SIGMA ADVANCED SYSTEMS LIMITED (SIGMAADV) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Sigma Advanced Systems Q2FI27 Earnings Conference Call, hosted by GoIndia Advisors, LLP. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call? Please signal for an operator by pressing star, then zero only touched on telephone. I now hand the conference over to Ms. Priyasi Patel. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone, and welcome to Q2FI27 Earnings Conference Call of Sigma Advanced System Ltd. We have the senior management of the company on the call, Mr. Sunil Khalidinli, Group CEO, Mr. Sridhar Tathacharya, Chief Financial Officer, and Dr. Pramod Raju, President, Corporate Finance and M&A. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company may face. May I now request Mr. Sunil, sir, to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for question and answer. Thank you and over to you, sir.

Thank you very much. And a very good evening to everybody. A warm welcome to SIGMAIRON Systems. We appreciate your continued support. I hope you have the opportunity to review our investment presentation, which has been uploaded on the start of the series. Our goal at SIGMA is to make India a trusted manufacturing partner through the world's leading aerospace and defense companies, one they rely on for reliability, quality, and execution on their most demanding programs. For years, we've been building the capacity to deliver on them. This quarter, it began to show in our results. In Q2, we delivered an operational revenue of 417 crore. INR, growth of about 11.40% over Q1, with an operational event of 82.28 crores, at a margin of 19.7 crores on a consolidated basis. What made the quarter exceptional was the new auto wins romper acquisition, which consolidates our leading position in aerospace and rings. It's a clear sign that the investments that have been made in capability, capacity, team building, and customer relationships are now converting to performance that you can all see. Let me take you through the strategic developments behind these numbers. Firstly, we strengthened our global aerospace platform. We completed the acquisition of Bromford Transition Solutions in the UK. This has already deepened our engagement with Rolls-Royce. Rompter and Naismith together give us a meaningful UK platform, which is now integrated to our India operations. Our facility in Sri Sikhi commenced production in September, and we've already started rolling our parts from the facility to the UK and onwards to our customers. It will be central to our margin improvement over time. And secondly, we advanced our position on artillery ammunition. We are in a very unique position, being an Indian player, focused on exports. So we have progressed from fuses to shell bodies and then moved to advanced products and solutions. We've also entered into a collaboration with Munitions India Limited to bring course-correction technology in India, and this technology is well-proven across different militaries across the globe. Repeat orders from international customers reflect the contents that they place in our execution. Thirdly, we expanded into control systems for home and security, apart from military. In the past, we've had secure orders from Army and Navy, where we've delivered successfully. Together with EMSAJAL, we received orders from the Government of India for our latest offering, which is EMSAJAL Ranger, a vehicle-based anti-dome solution. Our order book as on date is about 10,000 plus crores. Out of which 90% is international, giving us a very strong long-term visibility. On guidance for FI27, we're targeting about close to 1,900 to 2,000 pros, with a margin of about 20% EBITDA. As we transition static manufacturing to India, we're also targeting an EBITDA margin improvement. Of about 200 to 400 basis points by the end of FY27, and a further 400 to 600 basis points by the end of FY28. Of course, we will be reporting our progress against these targets. So looking ahead, we see a very supportive environment across our markets. Global airspace OEMs are increasingly looking to India for engineering depth and scale. And beyond cost advantage. NATO and allied nations are strengthening their ammunition manufacturing capacity, which require dependable supply chain partners. Counter-dome capability is becoming a part of everyday security requirements from all the global conflicts that we've seen across the world. And the government of India continues to emphasize indigenous defense manufacturing. We have India and UK footprint approvals with leading OEMs. And a widening product portfolio and customer base, we believe Sigma is well-positioned to participate in these opportunities. On that note, I would like to hand it over to Mr. Sridhar, our CFO, to take you to the financial performance. Thank you.

