AXISCADES Technologies Limited (532395) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of AXISCADES Technologies Limited hosted by Centrum Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumeet Khaitan from Orient Capital. Thank you, and over, to you, sir.

Thank you very much. Good evening, everyone, and I'm delighted to welcome you all to the earnings conference call to discuss Q1 FY '25 results of AXISCADES Technologies Limited. To discuss the results, we have with us CEO and Managing Director, Mr. Arun Krishnamurthi; Mr. Mujahid Alam, CEO, Mistral; and our Group CFO, Mr. Shashidhar S. K. They will take you through our results and business performance after which, we shall proceed for a question-and-answer session. Before we begin the call, I would like to mention that this conference call may contain some forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. The actual results may differ materially. These statements are not guaranteeing the future performance of the company and involve risks and uncertainties that are difficult to predict. With this, I now hand over the call to Mr. Arun Krishnamurthi for his opening remarks. Over to you, Arun, sir.

Yes. Thank you very much, and good evening, everyone. Welcome to the Q1 FY '25 earnings call. I'm joined by Shashi, who's our Group CFO; and Muju, who's our CEO of Mistral. I hope you had the opportunity to review our financial results and investor presentation, which has been uploaded to the stock exchanges. So let me first dwell on the overall ER&D industry growth outlook, which directly impacts the company. The ER&D industry is currently undergoing short- to medium-term headwinds in the growth outlook. There are headwinds in certain verticals such as automotive, heavy engineering and semiconductors, both in U.S. and Europe. Declines in retail demand slowdown in the EV segment upcoming U.S. elections leading to slowdown in CapEx spending, client-specific issues, inventory build up, settlement of R&D spend on innovation and [ due diligence ] [indiscernible] are all challenges that the industry has to deal with. Sectors which are still positive are aerospace and Defense, both of which are seeing accelerated spending because of the unique context of these industries. Despite this, ER&D continues to be a growth sector with average growth of around 7.5% with digital revenues growing at an accelerated pace. The impact of industry slowdown is relatively moderate on AXISCADES because of the effective execution of our focused strategy over the last 2 years and at diversifying the customer base and verticals. We are particularly well placed in aerospace and defense and have very differentiated capabilities, which will allow us to take advantage of the strong sentiments in these verticals. We are positioned as a fully indicated strategic technologies, R&D and defense companies that delivers a broad spectrum of products and services from engineering, aerospace and space to defense. Therefore, we will be rebranding ourselves as AXISCADES Mistral and the name change will be pending regulatory and other statutory approvals. The company's strong presence in aerospace, defense and energy, together contributing about 60% of the company's revenues continues to reflect the bullish outlook for the year. Even though defense business, not part of revenue of other ER&D companies, while it's very mature, is very lumpy, and should not be compared quarter-on-quarter for its performance. The company is experiencing some slowness in automotive, some specific clients, heavy engineering and the semiconductor business due to the earlier mentioned macro factors. However the company is confident that the tides will turn in these verticals from H2. Q1 is typically a soft quarter for ER&D in general and defense in particular. The company recorded revenues of INR 223 crores, growing by 4.5% year-on-year with constant dollar growth at 3%, which was led by Engineering Services business, which grew by 15% from INR 152 crores to INR 175 crores. Defense was lower by 21% at INR 48 crores as against INR 62 crores in Q1 of last year. As stated earlier, the Defense business should only be compared on a year-on-year as Defense deliveries generally shift and rollover between quarters, depending on delivery and acceptance constraints by different establishments. The EBITDA for the quarter was at INR 31 crores at an EBITDA margin of 13.9% as against INR 33 crores with a EBITDA margin of 15.4% in the same period for the previous year. The EBITDA margin for previous year Q1 FY '24 was unusually high due to higher defense service revenues, which had an EBITDA margin of 23%. I would like to reiterate that the total enterprise EBITDA margin in each quarter depends on the proportion of Defense production and prototype revenues executed during the quarter, which tends to vary between quarters. The EBITDA margin of Engineering Services for Q1 of this year is at 14% as against 13% in the same period of the previous year. PAT for Q1 FY '25 is at INR 17 crores with a margin of 7.2% as against PAT of INR 6 crores with a margin of 2.6% in Q1 of last year. The company reduced its finance costs significantly during the quarter from INR 20 crores in Q1 of last year to INR 8 crores in Q1 of this year. And this is as a result of prepayment of borrowings from the proceeds of the QIP. In terms of operational performance, the year-on-year growth of 15% in Engineering Services was led by aerospace, automotive and energy, which together grew by 40% from INR 82 crores to INR 115 crores. Heavy Engineering and Semiconductor business degrew by 15% from INR 71 crores to INR 60 crores. As stated earlier, these 2 verticals are impacted by macro challenges of CapEx degrowth and inventory buildup, and we are hopeful that growth will return to these verticals from H2 of this year. While the overall Defense revenues in the quarter was lower at INR 48 crores as against INR 62 crores in the same period of the previous year. In Defense production, revenues at INR 28 crores is higher by 73% as compared to Q1 of last year. The company's production revenues from Defense [ has recorded ] another milestone in FY '25 with a strong order book of INR 322 crores at the end of Q1 FY '25 in the Mistral Defense business. We continue to deliver counter-drone solutions to Indian Defense and wish to complete the delivery of this anti-drone system in Q3 of this year, which will make us a prime candidate for repeat orders in this category. I will now dwell on the performance and outlook for various verticals. The aerospace vertical accounted for 36% of our Q1 revenues, totaling INR 79 crores and reflecting a 24% increase from the previous year. This growth was driven by higher wallet share from existing customers, ramp up in our services and the digital automation of our existing processes. Our long-standing partnerships with aerospace OEMs are growing steadily, and are expected to contribute further to the revenue as OEMs increased production rates, supported by the substantial order backlog, which is driven by a strong demand for aircrafts. We anticipate maintaining a healthy growth rate and momentum backed by a broadening scope of digital manufacturing services and engagement with our customers. Our outlook for aerospace continues to be bullish for the foreseeable future. Our automotive revenues at INR 25 crores is higher by 84% from the same period of the previous year with the consolidation of revenue pertaining to add-solutions, the automotive entity that we acquired in August of last year. Automotive revenue today constitutes 7% of the consolidated revenues, which was at 6% in Q1 of last year. We were selected as a preferred supplier by a leading U.K. automotive OEM and are actively expanding in this space by adding new logos. Our major focus going forward will be on digital and embedded solutions as well as hardware testing and validation. We are developing capabilities in margin accretive segments like software testing, cybersecurity, ADAS and investing in new technology trends, which are in great demand from the traditional -- apart from the traditional focus on mechanical. However, due to macro challenges in this sector, such as a notable slowdown in the European markets and changing strategy by an automotive OEM, we expect the next 2 quarters to be challenging in this vertical for us. We ended Q1 with revenues from our energy vertical reaching INR 11 crores, which accounts for 5% of our total revenue. The addition of EPCOGEN has provided a strong boost to our growth in the energy sector. We have been selected as a preferred partner for 2 new projects in the U.K. with a renewable energy solutions provider and are expanding our customer reach in India and the Middle East. The company has appointed a full-time business head in Dubai, and is in the process of opening a marketing office in Dubai to expand our footprint in this major energy geography. With new deals in this segment, ongoing geographic diversification and development of new capabilities in this vertical, we anticipate the growth momentum in this segment to continue. The Heavy Engineering and Semiconductor business continued to face margin pressures. Revenue in the Heavy Engineering vertical decreased by 8% year-on-year from INR 40 crores to INR 36 crores in Q1 of this year. This decline was primarily due to macroeconomic factors, a slowdown in the U.S. region and customer reprivatization of CapEx across various programs. Despite this, we remain a key strategic partner for our customers in their global manufacturing transformation initiatives. The objective is to move away from traditional low-margin staffing model, margin-accretive, value-added services and set digital competencies for internal automation in global and domestic clients. To enhance the revenue quality of this vertical, we are developing several use cases by leveraging our in-house capabilities and those from Mistral. By revamping our cost structure and optimizing operations, we aim to improve margins in the coming quarters. We anticipate this vertical will begin to recover starting in Q2 of this year. Our Semiconductor vertical revenues, also known as Product Engineering Services for the quarter stood at INR 24 crores, which is a year-on-year degrowth from INR 31 crores, down by 23%. This was mainly due to the inventory buildup of semiconductor chips by global semiconductor majors, leading to production decline. Despite the decline, we are diversifying our customers within the space, and increasing our effort in designing and prototyping for future production runs. The Indian government is supporting Make in India initiatives for semiconductor applications. And globally, we expect that growth will return to this vertical during H2 of this year, upon offloading excess inventory by the OEMs. While I will leave it to Muju to deliberate on the opportunities and status of Defense vertical, we remain bullish on a Defense potential banking on evolving production orders from the significant pipeline of prototype developments of Mistral, the prestigious Indian Defense programs made over the last 1-plus decade as well as potential in ACAT. Suffice it to say that the Defense production orders in FY '25 will be significantly higher than that of FY '24, while we continue to add to the pipeline of orders with certified programs, prototypes for new programs. As stated in our earlier earnings calls, the company is making significant investment in building its digital strength, which is being horizontally deployed across all our verticals and customers, both in terms of internal automation as well as digital offerings to our existing new customers. The digital investments, which are part of our P&L charge and continues to be margin accretive, is now fortifying into new order acquisitions as well as internal cost optimization, and will result in new revenues and improve profitability as the year progresses. The company is also bolstering its sales organization and has recently onboarded a head of sales in the U.S. region to expand our presence in the region and acquire new deals. The company's confirmed order book beginning of Q2 FY '25 is at $83 million, with continued acquisition of new deals, both in Engineering Services and Defense. We are also pleased to announce the appointment of Mr. Tanmoy Chakrabarty as an additional director in the capacity of non-exec independent directors on our Board. Mr. Chakrabarty brings in a distinguished carrier spanning across 4 decades with extensive expertise in corporate strategy, government affairs and digital transformation. He has head prominent positions in the Tata Group, mainly heading governmental affairs. Looking ahead into the full year FY '25, we are confident of delivering as per plan, both in terms of revenue and profitability by leveraging on the opportunities in our growth verticals as well as overcoming the challenges in some of our verticals. Let me conclude by thanking you for your patronage and look for your continued support while we build a marquee institution in the Engineering Services and Defense. I now invite Muju to provide a view on the Mistral Business.

