Bharat Electronics Limited (500049) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bharat Electronics Limited Q2 FY '25 Earnings Conference Call hosted by Nomura Financial Advisory and Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Raut from Nomura. Thank you, and over to you, sir.

Thanks, Steve. Good afternoon, everyone. On the behalf of Nomura, we welcome you all for the Q2 '25 conference call of Bharat Electronics Limited. I take this opportunity to welcome the management of Bharat Electronics, represented by Shri Manoj Jain, Chairman and Managing Director; Shri Damodar Bhattad, Director, Finance and CFO; Shri Sreenivas, Company Secretary. I'll now hand over the call to company management for their opening remarks. Thank you.

Yes. Good morning, good afternoon, everybody. myself, Manoj Jain, CMD BEL. I will just touch upon financial highlights up to Q2 financial year '24-'25. So in this Q2, we have achieved a turnover to INR 8,530 crores as compared to INR 7,365 crores up to Q2 of last year, with a growth of 15.83%. And profit before tax has also increased to INR 2,488 crores as compared to INR 1,777 crores, which was there up to last year Q2, with a growth of 45.05%. The profit after tax also has increased to INR 1,867 crores as compared to INR 1,343 crores in the last Q2 '23-'24, with a growth of 39.03%. EBITDA also has increased to 27.26% up to Q2 of '24-'25 as compared to 22.66% last year. The earnings per share has also increased to INR 2.55 as compared to INR 1.84 in the last year at the same time at Q2. The order book position as of October 1, 2024, is INR 74,595 crores. So overall, on all the financial parameters, we have achieved a good growth in -- up to Q2. This is a brief opening remarks from my side.

So we'll leave it to you for taking up the question-and-answer session, Mr. Umesh, you can go ahead.

[Operator Instructions] First question is from the line of Ankur Sharma from HDFC Life.

Just 2 questions. One was on the order inflows. Now if we see for the first half, we've done about INR 7,500-odd crores of inflows. Our guidance, I think, is INR 25,000 crores. So if you could just help us, which are the larger orders that you expect in the second half, which would kind of help you get to that target? Or are you seeing any slippages or otherwise? So just some sense on the order inflows. And my second question will be on the working capital. So while profitability and top line growth has been very strong in the first half, operating cash flows are actually negative INR 2,300-odd crores with this very substantial rise in both debtors and inventory. So if you could just help us what is driving that? And do we expect that to kind of normalize by the end of the year?

Good afternoon. As we have told that we have achieved an order book flow of INR 7,500 crores in the first half of '24-'25. We are confident of achieving the target guidance given of INR 25,000 crores for '24-'25. In terms of the major orders, which are expected are, one is for a CB radar of around INR 2,500 crores, Electronic Warfare Suite for Mi-17, that is INR 2,000 crores. [indiscernible] order is another INR 2,000 crores, Shakti Phase 4, is another INR 2,000 crores. So these are the major orders expected. Already, we achieved INR 7,500 crores. And with these orders and some other small orders, we hope to -- we are confident of achieving the given guidance of INR 25,000 crores. As regards to the working capital, the ratio is -- current ratio as on 30th September is 1.6x, and working capital is fairly reasonably okay. It has been around 1.5, 1.6 for the past few years. So we don't see any much challenges in the working capital management.

Okay. My question is because your operating cash flow was negative despite this, but you're saying will be broad?

Operating cash flow is negative because in the first half, the inventory is more taken up because for the second half, of our turnover further, we have to achieve around INR 14,500 crores as per the target. If you see our inventory, inventory is around INR 9,000 crores there. So first half, we have achieved INR 8,500 crores. Given a guidance of 15% growth, we hope to achieve INR 23,000 crore turnover, which means we have to achieve INR 14,500 crores turnover in the second half, for which we have to build up inventory for which cash outflow will be there. So that's why the operating cash flow is negative and inventory is slightly built up for the second half. So that will be recovered, this will not be an issue.

The next question is from the line of Priyesh from Mahindra Mutual Funds.

Just 2 questions. First, if you could provide a breakup of execution for this quarter in terms of project or program-wise?

[indiscernible] what we have received in September? On our execution?

Yes, execution for the second quarter.

Execution till the first half, we can tell you. Major are, of course, last time, last time order, which we executed in the first half. There are 5, 6 more main major projects. One is called CBIC project, we call it, for Delhi government, for Central Board of Indirect Taxes. That is around INR 300 crores we executed. IACCS so many activities we are continually doing. And this first half, we have almost some INR 300 crores worth of orders we executed for that project. The EW system of Shakti around INR 250 crores. HAMMER missiles systems, INR 235 crores; then manpack Ku-Band terminal, around INR 200 crores. So these are the major project orders which we executed in -- till September 2024.

What would be the quantum of LRSAM sir?

INR 1,600 crores roughly. INR 1,622 crores roughly.

Okay. Okay. And just wanted to understand the underlying reason that -- for the gross margin expansion that we have seen in the second quarter of FY '25, if you could provide the reason for the same? And also, would that be a fair assumption that this could be a sustainable gross margin for FY '25?

