AXISCADES Technologies Limited (532395) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the AXISCADES Engineering Technologies Q3 And 9-month FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us on the AXISCADES Engineering Technologies Q3 and 9 months FY '20 Earnings Conference Call. We have with us today Mr. Sharadhi Babu, CEO; and Mr. A. Srinivas, CFO. Before we begin, I would like to state that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available on the Q3 and 9-month FY '20 results presentation that has been sent to you earlier. I now request Mr. Sharadhi Babu to begin the proceedings of the call. Over to you, sir.

Thank you, Rishab. Good afternoon, everyone. Thank you for joining this conference call. I hope you have gone through the results presentation shared earlier with you, which provides details of our operational and financial performance. Let me quickly share a brief overview on the key developments, and later, our CFO, A. Srinivas, will walk you through the financial performance. One of the highlights of the quarter under review was the renewal of our tie-up with Airbus. AXISCADES has been selected in December 2019 by Airbus to work on the fuselage, product development, customer support services across multiple Airbus locations. We are proud of this as this is the third time that we have been selected by Airbus for critical engineering services. This contract was won among very stiff competition globally, and it is a reflection of our strong capabilities. We also, over the last 3 months, renewed a multiyear contract besides signing a new contract with a heavy engineering customer in North America. I would like to add that we also received further orders from our strategic solutions client. So slowly, but surely, we are putting in place a solid platform for growth, which is also bolstered by some of our key customer wins in the first half of this fiscal, which I'm referring to about 3 Fortune 500 clients, which we have added. And now the order book stands at about $100 million as on December 31, 2019. We are also continuing our efforts in the digital and Industry 4.0 domain, where we have had some [ recent wins ], and also, we see a lot of increasing opportunity. In essence, the strength of the company to capitalize on is well in place, and with these building blocks, we are very hopeful on ending this year very well and also a good start to FY '21. Our top line has grown 8.3% to $67.6 million in the 9 months FY '20, and we also delivered the highest ever EBITDA margins of 16% for the quarter 3 of FY '20. Growth over the sequentially preceding quarter is driven by improved performance in both of our business segments. On a corresponding quarter basis, the contribution to growth of our Strategic Technology Solutions business is significantly higher, mainly because of a strong order flow compared to orders in hand over the previous period. Our strategy going forward is four-pronged; namely, to enhance capabilities, to deepen the engagements, to begin work with more prestigious logos, and also drive down the cost. All this ties in with our endeavor towards profitable growth, which we view as an imperative. On this note, I will get our CFO, Mr. A. Srinivas, to take you through the financial performance. Thank you.

Thanks, Babu. Good afternoon, everyone. I will walk you through the financial performance for the third quarter and 9 months ended December 2019, following which we can start the question -- Q&A session. To start-up with, we had a good quarter. Our consolidated total income for Q3 was INR 170 crores as against INR 160 crores during the previous quarter. In Q3 FY '19, the revenues from operations grew 6.3% quarter on quarter. Slide 8 summarizes the 9 months performance for FY '20. Consolidated revenue from operations [ grew at 8.3% ] year-on-year in INR terms and was primarily driven by strategic technology solutions business. PAT for 9-month period improved to INR 14 crores -- INR 13.9 crores from a loss during the corresponding period of the previous year. We are focused on improving productivity and optimizing cost in order to drive margins, and thereby, increase our PAT. If you look at all financial metrics have improved quarter-on-quarter for the last 4 quarters. If you note, we had turned profitable in fourth quarter of previous fiscal and since then, have been able to deliver a robust performance going into FY '20. Q3 FY '20 margins have been strong, and we expect and are hopeful of maintaining this trend. Slide -- Now turning to Slide 10. Engineering services contribute about 78% of the overall revenue when the balance of 22% was contributed by strategic technology business, right? Aerospace, heavy engineering, product and solutions contributed to about 32%, 42% and 22% of the revenues, respectively. We improved our offshore mix and the same stands at 38% in the current -- for the period ended December 2019 as against 42% against the previous. Contributions of both the Europe and U.S. geographies remained strong at 38% and 41%, respectively. And also, you note -- fixed price -- proportion of fixed-price contracts had remained at about 53% for the 9 months period ended. Took -- it's [adaptive] good performance for the last 4 quarters. We also had a rating upgrade from BBB negative to BBB stable, right? And I hope that it improves further. On this note, I once again thank you for your participation. And may I now request the moderator to open up for questions? Thank you.