Thank you, Arun. As we all know, Mistral technologies, design and system integrated companies [indiscernible] Semiconductor and different vertical for over 27 years. The company has achieved a growth rate of 20% CAGR in the last 5 years. The FY '24 revenue was INR 328 crores with an EBITDA of INR 56 crores. Despite our strong presence to the Product Engineering space, we have firmly established our [indiscernible] solutions provider. We work closely with [indiscernible] and public institutions like [indiscernible] and Ministry of Defense. We are an integral part of the Radar, Sonar [indiscernible] and Electronic Warfare projects. Currently, Mistral has backed more than INR 800 crores to INR 1,000 crores in certified prototypes across multiple prestigious Indian Defense programs and [indiscernible] production orders. Additional new design wins with a potential of INR 2,500 crores to INR 3,000 crores in future production are under development. The company's order book at the beginning of Q2, FY '25, it stands at INR 375 crores, which was 60% scheduled for execution this financial year. In Q1 of FY '25, Mistral recorded revenue of INR 62 crores compared to INR 72 crores in the same period of the previous year. Of this, INR 23 crores came from [indiscernible] from INR 41 crores different business. The company achieved an EBITDA of INR 7.5 crores during the quarter with EBITDA margin of 11.5%. As Arun mentioned, Defense business experiences variability in both revenue and margins when compared quarter-on-quarter. Interest margin may also get diluted by the quantum of prototypes being designed. These prototype developments mostly have negative margin due Defense risk and become largely competitive in production. Therefore, it is essential to maintain a long-term perspective on the Defense business rather than the short to medium-term view. , The process in the Semiconductor business due to inventory hold in OEM is likely to continue for another 2 quarters. We're actively working to increase our business of newly added clients in automotive sector. We are also on track to add 2 new customers in upcoming quarters. The new drone based on Qualcomm is under development and will be released in the market in Q3 of FY '25. Mistral has secured an order of INR 90 crores from BEL [indiscernible] for 8 radar processing systems for medium powered radar Arudhra. The delivery for the same will begin in this financial year. We are confident that Semiconductor business will return to growth and the Defense vertical will maintain its position [indiscernible] supported by strong order pipeline. And now we would like Mr. Shashidhar, Group CFO, to provide a financial report.

