Avalon Technologies Limited (AVALON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Avalon Technologies Limited Q4 and FY '25 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Agarwal from Axis Capital Limited.

Good afternoon, everyone, and a warm welcome to the Q4 FY '25 Earnings Call of Avalon Technologies. To take us through the results today, we have with us from the management, Mr. Kunhamed Bicha, Chairman and Managing Director [Technical Difficulty]

I'm sorry to interrupt Nikhil, you are not audible. Ladies and gentlemen, the management has been disconnected. Would request you to stay online while I reconnect. Ladies and gentlemen, the management has been reconnected. I now hand the conference over to Mr. Deepak Agarwal.

Good afternoon, everyone, and a warm welcome to the Q4 FY '25 earnings call of Avalon Technologies. To take us through the results today, we have with us from the management, Mr. Kunhamed Bicha, Chairman and Managing Director; Mr. Bhaskar Srinivasan, President; Mr. Suresh VR, Chief Financial Officer; and Mr. Shriram Vijayaraghavan, Chief Operating Officer; Mr. Venky Venkatesh, Chief Sales Officer; and Mr. Michael Robinson, Chief Operating Officer for the U.S. operations. Mr. Bicha will give an overview of the business performance and will be followed by Mr. Suresh's remarks on the financial performance, post which we'll open the floor for Q&A. As we move forward, it is important to bear in mind any forward-looking statements made during this call are subject to potential risks and uncertainties, both known and unknown. Now without any further delay, I'll hand over the floor to Mr. Bicha for an initial remark, the CMD.

Thank you, Deepak. Ladies and gentlemen, on behalf of Avalon Technologies, we extend a very warm welcome to our Q4 FY '25 Earnings Call. I will quickly introduce Avalon Technologies, especially for the ones who are joining us for the first time. Avalon Technologies established itself as a key player in electronic manufacturing services with a global reach. We take pride in our leadership in high mix, flexible volume manufacturing. We currently operate across 14 manufacturing facilities in India and United States. Our 3 key differentiators are: one, vertical integration. We offer a complete box build solution from PCB design, new product development to final product manufacturing; 2, our global presence, both in terms of manufacturing presence and customer base; 3, optimal mix of established industries like industrial, rail, aerospace, communication and emerging industries like clean energy. Now turning to our business performance. I would like to begin by thanking all our investors for your continued trust and confidence in Avalon. As we celebrate our 25th anniversary, it is not only a time to reflect on our journey, but also look forward. Over these years, India has evolved to be a well-established global manufacturing hub. With this shift, the outlook for electronics manufacturing service industry and for Avalon in particular, is very encouraging. We believe the road ahead holds even greater opportunities. In Q4 FY '25, our revenues grew by 58.1% year-on-year. For the full year, we achieved 26.6% year-on-year revenue growth. This growth was -- has been broad-based, well diversified across sectors and geographies and consistently delivered in a dynamic environment. We continue to see strong demand from our customers both in India and the U.S. and remain confident in our strategy for sustainable and profitable growth. On gross margins, we are pleased to report that Q4 FY '25 came in at 35.1% at the upper end of our guidance of 33% to 35%. Supported by operating leverage, our EBITDA margins for the quarter stood at 12.1%. Profit after tax came in at INR 24.3 crores, marking a 244% increase over Q4 FY '24. As of March 31, 2025, our order book stood at INR 1,761 crores with an average execution period of 14 months. In addition, long-term contracts with execution time lines of 15 to 36 months grew by 18.3% year-on-year to INR 1,123 crores. Our year-on-year order book growth improved from 11% in FY '24 to 29% in FY '25. This order book growth has been well balanced and diversified across industry verticals and geographies. We have also made meaningful progress in optimizing our working capital. Net working capital days improved from 161 days in March 2024 to 124 days in March 2025, an improvement of 37 days, better than our guidance of 10 to 15 days. This reflects our ongoing efforts to drive operational efficiency. In Q4 FY '25, our U.S. manufacturing plant contributed 16.6% of total revenue. Meanwhile, our India-based operations, which cater to both domestic and global customers accounted for 83.4% of revenue during this quarter. The India operations remains highly profitable, delivering an EBITDA margin of 14.8% and a PAT margin of 9.6%. We have previously outlined our 3 key drivers of growth: our existing U.S. business, new U.S. businesses and our ever-expanding India business. We are encouraged by the traction across all 3, which reinforces our confidence in growth opportunities ahead over the next decade. At the same time, we are closely monitoring evolving global trade dynamics, including tariff negotiations and macroeconomic developments, which could influence manufacturing flows worldwide. India continues to benefit from strong industry tailwinds, and we are seeing sourcing decisions increasingly moving towards India's favor. Avalon's dual manufacturing presence in both U.S. and India positions us well to navigate these shifts. On one hand, higher tariffs on imports from select countries are driving opportunities to India to emerge as a preferred manufacturing hub, resulting in an increased engagement from global customers aiming to diversify their supply chains. At the same time, our U.S. manufacturing facility offers strategic flexibility to support customers looking to localize production and meet regional requirements. On the other hand, policy uncertainty and its impact on U.S. economy call for continued agility and disciplined planning. Considering this, we are adopting a more measured outlook for the first half of FY '26 with expectations of improved momentum in the second half as visibility strengthens. Accordingly, we are approaching FY '26 with measured optimism, mindful of the macroeconomic environment influenced by policy decisions. We are guiding for a revenue growth of 18% to 20% for FY '26 and will reassess this as the year progresses in line with market developments. Now moving to our key wins. We are making meaningful progress towards volume production across several ongoing projects. These include products for global auto components, home electrification systems. We are also developing new products across industry verticals, including rail, industrial, infrastructure, clean energy and communications segments. Some examples include backup power systems, transmission systems, aerospace cabin products and locomotive engine systems. Over the past year, we secured several new projects across industry verticals, which are progressing in line with our expectations. Moving from design of prototype stage to production. Many of these are expected to ramp up during the current financial year and support our strategy of deepening customer engagement across diverse end markets. In addition, we are entering new sophisticated advanced technology segments that play a critical role in enabling next-generation electronics and digital infrastructure. While these initiatives are still at an early stage, we see encouraging potential and we'll share further updates in the coming quarters. To support the series of new product introductions and the anticipated growth, we are scaling up our operations in advance of the project ramp. As a result, we expect the second half of FY '26 to be stronger than the first. While FY '25 has been a pivotal year in setting the foundation for growth in FY '26, we are going to focus on scaling capacity, deepening customer engagement and building strategic partnerships. On the infrastructure front, we are pleased to share that our new export-focused manufacturing plant in Chennai is now complete and has fully commenced production. In parallel, Phase 2 of our brownfield expansion in Chennai aimed at addressing rising domestic demand has also been initiated. We continue to strengthen our capabilities and capacities. As part of this, we are enhancing our technical competence through strategic collaborations, including our partnership with Zepco Technologies. Zepco is involved in the design and manufacture of motors, drives, controllers and power solutions, serving sectors as drones, electric vehicles and defense. This collaboration supports our efforts to gradually build capabilities in select emerging technology areas. In summary, Avalon's unique business model anchored in its dual manufacturing presence across India and U.S. offers customers the flexibility. Our ability to serve diverse end markets, adapt to changing trade dynamics and invest ahead of growth puts us in a strong position for the future. With that, I would like to hand over the call to our CFO, Suresh Veerappan, for a detailed overview of our financial performance. Thank you so much.

