AXISCADES Technologies Limited (532395) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 Earnings Conference Call of AXISCADES Technologies Limited hosted by MUFG Intime. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sangeeta Tripathi. Thank you, and over to you, ma'am.

Thank you, moderator. Good evening, everyone, and welcome to the Q4 FY '25 and the Full Year FY '25 Results Conference Call of AXISCADES Technologies Limited. I'm joined today by our leadership team to provide a brief overview of the business performance, financial results, along with our strategy ahead. We have with us today Dr. Sampath Ravinarayanan, our Chairman; Mr. Alfonso Martinez, our Managing Director and CEO; D. Muralikrishnan, our Chief Operating Officer; Mr. Shashidhar S.K., our CFO; Mr. Anurag Sharma, our President, ESAI and CEO Ad Solutions, along with Mr. Sharadhi Babu, our President of Defense. Before we begin, please note that this call may contain forward-looking statements based on company's current expectations, beliefs and opinions. These statements involve risks and uncertainties, and the actual results may differ materially. Now I hand over the call to our CFO, Mr. Shashidhar S.K. Over to you, sir.

Thank you, Sangeeta. Good evening, everyone, and I'm delighted to welcome you all to this earnings call for Q4 FY '25 and the full year FY '25. I hope you all had an opportunity to review our press release and the investor presentation, which are available under the Investors section of our website, and the same are accessible in the BSE and NSE websites too. To begin with, despite challenging macroeconomic scenario in certain of our noncore verticals, we are delighted to report that we have closed the financial year FY '25 with a significant milestone of crossing INR 1,000 crores in consolidated revenue. While we are recalibrating our automotive, energy and heavy engineering verticals, our growth was led by our focus verticals of Aerospace, Defense and ESAI. The full year revenue for FY 2025 was at INR 1,031 crores, recording a growth of 7.9% over the previous year in rupee terms and 5.7% in constant dollar terms. While the reported EBITDA for the year is at INR 142 crores, a growth of 7% over the previous year, the adjusted EBITDA came at INR 156 crores, a growth of 17% over the previous year, adjusting for nonrecurring and onetime expenses incurred in Q3 and Q4. Our PAT grew by 2.25x over the previous year at INR 75.26 crores as against INR 33.41 crores in FY '24, leading to a diluted EPS doubling from INR 7.74 to INR 17.22. The company since Q3 of FY '25, under the guidance of our Chairman, has embarked on major business transformation initiatives to turbocharge the business and achieve nonlinear product-led growth, both in revenue and margins in each of our core verticals, namely Aerospace, Defense and ESAI. The company is also evaluating and recalibrating its noncore businesses of heavy engineering, energy and automotive, which are till date negatively impacted by macro factors and are growth and margin dilutive to the enterprise, as has been elaborated in our investor presentation. The company is deploying resources and costs for this transformation, which is expected to be stabilized by Q2 of FY '26. These costs and investments are critical to ensure enterprise readiness to progressively achieve our aspirational target of achieving $1 billion revenue by 2030. Coming back to our business performance in FY '25. Our core domains grew by 12% from INR 671 crores to INR 749 crores, driven by Aerospace, which grew by 13% to INR 322 crores and Defense, which grew by 16% to INR 303 crores, with production revenues from Defense growing by 19% to INR 198 crores. Our noncore businesses of Heavy Engineering, Automotive and Energy together constituted INR 282 crores in revenue, a 3% degrowth over previous year. Automotive and Heavy Engineering together degrew by 7% to INR 238 crores and energy vertical at INR 43 crores grew by 30% on a small base. The core verticals continue to record healthy EBITDA margins at 19.1% and has been diluted to 13.8% at an enterprise level due to negative margins in the noncore businesses. The reported EBITDA margin is at 13.8% for the year, which is the same as in previous year despite the fact that the company incurred onetime and nonrecurring costs of around INR 14 crores in Q3 and Q4, mainly senior leadership settlements, legal costs and onetime consulting for our Automotive business. Adjusting for this, the EBITDA margin for the year is at 15%. Considering only our core businesses of Aerospace, Defense and ESAI, our EBITDA margins are at a healthy average of 19.1%, with Aerospace coming in at 21.2%, ESAI at 23.9% and Defense at 15%. Of the Defense revenues of INR 303 crores, if you only take Defense production revenues, which was at INR 198 crores, the EBITDA is actually at 22%. So the prototype revenues of Defense at about INR 105 crores was very marginal and slightly negative from the point of view of EBITDA. We intend to improve our EBITDA margins by about 300 bps each year with focus on nonlinear product-driven growth in core verticals and realignment of noncore verticals. As stated, our core verticals are already yielding EBITDA margins of 19%. With effective execution of product-led strategy by FY '28, the company aims to invert its current revenue mix of 80% service revenue and 20% product revenue, which will be the key driver for nonlinear margin-led growth with the aim and objective of achieving an average of 24% EBITDA in the next 2 to 3 years. With respect to business performance in Q4 of FY '25, the company's revenue was at INR 268 crores, growing by 4.8% year-on-year and degrowing by about 2.4% quarter-on-quarter as the execution of some of the Defense programs move to the right. The company's reported EBITDA was at INR 37 crores at 14% and adjusted EBITDA was at INR 45 crores at 16.8%. The company has been able to significantly reduce its finance cost from INR 56 crores to INR 32 crores with repayment of borrowings from QIP proceeds. The company's net debt is just at about INR 15-odd crores, excluding lease liabilities, with gross debt standing at INR 189 crores and cash bank and liquid investment at INR 174 crores. The company has a healthy balance sheet with shareholders' equity standing at INR 656 crores as against INR 592 crores in the previous year. To conclude, we are highly enthusiastic and committed on our path ahead. Our focus on scalable product-led growth, underpinned by significant investment in infrastructure and leadership positions us for sustained long-term growth. This strategy will enable us to unlock substantial value for our investors and stakeholders. I now invite our CEO, Mr. Alfonso Martinez, to provide his views.