Thank you, Muju, and thank you, everyone, for joining the earnings call for Q1 FY '25. On the back of headwinds [indiscernible] verticals due to macro factors, as explained by Arun and Muju, lumpiness in Defense and generally a soft first quarter, the company has recorded good results in operating revenue of INR 223 crores, a 4.5% quarter-on-quarter growth, INR 31 crores in EBITDA and 13.9% in EBITDA margin. The company recorded a PAT of INR 17 crores, which was almost 3x the PAT recorded in Q1 FY '24. As explained in the earlier earnings call, the company's finance cost has significantly reduced as a result of repayment of borrowings amounting to INR 110 crores that will be raised in early of 2024. The company's finance cost of [indiscernible] the INR 8.07 crores, which is a significant reduction as against INR 20.1 crores recorded in FY '24 and INR 12.51 crores recorded in Q4 of FY '24. The company scheduled to repay another INR 50 crores of its borrowing by end of September '24, which will further reduce the finance cost. Our net debt as of 30th June is INR 50 crores, considering INR 182 crores in cash, bank and liquid investments. Our steadfast focus continues to be on improving our operating discipline with has been objective of improving gross margins and controlling our operating expenses. We have launched many cost rationalization initiatives, both on variable costs and fixed and operating expenses, especially focusing on below 20% gross margin accounts to improve our blended margins. Our digital vertical while still leads margin accretive focusing its efforts on internal automation of billable processes to improve revenue per employee as let acquiring new digital revenues from existing and new customers at higher billing rates. We have strengthened the delivery organization with a focus on resource management, optimization of the [indiscernible] and maintaining the [indiscernible]. Our offshore on-site ratio stands at 71-29 [indiscernible] P&L ratio is at healthy 65-35 respectively. We added a net 70 FTEs since the beginning of the year, with reduction in attrition rates to 14% from 18% as compared to the same period of previous year. The annualized ROCE based on Q1 results is at 17% against 14% where we ended in FY '24. Annualized ROE stands at 11%, less than 12% in FY '24. The annualized EPS is at INR 68.27 as against INR 82.40 in FY '24. The company has a strong balance sheet with networth standing at INR 586 crores at a consolidated level as of 30th June, with sufficient cash generation to comfortably service our debt obligation and generate free cash flows. Our net working capital cycle as of 30th June is at 188 days despite working capital heavy defense business constituting 28% of revenues, and we continue to optimize our working capital turns. The company has enhanced its governance process by appointing a global controller to oversee internal control, risk management and has appointed a General Council towards the corporate governance for the entire group. In conclusion, over the past several quarters, we have made significant strides in establishing a foundation for sustainable growth and profitability while strengthening our balance sheet. We are confident in our ability to build on this momentum throughout FY '25 and beyond. Thank you. Now I request moderator to open the floor for questions.

[Operator Instructions] The first question is from the line of Jalaj from Svan Investments.

So I have a few set of questions. Maybe I will begin with them. Firstly, I wanted to understand build up to Defense from the past 3 quarters, we've been having a lumpy period there, we have been talking about Defense revenues picking up and order books being strong. What is exactly happening and when do we expect the production revenue to pick up -- and what sort of at least outlook or number wise do you have for this financial year in the Defense vertical?

Yes. So thanks for the question. So if you look at our Q4 results, we had a very strong production term. And the Defense business by its nature, is lumpy because we work with some large PSUs and government customers. So it is hard for us to calibrate this on a quarter-on-quarter basis. So last year, we had a very good production run. This year, again, we are looking at about close to INR 171 crores of production for FY '25. And Q1 was slow in terms of production, and that's traditionally always the case. But we do expect that next quarter for us, Q2 will be strong when it comes to production. So it will be lumpy, but there are certain quarters where we expect strong Defense production runs to happen.

Understood. Okay. And in the Defense, could you talk a little about maybe, just a little bit delving into it, the contribution from anti-drone revenue for the vertical product per se. And there's 1 more thing in this INR 170 crores, have we assumed something with regards to Tejas because I understand that HAL...

Yes. Sorry to interrupt you, but I think the line is not very clear at the moment. Can you just repeat the question? Get closer to the phone?

Sure. So I was trying to delve a little deeper into the Defense vertical. So one thing is how are we right now positioned on the anti-drone revenues started to flow into the -- started contributing to the top line. And I understand that HAL in its recent con call talked about the revenues for Tejas being a little delayed because there were some issues with the GE engines. In this INR 170 crore target that we have talked about, is there an assumption with regards to Tejas something? Or how -- what should I -- how confident are we about this? And how does that impact us the HAL issue?

Yes. So let me first answer your question with respect to the [indiscernible] anti-drone deliveries. As we have been reporting of the 100 numbers which have to be delivered to the Ministry of Defense, 40 have already been delivered and 60 is being scheduled between Q2 and Q3. And talking about revenues, we recognize revenues on a proportionate completion method so the INR 65 crores of revenues, which belong to us, which is our share. We have estimate about INR 50-odd crores and close to about INR 40 crores to INR 50 crores is still to be recognized, which will be recognized between Q2 and Q3.

Yes. On the LPA production delay, we have factored in the relay in our projections because, though the issue is with GE engine. And what we have looked into is about 14 to 15 numbers of [indiscernible] being produced annually and that is what we have given in our projections. What is it or plan provisions for this year or next financial year. So it should not impact in terms of our revenue.

Understood. And this was with regards to the margins. I do understand that there is some reversal corresponding to the ESOP provisions in the margin this quarter to the tune of almost INR 12 crores. If I were to adjust them, then the EBITDA margins would have an impact of almost 450 -- 400 to 450 bps. Could you talk a little about it? And where are we actually feeling the pressure in the margins? Is it all across particularly ER&D some vertical specific are we facing issues?

Yes. So maybe I can take that question and Shashi can add on. So I think like we talked about there are verticals that we have some seasonality. So if you look at vertical by vertical, if you look at Aerospace, obviously, that vertical is doing very well for us, and I think we are at very healthy margins. If you look at Defense, like we talked about it, there is lumpiness. So quarter-on-quarter, there are different circumstances. This quarter, on Defense we had some pressures on margin because of the fact that we have to invest in a lot of prototypes. But like I said, our production that we use next quarter are going to be very strong. So we'll see a big uptick happening there. If you look at energy, that business is very robust for us, and it's a very high-margin business. Now if you look at semiconductors, there are 2 parts of the business. One part of the NRE or the nonrecurring business, which is basically the services business, there the margins are very high. Rest the [indiscernible] semiconductor is a production slowdown. And this certainly knows the industry phenomena where there's been a high inventory, and we expect that situation to improve go into the year. So there has been some stress because of that because typically production visibility depends on semiconductors comes with very high margin. In automotive, we have a specific client issue, one of our clients in 1 of the European countries have faced a bit of a slowdown in the middle of a restructure [indiscernible]. So because of that, we have had some margin pressures, which again, I believe they're a large client, and they will come back. So we expect that in 1 or 2 quarters time, that customer should come back and that will contribute to it. But because it's a big part of our portfolio that has had a specific impact on us. And Heavy Engineering progress the largest has been pretty much steady. So it's a bit of a mix cap. I would say the margin pressures in this quarter specifically around Defense and from automotive and from some parts of [indiscernible] for semiconductors.