[Operator Instructions] The first question is from the line of Priya Sharmonti from Dolat Capital.

Sir, my question is you have reported the highest operating margins for this quarter. I just wanted to know how sustainable do you see this operating margins going forward? My second question would be about the new project in the heavy engineering that you won. What is the nature of growth there? If you could give a little more details there? And the third question is the Airbus deal. What is the size and the likely margins from the order there?

First one you can answer [indiscernible]. The first question will be answered by Srinivas, And the other 2 questions, myself, Sharadhi Babu, will take it. Srinivas?

Coming to the margin, right, I expect -- no, they need to be fairly in double digits. It should be sustainable, right? So now whether it's -- the question is whether it is 16% or 15.5% or 16.5%, that's -- at this point of time, I'll not be able to give a clear-cut direction on that. Neither I will be able to comment on that. But definitely, it will be in double digits. Our endeavor is to, as I stated in the last many -- about a year back in the call, we should be able to move in -- the goal is to move to about 13.5% to 14% for the -- this current financial year. We are on track. And in the following year, we hope we improve it further. We are working towards it.

To answer your question on the heavy engineering client, as I mentioned, this is in the design engineering and then we will be providing the design services for the new product development for this North American client. Second question on the Airbus deal, this is a -- as you know, this is the third time we are continuing our win with Airbus, and this contract also extends for 3 years' duration. And we are seeing a very -- we are seeing good growth in volumes and also good predictability in the business. So I'm very sure it is positive.

And the new projects with the heavy engineering client that's already won, that's already signed?

Yes, that's right. It's in the execution currently. It's already in -- under execution. We got the PO and it is under execution.

[Operator Instructions] The next question is from the line of [ Saket Kapoor ] from [ Kapoor & Company. ]

Under the heavy engineering segment, sir, if you could give more granular details for what kind of -- what is the scope of the work and which industry are we exactly catering to?

Okay. Yes, I would like to address this industry. This industry basically -- when I say we classify this heavy engineering, it could be construction equipment, it could be industrial equipment, right, or the large industry manufacturers, et cetera. So some of the companies in the market qualify this as a -- put this under transportation, right? Now [indiscernible] for us, this segment is other than Aerospace, other than Automotive.

Okay. Sir, then, which sectors are you catering to under the heavy engineering segment? If you could give...

It's basically construction...

Yes, which type of customer...

Yes, construction equipment, mining, right? Farm equipment, okay? Industrial machinery.

So sir, what is the scope of work there exactly we are doing for them? Because these are all manufacturing concerns and for a mining equipment, are we designing-- what sorts of designing are we -- what is our scope of work there? If you could give a more granular detail.

Yes. Here, for this equipment, which includes the mining equipment, construction and then excavators, we do the complete design. We do the design and manufacturing engineering. And in this design, we take care of the designing of 9 different subsystems. It includes engine, transmission, lubrication, hydraulic, pneumatic equipment, and also -- and it includes the cabin and various updates to their design. And also, completely optimizing their designs for the newer versions. And besides that, it includes new product development. Suppose, we are working on -- you are working on 1 old version. Now we want to release a new product. We do the complete design of various parts for all these many different subsystems.

Correct, sir. Sir, because we are seeing that a lot of scope of work will improve -- will come up due to this commercial mining opening up in coal and oil. And also, sir, most of the major mines, where now underground mining would be the need of the hour, where more technological expertise would be needed. So taking this into consideration, how do the scope of work for a company like us opens up, especially in the mining segment? Sir, what kind of revenue are we generating? And the next point is, sir, how much cost of the equipment does the engineering part of or designing part contribute to [ M&A ]? If a farm equipment is priced x, so how much of cost goes into our designing of it?

