Jyoti CNC Automation Limited (JYOTICNC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Jyoti CNC Automation Q1 FY '27 Earnings Conference Call hosted by Anand Rathi. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance, and it may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aniket Jain from Anand Rathi. Thank you, and over to you, sir.

Thank you. Good evening, everyone. On behalf of Anand Rathi, I welcome you all to Q1 FY '27 Earnings Conference Call of Jyoti CNC Automation Limited. We are pleased to have with us management represented by Mr. Parakramsinh Jadeja, Chairman and Managing Director. We will have opening remarks from the management followed by a question-and-answer session. Thank you, and over to you, sir.

Thank you, Aniket. Good evening, everyone, and a very warm welcome to our Q1 FY '27 earnings conference call. Along with me, I have a senior management team and SGA, our Investor Relations adviser. Results and presentation have been uploaded on the stock exchange. I have everyone -- I hope everyone has had a chance to go through the same. I'll begin my opening remarks with an overview of the economy, followed by industry and company's operational and financial performance. The global economy witnessed a challenging FY '26 with the geopolitical tensions creating uncertainty across markets for a significant part of the year. The conflict in the Middle East disturbed global supply chain and energy markets. leading the volatility in crude oil price, raw material cost and inflation. These developments have created an uncertain operating environment for businesses across the industries. FY '27 has begun on a relatively stronger footing, geopolitical tension in the Middle East have moderated with greater restraint being shown by all countries. While the outlook has improved, the global environment continued to remain sensitive and any fresh geopolitical or trade-related disruptions can once again impact global supply chains, commodity prices and cross-border trade. In today's interconnected world, no economy remain insulated from global events. India to witness the impact of higher crude oil prices and supply chain disruption during the past year. At the same time, the events have reinforced the importance of building the resilient and self-reliant manufacturing ecosystems. While India has traditionally been recognized as a service-led economy, there is now a clear policy focus on strengthening our domestic manufacturing as a long-term driver of economic growth, employment generation and global competitiveness. The government of India continues to accelerate the country's manufacturing ambition through initiatives such as Make in India, the PLI schemes. Higher infrastructure spending and the development of industrial corridor, sector-specific policies are also driving investment across key industries, including PLI incentives for mobile and electronic manufacturing, increased private participation in the space sector, continued focus on defense indigenation and policy support for automotive industry through EV and advanced manufacturing initiatives. Together, these measures are strengthening India's manufacturing ecosystem, accepting investments and reinforcing the country's position as a preferred global manufacturing hub. As a company, we are closely aligned with the structural growth opportunity. Our business is a direct reflection of manufacturing activity across the country as our CNC machines enables customers to expand capacity, improve productivity and manufacture with greater precision. Speaking about the machine tool industry, the global market today is estimated around USD 85 billion to USD 90 billion. China remains the largest consumer of machine tools, followed by the United States, reflecting the scale of their manufacturing ecosystems. India's machine tool market, while currently estimated at around USD 4 billion as an inflection point as manufacturing investments accelerate across the sectors. We believe the domestic market has potential to grow multiple times over the next decade. Despite this opportunity, India continues to depend heavily on imports with nearly 60% of domestic machine tool demand being met through imports, primarily from Japan, Europe and South Korea. This presents a significant opportunity for import substitution as Indian manufacturers increasingly look for reliable, technological advanced and locally supported solutions. Domestic machine tools companies are well positioned to capture larger share of this market while contributing to India's vision of becoming a global manufacturing powerhouse. Coming to the key updates during the quarter 4 stand-alone businesses. During the quarter, for Jyoti in India, we continue to witness a strong demand from general engineering, automotive, EMS, defense and other precision engineering sectors. This reflects increasing capital expenditure by manufacturers, rising localization initiatives and continued investment in expanding domestic manufacturing capabilities. The demand environment remains encouraging with customers increasingly looking to automate operations, improve productivity and enhance manufacturing. We recently launched a new product, NX, a high-pcision double column machine. The product is targeted to cater primarily to railway sector along with the commercial vehicles, infra, power and heavy engineering. These type of machines was largely imported previously, and we are confident we will receive encouraging response from our customers. India demand is reflected in our stand-alone performance. Q1 [Technical Difficulty] revenue [indiscernible] robust growth [indiscernible] compared to same period last year. The profitability front as well as Q1 FY '27 EBITDA adjusted for ForEx losses stood at INR 145 crores compared to INR 99 crores in FY '26 with margin of 28.4%, an increase of 190 basis points. Reported EBITDA stood at INR 137 crores with margin of 27.2 percentage. Q1 [indiscernible] stood at INR 88 crores, growing by 21 percentage over same period previous year with margin standing at 17.2 percentage. Speaking of the global level operation at [indiscernible], globally, our demand continued to be led by the defense, aerospace and general engineering. As customers globally continue to invest in advancing their defense and our manufacturing capabilities. We believe the long-term demand outlook for higher [indiscernible] machine remains robust. Speaking about the operation at Huron, I'm pleased to share that all operations are running smoothly are in full swing. There have been no disruption to order intake [indiscernible] or overall operations [indiscernible] resilience of our team and process are also meeting [Technical Difficulty].