Yes. So just to add to what Arun said, just to take the example of Mistral defense. In the current quarter, the total defense production of Mistral was INR 28 crores, which is almost about 75% more than what they recorded in the same period of last year. So on this Defense production of INR 27.5 crores, though EBITDA, which was recorded was 24.72%, which is about INR 6.8 crores. But when it comes to defense prototype, the total revenue from the defense prototypes, which is for future pipeline of orders INR 13.87 crores, on this the company lost INR 3 crores which is almost about 21%. On discount, Muju will add to this. There's a lot more prototype, I would say, acquisition of order for prototypes have become a lot more competitive. And if you look at last year FY '24 the whole of the year, we had -- the prototype production was around INR 91 crores, on which we had lost about INR 8.9 crores whereas in this quarter alone it's INR 13.87 crore revenue, we recorded a negative margin of INR 2.9 crores, which is almost 21%. But we have to propose to do this because we have to add to the production of pipeline. And if you do not do this, obviously, our margins will improve dramatically, but we are playing for the long term [indiscernible] defense, and we have to continue to manufacture this prototype. Muju, you want to say something on this?

And because the long-term business. So basically, what we need to do is today, we need to get ourselves in over into multiple new products, which have been launched by Indian Ministry of Defense. We are not dealing the program today, we do that when the production happens. For instance, we had not been in the LCA program many years [indiscernible] almost 15 years back. Those [indiscernible] today. So the investment which we do is [indiscernible]. But unlike in the earlier years, wherein the benefit happened up 15 years, now we see -- foresee a thing will [indiscernible]. What we do today go out into production numbers in 3 to 5 years from now. So basically, the investment [indiscernible].

Got it. Got it. Understood. And one last quick question, if I may be?

Mr. Jalaj maybe I request you to return to question queue for a follow up. The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.

Sir, just want the clarification on the automotive segment side. Like you mentioned some client issue was there. So it will -- we are expecting the upcoming quarter also. And another on the defense side, we are seeing lumpiness, and we are already multiple segment. So is there any -- I hope not a focus issue because we are trying to manage a number of segments. So what our view going forward from here onward?

Yes, Jyoti, thanks for the question. So I think in automotive, it's a very specific, like I said, customer issue. And just to give you a bit of a context on automotive, what's happening is that a lot of OEMs are migrating their portfolio towards EV, electric vehicles. But what's also happening is that there's a lot of competition, which is coming from Chinese OEMs. And because of this, this is putting a lot of the traditional OEMs who are trying to [indiscernible] business into a lot of pressure. And they are trying to adopt ADAS and connected and embedded [indiscernible] So what we are seeing is a short-term impact. But given the fact that these are very market names, it is just a matter of time before they come back. So since we have a large book of business from this customer, as the customer recovers, we'll see the recovery happening. It is not something which is systemic. I think it is more a time-based issue. As far as Defense is concerned, we are very focused actually. I think this is a core area for us. We have 2 parts of the business, which are now merging together. So we worked with on 1 side with all the labs, like the [indiscernible] and BAUs like HAL, BEL et cetera. On the other hand, we work through the Ministry of Defense. So our portfolio actually is very focused. It's actually -- if you look at it on the lab side, we do a lot of work on the electronics side, which is on telemetry, which is on Radar and Sonar. And again, with the Ministry of Defense, we work on the anti-drone as well as stimulators with the [indiscernible]. So we are actually very focused on the electronic side of the Defense business. So it is actually any strategic for us is a growing area. And we are not spread into multiple areas like 1 of your questions, but actually very, very focused. And this is actually the right place to [indiscernible] because there is a lot of growth which is going to happen here as we all know. Muju anything you want on the focus part of the defense?

As a company we are very clearly focused because the team which is working on the non defense portfolio companies [indiscernible] which is working on a defense portfolio is totally seperate. So we all have our strength, and we are very clear about what we are doing because the [indiscernible] mindset as to date. And the Defense portfolio requires a completely different mindset and the people who have been engaged with Defense the average age in Mistral or across both the entities come back to [indiscernible] in Mistral alone. So that gives a very clear vision in that give people are completely focused on [indiscernible].

Great, sir. And sir, on the semiconductor side that the production issue we are facing. So what are the expectations on that front?

The semiconductor business, see there is still lower stocking by multiple OEMs. We expect this business to take off by Q3 or Q4 of the financial year.

The next question is from the line of Deepak Poddar from Sapphire Capital.

So just wanted to understand now, now we were talking about the margin pressure driven by 2, 3 sectors like Automotive, Defense, Semiconductor as well as Automotive not doing that well. So in light of -- and I think we also mentioned that all these sectors will take maybe 1 to 2 quarters for them to revise I mean -- so how do we see then the growth part and the margins part for this year? I mean, this quarter, our adjusted margin was close to 8.5%, right? So -- so how one should look as a whole year as a whole in terms of growth and margins here?

Yes. So a large part of our margin contribution comes from Defense, and that sort of accounts for when we have low margin as well as when we have high margins. So I think we are going into a quarter now another year in Q2, where we expect, like I said, the production tends to pick up. So we expect a strong margin performance to happen in Q2. A lot of that will be contributed by our Defense business. And of course, on the engineering side is the sectors like aerospace are very strong. So like I mentioned in the opening remarks, I think if you look at the headwinds that are impacting ER&D, the 2 shining lights are Aerospace and Defense. Aerospace, 1 is because it's always a long-term game. And air travel is picking up, people are traveling more and then some of the OEMs have very strong order books. So we are unique that we are 1 of the ER&D companies who is positioned in Aerospace, which is differentiated from a lot of other companies. So that will be a strong performer for us. And again, because the Defense is part of our portfolio, we expect -- as Defense ramps up that will grow. So like Shashi said, last year, we did INR 90 crores worth of production in Defense. This year, we could do INR 171 crores. So a lot of that hasn't happened yet. So you can expect a lot of that to happen over the next 3 quarters. But we are looking at getting into a quarter where we'll have good Defense business. So that will provide a lot of the margin benefits.