See, in this -- I will answer this in 3 different parts. From the revenue perspective, I think Srinivas also explained, almost we have more than 1/3 of our revenue covered in the heavy engineering segment and build it with the customer, we work with them on design and manufacturing engineering. And today we have a good spread of our services extending to design and extending to the -- their production -- during their production, okay? And here, the industry is also moving into the new digital area. So we are providing services in the digital domain, which includes the IoT, manufacturing, automation, and additive manufacturing and there are other artificial intelligence information learning services. Okay? So this all -- it's -- we aligned to our customer strategy. Okay? And today the -- based on their geographical spread, we also walk along with the customer and then i.e. work with them in multiple locations besides the North America, U.K. and India and also other locations like China and Mexico. So there has been a strategy to grow along with the customer, going to their more and more new plants and also offer them the new product development services.

Sir, if you could give your major customer profile in India? Sir, domestically, who are your major customers?

Just to answer your question, no, we don't work with any domestic customers in this area. It is all international, primarily U.S. and Europe-based. Okay. And they are the largest. Globally, they are -- by one, the largest in terms of market share in their respective segments.

Okay, okay. And there are very small points. Sir, suppose Coal India want to develop a product for mining equipment, so how will they get -- how will you -- your role will be played? It would be handed over to an foreign collaboration? And then through them, the product would be designed?

No, the way it happens is, see, the coal -- for example, in this case, particular case, the Coal India [ visage ] is also the OEM. I'm not the OEM. There are 3 or 4 large OEMs globally. Whoever gets that bid -- whoever wins that bid, so obviously, they have to come back to companies like us -- ER&D companies like us to what backwards to meet, one, the time lines; second, to meet the local conditions; three, to meet the price considerations, okay?

Sir, the peer comparison in your sectors, the way we are operating...

I'm sorry to interrupt.

Just last points -- last point. I'm coming in the queue for further up questions. I have 2 more. Peer competition, if you could give, sir?

Peer competition in our segment, you know, it includes -- in this particular heavy engineering is what you're talking about? Or...

I'm talking about the designing work which we are doing. If [ cement construction ] also, your peer competitors are in this segment, they do also designing work for architecture and designing?

Yes, there you see, across my competitors -- sorry, company as a whole, there are a couple of listed entities, a couple of private -- which could be Cyient, HCL, right? Depending upon which segment you're talking about, it could be Cyient, it could be TCS, right? So -- and then a couple of European companies and North American companies as well, okay? There are a whole stuff companies we are competitors to.

So [ Sena ] is one of your competitor. That is what I was trying to find.

Who? Sorry?

[ Sena Consultant ]from Bangalore.

No, no, no. We are not in that, not completely.

Okay.

We are not in that business. Our business is completely different. Okay. Anyhow, we'll take this off-line. I would request you to, whenever you are in Bangalore, come and meet us so that once you visit our office, you will get a better idea of what we are doing.

The next question is from the line of [ Yash Diwari ] from Sushil Finance.

Congratulations on the good set of numbers. I just wanted to know the reasons behind the margin improvement other than the reduction in the selling expenses, which is shown in the results that you gave out. And the second one is, does that strategy still remain the same going forward, which is focused on the embedded systems and increasing wallet share from the existing clients?

Yes, I will answer the second part. Babu here. So yes, going forward, the future is going to be a mix of electronics and mechanical. We have a good recent wins in the embedded systems and in digital. And we foresee to that this opportunity is going to increase. And certainly, the future mix will be more of -- more in electronics and also we'll build on our mechanical domain. It's very important for -- when we go on the electronics listing, our strong classic mechanical domain expertise becomes very, very important. The first question, I think, Srini?

See the margin improvements is a combination of 2 things. One, compared to the previous year or the previous quarter, the contribution of strategic technology solutions business has been higher, number one. Number two, basically, we have been reaping the rewards of our productivity improvements and cost of commission measures, which we have been articulating with you -- we have been discussing with you for last 2, 3 quarters. Very frankly, this is leading to an improvement in margins.

[Operator Instructions] The next question is from the line of [ Rohan Chawania ] from -- who is an individual investor.

So basically I have three questions. Can you hear me now?

