Bharat Electronics Limited (BEL.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bharat Electronics Q1 FY '26 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Harshit Kapadia from Elara Securities Private Limited. Thank you, and over to you.

Thank you, Vishaka. Good afternoon, everyone. On behalf of Elara Securities, we welcome you all for the Q1 FY '26 Conference Call of Bharat Electronics Limited. I take this opportunity to welcome the management of Bharat Electronics represented by Shri Manoj Jain, Chairman and [ Laning ] Director; Shri Damodar Bhattad Director, Finance and CFO; and Mr. Sreenivas Company Secretary, along with their team. We will begin the call with a brief overview by the management followed by Q&A session. I'll now hand over the call to Manoj sir for his opening remarks. Over to you, sir.

Thank you. Good afternoon, everybody. So these are the financial highlights for Q1 for the year '25, '26. Revenue from operations, it has increased to INR 4,417 crores up to Q1 as compared to INR 4,199 crores last year figure with a growth of 5. 19%. Then profit before tax, it has increased to INR 1,289 crores up to Q1 as compared to INR 1,037 crores previous year Q1, with a growth of 24.28%. The profit after tax that also has increased to INR 969 crores in Q1 as compared to INR 776 previous year Q1, with a growth of 24.87%. The EBITDA also has increased to 29.86% up to Q1 as compared to 22.82% last year. Earnings per share has increased to INR 1.33 as compared to INR 1.06 and order book position as on 1/7/2025 is INR 74,859 crores. Of course, after that, I think almost around INR 2,600 crores more we have received order after 1st of July, so that you may be knowing through our different disclosures from time to time, including 1 disclosure happened today also of around INR 500-plus crores. So these brief about the financial highlight of Q1 for Bharat Electronics. Hello. Yes, ma'am you can take on questions.

[Operator Instructions] The first question is from the line of Umesh Raut from Nomura.

My first question is pertaining to our margin performance for the quarter. We have seen a very sharp increase in our margins on a year-on-year basis. So could you please share some insights behind these improvements? What was on the account of material savings, localization and [indiscernible] and how much was on the account of product mix?

Overall margins, that is -- last year itself, we had almost 27%. It is slightly better than that, and it should be a good sign only, I should say. So that is there. So it is -- although last year first quarter, it was less, I agree. But overall, at the year end, we had almost 27-plus percent was there, and this year guidance was 27%. So we are trying to adhere to the guidance what is given to you. So that is the first thing which I want to tell. Damodar sir, do you want to tell something about .

As regards to gross margins, gross margins were better in the first quarter in the composition of products, which was more in hose manufacturing were there. So it was -- gross margins were better in the first quarter. As in as you rightly said, it is due to composition of product mix. .

Got it, sir. My second question is pertaining to large ticket ordering about this. So could you please update us time lines for these following programs? So update on QRSM program. So where exactly now you are seeing this program kind of getting finalized in terms of order timing? Second, with respect to MSR program and exit kind of now getting finalized through shipyards? And third, basically, on the project [indiscernible], kind of in the finance phase of development now?

Okay. QRSM, as we referred to last time also we have progressed a lot now. You may be knowing --

Sorry to interrupt you, sir. Actually, there is a echoing sound from your line. Can you please check it and also some disturbance on the background.

We are also noticing that Yes. Here, it is clear. But when we were speaking, we were seeing background noise, echo was coming from other side, I believe. .

Just a second. Mr. Umesh, can you please check if there is anything around your side on the speaker for? .

I'm on mute. .

I think now it is better. Because when Madam, we were speaking as from both sides. All you go ahead, Mana? .

Yes.

So QRSM, as you may be knowing, the DSP approval was given on third July 2025. So good progress has happened on that front. So now only the RFP has to be issued to us, which internally, there are some processes for that. We are constantly following up that. We are confident to get this order by February, March as of now also. It may not slip to Q1 of next year. We are confident we may get in the Q4 of this year itself QRSM because the progress looks really good for us and DSP approval already has come. . Regarding [indiscernible] and other subsystems. This was also told last time that our shipbuilder, they already got. So we have already started discussing with them about the configuration, final effect about the final bomb. So those activities are going on at a good pace. So we are hoping in the next 3 to 6 months, we will get a considerable portion of subsystems order with us. So that is a -- good progress is there, but this is having some 5, 6 different types of subsystems. So for each subsystem, configuration and other details, final details are being worked out. After that, we will have P&C, CLC then order placement by them. So hoping that also Q3 and Q4, we are expecting a major portion of that. Some small thing will spill over to Q1 of next year also, some mall subsystems, may go, but majority of the orders we are expecting Q3 and Q4. Q2 nothing may happen because still we are in that discussion and that more only the PMC, CMC will take time. So typically, Q3 and Q4, we are expecting majority of the portion for this. And for the [indiscernible], we'll be knowing we are still in the development, I'll say, jointly with the DRDO. So DRDO those development-related trials only are going on. So order conversion is at last time also all, it will take a minimum 3 to 4 years. Until that time, we are developing systems and testing jointly with the DRDO, the subsystems and their performances. This is in brief about all the 3 systems..