Thank you. Thank you, Sunil. Good afternoon, ladies and gentlemen. I will now take you through the consolidated financial highlights for Q2 FY27. Revenue from operations stood at Rs.417 in course. Compared with 374 crores in Q1, which gives you a healthy growth of about 12 to 13%. Operational EBITDA stood at INR 82.28 crores, compared with INR 61 crores in the Q1, at a robust margin of 19.7%. Profit after tax, excluding share of profit or loss from our associate companies, stood at ILR 48.6 crores, with which when compared with 35.41, which was the number in Q1. We have also made targeted investments in KPEX and working capital at our UK facilities. Primarily aimed at automation and process efficiency, and we expect these to deliver further efficiencies. With that, I would now like to open the floor for any questions. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question, may press star and 1 on the touch phone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nilesh Souni from Hightong Securities, Private Limited. Please go ahead.

Yeah, thank you for the opportunity, sir. Sir, I wanted to understand about what investments have been done in Naismith and Bromford post-acquisitions, and secondly... What are the factors that will be driving the EBITDA margin expansion in these two acquisitions, apart from the transfer of work? This is my first question.

Yeah, so between Naismith and Bromford, I think we've invested close to about 8 to 9 million pounds, which is a combination of working capital infusion, right, capex into equipment into new kit. We have significantly improved customer deliveries in terms of our operational metrics, which I think one key metric is four tips, on-time and full. We've taken it up from 65% to about 97% over the last few quarters. And, yeah, so that's the investment that we've made, and that's clearly reflecting in operational efficiencies. Which, in turn, is reflecting in our financial performance.

So this is Pramod Raju. So with regards to the operational efficiency, you'll see from our Q3 of last fiscal year to our Q2 of this year, you've seen from what we classify as UK, I think in the UK, a strong breakup of our EBITDA margin, right? Therefore, you're seeing at least a 200% per quarter improvement on our EBITDA margin in our UK operations, and this is as Sunil was saying. We've contributed because of the various investments that we've done, you know, nearly eight, nine million pounds across, you know, buffer stock, raw materials, supply chains, with less of the capex and the new equipment kits that we've invested into NASA. Now that equipment and also insourcing, so going forward, we're expecting, you know, the quarterly trend to continue just because the new kit will start to perform as more product goes through it over the next couple of quarters.

Oh, okay. And secondly, if you can quantify what will be our total capex or next to what we are in this tool

entity and standalone both together.

Yeah, I think we've made adequate CapEx investments already to give us enough capacity for the next few years. So there is no capacity constraint across all our manufacturing responsibilities. I think we're well positioned to execute on the order that we have for the next couple of years. Okay. Got it. Got it.

That's it for my end. I'll come back in the queue. Thank you. Thank you.

Thank you. Anyone who wishes to ask a question, please press star and one on your touch on your telephone. The next question is from the line of Mukul Dardar from Valorius Investment, NLP. Please go ahead.

Yeah, hello. A bit kudos to the Figma team. Firstly, I would like to appreciate the vision and commitment that has gone into building Figma and the opportunity you guys are creating for the long-term investors to participate in this journey.

The participant line got disconnected. We move on to the next participant. The next question is from the line of Rajesh Joseph, and individual professor, please go ahead.

Am I audible, sir? Yes, you can. Sir, today you have... Okay. Sir, today you have announced the plan for raising up to 3,000 crore. What is the purpose of this huge fundraise, and within which time we are planning to do this?

The fundraise is primarily to fuel our growth coming in from M&A, right, new acquisitions. We've been working on multiple opportunities over the last six to eight months, and I think next quarter Q4 is when we expect to close these transactions. And this fundraise is primarily to fuel growth. Okay, sir.

Thank you. That's all from my session.

And all this is subject to shareholder approval, et cetera, in due course, right? But we have a healthy balance sheet, and we have cash on the balance sheet. So any fundraise post any approvals would be linked to any inorganic subsequent time. So sometime in Q4 is, you know, potentially where something could progress. Thank you, sir. Thank you.

Thank you. Just a reminder to all the participants to please press star in 1 for more questions. The next question is from the line of Bornak Singhvi from Nafa Asset Managers Private Limited. Please go ahead.

Hello. Happy to be with you, first of all. I have questions on your 152mm shells business. So, basically, you have orders, two orders worth 100 million for shells, of which one order you have mentioned, the quantity of the shell is 1,47,000 units. The other would also be the same, I guess. So, where exactly is your manufacturing facility for the shells?

