MTAR Technologies Limited (MTARTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to MTAR Technologies Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [indiscernible] from MUFG Intime Investor Relations. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone. On behalf of MTAR Technologies Limited, I extend a very warm welcome to all the participants on Q4 and FY '25 earnings discussion call. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchange and 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, opinions, and expectations as of today. The statements are not guaranteed for our future performance and involves unforeseen risks and uncertainties. With this, I would like to hand over the call to Srinivas sir. Over to you, sir. Thank you.

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, Chief Financial Officer; Ms. Srilekha Jasthi, Head Strategy, Investor Relations; and Orient Capital, our Investor Relations partner. 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. We are pleased to inform you that we have delivered a growth in FY '25 with revenue from operations at INR 676 crores, representing 16.4% year-on-year growth, and EBITDA of INR 120.9 crores, demonstrating 7.2% year-on-year growth. The growth in revenue is primarily driven by increase in wallet share with existing clients and additional products from new customers. Our margin is slightly lower than the estimates by 200 basis points because of certain spillover of execution of new projects in aerospace and defense in -- to Q1 FY '26. In FY '26, we look forward to a 25% growth in revenues on a conservative note, with 21% EBITDA margins, plus minus 100 basis points. We anticipate a sequential improvement in EBITDA margins in FY '26 with operating leverage and scale up in production of new products developed over the past couple of years. Notably, we have successfully executed proto units for various multinationals. And additionally, we are also working on first articles for leading multinationals like Fluence, Weatherford, IAI, [ GE HealthCare ], et cetera. We have secured orders worth INR 720 crores in FY '25, for which INR 178 crores are from aerospace and defense, which is a substantial improvement in this area and INR 349 crores of orders are from clean energy underlying our technological leadership in these sectors. In clean energy, we have delivered around INR 417 crores of revenues. The company is presently working on increasing the wallet share with the customer in FY '26 that is going to boost the revenues further in the vertical. In fabrication, hydropower and other segments, we look forward to deliver around INR 60 crores of orders this year. We have completed the execution of proto 1 for Fluence Energy and currently working on Proto 2, and we are currently in discussion with Fluence for orders related to mass production. We look forward the growth in clean energy at the rate of 15% to 20% in this sector, including fuel cells, hydropower, battery storage systems and others. The aerospace and defense sector has witnessed significant progress in several key projects to ISRO, DRDO and MNC Aerospace, including the successful delivery of ammunition boxes, engine components for various customers, including Thales, GKN and Elbit Systems. We delivered around INR 93 crores of orders in this division. Aerospace and defense sector is in an exciting phase supported by Make in India tailwinds and strong export interest. We anticipate a phenomenal growth of 80% from this sector in FY '26. We have registered revenues of around INR 19 crores in civil nuclear sector in FY '25 as against INR 157 crores of closing orders. We are in advanced stage of executing nuclear orders currently, and we look forward to deliver around INR 60 crores of orders in this sector in FY '26. Kaiga 5 & 6 reactors orders have been placed in the private entity, and we are expecting the order soon as we have prequalified vendor for NPCIL. We started receiving tenders for refurbishment of reactors. In addition, we have also started working on budget reports for 220 megawatts Bharat modular reactors. We recorded INR 148 crores revenue in products and other verticals, and we expect a 20% growth in this segment as well. The company is actively working on increasing the product base and expanding the customer portfolio. We have achieved a significant improvement at operating cash flows by generating cash flows of INR 101.3 crores in FY '25 as against INR 57.4 crores in FY '24. In addition, we have reduced our net working capital days to 229 days, and we expect to improve our cash flows and net working capital days further over the coming quarters. Successful delivery of first article orders for various new products across all sectors underscores our execution capabilities and commitment to operational excellence. The company continues to focus on quality, innovation and process excellence to drive long-term shareholder value. We are optimistic about robust order inflows over the coming quarters that will strengthen our order book. Furthermore, we are in discussions with multiple customers in clean energy, oil and gas and aerospace sectors to enter into a long-term contracts. The company had also entered into long-term contracts with some of the few domestic companies for execution of INR 20 crores year-on-year over the next 5 years. Our consistent revenue growth over the past 5 years demonstrates sustained growth momentum, and we remain confident in our ability to maintain this growth trajectory with an average growth of 25% year-on-year over the next 3 years due to multiple growth engines across various sectors. Our CFO, Mr. Gunneswara, will discuss in detail of the financial performance for FY '25. Over to you, Mr. Gunneswara.