Thank you, Shashidhar, and good afternoon, everybody. I'm really happy and pleased to participate in this my first quarter presentation as our group CEO. And complementing Shashi's presentation and speech, I would like to highlight the transformation of the company that we are currently driving. This transformation is going into 3 axis as mentioned in the presentation. First is people. I'm very pleased to announce that our new management team is in place. We have all the presidents in place. We added veterans on the industry in a leadership position for the last 30 years, and this is already starting to boost our relationships with our clients. An amount of progress is being done in that respect. This will lead no doubt to an impressive growth. We are also starting to train our existing sales force into a new way of selling, new way of engaging with the clients. Second axis of the transformation is moving from the traditional services to products and solutions. This is key for the margin expansion that we are forecasting. And third, the investments in key assets with very high return. And this is already, as we will disclose later in the presentation of our Chief Operating Officer, leading to a new area. As a golden rule for next year, I would like to say we have 3 key objectives. First, is a minimum growth of EBITDA of 50%, excluding ESOP cost. That's very -- the very, very first target. Second, the profit after taxes will increase proportionally. And third point, we want to increase the quality of our revenues with that, at least 300 basis points of EBITDA percentage improvement. This will lead to all the future. But for this year, these are the three parameters that we are targeting. And as a golden rule, we will achieve. Now I would like to lead my presidents to present you the different verticals. Unfortunately, Mohanakrishnan, our new President for Aerospace is not present. He is in a very important client meeting today, and I will take this part. Starting by Aerospace, I will say that our target for fiscal year '26 is at least 35% growth in revenues. That will change the path of growth of the previous years. Deepening engineering expertise, now empowered with artificial intelligence, moving from traditional service to really disruptive solutions. Some of our services are already ongoing this transformation with spectacular results. Also, we are building manufacturing and supply chain solutions. This action is particularly driven by Mohanakrishnan that brings with a strong background in these areas of manufacturing and supply chain. Our current Airbus engagement, our #1 client in Aerospace, we, as a strategic supplier, are long-term settled with that. We are about $40 million of yearly revenues, and this is a long-term established. We are also discussing to expand this partnership from these areas into new fields and also forging new partnerships with the OEMs and Tier 1s of aviation. As you can know, India has become the center of gravity of commercial aviation, and that's a very, very important point in our strategy. Said that, I'll let the word to Sharadhi Babu in Defense, and he will explain you the keys of this vertical. Please Sharadhi Babu?

Thank you, Alfonso. Good evening, everyone. This is Sharadhi Babu President of Defense at AXISCADES. And as you heard, we have created a very strong base for business with a stellar performance at INR 303 crores. And we continue our focus on defense production and also very specific focus on new product development, especially in the areas of radar, electronic warfare, missile systems and unmanned warfare systems. And we -- right now, we are on a very strong growth path, and we expect the growth to be at a rate of about 75% moving forward and also on a similar focus on the bottom line also. And our order books now are reaching about INR 1,800 crores. And we hope this emergency procurement also will actually have some success for us. And then going forward, we're looking at a very, very strong defense growth. So -- and also, we are having a very strong practice going on at the OEMs, and there are many programs coming up at the OEM level. Overall, we are looking at addressing the entire DRDO and also the MOD practice and also the OEM programs. And with that, I would like to hand over the session to Mr. Anurag Sharma, who is the Head of our Electronics, Semiconductors and Artificial Intelligence. Thank you.

Hi. Good evening, everyone. I'm Anurag Sharma. I'm President of ESAI, which is basically Electronic, Semiconductor and Artificial Intelligence, wing of AXISCADES. Now you will -- I would like to tell you that why 3, what is the combination of these 3. So this is the combination of Electronic Semiconductor and Artificial Intelligence is the one which is churning out the fastest and most innovative products across the globe. And this is the space where we already belong. And we are -- we have a very robust pipeline in terms of the order book. We are close to INR 600 crores plus of order books with us. We are doing a growth of 60%, more than 60% and speaking more specifically on the products, we have a lot of focus on products. Products are not new to us. We have been doing products, but now we are offering complete system-level products. And for that, we have taken a new initiative. We have started a product development center in Fremont in California, where we are -- we have multiple products, which are being conceptualized, developed, tested and then manufactured across the globe. We also have started a lot of sales reinforcement in Europe with our headquarters being in Germany. And we are trying to set up a product sales ecosystem across various channels, resellers. And so the idea is that our -- both products and solutions should shall reach to maximum clients. We also have our company ADD solution in Germany, where we are doing a lot of wiring harness development and also specific products like micro data center and also solutions like thermal management. So all these initiatives are with a view to increase our presence in this sector across the globe and increase our revenues. So with that, I would like to give the mic to my colleague and COO, Mr. Muralikrishnan.