For the year as a whole, I mean, for FY '25 as a whole in terms of growth and both margins, how do we see that?

Yes, so we are doing a combination of things. One is, of course, because the Defense production that will be a contributor. The second thing is that we are also, like I mentioned in the opening remark, we are looking at a lot of digital as well as cost optimization initiatives, which will happen, which have already played out and some of these cost initiatives take 3, 4 months to actually show up on the balance sheet. So we expect all of that will start up appearing in the next few months or next few quarters. So we believe by the next -- for the whole year, I think we have a good plan in terms of both topline as well as EBITDA.

Both top line as well as in terms of EBITDA. And are we still maintaining FY '26 that we had guided earlier 3-year vision of INR 1,600 crores kind of a top line and a bottom line of maybe what, INR 160 crores, INR 180 crores?

Yes, yes. That's the plan we're still working on. So we're hoping to have a strong year this year, and then that will continue to what we get into next year.

Okay. Fair. And just one last small thing. Finance cost, we spoke that we are repaying some debt. So we expect some finance cost reduction. So what sort of finance cost we are looking at for this year?

It will be around INR 30-odd crores. Out of the INR 56 crores as what was there for FY '24, we should be around INR 30 crores in terms of finance cost more than that.

The next question is from the line of Koushik Mohan from Ashika.

I just wanted to understand one basic question. What are our components in the other income that we have because this time, we have recorded a huge other income, right? What are the -- can you give the breakup?

See, essentially, the other income, a major part of the other income of INR 11 crores at what we see in Q1, INR 6.59 crores of that is capital gains. We had a property in Noida, which was kind of a new, so we monetize that. And we were -- we made a INR 5.9 crores capital gains out of it. The rest of it is, of course, the interest income and all of that in terms of the [indiscernible] what we have majorly.

Okay. So this onetime income of capital gain if I remove then our PAT is not having such a kind of a growth sir. Like where are we lagging, which division is [indiscernible] because I joined very late, so if I'm repeating the question, I'm sorry.

See, as Arun explained, for us, aerospace and defense are the front runners in terms of both revenue and margins. As Arun was saying, with respect to Aerospace, our EBITDA margin is close to 19%, and with reference to Defense. And as I told you in the first quarter, we had about INR 28 crores of production revenues and that gives us about 24% EBITDA margin. Even with respect to Product Engineering services, our EBITDA margins are upwards of 80%, only that the growth has to return as what Muju stated. So the ones which are compressing our margins are the Heavy Engineering vertical, where dominated in the staffing business, that's where Arun said that we are completely revamping this entire engineering vertical if you, in fact, remove the engineering vertical from the scheme of things, which is about 20-odd percent in terms of revenue, our EBITDA margins will actually go up by about 100, 150 basis points. But that's where we are taking a major correction in terms of moving away from the staffing model as what we are talking about. And the other verticals where because of the degrowth in terms of the OEM business is the automotive business where we saw a compression of margins, and that will come back in from about 2 [indiscernible] 2, 3 onwards. And energy, of course, is a higher margin business for us of the, I would say, close to about 40 -- INR 11 crores of revenue, which were recorded for the Energy business, the EBITDA there, again, is upwards of 20%.

Got it. Sir, are we sticking on to our guidance of INR 170 crores guidance? Or are we upgrading? Or are we looking at it reach [indiscernible]?

I'm not sure as to what this number, but the guidance with respect to the EBITDA as we are progressing from Q2, Q3 and Q4, we will -- we are s per plan.

The next question is from the line of Aman Vij from Astute Investment Management.

My first question is you have talked about INR 800 crores to INR 1,000 crores of approved production wins. So if you can talk about how much can we expect in FY '25 [indiscernible]?

We currently have production [indiscernible] , which we have put in the past. So these are the efforts with the Mistral and the team has put in the last 15, 20 years, build a new [indiscernible] production revenues. So as on date, we have approximately about INR 375 crores of order book on hand out of which [indiscernible] most of this will be attributed in the next 1 to 2 years.

No, no sir, that number you have -- that is known, but I was asking that the number which you mentioned, INR 800 crores to INR 1,000 crores of approved wins. So only INR 300 crores do you think will come for FY '25 and next year, FY '26, out of this INR 1,000-odd crores, how much can be the order inflow for us?

See as has been reported in the investor presentation of the INR 324 crores of order book is what we have in Defense, about 60% will be converted this year. The rest of it go to the next year. And again, total INR 800 crores to INR 1,000 crores is what we have stated where they're all approved prototypes where we have a part number and a reasonable visibility in terms of when the production orders are going to kick in, we will start with a strong order book at the beginning of FY '26 again.

What he mean to say INR 800 crores will perhaps convert over the next 2 to 3 years.

Sure, sir. And if you can talk about how much of these are -- will be like [indiscernible] tender based versus how many of these INR 800 crores, INR 1,000 crores, we would be the single vendor?

See, most of the [indiscernible], which have been [indiscernible] and approved in the past where it is only part -- reissue of the order because there'll be no other competition as such because we are the Indian customer in building the prototype and the designs which we have done have gone through multiple testing cycles [indiscernible] cycles. So this part will typically will not be changed, but it will be on the single tender basis.

As we have been talking about it from the past so many earnings calls, once the prototype is developed and certified and we have a part number that becomes an IPR for us, and it is -- when a total system is developed, that part number purpose has to be there in the system. So it almost becomes a single tender.

Okay. So most of -- then my assumption is correct that most of it will be single tender out of this INR 800 crores, INR 1,000 crores. There won't be even a second player.

Yes, your understanding is correct.

Next question is, if you can give updates on 2 of the programs, sir. We used to talk about it a lot more in earlier presentations like Uttam AESA radar as well as the new Ashwini Radar, another player has getting a lot of orders in this. So if you can talk about...

Your voice is very -- you voice is not audible.

I was saying, sir, I just wanted to update on 2 of the projects. One is Uttam AESA radar and the second is on the Ashwini radar. So a lot of orders are coming for other players in this. So if you can talk about what kind of order inflows we expect from this Ashwinin radar?