Thank you, KB, and good afternoon, everyone. Thank you for joining the call today. FY '25 has been a pivotal year for us marked by profitable growth. Let me begin with our Q4 FY '25 performance. We recorded revenue of INR 343 crores, a year-over-year growth of 58.1% compared to INR 217 crores in Q4 FY '24 and a sequential growth of 22.1% over the previous quarter. For the full year FY '25, revenue from operations stood at INR 1,098 crores, reflecting a 26.6% year-on-year increase, exceeding the guidance we had provided earlier. Our geographical revenue split for the quarter was 47 and 53 with India contributing INR 150 crores and the U.S. contributing INR 193 crores. For FY '25, our geographical revenue split was INR 43 and 57 with India contributing INR 477 crores and U.S. contributing INR 621 crores. Our gross margin for Q4 FY '25 stood at INR 120 crores, reflecting a 47.7% year-over-year increase from INR 81 crores in Q4 FY '24. Sequentially, gross margin grew by 14.7%. For the full year, we delivered a gross margin of 35.8%, which remains among the industry leading levels. EBITDA for Q4 FY '25 stood at INR 41 crores, reflecting a 139.6% increase from INR 17 crores in Q4 FY '24. This resulted in an EBITDA margin of 12.1%, up by 410 basis points from 8% in the same period last year. For the full year, EBITDA stood at INR 115 crores, representing a year-on-year increase of 83.7%. EBITDA margin for FY '25 was 10.5%, marking an improvement of 325 basis points over the previous year. PAT increased to INR 24 crores, a 243.8% year-over-year increase from INR 7 crores with a PAT margin of 7%, up by 380 basis points from 3.2% in Q4 FY '24. For FY '25, PAT stands at INR 63 crores, an increase of 26.7% from INR 28 crores in FY '24. Our profitability continues to strengthen, delivering sustained growth. Net working capital days improved to 124 days in March '25 from 161 days in March '24, an improvement of 37 days, exceeding the guided reduction of 10 to 15 days. Net inventory days improved to 86 days in March '25 from 118 days in March '24. Trade receivables increased slightly to 84 days in March '25 from 79 days in March '24. Trade payable days improved to 46 days from 36 days over the same period, reflecting better terms with our vendor partners. For FY '25, cash flow from operations reached INR 25 crores, up from INR 17 crores in FY '24. The improvement is due to better working capital management and profitable growth. As of March 31, our total outstanding debt stands at INR 141.7 crores with cash equivalents and investments at INR 134.7 crores, resulting in a marginal debt position of INR 7 crores. Our CapEx for Q4 FY '25 and FY '25 was INR 25.1 crores and INR 57.8 crores, respectively. With a CapEx-light model, our asset turns are at 7.5x. Building on FY '25 revenue growth, we are approaching FY '26 with measured optimism, mindful of prevailing macroeconomic environment. To conclude, we are encouraged by the consistent momentum across all 3 of our growth engines. Our continued focus on operational efficiency, working capital management and strategic execution positions, we are well positioned to capture the opportunities ahead and creating lasting value for our shareholders. Thank you.