Yeah, so we don't want to disclose any quantities at this time, at this point, but for Shell specifically, we have already insourced a lot of the production process, right, as part of our facility in CCT. We don't do forging. So forging, there are many suppliers in the country. So we buy forges, right, from the forging companies, and the rest of the process is done in us. So, last quarter, Q1, rather, was... A bit more outsourcing, due to we've made significant progress on our insourcing, and ultimately, except for forging, we'll do the rest of the process in us. And we've already started delivering to our international customers, and since we've started delivering, And to quality conformance, right, and expectations of the customers. And that's also primarily the reason that we've got repeat orders. Okay.

So, on 8th June, you have announced that you got 40,000 orders for shells, basic shells, N107, export order. So, how much of it is recognized as revenue in this quarter? Because the timeline which you have given is six months, so which is getting completed in December. So did we record any revenue?

About 85% of the revenue is already recognized in Q1 and Q2. And the rest 15% is already completed in October. And you see it in, it will reflect in the Q3 results.

And just to add on to that, as Sunil was saying, there's, you know, supply chain changes that we did. So, with regards to The margin expansion between Q1 and Q2 on our M107, you will see in our recorded numbers that we gave that the margin expansion for our defense exports in the presentation is much stronger despite a slightly smaller Q2 sales of M107. So that 15% you'll see in the presentation to the stock exchanges shows the margin expansion.

Got it.

So we're moving in the right direction, and we're, you know, now that we're doing more in-house, our margins are expanding in the defense export of these shells. Okay, got it, sir.

Also, one last question. Like, the first, your first announcement regarding this 155mm shells fuses, the order which you got for filled fuses, that is only for the fuses or for the whole shells?

No, fuses and shells are different. Fuses is a combination of fuses and filling, right? And shells is different, right? So all these form part of the same ammunition platform, the two different components, but finally we're offering it to the customer as a solution.

We have, so each of the orders that we have are specific, that we've announced are specific to that part. And not as an entire solution, right? So the fill-fuse disorder that we announced was just the order just for the fill-fuse. The body disorder that we announced is just for the body. So now we're a full solution provider for the entire shell, except for the explosive, right? We have the in-house capability to do the entire shell. But the orders that we've announced are all for the individual components that go into the system.

Yeah, there's one direction there from what I was mentioning on the entire shell, but it's actually the entire ammunition.

I got it, understood that. Also, like, what, the CCF MOU with MIL, are we the only company which are into this MOU with MIL for CCF? Or some other companies are also there?

It's an exclusive MOU with MIL because we are bringing in the technologies through our partners.

Okay, so like you are developing and you'll be developing with MIL? No, so the technology has already been developed

by European partners, right? Well tested, well proven across Europe and America, and that technology is what we are bringing to our partnership, right? And offering it to MIL on an exclusive basis.

So, Sunil was saying this was a technology that's been in testing since 2017 by our joint venture partner in India, the European partner where we have a joint venture. They've already tested it. They've already deployed it into combat around the world, and what we are bringing is we've indigenized the technology into India, and that is what we're offering to MIL in our partnership.

Wow, that's great news, sir. So how much time do you expect from these fuses?

With MIL care, we are expecting somewhere between 6 to 18 months. For Q2, actually translated, for its partnership, actually translated into supply, into MIL. Got it, got it. That's it from my session. I'll get back in the queue. Thank you. Okay, thank you.

Thank you.

Thank you. Anyone who wishes to ask a question, may press star and one for more questions. The next question is from the line of B. Green, Vakil, from Filth Capital's Private Limited. Please go ahead.

Yeah, thank you for the opportunity, sir. So, can you help us understand a little bit about your facility as to how is your capacity utilization in your current facilities and what are your expansion plans within India, even abroad? So, can you help us with your capacity utilization? That could be my first question.

Current, yeah, current aerospace capacity utilization in India is about 15%, right, and that will rapidly grow. And even from a shell's perspective, it's about, ammunition rather, it's about 20%. And from our electronics business, defense electronics within the country, we are running a single shift, right, and we're also expanding the current infra. So that gives us enough room, right, or enough capacity, un-utilized capacity for the next few years.

So what kind of CAPEX are you expecting in the next few years for this?

No more CapEx. CapEx has already been invested.

