MTAR Technologies Limited (MTARTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '23 Earnings Conference Call of MTAR Technologies Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you. And over to you, sir.

Thank you, Michelle. Good morning, everyone. Myself Irfan Raeen from Orient Capital. We are an investor relation adviser to the company. I hope all of you and your families are safe and healthy. On behalf of MTAR Technologies, I extend a very warm welcome to all participants on Q3 and 9 months FY '23 financial discussion call. Today on the call, we have Mr. Srinivas Reddy sir, MD and Promoter; Mr. Gunneswara Rao sir, CFO; and Ms. Srilekha Jasthi, Manager, Strategy and Operations. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded yesterday on exchanges and on the company's website. I would like to give a short disclaimer before we start the call. This call may contain some of the forward-looking statements, which are completely based upon our belief and opinion and expectation as of today. These statements are not guarantees of our future performance and involve unforeseen risks and uncertainties. With this, I hand over the call to Srinivas sir. Over to you, sir. Thank you.

Thank you, Irfan. Hello, and good morning to everyone. Thank you for taking the time to join us today. Today on the call, I'm joined by Mr. Gunneswara Rao, Chief Financial Officer; Srilekha Jasthi, Senior Manager, Strategy and Operations; and Orient Capital our investor relations partners. We have uploaded our updated investor desk [indiscernible] and results highlights from stock exchanges and company website. I hope everybody had an opportunity to go through the same. I'm pleased to inform you all that the company continues to deliver strong growth in top line and bottom line. The company has clocked a revenue of INR 160 crores with an EBITDA of INR 45 crores and a PAT of INR 31 crores. I would like to give a brief overview of the quarterly performance and the future outlook of the company. The company registered a very significant growth in Clean Energy vertical, which is definitely as expected, and we have done much better than the previous quarter as well. We have generated revenues close to INR 125 crores in this segment. We've also commenced our operations, as you all know, in Sheet Metal vertical, this fiscal year. And we continue to get qualified for many assemblies moving forward as well. We have already dispatched close to over INR 25 crores of sheet metal assemblies and enclosures have been approved, and dispatches are getting commenced this quarter. The company has done significantly well in delivering 1,430 units of Yuma boxes and 20 units of electrolyzers this quarter. which is a significant -- almost averaging 500 units per month. And we also started receiving enough orders in the hydel sector as well from reputed companies like GE and Voith. We are expecting to finalize various discussions with some of the leading MNC companies in the U.S. for the energy storage systems, which will come into effect next year, which would substantially increase our revenue base in a completely different sector under Clean Energy segment. We also initiated discussions with various other MNCs like Thales, Collins Aerospace and various other MNCs like [ GKN ], and we have also received orders from a few of them as of today. As you're all aware that we have signed an MOU with Indian National Space Promotion and Authorization Centre, it's called IN-SPACe, for design and development of 2-stage to orbit all-liquid small satellite launch vehicle. We are very excited with this. The design has already started for this particular innovation that we are working on. And the company is in the process of recruiting industry veterans for the Launch Vehicle project and is short of time. We expect, as I mentioned earlier, we have given a revenue guidance of 50% to -- 55% to 60%. And I would like to revise this upward based on our very strong Q4 also coming up with revenues of between INR 570 crores to INR 600 crores of revenues been generated for the entire year, this current financial year, which is a substantial increase compared to the previous guidance what we have given and also having a plan to maintain the EBITDA margin around 29% plus/minus 50 basis points. We're also expecting our order book, which is very strong, closing order book of close to about INR 1,200 crores [indiscernible] INR 1,000 crores what we have mentioned earlier. And one of the most positive update also on the management front is that we have appointed a new Chief Operating Officer, Mr. Raja Sheker Bollampally, who has a vast experience in operations across geographies and global OEMs like Bloom Energy, Ford Motors, Ohmium, et cetera. The company is set to achieve greater milestones under his leadership as well. Also, we are strengthening our management brand across all functions, which has been a continuous process to be in line with our accelerated growth path. Further -- in FY '24, we would maintain a very good growth momentum, in the tune of 45% to 50% in revenues and the EBITDA, similar margins very comfortably. The company specifically is also placing effort to reduce the working capital days, which our CFO would explain with more clarity. Technically, we are at about 240 days right now, which is lower than last quarter. And we try to reduce it further to about 220 days by end of this year. With this, I would hand over to the CFO, Mr. Gunneswara Rao, to take over from here. Thank you.

Thank you, Mr. Srinivas Reddy. Good morning, everyone, and warm welcome to our earnings call today. I will take you through the financial performance, post which we will open the floor for the question and answers. Coming to our revenue. So the revenue for the 9-month period is INR 377 crores, which is higher than the last entire financial year, INR 322 crores. So we have surpassed the revenue, EBITDA, PAT, everything in terms of absolute numbers compared to last financial year, entire financial numbers. So our revenue from operations for this quarter is INR 160 crores as against INR 126 crores in Q2 FY '23, which is 27% increase on a quarter-on-quarter basis. EBITDA reported at INR 45 crores in Q3 FY '23 as compared to INR 35 crores in Q2 FY '23, which is 29% increase on quarter-on-quarter. Profit before tax stands at INR 42 crores in Q3 FY '23 as against INR 33 crores in Q2 FY '23, which is 27% increase on quarter-on-quarter basis. Profit after tax was at INR 31 crores in Q3 FY '23 as against INR 25 crores in Q2 FY '23, which is 27% increase on quarter-on-quarter basis. So our net working capital days stands at 287 days. However, INR 39 crores was received from Bloom Energy on 7th of January on account as Christmas holidays. This has resulted a 39 days increase in working capital days. The working capital days would have been 248 days had it been received in December '22. So when it comes to receivables, out of INR 241 crores of receivables, INR 195 crores are current, and the rest of receivables are within the credit period extended to the customers. And as informed by our MD, we will maintain a closing order book of around INR 1,200 crores by end of this fiscal year. Our order book as at 31st December stands at INR 1,183 crores. So the company has received INR 893 crores of orders in various sectors, including Clean Energy, Civil Nuclear Power, Fuel Cells, Hydel sector as on YTD 31st December '22. So also, we are set to deliver the strong performance in FY '24 as well. As the revenue ramps up, we are expecting to maintain the sustainable margins due to operating leverages. In addition, as discussed by our MD, addition of Mr. Raja Sheker Bollampally to our leadership as a COO is expected to propel our growth further. So with this, I open the floor for discussion.