See, we have given a gross margin guidance of 42% for the current year '24-'25. The current half, the gross margin we achieved is 45%. So it is a composition of product mix during the first half, which has given us this margin of 45%. Overall, during the current year, we expect to have the gross margin of 42% only as we have given the guidance.

The next question is from the line of Mohit Pandey from Macquarie Capital.

Sir, firstly, if you could highlight which are the major projects to be executed in the next 2 quarters? That would be very helpful.

Yes, in the next 2 quarters, the main project again is LRSAM. So that is around INR 1,600-plus crores. We will execute orders for that. Then one -- another EW project is called is Shakti. That also will be around INR 800 crores to INR 900 crores worth of order we will execute in the next half. One more EW project is Instrumented EW Range. That also is one more major project executed by our Hyderabad unit, around INR 750 crores is there for that. Akash Army, we have already started a good progress on that, and we will liquidate around INR 500 crores worth of items we'll deliver by March for Akash Army. D-29 EW system is we're now, continuously we are supplying. So in the next 2 halves -- next 2 quarters, around almost INR 500 crores worth of equipment we we'll supply for the D-29 EW system. And then weapon-locating radar for planes, we will supply around INR 450 crores. So these are the major items which we are going to supply in the next 2 quarters.

Okay, sir. And sir, secondly, on the supply chain, if you could give an update on Israel-linked supply chains? Are you facing any challenges on that front?

Yes and no. Actually, major challenges which we had seen earlier about LRSAM and other, those big ticket items already streamlined. So we are not facing any challenge. Some other small items, which are not affecting our turnover that much, but this goes as a subsystem -- in larger system of other DPSUs. There, we are finding some challenges. So it may affect their turnover that much. But our turnover point of view not, in fact, is analyzed for items which are coming from Israel. All the items streamlining has been done in the last 3 to 6 months. So we are not facing any challenges as such.

Sure, Sir, just -- and lastly, on margins, if you could highlight what are the 2, 3 factors which lead to variation in margins across the different products that would be very helpful, sir.

No, it is just the product mix of different products. See, there are 29 strategic business units which we have got, and all are exhibiting different product lines. So it is all that, that combination factor has given us an advantage in this current half. That is the only one. Individually, I cannot tell which product has given what, that we are not able to comment on.

The next question is from the line of Nitin Arora from Axis Mutual Funds.

Sir, just on the order intake guidance, which you said you feel very confident of doing INR 25,000 crores and you articulated a few projects. Can you throw some light, especially on this Ashwini Radar and all? It's been now 4, 5 quarters, we've been hearing that this is something coming. I just want to understand, it is some structural issue has come into it? Or it's just that the final price negotiation is somewhat delaying it. Also on the other projects where the confidence is so high that we will do INR 25,000 crores, are these more of in the final negotiation of pricing? Where the stuck? Just wanted first thing on that.

Definitely, we have told you that our target was INR 25,000 crores of order inflow this year, definitely, we have done the homework and we are confident, then only we announced that. So it was there. Ashwini Radar, we have told. This radar already, we have become L1, already declared L1 also. So it might become a multi-bid. Actually, we were trying this to become a single bid. But because of previous commitment given by the RDO, that it will be a single bid for BEL. But anyway, over a period of time, they told like it go to multi-vendor situation. And we were confident that we will become L1 because our association, our development, our knowledge, our expense, based on that, we can give to our users the most cost optimum solution. And then we were L1 already declared. So now declared L1, it may take another 3 months maximum to convert that L1 to getting the order. It will not be an issue. Already, I think the 3 vendors participated in this, and we were L1 in that. So this is about to come any time now. So previous delay because of that confusion only, whether they will go multi-vendor or single vendors or partial quantity single vendor to BEL because BEL was associated from day 1 in this radar development program jointly with DRDO. So we were fighting for that, and it was their previous commitment also. Anyway, part of life, that we have to have multi-vendor situation. And multi-vendor also, there is no threat for BEL. So in this particular case, we have proved that we are cost-competitive also. And we are getting order very soon now because all other process are done by the user. Regarding other 3 projects also, they are in very, very advanced stage. We are having multiple discussions going on. Even some of them have already started PMC also, first round of PMC, et cetera, started for that. So we are confident in next 3 months, maximum 4 months, we will have this order, and as soon as the order comes, we will firstly intimate to SEBI and tell you immediately.

Okay. Sir, the second question was given -- and sorry for this. I always ask this. Is that INR 25,000 crore kind of an order intake, you've been consistently maintaining the momentum in the last 2, 3 years? But given next year, how you're looking at it? I mean to grow at INR 25,000 crores, you think you can grow on that number? Still do we have those programs, for example, LRSAM is still there. But generally, in your sense, in a very practical way, do you think growing on INR 25,000 crores is still possible? Because otherwise, then your growth on the -- basically, your profit growth will start looking quite weak. So just more of a question on a forward basis, that how are you looking beyond INR 25,000 crores, if you look at your pipeline and government agency of ordering new orders?