Ladies and gentlemen, the line for the management has been reconnected. Thank you, and over to you, sir.

We are also witnessing a steadily improving demand environment across multiple industry sectors, which gives us confidence in healthy order inflow over the coming quarters. Based on current market trends and the customer engagement, we remain optimistic about building a strong order book for Huron. Huron continued to be a key pillar of the company's long-term growth strategy. Its advanced technological capabilities, strong engineering expertise and established global presence significantly enhance our ability to serve customers worldwide. As we continue to leverage Huron [indiscernible] -- it will play a critical role in expanding our global reach, excellent innovation and delivering world-class P&C machine solutions to customers across diverse industries. Our financial front at a consolidated basis. Revenue for Q1 FY '27 stood at INR 508.5 crores compared to INR 410.2 crores in Q1 FY '26, a growth of 24 percentage. The consol number also includes INR 35 crores in revenue from Jyoti CNC to Huron will get net off in consolidation. Further, the Q1 FY '27 and Q FY '26 are not strictly comparable as in Huron. We have moved away from our accounting method, which led to lower revenue recognition in Q1 FY '27 as compared to Q1 FY '26. At which time, we are following a percentage completion method on a certain terms and conditions on a like-to-like basis, our consolidated revenue should have been higher by more than INR 30 crores. Q1 FY '27, adjusted EBITDA stood at INR 119 crores compared to INR 100 crores. Adjustment was in account on unrealized ForEx losses to the tune of INR 10 crores. Adjusted EBITDA, [indiscernible] stood at 23.4%. The reported EBITDA stood at INR 109 crores with margin of 21.4 percentage. Q1 tax stood INR 57 crores in a margin standing at 11.2 percentage. Overall, both our stand-alone and consolidated businesses continue to benefit from a healthy demand environment Historically, the first quarter has been seasonally a soft quarter has been seasonally a softer period for machine tool industry, which customer ordering activity generally picking up [Technical Difficulty] generally picking up in the second half of [indiscernible]. We expect a stronger second half this year as supported by a healthy demand pipeline across both domestic and international markets. In addition, our new manufacturing facility is scheduled to commence operation by the end of September, which will significantly enhance our production capacity and enable us to better cater to the strong demand environment. As a result, we expect the second half of FY '27 to be particularly robust for the company. Overall, the demand environment today is so strong that we are running at close to our full utilization. Our plant operation at 86% capacity utilization in Q1 FY '27, underscoring the need for the capacity expansion that we had announced earlier. I'm pleased to share that our expansion project, which will add the capacity for 10,000 machines annually is processing as planned. Installation of machinery is well underway. Our operating teams have already been put on place, and we have proactively built up raw material and inventory over the past 9 months to ensure a smooth production ramp-up. We remain on track to commission the new facility by the end of September, following which we will be positioned to cater to strong domestic and international demand pipeline while supporting our next phase of growth. Our revenue continued to be well diversified across the end user industries, reflecting the strength of our business model. During the quarter, 37% of revenue came from aerospace and defense, 35% from automotive and auto components, 17% from the general engineering, 6% from electronic manufacturing services. The balance 5% came from other industries. Moving to our order book. We continue to maintain a healthy and diversified order pipeline. As of today, our order book stands at INR 4,848 crores, providing good revenue visibility for the coming quarter. The industries-wise order book comprised 38% of order book is from aerospace and defense, 20% from general engineering, 19% from automotive and auto components, 13% from electronic manufacturing services and 4% from d and molds and with balance coming from the other sectors. For a detailed update on order inflow during the quarter, you can refer to our investor present. On machine sales front, we sold 1,406 machines during Q1 FY '27 compared to 1,117 machines in Q1 FY '26. The product mix was as follows: entry-level machine sales stood at 1,349 compared to 994 last year. Midrange machine sales stood at 33 compared to 104 last year and high-end machine sales stood at 24 compared to 19 last year. Overall, we have started FY '27 on a strong footing with healthy revenue growth, improving profitability and robust order book. Demand continues to remain encouraging across key sectors, while our upcoming capacity expansion will further strengthen our ability to capitalize on the opportunities ahead. With a strong manufacturing base, continued investment in technology, our partnership with [indiscernible] and a clear focus on supporting India's manufacturing transformation, we remain confident of sustaining our growth momentum while creating a long-term value for all our stakeholders. With that, I would now like to open the floor for question.