[Operator Instructions]. The first question comes from the line of Deepak Krishnan from Kotak Institutional Equities.

I just wanted to sort of understand, obviously, we've given a slightly measured guidance of 18% to 20% given near-term uncertainty. But just wanted to understand both from a near-term perspective as well as from a medium-term perspective, like is there any disruption in terms of shorter term? Are you seeing work getting stalled because of tariff uncertainty? And secondly, on the medium term, is that leading to more conversations of volume sort of shifting and how they want to do it in India or U.S. or any sort of commentary around both the shorter-term impact as well as longer-term conversations that we are having with our clients in respect to this tariff uncertainty that is there.

Thank you, Deepak, for your question. See we are uniquely positioned in this scenario because we have factories in the U.S. as well as in India. So I think either way, what we see is that taking India, for example, is better positioned than most other countries as it stands today -- it changes every day -- but as it stands today. And if customers want to make it in the U.S. before the transfer to India -- the new customers, I mean, want to make in the U.S. before transferring to India in the mid or longer term, that is also possible. So we are seeing different parts of this play out. And customers are also cautious because they're not sure how they are going to -- the whole policy situation is going to play out. So I think as of now, we are fairly confident. With all the news around we want to be cautious, optimistically cautious, let me put it that way. But I think there's a lot of growth ahead for us with the programs which we have signed up for with customers, especially the new programs. Did I answer your question, Deepak?

Yes. So FY '26, should we assume sort of a higher India percentage in terms of the overall mix because of maybe there is uncertainty and then things gradually recover, does India become like a 60% contributor this year? Is that what you are looking at in terms of order book or that's not the case today?

So let's -- if you go back 3 years, Deepak, we were an export-focused company where it was 30% India, 70% export. And our goal in the last 18 months is to have the 50-50 mix, 50% export and 50% domestic, which is India. And as you can see over the few quarters, we have come to 47% India in the last quarter and 53% export. And we see the trend continuing. As India evolves, we are seeing a lot of our customers in rail. You're seeing a lot of customers in the infrastructure side of things and industrial. And we are confident that the India number is going to go up. And that's where it's just not an export focus or U.S. focus. On the other side, we are seeing a lot of activity in our U.S. factory with customers requesting what it will take for new programs to build in the U.S. with, of course, as there's a cost over time, and they see an easier path to India once the tariff situation settles down.

Maybe just one final thing. Is tariff an element that can be passed through customers in your contract? Or in a worst-case outcome, would we have to take some impact on our end? Or is it mostly like a pass-through element for us once we get some certainty on tariffs.

It's 100% pass-through, okay? And in the U.S., we have also been dealing with the Chinese tariffs for U.S. customers, which is 35%, 40%. For the last couple of years, we've been passing it through.

[Operator Instructions] The next question comes from the line of Praveen Sahay from PL Capital.

My question is related to the order book, which is -- you had shown 29% of a growth. If you can give some more detail on that, how is the geographical mix in that or a sector bifurcation? And also related to that, even after 29% of a growth, you are talking about 18%, 20% of a growth in revenue because the customers are a little cautious. So you are seeing some delay in the order as well from the customers?