[Operator Instructions] The first question is from the line of Deepak Krishnan from Macquarie.

Congratulations on a good set of numbers. I just wanted to first understand this additional INR 140 crore order that we've said that we got this quarter, like which segment and which key client, if you can highlight that? And maybe just on your revised revenue guidance of INR 570 crores. That implies, again, at the lower end of 77%. So what's really driving this growth and which is the segment that really sort of stands out in Q4?

Thanks, Deepak. So as I said earlier, this INR 140 crores, which actually I [ forgot to ] mention in my earlier speech. One good news is that in our Product Portfolio division, we got qualified for the ASPs, which is one of our products that we are working on. And based on the qualification and the initial batch production, we have received an order for INR 100 crores for this product itself. Technically, it's about a requirement of INR 130 crores per year. This is a great addition to our revenue base. And I would really congratulate my R&D team for being able to achieve this in hardly about 4 to 5 months' time. So the product got approved and we were able to get this order as well. And the rest of the orders are from Hydel and other segments that we are holding right now. So these orders are expected to come in the previous quarter, but have come in early Q4 itself. So that's why we had to highlight that to all of you at this time. Now coming to the revision on the guidance numbers. Based on the -- what we have achieved in the Q3 and what we're almost at the middle of February right now, we have a clear path in which we can confirm -- in a confirmed way we can say that we will be able to achieve anywhere between INR 575 crores to INR 600 crores of revenue base revenues for this year, which is far -- which is almost like close to 80%, 85% compared to the previous year. And the growth is primarily coming not only from -- in the last quarter is going to be stronger, not only from the Fuel Cells area, but also in terms of the new products that we have received the order and as well as the revenues that we're going to catch up in terms of Nuclear and Space as well in the last quarter.

Sure -- ASP is eventually for Bloom itself, right, if my understanding then is correct?

Yes, it's right. That's right.

Yes. So maybe just a follow-up question then on essentially margins. So do we still kind of stay confident in the 29% range like because essentially we're slightly below for a 9-month basis. So I think would it be the Nuclear and Space sort of helps us catch up with margins? Just any thoughts on that?

Yes, we would probably maintain around 29% plus minus 50 basis points at the end of the financial year because we are -- we'll be getting the sales coming into Nuclear and Space as well in this quarter. And based on the revenues that we generate for the fourth quarter, we are pretty confident that we'll be able to have this kind of margins for the entire year.

Sure, sir. Maybe just 1 last question from my end. I just wanted to understand essentially your working capital days. You've sort of received this INR 39 crores order on Jan 7, but what is the glide path that kind of takes us to 220? Is it more of receivables, you're sort of converting that into cash? Is it inventory management? Because I see a comment that with the higher inventory basically due to Q4 revenue that you're going to book. So maybe just any incremental points on how you kind of end up closer to 220 days in terms of working capital?

Gunneswara, you want to...

Yes. Deepak, thank you for questions. See, because of the Christmas holidays in the U.S.A., we received 1 week later -- late on this Bloom Energy receivable. As of today, we had 248 days. And looking at the higher guidance given by our MD. So definitely, I think we can able to maintain the working capital days around 225 days by end of this financial year. We are doing lot of steps in terms of reduction of working capital. But as you know, we are working on the long cycle projects, for which there is a made-to-order scenario we are working. We need to maintain the WIP because the operating inventory is very high. And looking at the next year growth also, I think our MD has given the percentages already. We need to import material or purchase material 1 quarter in advance for the next year. So the inventory always is for a future sale, not for the what has happened. But incidentally, we need to calculate working capital based on the actual sales basis. So also, many of the supplier credit terms we are making into LP kind of thing and stopping advances. Unlike during COVID scenario, we use to pay advances. Now I think we are slowly converting into the LP credit terms and all. And we also try and do the receivable factoring on nonrecourse basis. We are talking to various people. Once it is materialized, I think drastically, working capital reduction will happen. But definitely [ 125 ], we will do it by end of this financial year because of the higher revenue numbers.

Sure, sir. Maybe just on Bloom, also is there any improvement in the overall receivable cycle? Like it's 45 days after shipment because -- transit time reduced or anything incrementally positive on that front?

Yes. So definitely, supply chain, that is any reduction in the transit times, it automatically will help our reduction in working capital. So I think that is also now happening slowly, but not -- as before COVID levels. It still takes some more time.

The next question is from the line of [ Mohit Kumar ] from [ DAM Capital ].

So my first question is on the -- how do you see the order inflow for FY '24 and the revenue stacking up? That's the first question.

The order inflow, as I said, we have received orders during the -- until December close to, I think, INR 893 crores or INR 900 crores. And further by end of the year, we should have a closing order book close to about 1,200 crores is what we are expecting. So I think we'll have a very strong order book position. We earlier said INR 1,000 crores, but now it should end at around INR 1,200 crores is what we're expecting right now.