No, come closer.

Can you hear me now?

Yes, better.

Yes, so basically, I wanted to know a new Chairman has joined, Mr. David Bradley. So why doesn't come on calls? And what was the reason for him joining? And the second question is on your pledge. How does your -- how do you aim to reduce your pledge? And is there any guidance on that?

Okay. One, the Chairman, David Bradley, was in the call last quarter, right? Unfortunately, he was tied up this time. He'll be there for the full year results, right, which should happen -- we will -- at the end of the year, he will be there on the call. Number one, okay?

Okay. But what was the rationale for him becoming Chairman?

Sorry?

What was the rationale for him becoming Chairman?

We invited him, see, he was able to run his company, which subsequently got sold up with [indiscernible] right? Then he was available. We have been -- had -- we, as a company, had great [ equation ] relationship with him. So once he was available, we invited him. Then he chose to spend some time with us, basically, to help us, to guide us, to improve the performance of the company, okay? So that's the reason why he choose to become Chairman.

On the pledge?

Okay. The pledge, I think, it's more -- question is more towards the shareholder. So it would be right -- it would be appropriate if you could direct -- I will get you an answer probably...

Okay. But what is the nature of the pledge? What is the nature? Why is the share pledged?

Okay, nature of a share pledge is 2 [indiscernible]. One, about 2 years back, we did an acquisition for which we borrowed some money. Basically, we did some refinancing to fund the acquisition, so for which the promoter has pledged his shares, a part of it. The pledge is coming. The second part of the pledge is more from the shareholder internal treasury operations, which are..

So there's one part of the share pledge which is not company-related, you're saying?

Yes, both are not -- one part of it is not company-related, yes.

And you have no guidance as to how this will reduce?

Sorry?

You have no guidance as to how this will reduce?

I think this question should be more appropriately answered by the shareholder, not the operating team here.

[Operator Instructions] The next question is from the line of [ Veerul Vensari ] who is an individual investor.

Congratulations on a good set of numbers.

The next question is from the line of Manish Bhandari from Vallum Capital.

I have few questions on the working of the company. One, I wanted to check with you is like how is the margin in our Airbus deal. Because now it's the third time when we have won it. So is it -- and who are your -- our competitor during this renegotiation, which has happened? So do we -- I understand that last time, we didn't had a great margin on this business. So has the margin improved on this business on the Airbus contract? And how long will this contract run through?

Okay. Regarding part A of your question, which is we had a tough competition with who is who of engineering services, right, from the European companies to domestic companies. But eventually, the domain knowledge helped us sail through, A. B, compared to last time, we are much -- very, very better off or place with regard to margins, right? And we also expect to see increase in volumes over the next 3 years.

So is it a part of the discussion in the deal and the documentation about the volume growth, what we'll get it from the Airbus?

This is what they have indicated to us.

Sure. My second question is regarding the Mistral pickup. So how we should view Mistral earnings and sales for next few years? And maybe next few quarters also on the -- from an earnings level perspective?

Okay. First part, usually the second half and between second half, Q4 should be better, A. B, if you take -- if you were to take a long-term view of, let's say, 3 to 5 years, the revenue should be doing well, right, both domestically as well as on the embedded services, which is basically any -- what we call it product engineering or ER&D, that should -- that has also seen some traction there. So overall, I believe, in the next 3 to 5 years, it should, if you get a long-term view, there will be ups and downs quarter-wise because of certain domestic defense revenues, right? But if you need to take 3 to 5 years, they should be able to grow at a good pace.

So would you have any number in your mind for FY '22 and '23 on Mistral side? What will be internal budgeting you would like to achieve?

Internal budgeting, to be on a conservative side, we should be looking at around approximately 12%, 12% to 13% tax.

Growth?

Yes.

Sure. And my last question is regarding the liquidation of land, which you spoke about some time back to deleverage the company. Is there any other way to deleverage the company for the debt that we have? And how we should view this?