Got it, sir. If I can squeeze 1 more. So if I --

Sorry to interrupt you, Mr. Umesh Actually, I would request you to rejoin the queue for follow-up questions. [Operator Instructions] The next question is from the line of Amit Dikshit from Goldman Sachs.

A couple of questions from my side. The first 1 is on [indiscernible]. Now there has been a pilot indicating that they have received order for exciter unit and certain other components for [indiscernible]. Just wanted to understand, have we also received the order or in which phase we are? So that is my first question. .

No, this [indiscernible] is for mainly 230. So there are various subsystems in that -- we have got 1 order, developmental order from DRDO for that. And that order, we are in the stage of execution. But these are all development orders. After development order and at what you are referring also that the company also has got developmental order from some subsystems we can it. So they have got some order, but main order is not gone to them in others. I think if I'm not wrong, it is well and extra microwave, if I'm not wrong, for the main system. So we are developing these prototypes. Once these prototypes are evaluated and tested, and I am confident we will qualify then only the production phase related orders will come. But right now, it is a prototype development jointly with DRDO for the [indiscernible]. .

The second question is still related the emergency procurement. Now in the last con call, of course, fresh from the skirmish we expected that there could be around -- the media articles indicated INR 40,000 crores to INR 50,000 crores of emergency procurement. But things appear to have cooled down a bit on that front. So what are you hearing? And some of these orders that we have got in the recent quarter, do they also pertain to emergency procurement or majority procurement, if any, would be over and above this? .

Okay the emergency procurement overall, the activity started as last time told. We have received 1 or 2 orders already as part of the emergency procurement. I think it was -- when we had given our public statement where we have written also some of the items like on Triple [indiscernible], we received and 1 more item, I think -- so we have started getting emergency procurement-related orders also. As it was told the last time, I think September is the cutoff as of now for them. So by next 2 months, we are expecting many more orders. But overall, all these -- let me assure you, they will be part of our INR 27,000-plus crores of order book, which we wanted to get in this total financial year. We have already received more than INR 10,000 crores, remaining INR 70,000-plus crores, definitely, the AP will help us in crossing that target.

The next question is from the line of Amit Andani from PL Capital. .

First question on the -- any impact of supply terms since this quarter, we did about 5% growth despite a very strong order book? So first thing I wanted to understand, anything which impacted the revenue betting because of the supply chain issue? And second, how are we dealing with the rare earth magnet band which came from China? Any exposure there? And how are we dealing with that situation?

Okay. Yes, your first mine is correct that we only could register 5.19% growth. We were expecting around INR 200-plus crores further execution of the order, but last minute because of geopolitical situation, especially in Israel-Iran conflict, that affected our minimum INR 200-plus crores of the revenue. So because of that only, we thought we will be in double-digit growth. But because of this only, we fall short of that. Anyway, quarter 2, we will compensate for this confident about that. And regarding this rare earth magnets, it is not affecting us directly because this is mainly for EV and other segments. We are not right now in EV segment as a big player. We have only done some partial R&D in the EV segment for chargers and others.. So it is not affecting us at all. The real art magnate related issues, not affecting BEL affecting automobile sector and other companies.

Sure. And sir, I wanted to understand on the current order book plus 1...

Please, you have to -- Madam has told you already asked to please join the queue, and we are available since 4 o'clock please. .

The next question is from the line of Harshit Patel from Equirus Securities. .

Sir, my first question is, could you share some time lines for the [indiscernible] electronic warfare system orders. Also, how large these orders will be?

Yes. This [indiscernible] order, good progress already has happened. We have received even RFP for 1 of the program because they are quite interrelated programs, [indiscernible]. So we have got 1 [indiscernible] program. already the RFP has been issued to us. So we are in the process of responding to that. Generally in the public, we only go after we received the order. So this intermediate stage, we generally don't sell. But anyway, to give you confidence that it has come to that state. And following this, the next order will be for [indiscernible], RFP will be issued for [indiscernible]. More or less similar configurations are there. One is for plan and desire anger mountain requirements type of thing. . So the total order, I think for [indiscernible] put together will be around INR 6,500 crores plus. Okay.

Understood, sir. Sir, my second question is on the next generation covers program. So you have highlighted that we will break the subsystems related orders worth INR 60 billion to INR 100 billion. So sir, what is the overall addressable electronic pie in this order? Out of this, we are getting this INR 60 billion to INR 100 billion. I'm just trying to understand what is the import content over here in this program? .