See in the Ashwini radar, the theme would be -- in the past it was given to only one single company which was [indiscernible]. And today, there is the [indiscernible] in the transfer agreement and 3 more years [indiscernible] in 3 different companies. So there will be a portion of Mistral competitive accelerator, which will definitely comfortable. And as on date when we talk, we have given our quotation to all the 3 companies whoever wins, we will get our [indiscernible], and as far as the [indiscernible] these trials have been good. And on 15th of August, the first prototype will fly out with the [indiscernible].

Yes. Sir just wanted to understand what product are we...

Mr. Aman may be we request you to return to question queue for follow up.

Yes, yes ma'am. Just I'm finishing the question and the next question I'll ask later. Just this part, just a little bit clarity I wanted. Sir, I was asking that only Uttam AESA radar, typically, the radar cost a lot. But what part are we doing? Is it a very small value addition or a big value addition if you can talk about the same?

There is a part called [indiscernible] receiver in the radar has been done by us.

And this -- sorry, this cost around like few crores? Or these are like INR 50 crore-plus kind of...

The rate of about INR 2.5 crores to INR 5 crores.

[Operator Instructions] The next question will be from the line of Dipesh from Emkay Global.

Couple of questions. Just want to look -- if I look at organic basis, overall, revenue is down on Y-o-Y basis and sizably down. Even if I look at the vertical which you indicated, you're seeing headwind. Even if you adjust for their flattish performance, revenue is down on organic basis. So just want to understand, it seems to be relatively more broad-based, particularly in Defense side. Defense is fairly weak compared to where we used to run -- run rate perspective. and even from production and design, design, which used to be stable, showing weakness. So if you can give some sense how one should look Defense business because you said it will pick up from production perspective. But then overall, is not showing any material strength. Because of the design-related softness. So if you can address 2 part question. First is organic fairly weak number, Y-o-Y basis? Second, even Defense is showing weakness. So if you can address it.

Yes. So the way we look at the business is that there are certain areas where we have legacy, where we have strong capability, and typically, that is in Aerospace, it's in Defense and it's in Energy. And like I've outlined earlier as well, our strategy is to diversify. So when there are seasonalities, which happened like what is happening now we are present in sectors which are strong as well. So to that end, we make acquisitions and for us, automotive, we grow from an acquisition and energy for an acquisition. So your question should be seen in the context that we have acquired new capabilities. So it is not that we are growing Aerospace and Defense through inorganic. The growth that you're seeing in Aerospace and Defense is completely inorganic. And Defense for us is lumpy. That is something that there's not much that can be done because when we have production orders, it's a very high quarter like Q4, for example, was very strong for us because we had a strong production and that has been saying even the next quarter is looking good for us. In Q1, which comes in between is where we have to invest in a lot of prototypes. So the way I see it that when 1 has to grow in overall business, 1 has to invest in certain areas and there will be growth in other areas. So -- and of course, meanwhile there are also macro trends that we have to deal with. So I think given this whole context, I would say that the performance has to be looked at as organically the sectors that they're strong, have done well. I think the new sector for us where we have to grow quickly. And these are sectors where we could have grown organically, but then it could take 5 years instead of doing it in 1 year. So I think the contribution comes in for specific sectors that are inorganic because we wanted to grow quickly. So we feel that because of the Defense seasonality, this quarter has been a little bit deep in offers there is a client-specific issue in 1 particular vertical. But other than that, I think the health of the business looks pretty robust as far as we are concerned.

Sir, if you can answer the Defense products and design. One should look combined number from defense growth trajectory perspective or emphasis should be more on products and design lumpiness may continue? Because design is weak this quarter-on-quarter as well as on a Y-o-Y basis.

In terms of production business, for the year, we are [indiscernible] because typically we talk about production, you need to have your orders in hand at least about 9 to 18 months in advance. Otherwise [indiscernible] so we are in good shape for the year. And whatever investment which we are doing today is for the future.

That is true. But design, let's say, when weakness was there typically margin benefits would get reflected? If I adjust for the -- some of the one-off margin, it seems to be weak even design revenue was weak.

No. So I think just to clarify, designing for us is prototyping. So typically, when a new defense program comes out, it is a competitive tender, and we have to bid against other companies. And usually, there is a lot of pricing pressure when that happens. So you usually come in lower, plus there is an investment because you need to do ER&D. So the design in the very nature of this tender, it'll always be more investment move, but the reason we do design is because when the design finishes, once the certification finishes, the production which happened at the end of it is very substantial, and that's at the high margin bar. So when we have a quarter where there is more design and less production, that quarter will have lower margin because design by definition, is more investment and production by definition is where we harness all the market. So next quarter, like I was saying, we have higher production as a component of our Defense business. And therefore, we expect that the margins will be very strong. So I think it's just important to understand the life cycle we are in. And in quarter indeed, there's no design, the margins are lower. I hope it clarifies.

Sir, this clarifies and that's the question I raise your design is lower this time compared to, let's say, Q-o-Q Y-o-Y, which our 1 look absolute number. So it should have benefited your margin, and your production is also higher...

No, see, just a minute. I think I answered this question earlier, if you look at Mistral Defense this quarter. The total defense production for Mistral INR 27.5 crores in this quarter, which recorded an EBITDA of INR 6.8 crores, which is 24.75%. Now coming to Defense prototypes, the total revenues from defense prototypes were INR 13.87 crores, where we lost INR 2.9 crores, which is almost 31% so if you take the total Defense margins from Mistral, it was about INR 41.37 crores of revenue and INR 3.9 crores of EBITDA, which is about 9.43%. So that is the reason why Arun said that depending on the mix between prototypes and production revenues, the margin profile with reference to Defense stages, it so happens that in Q1, there are substantial prototyping of around INR 13.87 crores of revenue. And also the -- because of the competitiveness as what is there in the prototype bidding now, the loss that what we took on, the book is much more than the whole year of last year between [indiscernible] prototype.

The next question is from the line of Manjubhashini from JM Financial Services Limited.

First question is regarding the reversal of -- in the employee -- in the notes to accounts, there is a mention about certain reversal of the share-based payments to employees to the tune of INR 10-odd -- INR 10.82-odd crores. So how should we treat this for? Is this an exceptional one? Because if you do not include this then the -- whatever margins that we are seeing at the EBITDA level would have been even more lower and there would have been a significant drop on Y-o-Y sequential basis from our EBITDA perspective. So how should we read this, sir?

So basically, this is -- we have programs and compensation which we rollout for employees, which are retention based, which are performance based. So I think time to time, we need to review this. So I think this quarter, we had a review of some of these processes. And in discussion with our Board, we found that some of the old programs need to be rolled back and we need to launch a new program, which is what we are in the process of doing. So I anticipate that over the period of the year, this is something that we value for.