So what you see in the balance sheet in our filings earlier this evening, you will see the CapEx. So that's already been, all the CapEx has already been put into these facilities. Got it.

So, I'm not sure if you have answered this question already, but can you help us understand the kind of deliveries that will happen for your aerospace autobook? So, will it be like a balanced, staggered execution or there will be like a gradual ramp up into execution, peaking out and then coming down? So, what kind of execution can we expect in your aerospace autobook?

So, UK execution is stable, and we're looking at a, you know, 15-20% annual growth, right, year-on-year. And from our new facility in CCT, we're expecting about 15% per quarter ramp-up.

Yeah, so just to highlight on that, what Sunil was saying, in our aerospace order book, it is a long-term contract. It's an executable order book. This is not a development order book. So we already have a run rate in our UK operations with SMO countries and locations. So there is no gap between the order book. What we're currently executing. But given we have new orders, that we are RQs and the WIMs, we're expecting that 15% growth year on year to be continuing to add to our order book. But it's a stable, high visibility order delivery for the next five to seven years.

Got it, sir. Sir, also in your PPT, you have mentioned about the different products and solutions from counter drone solutions, UAVs, and other proprietary solutions. Are these currently under development or they are already developed and may be undergoing trials or certifications?

So, like I mentioned in my opening note, right? So, Counter-Rome Solutions, we have one of the leaders in the country, right? We're wanting to supply successfully to Army and Navy. We have a large contract with DSF that's under execution, right? It's the largest contract in the country for under MSA, Ministry of Home Affairs for DSF. And we have a, you know, we have a good pipeline for Counter-Rome Solutions. And we also have what's unique to Sigma is the ability to supply these systems overseas with all the certifications from NASA.

Got it, sir. That's very encouraging to you, sir. Thank you so much, and all the rest for the second half.

Thank you. Just a reminder to all the participants to press star and one on the touch on telephone for more questions. The next question is from the line of Jay Menderatao from Nirmal Bank Private Limited. Please go ahead.

Thank you for the opportunity. Firstly, congratulations, sir, on a great set of numbers. Sir, I wanted to understand what do you want the aerospace defense export and domestic defense split to be in F528? Given that the domestic defense is only 3 to 4% of the mix, is it still a strategic focus?

Yeah, so it will continue to be a strategic focus because as part of the domestic business, we build full solutions for the customer, for various customers, and that has a healthy margin profile, and that business will continue to grow.

All right. All right.

Understood. And so, Shree said the phase one was live. So, what utilization do you expect by Q4, FY27, and by end of FY28 in general?

By end of FY28, I think we'll achieve about 50 to 60% of that utilization. That's why I said the capacity is good for the next few years of our execution. Okay.

Thank you so much for that. The infrastructure, since it's already built, and we already have the contracts and the work happening in our UK operations, so the transfer of work is about what we've already executed and demonstrated, started last month, right, that we're shipping parts out in India, so as we put more parts into India, so we'll get to 50% to 60% capacity utilization by the end of next year, and then FY29, we should be at full capacity utilization.

That's great to hear. Thank you so much.

Thank you. I just wanted to highlight that we didn't need any orders to fill the factory, right? We already have the orders. Please go ahead.

Thank you. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. The next question is from the Lion of Devang, from Spark PMS. Please go ahead.

Hi, sir.

Thank you for taking my question.

So, just wanted to understand the bridge that, you know, you have made 700-odd crores in H1. To achieve 2,000 crores, you know, you need around the ramp-up of 1,200 crores. So, what would be the, you know, ramp-up over Q3, Q4? What will drive that crore? This first question, sir.

So the ramp-up is coming in from both aerospace and different exports. And Q3, Q4 for domestic defense business, as you're aware, most different companies in India are heavily skewed towards Q3, Q4, and those are the best quarters for Indian companies. On all three fronts, I think we have promising next few quarters.

Yeah, just to add on that, when you look at our financials, on the first six months, we already are at 800. So we've announced 3,915 crores of new orders from July 1st to date, right? So we have a large order book, and a lot of that order book is executable over the next 12, 18 months. So a lot of... The production of those orders that we've announced are going into Q324, so, you know, the six months was strong at 800 plus crore of top line, as you can see in our numbers, but, you know, you'll see a lot of the new order wins start to contribute in Q324, as soon as we'll say. And then there are six businesses consistent.

