MTAR Technologies Limited (MTARTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the MTAR Technologies Limited Q1 FY '25 Earnings Conference Call hosted by Orient Capital. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Parth Patel from Orient Capital. Thank you and over to you, sir.

Thank you, Sumit. Good morning, everyone. On behalf of MTAR Technologies Limited, I extend a very warm welcome to all participants on Q1 FY '25 results discussion call. Today on our call, we have Mr. Srinivas Reddy sir, Managing Director and Promoter; Mr. Gunneswara Rao sir, Chief Financial Officer; Ms. Srilekha Jasthi, Head Strategy and IR. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchanges and on the company's website. I would like to give a short disclaimer before we begin the call. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion, and expectations as of today. The statements are not guaranteed for our future performance and involve unforeseen risks and uncertainties. With this, I would like to hand over the call to Srinivas sir, for his opening remarks. Over to you, sir.

Thank you, and hello and good morning to everyone. Thank you for taking the time to join us today. Today on the call, I am joined by Mr. Gunneswara Pusarla, Chief Financial Officer; Ms. Srilekha Jasthi, Head Strategy and Investor Relations; and Orient Capital, our Investor Relations partners. We have uploaded our updated investor deck, press release, and results highlights on the stock exchanges and company website. I hope everybody had an opportunity to go through the same. In Q1 FY '25, we have posted a revenue of INR 128.3 crores with an EBITDA of INR 16.6 crores at a margin of 13% and a net profit stand at INR 4.4 crores. We have an increase of employee benefit expenses in this quarter to the tune of 22%, which would eventually bring down because of the establishment of new business verticals. And on an annual basis, the employee benefit expense would drop to about 16% with a robust revenue growth in the subsequent quarters. And also, as guided earlier, we are still maintaining a 22% EBITDA margin for the year with plus/minus 100 basis points and with a revenue growth of 30-35% year-on-year basis. I just would like to mention and guide for the Q2 numbers as well, which is just about 45 days from now or 50 days from now. We estimate to raise the highest-ever revenues in tune of around INR 200 crores plus with an EBITDA margin of 20% plus/minus 100 basis points. Going back to Q1, in Clean Energy, we have executed roughly around INR 86 crores of orders and we have dispatched around 814 units of hot boxes and around 22 units of electrolyzers. This is in line with the overall dispatches that we have mentioned earlier, close to 3,300 units for this financial year. The closing order book for Bloom Energy stands at INR 468 crores by end of Q1. In addition, we have received around INR 140 crores of orders last week and the company will be receiving further orders during the current financial year for various requirements of the Clean Energy segment, especially with Bloom Energy as well. We expect to execute around INR 104 crores of orders in Q2 and INR 323 crores for FY '25 in this sector. While the past few quarters have been challenging for us for various reasons, which was explained earlier, I am pleased to inform everyone that our main customer, Bloom is witnessing a rise in commercial demand, primarily from various data centers and posted a strong Q2 CY '25 as well. The revenues of Bloom are projected to grow 18% per annum on average during the next 3 years, compared to the 8% growth forecast for the electrical industry in the U.S., while the past few quarters have been challenging for the company. The reasons for which have been explained very clearly in the past quarters. In the case of Civil Nuclear Power, in the first quarter we were building the systems for dispatches to be affected in the subsequent quarters. We have done a marginal sales of INR 1 crore plus. We built a lot of work-in-progress that shall be dispatched over the coming quarters. We look forward to deliver around INR 16 crores of orders in Q2 and the company shall be executing around INR 62 crores in FY '25. The contract of Kaiga 5 and 6 reactors has been awarded to a private player. And as per the tender terms, they have to outsource the subsystem orders for the nuclear island to pre-qualified vendors of NPCIL. We are definitely expecting around INR 600 crores of orders coming in from Kaiga 5 and 6 in the second half of this year and refurbishment of reactors are over the coming quarters as well. We are expecting a strong closing order book of around INR 700 crores in Civil Nuclear Power by end of this fiscal year itself. We have executed around INR 8.5 crores of orders in Space in Q1, constituting 7% of total revenue. We expect a threefold increase in revenues in Space in FY '25 compared to FY '24. And also we have increased volumes from MNC Aerospace as well. In Q2, the company shall be delivering around INR 12 crores of orders to ISRO and INR 25 crores of orders to various MNC customers as we have now gone into the production mode for the various first articles we have done earlier. On an annual basis, we are estimating an execution of INR 120 crores to INR 130 crores of orders in this sector, of which around INR 50 crores of orders will be delivered to ISRO, which includes semi-cryo as well, and the balance INR 70 crores to INR 80 crores will be to the MNC Aerospace customers as we have taken up the production orders from these customers after completing the first articles. Batch production orders are being placed by the MNCs as and when a set of first articles are being executed on a continuous basis by the company, keeping the future growth in mind. We could have further order inflows in this sector in the tune of INR 120 crores over the coming quarters. As you are aware, the company has also entered into a long-term agreement with IAI and Thales, where it will be signing a long-term contract also with GKN Aerospace soon. Apart from this, we are also in discussion with various MNC Aerospace customers for several other projects. The revenues from Defence for Q1 stand at INR 4 crores and in Q2 we will execute around INR 5 to INR 6 crores of orders and an annual execution is estimated at around INR 30 crores. Products and Others have been doing extremely well based on our earlier efforts with very robust growth prospects. It is emerging stronger as we have dispatched around INR 28 crores of orders. We shall be executing around INR 37 crores from this segment in Q2 as well and INR 130 crores of orders shall be executed on an annual basis. In INR 130 crores, around INR 20 crores of orders are being executed for new customers in other sectors. We plan to execute around INR 12 crores in Q2 from clean energy like hydel, wind, et cetera and other sectors and end up with about INR 45 crores of orders being executed in FY '25. We are very confident of achieving the 30%, 35% growth in revenues and achieving a 22% EBITDA margin with plus/minus 100 basis points and the long-term growth of the company remains intact. In addition, we also target to improve our cash flows further by end of this fiscal year and reduce the net working capital days to 220 days. While the company has clear targets with respect to revenue growth, improvement in margins and reduction of working capital base, I am confident of achieving the same, we are taking necessary steps to ensure a sustainable growth in long term. Although the clean energy is witnessing a bounce back due to stronger demand, which is a positive sign for us, we are primarily focusing on also diversifying and strengthening our revenues from other verticals as well. The growth in other verticals over the next 2, 3 years is going to be very strong based on the efforts being made in developing various first articles for customers in various fields. Accordingly, the company is in final stage of discussion with clients in oil and gas field as well. We are expecting a strong inflow of orders in this segment as well in the current fiscal year where we start with the first articles and then move on to the volume production in the next financial year. In addition, we are commissioning our new aerospace facility in Hyderabad by end of September and it will be fully operational by end of December with all the certifications done, and this unit is expected to further impetus the growth of our aerospace vertical. Further, we are also planning to close out the oil and gas vertical itself by establishing the required facilities, for which we have enough equipment within the company and we will be adding further equipment to take care of the bottleneck areas in this field itself. The primary focus of the company is on increasing the inflows of orders entering into long-term agreements with customers and building new verticals, which might have -- which will definitely ensure a strong growth outlook moving forward and that's the focus in which we are working upon on a regular basis. Our CFO, Mr. Gunneswara Pusarla will discuss in detail on the financial performance of Q1 FY '25. GR, you can take over right now, please.