These all subsystems barring [indiscernible], I think. The [indiscernible] only is having some 50%, 50% work share arrangement with our foreign partner. All other subsystems are totally homegrown. So they are, as such, only dependencies of ICs or some other component level things which manufacturing capacity are not there in India. But otherwise, from indie content point of view, they are totally homegrown. INR typically takes around 50%, 50% work share between us and foreign OEM typically, roughly. So that is the total NDC program. So the total program per se, I think around it 60% to 70% minimum indigenous content will be there. It will be higher only exit value, I don't know, but roughly, you can assume around 70% indigenous content for the NDC program for BEL.

The next question is from the line of Atul Tiwari from JPMorgan. .

Sir, my question is slightly medium term. Your revenues are now almost stretching on an annual basis, INR 300 billion and except for some of these larger orders, your order inflows are about INR 270 billion. And even in this quarter, the order book was flattish to down slightly. So thinking forward 3, 4 years out, can we sustain 16%-plus revenue growth from this large base of revenue? .

Certainly, yes, 16% is not a 1 challenge. We are actually internally aiming for 17.5% plus thing as it was told also last time also, so many projects are in pipeline where we have done good investment at right time. 2 programs are an [indiscernible], which you know, which are definitely INR 30,000 crores, INR 40,000 crores plus. But in addition, also so many other tile programs we are now a PPP partner for DRDO. Like 1 of them is, which was tested yesterday, [indiscernible]. It is a [indiscernible]. So that way, so many other missile programs we are now confident that our share will increase in this program. In addition to our main equipment of electronic variety in ships somewhere in airports, radar, so these are programs, we have a good pipeline, we are admitting for at least next 3, 4 years for order inflow as well as for execution. The execution itself -- and right now all over INR 80,000 crores plus order book is already there with us today. And including QRSM, around INR 40,000 crore to INR 50,000 crores, we are going to get orders now. So I don't see 16% or 17% will be a challenge for me. But definitely, it will not go below 15% that much I can assure you. It will be between 15% to 17%, 17.5%, 18% somewhere, we will try to stabilize around that type of a growth pattern based on the order inflow and type of projects where we are involved right now.

Great sir. Last question is on margins. So margin performance has been very strong even in this quarter on a base of last year where the margins were at 28% plus at EBITDA level. Can we see further margin expansion also over the next 2, 3 years, beyond 28%? .

Presently, we have guided for a margin of EBITDA of 27% this year. And we maintained that since the composition of product mix is different in every quarter, so it appears it's a little more this time. But overall, for the current year, we maintain it at 27% and over a period of time, also 27% is a healthy figure. Anyway, next year, when we review our product mix, we'll come back with a revised figure it may be left side or right side, I don't know right now, depending upon the overall product composition, but it will be around this range only. That much I can assure you. .

The next question is from the line of Manish Ostwal from Nirmal Bang. .

I hope 2 questions. One on the employee base side. So what is the current base of employee? And in terms of addition last 3, 4 years, how many people we added on the technical side and how much money we are spending on the innovation R&D side on a yearly basis, a percentage of revenue? .

Okay. Our employee base was around 9,000, slightly less than 9,000 [indiscernible]. This year, as we have told earlier also, we will cross around 9,600 plus. And next year, we are planning crossing definitely 10,000 plus. So because overall -- and most of the employees, what we are adding now is in the technology front. Almost 70% plus of our new recruitment is going into R&D because we know they require more and more stronger R&D to take care of this new technology-related products like AI as a technology, ML as technology, Quantum as a technology, which are in basin side are these new developments. So we are adding good technical manpower, almost 200 scientists also we are taking from premier institutes for our PRLs as part of this activity. So total, we put in R&D around 6.2% last time. It was turnover of -- our turnover on R&D. This year, although we are expecting a bit more than that only. So between 6% to 7% of our turnover, we wanted to invest on R&D. And as it was told last time also, total R&D investment this year will be between INR 1,600 crore plus only. Between INR 1,600 crores to INR 1,800 crores somewhere we will plan. And it will not be below INR 1,600, that much I can assure you for doing this innovative R&D across all domains, where value is operating.

Yes. Second, sir, in terms of -- you talk about the technology like AI, ML and quantum technology. So in terms of modern warfare, where do you see the significant shift in terms of -- I mean technical trend? And secondly, whether those technology, we are having right now in India, we need to have TOT with other countries. So can you talk about it slightly detailed where we are in terms of technological aspects compared to the other players like in U.S. or China?