My question is more about FY '24, 12 to 18 months, how do you see the order inflows?

FY '24, obviously, we're expecting a lot more orders in FY '24. We have -- we're working on various products as I said. So our order -- I can't just quantify it right now, but we'll probably would receive a lot more orders in FY '24 compared to FY '23. So...

I'm looking for some kind of segmental outlook. I'm not asking you to quantify the exact number. Just a color on which are the segments -- which are looking -- which are looking -- thinking will add materially to the order for FY '24, just outlook, sir.

Basically, on the Fuel Cells side, you would receive substantial orders, the way we have received this year, probably slightly more than that. Then we are doing pretty well in terms of Hydel with GE Aerospace, with Andritz, Voith. We have completed all the first article. So we're going -- we'll move on to the volume kind of a scenario next year. So we would expect a lot more orders, at least close to about -- more than about INR 100 crores plus in that segment, which is a new segment for us. And Sheet Metal would be another area where you would expect a lot more orders coming in. Apart from this, the ISRO has already advised us to gear up on almost tripling our capacity because they [ want to ] increase the number of launches moving forward. So we would expect a lot more orders coming in. So it's looking very encouraging in all these sectors as well. And that's where we stand right now. So that's why we are pretty confident about getting a much higher order book in terms of -- from various segments, not necessarily 1 segment, from various segments as well.

And something on the electrolyzer side, where we are right now? Where is the Bloom? Are you seeing some indication from Bloom that there will be a substantially higher order as you move forward?

Can you repeat that question?

On the electrolyzer side, hydrogen electrolyzer, are we hearing something? Where are we right now in terms of evolution of our products?

See, electrolyzers, we have received an order for 200 numbers, which we completed probably 100 numbers this quarter and probably 100 numbers next quarter. And then once that is done, we're expecting the ramp-up, which I've said earlier, ramp up should happen by fourth quarter or by about third quarter of next year. So that would be a substantial ramp-up happening moving forward. So we are very excited about that. That's a completely an independent vertical. So that would bring us a lot of revenues back [indiscernible].

The next question is from the line of [ Anik Mittal ] from [ Nvest Research ].

Yes. Congrats for the wonderful set of numbers, sir. Sir, 1 quick question on where do you see yourself in the defense sector in next 3, 4 years? And what are all the steps that you are taking as you see the current contribution to revenue from defense sector is around 5%, I believe. So how are you seeing to have a good share of that sector?

So defense, basically, we are working on a lot of projects with defense labs right now, which we have been doing for a number of years. But we would obviously would like to become a defense -- like a prime for airports, navy, things like that. So we are working towards that. It's all about technology in terms of working with various MNCs in a joint manner based on the Make in India concept or the Buy in India concept that we have with 50% of production happening in India for all key projects. So we are in touch with a number of companies abroad as well. So you will hear from us very shortly what steps we are taking to really move into the line of defense prime shortly, probably in 1 month or 1.5 months. So as now it happens, we'll definitely let all of you know about it. But we are definitely working on that.

Great. Sir, another stuff, which I wanted to understand in terms of -- see, when you get a big order from any of your segments, how do you accelerate your capacity, sir? So we were -- we know that you are incurring CapEx and stuff. But how quickly you can bring new capacity in line with the requirement of the industry?

So as I mentioned earlier, we have enough capacity to handle, whether it's Nuclear, Space, any of these defense requirements. But we are also aware that we are gearing up on the electronics division as well. One good news is that we've already implemented the cable harness systems in the company. And we are getting qualified with some of the MNCs by next month itself. But we proactively look at the forecast and demand and then we implement or -- augment the capacity accordingly well ahead of time. That's what we have done even for the Fuel Cells, the way we are growing in that line. So recently, we already acquired a land in the SEZ zone to cater to the future requirements of the company, the way it is growing. So we are proactively working on such things much ahead of time. So we always do that, and we continue to do that.

Okay. Sir, on this Clean Energy segment, your tie-up with Bloom Energy. So how does that relationship work, sir? Is it like you have a long-term agreement with Bloom Energy, so just to secure your revenues for the midterm, right? So how does that relationship work, sir? Any insights that you can give?

So it's not only about Bloom Energy, but all our customers, if you look at even ISRO or nuclear programs or any other customer, MNCs customers, it's more like a partnership basis because we work on a lot of developmental activities with them. And we work with them in developing and making their product also very competitive in terms of -- not in terms of price versus volume, but also in terms of innovation that we do. So it's been a -- it's always a long relationship even moving forward as well.

Okay. And any idea like you -- will you be getting any big plan next to Bloom Energy in near term? Any insights that you can give on that?

Yes. As I said earlier, we are working with a couple of companies on the energy storage systems, which are U.S.-based, which could be close to what Bloom could be Bloom is probably 2 years from now. So these are the companies which we are working in different segments and Clean Energy. So obviously, we're adding a lot more customers. We have a great platform to work with all of them. And our qualification process also is pretty quick because of the platform that we have created over the years. So definitely, we'll see a lot more customers coming in to, say, over the next 1, 2 years.

The next question is from the line of Renu Baid from IIFL Securities.

Sir, I have some questions. First, in your presentation, you mentioned that you started work on ceramic assemblies for Bloom. So if you can give some perspective on what are these products? And given they're associated with the [indiscernible] the electrolyzers -- which end products of Bloom and how are we looking at growth in this market? Also for ceramics, are we doing any particular CapEx at the moment or not?