One, we are on one -- the 2 pieces to the property, which we talked about. One, we are working. If we are -- if everything goes out well, we should be able to give you some good news by end of March quarter or maybe starting of April. The right dollar pace is a bit too long term. We have been -- we are working on it, right? So at this point of time, still a lot of work has to be done on a larger piece of land, which probably should take about 9 to 12 months from today to get to amortization or to get to divestment.

Is it fair for us to assume a 15% to 20% growth rate in our top line in...

I think now we are just comment our budgeting process. Probably, I should be able to -- we should be able to in much better position to share with you these things as part of our annual results.

And sir, also, this new heavy engineering customer, you already deal with Caterpillar through your North American facilities.

Yes.

Is someone beyond Caterpillar?

Yes, yes. Well, it is beyond the Caterpillar, other than Caterpillar.

And that business can become sizable for us?

There's a whole idea. So it's again $1 billion in revenues, right? So the whole idea is to ramp it up to, let us say, [ $3 million ] revenue run rate, that is again -- that is our plan. That is our -- that is where we are working on, right? So the next 3 to 4-year time frame.

Next question is from Mr. [ Viral Bhansari ], an individual investor.

Congratulations on a good set of numbers. We've been waiting for this for a long period of time. Sir, I have been with your company since the last 12 years now.

Thank you. Thank you so much. Thank you for your patience.

I hope we get rewarded.

Sure, definitely.

My question -- coming to my questions. The question is regarding the order book. You said your order book is right now $100 million. So it that order book -- over what period? I mean that order book is executable over which period, how much period? 12 months? 18 months?

If you look at weighted average money -- if you look at in the next 12 months, approximately 65% to 70% should get executed.

And continue sir?

70% should be executed in the next 12 months, 12 to 14 months.

And does this order book calculate also include the new Airbus engagement and the renewal of contract with Caterpillar?

Revenue with Caterpillar, yes, right. But Airbus, part of it, not the full.

So how much, 50%? What part of Airbus deal is included in this and not included in this?

This will include about 1/3 of the Airbus investment.

Okay. So can we expect a focused ramp-up in the Airbus account going forward, I mean, through this year?

Yes, it will increase during the year -- during the calendar year, yes, definitely. Yes, it will go up.

It will go up.

Okay. So what kind of -- just a rough calculation, back of the envelope thing, what kind of a growth are we looking at?

As I said, overall growth of the company will be in a much better position to share at the end of financial year, along with the financial year results, right? Babu, along any ...

No, I think -- as I think Srinivas covered, see, we are looking at anywhere about 12% of the growth, but we'll be able to share more details during the annual results, okay, where our budgeting excels would have been complete. And we also have a full view of our order book.

Sir, my second question is regarding the order book of -- you said you've got a few deals in the strategic electronics division, strategic technologies division. So is that order one under Mistral or access aerospace?

This order -- the order book has -- on the access aerospace. I mean we have orders and access Aerospace also.

Okay. So how is the Mistral account going, sir? I mean how is Mistral performing? Because you broadly mentioned strategic technology division as one of your segments. So we don't know how Mistral acquisition is performing.

Doing well. Doing well. Both the businesses are doing well. Second half is better for strategic technology business. And in particular, Mistral in Q4 will be better.

Okay. So we have some deliveries lined up in the Q4?

Yes. Yes.

Yes, absolutely.

Okay, so what could the share of Mistral in the current quarter?

On the current order book, it will be about 18%, 20%.

Yes -- no, the current quarter revenues, what would be the share of Mistral in it, sir?

Current quarter revenues? It is about 28% -- 23% to 24%.

23% to 24%?

Yes. Yes.

So that means Mistral operations have gone down quite significantly?

No, I do think so. No, no, I don't think so. See, as I said, because the business will be lumpy. Most of the revenues will get booked in Q4, second half.

Okay. So one last question. Can you provide me with the revenues that Mistral has clocked over the 9 months?

The Mistral revenues is about INR 100 crores for 9 months.

INR 100 crores?

Yes, for the last 9 months.

The next question is from the line of [ Aman Chohan ] from [ Abacus ].