No, Praveen, we are cautious. The customers -- so far, we don't see -- it's not like what we had seen with the destocking situation. So we don't see too much of a slowdown from customers. But if the economy slows down, there could be some slowdown is all that we are planning for. And as you've seen last year, every quarter, we have come back and revised our guidance. We'd like to follow through and do that as things progress.

And on the first part of the question -- Suresh here. On the order book mix, it closely resembles the revenue mix. So India will be approximately 45% and U.S. will be 55%.

Okay. And sector is also similar in the order book, sector bifurcation?

It will closely resemble the revenue.

Yes. So if you actually look at what -- by sector, we have seen growth across every one of them, all the 5 sectors. And these are significant growth across the board. So that's why we are confident in projecting this. It's just not -- for example, Clean energy is at 66% growth. Communication is 53% growth, Industrial is 35% growth, Mobility is 113% growth. Okay. And on your receivable part, which...

I'm sorry to interrupt, Praveen, those were your 2 questions. I would request you to rejoin the queue for further questions. The next question comes from the line of Palash Gandhi from Investec India.

This is Aditya from Investec. Sir, just wanted to confirm once again. So you mentioned so far, you haven't really seen any major slowdown. It's only going forward that you're hearing that the U.S. economy may slow down and therefore, you are building in such a conservative estimate. But as far as April and whatever little we have seen in May is concerned, you're not seeing customers pushing back on deliveries or at this stage going slow?

No. Aditya, historically, we've been light on Q -- in the first half and heavier on second half, which will continue to go through. But to answer your question, we are not seeing anything significant happening. But it's just -- the news every day is just throws it off a bit. But we'll just be cautious, but there is enough growth in the system, okay? We're just not what you say, committed and we are always committed for the last year or so that we will double in 3 years, and we are still sticking to that commitment, okay? So it may be a one slow quarter, but it's still there in the past. And some of the customers we are signing up are fairly large.

Sure. Understood. And sir, given that our capacity has also now increased, what does this 18% to 20% growth mean in terms of capacity utilization? Do you think we'd be left with excess capacity and therefore, a risk of unabsorbed overhead?

No. So it's -- we've been planning for our growth in the sense of people and building earlier than it's coming. So a good sign or a bad sign, I'm not sure. We've built this new export facility, which is supposed to take care of us for 12 to 18 months. But I'm happy to say that in 4 months, it's filled up and different projects have started there. So we're building a newer facility or updating a newer facility. The same goes with India. We are building up the buildings earlier and getting the people in for the projected projects to come in a bit earlier. There's going to be a couple of months of lag before the projects kick in. So that's going on. So we are confident of the growth. And you've seen us we managed 50%, 58% growth year-over-year quarter. And we don't break a sweat doing that.

The next question comes from the line of Bhoomika Nair from DAM Capital.

Congratulations on a good set of numbers. Sir, my first question is on aspect of the new client additions that we've done in the last year, 1.5 years. How is that progress moving? Which clients are you seeing scaling up quite sharply, both in U.S. and in India, which has moved to now from a prototype to a mass production kind of a phase? And which areas are you seeing really new client additions happening per se? If you can just give some more qualitative color on which segments are seeing improvement in terms of the trajectory? That's my first question.

Thank you, Bhoomika. So it's broad-based, but let me just put it in perspective. The Clean Energy, for example, was slower last year, but year before '25. So you've seen a growth of 66% last year. And we'll continue to see that. There's additional new customers. On the Infrastructure side in India is where the larger growth piece is going to come in, and we are setting up for that, which has not yet come in. And we believe that will play out in, I think, late part of Q2, if not earlier, of Q3 for sure. We are seeing that piece. Rail, we've got 6 or 7 new products in different types of NPI to production, which will kick in later part of this year. Industrial, multiple customers in both the geographies, we are seeing significant growth. It's a little bit lower than the other 2, but it's broad-based. And most of these customers are Fortune 500 type customers, not start-ups or anything. And Clean Energy, I thought we are going to see significant growth in the U.S., especially.

Okay. And in the quarter, we saw very strong growth in terms of the Mobility segment. Is this something now as a steady run rate that we should look at as we move into the next year because we've seen growth of new customer additions and a scale up in both freight and aero. So should that kind of continue into the next year as well at this run rate?

Yes, on a yearly basis, for sure, because there's multiple projects which are going to come in also. And this is not including Kawach and all that, okay? And that is all in progress, progressing very well, okay? And on the aero side and rail side, multiple projects have kicked in and some of it you'll see already playing out. We have a few more coming in. So I would assume that it is going to continue, and that's all India.