Right. And, sir, this recent defense order that you have received, is that suitable, and are there any other orders in the pipeline?

Yeah, so, in terms of overall order book, defense exports itself, we're talking about 2,700 crores, right? So, I think it's one of the largest order books for any product in the country.

So I think, you know, as Sunil said in his opening remarks, we are the supplier of choice to a lot of our customers now. Now that we've executed in Q1 and Q2 on time, right, and conformed to their specs, that's why we're winning the repeat orders from certain customers. And now we've opened up the NATO order book. So, from that perspective, we will be a dominant exporter of these solutions. So, we see interest from other new NATO customers that we are in discussions with. So, yeah, so we see as long as there's conflict happening, as we see throughout the world for the medium term. And although the restockpiling that needs to happen and the defense budgets in NATO going up for what's being announced, we see the medium term that the order books will continue to rise. And a lot of our orders are repeat orders based on delivery milestones. So we expect this to continue for the medium term.

Great. And to this, in terms of UK backfill, what is the progress that we have seen in that? Sorry, Sarah, can I please?

UK backfill.

Yeah. So, the wall that you're transferring to me.

Yeah. So, we have backfill commitments from our customers for both the UK companies. Already contracted, and we have a lot more RFQs, right, and new orders coming in for our aerospace buildings.

So on some of our aerospace contracts for the transfer work, the work that we start to make in India, that was contracted for the UK, but contractually we have terms that say they have to give us equivalent amount of work in the UK. So we already have that contractually in our contracts. With regards to the backfill, additional backfill for the defense work that we're doing, we have won some smaller orders in the next last few months, right? Therefore, to fill our UK operations, we're not seeing any issues in keeping those capacity utilizations high.

Okay. And so just one last question. There is an increase in debt in the six months. So what is your view on the debt? Are you going to pay off that debt or it will increase in the H2O for working capital requirements?

I think we're, you know, we barely have any leverage on the balance sheet. The current debt is only about 80-odd crores that we borrowed from the parent to fund previous acquisitions, right, before the allotment. And, yeah, the rest is all working out. So we're literally, you know, we're almost that free in that context.

Yeah. But from our perspective, as Sunil was saying, you know, term bargains is very low enough. Everything is working capital. So, you know, in a business of our nature, with our business. We're well in line with industry standards on the working capital requirements. So with regards to repaying, we don't like to have a lot of debt, any debt on our balance sheet other than working capital. So we will figure out a strategy, right? But we haven't decided that small amount of term loans, 76 crore that we have, when we'll pay that back. But number two is the other term borrowings that we have that you'll see on our six-month balance sheet. That has a schedule of payback over from January 1st to December 31st, calendar 27th. So, a big chunk of that will be paid off as per payment milestone to the borrower. So, you will see that coming down through the next, from January 1st to December 31st of next year. But the other loan that we have, we have not finalized a repayment strategy yet. Great. Thank you, sir. Thank you for taking my question. Sure.

Thank you. The next question is from the line of Varun Kulkarni, from Incred Capital Limited. Please go ahead.

Hi, good evening, and congratulations on the first time. Thank you. The first question I had was, you know, you released a statement that you are looking for a fundraise, so I just wanted to understand what is the mix of debt and equity in the fundraise and what is the actual purpose of this? Is this going to be primarily geared towards an acquisition or to fund our working capital?

So, there's no additional working capital funding as such required, but primarily, the fund raise is primarily to driver acquisitions.

So, as you would see on our balance sheet, we do have about 350 crore of cash, which is a portion of that is from the prep placement that we did in June. We do have funding and allocation of objects of that for general corporate purposes. But as Sidney was saying, we don't need working capital. We have working capital lines from various financial institutions that will allow us to achieve our objectives this year and next year. And we do have cash on the balance sheet. And all of our businesses are generating cash, right? Therefore, we don't need any working capital cash fundraise for any working capital or general corporate purposes going forward. So our strategy is the inorganic strategy to continue to grow the platform.

I've got that. For the end of the year. Bye. Got that. And on the inorganic side, so we've already acquired UK-based companies. Are we looking forward to acquiring any European or US-based assets?