My query is on the strategic technology solutions segment that we have. Now I was looking at the numbers to the September quarter, we had a revenue of INR 24 crores and EBITDA of less than INR 1 crore. Whereas in the December quarter, this revenue has gone from INR 34 crores to INR 36 crores, but EBITDA has gone INR 9 crores. So what has been the shift in the nature of revenues for this division for such a strong growth in profitability? What is the business that we do in this? And what's the outlook for this division?

See, [ strategy solutions business ], it depends upon the business mix. It depends upon what type of contracts we have and what are the nature of the contracts, right? Some of the contracts are highly profitable in [indiscernible]. So that's what had resulted in this type of the margin profile improvement, A. B, as I said earlier, Q4 should be good.

Yes, I understand that profitability is higher. But see, there's been INR 2 crores of revenue growth, but the EBITDA growth is INR 9 crores, which means that, in the existing business, also profitability improved. It's not just that the new business that came in at a higher margin. So something -- or there is a onetime license fee income or onetime product delivery income or something which is extraordinary or onetime that has happened in this quarter for this division? Because even if it is a profitable segment and even if a new project has come in or an old project, some milestones are achieved, EBITDA swing cannot be 4x of the revenue swing.

No. Okay, let me explain this. First of all, there are no license sales, et cetera, in this business, number one. Number two, it's a milestone, two. Third, whatever had built in the previous quarter, it doesn't mean the same projects will continue because what our [indiscernible] , most of the business will be new business or new milestone-linked business. Okay. It's entirely milestone-driven for some of the contracts that we have.

Okay. So how many clients we have in this division? And what's the typical order, or say, tenure of contracts in this division?

Okay. Which is -- so when you say this business -- and in terms of -- there are -- both the business put together -- in the same strategy technology business, there will be about 6 large clients, right, A. B, this relationship, it's a big project driven, okay? It doesn't mean that 1 product is over, the relationship will end there. No, but some other projects will come, right? So am I clear? Have you understood or no?

Yes, I have. But still, I'm not able to figure out. Because there's a very big swing. The whole profit swing, which has come in this quarter, is coming from this division itself because our traditional engineering design services margins have dropped sequentially. So I was...

No, that is not -- that is -- sorry, we need to correct that. Okay. Now we are comparing the segment results versus the margins. Here, the segment results, it includes depreciation and amortization as well. So there is a reason, A. B, in engineering services as well, et cetera, we provide solutions, which means we need to design and then we need to get it manufactured as well, right, in 1 or 2 contracts that we've gone through this quarter either. So that manufacturing contract, I show that as a subcontracting, okay? That's where -- has led to that your conclusion. Okay. But if you look at quarter-on-quarter on like-to-like basis, the margins for engineering services have also improved. Okay, yes, I agree. in the strategic solutions business, the margin improvement was much better. Okay?

Okay, okay, sir. The last question, with going ahead on the strategic technology solutions, do you feel this kind of profitability can be maintained? Or do you think that the [indiscernible]...

I will not be able to -- It's dependent on so many external variables. It depends upon FX movements. It depends upon -- it's a very complicated process, which runs global supply chain et cetera. So the profitability should be there, but whether this profit, okay, we need to see if in -- the execution is the key to maintain this amount of profitability, right? But definitely to be profitable this business.

[Operator Instructions] The next question is from the line of [ Chetan Dhruva ] from [ Blue Banyan Advisors ].

Regarding the tax rate, everybody is still paying the tax rate this quarter?

Yes. Tax rate, yes.

When are you -- are you moving to the new regime? And if so, by when do you expect it to come to that level? Do you think a big deferred tax [indiscernible] also, right?

Yes, yes. Yes. we are paying taxes because we have different subsidiaries, which are profit making, right? So we have those taxes, A. B, deferred taxes because we had losses last year on the strategic technology business, et cetera. So that's why the deferred tax is coming to. Third, as of now, we are continuing the old regime because one of our subsidiary company will lose the benefits, which was there in the past in the prior regime. So as of now we expect to continue with the older tax rate -- [ taxes slab ] structure.

Okay, okay. Are we -- will still see the [ 34% ] but cash flows will be [indiscernible] ...

Sorry, I didn't get your question.

On the P&L, you'll still feel this 34% shown, but your cash flow is going to be lower, right? Actual cash flow [ lower for the tax ]?