Thank you Mr. Srinivas Reddy. Good morning everyone and a warm welcome to our earnings call. First and foremost, I would like to express my gratitude for your continued trust and support for MTAR. I will now cover the various financial performance parameters for Q1 FY '25, post which we will open the floor for questions and answers. When compared to Q-O-Q, Q1 FY '25 versus Q4 FY '24, on the revenue front at consolidated level revenue from operations stood at INR 128.3 crores in Q1 FY '25 as against rupees INR 143 crores in Q4 FY '24, a decrease of 10.3% when compared to Q-O-Q. Moving on to EBITDA, reported at INR 16.6 crores in FY '25 as compared to INR 18.2 crores in Q4 FY '24. Profit before tax stands at INR 6.2 crores in FY '25 Q1 as against INR 7.2 crores in Q4 FY '24. Profit after tax was at INR 4.4 crores in Q1 FY '25 as against INR 4.9 crores in Q4 FY '24. Our EBITDA margins will improve starting from Q2 due to operating leverage and increase in revenues. In Q2 we estimate EBITDA of 20% plus or minus 100 bps as said by our MD. Sequentially it will improve in subsequent quarters so that we will end up with 22% plus or minus on an annual basis. The company has reduced its long-term debt by INR 15 crores from INR 142.5 crores to INR 127.4 crores in Q1 FY '25. During the year the company is repaying s INR 41.9 crores in term loan. Another positive sign is the cash flow from operations stood at INR 24 crores positive as compared to FY '24 full year INR 57.4 crores. The company will be achieving an improvement in cash flows by end of FY '25 compared to FY '24. Our net working capital to revenue days for Q1 FY '25 stood at 277 days. In absolute terms, the working capital reduced to INR 390 crores from INR 400 crores. Though there is a reduction in RM and receivable on absolute terms, the number of days is still higher due to lower revenue. We are confident of reducing it to 220 days on increased turnover by end of this financial year. As informed by our MD, the company is working on various initiatives such as adding additional customers, expanding its presence in aerospace by setting up dedicated facility at Hyderabad as required by the OEMs, enhancing product portfolio with existing customers, venturing into new verticals, oil and gas sectors, et cetera. We expect EBITDA and PAT margin to improve from Q2 and H2 of financial year '25 on account of higher revenue expected at 30% to 35% CAGR and also through operating leverage. Going forward we continue to maintain EBITDA at 22% plus or minus 100 bps. So we are working on various initiatives such as process improvements, batch production, aerospace, et cetera. The company has reduced the debt substantially by end of this financial year. We'll reduce the debt. So I'm opening the floor for questions and answers.