Everything is promising for us right now. Let me again assure you. We are targeting -- next year, it will be more than this year growth guidance what we have given you. Next year, April, we will again consolidate all of that. I can only assure you today, it will be more than what is there for this year. This year, we have got revenue growth of 15%. Next year, I can assure you now it will be a little bit more because of the -- so many leads and so many discussions, we are already having so many programs, including we have called QRSAM, including MRSAM, follow-on orders. So these all orders are going to fructify mostly next year. So next year, order book position, if you say only QRSAM alone itself may give us INR 25,000 crores to INR 30,000 crores order book, one line item itself. Then remaining line items will give us something more. So we are confident next year will be definitely much more than what target we had set ourselves for this year. It will be much more. I can assure you. But that we will tell you from data on 1st April, definitely, we'll come to you with much more better figures for next year. But we are fully confident on that.

And sir, in terms of margin, you stated -- you're generally been saying that gross margin, I will maintain it for about 42%. But given you have plan to strong margin, I understand mix always is important, which you better understand than us. But generally, in your sense, do you think there is a high chance of you doing better margins just because of the mix part, nothing else? I mean operational leverage would be there, but I'm saying just because of the mix where it is getting concluded because you stated one number of -- one project, which is like INR 1,600 crores over the next 1 or 2 quarters. So that could be coming because of that order mix is somewhat -- do you think margins can hold up further?

You're asking in no different version of the same question. All I say is that we maintain the gross margin of 42% for the current year. We will definitely maintain that. We are in the process of doing further and further indigenization of our module subsystems, et cetera. So hoping that the indigenization is done well in line, definitely it will be profit margin will increase. But today, we can't quantify about the future. But today, we are confident about whatever margins which we have given to you, we are definitely going to cross that. We'll achieve this, no doubt on that.

The next question is from the line of Mayank Chaturvedi from HSBC Mutual Funds.

You highlighted that you now are working across 29 SBUs. I think a year or so back, it was around 24 SBUs. Can you just highlight which SBUs you have added over the past 1 year? And what do you think is the total addressable market for these SBUs?

So 1st of January, we had opened 5 more SBUs. And that one of them are EW land systems at our Hyderabad. So that was the biggest SBU. Because for that, we were doing so much of homework.So they have now started generating -- this year, I think they will cross around INR 1,500 crores plus turnover this year itself. Because last year, they were working jointly with another leve system SBU of EW. So they already were doing a good work. We had to only streamline them and separate them and become a separate SBU. So that SBU already in the first year of existence, so called itself will cross INR 1,500 crores. Other 4 SBUs are created at Bangalore for us. That also started as a micro SBU type of concept within BEL. And some homework they have already done. One of them is speaker SBU, RF and IF speakers. Another one is arms and ammunition SBUs. One of them is network and cybersecurity SBUs, and one of them is unmanned systems SBU. So these 4 SBUs also have good growth prospects, et cetera. We have reviewed that. RF speaker SBU this year may touch around INR 350 crores to INR 400 crores turnover. And other SBUs also will be of this similar line. The first year for these 4 SBUs, we've given a target -- internal target of around INR 200 crores, INR 250 crores to INR 300 crores, barring this fifth SBU, which we definitely cross INR 1,500 crores. And then slowly, they will pick up. Finally, we want all these 5 SBUs to become INR 1,000 crore SBU because they have those types of operation. In the next 2, 3 years, they will start contributing INR 1,000-plus crores that we have already have own plans for these SBUs.

Okay. And sir, on the cybersecurities, I think it was largely being -- the services were largely being consumed internally. Have you started offering these services to third party now? Now that you're targeting INR 200 crores, INR 300 crores revenue?

Certainly, certainly. Because earlier, their services are used for our bigger programs of our BEL itself, which earlier we were supplying directly to [indiscernible], but there were no direct orders for them. So now anyway, they will keep on supporting that internal usage. And we have our own internal booking standards for that. If they give services to our internal SBU, also, we account for that. But definitely, now we are looking at direct turnover for them, direct sales [indiscernible] . So that -- there are 4, 5 big leads already which converted into a business case for them. We are expecting 1 or 2 big orders in next 10, 15 days or maximum 1 month time, one from Ministry of Defense, one from medical aims and other department. And some other are from SoC-related activities for some DPSUs. So some 4, 5 big leads are there, which is they are going to get and then execute also some INR 10 crores, INR 15 crores type of orders they have already got, and they have started executing that. But these big-ticket items, we are expecting now. And that's why we are confident by March direct sales, they may cross INR 200 crores to INR 250 crores. But definitely, they are supporting other SBUs and generating indirectly revenue for them for around INR 200 crore worth services they started giving to other SBUs.

Seeing the potential leads have formed a separate strategic business unit, there is a great potential in this area. There will be a slow beginning. And as the time goes, they will slowly take off.

[Operator Instructions] The next question is from the line of Harshit Patel from Equirus Securities.