Sorry, I'm not able to get your question properly. I'm not able to hear.

Yes. I'm just -- can you hear me now? Am I clear?

Yes. Yes, much better.

So I was saying that on the P&L, we'll still see this higher number of 34% [indiscernible], but your actual cash flows will be lower because of the deferred tax benefits.

Yes, that's right.

Okay. And when do you think that will go away and you [indiscernible]?

Probably I think towards the end of next year, over the next fiscal year, we should have a view. We can take that because once I opt for the new tax regime, I can't come back again. So we'll take this patience towards the end of next fiscal year.

End of FY '21? Okay. Got you.

Thanks.

[Operator Instructions] The next question is from the line of [ Pravine Padukari ] from [ RCML Securities ].

Yes, taking cue from an earlier speaker, where it is clearly shown or seen that the strategy electrical division is having a much higher EBITDA margin. So is it -- and the turnover is INR 103 crores. So like we still have the INR 100 crores runover in 9 months that you have said. So this is then INR 109 crores -- INR 103 crores during the 9-month period. So is the whole strategic solutions is accountable to Mistral?

No, no. There is the maintenance within AXISCADES also. There is ACAT. Mistral also has engineering services. No, let us not confuse, okay? strategic technology solutions has 2 businesses. One is the ACAT, second is Mistral. Again, Mistral has product engineering, which is engineering design services as well, plus the strategic solutions business as well. Okay. So the question the previous gentleman had asked, what was the revenue they have done, which, to my response of INR 100 crores for the 9 months, which doesn't mean the entire INR 100 crores is the strategic technologies, okay?

Okay. So in that case, the strategic division margin, if you can at least explain the improvement in margin, once again, what are the basic reasons for that improvement?

Okay. Now you're asking for margin improvement year-on-year or quarter-on-quarter?

Sir, quarter-on-quarter.

Quarter-on-quarter is because of specific project that I had, which is highly profitable, A, right? Year-on-year, because the previous year, I had not in one of the divisions strategic technology business, the revenues were [indiscernible], which contributed to the fixed cost, we could not -- which led to a losses. So year-on-year, there is significant growth in margins -- EBITDA margins on strategic technologies. Quarter-on-quarter is an improvement because of one specific product -- one specific project. Revenue mix, basically.

So suppose it on [ Q-o-Q ], if we see, it's from INR 34 crore to INR 36 crores...

That's right.

INR [ 34.36 ] crores to INR [ 35.84 ] crores, but their margin has improved drastically. So like his particular project, I mean, for how much duration would this capacity projects be executed?

Sorry?

For how much you've turned -- the project for which you have turned profitable, significantly higher profitability. So this project will be executable over how many quarters?

Okay. This project will be delivered over next 6 quarters or so, okay? Right? So the profitability will vary depending upon what I deliver in each, this one, et cetera. So this will continue -- different components -- the business mix. Yes. And the milestones are clearly defined.

Okay. So is it fair to assume that this kind of profitability would be sustainable for the strategic electronic division -- strategic technology division for next, say, 6 quarters?

The profitability will be there. But this account, as I previously explained, it depends upon how I run -- how well I execute. It depends upon excellent government too. Third, ability to execute on a timely basis, the remaining milestones. Because if there is a slippage in some deliveries, et cetera, then the cost will increase and also it will have an impact on the fluctuations and on the procurements.

Okay. Okay.

It will be profitable. But it's much -- we need to see. It depends upon our execution. It depends upon CapEx movement as well.

The next question is from the line of Manish Bhandari from Vallum Capital. There seems to be no response from the line of Manish Bhandari.

Yes, we can have someone else, if there are.

That was actually the last question in queue. As there are no further questions, I'd like to hand the conference back to the management team for closing comments.

Okay. Thanks, Rishab. Once again, this is Sharadhi Babu. I would like to thank all of you, once again, for your participation and support. We look forward to interacting with you very soon, and thank you very much. You have a wonderful day ahead.

Thank you very much.

Thank you so much.

On behalf of AXISCADES Engineering Technologies, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.