[Operator Instructions] The first question is on the line of [ Bala Murali Krishna ] from [indiscernible] Investment Advisors.

Sir, my first question is regarding the number of hot boxes or Santa Cruz boxes you delivered and electrolyzers this quarter? I missed your opening remarks, sorry if you already mentioned that.

So we have delivered about 814 hot boxes this quarter, which is in line with the 3300 hot boxes that we are supposed to deliver in this financial year. And also we have delivered 22 units of electrolyzers this quarter. And apart from this, in Q2, we are expected to deliver -- there is a lot of pull-in and we are expected to deliver about 990 hot boxes this quarter. So there has been a very increased demand from the Bloom Energy customers and also they have released orders for further INR 140 crores, which we have informed the stock exchange last week. So we are expecting an improved demand and coming back to the higher dispatches moving forward as well in the coming quarters which we will know further as and when we move forward.

Okay sir. Is there any update on the electrolyzers order, further orders? And how much you have yet to deliver from the electrolyzers previous orders?

We have executed all the existing orders that we have on electrolyzers. So we are expecting further orders coming in, but we do not have a clear idea right now on when exactly we will get the further orders. But definitely Bloom is moving very aggressively in terms of implementing various projects in electrolyzers. So as and when the orders are booked, we will get back-to-back orders from them. And once we have it, then we will definitely intimate everyone.

Yes, sir. Secondly, on this aerospace unit which you are going to start, what is the product we are going to make here? And oil and gas sector we are expecting orders. And what is the product for the oil and gas sector?

So basically, aerospace, we are working with various MNCs. For example, as you mentioned with IAI, GKN Aerospace, Thales, et cetera for various of their requirements in the aerospace sector. And we have already done the first articles. Now we have gone into the production mode. That is why you have seen growth in the revenues coming in from this sector already this year as compared to last year. Last year, we hardly done 8 crores or 9 crores in terms of first articles and this year we are looking at about INR 70 crores plus. So that is a substantial improvement in the aerospace revenue itself. So once this unit is commissioned, we will see a lot more impetus in terms of revenue growth coming in from this, which has been an exclusive state of the art plant which we are commissioning shortly in Hyderabad itself. So that is where we stand. And as far as the oil and gas is concerned, we have just discussed with a number of customers and we are looking at executing certain first articles this year and then we move into volume production next year and that will also add to a new vertical which we intend to start and we are progressing very well in terms of discussion with various MNC customers in this line.

That is helpful. Fluence Energy, sir, any update on the progress on the deal with Fluence Energy?

No. As I mentioned earlier Fluence has already concluded the discussions with us. The only thing is they have to win orders within India to begin with, for us to get back-to-back orders. They are participating in various tenders. So as and when they win the orders, then it will probably commence that particular area, we will be able to get some orders. But as far as exports are concerned, as I mentioned earlier, they are working with a couple of companies to establish the battery manufacturing units in India. Once that is done then we will be able to even handle the exports for Fluence Energy in the long run.