So my first question is India's naval pipeline is quite comprehensive in terms of additions of next-generation destroyers, frigates as well as there has been a substantial movement on the submarine programs as well recently. So could you highlight how we are going to increase our wallet share in these platforms vis-a-vis how we were doing in the past? So basically, what are our newly indigenized products and systems that we can now offer in these platforms, which we were not doing earlier?

Definitely, one is number. The number increases, turnover increases, and one is extra share in these platforms. So extra indigenization of extra products to be added in these platforms. So we are working on both fronts, adding numbers, upgrading previous products because some of the products which we have supplied, now we are giving slightly upgraded features. So that is not called as a new addition, but upgradation also has a huge turnover advantage for us because upgradation comes at some cost. So there are incremental product upgradation, subsystem upgradation. And third is, adding some new portfolio of electronic variety subsystems. So we are working on all the 3. The new variety share also, we have now discussed special submarine programs, et cetera. And that itself will give us very good returns, very good turnover for us. So all the 3 fronts, we are working on big level platform. So many new type of radars, which were early are imported, and now we are indigenized and we are giving like MFRF radar orders, which we received in the last quarter. That is one such example, which are older ships. It was a foreign-sourced radar and now we have indigenized, and that's why now it is directly supplied by BEL. Earlier, it was directly by global radar. So that way, we are increasing some other gun interfaces and other things we have added some other integrated Sonar Suite type of things we are adding for submarine program. So we keep on increasing the indigenization content in these programs and keep on upgrading various products, which we had supplied earlier, like EW or communications suite, et cetera, we are upgrading. So all the fronts, we are finding in our level pipeline, project itself are growing. And our share -- our electronic share is further increasing because of indigenization efforts which we have put at the right time. So because of that, naval segment is the most promising out of the 3, army, navy and air force, for us as of now. But definitely, other 2 also, navy and air force -- army and air force also are catching up now because there also we have done a lot of many indigenization programs and so many big programs. But definitely, naval has taken the lead as of now for us.

Understood. My second question is, could you comment on our content in the artillery systems being developed by the private players? So there are many programs happening simultaneously, ATAGS, Towed Gun Systems, VAJRA, Mounted Gun Systems as well as light tanks. So what is the total addressable opportunity for us in these programs? I am asking because a lot of OEMs, which are developing these programs, they also have their own electronics division, so would we be competing with their own divisions? How our market share, wallet share will pan out in these systems?

Okay. Like these -- all platforms, firstly for us, each and every platform is important, whether it is a naval platform or whether it is a tank-and-gun type of platform because everywhere, there is a presence of electronics and there is a presence of BEL. So in these programs, although many of the programs are now -- these type of platforms are opened up to private. But basic electronics for that, based on our experience, based on our products and based on our compatibility with the previously supply system or based on our expertise of integrating them to a larger C4I systems. Because of all these things, we are confident that they are coming to us for all these type of interfaces, like what I call it CIU is one such example. The Communication Interface Unit for all these tanks and guns is provided by us. Typically, all type of [ EU ] system are provided by us. So those are the -- tank radios, radio communications with them that is provided by us. And because when they approach us, they know we will give them a quality product and which is interfaceable to present solutions and future solution because largely these all are complex system-oriented solutions, [indiscernible] program are handled by BEL. So that gives us an extra advantage. And that's why even these private companies also want to work with us very, very closely. So we are not foreseeing any problem. We are working very, very closely with Bharatpur or Tata or L&T and all these big players, private players also to see that we give them right products and technology required for them in these programs.

The next question is from the line of Amit Dixit from ICICI Securities. SP-6 Yes.

Congratulations for a good set of numbers. The first question is on the EBITDA margin, which seems to be very high in the quarter. Now I just wanted to understand whether it is due to the nature of contracts or nature of orders that were executed or whether certain provisions have been rolled back? So I just wanted to get a little bit more clarity on that.

It is on the nature of orders executed.

So there are no provisions that have been rolled back?

Provisions withdrawn are minimal only. It's more on the nature of contracts. That's why the gross margin is 45%. That is why the EBITDA margin has gone up to 27%.

Okay. Fair enough. The second 1 is, if you can just throw some more light on QRSAM? And specifically, where we are when we expect the ordering? I mean what is the -- where are we stuck? What is the major -- are there some tests spending or something? And also, whether we are also participating in this Virupaksha?

Virupaksha, which one Virupaksha? Can you explain a little bit more?

Sukhoi 30.

[Foreign Language] That one. Sukhoi 30 radar. That is a radar program of Su30. Because Su30 has so many upgrade programs. And there are 2 or 3 programs that we are taking lead also. We are having constant discussions with our defense user, IAF, for that. So we are engaging with them for EW right now. And for this radar program, we and HAL both are participating. And we will see how -- but it will take some more time to finalize that configuration -- optimum configuration, et cetera, for this. Because right now, we have just -- they're just frozen -- the DRDO just frozen the ICAI configuration. So from that to Su30 configuration, there are a lot of technical challenges, et cetera. We are just watching that and technically associated with them for that. So regarding QRSAM, last time also, we told quite good advancements are happened now in the last 3 months also. We are moving in the right direction. Some clarification, configuration changes, et cetera, some MRLs, those type of nitty-gritty of the contract or scope of work only is finalized. And once everything is totally frozen, it will go to ministry for competent authority approval. Hopefully, next year, first quarter, we are expecting RFP maybe issued to us.