Let me assure you, we are almost at par with these countries in this new technology of AI/ML. We are working closely with our defense forces to see that how the modern warfare can be benefited by this new technology of AI/ML. The main challenge there typically in AI/ML is the data. So how to get the right data to train ourselves. For that, we have done considerable work. We are having a very, very close tie-up with our defense forces. We have created an AI incubation center for Navy and Army as well so that we, user and start-ups, all can work together and develop this technology, this cutting-edge technologies well in time. So we have done good investment. We have done a good infrastructure and good framework for these technologies to be developed for the modern warfare. As you may be knowing, our major [ C4I ] program, which we have used even in the recent option were primarily from BEL. The support from DRDO as the initial technology provider, but now it is mainly paraded by BEL. A lot of AI/ML components were there in this system, but many more are planned now as a value addition for the C4I programs based on AI/ML technology. So we are confident we can do jointly with our start-up ecosystem. We can do jointly with our defense user in place, closely working with them. We can give this cutting-edge technological solutions related to modern warfare without any support from foreign countries. That much I can assure you.

The next question is from the line of Jyoti Gupta from Nirmal Bang. .

Good set of numbers. I have 2 questions. So in relating to export component in revenue. How is it going to look like in the next 5 years is going to increase? . And second is you are talking of missiles, the LC mark on where this CMD has said that we will finish but it looks like we've received 2 engines in July, and we expected to receive roughly around twice. And my sense is best-case scenario, we should be complete with 7 LCs. So what will be our contribution in terms of -- from the ACA this year? How will that impact your margin or revenue from the high platforms?

So regarding export, we are having consistently performance of almost 20% year-on-year growth on export front, and we are confident over a period of next 5 years, we try to reach around 10% of our turnover to exports. Right now, it is around 4% to 5%. So we are constantly putting efforts as the overall company is growing at roughly 15% to 16%. But export, our internal target is more than 20%. So over a period of time, the export share to the overall turnover will steadily increase, and we wanted to reach in next 5 years, around 10% of our turn over to exports. So that is our reason about the exports. We are going in the right direction with a reasonably good speed, I should say, on export front. Regarding LCA, yes, there were some delays of the engine availability to [indiscernible], but our components, our electronic components, which goes in these trade firms because that more than that is they use for their testing and making the total LCA ready or to shipment for the engine. Their side, we have not seen any challenges. We are regularly started supplying to [ SEL ] and then we continue to supply. So ACL finally supplying LCS to user is not impacting sell per se. So our return production to meet their expectation as for the contractual time lines between us and SEL was committed. We are more or less on target for that and it is not going to affect our revenues per se.

But what could be the contribution of your revenues coming from [ Hal ]?

[indiscernible], I think the SI are supplying LCA component and then some other helicopter components also. So those are there. Overall, I think we are planning around -- you can assume around INR 1,000-plus crores total put together for LCA and other helicopter programs of SEL. Typically INR 1,000 crores plus/minus INR 100 crores maybe there because from a we are supplying to them this year for their airport operations. So tentatively around INR 1,000-plus crores, you can assume. .

So one more question from my side --

Please, join the queue.

The next question is from the line of Dipen Vakil from PhillipCapital. .

Congratulations on a good set of numbers. Sir, my first question is in the line of to understand electric of your order book, sir, can you give us the breakup of the pending orders in your current order book? So major maybe 5, 10 contracts which are large value in your order book?

Certainly. So as of today -- as on 1st of July, technically, the major order book, largest alarm program, which you may be knowing we received an order also this year also out of that. So around INR 5,000-plus crores is LRM program. Uses is around INR 4,500 plus crores. Akash Army is the third one, which may be knowing cash trials successfully. It was done recently, nearly came in the media also. So that's around INR 3,000 crores, BMP upgrade around INR 3,000 crores. [indiscernible] around INR 2,500 crores, Shakti around INR 2,000 crores -- around INR 2,000 crores. So like that is their top 10, 12 programs itself consisting of around INR 35, 000 crores to INR 40,000 crores order book for us.

Got it, sir. SP1 And I wanted to also understand, sir, recently, you received an air defense tolerate from Indian Army. So what would be the kind of execution cycle for such order? .

I think it is around 3 years, if I'm not wrong, because already, we have realized a -- plus early production model also for that. And total 24 numbers of the radar, we have to supply as part of this. Roughly 3 years, I can say, exact details, I don't have. But typically, because there is no [indiscernible] or other things there, we have to directly start supplying because we have already developed the prototype and are ready with the so-called production version now. So we hope to complete this in roughly 3 years' time frame. .

Got it, sir. So safe to understand that even electronic office out for MI 17 helicopters was the execution cycle would also be 3 years? .