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

On you CapEx, you mentioned that the additional 10,000 machine capacity will come on stream in September '26. What will be our overall CapEx outgo for the full year FY '27 because there will be some maintenance CapEx as well. And just a follow-up to that, all our relevant backward integration, foundry, sheet metal fabrication, machining, all those things, they will also come on board in September '26.

Let me come back to one by one your questions. So we targeted close to INR 450 crores of CapEx for this new capacity over there. And we are -- until today, we are on to the same target line. We are on track absolutely on that. Another question about the detailing. So today, almost our 80% of machine shop is already -- the factory has been constructed, machine has been put up. Already, we started to partially machining and everything has already started. Only the part of automation that we are going to do it now and then it will be improved our more and more manufactabil over there about the machine shop there. Sheet metal shop, the building is about to finish now and all the machines we already received. And once the building has been handed over from this day within a week and all, our installations and everything is going to start. Parallelly, our paint shop also the building is getting ready in this week. So basically, all the equipment, everything is put into inside and installation is going to start from this. Only the foundry part, that is running a little late. We are expecting to this foundry to be finished in October there. So right now, the foundry equipment and everything is going to come in September, and we may take at least 1 month additional time to that. But apart from that, assembly building is also ready now. Assembly building is ready, machine shop is ready, sheet metal is ready. Only in foundry, we will have 1 month to wait over there. So almost you can say that 99 we are on time...

Perfect. Sir. Secondly on our working captial position as you mentioned in your opening remarks. Our current inventory levels are slightly elevated because we are planing upcoming execution ramp up from the second half of FY '27 onwards. So inventory position along with both receivables and payables. How this [indiscernible] look like at the end of FY '27? Here I'm trying to understand how the operating cash flow look like for the full year?

Basically the last year, we started to ramp up the -- today, you see that we have close to now INR 5,000 crore order book, okay? So we have ramped up the procurement and all since last 9 months -- and with this new facility is coming up and execution will set nicely after the new facility, we are expecting to, let's say, the working capital in the inventory stage drastically, let's say, improvement we will see. In terms of operating cash flow, we are expecting to very positively surprised to be seen there.

[Operator Instructions] The next question is from the line of Ravindranath Nayak from Nirmal Bang Securities.

Sir, congratulations of good gross margin. There is a significant growth in the gross margin despite very low sales in [indiscernible]. But the other figures like the staff cost and also the other expenditure on a quarter-to-quarter basis has increased. And also whether it is due to the new capacity that we are building so whether it is relating to that, the interest cost also has gone up. So you mentioned that with the foreign exchange loss, our EBITDA is around 23%. So I'm referring to your past call that we mentioned that whatever may be the realization, 34, 36 realization go to around INR 30 lakhs, our margin will remain 24%, 25%. So how will you reconcile all these things to actually to a 23% margin in this quarter? So whether there is some capacity cost we have built in this quarter so that our margins are low. So can you comment on something on this I will come...

See Ravindar bhai basically, if you look at that, our stand-alone margin has improved very well, okay? It means we are completely on a cost and everything is nicely there. Even though, let's say, the individually, we have a 27% plus. And we always guided to the people at 25%. Right now, what we are seeing is the difference are coming basically in. We have made the revenue close to INR 35 crores in quarter. Compared to the last year quarter, it was close to INR 70 crores. We missed this INR 35 crores additional revenue due to this new accounting structures and all. We have produced, but we are not able to -- but the cost and everything has been loaded there, okay? So that's how it has been looked like. And compared to, let's say, even we have a INR 35 crores of material has been transferred from India to there. So that in consolidated revenue, it has been net off. And that's why this revenue has not been seen to be higher there. But in terms of the margin, we are absolutely on track. Once the revenue comes in the coming quarters been booked in Huron, it will be restated to all the margin to be there.