Thank you, Anurag. Good afternoon, ladies and gentlemen. This is Muralikrishnan, Chief Operating Officer of AXISCADES. We have seen a vision in our Chairman's statement, which is there in our investor presentation. We have a vision to become a $1 billion company in 2030. We call this as Power 930. As a COO, I take the responsibility to carry out this vision. This vision is also coming up with a high EBITDA of 24%, and this vision is going to be driven by flipping our product versus services revenue. From today at a level of 20% product, we are going to move to an 80% product and solutions-based organization. So in order to enable this, I do three things: First, enable the organization to deliver the AOP with the right processes, with the right resources; two, transform the organization for the future; and three, provide world-class facilities and resources to take up our Power 930 vision. This infrastructure is going to come up in two places. One is called DAC, Devanahalli Atmanirbhar Complex at Bangalore, which is a 20-acre facility. This is going to come up in 3 phases. Phase 1 is going to handle radar and electronic warfare solutions, development, manufacturing, testing, maintenance. Phase 2 is for missile complex, missile MRO as well as missile manufacturing, while missile MRO would happen at Bangalore. We also are planning to set up another facility at Hyderabad to establish our presence in missile manufacturing. Phase 3 would come up with MRO speed shop and supply chain facilities for Aerospace and Defense customers. We want to construct these facilities in 3 years' time. First phase will come up in this financial year itself. This facility of Phase 1 would cost INR 250 crores and the first Phase 1A of it would cost INR 120 crores, which would be mostly through internal funding. We are also looking for strategic partnership for the infrastructure development, which is through a company called AAIPL, Axis Aerospace Infrastructure Private Limited. With this, I request our Chairman to say the concluding remarks on our speeches. Over to you, sir.

Thank you, Murali. My colleagues have covered all the aspects. I've set the goal for the company, brought in the team of capable leadership -- the leadership team who can deliver the goal. However, I've tasked myself with the following. One is to create a robust silo or funnel that leads to a pipeline and wins to achieve the Power 390. So I'm tasked myself with that -- creating that silo contacts everything that leads to this goal, which has to be done in the next 2 years so that we can deliver on the third, fourth and fifth year of the goals while the AOP keeps going on. Second is, as Murali mentioned, ensure our DAC and MAC projects are completed on time. For that, we need resources and funds. So my job is to organize that without any dilution. So the land is owned by a company, one of our group companies, as should have known called AAIPL, Axis Aerospace Infrastructure Private Limited. We are trying to leverage or bring some strategic partnership into that and achieve this. This is one of the options. As we Murali also mentioned that 1A, we are splitting the whole approach into three cases. One year, we are pretty much covered. So rest of the things we have to organize. So we have time to organize, okay? The third thing is for long-term partnerships and relationships to achieve this. We hope to get the more -- the work from -- for the work as well as for the completion of DAC and MAC projects. So this will also have a sustainable growth and achieve the 930 in a sustainable way. So with this, I will be -- we are ready to take the questions. So I'll hand it over to Sangeeta, who can just organize the questions. Thank you. Thank you all.

We can start with the q&a.

[Operator Instructions] The first question is from the line of Koushik Mohan from Ashika Group.

Can I just understand this onetime cost on the P&L that we're having on more clarity basis?

Yes. So Koushik, thank you for the question. See, essentially, as what I explained in my speech, we went on a complete transformation initiative from Q3 onwards. And the one of the major parts of this is kind of complete overhaul of the leadership team. And essentially, the cost -- major cost with respect to the INR 14 crores, which I mentioned pertains to -- it not only was in India, it was also across globally where we had to kind of I would say, do a kind of a voluntary separation for our leadership, including the previous CEO and various other leadership positions across the globe. So that -- and also we had to incur certain, I would say, onetime legal costs in the course of a few exits, so to say. And then we also took a specific consulting from Zinnov with respect to our Automotive business, which I would say, especially for ADD solutions in Germany. All of this amounted to INR 14 crores, which in a way are nonrecurring in nature, which will not repeat next year.

Got it. And sir, second thing, currently, in this quarter, we have achieved around almost around 16.8% EBITDA margin. And we are talking about a target of Power 930, where we are talking about a 24% EBITDA margin. So what are the key levers which will play out in this specific margin increase? And how is the plan towards achieving that? And also can you relate this with the 80-20 rules that we are talking about product as well as the solutions?

Yes. Before I hand it over to Alfonso and Murali to kind of would say detail on this, I would like to say that while our kind of a blended EBITDA is at 13.8%, you would observe that the 3 main core businesses where the future growth is going to come is already at a 19% EBITDA. If you look at Aerospace, that's at 22%. And if you look at ESAI, that's also at about 23% plus. And if you look at only the Defense production, that's already at 22%. So the approach is to take it from here and drive it towards the product-led approach. And I will ask Alfonso to kind of say and also to Murali if they want to delineate on how this entire drivers are going to work out.