Okay. So this is based on the milestones that were set for the employees. And they have not reached those milestones and hence, this reversal of the compensation. And let us assume that things get better, et cetera, this cost can come back to us. Is that the right way to understand?

Yes, you can say that. It's a combination of factors. One is partly the milestone, so there have been some stocks which have tested, but it's also in terms of the ambitions of our company, the aspirations that we have that changes from year-to-year. So when we have a different ambition that we want to enhance our performance, we would like to revisit some of our compensation programs and partly that's what we have done with this. So we wanted to reset to the future growth potential and to some of the sectors where we feel that there can be superior performance. So it's a combination of both of those.

Sure. Sir, a lot of questions were on Defense and this production revenue run rate which -- improvement which you talked about, just a few data clarifications here. The Mistral revenues last year, F '24 fully overall, was somewhere in the range of INR 328-odd crores. Am I correct in that vis-a-vis some [indiscernible]

You're right, you're, right.

Sure. And this number for the current quarter, Q1 '25 is INR 49-odd crores. Is that right?

No, no. The total revenue from Mistral this quarter INR 65 crores.

INR 55 crores, is it?

INR 65 crores.

INR 65-odd crores. Okay. And this INR 65 crores on a comparison basis is INR 72 crores in Q1 of '24. Is that the right comparison? or any changes?

That's right. That is right.

Okay. Out of the INR 65 crores, you have said somewhere around INR 26-odd crores is the production revenue in this quarter -- on INR 65 crores.

Yes. So let me break this INR 65 crores for you. The Defense production revenue INR 24.5 crores. The prototype revenues were INR 13.87 crores, and the semiconductor revenue of INR 23.62 crores.

Semiconductor is INR 23-point-something crores, right? And the margins -- the EBITDA margins on that production revenue of INR 27.5 crores is 24.7% EBITDA margin. Is that right?

That's right, that's right, that's right.

And we incurred INR 3 crore loss on the prototyping and revenues of INR 13.87 crores.

Correct. Correct.

Okay. Sure. And semiconductor is also in losses or...

Semiconductor, we have made a 15% margin on the INR 23.62 crores, we recorded an EBITDA margin of INR 4 crores.

Okay. INR 4 crore EBITDA is what we have generated there. Okay. Understood, sir. And the visibility for this INR 27.5 crores current quarter production revenue is INR 170 crores the full year is what you're indicating?

Correct, you're right.

This number, the same F '24, the corresponding comparable number was somewhere in the range of INR 112-odd crores, is it INR 112 crores is going up to INR 170 crores, that is the latest...

That's right.

Okay. And this INR 800 crores to INR 1,000 crores of the number that is there in the presentation about our confirmed or design-led production revenues that can accrue to us where you talked about the cycle of 2.5 to 3 years when this can be achieved. So over here, so the entire INR 800 crores to INR 1000 crore is convertible into order book in, let's say, 3 years? And that order book to revenue could happen in maybe another year time frame or so. So in 4 years' time frame, the entire INR 800 crores INR 1,000-odd crores can translate into revenues? Is that the correct way to understand?

Many of the Radar program, that Sonar program, the revenue recognition will happen in the next 3 to 4 years. But there is also some amount of revenue in this INR 800 to INR 1000 crores, which is part of the right [indiscernible].

Sorry to interrupt, you were echoing a bit, sir. I got the point that in next 4 years or so, this can get translated into revenues. But after that, I lost you.

The program, which we work on today are multiple Radar programs, Sonar programs, Electronic Warfare programs, so these programs, I expect things to be recognized in the next 3 to 4 years. But whereas the revenue which we have calculated here, which is [indiscernible], that production is going to be for a longer duration. So that revenue will be still lower [indiscernible] of produced. So 100% will not be consumed in 4 to 5 years. If some of the revenue will be [indiscernible] 7 years.

Okay. So the revenue conversion will happen over the next 7 years, but order book conversion from the INR 1,000 crores could happen over the next 4 years. Is that right?

Probably the most important what happens is that whenever we get orders for instance [indiscernible] we know for a fact that there were [indiscernible]. So we may not have the order for the complete -- not in one go, [indiscernible] the future also. So that is the part we did already [indiscernible].

At the same time, I know if you look at the other ones, which are designed in under development, that also will realize into revenues in these number of years. But at the moment, we are not very clear in terms of how the program is shaping up.

Because see in terms of INR 2,000 crores to INR 3000 crores of prototype under production, in some of these cases our portion of activity is completed, but [indiscernible] going into a larger [indiscernible] radar program. [indiscernible] is already delivered to my end customer. My end customer is putting the radar. The radar has to go to [indiscernible] production will happen. So there have been long time. But unlike in the past, [indiscernible] cycle for about 10 years to 20 years, now [indiscernible] 4 to 5 years.

Okay. Got it. The translation will take much longer, could be even up to 10 years is what you're saying because there are multiple parties involved, and hence, there could be a delay there, right?

Right.

Sir, just on the -- I got the point on the auto and the client-specific issues that you're having and how you believe that it can -- things can get better over the next 2 quarters or so. But aerospace on a sequential basis is largely in the current -- and the similar run rate only looks like there has not been any material improvement on a sequential basis in the aerospace revenues. Any -- I mean, is this on expected lines? Or you think -- anything that you can elaborate here, sir, on this point?

Yes. So just in Aerospace from Q1 of last year to this year, there's been a 24% growth from Q4 of last year to this year, it's been similar. The reason being that if you look at large manufacturing facts, whether it's in aerospace or automotive, they typically have shut down 2 periods. One is the summer shut down, which happened. The second was during the Christmas period. So in Q1, we had almost 2 to 2.5 weeks of summer shutdown because of which the revenues from the Aerospace segment was a little bit lower, which we expect to see that coming back. Because for us, when the factories are humming and the products are being generated that's in the business for us [indiscernible].

Okay. So in that sense, then Q2 on a sequential basis should be a good number to look at in the absence of the shutdown, which impacted us in Q1.

Yes. So Q2, we do expect revenues to be much better.

Okay. Understood. Understood, sir. Sir, and just another point on the interest cost, you said interest cost for the full year could be in the range of INR 30-odd crores vis-a-vis INR 53-odd crores, where we closed in F '24, right? And the current quarter interest expense is in the range of INR 8 crores therein. So -- and you have also talked about further reduction in the debt, which can come through there. Can you please clarify these numbers, sir, what is the current net debt? And what is the -- current gross debt and net debt on books?