No. Ceramic assemblies, we don't need any CapEx at this time because it's the kind of product which actually we are importing it from U.S. at this point of time. So as we have done earlier, the number of [indiscernible] we have indigenized and localized everything [indiscernible] at Bloom from step to step. So these ceramic assemblies go in all the systems, whether it is in [indiscernible] or whether it's in Yuma or [indiscernible] electrolyzers as well. So we are in the process of getting qualified for that and probably expect our [indiscernible] also to get qualified. Our existing equipment, machineries can handle this. We need to import the ceramic boards from Germany. That's the only thing which we need to do. There are some supply lead times involved in that. So once that is done, we will be all set for that. So if you look at the ASP, we have done a remarkable job, that is in 3 to 4 months' time we got qualified and we also received an order of INR 100 crores in the Product division, which [indiscernible]. So similarly -- yes, similarly, we are also working on heaters. Right now, it goes into electrolyzers. So that would take about 6 months' time to get qualified, trying to localize that as well because it is being imported from U.S. And the recent development is there is a product called dielectric,, which has goes into the hot box system, which has got a potential of almost INR 200 crores plus. So kickoff meeting on that, [indiscernible] that is going to happen starting from next week onwards. So we're trying to do more and more of these products. So all this -- the upside of all this will come into play once we get qualified...

Got it. Right. So just to clarify the ASP, hundreds of orders that you have received is classified in the products business and not in Clean Energy? Or is reflected as a part of the Clean Energy portfolio itself?

So it's technically Clean Energy, but actually it's a product, which we are supplying in the multiple numbers. So if you look at whether it is ASPs or [indiscernible] which are using in-house, but it's also a product. Then roller screws -- finally we got qualified for roller screws. We submitted the [indiscernible] as well and is waiting for government of India the year to [indiscernible] the nod for import ban on that. So all these are -- would be classified under products, including the EMA. There are some mechanical actuators which we are doing right now. So our idea is to build this product portfolio, whether we use for Clean Energy or for Space or Defense or Nuclear. So that's how we want to classify them moving forward.

Got it. So okay. That explains this. Secondly, can you share with us the developments on the Electronics business division, which we had set up. You've done some trial of First Articles for Bloom [indiscernible] and you're targeting some new business in the Space? So any updates on the Electronics division?

Yes, absolutely. We have already established the cable harness business. The equipment, everything has come, we have established it. We're in advanced stage of qualification with Bloom, which should happen in this quarter, for sure. So we don't have to, anyway, buy the cables -- moving forward for our -- enclosures. Similarly, ISRO also have come and approved our provision, including HAL also had reviewed our progress in this. So our idea is to move into the Electronics division, both in domestic defense market as well as for exports. And once we complete the cable harness, then we move on to the other segments of electronics step by step. As I said, it's a 1.5 years kind of a plan. And ultimately, we're going to move very strongly into the Electronics division, probably a couple of years from now in all different areas that we're looking at in the Electronics segment.

All right. So just trying to understand beyond the cable harnesses, you plan to do the PCBAs required for -- the EMS for PCBAs for ISRO,, HAL and other different PSUs?

Yes, that's the idea. Once we complete the cable harness, then the next step is going to do the PCBAs and the box builds and all that. So that's the idea of moving step by step in the different areas. Obviously, we are looking at a lot more other areas in the Electronics division, which is too premature to talk about, but we are -- simply we're looking at really building product portfolio or in terms of the segments that we can work on the electronic side of story in the different sectors.

Got it. And sir, lastly, while you have shared inflow outlook across other segments, any word on the Nuclear? Large project awards have been delayed for quite some time now, and we're still waiting for the fleet tenders to pick up momentum. So any updates on the order inflow prospects on the Nuclear side for current year '23-'24? And how should we look at the execution on this business?

See, Nuclear, what we are trying to do is our projects are almost like, for example -- so it's a very important question what you asked. So the fuel machining head orders what we have, which were almost exclusive in this country, some of the [indiscernible] we are asked to actually indigenize it because of the need for government of India, what actually they're facing issues with election situation right now. So that's why there has been slight delay in terms of getting these [indiscernible] indigenized. So we are through with all that. So you'll see the dispatches happening in the fuel head machining starting from this quarter onwards. Similarly, we also got orders for the Fuel Transfer System, the [indiscernible], all these orders, which [indiscernible]. We just received those orders. We're in the process of sourcing the material at the [indiscernible] for that, which some of the [indiscernible] we still have to indigenize. I'll just give a simple example in terms of Thompson Bearings, they have put a ban of not exporting those things to India for whatever reason. So now we are developing our own [indiscernible], part of that is [indiscernible] probably -- we are developing that and we'll be able to do it at 20% of the cost. So we have been asked by government of India to indigenize as much as possible so that the dependency on the external factors will not come into play at all. So we are working on all this parallelly to make sure that India is self-reliant by itself, and we are contributing a lot towards that. And that might -- that thing is slightly delaying the process, but we'll catch up with those numbers very quickly. But most important thing is trying to indigenize certain things which are very crucial for this country at this time.

And will that also mean that once have indigenized some of these components...

Yes, go ahead.

Will that also -- yes, will this also mean that once some of these critical components are localized, you will have assured revenue shares from the customers or -- from NPCI for these projects -- mostly a single vendor basis or it would be, again, bid based?

Yes. That's what we have seen in the case of water lubricated bearings. We are the only supplier in the country [indiscernible] specialized ball screws as well. So similarly, the roller screws and other things. So Thompson Bearings -- So all these are going to be like exclusive, but we are spending a lot of time in R&D to develop them. It's not easy to do all this. In engineering, it's not that easy, but we have been doing it. We have been achieving it. So we'll benefit a lot moving forward. So that's the idea behind this also.

The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund.