Yeah, we are looking at all these geographies. We'll, yeah, we'll break the news safely as and when we're closer to, I say, closing the deal.

Yeah, as we stated in our Q1, earning the investor meet, we are building a global platform, so we still have two, three years of where we want to get to in that, both from a horizontal and a vertical integration and customer penetration, so we are looking at all these geographies as we speak.

And on the order book front, what export revenue are we expecting in FY27 and FY28, and which facility and entity will kind of build that?

We can't give you a breakdown as much, but about 90% of our revenue is export revenue.

Yeah. Between both UK and India. So if you look at, you know, our breakdown and the guidance we've given in Q1 also, and for the year, our domestic business is around roughly 10% of that. All of our other contracts in our defense exports in our aerospace business are all GBP, U.S. dollar, and euro denominated with global customers. So 90% of our revenue is from global contracts, and about 10% is domestic. With regards to what is going to be, you know, the breakup, we can't give that now. But on the presentation, we give you a sense of how it's growing. Aerospace is a stable... Good morning, everyone. You know, long-term contracts in place. The defense exports, we are seeing that ramp up, and because we've won so many recent orders, and we're executing and delivering, there's where we'll see growth, strong growth, over the subsequent orders. So the contribution of the defense exports to the overall mix will grow faster, if on a status quo with our current platform. Organic wins are very, very large there.

Got that. And would it be possible, or do you feel like it's difficult to give a breakup in terms of the book by customers?

It's sensitive information, and we're protected by all the India that was signed with the customers. All right.

All right. Yeah, that's it for my side. Thank you so much.

Yeah, but just to add on that, if you look at the presentation, the customer base that we have, we just want to highlight that we are direct customers to all of the customer logos that you see on that. So we don't sell to sub tiers. We are directly selling to the defense primes and the majors, and they are space majors only. Thank you very much.

And one last question, if I may, how much of the aerospace revenue do you expect to move to India by FY28? And of the press that we have done, how will the balance be split between Shree City, Phages 2 and 3, UK automation and other acquisitions, maybe?

We don't have the numbers offhand, but, yeah, maybe we can, we will provide the course.

Yeah, we tend not to give FY28 forward-looking numbers. We like to just give one quarter, maybe two quarters maximum outlook, but, you know, the transfer of work is a good contribution to our EBITDA margin, right? Therefore, we're working aggressively to make sure that it happens, right? And you'll see it on a Q&A when we announce about how much work, but whatever parts on large volume make natural sense to make in India, we are going to shift, right? So, you know, there's no point in making it. With regards to the second point of automation, as far as some of the investments in the UK operations. Because similarly there, the shifts that we want to automate, so we run 24-7 on certain machines. So that investment is being made in pilotization, and you'll see that contributing to the operational efficiency margin expansion, Q1Q. So it's already coming in, and we've already made certain investments, but you'll see the contribution of that contributing.

All right. Thank you so much. Thank you. Thank you.

Thank you. The next question is from the line of Veibhav Jain from Nucleus Captain. Please go ahead. Yeah, hi, sir.

I want to understand regarding your inorganic growth. You are raising 3,000 CR funds. So what kind of opportunity in terms of size you are looking? Because previously you acquired Nismath Group, I think around 250 CR and it was doing 750 CR top line.

Yeah, so the size of our acquisitions are somewhere between companies which are doing about $100 to $150 million. That's the side that we've been talking about, and then these opportunities will be spread across different, driven by different customers and different set of capabilities.

Yeah. So when we look at our inorganic growth strategy, we continue to find where we have deeply penetrated to new customers. We don't want just a small, you know, opportunity to partner on in that. We want to penetrate the OEMs. Therefore, we're not looking at smaller companies anymore, given the scale of our business. And number two, we will continue to look at the... Companies that bring capabilities, if they bring a capability to us, it might not be on that scale, right? But from, you know, the real main strategy of getting into new OEM customers, you have to be sizable, and what Sunil had mentioned is the scale we're looking at for each opportunity.

Okay, sir, second question. Previously, we acquired the company which was in financial stress. Okay, so upcoming our acquisition day will be completely financially healthy company or again will be in similar range?