Okay sir. Lastly, on this order intake, I think we have a target of closing orders by INR 1500 crores. So I think -- we are on track for that?

We are definitely on track for that. The majority of the orders are going to come in obviously from the nuclear sector, which is very clear right now. And once the private player who is getting it, we will get back-to-back orders from them because we are supporting in the case of manufacturing of the nuclear island, which we specialize in that. And also in aerospace sector and clean energy sectors, we are expecting a lot more orders coming in, including the defense sector as well. So we are definitely in line with what we have said earlier as having a closing -- strong closing order book for next year.

The next question is from the line of [ Sunidhi Joshi ] from KM Capital Advisors.

In the press release, you had mentioned about Q2 being very strong. And post that, can we expect H2 also showing good momentum? And our guidance for FY '26 also remains intact?

Absolutely, that's what we have clearly mentioned that it's not about Q1 for us, it's about how we are taking this company forward. And we are just like 45 days to 50 days from Q2 and we are pretty confident of recording the highest ever revenue for MTAR, in the history of MTAR, which is around INR 200 crores plus. And the second half is also going to be very strong for MTAR based on the kind of work we have done over the past 8 to 9 months. And based on that our revenue growth which we have mentioned, 30% to 35% year-on-year is very much intact, including the margins which we mentioned at the end of the year at 22% plus/minus 100 basis points. We are right on track with that as well.

Okay, fair enough and it would be great if you could comment on how this breakup would be across all the segments?

Are you talking about Q2?

Yes.

Yes. So basically, if you look at nuclear, we'll be executing orders worth about INR 16 crores roughly. We are very specific in this because we know what's going to happen. And then we are closing out the fueling machine head contract completely well within the time frame of NPCIL without incurring any LD charges, so we are well ahead of time. And space and aerospace sectors, we are looking at close to about -- Space we're doing about INR 13 crores and odd. And Aerospace, we'll be doing around close to about INR20 crores as such. Products we'll be doing roughly about INR 37 crores and odd. And Clean Energy segment, in Hydel Wind, we'll be doing roughly close to about INR 11 crores to INR 12 crores. And in the sheet metal vertical, we are looking at about INR 17 crores of business coming in -- sales coming in. And then we're looking at the hot boxes, which I said, the demand has gone up to 990 units right now from 814 of last quarter, and which is far more than what we have anticipated and we'll touch around close to about INR 88 crores to INR 90 crores of sales from there. So this is the approximate breakup of the revenues that we're expecting for Q2 and that's why we have mentioned that we'll touch around 200 crores plus in Q2, is where we stand right now. That's the breakup of the whole sales.

Okay. Got it. Got It. And also can you help us know the total L1 orders being bid for the quarter? A ballpark number would also be fine.

Which one? Can you repeat that, please?

The total L1 orders being bid for the quarter.

L1, you're talking about -- no, no. Basically, we have bid for a number of orders in the defense sector, in the space sector, in various other sectors. And we are expecting all the orders to come in over the next -- this quarter and the next quarter as well. We can't really quantify that, but it depends on when exactly they will release the purchase orders. So we're waiting for that. We have won orders even from defense. We have won roughly around INR 30 crores of orders recently in various lines, in wind kit assemblies, scramjet engines and all that. So all these things will come into play for the future years and those orders are expected to come in any time now.

The next question is on the line of Meet Jain from Motilal Oswal.

One question regarding our guidances. Like, how confident are we to achieve that in that Q2, we have given a break up of all the revenues? And like what can be a downside risk on this?

I don't see any kind of downside here at all because they are well on track with the revenues for Q2, and that's why we specifically are guiding for Q2 as well this year. And we have given also the clear breakup in various segments that we're going to achieve these revenues and we are right on track with that. So I don't see any kind of downside with this.

Okay. Even on the margins are like, we are guiding on 20% kind of margin plus or minus 100%? So we foresee such kind of product portfolio that can help us achieve this kind of margin?

Yes that's right. So we will be achieving margins of EBITDA of 20% plus minus 100 basis points, that's what we're looking at for Q2. And in the second half also, we are having a strong revenue outlook and as well as improved margins. So we'll end up -- ultimately we'll end up with what we've guided in terms of revenue growth and the EBITDA margins what we have said, 22% plus/minus 100 basis points for this year.

Okay. And any guidance on the order book -- like, closing order book by FY '25 including L1?