Not wrong, it was 4 years -- size you are telling now? It is not only our production capacity. It is depending upon what user ones because user has to do like upgrade. They are already flying this helicopter. So when that will be available to us for these upgrades, so they have their own plan for next 3 to 4 years. So if I'm not wrong, it was almost 4 years -- 3 more years quarter-on-quarter. Let me pass in that 3 more, yes. So total 4 years is a delivery schedule, if I'm not wrong about that. But that is really because of the overall planning jointly between us and airports. There on that, the schedule has worked out, and we are on time or applying them to the subsystems. . See, all these are factored in, in our viewing our execution program. Whatever we are telling is all factoring in our execution programs, whatever you are projecting.

The next question is from the line of [ Hardik Rawat ] from IIFL Capital.

Congratulations seeing on a very strong set of numbers. My first question is pending on the question of the order book constitution, which are the major -- considering our guidance a conservative guidance of 15%, roughly INR 22,000 crores of balance revenue to come in the next 9 months. What will be the major program that will contribute to this? .

Just -- Major order to be received or order to be executed in next 9 months? What was your question?

Orders to be executed, sir. .

Order to be executed, then it's okay. LRT, of course, always are tops for us. So LRSM around INR 3,000 crores, we are working to execute this year. [indiscernible] Shakti another big program where we are going to realize the revenue around INR 1,700-plus crores. Akash Army, around INR 1,300 crores, D29, LRU for LCA, BSS and [indiscernible] INR 600 crores to INR 800 crores each and then links you to ICS, [indiscernible] upgrade around INR 500-plus crores and then remaining are smaller, smaller things. So overall, we have planned totally how we're going to execute in next 3 quarters left over to achieve this growth of at least 15% for this year.

Got it, sir. That's very helpful. One last question would be with regards to the margin front. Now we have seen a sharp expansion in the operating margin, which has largely been led by the gross margins yet our other expenses have grown as a percentage of sales by roughly 215 bps to 9.5 percentage. Any specific reason because of this -- reason for this jump as a percentage of sales? Have we made any additional provisioning this quarter? .

Yes, very regular provisioning will be a part of whatever we need to do at that particular point of time, depending on the delivery schedule of products. But in certain cases, we get the DD extension without the LD or without the penalties also. So we are able to reverse. So the provisioning is there as a part of other expenses. But that is a regular feature.

Yes. So nothing out of the oridnary?

The next question is from the line of Andre [indiscernible] from Cogito Advisors. Hello. Sir, your voice is not audible. I will request you to join the queue. The next question is from the line of [ Ajinkya Radhav ] from KRIIS Portfolio.

Yes. Just wanted to ask, like, are we into the SONAR system? Like have we participated in the tender for the tax SONAR? .

SONAR, I think we are the largest supplier of SONAR, and we are the trusted partner for NPL, who is the main designer for SONAR for India. So we have associated ourselves with them since beginning -- and we are doing some proactive investments also jointly with them on SONAR. We have our own some subsystems development and indigenization program also for SONAR, like sidescan SONAR and others. We are planning to have export worthy version of SONAR also. So overall, I think in the SONAR front, we are a good technology provider for our defense forces. And we are doing now some more value addition in that by adding this AI/ML type of technologies or integrating it for larger strategic platforms. So as such, I don't see any issue of changing our role for that. We are going to further excel only in this domain. We are hiring some more advisers in this domain to see that with a strong position in the SONAR development, we continue to maintain. And we are hardly depending on foreign countries from the SONAR perspective, although a few origins 1 are there, but they can as part of the platform earlier itself. Any new SONAR per se, I doubt whether now we are importing.

Yes, great to know about that. And the second question is regarding that, what is the sales mix for between, you can say, the component assembly and the product in our total sales?

The thing is fire, we are making product only. As part of the product, we do the assembly, okay? That per se assembly, we don't take as a business case, okay? So we generally sell modules, some modules, systems or systems of systems. Same thing is our components per se, components direct business because we have a component foundry also, but that a business is very, very minimal because that is only for some strategic so and other requirements only. That is very, very insignificant, I should say, as part of the business. It is more of a strategic indices. So presently, our sale mix is mainly of products and solutions.

The next question is from the line of [ Karan Gupta ] from [indiscernible].

So I joined a bit late. So I just see commentary. On your 1 question regarding revenue and margin side. So what's the product mix change has happened kind of 4%, 5% of the revenue growth this quarter. On the margin side, going gross margin improvement is around 9% to 10%. So what product mix have changed? And you've also said something on the more doing in-house manufacturing of some of the components which was your earlier in outsourcing. So what's the impact of in future, in housing manufacturing and the product mix on the margin? I mean if you can just quantify if we are doing more in-house manufacturing, so how it will impact positively on the margin side? .