Okay. And sir, interest cost has gone up, whether we are booking -- because why you are not capitalizing the interest for the new capacity that you are going to...

So basically, we have fully booked into cost over here. And anyhow, this capacity is going to start in this year. We are going to utilize from September onwards. And partly already, we started using the building up this all our components and all. Already we have put to use. There are many things we have put to use there, okay? And that's how we are able to improve from our third quarter. If I have not put to use and if I start everything from October onwards, then I can capture the revenue from next year onwards. So already we started, so we put to use and then cost has been incurred. So we cannot push into a capitalization over there.

Okay. And if you compare it like-to-like basis, whether it is right to estimate of around INR 20 crores to INR 25 crores of additional cost we have built in, in our cost for which the margin is down...

So basically, if you look at that... See, the margin, I told you that revenue has not come from Huron at close to INR 35 crores. That's supposed to come as compared to the last year first quarter, okay? And if you calculate this margin, we missed the margin of INR 20 crores, INR 22 crores, exactly the same margin we missed there.

Okay. Okay. And sir, one suggestion because if you give the Huron's performance on a quarter-to-quarter basis, that would be helpful because instead of discussing in the conference call, if we can give it explicitly, that would be helpful for the investors to actually analyze the things properly. So that is a suggestion. And last year, there was a ForEx gain that we have not accounted because if you could have accounted for that in this quarter, then the Y-o-Y, the things would be better because we have got INR 10 crores loss. Last year, it was INR 20 crores of gain -- so like-to-like basis, it should be -- the performance should be compared properly. And sir, the new machines that you have just discussed in the opening remarks, is it what type of machine and what is the realization? And also what is the market? What is the import currently India is doing on this for this import machine?

So basically, this large size of the machine are coming from the -- mainly from this Taiwan, Korea are the main supplier of this particular machines. The machines are more than 5 meters range. We have built up the 6 meters, the new first model, then another machines they have put up right now under development is 8 meter and 10 meters also, particularly for the heavy engineering, last year, India has imported more than 300 machines of the categories there. And value for this machine is close to INR 3 crores to INR 5 crores in between here. So we have just been developed. And the target industries is right now, the railway is also expanding big way there. And we have received some of the orders in this quarter also against this machine for the railway component suppliers over there.

Okay. And...

May we request that you return to the question...

Last question. Okay.

So Ravindra, this is a 3 plus 1. This machine is a 5-sided machine, but not in a 5x simultaneously there.

The next question is from the line of [indiscernible] from ICICI Prudential AMC.

Yes. Sir one question around Huron thing which you mentioned at [indiscernible] regarding one of the machines that over as spending was at it is in inventory, right? Is that correct.

Correct.

So as comparing it to the last call, which you had highlighted, it is about some licenses, if I remember. I think for your machine, I think cost is that approval received now? Is that approval received now or is that a timing issue? Or is it still due [indiscernible].

Now particularly it's not in a 1, but specifically, all the export license is right now, they are taking a longer time there. So we are in a waiting mode there. Onece, we will receive the license -- it means there is a start annuity for the machine to be disposed. And then only we can able to book this into our revenue to be there. This is a method in a very conservative method being adapted by the local authorities and the local holding puts over there. So that we have entered towards here basically. And we are in a very, very strong position. Our 2 to 3 meeting our management has done with the authority there. They are very much positive. They are looking to the end user, client and all, and they will clear very soon there.

The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Sir, congratulations for the recent set of numbers on a stand-alone, of course, there is some ambiguity on the or on site. So I'll be a little more specific to get the clarification tone from you -- so since you already pointed out, I'm just putting in perspective earlier, we were -- we have adopted percentage completion method. And now we are booking revenues on Huron once the machines are discussed. So since the complete dispatch was not there in this quarter on the own side, as compared to what we have exported the some material to Huron we have seen the revenue dip. And if we would have adopted the earlier method, then revenues would have been higher by close to another INR 30 crores, INR 35 crores, which would have flown to EBITDA and the comparable EBITDA would have been much better than what it looked like in this quarter. So is my understanding right, sir, to understand.