Sure. And if I might just squeeze in one more question on the margin profile. India margins are doing quite well. We've reported about 14.5% kind of margin as such out there. The U.S. business to some extent, remains a drag. How do we see that progressing, particularly when we're seeing perhaps with the trade tariffs, et cetera, a lot of clients actually looking to do more prototyping in U.S. Do you see that kind of turning around? Or will that kind of remain a drag? What kind of time lines, if any, should we look at?

So we've always mentioned U.S. -- because we are present in the U.S. for the long term. And today, this is a unique situation where it's just not cost, it's location. So I think it will play out well. The margins won't be as high as what we see in India, which is 14.8% EBITDA and 9.6% last quarter. But in '26, I'm fairly sure that it is going to make a reasonable amount of money.

The next question comes from the line of Meet Jain from Motilal Oswal Financial Services Limited.

Congratulations on the good set of numbers. My first question is regarding our order book and our revenue guidance. Seeing the order book, like we mentioned the order book is average 14-month order book, like it translates to around, let's say, INR 1500 kind of crores, but what we gave a guidance is far less than that. And when you look at the commentary on the segment-wise, we are estimating a very strong growth across segments. Just want to understand, is it really optimism like a conservative number? Or are we seeing any early signs in the U.S. slowdown what we have seen in the past 2 years because of the order book and everything? Can you just highlight -- give some more color on that?

So you used the exact 2 words, Meet. We are cautiously optimistic at this point, right? You use that. So that's what exactly we are -- I think there's a lot more growth in the system. We are just making sure that things settle down with the macroeconomics. And there's enough new customers to fill the growth. So it is more of erring on the side of caution rather than going out and saying a number and chasing it. And for us, see, we've never had a strong India position when we -- a couple of years back when we got into the U.S. slowdown. And at that time, India was probably around less than 30%. Today, India is 47% and growing. So between the 2 economies, we should be okay.

Understood. So just as a differentiator, what mitigating factors will we have implemented in place to avoid that kind of the -- like last 2 years if the U.S. goes into slowdown or something like that?

No, we are seeing substantial pieces coming to India itself, and there are new customers coming to U.S. So even if there is a slowdown in existing customers, it's not going to be a stocking, destocking situation where they stop. So instead of taking 100 parts, they may take 80 parts, okay? So it's not an alarming situation like what we went through a couple of years back. So we are just being cautious and not -- I think the orders are there. It's broad-based. It's exciting for us on both segments, and there are more coming. So that's the key.

Understood. The second question is on the margin part. So can we expect FY '26 to show some positive bias on FY '25 level in terms of margin going ahead?

We'll still continue to say 33% to 35%, okay? In certain quarters, you may see a little bit higher. Certain quarters, it will be in that range.

And what about EBITDA margins?

Suresh, do you want to answer that?

We generally do not provide the guidance at the EBITDA level PAT level, but like what KB said we would like to reiterate that 30% to 35% is a reasonable number for us to look at the gross margin level. Some quarters may be higher, some quarters may be at this range.

Okay. So just to clarify, like in this year FY '25, we...

I'm sorry to interrupt Meet, those were your 2 questions. If you have any more questions, please rejoin the queue. The next question comes from the line of Jalaj from Svan Investments.

Congrats on a great set of numbers. Sir, my first question was what exactly happened or what went through in the gross margins for this quarter in particular? Could you help us understand that because that will help us to project fourth quarter going forward? There is a drop in the gross margin this quarter. What explains that?

So the guidance range, what we have mentioned earlier is 33% to 35% of gross margin. We are there at the upper end of that guidance range. The previous quarters may have been a little higher because of the product mix, but we've always maintained that 33% to 35% is a reasonable number to look at. From a full year perspective, we are at 35.8%. I think that is a reasonable number to look at, Jalaj.

Okay. Understood. So basically -- so just a little bit harping on to it a little. So considering the order book we have in hand and the product and the industry-wise mix, 33% to 35% looks a reasonable one. Is that my understanding correct going forward also?

Yes. In certain quarters, you will see an upside. And I know where you're coming from. We've always said 33% to 35%, but a few quarters, we've been 37% and odd. And we'll -- of course, our endeavor is to be higher, and we will try to get there. But I think you should take 33% and 35% as your range.

Got it. That was it. And secondly, on your aspiration of 3x -- of double the revenue in 3 years, the base -- what year base are we considering? And what sort of mix should I see across U.S. and the India business across it?