Okay. Let me again clarify. I think last time also we told it is not in-house manufacturing. It is in-house design or indigenization, which as the drive we are doing. Manufacturing, we do based on the case-to-case basis. Typically, we involve our MSME and other partners more and more. Wherever they are available and their quality output is insured, we generally take from them only. When we are not finding any MSME partner for doing manufacturing those items only we do in-house manufacturing. Otherwise, our moto and vision is to promote our MSME partners and take their health as and when required as much as possible. But I was mentioning about in-house design and indigenous designs. So we are doing more and more efforts for indigenization. So indigenization is a bit different in designing in India, but manufacturing in well are outside well that we see on case-to-case basis. And as I told, wherever possible, if any vendor is there, MSME vendor is there, we firstly off to that only. And that only will give us actually more and more margins. because definitely, when we invent our MSME vendor ecobase, it will be overall beneficial for them and for us also. Only thing we have to ensure is the quality and timeliness of the deliveries. That we go through a rigorous process of evaluating our vendor base. And based on that only we select them. But once we select, we really do hand holding and see that they also prosper and we also prosper. So that is the -- about this in-house manufacturing opening in-house design rent. The second point you talked about revenue. Yes, this year, first quarter, we had got almost 5% only as our revenue growth, mainly around INR 200-plus crores, which we thought we will realize the sales by June because of geopolitical situation, especially in Israel-Iran conflict. Some of the critical components from Israel could not come. And because of that, we could not achieve rider target was at least 10% plus in the first quarter itself. Overall, anyway, definitely, we will cross 15%. But in the first quarter itself, we were having our internal target of 10-plus percent. But we could fall short of this because of this last minute so-called surprises for us. And that is a regular feature nowadays knowing the geopolitical situation around the world. But sometimes, some particular item may affect us a bit more in 1 quarter, next quarter, it will compensate. Just because we have overall a very, very large product mix. So this large product mix will not impact us too much like here also around INR 200 crores in fact only was there, which definitely I'm confident they will compensate in quarter 2. And overall, margin-wise, as was told earlier also, our product mix is so large we can't quantify whether this product mix and what margin will come with this product mix. I average it out. And overall, what guidance we have given will be around that only will be our margins. It will not affect too much because of so far geopolitical situation or because of the product mix for 1 particular month, et cetera.

Okay. Fair enough. Second one on anything we are doing the live simulation we are providing services to maybe export side or domestically for some companies, live simulation?

Live simulation? The simulator business we are having. Simulators, we are supplying -- exporting also now to some of the countries. And definitely, in India, large complex systems and solutions related to Radar or missile segment, we are developing advanced simulators for our Indian needs. But we found a lot of export opportunities, and we have exported in the recent past, also some 2, 3 good leads, we have exported also. And we are doing marketing for our simulator business further in many more countries. So we are confident that the simulator business is really great growing for us and good growth prospectives are there in this business. We are putting some more manpower also in this particular segment and then seeing that some of the large programs because in all large programs require the high-end simulator also. So we wanted to develop those similar drops well in time itself so that it can be used while supplying the equipment itself. The simulators can be used for good training from day 1 itself. So we are working for that. .

So part of the business is the part of the business is Part of the business is -- similar [indiscernible]?

No, no, no. Simulator as a business will be around maybe 2% to 3% of our total business, less than 5% definitely. One of our [indiscernible] is primarily doing that business and 2 of our R&D houses are supporting them. So out of total 29 actually, 1 is more focused towards simulator and 1 more SPs partially supporting them. So you can see the overall business also depends upon how many pets are working. It's around, you can say, roughly 2% of our business. .

The next question is from the line of Nikhil Purohit from Fident Asset Management.

Just 2 questions. So what was -- I joined the call late. What is the defense system, non-defense ratio? .

Again, typically, it defense, non-defense, it's 88% to 90% and 10% is roughly nondefense, which is our typical figure. .

Got it. Okay. And does our exports order inflow guidance remain intact?

Yes, yes, yes. We are confident. We are confident of what our target we have given around INR 120-plus million. We are confident we will have that. Good progress already has been done, although we don't give a direct breakup of how much export order we have received quarter-to-quarter, we don't give that, we give our consolidated figures only. But in this order, what we have received right now, so there is some portion of export orders also. And we are confident we will meet our guidance on export end. .

The next question is from the line of Umesh Raut from Nomura. .

The first question is, sir, pertaining to increase -- possible increase in employee cost on the account of commission now, specifically in FY '28. Because I think if I look at are assessment of what they are recommending. I think it is about a 3x kind of increase in basic way. So any assessment, early assessment, what kind of increase we can expect in case of employee cost? .