Absolutely, absolutely, you understood as perfectly right. And I already stated in all past 2 questions also. So absolutely absolutely, let's say, if this method has been not set, then my top line, it should be INR 35 crores more and INR 22 crores margin should be more there.

Correct. So now, sir, going into Q2 precisely -- can we expect that some dip that we have seen in Q1 in terms of the specialty of machines, can they pick up or we have to wait for the second half. So can we expect some sort of pickup in dispatches of machines in Q2, so [indiscernible].

Yes. Basically, we are looking to be -- see, this particular thing has been changed in only in the last 3 months, okay? It started from -- and now we are expecting Q2 is much better. We have a local machine. Those are the machines are going to be prepared and going to the start even we are not waiting for the end user certificate also. So we have significantly -- we are expecting Q2 numbers to be improve there, first. Gradually, I'll tell you 1 thing. This on the long-term long, large machines. -- and the manufacturing banks are longer. So the lumpy things are coming up. So on third quarter and fourth quarter, we will see the bunch will come. Ultimately, we are producing and sitting there into WIP there. So 1 day, it will go out, and we will see the ninth results on the coming quarters to be there.

Okay. So sir, I'm just trying to conclude it, the earlier fact was that since the lumpiness was not there, so numbers we are looking smooth because of percentage completion method few quarters, few quarters might see more dispatches for quarter might see lower dispatches on the or on site. So it is better for us to look at the early picture rate rather than quarter-on-quarter EBITDA margins. Is that right .

Absolutely, machine tool company will need to see a yearly basis only there.

Okay. And sir, still we stand by -- with our earlier guidance of close to 25% to 30% growth on top line and maintaining the EBITDA margins in the range of 25%.

Absolutely. We are fully committed. We are on the way. And we have demonstrated, if you look at that, even situation also, we are close to 23.4% net margin and growth also is close to 24% at consolidation level also. So we are on track, and we are absolutely going to deliver 25% to 30% as the guideline has been given and margin also to be maintained there. We are fully confident on that we'll deliver that.

The next question is from the line of Aniket Jain from Anand Rathi.

I wanted to check on the EMS market. Is the demand environment improving there? Can we see some good ordering in the couple of quarters that are yet to come in this year. So maybe that's question 1 for EMS [indiscernible].

Okay. What is the question number two. [Foreign Language].

Sir Question number 2 is also on the accounting change that you have done. So if I understand correctly, there will be some huge lumpiness in the revenues basically INR 30 crores to INR 35 crores. We may see INR 30 crores Huron in 1 quarter and that increase to INR 100 crores in next quarter because eventually the run rate was about INR 70 crores that was historically done. So doesn't that create a lot of lumpiness in the EBITDA margins also. It can go to probably 30%, 31% when the revenues are higher and come down to 23%, 24%. So how we look at the margins, the sustainment of margins.

I always say that, Aniket, that, first of all, the machine tool company, we are not a quarter to quarter, okay. But anyhow, we are here. So and we manufacture a very large machines and also it is going to happen, and we will see that thing. And people will also -- you will also able to understand the complete cycle to be there. there is a part on part of the business. So we will see that things basically. Regarding the EMS, we are fully busy right now. That's not converted into an order because all my customers also are developing their own capacity. Many customers are getting now there is a new electronic manufacturing component PLI scheme and the enhanced up to INR 40,000 crores. So many of customers are waiting and then again the clearance. Right now, we are fully more than 200 our people -- those are working with those of our customers and developing each new processes, toolings, the programming and supporting that. So we are really equipped to support to them, once they are ready, we are also ready. And basically, right now, our capacity also will come up. They all are looking to us over the year also that today, we are almost 90% to utilization levels are there. So in order, we have a big order book in our part, and we first like to execute all these things first.

The next question is from the line of Arafat from Dawlat Capital.

So my first question is on your variation. If you look at the nation for machine ended its come down FY '26 to around INR 38 lakhs from INR 40 lakhs, INR 45 lakhs in FY '25. And if you look at it a number what we discussed in the 1Q '27, it's further down to INR 36 lakhs. So just want to understand mainly due to the, let's say, machinery or the sector which has driven this lower ratio for the '26 and [indiscernible] '27.