Yes, the closing order book, as I said, will be roughly around INR 1,500 crores and we are expecting major orders coming in from nuclear, aerospace, defense and also the space sectors and the new verticals that we are entering into as such. So we have estimated all that based on the time frame, most of those orders will kick in, in second half of this year and we'll end up with a strong order book by end of this year.

Okay. Apart from that, in the Product and Other segments, are we developing any new products, like we have few products which we were able to generate a very good revenue out of that? So any new products that we are supposed to launch this year or in the pipeline?

We have already -- yes, we are actually -- the R&D and the new product development team is working on various products, including valves for defense and space sectors as well. So we are looking at a lot of areas where there are quick wins for us. We are focusing more on that right now. So those things will come into play. Probably by end of this year, we'll be able to see the light of some of those products for sure. Apart from that which we had mentioned earlier, finally our roller screws have been proven in the defense department and they're releasing a certification by end of this month. And with that, the import -- it will become a 100% import substitute for us moving forward. And the government will need not further import from [indiscernible] Sweden as we will be the first company who has developed this product which is useful in all the defense areas and space sectors as of today.

Okay. So this will -- the new launches, we will be doing by the end of FY '25, plus the roller screws always contribute to healthy growth in FY '26?

Can you repeat that? I'm not able to hear you well.

So new products that we'll be launching in FY '25, by the end of FY '25, and the roller screws also which have been approved in the defense. So this will all be contributing from FY '26 onwards?

Yes, absolutely yes. So what was the idea behind this is that we are clearly focusing on various products as import substitute products and all this will definitely contribute for the future growth in the next financial year FY '26 for sure.

Okay. And 1 last question is on this defense, so where are we on this defense JV that we highlighted earlier?

See, we already have the defense license, but we are looking at the right opportunities and the right partners in terms of the JVs, right? It has to be beneficial for MTAR to move forward with such JVs. So we had couple of opportunities which we looked at it, but we are not convinced with the kind of returns that we're going to have. But we are still working with various companies to see how best we can do to have a jump start in terms of taking this forward. So once that happens, then we'll be able to let you know about that.

Got it. And if you can give CapEx guidance for this year, it will helpful. [indiscernible] guidance.

I can't hear you.

Sir, I just wanted to understand the CapEx guidance for FY '25.

Yes. CapEx, yes. So basically, as I said, we're already gave -- we are already implementing the aerospace sector which we mentioned last time. We are looking at oil and gas as well and we're expecting the first orders to come and kick in sometime this quarter or beginning of next quarter. And we are looking at -- we are going to use our existing -- we have -- as I said, most of our equipment are fungible in MTAR. So we're going to use our existing CapEx for what is already implemented in the company for the oil and gas field for the first articles. But in order to establish an independent facility for them, we might look at about -- we'll be shifting a lot of machines out there in a separate facility and also add a few bottleneck machines. We’re estimating the CapEx requirement which can be between INR 35 crores to INR 40 crores, which will enable the company to do volume production for next year. Hopefully, we're looking at about INR 150 crores of revenues coming in from there, from oil and gas itself. So we look at that. So we are working on that still. It's a work-in-progress. And once that is done, we'll be quickly establishing all this to ensure that we book those revenues for next year after completing the first articles in the current financial year.

Okay. So only around INR 35 crores to INR 40 crores is our CapEx guidance for FY '25?

Yes, for the oil and gas field, yes, around INR 40 crores-and-odd. And aerospace, already we have mentioned the CapEx requirement, which is already under implementation right now and should be done by September and fully commissioned by December end.

How much is that CapEx, sir?

That's roughly -- see, we have exclusive facility in Hyderabad, which we have taken for INR 16 crores earlier. And we're looking at probably around INR 20 crores to INR 25 crores of expenditure that we've incurred to set up the full-fledged state-of-the-art plant for the aerospace industry, that's what it is roughly.

That has been spent in this quarter and the previous year?

It's in the process. And that's why I said, we're commissioning part of it in September and fully commissioned by December. So it's a work-in-progress in implementation stage. It will be done by December end.

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

I just wanted to understand, sir, on the hot boxes side, are we now completely moved to Santa Cruz from Yuma, or there are still some inventory for Yuma left in the system? That's the first question. And secondly, sir, on the quarter 2 number, you mentioned INR 200 crores. Is that a correct number? And what margin are you looking at for Q2 is what you have also mentioned?