Congrats on good set of numbers. Sir, one thing which we wanted to understand is that like what is our strategy in terms if you want -- we were also planning to derisk ourselves from the dependency on Bloom. So currently, like you also had mentioned last time that we are looking at a Voith and other kind of hydropower and other things. So in a 3-year perspective, if you look at it, like how much will be Bloom's contribution in your overall top line given the ramp-up in the other segments, which you are expecting?

So let me answer this question to you in a different way. We definitely do have a strong strategy moving forward over the next 3 years to 5 years, right. So MTAR works in different segments. It's not only in fuel cells, but we are also now into Hydel, wind. We are also into nuclear programs, space and all that. So if you look at Bloom, see today, Bloom is the #1 leading company in the world in fuel cell technology, crossing $1 billion turnover. If you look at the UBS report, the latest UBS report on Bloom, they're going to be a $3 billion revenue company over the next 2 years now. So what I'm trying to say there is that this company was built over 15 years and the technology has evolved and they are competing with the [ great power ]. So I don't see any kind of risk for the company as such, but that doesn't mean we're stopping at that point. We are working with other fuel cell companies, but other fuel cell companies are way behind Bloom. We still have to stabilize on the prototypes, ramp up and come to a level where Bloom is. So that's going to take some time. So you have companies like [ Fluffer ], for example, right? So their major revenues of the material handling system drive on the fuel cells, so they still have to gear up. So yes, we would love them to develop their products very well, so that they can have the need of company like MTAR to work with them. We have no exclusivity with anybody. We keep each individual IPs very independent. So we are working with a number of companies. As I said, we are looking at Fluence Energy for the energy storage system. It's going to a huge gain in terms of revenues over the next 2 years. We're working with EnerVenue, it's another company, which we're working with, a U.S.-based company. So looking at Voith, GE, Andritz on the Hydel sectors, we have already completed first articles. We're getting reporters right now. So the company going in a path where we have a lot more wider customer base, but the numbers coming from Bloom are purely based on their performance in the international market. So I don't see that as any kind of risk strategically, but we are working towards various ways to enhance our customer base in the long run.

Okay. Great. And sir, the space program. I think in your PPT also, you have elaborately mentioned. So what is the overall size of these projects, if they fructify in the next 2 to 3 years? And how do you see that growing? At what size it can attain in a long-term perspective? Can it become a INR 300 crores, INR 400 crores business?

It would become a INR 300 crores, INR 400 crores or even much bigger business once we launch our small satellite launch vehicle, which we said we working on it. It's a 3 to 4 years of program, which we're working on. We're having our own launch vehicle by itself. We have all the facilities to do that. We have -- right now, the team also is getting recruited. So we're right on track with that. But as far as the -- that's the game changer for MTAR and that's our plan beyond FY '26. But as far as ISRO is concerned, obviously, I mentioned earlier that they're looking at 3x the requirement, the kind of launches that we would like to do. They have asked us to gear up on our capacities, which we have in most of the areas. So that would grow at a CAGR of 30%, 35% year-on-year basis moving forward. So other than this, the major thing what's going to happen is once we launch our own vehicles. So that's what our vision is, in the prioritization of the whole space sector, which Government of India is also pushing for. And since we have enough experience of 35 years in this line, it would speed up the whole process moving forward.

So in our own vehicles, probably the engine -- Vikas Engine will be kind of bought from ISRO and some of these engines, which you are supplying to ISRO that would...

No, no. There's nothing to do with the Vikas Engine. It is our own engine. That is what I am trying to tell you. So, we are designing and developing our own entire launch vehicle. So ISRO’s Vikas Engine is completely independent on that.

Okay. And when is this...

Sorry to interrupt you Mr. Sivaram. I would request you to please join the queue. [Operator Instructions] The next question is from the line of Sandeep Tulsiyan from JM Financial.

Yes. Sir, is it possible to quantify some of these new products. You quantified ASP assemblies. Sheet metal, of course, you have done better than what we had guided for, for the year in the 9 months itself. But for next financial year FY '24, if you could quantify what would be the sales you could derive from these areas, like sheet metals, enclosures as well as the new electrolyzer parts that you mentioned will be indigenized?

See, as I said, the ASPs, which we have developed and we received an order of INR 100 crores, it's an annual requirement of both -- it's the same product you talked about in terms of numbers. Each of the ASP is about $55 and it's close to about INR 130 crores of requirement every year, which will grow year-on-year basis based on the number of hot boxes, which we grow every year. When it comes to enclosures, we're looking at almost like 3,000 numbers of enclosures moving forward in the next financial year because we're all geared up for that. There has been a certain lead time on various parts, bought-outs, which have to go into the enclosures. So we are all set for that. We got qualified for it. And in fact, the UL certification for enclosures also in the last stage. Probably by next week, we should receive it. So this would really enhance on a quarterly basis. We're looking at almost like somewhere between 600 to 800 enclosures going out every quarter. When it comes to sheet metal assemblies, we're actually doing really well here. We said earlier 67 assemblies were qualified, but right now another 15 to 20 more assemblies are going to get qualified for this. And that's going to increase our revenue base moving forward. Now the electrolyzers, as I said, is going to -- once we complete the 200 numbers, the ramp-up will definitely happen by the third quarter of next financial year for sure. So we are trying to gear up for that. So keeping all this in mind, we have a very strong growth outlook, not in only fuel cell, but in Hydel also we got qualified a number of areas right now with all these companies. So we don't have a very strong growth outlook even for the next financial year as well.

Got it. Sir, second question is on nuclear. I think, of course, you've had a very good buildup in the order book, but revenues in the first 9 months are definitely, you could say, very similar to what we did last year. So assuming there is some bunching up of revenue going to happen in fourth quarter. Over here, what would be the annual revenue we could look at in the nuclear segment for the current financial year?