So basically, if you look at that, the last year, the first quarter was 1,100 machines are there. This year, we have increased the number of machines to close to 1,406. So the last year, the first quarter average was INR 34.41 -- and this year is close to INR 34.56 is almost similar there. And we will be in a range in coming days because the number of machines and capacity on entry-level and mid-level machines are increasing. So we will be in a range of similar in the coming quarters or 1 or 2 years to be like this.

Okay. Got it. And sir, next question, a bookkeeping question. You said the total CapEx for this 10,000 machines close to INR 43 crores. So I think if you look at for the '26 CapEx, I think it's somewhere close to INR 300 crores. So just want to understand what CapEx we have done till now in FY '26 and what would be your CapEx for FY '27 in terms of numbers.

So in terms of this year, we are going to do close to INR 200 crores to INR 225 crores, the balance of this INR 150 crores plus some maintenance CapEx and all kind of things.

Okay. So can we assume again INR 300 crores CapEx for this year as well?

No. It is not going to touch to INR 300 crores. I told you that INR 200 crores to INR 250 crores between...

The next question is from the line of Shweta from IThought PMS.

Sir, firstly, a clarification. In the beginning, you said that this quarter's capacity utilization was 86%. Can you tell me what the capacity was for that utilization number?

So basically, it's a 6,000 machines in a year.

Okay. Because if I was not wrong, earlier for FY '26, we said around like 90% utilization. That's why I wanted to confirm that number.

Yes, correct. SP1 So the last year, let's say, at the end of the year, we've built 5,550 machines day.

Okay Yes. Okay, sir. My question is even though the ASP declined this quarter, we saw an improvement in the gross margin. So is that -- how is it going to be going forward, even as the entree admissions ramp up with the new capacity?

So that's why I'm telling, let's say this, the growth margin, ultimately, with all model mix, I always guided like that. We will be at EBITDA level at 25 percentage. We may sometimes go plus, but we are being -- business model has been ensured like that we'll be near by that.

Okay, sir. Lastly, one subscale question. Are you seeing any signs of replacement demand like machines that were imported like 20 years back or something that are getting shopwithIndian machines now?

Yes, there is a lot of new demand that are coming, particularly in the last July, we have seen historically higher order book today now. Every area is demand is coming up. We first time in local a local market, local items in India. We cross more than 1,000 machines 1 month. And specifically, even -- every industry area is growing, but particularly the area I'm coming from, let's say Rajkot alone Jyothi has booked more than 250 machines in July there. So it's a massive demand and already now -- we have been witnessing our people. Those have been used our machine in 2000 to 2005. They are replacing even new capacity being held on and many, many new things are coming there. See the last year, none of the Indian making the company, we were having the capacity. So important Import has increased to now in the last year has reached to 62 percentage of total India consumption there.

The next question is from the line of Saurabh Vyas from Systematix.

First question regarding the Huron accounting one. So we -- as of now, we took the stance because of the going on investigation in the Huron capacity. I just wanted to understand that if we get this investigation concluded and this investigation comes into our favor. So going forward in the next year, we will be again going back to the percentage of completion method or the Huron facility specifically will be accounted as on the basis of deliveries?

No. Basically, until that is now the principle of account is no more connectivity with today our investigation and all. So basically, the uncertainty is happening due to geopolitical situation and end user certificate is an important parameter there. Previously, it was not that important there. Now they consider this is the uncertainty of the deliveries. So once that -- until that certainty will not come over there, they will not book. If I get, let's say, the end user certificate within 3 months of my order, I can able to book a POC there also.

Got it. Got it. Got it. And just, sir, 1 more question on the new cases. Basically, we will be adding around 10,000 of machine capacity in the coming quarter by September. What number of machines that are we looking from this incremental capacity to be booked by FY '27.

So what I said that we will be grown up by 25% to 30% this year, okay? That's already we have estimated and we have been given the guideline there. So you can make calculation based on that because right now, last year, we have built almost 90% of our capacity. So you can say that we are going to cross more than 8,000 machines this year.

The next question is from the line of [indiscernible] Gandhi from Covivio Investment Managers LLP.

I just had one question on the subsidiary. First, can you just explain the rationale behind changing the accounting policy? And secondly, the total loss that the subsidiary has recorded approximately of INR 30 crores. Can you just give us the bifurcation of how much that loss has occurred due to operational and probably delaying sales issues? And how much is purely due to accounting purposes?