So one, it is from FY '24 to FY '27. And in terms of growth engines, like we mentioned earlier, we're seeing growth opportunities across India, existing business in U.S., the new projects in U.S., we're seeing growth opportunities in all 3. The aspiration is to be 50-50 between India and U.S. Some quarters, we may see some industry verticals growing a little faster, some geographies growing a little faster. But the aspiration is to be 50-50.

And today, we are at 47% India, 53%. It is a little earlier than we expected.

So sir, I understand that India as an industry or a market is growing...

Jalaj, those were your 2 questions. I would request you to rejoin the queue for any further ones. The next question comes from the line of Chirag from Keynote Capital.

Sir, my first question is related to raw material sourcing. Could you make me understand like do we procure where you see from India? Or is it from another countries? And if you could provide the mix for the same?

Shriram, do you want to answer that?

Yes. So we source materials globally. So wherever available in India, we would source locally. And wherever sometimes it is required to import the materials, we would do that. So it depends on the commodity and depends on the particular building.

And also sometimes complexity and type of product.

Any ballpark number to understand if there is any dependence on a particular country at this moment?

No, it's all over the world. So it depends, right? A lot of it could be from India as well. So...

Yes. Now with the PLI scheme for the PCBs coming out, our endeavor is to do more and more India. Only if we can't do India, we go outside.

Perfect. Second question of mine is related to the collaboration that you had with the new company. I just wanted to know what different things as R&D we are bringing on table? And what are your future thoughts related to the same companies that are you willing to increase the stake in the same company or not?

So our endeavor is always to do manufacturing, okay? So what Zepco Technologies brings to us is a design arm for our Clean Energy customers who are looking for doing more and more designs out of India. And what that helps us is a funnel to get our production. These are some of the large customers we already deal with. And some of the future products will be designed by us in association with Zepco. And number 2, they are into one of the -- I don't know the exact statistics, one of the key companies making drone motors and controllers, okay? And in the same case, we will be doing the manufacturing into the future. So that is one of the reasons why we have this close association with them. They also have a EV solution for 3-wheelers, which we completely made and designed in India, which we want to see if we can partner with some of the OEMs. Did that answer your question?

Yes, clear. I just have one last question, and I'll join back the queue. You have said that you are being cautiously optimistic related to revenue guidance. Is it possible for you to make us understand is there any kind of seasonality in sales that takes place because from a perspective that last year Q1 was at around INR 200 crores run rate. At this moment, we are almost INR 340 crores run rate on a quarterly basis. ARR is almost about INR 110 crores per month. So just wanted to have a check, is there any kind of seasonality, or else achieving the 12-month or 14-month average order book guidance, we could have easily thought about doing a top line of INR 1,400 crores, INR 1,500 crores from just a number perspective, but it would be great if you could throw some light on that.

So let me put it this way. The order book is strong. We anticipate growth, which is that you've seen in the last 3 quarters. In Q2, we grew 38% last year. Q3, we grew 31% and Q4, we grew 58%. So we're just being cautiously optimistic. I think -- and I believe that the growth is there. And like I said, every quarter, we'll try and update you as the big programs kick in. So some of these programs, there could be delays. We don't want to go out and say that it's going to kick in, in June, let's say, there could be August because we burned our fingers a couple of years back doing that. But it's all there. So we'll update as we go.

To add a point, there's no seasonality per se, but H2 tends to be a little stronger than H1 for us.

[Operator Instructions] The next question comes from the line of Rahul Gajare from Haitong Securities.

Firstly, congratulations on your Q4 performance. The first question that I have is on your Chennai facility, which have become operational. Can you talk about the potential peak revenue that can come out of Chennai factories? And based on your thought on the capacity, et cetera, when do you think you will have to start adding or think of adding more manufacturing? That's the first question.

So let's put it this way, being cautiously optimistic on one side, but this factory has already spoken about. So some of our products are larger in size. So we believe that the capacity is getting utilized, but over the period of this year, you will see -- we always look for asset turns of, I would say, 8% to 10%, and we continue to be the asset-light model. So you can do the math on that. I don't want to say -- because it's not a specific product you're making there. It's a multiple set of products. So saying that, we are also setting up 2 more factories, okay, in the next 6 to 12 months.

Okay. And where are you planning to set up these factories?

So for export, we are looking at setting up in the same location, which is in Chennai. And the Phase 2 is around 30 kilometers from where we are for the domestic tariff unit. That's in Tamil Nadu also.