Yes. Exactly, as Shashi said, it is mainly driven by our focus. Our focus in Aerospace, Defense and ESAI will bring this margin improvement. If you see, we are running there around 20% in combination this year. But specifically also Defense is not -- is only at 15% and we will expect for next year, for fiscal year '26, an expansion of that EBITDA margin very clearly. So it's a combination of keeping, improving the balance between core and noncore and of course, also increasing the quality of our revenues. And we are very, very much secure on that. I don't know if you want to complement, Murali or more or less this is.

Yes. Thanks, Alfonso. So I think you are right. So once we focus on products and increase the share of our products, the EBITDA margins are improving or going to improve. Also the uniqueness of the product. So if we are the only supplier and if our products are innovative and unique, the margins are going to be higher. That is the way we want to go forward. 80-20 is the way where we will increase our EBITDA. So Chairman may please add if you want to have any comments on this, please.

No, no, I'm fine. As we said that this is a goal we have set. As Shashi explained, we are already at 19.2% in the core verticals. And Defense is also -- if you take only the Defense product solutions, without taking out the onetime development cost, it is at more than 20%. So we should be fine if we keep the focus, and that's what we are planning to do.

[Operator Instructions] The next question is from the line of Jatin Jadhav from Sahasrar Capital.

Am I audible.

Yes.

Congratulations on a great set of numbers. I have two questions. One is, sir, can you again briefly explain me the Phase 1, Phase 2 and Phase 3 in brief? And sir, my second question was regarding Phase 2. If I heard it correctly, you were trying to build a facility for missiles MRO and manufacturing. So I wanted to understand what kind of missiles are we targeting to manufacture for the Defense clients? And what kind of MRO facilities are we trying to build over here for existing missile systems or probably future missile systems. So those are...

I will take these questions. Basically, Phase 1 is meant for all the electronics, strategic electronics that will cover normal electronics also that will cover in the -- so that also includes radar, electronic warfare, strategic electronics and ESAI electronics. So that should cover pretty much our strategic electronics group and ESAI Group. So that will have a manufacturing facility and high-level test facility, including anechoic chamber, et cetera, which there are very rare availability in India. And it will also have a large hangars for radar maintenance, radar assembly, et cetera. So that means radars are widely used, for example, I'm just giving an example. So some of the as use large radars that can come in and then tested. This will have wide hangar to test all these things. So this is Phase 1A. So this will cover radar, electronics warfare and all the other strategic electronics and normal electronics, manufacturing, testing, assembly and so on. And so the Phase 2 we talked about is missile. Missile has 2 parts. Missile, we maintain the launches. When we say missile maintenance, there are two parts. Launches and missile transportable test benches, where the missile can be assembled, the four components of missile can be assembled at the war zone or wherever it is. So these are some of the ecosystem we are building. And also we are building the ground systems. That part may happen in Bangalore. But the main missile part, missile, when we say missile manufacture, this is more like an assembly. Some parts we are planning to manufacture, including airframes, including rocket motors and even the munitions for missile at some point of time, warheads, and then the nose cone, the front part. And of course, missile electronics, that onboard computing, et cetera. So this will happen in -- the whole integration will happen in Hyderabad. We are targeting to manufacture more -- we are focusing on smaller missiles, which is more into air to surface and so on. I don't want to reveal too much, but this will be the focus on the missile side. And third is MRO speed shop and manufacturing will be focused on dual use that will be mostly for both Aerospace and Defense. There are many aircraft. For example, Boeing aircraft are used for -- Boeing 737 is used in Defense as well as air. Airbus is used both in the -- so there are cases where there are a lot of dual-use aircraft and helicopters. So we'll be doing maintenance of the parts, both avionics and engine parts and some kind of some parts of airframe and manufacturing and supply chain for this. This will be Phase 3. So except the missile related activities, missile assembly, everything will be in Bangalore, which will be Devanahalli Atmanirbhar Complex. Missile Atmanirbhar Complex that will be in Hyderabad. That will come up in a 6-acre facility, which are yet to buy. We are in the negotiation with the Telangana government or talking to the Telangana government. Here, we are already -- we have acquired the land and we are starting up the work. We are in the plan approval stage at this stage.

The next question is from the line of Karthi from Suyash Advisors.

Sir, I just wanted to understand the visibility for the revenue growth guidance that you've given, 35% for Aero, 60% for Defense and 75% for ESAI. I hope I got those numbers correct. Just wanted to understand how much of this is contingent upon maybe order wins or whatever or customer approvals to go ahead? And how much of this is, shall we say, routine? Some clarity on that would help.

So I will -- Alfonso, would you want to talk about Aerospace first, followed by Sharadhi Babu on Defense and then of course, Anurag, who will explain about ESAI.