The next question is from the line of Ishan Srimali from Tara Capital Partners.

Am I audible sir?

Yes.

I have a couple of questions. The first would be, what would be the EBITDA margin, like outlook or guidance for FY '25? And the second thing is in the last con call, you had asked -- that you had said that CapEx for '24-'25 is projected around INR 800 crores, with some facilities in Hyderabad and Andhra and Nagpur. So could you elaborate on the anticipated production capabilities of these facilities? And how they align with the future order pipeline?

The EBITDA margin, as we have told, we maintain at 23% to 25% on variance we have already given for the current financial year.

Okay. For the current financial year.

For the current financial year. As far as the CapEx is concerned, we are in the range of around INR 800 crores is what we are targeting in the current year. And what growth projections we are giving to you is all based on the different capabilities, which are also coming...

I think the line is disconnected sir, hello? Can you hear me? [Technical Difficulty]

Ladies and gentlemen, the management line has been reconnected with us. Thank you for patiently holding.

You are asking about the CapEx?

No , I first talked about the EBITDA margin guidance for the...

EBITDA margin, we maintained the guidance of 23% to 25%, what we have given for the finance year '24-'25, okay? And as far as CapEx is concerned, yes, we are expecting a total CapEx of INR 800 crores in the current financial year. This CapEx, what you are telling, the additional factories is what are coming up, it will take maybe next year, next to next year fructify to become operational. It maybe next year and some maybe next to next year also. So these are work in progress in some of the cases. So whatever growth we are forecasting for the current year and especially in the next year is based on the additional capabilities also which we are building up because as the base goes up, the percentage also goes up and the growth overall actually more. For this only, the additional factors, additional CapEx is being done.

The next question is from the line of Lavina from Jefferies.

Congrats on a great set of numbers. I just wanted to check nondefense side. Any updates you'd like to give? Defense side is very clear.

Nondefense. Nondefense side, yes, we are having a order book position. I don't know exact order book, but around 10% of our order book is typically nondefense. Right now, we have around INR 8,475 crores as our nondefense order book. We are getting very good leads now for like we got last year CBIC and UP-112 as a project. This year also, we are finding a lot of interests in our D4 system for BSF. We are going to get order very soon. We have declared already L1 for that also. And one more, some security-related cabinet -- one more security-related project, we have recently got order. So we are getting every month around INR 500 crores to -- INR 500-plus worth of orders in the nondefense segment also. So we will have a logical mix of around 85%, 15%, which we typically want to maintain between defense and nondefense. So we are in that range only right now also, and plans are there separately because we review our nondefense market leads, execution, et cetera, separately. And we found that there are no problems for maintaining this ratio of 85-15.

And then lastly, sir, I know a couple of people have asked as well, but just wanted to understand there is a concern that defense in general might be slowing down. There could be some derailment in future orders. I know, at this point in time, the outlook looks very healthy. But do you think any challenge you foresee over 12 months or 2 years or 3 years that could derail the story, in general, from a very macro perspective?

In defense or nondefense?

In Defense, in defense.

Defense for the next 5 years, we are doubling with the lease and order books and other things. We are not having any issue for next 5 years. When we all sat together internally and then see what are the main, main news, which we are having or main, main acquisition plans of our defense forces, Army, Navy, Air force, we are confident minimum 15% growth guaranteed for us in next 5 years. We have made already for next 5 years our internal plans, which at appropriate point of time, we may share with you also. But definitely, for next 5 years, our visibilty is very good for maintaining minimum 15% growth. We wanted to target for 17.5%. But right now, minimum 15% guarantee visibility is ensured for the next 5 years for defense electronics for us.

And as far as the macroeconomic, what you are billing, macro budge is concerned, as you could see from the budget, which is presented every year. The defense budget is always on an increasing trend only in general. Maybe sometimes the increases could be a little bit here and there. But overall, it is on an increasing trend only, even the country's defense budget also.

The next question is from the line of Amit Mahawar from UBS.

So I have 2 quick questions. First is, so broadly in FY '25, assuming INR 250 billion to INR 260 billion worth of orders, the advance that we'll have is around INR 2,500 crores plus minus? Or there is a change there?

So what is your question? INR 25,000 crores of orders in?

I'm saying the advance, the advance that we get on orders. I was just trying to understand if anything has changed on the contract side from them?

So in general, the contractual terms more or less remains the same. It is, of course, depending on contract by contract, but more or less, they are on the same pattern.

Same. Okay, fair. And second question is more medium term. You shared about status on QRSAM and some large orders. Across '25 -- because QRSAM is a very long project, and it is come in stages. So apart QRSAM, MRSAM, and Akash NG, et cetera, I just want to understand how should we year-wise look at the large auto configuration for BEL in '25, '26 and '27? The reason I asked the question is, if you're growing your turnover by 15% in '25 and '26, your revenue billing is going to be more than INR 500 billion. So I just want to understand if '26 is going to be a very, very high intake year for you?

