Cyient DLM Limited (CYIENTDLM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Cyient DLM Limited Q2 FY '27 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, Non-Executive Chairman, Cyient DLM Limited. Thank you, and over to you, sir.

Thank you very much, Darwin, and good evening, ladies and gentlemen. I am Krishna Bodanapu, Non-Executive Chairman of Cyient DLM Limited. It is my pleasure to welcome you to our Q2 FY '27 earnings call. And joining me today are our Managing Director and CEO, Mr. Rajendra Velagapudi, and our CFO, Mr. R. Subramanian. Before we begin, I would like to remind you that certain statements made during this call may be forward-looking in nature and are subject to risks and uncertainties. A detailed disclaimer is available in the investor update section posted on our website. Let me begin with what I believe is one of the strongest indicators of the underlying momentum in our business, the continued strength of our order book and sales pipeline. While Rajendra and RMS will talk about details, I'm happy to note that the headline number is that order backlog now stands at INR 2,813 crores, with on top of which there is a pipeline, which is in excess of $1 billion. So I'm very happy to note that the order book momentum continues to pick up during the course of the quarters. We have sustained positive momentum in our order book for 6 continuous quarters. During Q2, our book-to-bill ratio remained at over 1.6x, supported by strong order inflows from large OEMs. We have also surpassed the record order book achieved in the previous quarter, providing us with strong revenue visibility. This reinforces the confidence our customers continue to place in our quality, delivery, performance and capabilities. Our execution teams have done a commendable job in fulfilling critical customer requirements despite the continued supply chain shortages, longer lead terms and geopolitical uncertainties, especially driven by what is happening in the memory market. This has resulted in a revenue growth of more than 26% year-on-year during this quarter, which is broadly in line with our expectations. Increasingly, we're seeing positive growth across all key segments. Aerospace & Industrial continues to grow at a faster pace, while Defense & Medical are gaining momentum. We have also strengthened the sales leadership team recently, bringing in diverse experience and capabilities that will help accelerate our revenue and profit agenda -- growth agenda. This gives us greater confidence in the execution of our strategy. While Rajendra will elaborate on this further, our strategic direction remains clear, which is to deepen and scale our presence in existing segments while selectively expanding into attractive new growth areas. As we position the business to the next phase of growth, we have continued to invest in our sales organization, strategic capabilities and the overall foundation to support the next phase of growth. These are deliberate investments. While they have an impact on margins in the near term, we believe that they're important to building a stronger and more scalable business. These investments are in 2 dimensions. One is the investments that we have made in our go-to-market organization, sales, marketing, et cetera. And the second -- I'm sorry, and that leads to better pipeline, better backlog and of course, eventually better margin and growth, which we're starting to see. The second investment is in our build-to-spec business, where engineering is done upfront. The IP is owned by science with our customers. And we have a very long manufacturing responsibility for many, many years. So both are very good investments, and I'm happy to say that they're starting to show some very good results. For example, with sales in terms of the order book or DLM in terms of the number of DLM contracts that we are building, and that we have won. As we continue to focus on growth, our focus firmly remains profitable growth, operating leverage and sustainable improvement in margins, medium to long term. Looking ahead, we remain excited about the opportunities across our market sectors. Rising electronic content, growing AI infrastructure demand, global supply chain diversification, increasing investments across our focus sectors and broader outsourcing trends continue to create a very strong and favorable demand environment. Our differentiated design-led manufacturing, the model which is unique to sign DLM, our strong customer relationships, expanding execution capabilities, we believe Cyient DLM is well positioned to capitalize on these opportunities. Most importantly, our H1 FY '27 performance reflects a strong rebound over FY '26, with revenue growth of more than 30%. It is supported by a record order book and a robust business pipeline, which provides greater visibility as we step into the second half of the year. I am confident that we will see this sustaining through the rest of the year and into next year. With a strengthened leadership team, improving growth momentum and continued investments in our capabilities and growth areas, we remain confident in our ability to build a strong and more scalable business, create sustainable long-term value for our customers, employees, shareholders and all stakeholders. With that, I will now hand over the call to Rajendra, who will take you through the business and operating highlights in greater details. Rajendra?