Yes. On Aerospace, we have a base of revenues that is secure with our current customers. Luckily, both customers are in a good shape. And the revenues that we make this year is nearly secured for next year plus some expansions. So that's securing a part of the growth in Aerospace. Also, the rest is coming from the pipeline of opportunities that we have now. It's a pipeline we started to build in the -- basically when I joined. And then we are now waiting the pipeline. And with the secured revenues plus the weighted pipeline, we are nearly 90% of the secure on the revenue increase. There is always -- we are starting the year, and there is always some deals to be won along the year. And I hope that we are putting a lot of hope in the Paris Air Show in which we will participate. We may have announcement of some important deals that will come in the Aerospace side. So basically, it is an estimation that we are pretty much secured and we are very confident on getting this 35% growth of revenues in Aerospace. There is also maybe Babu you can complement on the Defense side.

One quick question. How much would be the two customers' contribution?

The two current customers.

Yes.

Yes. That's nearly a similar revenue to this figure. So if it is a 35% increase, you can make the math very easily. In the current customers, we are expanding about 10% basically is coming from the pipeline with new customers. When I say new customers in Airbus, that is very big, Airbus is a full ecosystem. We have one current customer in Airbus, but Airbus is a very big group, and we are expanding into new areas as well.

Thanks, Alfonso. Covering the Defense part, the Defense growth is coming from the -- much of our Defense production where we are -- as you know, we are already -- we are part of the LCA, Sukhoi and also the AWACS program. And also multiple -- our -- both radar and EW are going on multiple platforms. So production is from different -- all these programs. And also, we have the MOD programs. We have -- we are implementing a large land systems Defense program in the coming year. And also, we are -- the OEMs listing has opened up with various activities happening and the new procurement from Defense has triggered a lot of OEM programs. So the much of activity is also happening on the OEM -- global OEM programs. So it is spread across all these three areas.

And also Babu I just want to clarify. The question was a little wrong, casted wrong that Defense is 75% and ESAI is 60% growth. Just to reiterate that, that's all.

And also the counter-drone systems, where we are in the forefront, and we have already supplied 100 systems to the Defense. So we are expecting repeat orders and also the new programs. There are a lot of things the counter-drone is the most wanted system across the Defense now. And then we are at -- we are leading this entire program, supply of these counter-drone systems to the Indian Defense.

Right. So if I may clarify, what would be production revenue in FY '26? We did INR 190 crores roughly in FY '25.

Production revenue is...

This year, FY '25 was around INR 196 crores. We are talking about probably doubling it in FY '26.

The next question is from the line of Nishid Shah from Ambika Fincap Consultants Private Limited.

This is Dhruv. Congratulations on a good set of numbers. Just one clarification on the Defense side. The deal we announced...

Sorry to interrupt Mr. Nishid. Could you please come closer to your device?

Can you hear me?

Yes. We can.

Yes, sir. I just had one clarification on the Defense side. The deal we announced on the test runs, any revenues included in the growth, which we are saying 75%?

Which deal you are talking about, we are not able to...

The MBDA deal, which we announced in January for the test bench, have we included any revenues from that, sir?

Babu, can you answer this?

[indiscernible] excellence, which we inaugurated. Yes, we have revenues in that program in FY '26.

Okay. Okay. That's it.

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

Am I audible sir.

Yes you are.

Sir, just wanted to check, I mean, our INR 9,000 crores kind of a target in next 5 to 6 years basically. So that kind of equates to about 40%, 45% kind of a CAGR over the next 5, 6 years. So just wanted to understand, do you expect this growth to be evenly phased over the years? Or do you expect it to be front-ended, back-ended? I mean what sort of thought process you have on that, yes?

I will take this question. See this year, one, let us call this one T0 beginning this right now. This will be a normal year. The AOP will be met as COO when said, we are looking at a 50% EBITDA growth and proportional PAT growth this year. And because we are [indiscernible], infrastructure at least 60% should be ready. So there could be some traction other than the AOP figure, something towards the Power 930 will come next year. But the third, fourth and fifth year, I think we will ramp up faster because by the time, most of the DAC will be completed, MAC will be completed. All the third phase will be almost on. So all the lines of revenue streams will be ready. So I think it's still a vision, but I would say that it's very much possible to achieve this.

Okay. And this year, we are targeting 35% growth at the company level.

This year, see, we are not looking at revenue per se. The revenue will be 35%, I guess. But I'm saying profit after adjusting to EBITDA, because we have a cost -- huge cost on ESOPs, after adjusting our EBITDA still can be around 50% growth from the current level. And PAT will be proportional. And EBITDA margin will be at least at 17% so average. So you can do the math, what should be the revenue and what should be the cost.

And what is the FY '23 the ESOP cost we are expecting?

Around INR 50 crores to INR 60 crores.

Around INR 50 crores to INR 60 crores. Okay. And what is the tax rate? I mean, this tax rate, we have seen some...

Yes. So the tax rate we have now moved to the new tax regime. Of course, as you know, we have global operations and each of the, I would say, our global operations have a different tax rate. But in India, we have moved to the new tax regime at 25.82%.

So 26% is the effective tax rate we can expect at the company level? And what was the onetime provisioning cost in fourth quarter?

Sorry to interrupt, Mr. Deepak.

It's just the last question.

Onetime provisioning, I didn't get you.

Onetime cost in fourth quarter. Just onetime cost in fourth quarter. Out of this INR 14 crores, what was the cost in fourth quarter?