I think, as I said, explained earlier, we're trying to indigenize a lot of bought-outs, which are forced to indigenize. Because of the restrictions by the Government of India, we're working on that. But we would definitely do probably between around INR 45 crores to INR 50 crores of revenue in the nuclear. The fourth quarter would be much stronger than in U.K. program, which we will start dispatching our FM Heads in the fourth quarter. So that will propel the revenues. And moving forward, since everything is in place for the FM Heads, we have still 5 more FM Heads to deliver, that would get done in the next year, comfortably every quarter. So then we work on the other projects, which are working on the fuel transfer system, assemblies, all come in to play step by step. So there will be a growth happening moving forward in nuclear programs. Since everything has fallen into place, especially the indigenization [indiscernible] what we are trying to do for Government of India right now.

Understood. Last question is on the working capital. If you could also give us the absolute number in rupees crore, what was there at the end of December? And then after receiving this INR 38 crores, how much did it reduce to?

Yes. The absolute number of working capital value is INR 394 crores, and we received INR 38 crores in Jan 1 week. And entire January, we received around INR 75 crores, which is all are well within our credit period.

So this INR 240 crores what is mentioned in the presentation of receivables, this is after reducing the INR 38 crores?

Only receivable value. That is only receivable value.

No, no, that is after reducing the INR 38 crores? Or it is prior to...

No, not reducing. This is before reducing. We don't want to reduce because as of December '22, this is a scenario, so we are maintaining. So this is an additional explanation we are giving to just have a transparency.

The next question is from the line of Neerav Dalal from Maybank Investment Banking Group.

I had 3 questions. First is, say, for the FY '23 revenues of about INR 550 crores to INR 600 crores, what would be the annuity portion for that going ahead? Because you obviously mentioned that in the ASP INR 130 crores would be something that would recur every year. So just wanted to understand the annuity portion of the business and how that has increased? That is my first question. The second question is in terms of as we indigenize the products or start to make production, how is -- would that mean increase in margins? Or would that also -- would that mean that the R&D expenses would also increase for us? That is question number two. And in terms of our CapEx plans going ahead, what would be our CapEx plans for the next couple of years?

See, as I said earlier, obviously, we have revised our guidance based on what we can clearly see right now, something a range of between INR 575 crores to INR 600 crores of revenues coming in for this year. And moving forward, as said, that for next year, FY '24, we at looking at 45% to 55% growth -- revenue growth compared to the current financial year. Now the growth is happening in terms of products, what we have developed, plus also growth in the fuel cell segments, also in the Hydel segment as well, and growth is also equally coming also from the nuclear programs, where we're in advanced stage of execution in some of the projects and also in the space sector as well. So it is evenly distributed among all the various segments that we are working on. And probably, as I said, some of the new customers, who've joined in, they're going to generate additional revenues from the new customers, like Thales, Collins Aerospace, all these customers have joined in already. And customers in pipeline as well in the energy storage systems would contribute towards additional revenues in terms of phase and batch production for next year. So it's a very clear indicative that we would comfortably do that 45%, 50% across the board in all these sectors.

Right. Sir just as one follow-on this. Sir right -- sir, we are looking at growth, but would there would there be an increase in the annuity portion of our business where we have visibility and it is -- it would recur every year for us. So that becomes the base and then over and above this, what would be the growth, say, for '25, '26, '27 as the years go by. So just wanted to understand that part of it, whether there is any...

Yes, absolutely. Yes, I got your point. So most of our projects, there will be a growth on annuity basis. It's not like a onetime project for us. Like if you look at space, we continuously supply the Vikas Engines or the Rocket Engines that we supply, the Cryo Engines. We are launching the Semi-Cryo next year. So there are new products coming in and the continuity of these existing products going year-on-year basis. If you look at our fuel cell segment, every year, it is growing in terms of the number of units that we are doing consistently. So that's growing and also the new products that we are launching in the year. So the growth is happening not only on a regular basis from the existing products, but also the new products that we are developing year-on-year basis, right? So the margins also would more or less sustain even with this growth what we are looking at, which I have said around 29% plus, minus 50 basis points. So that's what we still continue to maintain moving forward. And you asked about the CapEx plans. Yes, we'll have some bottleneck areas, we have some new customers coming in, in the energy storage system. So we'll have certain CapEx plans. We have to crystallize that. As and when that is done, we need to [indiscernible].

So just on the margin bit. So as we indigenize or we start to manufacture goods products in-house, would there be any benefit in terms of margins or we would use that same into R&D?

Our R&D costs are there, but they're not very high because we use our existing facilities, our existing team works on it, but we do have. So there's not much of an amount to really highlight at this time.

The next question is from the line of Jonas Bhutta from Birla Mutual Fund.

Mr. Reddy, congratulations on a great set of numbers. So just picking up from one of the previous questions was on the CapEx. So what is the CapEx that we've done so far in the 9 months? What is the target for FY '23? And how do we look at it for FY '24?

[indiscernible], you want to answer that?

Yes, I'll answer this question. I think for last 9 months, we have actually CapEx around INR 80 crores we have done it. And there is a capital work in progress of around INR 72 crores is there, so which we will capitalize over a period of time, maybe in this quarter, something will slip over to next quarter. This is because last year, we have actually constructed one new facility in Adibatla, where our sheet metal and fabrication setup we have done. So something was spill over from the last year, around INR 40 crores spill to this year. And also around INR 45 crores, we are spending for augmenting our capacity in our clean energy business in EOU. So we have increased our capacity by almost INR 4,000 to INR 10,000, 2.5x we have increased. So this year also, as Mr. Srinivas Reddy is already telling, we are crystallizing. I think we are looking the numbers, so we will communicate maybe in the coming quarters.