Thank you, Krishna. So good afternoon, everyone. And just thank you for joining Cyient DLM's Q2 FY '27 investor call. So I will outline the structural opportunities ahead and explain how our long-term strategy positions Cyient DLM to participate in some of the fastest-growing high-reliable segments of the global electronics product and manufacturing services market. Let me begin with the market backdrop. The global EMS industry is on a structural growth part with the market expected to rise from approximately $650 billion today to about $1.1 trillion for the next few years. Within this market, the high reliability EMS segment in which we operate, represents an estimated opportunity of roughly $230 billion. This growth is particularly relevant to Cyient DLM because it is driven by sectors that require deep engineering expertise complex manufacturing, stringent quality standard, resilient supply chains and long product life cycles. These requirements closely align with our capabilities in design-led manufacturing and high-reliability electronics. And if you just further look at it, there are 3 structural tailwinds which are expanding signed Cyient DLM's addressable market. The first tailwind is rising demand for AI and data center infrastructure. The second one is semiconductor capital equipment. And the third tailwind is robotics and the growing electronic content in all these 3 areas. Against this backdrop, we estimate an addressable EMS opportunity of closely around $58 billion in AI and data center infrastructure. And for EMS, this creates a significant opportunity in AI data center, box build solutions, tables and other cooling controls. Cyient DLM, this is a natural SMC, where our capabilities in high reliability, manufacturing, systems integration and power electronics and become increasingly relevant. So if you can look at it, AI in data center infrastructure, semiconductor capital equipment and robotic, extend signed Cyient DLM's growth runway while remaining closely aligned with our core strengths. Against this backdrop, our long-term strategic pivot follows key pages. Strengthen, expand and transform. So this delivery progression builds on a proven foundation extends our core capabilities into attractive adjacencies and ultimately create a stronger product and platform moat. Our first priority is to strengthen the business we have today. We are anchored in 4 core industries, aerospace and defense, medical, industrial and automotive focused in electric vehicles. These markets form our foundation and are supported by a proven core stack. The margin framework for the stage is approximately 9% to 11%. We are focused on deepening customer relationships, improving execution, scaling programs and reinforcing the operational capabilities that have earned our customer trust. This foundation provides the credibility and capability base for the next phase of growth. In the second phase, from FY '27 to FY '29, we plan to apply this proven stack to new sectors. The portfolio will expand from 4 industries to 7, adding robotics and a data center as a key growth areas and sharpening our focus on semiconductor capital equipment alongside with our existing core industries. Our approach is disciplined, and user efficiencies where customer requirements align with our engineering, manufacturing, quality and supply centres. As the business mix evolves and scale improves, the margin framework for the savings approximately 11% to 13%. Expansion is, therefore, not only about accessing new revenue pools, but also about improving the quality and resilience of growth across a broader range of high reliability end markets. For FY '30 onward, our ambition is to transform the business by building a differentiated product and platform moat. We expect to retain the benefits of a diversified industry portfolio while adding new platforms and expanding our 2 specification products. So here, I would like to elaborate on build-to-specification products. The key strategic priority for us. So we recently renamed this offering as electronic products to reflect the broader value we now provide across the product life cycle. Beyond manufacturing, our capabilities span product architecture, detailed engineering and embedded hardware, and software integration, prototyping, testing, qualification, industrialization and transition to volume production. So we are pursuing several multimillion dollar opportunities in this area, demonstrating both our capabilities and customer relevance. As these programs progress from development and qualification to scale production, we expect them to generate significant sustained growth from IFRS onward. Given the strength of the pipeline, the long-term nature of these engagements and their potential to deepen strategic customer relationships electronic products will remain a priority for investment and execution. The margin framework for this stage is approximately 13% to 18%, reflecting a growing contribution from product platforms and intellectual property-led differentiation. Our objective is to move progressively up the value chain while building on the execution discipline and customer trust established in our core EMS business. As we execute our long-term growth strategy, we remain focused on deliberate forward-looking investments that strengthen our competitive position and expand our addressable market. For the past several quarters, we have accelerated efforts to build capabilities that deepen our presence in high potential areas. Our investment approach includes strengthening domain expertise, expanding customer engagement, enhancing engineering and manufacturing capabilities and accelerating the development of differentiated products and solutions. All these investments carry near-term costs. They are essential to building a stronger foundation for sustainable and profitable growth as said by Krishna earlier. Even as we invest for the future and support the growing scale of our business in both data print and electronic products, we remain committed to disciplined execution and operational expense. Based on the planned investments and timing of our growth initiatives, we expect margins to remain at the higher end of the single-digit range for while establishing a platform for stronger value creation over the medium to long term. We believe these investments will strengthen our strategic position and market relevance, enabling us to participate meaningfully in some of the or most attractive technology and industrial growth sales. Turning to the second quarter. Our performance demonstrates both strong demand and continued execution. The order book reached an all-time high with a book-to-bill ratio of 1.6x. This provides a solid foundation for future growth and reflects the relevance of our capabilities across both established and emerging markets. Revenue grew 26.5% year-on-year in Q2, supported by strong growth in aerospace and industrial, together with the continued traction in defense and med tech. If you look at for H1, revenue grew 30% year-on-year. At the same time, the product mix is shifting toward higher value integration. Box Build revenue increased 86% year-on-year. This is strategically important because it reflects our progression beyond component manufacturing toward more integrated solutions. We also added 3 new logos in this quarter, strengthening the pipeline for treated business. In parallel, we completed the integration of Altek Electronics and renamed the business as Cyient DLM Electronics, which expands our global footprint and enhances our ability to serve customers across geographies. Finally, we are investing in the next engines of growth, as I said earlier, AI and data center infrastructure, robotics and semiconductor capital equipment, while continuing to strengthen our build to specification and electronics product capabilities. Together, these initiatives all in near-term execution with the longer-term margin and portfolio transformation outlined earlier. To conclude, Cyient DLM is positioned at the intersection of a large and expanding EMS market, accelerating demand in high reliability sectors and a clear internal road map to move up the value chain. Our card order book, strong year-on-year revenue growth, improving mix, new customer wins and broader global footprint demonstrates that this strategy is translating into operating momentum. We remain focused on disciplined execution, profitable growth and building differentiated capabilities that can support sustainable margin and expansion. Thank you for your time and continued interest in Cyient DLM. Now I hand it over to RMS Subramanian, our CFO.