See, the current gross debt is around INR 230 crores and current debt is about INR 50 crores and I was saying the total interest cost for the entire year would be in the range of around INR 30-odd crores because we are taking some CapEx -- we are putting in some CapEx for which we are the borrowing at a, very reasonable and competitive costs. And so as a little [indiscernible], the total finance cost will not be more than INR 30-odd crores in that range.

Okay. INR 230 crores is the gross debt and INR 50 crores is the net debt. That's the number.

That's right we are having about INR 182 crores in terms of cash, bank and liquid investments.

Okay. And what was the operating cash flow? I think you mentioned about net working capital of somewhere in the range of 120-odd days or something. Is that the number, sir? Did I get it, right?

Right. That's right. If you look at most of the Engineering Services business on that net working capital cycle of around 65 -- 75 to 90 days, whereas in the case of Defense is a little bit more because we hold inventories as well as [indiscernible] opens.

[Operator Instructions] The next question is from the line of Dhruv Shah from Ambika Fincap.

Arun, my question is on your EDS segment. Now our EBIT margin is around 11% this quarter, and that also includes this INR 12 crores of write-back you guys have done on the stock-based payment. When do you see our EBIT margin on the EDS coming back to the industry level of 13%, 14%. There is also industry reports around 15%, 16%. But when do we get to that 13%, 14%? I understand you are investing in automotive and energy. But at the same time, you are -- our EBIT margin on aerospace will be much higher. So if you can just elaborate on this one?

Yes. So Dhruv, like I said, next quarter, when we have our Defense production runs to be higher, we will see a higher margin when it comes to Q2. But I think for us, every quarter, we have certain rhythm of our business. And I think this quarter, because of the fact that we had lower production as well as client-specific issues, the margins were a little bit lower. If you look at last year, we closed FY '24 at close to 13% margin. We are looking at taking that up in FY '25. So we have a plan in place to sort of recover that over the next 3 quarters.

Just when you say production, but that would be related to Defense, right? I'm talking only about...

Engineering Services, to answer your specific question. As I said, the current -- I would say there are 2 verticals which are undergoing correction, which is, of course, Automotive as well as Heavy Engineering. To answer your question as to when we'll be able to scale up another 200 basis points, we would assume that by the end of this current financial year, which -- and we should be able to scale up at about at least about 150 to 200 bps on the Engineering Services.

Okay. By end of this year. So every quarter, we should see this going up from 11% EBIT margin?

Yes. So because we are doing a major correction in Engineering vertical and that is in fact turning to be margin accretive rather as against total margin decretive position where it was in FY '24.

Right. And Shashi, on the thing which we were supposed to start on Heavy Engineering to increase the margin, which we said on the last call also, is the exercise on? And should we start seeing results from coming quarters?

So it's already -- let me tell you, so in fact, if you look at the total revenues of last year from the Engineering vertical, the total revenues from engineering vertical was INR 152 crores last year, which -- with an EBITDA margin of negative 0.5%, whereas in this year, in Q1 FY '25, the revenues from engineering vertical is INR 36 crores where the EBITDA margin is now 3% -- plus 3%. And this correction has kicked into place largely in Q1, and there is more to come.

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

I have just 1 question. Most of the questions have been answered. So you were sticking to the guidance of INR 1,600 crores of top line and INR 160 crores to INR 170 crores...

Dipesh (sic) [ Jalaj ] we're completely losing you. We're unable to hear.

The question that I have is, if I see the guidance that you are giving for FY '26, which is INR 1,600 crores of top line and INR 160 crores, INR 170 crores of bottom line, now considering the current run rate and considering the guidance that you are providing for this year, I think we'll be ending somewhere around INR 1,100 crores, INR 1,150 crores, at best case scenario INR 1,200 crores this year at the top line level. Now to get the INR 1,600 crore next year, you need to have INR 400 crores of addition. So just wanted to get some sense, do you have this kind of visibility in terms of your existing order book or existing pipeline to get this kind of number? Or it's just an aspirational number.

No, no. These are all numbers [indiscernible] is has been computed. As the biggest driver here, of course, you see the Defense vertical, where we have been talking about INR 39 crores, production is going INR 100-plus crores, INR 111 crores going to INR 170 crores. And the pipeline of orders as we confirmed say, the total tax is what we have, resulting in the production revenues on defense going by much more multiples going forward. And of course, the other vertical to energy still a small base, -- but again, it's going to pick up better going forward in terms of the pace of what we are now in the Middle East and the various other strategic plans we are kind of getting in this vertical. So we have [indiscernible] aerospace the production run rate and what is [indiscernible] and our order backlog as what the volume has, but other verticals, which will also go capacity. And the entire [indiscernible] is not purely organic. We have taken this amount of inorganic also in that and the something which we have to play out.

Yes. And I think what it's also doing is that obviously, in order to realize those ambitions, we still investing in our sales force so we are recruiting more people so that we can improve our new logo addition and large competition. So definitely, it's work in progress. I mean this is the direction of travel that we want to travel and there are investments that we will plan and we will expect that we'll have outcomes on those investments. So not everything is in the bag right now, like it is for [indiscernible] company. But the investment that we're putting in and with the growth rates that the industry see, we feel that this is an ambition that we can [indiscernible].

Sure. If I may know, sir, how much is the inorganic -- you are building is this in the INR 1,600 crore number?

About 10% is the inorganic revenue [indiscernible].

Sorry, sir, I missed that, sorry.

10% to 15%.

Okay, 10% to 15%.

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

We thank all the investors and the participants in this call for participating in this call. And we also thank you for your support throughout, we also thank Orient Capital for arranging this call. Arun?

Yes. So just 1 closing remark I wanted to make is that I think, like I mentioned, as we see the industry going forward, our strengths are in Aerospace and Defense. And like I mentioned, we will be looking at how these are 2 verticals, which we believe has a lot of juice left in them. So we will be wise. Of course, all the engineering services verticals are important to us, and we will look at -- but I think as a company, we will see a figure happening more towards Aerospace and Defense and we will expect to see superior growth coming from that. So I just wanted to leave that and -- we are also looking at building a lot of the [indiscernible] capabilities on Mistral into our portfolio. Therefore, the logic for our rebranding is to -- 1 is thing to focus the whole defense portfolio that we have. And the second is the digital engineering and the embedded capabilities that we have, which is something that we will play upon going into the future. So thanks a lot for all your questions, and good talking to all of you.

On behalf of Centrum Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.