So basically, I'll tell you that, let's say, this year, the first year -- last year, first quarter, we did close to INR 7 million turnover. This year also, we have manufactured the machine up to 6.5 million, but we are able to build up to 3 million there. So additional INR 35 crores revenue we have missed. But all the costs have been incurred there, okay? There is a difference being seen into INR 30 crores of a gap there.

And sir, the rationale behind changing the accounting policy...

See the rationale behind the accounting policy is that today, now the end user certificates, okay, is getting too much late there, okay? And with this investigation has been started. So the auditor has taken a very conservative steps and based on the accounting standard and French GAAP over there, any percentage of completion method, if any of your dispatches, if there is uncertainties are there, you are not able to book those revenues basically. And uncertainties means that you have received the order, even you have received the funds also, but your government authorities, they will not clear, you are not able to dispatch. So you are not able to book this revenue to be there...

Okay. So just 1 clarification. So we are just eating the certification and completion of this investigation. -- sorted out.

Both things are different. You remember 1 thing. Investigation is a different parameter and end-user certificates are different there. Yes. And certificates have entered dual use end-user certification and we need to take any exports from Huron to there, not today, even in past also. But previously, we used to get the certificate very fast. Today, the time line has increased [indiscernible].

So any reason for the time line to stretch.

Geopolitical situation. Those guys are all there it's a defense ministry. They check every individual user. Let's say, today, if I received the machine order from HAL? And if I have to export, let's say, give machines to HAL, I need -- and I'm using a Siemens controller. So Siemens has to take this permission for HAL from German defense government there from government defense there, okay? They will give the clearance based on the users of these machines, okay? So every time they ask something, we go to our customers. Let's say, we are right now waiting for many of our Chinese customers and Turkish customers to getting the clearance over there, okay? So once the authority asked something questions, we have to go again to that customer and getting the documents and going back. So this is how it's the process has been increased...

Okay. That is quite insightful, sir. Just one if I can squeeze one more thing. On the investigation side, can you give any time line as to when this entire thing will get sorted out?

We will be normalizing things basically. I don't think so we are not seeing very near future to be, let's say, they are not -- geopolitical situation is such that we don't see that it has been finished in 1 month or 2 months like that, okay? But we are sure the way authorities have been responding to us about licensing and all, they are also -- we also -- our team and went and meet them, definitely, they are going to improve the time line over there.

The next question is from the line of Aniket Jain from Anand Rathi.

I wanted to check whether these export licenses are required when you are manufacturing the machines in India and exporting from India as well? Or is it just a Huron specific issue?

No, it's every machine tool company. Let's say, today, I'm in India and whatever the machines I'm manufacturing, the machines are simultaneously [indiscernible] and if I have to supply to any of the customers, okay? The license, let's say, right now, I'm buying this controller from Siemens. If tomorrow, I buy a controller from Panu or Siemens anywhere. So they have to obtain this license from their authority to be... Right now... Huron is in Europe. So they are making a machine. So they have to take there. I'm buying a controller from Siemens. So Siemens is taking this basically India for us there.

The next question is from the line of Abhishek Jain from [indiscernible] PMS.

Sir, as you mentioned that you are not able to book around INR 35 crores revenue in this quarter. Otherwise, revenue to be around INR 65 crores... Sir, as you mentioned that you are not able to book around INR 35 crores revenue in this quarter. Otherwise, revenue to be around INR 65 crores on the Huron. So just wanted to understand what's your full year guidance for the revenue of Huron in FY '27? And what margin -- EBITDA margin can we expect from this year?

Okay. So basically, that's a correct question. So Huron, we are expecting to close to INR 300 crores to INR 325 crores of revenue this full year.

And on the margin side, what margin we can make on the Huron in this year...

So basically, EBITDA level, we will reach level at close to 8% to 10%

8% to 10%. Okay, sir. And my next question on the CNC controller as you are developing CC own CNC controller. So just wanted to understand what is the progress right now and when we can expect commercial deployment of CNC controller?

So basically, we are manufacturing, let's say, designing and developing drives, motors, CC. Today, our HMI is ready. And I think commercialization will happen in the next 2 years' time.

So when can we expect the CapEx for this commercial production of the CNC controller.

So right now, we have already applied for the PLI, okay? And we are eligible and we have been applied there. And we already now -- our plans are ready. Once we get the clearance, we will make a plan to commence there.