Thank you, Rajendra for the business overview. Good evening, ladies and gentlemen. I will now take you through the financial performance for Q2 and H1 of FY '27. We delivered a revenue of INR 3,931 million, representing a strong growth of 26.5% year-on-year, reflecting the continued momentum in the business. Our order book reached an all-time high of INR 28.1 million, increasing by approximately INR 2.1 million sequentially. This provides us with a healthy foundation for growth going forward. At the operating level, EBITDA for the quarter was INR 342 million, up 9.5% year-on-year, with an EBITDA margin of 8.7%. The margin is lower by 135 basis points year-on-year reflecting our continued investment in growth areas. Moving to profitability. Normalized PAT grew 25.8% year-on-year to INR 158 million, broadly keeping pace with our revenue growth, while the normalized PAT margin remained 7.4%. Reported PAT for the quarter was INR 340 million. The difference between the normalized and reported PAT reflects the onetime reversal of the earn-out provision of INR 182 million. We see this as a quarter of strong growth with continued strengthening of the order book. Our focus going forward remains on converting this growth into a stronger operating performance and improving margins as a business case. Now let me provide some perspective on the strength across our key financial metrics. Starting with revenue. We have maintained a strong growth trajectory, the revenue reaching INR 3,931 million in Q2 FY '27 compared with INR 106 million in Q2 last year, representing a growth of 26.5% year-on-year. On profitability, EBITDA for the quarter was INR 342 million with an EBITDA margin of 8.7%. The moderation in margin reflects our continued investment in sales, strategy and new growth areas to support the next phase of growth. Importantly, despite these investments, our underlying profitability remains healthy. Normalized tax for the quarter was INR 158 million, growing 25.8% year-on-year, broadly in line with our revenue growth. Reported PAT was INR 340 million, which includes a onetime benefit of INR 182 million from the earnout reversal. Excluding this one-off, normalized PAT stands at INR 158 million. As we look at the overall trend, we continue to see strong revenue momentum and healthy underlying earnings growth while making the necessary investment to build capabilities and support sustainable growth. Moving to the set of KPIs. Let me touch upon our order book and working capital performance. Our order book continued to strengthen and reach an all-time high INR 28.1 million at the end of Q2 FY '27 compared to INR 26 million in the previous quarter. This gives us a healthy base as we move forward. On working capital, net working capital improved sequentially to 153 days from 161 days in Q1. Inventory days remained same at one rebate, while DSO improved from 77 days to 73 days. DPO from 63 days to 68 days providing further support to the working capital. Customer advances stood at 13 days compared with 15 days in the previous quarter. Overall, retention improvement in working customer, together with disciplined execution have us generate an operating free cash flow of INR 172 million during the quarter. Going forward, working capital efficiency, particularly inventory optimization and collections will remain an important area of focus as we continue to scale the business. Let me now give you some perspective on our revenue mix for the quarter. From an industry standpoint, Aerospace continues to be our largest segment, contributing 47% of our revenue. Followed by industry at 31%. These 2 segments delivered strong year-on-year growth of 62% and 29%, respectively. Defense contributed 7% of revenue, with 13% year-on-year growth, while Med Tech accounted for 14% also growing 14% year-on-year. Looking at our product mix, PCBA continues to be the largest category at 48% of our revenue, growing 19% year-on-year. At the same time, we are seeing strong momentum in Box Build, which now contributes 37% of revenue. And grew 86% year-on-year. Geographically, our business continues to be predominantly international with the rest of the world contributing 93% of revenue, and