Sure. So should we pencil in more like the same number of about INR 90-odd crores even in FY '24?

Not that much. Definitely, it will be lower as we have to address bottleneck and also some of the new customers, which we are working with them. There may be some little CapEx is required. So some sustenance CapEx we need to incur. It is not going to be that much, which is very, I think, lower -- much lower than the last 2 years.

Understood. So my second question was on, again, client concentration. So while we've done a phenomenal job in terms of adding newer products, such as ASPs and sheet metals and enclosures, et cetera. But the idea when we were setting this, these capacities were also to bring in newer clients. So if you can talk about sheet metals or roller screws, et cetera, what will be the ex-Bloom revenue that -- or in terms of marketing, are we doing that over the next 1 or 2 years, excluding Bloom, where can these revenues be for these 3 or 4 products that we've developed in the last year, 1.5 years?

It's not about 3, 4 products. Basically, what we are looking at is -- we're adding a lot of other customers, right? For example, as we said in sheet metal, we are looking at [indiscernible] Taiwan. They are looking at us in terms of delivering a lot of the requirements for sheet metal for them. So we are still discussing in our discussion stage with them. GKN Aerospace, as already indicated, they're going to release orders this quarter for us, which is a formulation of sheet metal and machining and stuff like that. So we're adding a lot more customers in different segments. We can't quantify at this point of time. But as I said, a lot wider basket of customers are in our portfolio right now. Some are in first article stage, some have been qualified, some are moving into volume stage right now moving forward in the next quarter. So overall, the concept is that I would not say that as explained earlier Bloom is growing rapidly. So that's good for us. But we also paid a platform to work with other energy storage companies like Fluence Energy, we are trying to work with them. That's going to be a huge thing, like, that we're looking at almost a INR 300 crores to INR 500 crores of revenues coming in from Fluence Energy over the next 2, 2.5 years. So we are looking at customers where a lot of R&D is required, lot of developmental activities required, but that should convert into a meaningful commercial -- meaningful numbers for us in the long run. So we are trying to add customers in areas where MTAR can really contribute to a greater extent where entry barriers are very tough. So that's what we are focusing upon right now. So we've been a very good space moving forward, let's say, 1 year, 2 years from now.

Got it. And my last question was regarding Bloom and the hot box. So one, if you can tell us, we started off with a mandate where we were realizing almost $8,000 to $9,000 per hot box. But with all of these product additions that we've done over the last few years, our share -- wallet share was likely to increase. And part of that is also indigenized. So within that 9,000, say, bellows, et cetera, you localize and you get more value -- more margin, though the ASP largely remains $9,000. So I'm just trying to think through where are we? So what is the realization for hot box as of today? And where does it move going forward?

So we're trying to do more and more. So ultimately, if you look at the cable harness, we're going to get qualified next month. So we have the ASPs, we have the enclosures, we have a sheet metal assemblies. So we are moving close to about 17,000 to 18,000 or 19,000 for the Yuma hot box to accumulate everything together. So we are going to a stage where we can completely do the box build ultimately in a year's time from today. That's the ultimate goal for us. Probably trying to cater like we have started exporting to South Korea as well directly for Bloom instead of those selling into U.S. So the idea is for the Asian market, for the markets closer by, it doesn't make any sense to send the systems from here to U.S. and back and forth. So it's going to evolve in such a way that in a 1 year, 1.5 years, probably we'll do the entire system as such. So it has to stay evolved that way. There's a lot of qualification process for every stage of this, right, so [indiscernible] that's what happens. So ultimately, that's the end goal.

Got it. And we are set for 7,000 hot boxes next year, right?

Yes, that's right.

And the order for that is already in our book or a part of that needs to come through during FY '24?

It's already there. Only we have bought orders until December of next year. So probably they will review that. The orders are released almost like 6 to 9 months ahead of time. So we'll probably get the next batch of orders in the first quarter of next financial year.

The next question is from the line of Aman Vij from Astute Investment Management.

My first question is on the disclosure you had talked in the last call about Fluence Energy order, and we were expecting around INR 300 crores to INR 500 crores in 1, 1.5 years. So sir, if I correlate this with our guidance on that INR 600 crores top line that we are aspiring to achieve in FY '23, 50% growth is around INR 300 crores. But are you not taking into account any revenue coming from the Fluence Energy orders? Or is there any delay, which you are seeing. If you can talk -- give an update on Fluence Energy and tie up with the revenue guidance?

See, any organization, like Fluence Energy or any other company, EnerVenue or any company for that matter, first you need to do the first articles, you need to do the batch production. It's a process by itself. So by plugging those numbers for the next year doesn't make any sense to me. So whatever numbers are generated from that is something which is a small upside to it, but the real ramp-up will happen by end of next year once we implement everything. So probably look at the major numbers coming in, moving forward for FY '25. That's how it works.

Sure, sir. And do you think this can be, like you talked about as big as Bloom Energy in the next 2 years?

Which one, the Fluence Energy?

Yes, yes. Yes.

So basically, there's a lot of demand for energy storage systems internationally. So I can't say it's going to be as big as Bloom Energy, but it's going to be one of our biggest customers moving forward from FY [ '25 ] onwards.

Sure, sir. My second question is on the ISRO SSLV launch, which happened today, and also our plans on it. So what I understand, and you can correct me if I'm wrong. So ISRO has been planning to ramp up the number of launches for the last 3 to 5 years, but it has been stuck at that 10-odd level, 10 to 12. Their target is maybe 18 to 20. So if you can talk about do you see that happening in FY '24, or it will take more time on the ISRO side as well as could -- an average launch cost around $40 million to $50 million SSLV. So what will be our portion of value addition in that because now you are also working on the full engines, apart from the vehicle body. So if you can explain these 2 things?