See there is always -- we are always talking about larger programs like QRSAM and some other programs, but there's always a base order, which always is there, which is INR 15,000 to INR 20,000 crores, which constitutes for whatever supplies you have already made, there are upgrades. There are spare supplies, there are maintenance, which are being done. So that base order is always there. What we talk always is the incremental program, like sometimes we talk Ashwini radar, QRSAM, MRSAM. These are the further programs which we talk. So base order of minimum of INR 15,000 crores is always there based on the old upgrades as well as spares, as well as maintenance services for which equipment have already been supplied. In addition, these programs also build up on that. So as it is -- as we say, last -- next year or so, the base order book of INR 15,000 crores to INR 20,000 crores is there. We already talked of QRSAM is over and above, QRSAM is a specialty. So we are adding as one-off for next year. So similar programs will keep coming because so many R&D spend is also going on in the company. So there are many programs of the Ministry of Defense, which are going on. So as they have been -- or to say, as the program fructifies in the future, you'll see more and more good size orders coming in.

The next question is from the line of Harshit Jitendra Kapadia from Elara Capital.

Congratulations for a good set of results. Just 2 questions from my side, starting on the order book of INR 75,000 crores, could you give us a tentative breakup regarding how much of the order book is still left for LRSAM, MRSAM, the Electronic Warfare System, IACCS, which you generally give and some maybe other large projects, which is there in the pipe?

LRSAM order book as on October 1st is around INR 4,200 crores, pending order of INR 74,500 crores what we told. LRSAM is INR 4,200 crore, IACCS is INR 2,000 crore. Akash prime is INR 3,500 crore in total. LCA Avionics is INR 1,600 crore. D-29 EWS is INR 1,300 crore. Akash [indiscernible] is INR 1,500 crore, [indiscernible] is INR 1,000 crore and all others are below INR 1,000 crores. So these are the major orders. INR 4,000 crores of LRSAM, INR 2,000 crores of IACCS, Akash Prime INR 3,500 crore, LCA Avionics, INR 1,600 crore, D-29 EWF INR 1,400 crore, Akash [indiscernible] INR 1,500 crore, and the MI-17 upgrade, INR 1,000 crore. These are the major orders out of the INR 25,000 order book what we do on 1st of October.

Okay. And the LRSAM/MRSAM execution would be completed by FY '26? Would that be a correct understanding? Or would it be -- may go into FY '27?

As of now, I think '26 only, but some spares and other small quantities only may spill over to next year. Major will be over in next year.

Okay. And just continuing on the previous question on the order inflow part. If you can also highlight, apart from the QRSAM, which you expect of, let's say, the first batch of INR 12,000 crores to INR 14,000 crores. Any of the large program that you envisage for FY '26 when you give a guidance of INR 37,000, INR 38,000 in terms of order inflows?

We are telling there is a base order which we are expecting of [ INR 15,000 crores ], which comes up from the old programs. This QRSAM is a one-time, high-value order, which you are talking about for the coming year, next year, which you are telling it may come. There are many other programs which are coming up on which our R&D is going on. We are working on those programs. It would not be fair on my part to name all the programs at this time. Please understand it's an open forum. So we cannot name all the programs what we are -- what the company is working on.

The next question is from the line of Deepak Krishnan from Kotak Institutional Equities.

Just wanted to understand defense, non-defense mix for 2Q as well as 1H FY '25?

As such, overall, we told. Overall, it is 85-15, 85% to 89% is typically Defense and 10% to 15% is typically non-defense. And quarter-to-quarter, also, we don't minutely check that, but the ratio will be similar order only in each quarter.

If you are very precisely interested in the first half of '24, '25, it is 87% Defense, 10% non-defense, 3% exports.

Sure. Sir, and maybe just sort of a split on how much is indigenize versus how much is foreign collaboration?

Total -- our overall invested typically around 85% to 88% of the products which we supply are either in-house or by other indigenized sources like DRDO and any other Indian company. And typically, ToT component is of the order of 10% to 15% only. So in general, we maintain that as a logical mix because some ToT products also are required for growth turnover and urgent requirements of the user. But over a period of time, those are also -- we are in the process of indigenization. So typical ratio of around 80% to 85% of total in-house, some other indigenous sources of DRDO, et cetera, the technology we are delivering. So that ratio, we are more or less tracking and maintaining.

Sure, sir. Maybe I just want to sort of understand our sort of ability to continuously sort of report EBITDA margins substantially higher than what is sort of the margins for the typical nominated contract? Sir, how does it affect your future negotiations and upgrades? Or is it like every product is sort of looked at a new product. So even if you're sort of reporting substantially higher than nominated ranges, you can still continue to enjoy that because of our own sort of cost efficiency measures?

The thing is, overall, how we earn the profit is not made of only margins. It is based on overall indigenization efforts which we put. We give the most optimum solution to our defense forces, the most economical way of solving a problem. So there are various ways. And overall, again, different type of product mix are there, which gives us -- some gives us slightly better margins, some gives us a slightly less margin. So overall, margins are good because we have put a lot of efforts on R&D., in-house as well as supporting industry also. So this indigenization effort or this in-house R&D effort only gives us more and more margins in long term.