India geographic contributed 7%. The international mix continues to be supported by demand from aerospace, medical and industrial customers. Overall, the revenue mix reflects strong growth across our key verticals, increasing contribution from Box Build and continued strength in our international business. Let us now look at the DKL financial performance for the quarter. As mentioned earlier, revenue grew 26.5% year-on-year to INR 3,931 million, reflecting a strong growth momentum in the business. EBITDA stood at INR 342 million, up 9.3% year-on-year with an EBITDA margin of 8.7% compared with 10% in the same quarter last year. The moderation in EBITDA margin was primarily driven by 2 factors. First, we saw an impact on the revenue mix and product development-related costs. Second, the employee cost increased as we continue to invest in sales strategy and new growth areas to support future growth. Below EBITDA, [indiscernible] declined by 10.4% year-on-year to INR 61 million, supported by lower working capital borrowings. Reported profit before tax was INR 393 million and reported PAT was INR 340 million. It is important, however, to look at the profitability on a normalized basis. Other income during the quarter includes a onetime earn-out reversal of INR 182 million. Excluding that -- this -- our normalized tack was INR 158 million, representing strong growth of 25.8% year-on-year with a normalized PAT margin remaining stable at 4%. While we have seen some near-term impact on the EBITDA margin level, the underlying earnings growth remained healthy and broadly in line with our revenue growth. Our focus remaining on sustaining growth while driving greater operational leverage and margin improvement as the business scales. As we complete our half year to FY '27, let me now summarize our performance in the first half of FY '27. We delivered a revenue of INR 7,669 million, representing growth of 30.2% year-on-year, supported by healthy business momentum and a strong order book. EBITDA for the first year was INR 733 million, growing 30.4% year-on-year, broadly in line with the revenue growth. Importantly, despite these investments, we are making to strengthen our business. Our EBITDA margin for headform stable 9.6%. At the bottom line, the performance has been particularly strong. Normalized tax increased year 60.4% to INR 321 million with normalized PAT margin improving by 79 basis points to 4.2%. Reported tax for H1 stood at INR 503 million, up 27% year-on-year. The difference between reported and normalized PAT reflects INR 182 million onetime on version record during the second quarter. Our order book stands at a higher INR 28.1 million, an increase of approximately INR 5.2 million compared with the same period last year, providing good visibility as we move into the second half. Overall, H1 reflects a strong and broad-based financial progress with revenue and EBITDA growing around 30%, normally earning growing significantly faster and the record order book supporting a growth trajectory. Since we have already covered most of the H1 performance highlights in earlier, let me keep this slide brief and highlight just a few oration points. While EBITDA margins remain broadly still at 9.6%, we saw some impact from the revenue mix and product government-related costs, particularly in Q2. At the same time, we continue to make targeted investments in capabilities to support growth. Below EBITDA finance cost declined by 21% year-on-year, supported by lower working capital borrowings. Overall, the underlying profitability remained strong with normalized PAT growing at 50% year-on-year and normally start margin improving by 79 basis points to 4.2%. To conclude, Q2 and H1 has been strong for us is a healthy revenue growth, a record order book and strong growth in underlying profitability. As we enter H2, our focus will be on continued momentum in order intake, excluding the order book improving margins and driving working capital efficiency as we continue to scale the business. We remain confident in the growth trajectory of the business and our ability to translate this growth into sustainable value creation. Thank you. Let's move to the question part now.