The fourth quarter was around INR 9 crores.

INR 9 crores. Okay.

INR 7.5 crores. Let me correct myself.

The next question is from the line of Aastha from Pkeday Advisors.

Am I audible?

Yes, you are.

Sir, first, I want to ask you, we saw the slowest growth in this year in FY '25 compared to last 3, 4 years. What was the reason? I mean, what happened? We saw 13% growth in Aerospace, which was again slower than compared to previous years. And sir, in the similar -- similar line, I want to ask you what was the revenue growth in Automotive segment?

No, the Automotive segment, talking about the revenue growth as such, you're right, the core businesses is where the actual growth happened. And most of the, I would say, management bandwidth as well as, I would say, our efforts were getting into ensuring that we reset the noncore verticals, and we were exposed to the macro factors, especially in Automotive. Just to give an example, the acquisition which we did of ADD Solutions in Germany, where we -- I would say, Volkswagen was the main customer, which there was a huge degrowth there. So we did not achieve the objectives. That was the issue there. And also with respect to the acquisition which we did in energy of EPCOGEN, yet to hit critical mass. As a result of which the noncore verticals kind of, I would say, impacted the overall growth in terms of the business. And as to the Automotive vertical, the total automotive revenue was INR 91 crores -- INR 90 crores as against INR 104 crores, which we recorded in FY '24.

Sir, but even Aerospace grew only by 13%, whereas if I see from FY '22 to '24, it has grown pretty well.

Yes. So because we -- I would say we had some new programs, which we started implementing.

No, no, Shashi, that is post COVID that went up. Okay. That is clear because there is a complete -- lot of orders were held back as a result.

Yes. So just to elaborate on what Dr. S.R just now stated, if you look at the period from FY '23, if you look at FY '22, which was the period of COVID, the revenue dropped by 50%. So when the COVID -- the growth came back, it came back with a vengeance. So that kind of stabilized in FY '24 and onwards.

Going forward, should I expect 13% to 15% growth as my Aerospace growth?

I think Alfonso has clarified that.

Shashi, I'll take the question. Madam, this year, we are expecting, as our CEO on behalf of one said 35%. If I can give the figures, approximately, we did about 300-- around $38 million in Aerospace. We are targeting about $51 million this year, approximately, okay? So we can expect -- and we are looking at a similar or better growth next year because we'll be adding products and solutions to this, okay?

Got it, sir. Sir, my next question would be, is it possible to...

Sorry to interrupt Aastha. I request you to return to the question queue as there are several participants waiting for their turn. [Operator Instructions] The next question is from the line of Nirvana Laha from Badrinath Holdings.

My question is regarding the ESAI segment. So if I look at the revenues this year, they were flat. We are guiding for, I think, 60% growth in EBITDA next year. So can you please elaborate on what programs or what clients will help us drive this? Some details on where we can understand what tangible programs or clients will help move this will be very helpful.

Yes, of course. This is Anurag Sharma here. So you see that we have -- we are basically also doing a revision in our strategy where we are moving towards product-driven growth. And in that context, we have introduced some new products also in this year. And that is why we are very much confident of this growth, which I spoke about. So we have -- we already are doing a certain type of products for our OEM clients in the Semiconductor segment, and we were doing high-end electronic design and PCBAs. But now we are doing our own system-level product, which directly go into the market. So this is something which is a renewed strategy and very effective one, and that will -- that gives us the confidence to move forward.

Sir, just a follow-up on that. So 60% EBITDA growth, do you already -- and I think we reported 24% EBITDA margins this year. So the EBITDA growth, how much of that will be driven by top line growth and how much will be driven by further EBITDA expansion, if you already have some plans around that?

So you're talking about ESAI or you are talking about the company?

No, ESAI. ESAI is INR 125 crore revenue, I believe, with INR 30 crores EBITDA. So 60% EBITDA growth that we are targeting, what will be the split between the revenue growth in ESAI and further EBITDA margin expansion?

This is mostly coming from the revenue growth. So we are going to substantially increase the revenue.

See, we have added a lot of new logos. Earlier, there used to be 2, 3 logos which were kind of focused with respect to the entire ESAI revenues. Now we are adding quite a lot of new logos, especially in the U.S. region, which is going to kind of, I would say, take this forward.

Yes. Yes. If I may complement the revenues flow in ESAI in the previous year has been delivery led. It's basically the sales done many years ago, and we have continued. And what we have done now is really boosting the sales and the relationships with the clients together with a new product strategy. So by the continuity of the current revenue streams is there. But on top of that, we are adding new OEMs, new clients, et cetera, and new product range that has not been done in the company for the last years. This is a new era now.

Traditionally had only 2 silicon manufacturers with us, which have brought in 90% of the revenues. Now we are having about 3 or 4 more silicon manufacturers to work with. Number two, we have taken a strong China Plus One strategy and the Tariff Plus One strategy. So that means that we are going wherever there was a replacement activities are required. That has boosted our order book. The entire 60%, we can say is almost 90% of this covered is already an order book right now. It's a good question of execution. There is a robust pipeline. And customer base, we have some marquee customers. So basically, these three things give us the confidence. And the EBITDA growth is proportional. There won't be bps growth. There is no basic point growth. The EBITDA will remain almost the same percentage, but there will be -- it will be a result of revenue growth. Revenue growth will be -- revenue growth will be there. Also, there is a small element of ESAI in with Mistral with ESAI, everything is being still under...