Yes. So we have completely moved to Santa Cruz. What is important here is a lot of -- see, it took some time because a lot of field tests also Bloom has to do as a company, which has been successfully done and that's how the whole thing has changed right now. And we have completely moved to Santa Cruz Block 2 and it's fully implemented right now. And Yuma is completely out of the picture. And as far as Q2 is concerned, I did clearly mention that we'll be doing our highest ever revenue, around INR 200 crores and with a margin of 20% plus/minus 100 basis points.

Understood. And where are we in the value chain of increasing our share on the you know hot boxes and the green hydrogen chain? You are looking to add more products pie from -- just from the Santa Cruz boxes as well. So if you can share some details on that, that would be helpful.

Yes. We are just -- see, I can’t go to specifics, but we are just working on a few of those items right now. The first articles are being established and which will come into play in the next half of the year and full fledged in the next financial year. So we're working on those things right now and probably we'll see some traction happening over that over the next quarter or so. And as far as the electrolyzers are concerned, as I said earlier, we have completely manufactured the entire units for Bloom, and we are looking forward for the new set of orders from them. It depends upon the orders which Bloom will receive, which actually they're going in the right direction as mentioned in their earnings call as well, and hopefully we'll get -- that is an independent vertical and right now we have not considered that in our revenue budgets for this year. But if it happens, then it will be a separate new vertical which we have already established.

And what kind of opportunity would you associate electrolyzer with, sir?

See, electrolyzers is something very new, right? Production of green hydrogen. So that's something which a lot of countries are looking for and already Bloom has established it and already executed some projects. I heard they've also executed 1 project in Europe as well. So we are looking at that vertical growing really in a very big way, but it would take a little time, but it will definitely happen. We're already there and hopefully, I know even if you get the orders this year, we have not budgeted in our revenue outlook. But definitely we'll see some kind of revenues coming in next financial year for sure.

Right. And in terms of client diversification from Bloom, we had also submitted some of prototypes to some US companies and we were looking to add more clients. So where are we in that growth phase, sir?

We are actually very strong in that. As I said, we are working with US companies. We're also working with Israeli aerospace industries. We're working with GKN and American companies, Thales,, European companies. So a lot of other companies we are working with us in a very big way. See, in engineering, what happens is we have to build the product. We have to do the first articles, establish it, do batch production. We have gone through all that right now. That's why we are into the volume production right now. We're also getting into the oil field which I mentioned earlier. So all this will enable us to diversify more and more and strengthen our other verticals in a big way. And especially with nuclear sector becoming stronger and stronger for us finally because of the orders which will come in flowing for us, I don't see any -- the nuclear division is going to grow very rapidly over the next -- and we'll have enough on our plate for the next 10 years. And plus, they're also looking at -- a lot of private industries are looking at smaller nuclear reactors to be established. They're working with the government for that which has been announced in the budget as well. So we have a lot of scope in improving our area because we really specialize in the nuclear division for the last 40 years. So all this will enable us to diversify well and reduce the -- drastically reduce the customer concentration risk over the next 2 years for sure.

Fair enough, sir. And on space industry, now you have been doing a lot of amount of additions, product additions. So if we can give some highlights where are we in terms of growth in the -- particularly space sector? And any pipeline which you can share in terms the Gaganyaan, et cetera, which is there and where you will be able to delve more into this?

See, all those projects we're already working with. Space, from 1989 we're working with them and we're very exclusive in terms of supplying the liquid propulsion engines, cryo engines for them. And the major product that we're working on, hopefully, we're going to end up dispatching, it is the semi-cryo engine for the first time. So we're developing that as well. So -- it also -- the growth in the space also depends on the number of launches they do and how they want to take it forward. So we have to look at that. But we are very stable in this space business because of our exclusive relationship with ISRO and the kind of technology we have developed with them and that will continue for us.

The next question is from the line offer of Arafat Saiyed from InCred Research.

Sir, can you take us through the outlook of clean energy, and especially Bloom Energy? So what kind of, let's say, the growth they are guiding you in terms of revenue and value addition?