The next question is from the line of Gagan Thareja from ASK Investments.

Last quarter, you indicated that you will also be doing work related to Kavach, which is the anti-collision -- train anti-collision systems. I think some large orders were to be placed in October, November for that. Any news flow regarding that? Has BEL participated there?

No, the Kavach program, we told our intention now that yes we are to enter into this Kavach development. This development is an involved process. So right now, Railway has given us one execution, small execution order to prove our capability. And that order, they have told around 18 months' time to prove that on a small section. So we are in the process of development of this Kavach ourselves. And we have to install it in that smart execution place. And once we qualify, then only we will be given the bulk production clearance. So right now, we are in the process of fielding the prototype, developing and fielding the prototype, and then only the bulk production activities will start. So at least we have got this order from the railway for development, right? So we are in that space because that way only railway works. Firstly, they gave a small execution order, based on that capability shown by us. So we have proved our capability. After witnessing that capability, they have given us a small execution order, to execute. And the detailed evaluation will be done on that order, that particular execution order, where we will really install it also. And there only the efficacy of our system will be verified by Railways. And once that is done, then only we will migrate to participate in bulk production-related orders. Recently, they have RfP we have issued. There, we cannot participate because we have not crossed that particular milestone. So once we cross that milestone, the next order when it comes bigger order, definitely, we'll participate. But this present order, we cannot participate because we are still in that prototype verification phase for the Kavach.

Okay. Second question on -- I mean around manpower and talent. One, I wanted to understand the attrition rate in the company. And two, I think that there were some news, some media articles that you had given offers to graduate trainees in IIT Mandi, but finally, none of them joined. Is there, therefore, a challenge in terms of getting quality manpower? So attrition and hiring are the 2 aspects I wanted to understand.

Firstly, luckily, we are not having attrition problems to the extent what this IT sector and other electronic sectors are facing, because of overall environment, which we give to our manpower, the overall growth and learning opportunities which we give to our manpower. So our attrition rate is typically 2% to 3%. Only during -- post-COVID, there was a small surge, that time I think we might have touched around 5%. But otherwise, we are generally 2% to 3% only is our attrition rate, which is manageable. What I was referring in IIT Mandi and other places also is now we are growing. So for our future growth and where we have to do a lot more of indigenization, lot of more of Make in India and Design in India type of initiatives, that requires much more manpower to be put in R&D for us to meet the government of India timelines and guidelines. So one is doing more and more of indigenization. Second is for our own growth for 15%-plus growth. We have to diversify. We have to add so many new products in our portfolio. So that requires more and more of manpower. To attract that manpower, we are going to all IITs, NITs, and so many other places. And we are coming up with a better and better reward and the recognition schemes. That is a continuous process in BEL. So more and more of those schemes, which we are going to give, that will -- we are confident that with that, we can attract the talent and increase our manpower considerably, especially in R&D.

Okay. What could the hiring program look like, sir? Number of trainees or -- I mean, at a lateral level, hiring absolute terms, what is your target annually?

No. This year, in next 12 months, we have set our own target that in next 12 months, we should have permanent manpower, minimum 1,000-plus we are going to add. That we have already got from our Board approval also. So that is for permanent manpower. And I can tell you, if permanent manpower itself, we are going to have 1,000-plus more, all other contract manpower like trainee engineer, researcher, project engineers, et cetera, minimum this number always will be there. So around 1,000-plus additional of other variety manpower. We will have 1,000-plus permanent manpower, which we are committing, for the next 12 months. We have come out with a plan, internal plan for that. And we are confident we will exceed our -- that internal target of manpower hiring also.

The next question is from the line of Rupesh Tatiya from Intelsense Capital.

Thank you for the good set of numbers. My question is around the Uttam AESA radar for LCA program. So can you give some update on that? Where is that? And when are we expected a large order for that?

This Uttam Radar -- actually radar as the integration will be done by HAL because the first radar you know, there are a lot of challenges. So first time any radar has to be integrated in the airborne platform. So LRDE took a calculated task on hand. And based on that, they decided let HAL only take the lead for this integration. So AESA Uttam radar per se will be integrated by HAL only as of now for the first few radars. However, the most important component of that is T/R module and the triple AAAU, we call it. So these modules, definitely, there is a role of BEL to play and BEL is working backward for giving that type of quality solution to HAL. So it will take some more time for HAL to come out with the order for placing on us. But right now, the radar is going on under integration trials in the Tejas, and it will take some more time to fully qualify. You may be knowing airborne systems qualification is a very, very involved process. So that process and overall integration of Radar, so, AESA Uttam radar will be integrated/managed by HAL, although the basic component will come from industry and in that industry BEL is taking definitely good leads.

Okay. Okay. So sir, just one follow-up to that. So let's say, LCA planes that would need to be produced in 2026, the order for that will come in -- how much advance? Will it come 6 months in advance? Will it come with 12 months in advance? How does that ordering cycle works?