Sorry, which company was on the first?

On the Smith. The Smith group, it was in financial stress.

No, the Smith group, the day we took over, they were already generating positive evidence.

Yeah, but that's negative.

The days of financial stress was prior to us taking over, and, right, when they, so the announcement has revived by the time we acquired, and then we made a lot of incremental improvements, right, and that's what's reflecting in our financial performance.

So we continue when we look to partner on companies, we're always looking at companies Thank you. I have a good customer base. And they are a bit of positive. We are not looking at any companies that, you know, will put a drag on our P&L, right? So we continue to look at those companies where we can, similar to what we did in Naismith and that they had the base, they had the customers, they had contracts. We can renegotiate with the customers on the contract. Therefore, you know, we have a more visible order book. And number two is, you know, our India manufacturing scale, where we can transfer work into India. Those are the only type of companies we're looking at, right? I mean, we're not making investments for the sake of investments. It has to fit into our overall strategy of our business needs. Right? And our strategy of having a dual-source manufacturing base for our end customers. So, that's where the margin expansion comes. But we do not make any investments. When we make the investment, we do not make it into any loss-making or sick companies. You know, so we are really partnering on companies and taking those companies to the next level by being part of a larger segment. Okay.

And sir, with your discussion, it's just looking like you already finalized certain kind of requisition. So what may be the timeline of this requisition, sir?

We are looking at Osvali Q4.

And it will be single company or we again look two, three company of similar range.

It's too early to conclude on that, but we will keep you informed in due course.

Okay, just last one question, sir. Like, we, within a year, we acquired many companies, and we built a completely different company, other than this Megasoft, Sigma Advanced System, which were in defense and aerospace. So, what is your larger vision? Because we are acquired a company who is supplying to F-35 or V-20 bomber and others. So, what is your larger vision?

So, the reason is to, you know, keep building on new capabilities, right, through new acquisitions, and targets to penetrate into new customers, right, or the customers that we have today, right, in aerospace, but we don't have too much business from them. So, new acquisitions will help.

Yeah, so with regards to that, I mean, what are we building? Building a global airspace platform, right? Which make in India and having a service offering of the onshore presence closer to customer, as well as our large-scale India manufacturing. That is what the OEM customers want, right? So we will continue to add to that platform as we go forward. And it's very clear what we've done in Naismith, as well as in Bromford. So it's the same thing. And any new opportunity that comes into this platform, you know, we have a strong management team, not just as a company, but also in our UK operations and that these are senior management from some of the largest companies that have historically run We've done businesses on a much larger scale than what it has today, therefore, and also done the same playbook for other companies in years past. So we're just replicating, leveraging off of their know-how, capabilities, and also the young management team, right? I mean, we're not young. We're 20, 25, 30 years, average, 30 years average experience, but we, you know, it's a team that's already delivered, right? And we're just replicating that as we build this India platform.

Okay. Thank you.

Thank you.

Thank you. The next question is from the line of pages from TNG Investments. Please go ahead.

Thank you for the opportunity. And I would like to thank you for starting the calls with the investors which we had requested during the AGM. So, appreciate that. So, first is, what is our current utilization at CCT as of Q2 end, and what is it likely to reach by end of FY27?

Yeah, I think we've already answered this question, but I don't mind repeating myself again. Sorry, if I... No problem. So, 15%, 10 to 15% utilization currently, since we've just been on operations last quarter. But going forward, I think every quarter will be, will increase by around 10%, every quarter.

Okay. And so what is the split? You mentioned that certain amount of work has to be given to the UK. So let's say 100 rupees, what is the split that you need to give to the UK and the balance can be all transferred to India? Because I'm assuming India would have better margins in terms of producing the output.

It's about a 30-70 model, 30% would be the ultimately rate from the UK levels, and the balance will be done at the time of the time of the time of the time of the time

of the time of the time of the time of the

time of the time of the time of

the time of 30% will be retained in the UK, and 70% will ultimately move to India, right? But the very unique feature that we have in our UK business, both in Bromford and Naismith, 25% of our, roughly about 25-30% of our revenue comes from our different business, right? It's highly restrictive, profitable. And that can never be moved to any other part of the world. And that's something that no other Indian company in the aerospace sector has. We supply to Lockheed Martin and Airbus different programs and VA systems and environmental.