I think that, that also last time also we indirectly indeed to you. This [indiscernible] commission things are not directly relevant for us, although indirectly, it will control our PRC. There will be a separate peer revision committee, which will be constituted by government that will get some input from this assay commission, but it will not be exactly the same. And in the PRC, they give a lot of flexibility to to decide based on their profitability and viability of some financial window. So at that time, we can see definitely we want to give the best to our employees. But I don't see any big challenge in the FY '28 for that. We will start doing some small provisioning from 27 and onwards and see that, but I don't think it is going to impact us too much because our overall growth turnover growth have been compensated for this small increase in employee cost. That's what I can assure you. .

Got it, sir. And sir, my second question, if I look at our services business, I think there also, we have set up now new SBU related to SaaS business in the nondefense area, but I think our service business contribution in overall turnover is still at about closer to 10%, 11%. And looking at our defense installed base has been down, it looks like we have a sizable exposure towards the installed base and indignation is also going up. So how do you think this services turnover as a percentage of total revenue for you to go up in medium to longer term?

You have told a 10% to 11% is our services sector. .

Sorry to disturb you again, your line is echoing, there's an echo in your line. .

That is [indiscernible] side, I believe. They have to mute. Can I go ahead?

Yes, please go ahead. .

Yes. So 10% to 11%, as you have told, we are trying to increase it to 13%, 14% over the period of next 2 years. So definitely slightly increase will be there in the services because we have some of the new areas also now we are pursuing the services, especially 1 order which we have received even today, but where we have given a public domain data related to financial services-related business by our corporate view, we have got a good order. So these orders of nondefense where IT also will increase. So we will have 3% to 4% overall increase in our overall product mix because of services. So we are expecting 10%, 11% will become 13% to 15% over a period of time. .

Got it. Sir, just 1 clarification. As a part of different offset contracts, does services come and as more of a potential opportunity for exports? .

Everything can come under opportunity for export. But definitely, right now, we are not getting any big leads of the services are under offset. Under offset typically is a contract manufacturing type of thing or some of the subsystems, which we have to supply to them as BLE, et cetera. The services per se and offset these 2 are not gelling together as of now. But definitely, there will be scope.

The next question is from the line of Harshit Patel .

Sir, we received an order work close to INR 2,000 crores from HL for the electronics LRs for NCA margin. .

Sorry to disturb you, sir. There is a noise your background of whistling. .

Yes, some noise is there for, but we will manage. And when we speak at the time, I think he has to mute. .

Sure, sir. We'll do that. Sir, we had received an order worth INR 1,000 crores from HL for the electronics LRUs for the first 83 numbers of the [indiscernible] program. How large could be the follow-on order for the subsequent 97 numbers, how much more wallet share we will take with the enhanced offerings in this upcoming order? .

It will be more or less in that order of 83 to 97 and early escalations. HL cannot give us more than that. So it will be a quantity to quantity. And typically, it is year-on-year escalation. So that will be there. So you can extrapolate how much it will be, roughly, it will be around INR 3,000 crores, I can say, including escalations, roughly INR 3,000 crores plus/minus, we have to sit across with PL and do smart negotiations. That only will tell us what is the final figure. And as and when we finalize that contract, we will definitely intimate to other you. But you can assume ballpark figure of roughly INR 3,000 plus/minus few hundred crores here and there. .

Sir, I was asking from the point of view that won't we be supplying many more subsystems vis-a-vis what we are supplying right now? For example, the [indiscernible] Radar will be part of our offerings when we'll go to this additional 97 numbers, there could be much more offerings on the electronic warfare subsystems as well. So we will be supplying the same subsystems or we will increase our scope as well in this newer order? .

You have rightly pointed out. What I was referring you because you told electronic subsystems, which we have supplied for 83. So for 97 base supply are those same. But of course, EW and Radar the 2 new subsystems which is still not finalized configuration or minor details of that. And there are -- I think in both of them, there are 2 partners. So we don't know who will become lean in that. So we are only bidding but not confident whether we will get the full order. So maybe for those and there is a 50% probability, I should say. Although as management, I should be confident about 100, but I know my competitor also would like to have. And the second thing, HL may decide to give it to L1 and L2 because many times, when systems are complex and time lines are crucial, they split the order between L1 and L2. So right now, EW and Radar related, those discussions or those draft RFPs or contract discussions have not started with. So I can't quantify right now what type of terms and conditions they are going to write for that. Once they give us some tough RFP, then I can come out with a more revised figure for this AWR. Right now, I have excluded AW and Radar from that and only the other electronic subsystems around 11 to 16 type of subsystems, which we are supplying for them. So those subsystems only, I told order value of around plus/minus INR 3,000 plus minus crores.

The next question is from the line of [ Darshan Permal ] from Jefferies. .

Congrats set of numbers. Most of my questions are answered. I just had 1 question regarding the potential opportunity on the drone front. If you could give some sense on that, please? .