See, as I said, right now, we are seeing a spurt of demand from Bloom Energy, which we didn't anticipate -- which we anticipated, but we were waiting for the time to come in. So if you look at the first quarter, we have done 814 boxes. Now we are doing 990 for Q2. And probably progressively we'll do such increased requirements from Bloom. We have to wait and see. So we are in line with what we have said earlier. In terms of the number of units we're going to dispatch, that probably -- that might increase or that might fortunately will be there, for sure, the kind of growth we're looking at right now. It was like sudden requirements which are coming in from them because of the various orders they have won, the kind of outlook they have. So we would see a positive growth coming in from Bloom, as I mentioned earlier. And in the long run, we're looking at about -- they're also looking at about 18% kind of growth and we'll also see that kind of growth. Plus, we’re trying to other -- increase or try to increase our wallet share with Bloom as well. So I think now we are back on track with Bloom completely and we're hoping to do better and better moving forward.

Yes. And -- sir, next question on oil and gas. So what kind of opportunity are you looking at in this space? And also which clients you're tapping in this space and what's let's say major outlook on this segment? And how this revenue will grow over the next 3 to 5 years, any guidance on that?

See, oil and gas, we have just over the last 3 to 4 months, we've discussed with various customers who have visited our facilities. I don't want to spell out the names right now, but they visited our company, they have certified, they were very convinced with what our capabilities are. In the past we had also worked with Schlumberger as a customer, I am talking about 10, 12 years back. So, we know what that oil field is all about. So we have -- as I said, most of our equipment is fungible so we're trying to use our existing equipment for the first articles this year. And then moving forward, we're going to establish independent facility for the volume production next year. Now what is the growth outlook? Yes, it is actually very interesting because we are looking at, as I said earlier, at least about INR 150 crores plus for next year, we can execute if we do the first articles on time, which we will focus on in the current financial year. And in the long run, this vertical can grow as big as Bloom as well or even more, the existing customer what we have. So that's our goal in which we are trying to move in.

Okay. And adding to that, sir, what kind of product are you looking at in this space and what's your USP? And also what is the investment in this space are you looking to invest in the next couple of years?

See -- I can't specifically specify a product. There are various requirements are given to us. Most of them are assemblies. Some of them are products. It's a multiple kind of requirement that they have. And the investment, as I said, will be roughly around, with the existing equipment what we have and the additional around INR 40 crores, INR 45 crores of equipment that we need to implement, which is very -- which is not much based on the existing CapEx, already machines that we have right now. So that's the kind of outlook we have for this year to implement.

The next question is from the line of Gaurav Uttrani, from IIFL Securities.

Sir, just wanted to check on the nuclear power orders for the same because, see, we have received the notification that Megha Engineering already received the order from them, for Kaiga 5 and 6. So when can we expect our inflows to sort of build enough which we are actually expecting to the extent of INR 500 crores this year?

So it should be in the second half, right? So, the tender has won by them. So basically, the process is that NPCIL has to release the order for them in turn for us to get back-to-back orders. So we are hoping that we'll definitely get it in second half of this year.

And sir, apart from that, you have also talked about 14 refurbishments for this nuclear reactor fleet which you were expecting. So any sort of inflows from that as well would be contributing to our inflows in FY '25?

Yes, that is for sure. They're saying that by mostly -- that's a fast-track project. Any refurbishment of reactors are on fast track. So, this is the Tarapur reactor which they are taking up. And that should be roughly -- they're saying they'll float the tenders in third quarter of this year. So, if they float the tenders in third quarter of this year, we'll have those orders coming in before March.

Okay. And sir, revenue build up, we would be seeing from FY '26 for nuclear segment?

Yes, for sure, definitely.

Okay. And sir, apart from that, on the oil and gas which you were talking about, if you're able to sort of qualify for our first article, any margin differential which we are seeing in terms of how margin accretive these orders could be for us going forward, say from perspective of next 3 to 4 years?

No. We don't want to specify the margins at this stage, but definitely, we will enter only -- we're entering into a very niche area of oil and gas. Unless the margins are reasonably good, we don't do that. So we have done that study already. So it is in line with the kind of margins we are looking at on a long-term basis, somewhere between 24% to 26% EBITDA margin. So that's not going to change.

Okay. And sir, any incremental CapEx which would be requiring to set this up this? Or already we have that sort have the facilities to take such orders on the oil and gas?

As I mentioned earlier, we do have some facilities. But incrementally, we might have to spend around INR 40 crores plus to establish independent facility for this for volume production to begin with.

The next question is on the line of [ Bala Murali Krishna ] from [indiscernible] Investment Advisors.

So, any update on this defense licensed products which are going to pick up other than roller screws? Any other [indiscernible] for defense?