Okay. Fair enough. So you're well sorted as far as manufacturing is concerned. My second question is on the segmental business. Now you've given a decent color on sector-wise, what to expect from Industrial, Clean Energy, Railway, et cetera. I wanted to know your take on Communication, especially given that we've seen a drop. How do you see this particular segment in the next year based on the backlog or discussion visibility that you are having with customers in Communication?

See, Communication has also grown, but it has not grown at a rate like the others. And Communication is primarily India. And we have grown at -- what is the number? 53% in Q4. So that speaks for itself, right? And it is going to grow further. And we are in our action of communication for the India market.

I was actually looking at it from a full year basis. We've done close to INR 90-odd crores compared to INR 112 crores. Though it's a small number, but I just wanted to know...

Yes. A lot of that will come in the Q3 and Q4, I would say Q4 primarily. So that will continue. And again, this is in the 5G area. So you know what I mean.

The next question comes from the line of Chetan Kumar from Avendus Spark.

This is Uttham Kumar from Avendus Spark. Most of my questions have been answered, except for on the CapEx front. I think a couple of -- the first thing is, I mean, the 2 factories is something which you had highlighted that it's going to be up and running over the next 6 to 12 months. Just wanted to know what kind of CapEx amount are we talking about? Because one side, we're talking about doubling of revenue over the next 3 years. So what is the overall CapEx which you are planning to set aside for this particular target?

We usually say our CapEx, everything, including buildings and it's around INR 40 crores to INR 50 crores. It could just go over a little bit to be -- if like the previous example I said our factories, what we planned for 12 to 18 months was kind of sold off in 4 months. So it may be just preponed a bit, but we still maintain that INR 45 crores to INR 50 crores in there.

These 2 new facilities which you have stated, is it on and above the brownfield capacity expansion, which is happening right now, as mentioned in the beginning?

No, no, it is Phase 1 is over. Phase 2 is what we are building In the brownfield.

Got it.

The next question comes from the line of Vipraw Srivastava from PhillipCapital.

Am I audible?

Vipraw, we cannot hear you.

Am I audible now?

Yes, you are.

Right. Sir, quickly on the Transport Mobility business, which has shown a very rapid growth. So obviously, my question is that does the margin profile of your Indian business is similar to U.S. business on gross margin side?

We couldn't hear the last part of your question. I know it's on Mobility. Could you repeat the last part of it?

Sir, what I'm saying is, is the margin profile of your Indian business similar to U.S. business in gross margins?

There will be some difference for sure. But since we are in mission-critical product lines in Rail or in Air, so they more than make up for it. So we're not doing Consumer or Communication that way, right? So that makes up for it.

Right, sir. And sir, one more question. So quickly on the Clean Energy business, obviously, U.S., that segment all the soft in that space are not doing well. There has been IRA funds blocked by Trump. So you see -- you continue to remain optimistic on the Clean Energy segment?

Yes. So because we are in the right part of the Clean Energy business, we are not in rooftop solar, a small part of it is there, but mostly in storage, which is growing at 70% in the U.S., okay?

Storage and inverters is the product mix, right, for Clean Energy?

Excuse me?

Storage and inverters, am I right? That's the product mix for Clean Energy.

Storage systems. And we've also got new customers in other -- see, because of the -- what you call the data requirements of AI servers, a lot of clean energy going in the U.S. with the data centers coming up. So that's why you're seeing a lot of uptick in that, especially in storage.

Right, sir. And sir, lastly, the storage mix is for your -- the storage which you cater to is for commercial partners, it's not for rooftop owners or homeowners. It's for industrial and commercial partners?

It's industrial and commercial. I mean not commercial. There is home also, but that is where they can actually make use of the solar because by storing it because there's a different price tariff for different times of the day in the U.S.

The next question comes from the line of Praveen Sahay from PL Capital.

So first question is related to your receivable, which has increased to 84 days for a year. So where you are going to see this number to be is because your mix change has is like that, which has reached -- which has actually led to the increase in the receivable days increase and will be here or where you will see?

No. Our receivable days have slightly increased from 79 to 84. But if you look at it, there is a decline in receivable days when you compare to December '24. I think between 75 to this current 85 days is a reasonable range to look at. It depends upon the quarter it changes, but yes. Overall, if you look at our net working capital days, there has been a marked improvement from 161 days in March '23 to 124 days in March '25.

And we'll try to maintain this?

We'll try to improve it, but then [indiscernible]

Maintain and internally to improve.

Okay. And one clarification, sir, because one, on the expansion part, the new export plant and the brownfield domestic, those are operational or commenced, apart from that, 2 new you are expecting?

No, no, no. Let me clear it. There's one export, which is already functional. The brownfield, the second phase is getting started, and we are looking for starting on a new export.