Actually, that question you should ask from HAL because it is... [Technical Difficulty]

The management line has been disconnected. Please wait while we reconnect them back. Ladies and gentlemen, thank you for patiently waiting. The management now has been reconnected back with us.

I think there was some technical glitch in between, again, call was cut. I hope now I'm being heard properly.

Yes. I understood. So sir, other question is the Shakti EW system, I think another private player actually was declared L1. So was there L1, L2 in that? And did we become L2 and did we get some order or the entire order went to the private player?

Which Shakti you are referring? Because 1 Shakti is EW Shakti, 1 Shakti we have our military communication-related Shakti program.

EW, electronic warfare.

EW Shakti is always with BEL. It is a buyer nominated equipment because overall, the total solution is developed jointly by BRDO and BEL and I don't think any time it has gone into multi-vendor situation. The Shakti EW was always with BEL and it is with BEL only.

I think the private player Adani, wrote in its annual report that they have been declared L1 for Shakti Electronic Warfare system. So I just wanted a clarification with respect to that.

No, no, no. There may be some other contract Shakti maybe they are telling. But this Shakti, Nayan, Shakti other EW program of naval ships, we are the buyer-nominated equipment, it's our equipment only.

I think it's Airborne.

Airborne EW is a different name. That is AEW&C now. In AEW&C, we also participated for the new tender, where I think -- Adani became L1. But that is just some integration projects. There is no development there, system integration are based on the CAPs design. So that project, we lost to Adani, yes, because we wanted to enter into this segment. We have never entered. We are only doing life cycle management of AEW&C EW system, but we were not a system integrator still there, but we wanted to enter into that. Unfortunately, in this program, I think that they quoted they become L1, although they have not understood the total project nuances or project subsystems, which we understood very well with I think for last 7 years. Some 3 of their aircraft are maintained by BEL only. But anyway, they become L1, let them prove that they can supply in that prices what they have quoted, best wishes to them. And anyway, part of life. When we quote, we may become L1, we may not become L1. But this is not a development program, it is an integration program and mainly, it is a [ CAPs ] driven program. So that program, you are right. But we have our own Shakti, Navy Shakti where we are [ B&E ]. Hope I clarified to you.

The next question is from the line of Aaditya Agrawal from Nirmal Bang Institutional Equities.

In terms of export, like what major orders like the BEL currently have? And the contribution of exports at currently is 3%, so in the future, this trend line will be more than 3% or what?

Definitely, it has to be more than 3%. 3% is not a healthy sign. But export, we started with very, very small order book and small orders, et cetera. And to that to reach 3% itself was challenge. But from 3%, our target is to cross 5% at the earliest. Maybe next year and if not next year, next to next year, we will definitely cross 5%. We have overall order book of around USD 403 million as on today and various big, big orders are there in that. So we are confident whatever target which we have set for this year, we are crossing that. And next year, it should be more than 3%, I can assure you now itself. It will be more than 3%. Every year by year, we have to increase. And finally, the Government of India wants us to reach double digits. So we finally have to reach 10% of our turnover in export. But right now jumping to 10% immediately is not possible because it's requires continuous effort, systematic efforts, et cetera. So we are -- every year by year, we will increase our percentage of turnover from export. Right now, I can't tell you when we will reach 10%, but our goal is 10%, and it will be a growth path only. Every year, we will increase on whatever we have achieved last year. These 2 are our guiding principles, exact values, et cetera, we will communicate to you, maybe next year beginning.

Sir, can you name a few projects that are in the pipeline for the exports?

Major projects in the pipeline. That is actually around $500-plus million lease are there with us right now. One or 2 major things actually are there for RWR, MAWS, spares and training for the Airbus. But I think today, the C295 inauguration is there, for that some expected order is planned. ComPASS-related orders and gimbal-related orders from Elbit systems for exporting to them so that they can supply to some other countries. Some Asian countries related, some orders are their big orders. Something related to Brazil, something related to weapon-locating Radar in Egypt. So those type of big leads are there, around $500-plus million lease, we are working right now. And we are confident we can liquidate as many as possible of them in the next 1 year. This year, anyway, we are going to -- we are targeting around $200-plus million acquisition. So that we are confident we will have that much acquisition extra in this year. Overall, order book is healthy from export point of view, the way we are planning, the way our growth is there. So we are confident about that.

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

Yes. The future outlook, as we told, we started to watch our data. We are committed to achieve that, but that only shows the overall confidence from BEL management to the investors that what started the year, we are continuing on that goal, and we are confident that we are going to achieve that goal of overall revenue growth of 15%, EBITDA margins of 20% to 25%, order inflow of minimum INR 25,000 crores. We are crossing, we will cross. R&D investments, we have increased INR 1,300-plus crores, we are going to have that figure. CapEx, INR 700-plus crores, and Defense/Non-defense business of around 85%, 15%. So these are all guidance what we had given, we are committed to achieve that for this financial year '24- '25. Thank you.

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

Thank you.