I did mention that, Bala, see the roller screws, we are getting a full certification by end of this month. And once that is done, it will be certified as a 100% import substitute. So that's taken care of. And we are working on various other products, which can be equipments, which is being done by our R&D and NPDT. So, once we do that, then that will also add on to our product portfolio for the future coming years. So we're working on that.

We will move to the next question is from the line of [ Narayan Danak ], an individual investor.

The first question is, in Union Budget, Finance Minister has allocated some amount to small nuclear reactors, the subsidies on that. Any benefits so far from that for us?

Yes, absolutely because that's something which we have we upon in the earlier years. We still don't have full clarity on that whether it's going to be 220 megawatts or even less than that. We don't have that clarity. But they're saying, it's going to be 220 megawatts for a lot of private players who wanted to establish those facilities. So MTAR has built a lot of those reactors, nuclear islands in the past. So -- and it depends on when they're going to get implemented. It might take a year or couple of years. But we have to see how it goes.

Right. So far, no orders from that, as I understand.

No -- you can't get orders overnight, right? It will take at least -- they have to implement that. They have to -- it's a process by itself. So -- but we have a great opportunity if that gets implemented and they're pretty serious about that.

Sure. My second question is the revenue decrease that we have seen in this quarter, Q1. For next three quarters for FY '25, the revenue run rate that we have to have is the same amount of revenue that we conquered in FY '24 as a whole -- if we are targeting 20% increase in the revenue Y-o-Y. So, in this case, do you see that it is achievable, sir?

Yes. I've clearly mentioned in my earlier responses that in Q2 itself, we'll be doing our highest ever revenues of INR 200 crores-and-odd, right? And then we move forward to the second half being much stronger. So, we will be on track with our growth guidance of 30% to 35% year-on-year basis.

Sure. And my last question is, sir, what do we see ourselves as, a big tech company? Or which vertical where are we in the industry as leaders or we would like to be? Because, see, the question comes from the fact that we have expanded to many verticals, right? So which is our favorite and where do we like to grow?

See, ultimately the verticals are different, but everything is the technology and the engineering behind it, right? You can name it differently. You can call it nuclear. You can call it space. You can call aerospace or whatever it is, or clean energy. But ultimately, it's the technology which we have built over the years and that's our strength. And that's how we're able to enter into number of verticals and that's the kind of technology we have in terms of manufacturing and in terms of doing various things in this company over the years. So that's our basic strength and that's how we're able to enter into different multiple verticals. So ultimately, it's the engineering which counts.

Sure. And if I can squeeze in the last one, the domestic contribution is higher in percentage terms. Is it due to the overall reduction in the revenue for this quarter? Or is it really something which is happening on domestic sales right now?

See, domestic has been low in Q1. But moving forward in the next 3 quarters, the domestic sales are going to be higher because we have built a lot of work-in-progress in building the dispatches for the next quarters in the domestic sector in various areas. So that is why when I have given a breakup of Q2 also, I’ have also mentioned that. So, we are actually converting all of them into sales, which you will see happening in the next 3 quarters. So that is what it is.

Sure, thank you. And if the last one. The clean energy and civil nuclear vertical has shown the least revenue compared to others in terms of contribution. I have heard you saying that, that would be compensated in the next quarters. But why such a less order turnout or order completion in Q1?

See, in nuclear, we are actually building the fueling machine head which has closed in the contract, which were doing it in Q2. So that was work-in-progress. So that major contract is getting closed out in Q2, that is the main thing. And the rest of the other sectors, lot of work-in-progress has been done. All the dispatches will happen in Q2. So that is the main reason. So, these are long cycle projects, which were closing out in the next 3 quarters.

Sure. And employee increase in expense, expense on employees is due to petroleum, energy, and aerospace vertical that we are entering? Is it due to that, the increase?

See, there are 2 things there. See, we are building up our management bandwidth, the employees for the future growth of this company. Now as I said earlier, it is at 22% right now in Q1. But eventually, at end of the year, it will come down to 16% based on our revenue growth. So -- but it's also important to build a strong employee group to cater to the growth of the company, which is also very critical.

In the interest of time, this will be our last question. I will now like to hand the conference over to the management for closing remarks.

So, I would like to thank everyone for attending this call today. And as the CFO has mentioned, we really appreciate all your support and to have patience with us. We are right on track with our growth guidance and EBITDA guidance for the year. And thank you so much for attending the call today. Thank you.

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