Okay. Okay. Fine. And any utilization number, if you can share right now?

We've always said we -- any time we hit around the 70% number, we will expand, okay? We will build the buildings which has got the longest lead time.

The next question comes from the line of Ashutosh Parashar from Mirabilis Design.

Vipin from Mirabilis this side. I had 2 questions on -- broadly on the current quarter only. So first was on the Mobility execution since it's a strong execution that we've seen this quarter. I wanted to understand what is the nature of the project, which is leading to such strong execution? So you can give some qualitative commentary on the -- either the nature of the product or the customer or the geography which led to this strong number.

So a lot of this is India, okay? And a lot of this is in rail and aero. Multiple sides, we are in the cabin, we are in the engine and the aero side, multiple different projects, multiple customers. And the rail side, again, we are in braking, we are in interlocking. We are in the engine controls. So it's very broad-based and diversified in the segment itself.

Got it. Okay. And also a similar commentary, if you can give on the order intake this quarter, which is about INR 500 crores order intake that we've got. So if you could just highlight -- I understand that you have already made a commentary that it's largely broad-based. But again, if you can just highlight, let's say, the largest 2 orders in this intake either on basis of the kind of product or are these all for new customers or existing customers?

The largest intake, I would say is in Mobility.

Okay. And this is not the 2-wheeler...

No, no, no. When we talk Mobility is more Air and Rail.

The next question comes from the line of Jalaj from Svan Investments.

So this was with regards to the India business specifically. If I understand the industry itself is growing at somewhere around 30%, 35% because of the migration from exports to domestically. But still our growth has been laggard in that sense. Any specific reason for that? Or are we changing any outlook for the way we are working for at least India business?

So we are -- India growth last quarter has been 70%.

I'm talking more from a Y-o-Y complete year, I was looking at those numbers. And also from maybe a 2-year perspective, if you could share your thoughts around that?

Yes. So see, what we're trying to equate is the -- both export and India. And India is growing faster as far as we are concerned because in the last 3 years, we have worked in India to get these projects to come in. And we also need the export. We just don't -- we want to have it both geographies doing well. And apart from that, 24% of our business is Japanese with Japanese customers. And today, what we are looking into the future growth is Europe and GCC.

Does that answer your question, Jalaj?

Yes, yes. And sir, the second question was on the margins. So I understand that we usually talk about the gross margins. But on the EBITDA level or with flowing through, is there a possibility of eventually the operating leverage playing out or -- because traditionally in these businesses of EMS beyond the point, we have not seen it playing out the operating leverage. So how should we understand that? Have we reached out to a peak wherein the shifting of from the U.S. facility to India has reached to a level of -- at the level of maturity right now. Incrementally, no more shift will happen and the margins are stable -- to be stable here or there is much more -- there is enough lever further to grow that?

Jalaj, we always look at profitable growth and not growth at any cost, okay? So certain businesses, we actually don't do because of -- we can't achieve the profitable growth. That's why you will see us even worldwide, we'll probably have one of the best gross margins there. And then as the top line increases, you will start to see some flow-through below that. But today, we are investing or getting ready for the future where some projects, though it's kicking in 3 or 4 months later, we need to start training our people to get ready to do that. So there's a lag before the revenue comes through.

And on the part of shifting from the U.S. to the India facility, margin kicker from that side, have we reached to an optimum level or there is more scope to it?

See, ideally, when we sell or do our sales, the ideal situation for us is a U.S. customer. I'm talking about export since you're talking about that, U.S. customer coming directly to India. But sometimes they want to stop over in our U.S. facility. The ultimate goal is to get everybody to India and the U.S. facility is a beachhead. But today, being in this unique situation, we can -- in case the customer is adamant to do it in the U.S., we can do that. But always our goal is to move the products to India. And last year, it was a short-term thing where we moved whatever existing product we did. Actually, we are lucky that we did that. So in case new projects come in the U.S., we can do that in the U.S.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments.

Thank you, Deepak and Nikhil. FY '25 has been a pivotal year for Avalon, marked by strong revenue growth, margin delivery and operational improvements and strategic progress across markets and customer segments. As we step into FY '26, we remain focused on executing with discipline, scaling responsibly and investing ahead of growth to capture long-term opportunities. With a robust order book, diversified customer base, expanding infrastructure and a clear road map supported by strategic partnerships, we are well positioned to build on the momentum and continue delivering sustainable profitable growth. We thank our investors for their continued support and look forward to updating you on our progress in the quarters ahead. Thank you. Thank you very much.

Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. You may now disconnect your lines.