I just want to add to that what Sanil was saying is, you know, that is the work mix of what's being manufactured in India and how much near-end product comes out of India when we talk about the 3070. But when we talk about our P&L and how we've been reporting our numbers, our P&L will always be through for the aerospace business or it'll be in Sigma UK. So, you know, our India factory will be a subcon to the UK. So the P&L will run through the Sigma UK in the published numbers that we publish. Okay.

And sir, since what I understand from the vision is we're looking to be the global supplier for specifically dedicated to aerospace, our current EBITDAs between all the three verticals that you have shared, our EBITDA is the lowest in aerospace. So is it because we are a tier two, tier three supplier and we are not dealing with critical components or is there some other reason for that, if you can throw some light on that?

No, I think that, you know, number one, we're not a tier two, tier three, as I said, we are a tier one, and we're classified, and we directly sell to all of our OEM customers. We do not sell to sub-tears for, you know, for the likes of Rolls-Royce, GE, Airbus, Boeing, et cetera. We directly contract with them, so we are classified as a tier one. Number two is with regards to the margin expansion, you know, when we bought the business because there is a large capital base and overhead in the UK, that's why, you know, the Western world runs at those upper single digits at the top margin, right, unless they've automated and done the capex. What we are contributing is by doing the CAPEX, doing the automation in their operations, number one. Therefore, the operational efficiency improves in those. And number two is when we start to do the transfer work. So, you know, we're making in India versus making in the Western world. You know, we will get a much higher EBITDA margin by manufacturing in India. Therefore, our P&L will be in line with other Indian players by next year, by FY28. When we say that, it's also with us maintaining a UK base of nearly 500 plus employees plus all that infrastructure, et cetera. We're still going to maintain Indian EBITDA margins in FY28 because our contracts and the contracts that we've won are international in nature and the programs that we're all on, AV value add is much higher. Therefore, if we were to make all of it in India and get those contracts in India, we'll be much higher than all the Indian players on the EBITDA margin, right? But given we have a UK fixed space, you know, we will be competitive, if not slightly higher than other players in the airspace in FY28 itself.

Yeah, so I get that part of the UK integration. So, what I was just trying to understand that since our aerospace, so let us say by FI28, do we see the aerospace EBITDA moving up to where our difference currently is in the range of 20 to 30 percent? Are we looking to take it there somewhere? Is it possible? Is it probable?

Yeah, it's possible. I think 25% to 30% is what we should look at.

So FY28, we will be in that 25% to 30% at the time margin. Okay. That's it for my third answer. Thank you for answering my question.

And happy to welcome you with the team. Same to you. Thank you.

Thank you. The next question is from the line of Ronak Singhvi from Nafa Asset Managers Private Lomitic. Please go ahead.

Hello. Thank you for the follow-up question. I just wanted to know, when I see the cash flow statement, I can see bank balances other than cash and cash equivalents in the operating segment. How should I read that, or is that a mistake?

Sorry, this is Peter. Could you repeat your question?

In the cash flow statement, I can say bank balances other than cash and cash equivalents in the operating segment, like adjustments for operating segments. So what is it or like is there a mistake? How should I read this?

No, that is, we have this funds that we got from the preferential issue. We have temporarily passed it in fixed deposit.

Okay. Okay. So, basically, financing, we can read that as financing item, eh?

Yes. So, it is, like I said, it is in the interim, back there.

Okay. Got it, sir. Thank you. That's it for myself. Yes. Thank you.

Thank you. We take that as the last question for today's conference call. I now hand the conference over to the management for closing comments.

Thank you, everybody, for participating in this call

and wishing you all a great Diwali. Thanks again.

Please continue to follow us, I think, from our perspective. We have a good, strong business. We'll continue to grow what we have shown in the last two, three quarters, and we appreciate that one comment with regards to the analyst call and investment call. We did the Q1 call for the first time in a fiscal need, but going forward, we will be doing these calls on a routine basis, but it's very important because our business is transforming very quickly, and we wish everyone to continue to participate in our story. Thank you very much.

Thank you very much. On behalf of Go India Advisors LLP, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.