[Operator Instructions] The next question is from the line of Dhaval Jain from Sequent Investments.

Sir, I just wanted to understand the contribution from our core business going forward because right now, what I see is out of the total contribution that we have in Aerospace is 31%, Defense is around 29% and ESAI is around 12%. So moving forward, how is this mix going to change? Is it going to be evenly split? Or is Defense going to be more contributing to the core domain?

Let me answer this question. I'm -- so -- Ravinarayanan here. So this is around -- we are expecting at 2028, we are expecting -- see, leave the noncore aside, we are looking at 40% in Defense, about 30% in ESAI and 30% in Aerospace. That's the mix we are expecting at this point of time with the visibility among the core activities.

Okay. Also one more aspect of it, I might have missed out on. So I just wanted to know about the CapEx that we are doing for the 3 phases that we are going to put in. So I see that we are going to put around INR 250 crores in the Phase 1, Phase 1A contributing INR 120 crores. So can I have the understanding of how are you going to fund the Phase 2 and Phase 3? And what will be the total CapEx overall?

I'm giving my brief this thing. Phase 1A, in Phase 1, we have divided it as Phase 1A and Phase 1 -- pretty much is INR 120 crores. That we are already allocated INR 45 crores from our internal accruals and we would be allocating more money to this internally. This won't be almost require external funding, which our main focus is going to be on strategic partnerships for the development of the whole thing. That's what it is.

We don't currently have the entire CapEx that -- I mean, the entire amount of what we are going to plan or is it going to come later stage?

See, as Dr. S.R explained, what we have on the radar and which is under development, where the plan is at an approval stage is the Phase 1A, where the CapEx, including the building as well as the equipment is going to be anywhere between INR 100 crores to INR 120 crores, of which most of it, our objective is that most of it should be through internal accruals. As I've already mentioned, the company is sitting on cash reserves. At the same time, the generation of EBITDA in FY '26 is also going to support that. So that is how the Phase 1A is going to be funded. And onwards, basically, as what Dr. S.R. was explaining, we are working on partnerships where there can be a contribution from the partner who we negotiate with the OEMs, which will take this entire CapEx forward.

The next question is from the line of Ruchita Ghadge from I-Wealth Management.

So sir, my question was essentially on the CapEx part only. So on the Phase 1 that we're talking about, so the Phase A, I understood. Could you please reiterate like on the Phase B, what would that be? And by when do you expect the A and the B to come? And how much revenue can each at the peak capacity contribute?

It's already work has started, somewhat the planning approval, et cetera. We hope to complete the Phase 1A by December this year and moving by January 15 at the latest. So Phase 1A is on track. Phase 1B as we conclude will have certain level of tool room machine shops, we call it as speed manufacturing shop and some kind of activities for supply chain and inspection equipments. And so these are -- this will come in that more towards Aerospace to take care of some of the Aerospace activities, more on to the onetime development, onetime manufacturing of Aerospace parts. Just to explain to you, around 90% of the OEM spend, that is Airbus, Boeing and their ecosystem, spent their whole entire money with the book [Technical Difficulty]

S.R. we are losing you. Hello? Yes, I think you can take the question.

Yes. So as S.R. sir explained, so there is Phase 1, which is about 1 year away. So we are able to complete that, and then we will move and start operations next year. And Phase 2 and 3, which are for missiles as well as for the MRO and speed shop, that will come in the subsequent year.

And about the Phase 1, if you could tell that what is the kind of peak revenue that we can expect in the Phase 1?

So this will be a part of our upcoming AOP. And Phase 1A is more related to radar.

So we are expecting -- just to add to what Murali said, we are expecting a healthy kind of an asset turnover here, at least by 2 to 2.5x is what we can expect.

Okay. And how fast can we ramp this up?

Revenues will start as soon as the facilities are ready. And our plan is beginning of next year, that will be ready. Sometimes today's supply chain of equipment and so on is difficult to predict. But we are very confident that beginning of next year, and we have some client discussions also. So revenues will start flowing early as soon as the facilities are ready. The pipeline is very big, and we are more or less securing the contracts in parallel to the investment in the Phase 1A. So that will boost specifically fiscal year '27. It's very difficult. The facilities are going to be ready at the end of this year. So the impact will be in the subsequent years. The return on capital expenses is very high in everything we are planning. This is for Phase 1 and basically. Next phases are depending on the customer negotiations and the client partnerships that we are closing in this year. As long as we will be announcing the partnership, the investments will be also putting into of the community.

Okay. Understood. And the ESOP cost, what was that for FY '25?

The ESOP cost for FY '25 was kind of marginal. It was less than INR 5 crores, let me say.

Understood. Understood. And just a follow-up on this.

Ruchita, we are so sorry, but there are a lot of participants waiting for their turn. The next question is from the line of Aman Vij from Astute Investment Management.