See, the one main thing from ISRO side is the recent GSLV launch, which they did was highly successful. So they have a lot more demand on such launches moving forward. So that's the reason why they wanted to increase their number of launches, commercial launches. And that's where the demand comes from. Asking us -- we received a letter directly from the Chairman of ISRO to work on more number of engines to be produced moving forward. That probably -- as you're all aware, the metal is given as they issue by ISRO. So they have to gear up from their side as well. But we're looking at probably in the second half of the year, they're going to gear up to not only from our side, from their side as well. So they're looking at those launches going higher and higher based on the success what they had. Now as far as our contribution to their launches, it's not only on the engine side, but we do a lot of electropneumatic modules, we do a lot of other assemblies for them. So that's something which -- in every area, there's going to be an increase. But our main vision, 3 to 4 years from now is going to be our own launch vehicle. We still have to quantify the numbers for that, but our design work has already started much ahead of time 6 months back, we have a signed MOU with IN-SPACe as well. So that's going to be a big game changer for MTAR moving forward 3 to 4 years from now. So we'll be able to launch the satellites with our own launch vehicles. And Government of India is also looking for that. They want ISRO to be more of an R&D division rather than looking at and asking the industry to do it. So whoever is capable of doing it, since we have 35 years of experience in this line, probably, we'll move ahead at a much faster pace to get this done. But to build the entire launch vehicle, it could take at least 3 to 4 years' time, and that's what we're working on right now.

And if you can just explain this part, which was less. Typically, as of today, what is the -- what is our share in a typical launch as well as what is the cost -- I think engine will be one of the...

It is difficult to quantify the share because the numbers from government are never given to us. So we can only say what all we can contribute. We contribute a sizable portion. For example, our engines are used for the last 35 years by ISRO, but there has never been a blemish till today. None of the launches have failed because of the products what we have given. We are the only Cryo Engine suppliers in the country today for ISRO. So we have developed this over years, 8, 9 years of research in the past. So that's the kind of technology we are holding with us. So we are continuing to support ISRO as much as possible. We work jointly with them. And we have a great set of scientists and engineers in this country. We all work together. Frankly speaking, we have been very successful technically in terms of achieving such launches without depending much on any of the international -- any other countries abroad. So it's been all done indigenously and that's a massive feat that we all need to appreciate.

This 3x capacity increase later, was it received recently? Or is it like a long time back?

Can you repeat that question? I can't hear you well.

We had talked about ISRO has given us a letter to increase, be ready for increasing our capacity to 3x. So is it a recent event? Or is it 1, 2 years back thing?

No, it's a recent event. It's not 1, 2 years back.

The next question is from the line of Mahesh Bendre from LIC Mutual Fund.

Sir, my questions have been answered.

The next question is from the line of Amar Mourya from Alpha Accurate Advisors. As the current participant is not answering, we move on to the next participant. The question is from the line of Deepak Krishnan from Macquarie.

Sir, my questions have been answered.

The next question is from the line of Abhishek Aggarwal from Naredi Investment.

My first question. Recently, MoU signed with IN-SPACe. Can you share more color and opportunity size in next 1 to 3 years? And second question, furthermore promoter stake sale in your cart?

No, Abhishek, can you repeat your first question, please?

Sorry, sir. Sorry to interrupt Mr. Aggarwal. I would request you to use your handset to ask the questions.

Sir, my first question. Recently, MOU signed with IN-SPACe, can you share more color and opportunity sizes in the next 1 to 3 years? And second question, furthermore promoter stake sale in your cart.

What was your first question about? You're talking about space?

Recently, MOU signed with IN-SPACe. Can you share more color and opportunity size in next 1 to 3 years?

That's what I had said. Like MOU is signed for a joint -- working together to build a launch vehicle by MTAR, completely independent of ISRO, but with enough support from ISRO in various areas. That's what Government of India wants to do, while using a launchpad, facilities, et cetera. So this will come into play 3 years from now. Once we build a launch vehicle, then we do the developmental launches and then the commercial launches. So we're looking at about 3 to 4 year time frame for this, but that's going to be a big game changer for the company. And your second question on the -- what some of the -- what is the second question. Can you repeat?

Furthermore promoter stake sale in your cart.

Where is that come from? I have no idea about that. There is nothing like that right now.

The next question is from the line of Sanjana Deshpande from [ Stock Axis ].

So firstly, I would like to understand, since the demand prospects are high in Clean Energy segment. So what is the exact order book for Clean Energy segment? And how it will be executed in FY '24 and '25?

See, the order book for Clean Energy segment, I don't have the exact number, but probably beyond INR 600 crores plus. So all these orders are executable over the -- by December of next year. That's what it is. And it is growing at a similar pace year-on-year basis. But we are going to add further products to it as I've explained earlier. So we are in a great phase of that. So there's nothing to...

Okay. And second question is how we like project the revenue inflow from this particular segment because not all that we are executing will be converted into revenue in that time period. So your comments on that.

No, whatever orders we have as of today have -- needs to get executed by December 2023, right? So that's what it is.

Okay. Okay. And congratulations on a good set of numbers, sir.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Srinivas Reddy, Managing Director and Promoter, for closing comments. Over to you, sir.

Thank you, and I would like to thank everyone for sparing their time to join in today's earnings call. It's -- I would like to say the growth numbers will come in the case of MTAR, but I would love to say this that I would like to thank all my engineers and the R&D team for building such fabulous products, which are generating good set of numbers just a byproduct of that. So we'll continue to do that moving forward as well. And thank you so much for all of you for your support.

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