[Operator Instructions Our first question comes from the line of Balasubramanian with Arihant Capital.

My first question, the margin impacted due to one-off revenue mix and product development spend? And how much it impacted in Q2 product develop plan spend? And what is the annual product development phase over the next 2 to 3 years? And whether we are capitalizing or the expense?

Yes. This is RMS Subramanian here. In terms of the margin impact, we explained the reasons for that, okay? I'd like to clarify that it's a marginal investments in terms of what we have done, which is in the range of 150 basis points. And as a policy, today, we are not capitalizing any of the cost what we're doing. With some of the costs are forward-looking in terms of employee cost for sales and building the same engine and also product development cost in terms of prototypes, et cetera. All of them are being expensed and that's the way we are seeing the impact on the margins. What we see this as positive investments, which will yield results as we go moving forward.

The annual product that we manicure there is any number in terms of sales that is -- we?

Will not like to get into in terms of individually what is the product demand, but that's part of our business, which Rajendra talked about in terms of electronics product position. So as we keep moving forward and as we identify opportunities, we will keep investing on a healthy basis. But we don't want to be putting a number in terms of what we'll be doing it, okay. This depends on the opportunities available in the market.

You mentioned the new growth engines like AI data center peniconductor and robotic do have. So what are the work we are doing right now? How do you look at growth in cans or next maybe 3 to 5 years strengthening. Because you mentioned the first FY '30, we have seen the focus that will be the trend?

I think as I said these also, if you look at on the new codes and data center infrastructure, robotics, and also on semiconductor capital equipment. I think looking to capital equipment, we are already there. We're already working right now. And on other 2 areas where I said earlier, so we just started exploring it right now. And it may take some time for us to get to a number there. So that's why I think we'll come back on where we stand on those things probably after by the end of the financial year.

Our next question comes from the line of [ Santosh Seshadri ] with Avendus Spark.