My question is on the Defense side. So could you give some more clarity that till last quarter or maybe 1, 2 quarters back, we were talking about 30% kind of production growth. But what has changed in the last 1, 2 quarters that we are now talking about 100% growth in our production revenue? And then if you can talk about some of the interesting programs which is coming up, which is helping in this. Is this NETRA program? And if you can give any update and also on counter-drone and CG drone POD update, if you can give on these 3 programs. These are the questions I have.

Sure. Mainly the Defense program, the production is coming from, as I mentioned in one of the previous answers, there is a ramp-up in production. We are actually significantly contributing towards the production of the LCA, the Su-30 upgrades and also in the AWACS, and also, we are having the direction finding system is going on multiple platforms. So much of the production is happening in this direction. And also there is an expedited deliveries. In fact, we have the orders. It is the execution, which is actually more where we are focusing and then enhancing it. And also, we are -- with the culmination of the new orders from the OEMs like the Marine Rafale and others are also expediting our OEM -- expanding our OEM footprint, okay? So we are already working with many global OEMs, and there, the expansion is happening on an accelerated mode. And in the MOD, so we are number one, we have a couple of -- we have -- we are implementing a LAN system project. And also, we are expecting this emergency procurement to lead to certain quick supply of systems where we are expecting this emergency procurement and also maybe there will be one more iteration also will actually contribute to our enhanced revenue.

A clarification on the emergency procurement part. What kind of contribution do you think can come from that? And sorry, this 230 and AWACS. So these program was supposed to come in FY '27. So is it getting preponed or when you are talking about so many programs, all of them are coming in FY '26 itself?

There are some systems -- subsystems already the production is going on and then deliveries are going on. Some of them are actually coming up in this year and some quantities next year. And also the emergency procurement, there are 10 lines of items the Indian MOD has embarked upon acquiring in a quick succession, and we already fielded our equipment in 4 categories. And then at least we have very, very high confidence that we should be able to win one of them. And also the same will also repeat in a very quick succession down the line.

Sorry, again, what is the order we are expecting from EP, emergency procurement in the next 1, 2 years?

No, we will not be able to disclose the values, but we are hoping for sure wins.

The next question is from the line of Pankaj Parab from Molecule Ventures.

Am I audible.

Yes you are.

So my first question would be on the recent traction in the anti-drone system. So what kind of new opportunities that we are seeing? And are we developing any new system except from the existing system in anti-drone?

Yes, we are actually expanding our anti-drone systems offerings. We are in the counter-drone systems. We are already in the man portable drone systems. And now we are offering the handheld systems also. And also, we have worked on the vehicle mounted and then we have offered the vehicle mounted systems also. And going forward, we are actually creating our own internal portfolio of long-range and programmable jammers and also -- and future add-on integrate our own radars. And so we'll be offering a full suite of counter-drone systems, including all the sensors and the kill options, both the soft sensors and soft kill, hard sensors and hard kill options. All of them will be part of our offerings. So it's a pretty interesting portfolio of products and also a very good pipeline coming up. And already, we are in the forefront of counter-drone systems in the Indian context. And also we are expanding globally also.

And sir, can you please elaborate some of the order in the counter-drone system in FY '26 that may be converted into revenue?

As of now, the values I'll not be able to disclose. So I mean -- but I'm sure counter-drone systems will be part of our revenues.

Okay. So we can safely assume that the amount of the revenue will be substantially higher than FY '25, I guess so.

Yes.

Yes, please continue.

Yes. To complement what Mr. Babu said, it is not only the products that we are developing. It also the recent success that we have last year in counter-drone systems here in India, has drive the attention of some international companies that are looking us as a main partner to develop. So this will accelerate because as you can imagine, developing our own products take some time. But what is going on is that now we are about to announce very soon a very good partnership on these systems with the leaders companies. And as you know, I come from Europe and there, we are experiencing a lot on drones. And what we are doing is partnerships with companies that are combat proven systems. And that's why we are putting a lot of bets on this counter-drone and even drone system. So this is where we are super confident. I'm sorry, this defense, we cannot disclose on the opportunities we are dealing with and the conversations we are having with the international OEMs and also the Ministry of Defense here in India. But we are super confident on a big boost on these revenues.

Okay. And sir, my next question is on ESAI segment. So we have a good jump in the quarterly revenue for this quarter in the ESAI segment. And sir, you also mentioned the INR 600 crore order book. And so can you just elaborate what is the portion of the chip to product division that we are trying to develop? And how we are progressing there? Any new product addition in the pipeline or anything on that?

So for ESAI, there are multiple products in pipeline, starting from millimeter wave radar, drone controller as well as no other radar systems such as Through-Wall radar and drone penetration radar.

And sir, does this contain our order book of INR 600 crores?

Sorry to interrupt Mr. Pankaj. Due to time constraints, we'll have to take this as the last question. Thank you. Ladies and gentlemen, in the interest of time, this will be the last question. I would now hand the conference over to the management for closing comments.

Thank you, everyone. Thanks to all our esteemed leaders and participants for your time and interest in our company. We appreciate this engaging session and the insightful questions. Should you have any further questions or need any additional clarification, please feel free to connect with us. Thank you.

Thank you. Thank you, everyone.

Thank you.

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