Drone per se. We are some 4, 5 major leases where we are working on drones. One of the lead anyway is the Archer UAB for which some trial and other evolutions are going on and immediately completing that, we are expecting a big order on [indiscernible]. But in addition, there is a loitering ammunition, there is a logistic drone as there is a [indiscernible] variety of drone requirement, which has come, we are pursuing these 3, 4 more opportunities of drones. [indiscernible] definitely a big lead for us. So we are confident by year-end, at least 1 of the orders we may get out of these 4, 5 leads before this. And the next 2 to 3 years, definitely, something orders we will expect from that. But presently, I don't have it quantified figures about that because these are in different exchanges of evaluation only. They have not come to a contract finalization stage where I can clearly give you some numbers, but definitely loan and drone warfare and entire. These are the area of importance for BEL. We are committed for this particular segment. because we know we can give very good solutions to our different portage in this segment.

The next question is from the line of Girish from MS. .

Just a couple of questions. Firstly, on the order book, what portion of the order book of INR 75,000 crores that you have today, is recognizable as revenue beyond FY '27 as in the contractual obligations and your execution, which is going to be beyond FY '27, whether it is FY '28 or '29, if you can quantify that? And the second question I had was on the order book on -- currently, how much of it is nomination versus competitive bid? Those are the questions.

So order book out of this next 2 years on the majority of the orders we are going to execute. Only some 2, 3 big programs like uses is there, which is there for next actually, and EW systems solutions are typically for around 4 to 5 years delivery schedule. So they are only a little bit larger. So more than 3 years out of this order book, around INR 14,000 crores is there for more than 3 years. Remaining all are within 3 years settle. . And regarding the nomination and the competitive bidding, the ratio is around 90% plus/minus to 10% 90-10, we can say roughly 90% nomination, 10% competition as of now.

And this is -- competition is including the nondefense -- or are you talking only about defense, sir? -- detail ratio?

Put together. Given some of the nondefense also, we have got a nomination. It is not that only defense we get on nomination. And based on acquired across a number of years. Some of the nomination projects we have got like this platform screen door, which we have got so many other projects are there on non-defense also. So this mix is for both defense and nondefense both. .

Just like you said, 3 years plus is INR 14,000 crores. 2 years plus would be how much, sir? Would it be like INR 25,000-odd crores or any ballpark number here? .

Yes. 2 to 3 years is around INR 8,000 crore plus. So 8 plus 14 around INR 22,000 cores, INR 23,000 crores is 2 years plus. We can have a last question .

Okay. So the next question is from the line of Hardik Rawat from IIFL Capital.

So quick questions. Firstly, with regards to the export opportunity, sir, which are some of the key orders that Ben has developed, which are finding good traction in the export markets? .

The thing is for us all our missile communication systems, software solutions, we all are there in our export-related portfolio for us, drones and anti-drone, especially anti-drone systems also lot of opportunities are existing right now. And 1 new area now in the C4I solutions. After option 2, you might have seen so many of our people solutions are time tested. So now many of the countries are coming to a such or giving a customized solution for them for the C4I. In addition, our contract manufacturing related to TR modules and LPC, which are led those types of things also are increasing for us. So there is a good set of products and solutions across almost all domains where then is working. So good export leads are there right now. And that's why we are confident we will achieve aware we have given guidance at the end of the year, we are going to achieve that. So these products are almost all major areas of operation of BEL.

Got it, sir. And lastly, sir, what would be the CapEx figure for FY '26? .

CapEx figure is INR 1,000-plus crores we are going to have this time INR 1,000 crores plus only. It cannot be less than that. That is we are committed this year because we are having large expansion in other plants already are underway and a lot of capital items are required for our new generation test instruments and others. So overall, put together, we have done good planning for that, and we are confident that we will definitely cross INR 1,000 crores. .

Ladies and gentlemen, that was the last question. I now hand the conference over to Harshit Kapadia for closing comments. Please go ahead. .

Thank you, Vishaka. We would like to thank Manoj sir, Shri Damodar as well as Shri Sreenivas for giving us an opportunity to host this call. Any closing remarks for the investor community, sir? .

Okay. The same is like future outlook for FY '25, '26. We are maintaining all those parameters. I will just repeat that revenue growth to more than 15%, EBITDA margin more than 27%, order inflow of INR 27,000-plus crores excluding QRSM, if QRSM comes, which we are still confident for Q4. If it comes, then it will be INR 30,000 plus crore. R&D investment as it was committed, it will be INR 1,600-plus crores only. CapEx, INR 1,000-plus crores and export $120-plus million. So we are our future outlook for '25, '26 and we are confident of achieving this. .

Thank you. Ladies and gentlemen, on behalf of Elara Securities Private Limited and Bharat Electronics, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you. .

Thank you, all.