So I just want to follow up on the margin part of the question. So could you help us quantify how much of this impact was due to one-off product development costs and how much due to underlying revenue in exchange? And also, just to get some flavor on what is driving the revenue mix change? So basically, is it a shift between PCD versus Box Build the BTS to BT that you're talking about? And the second part of the question is, as you continue to grow the business, how should we think about the -- in centers of -- or these product development costs recurring again?

Okay. So what we're seeing is a mix of various factors in terms of revenue product mix. Some investments in terms of future in terms of the cost Okay. So what we definitely see this is leading to -- getting back to the margins of what we will like to get back into okay. And from a revenue product mix perspective, we -- as you know, we are in a high mix, low-volume business. And -- there will be a small amount of moments, it's not a static in terms of revenue. But as we keep moving forward, we are confident that in terms of overall margins, we should get back to what our targeted levels are.

Just sorry if I missed it earlier, what would be the margin guidance for FY '27.

FY '27, as I said earlier, we will be at a high single-digit number. with close to around 9% EBITDA margin, okay? And for -- if you look at on the Q1, what are the investments we're making, whatever we are seeing in some of these one-offs which we have it. I think from Q1 onwards, we won't be having having a double-digit EBITDA margins going forward.

And just lastly on the time line for executing the order book, what would be the typical time line to convert these orders into revenues? And also on some of your new programs like semiconductor programs, when do you exactly expect just to contribute to your revenue? Is it fair to say that from third quarter or fourth quarter onwards, we should start to see some meaningful revenue? And also if you could help us quantify the run rate from some of these 2 programs.

Yes. I think if you look at on the order book, what we have, it is usually from 18 to 24 months, that's what the range, maybe very few will be there beyond the 2 years. But otherwise, mostly take into 24 months is our outer book what we have. And coming back on the semiconductor capital equipment, we have already started working on that. In the last 2 quarters, we have the revenues on that. Now that's where rewell be seeing some ramp-up going in that particular industry.

Our next question comes from the line of [ Shashank Cha ] with SB Capital.

Sir, my question is on EBITDA margins and you told that it will be around 9% for FY '27. Have I got it correctly?

Yes, more in that range 9% to 10% range. So we will be -- that is what we have current in the guidance, yes.

And sir, like your order book is growing fast, but if you going at that rate. So is it just an external paper or the order book or deliver a from the [indiscernible].

I mean, now if you look at the challenges, what we have is a tool the challenge in getting the material. So that's fair, I think the challenge is in the materials right now. The order book what we have is we have to go ahead and deliver done getting the material. That's why it is taking the time. So that's why the 18 to 24 months is what I said is that we will be closing this existing order books.

And you told about the build pipeline, which is expecting $1 billion. So what can we expect unbeaten?

I think -- so that's what the conversion usually happens to whatever the OI conversions we are seeing it now. That's why the conversions the bookable rate of 1.6%. Now if you look at it what we had in the last quarter and this quarter, the INR 600 crores plus. That's where probably you will be expecting it for the next 2 quarters.

No, sir. I asked about something we had a big pipeline of $1 billion. Out of that, what do you expect to build?

The percentage of the wins you're asking it? So usually, it will be a closer on -- I mean by the time -- I mean, not it's close, if you look at our past happen our history, we closed around the 40% is what the wind ratios. So based on that -- some of the things are there in the initial stage, lead in qualification. So probably once we put those things, so we will be closing -- coming close around 40% of the win ratio.

Okay. Got it. And regarding EBITDA margins for FY '30. So are we going to have it in double digits?

Double-digit a yes. for FY '28 on at double digit. And for this year, I said it was 9% to 10%.

Our next question comes from the line of [ Ned Jen ] with Systematics Asset Management. Will move to the next participant. Our next question comes from the line of [ Roman Gada ], with Avena Investment Management.

Sorry to map on the margin part again. We are expecting kind of a squeeze in margin of around 1 percentage this year compared to -- and you mentioned that it's due to the product development cost and revenue mix. So can you -- I don't know if it clarify a little bit in detail that specifically. Is it because of some nature of services mix change in like PCB box pay some industry mix changing in revenue because of that, the margin is being peeled out. If you can explain that in a little bit of detail, that would be helpful.

I think what our earlier said is that this quarter is where we just mentioned about the revenue mix. But if you look at it for when you ask of FY '26 compared to FY '27. The main -- the reason for that reduction is basically coming from the investments that we are making into the parts and marketing, okay? So that's what I said earlier, there are all the future investment which we are making it, I mean, for the figure growth.

So I think if I may just qualify that if you look at our gross margin or contribution margin, both of which our quality of business. They are higher -- actually, they're significantly higher in FY '27 year-to-date, then they're in FY '26. So the quality -- just to clarify that it was -- this quarter, there was a bit of a revenue mix. But again, even this quarter, if you compare it to the same quarter last year, our contribution margin is still higher. -- right? So it's not -- it's a revenue -- it's not a revenue mix. Revenue mix is always going to be there. I think that was just mentioned that it was this quarter. The reason why margins are really lower is 2 things. One is we've invested quite a bit in sales and marketing, all of which is now in the P&L, that in the S&M or G&A. So all of the value of sales and marketing is there, which is depressing the margins obviously a little bit. And we continue to invest in product development, which is not capitalized. Again, the product development piece also has been going on for a while. It's not that it is something that we only started this quarter. So it's really net-net, if I may just clarify, the reason for the drop in margins by about 100 bps or so is because all these sales and marketing costs have been accounted for. We will not add any more sales and marketing costs will be at least it about or at least net new, we won't add any more sales and marketing costs till we hit at least double our revenue on a quarterly basis. So that's just the issue. It's a point in time issue that is fully loaded. We've added a number of salespeople. We've added a number of people that have added a number of marketing costs, et cetera, including we had achieved growth officer in drama, et cetera, et cetera. So it's just that the full benefit of there's 0 absorption right now because if you look at it last year, we would have done a similar revenue with none of that cost, which is almost 150, 200 basis points. So I just wanted to that -- it's not a one-off thing. It's not a -- yes, there was a bit of a one-off, but there's always going to be there. It's just the fact that we're investing in marketing and we're investing our product at [indiscernible].

Understood. So sir, I mean, just if I aplite this thing. So when you say FY '28 onwards, we will have 11% kind of margin, which is down from 2% to 9% that we're expecting this year. So do you mean that the intensity of investments will get lower? Or the resulting outcome is going to get higher because of that, the margin expansion has happened of around 200 basis points? So the intensity of investment will get kind of lower or from Q3 or Q4 onwards?

That's what I think I said with Krishna. Whatever has been done sales and the marketing cost, there is all done now. There won't be any future investments in that area. And so I think once the revenue grows in FY '28, when you're seeing the growth for FY '28, whatever the growth we have currently seen growth will continue in FY '28. I think with the growth coming in the absorption and also we'll be seeing the EBITDA margins going up.

Understood. And sir, one last question, if I can ask. I mean a couple of weeks back, there was an interview showcased in the news that you have a $1 billion order book is executable for next 7 years. The bank that order book. I didn't kind of quite understand what does that mean or where this is accounted. So if you can give some -- to some light on this.

Okay. So that is predominantly on our build to spec, which is nothing about the electronic product, which we are working out for some of the customer programs. There are 4 major programs which we are working right now. I think if you look at it, some of the work which we are doing it, we already have some of the contracts signed with the customers. By FY '30, is where we told that the share will be seeing the revenue coming in from that. So there are the 4 programs are really come now currently close to $1 billion, which are not there currently in our order book, okay? So I think once we materialize it, that's what we'll be seeing our order book going up at that time.

Okay. So you think you have the visibility of the order book credit is not translated to order book yet. It will come in the later said when it is more materialized company?

Exactly, exactly. But the contracts, we know that what the volumes are going to be there, what is -- it is -- I mean the value of the contracts going to be -- that's why I said it is $1 billion.