Thank you, Mr. Srinivas Reddy, and good morning, and a warm welcome to our earnings call. I would like to extend my gratitude to all shareholders for your trust reporting on our company. Today, I will be discussing key financial numbers for Q4 FY '25 and FY '25 on consolidated basis. Coming to quarter-on-quarter Y-o-Y, revenue from operations stood at INR 183.1 crores in Q4 FY '25 as against INR 143 crores in Q4 FY '24, which resulted a 28.1% increase. EBITDA reported at INR 34.2 crores in Q4 FY '25 as compared to INR 18.2 crores in Q4 FY '24 with an increase of 87.5% increase on Y-o-Y. Profit before tax stands at INR 18.6 crores in Q4 FY '25 as against INR 7.2 crores in Q4 FY '24, 159.6% increase on Y-o-Y. Profit after tax was at INR 13.7 crores in Q4 FY '25 as against INR 4.9 crores in Q4 FY '24, 182.7% increase Y-o-Y. When coming to yearly numbers in FY '25 versus FY '24, our revenue from operations stood at INR 676 crores in FY '25 as against INR 580.8 crores in FY '24, 16.4% increase in Y-o-Y. We would like to inform you that this is highest ever turnover in our company we have achieved in FY '25. When it comes to EBITDA reported at INR 120.9 crores in FY '25 as compared to INR 112.7 crores in FY '24, 7.2% increase in yearly Y-o-Y. Profit before tax stands at INR 71.6 crores in FY '25 as against INR 73 crores in FY '24, 2% decrease year-on-year. Profit after tax was at INR 52.9 crores in FY '25 as against INR 56.1 crore in FY '24, 5.7% decrease in Y-o-Y. I would like to also add 3 key strategic focus areas. So the company has been strengthened its financial position with a reduction of INR 15 crores long-term debt, bringing it down from INR 142.4 crores to INR 127 crores, so the total repayment obligation for FY '26 is at INR 46 crores. 80% of the long-term debt, whatever we have, we are repaying by FY '27, the balance will be in the next 1, 2 years, we are repaying. Cash flow from operation was robust at INR 101.3 crores for FY '25, improved compared to FY '24's total annual cash flow of INR 57.4 crores with our monitoring -- daily monitoring of the working capital and other areas, focus areas. When it comes to working capital, the net working capital to revenue days stood at 229 days in FY '25. And also, we would like to further try to reduce working capital for FY '26 to 200 days. So like I also want to add, the company is in the key sectors we are catering as on today. India's engineering sector poised for growth driven by government initiatives, promoting renewable energy, civil nuclear power and defense indigenization. MTAR's diversified portfolio and engineering capabilities is well positioned to capitalize these opportunities. In civil nuclear domain, we have a clear visibility to support India's nuclear energy expansion to 100 gigawatts by 2047 with its new reactor approvals, retrofit programs, of which 5 reactors are set for refurbishment for which we are receiving inquiries from the customer. In aerospace and defense, we are seeing a positive outlook from our operations as explained by our MD. And in our new unit, which was commissioned in FY '25, is set to witness exponential growth in line with government focus on self-reliant India and in defense and also the global procurement by Tier 1 and foreign OEMs. We have continued our engagement with major defense OEMs and PSUs by participating in Make in India defense tenders, which are gaining traction with increasing budgetary allocations. Looking forward, the conservance of national priorities across clean energy, civil nuclear power and defense self-reliance is creating favorable environment for engineering companies like ours. So we remain committed to sustain EBITDA margins 21% plus or minus and with 25% revenue growth in FY '26. So with this, I open the floor for discussion and welcome any questions that you may have. Thank you very much.

[Operator Instructions] The first question is from the line of Vipraw Srivastava from PhillipCapital.

Quickly on the guidance part, I missed the nuclear guidance. So what kind of growth are we expecting in the nuclear segment for FY '26?

FY '26 is going to witness a substantial -- we closed the order book at INR 155 crores for nuclear, but it will witness a substantial inflow of orders during FY '26. One is we have already received tenders for the refurbishment of 5 reactors, a couple of reactors from Tarapur and reactors -- refurbishment of reactors in Kaiga, Rajasthan and Madhya Pradesh. So these tenders, we are supposed to quote by next month, and we are expecting those orders because we have worked on this refurbishment of reactors in the past in a big way. So we're expecting substantial orders to come in from the refurbishment of reactors. And secondly, also the purchase order for the private entity MEIL has been released by NPCIL. Since we are qualified vendors, as I mentioned earlier, we are going to expect substantial kind of orders coming in from there as well. So we're looking at -- at least around INR 700 plus crores of orders flowing in from nuclear division. So we have enough on our plate to have a consistent growth in these areas. But we have not considered any of these orders in our current business plan for FY '26. So what we have considered is what orders we have on hand as of today is what we have considered in our growth plan for this year. But we'll have a substantial exponential growth in nuclear division moving forward, including the budget reports we have given for Bharat modular reactors, which NPCIL has asked us for the 220 megawatts. So that's where we stand in the...

Yes. So nuclear will be more flat for FY '26. Is that correct understanding?

No, actually to add your point, like from INR 19 crores, what we have done in FY '25, we are expecting to do INR 60 crores in FY '26, from INR 19 crores to INR 60 crores. That is also whatever orders we are having in hand. INR 60 crores we are planning for FY '26.

Okay, sir. Noted. And sir, in the products division, what's the guidance you have?

Product division, I think we have done -- last year, we have done around INR 148 crores, and we should have a growth of at least about 20% in this area. And we have developed various products and we have improved this substantially. If you look at in the last 3 years to now, there is a huge growth in this area, and we continue to do that. So our team has been working on various products, which are getting qualified where we are doing first articles, some are related to government organizations like Roller Screws we are already qualified. Technically, we're just waiting for the final confirmation. So we need to be 100% import substitute for government of India for this sector. We have been importing from Rollvis Sweden. So we are working on a lot of products like EMAs, electromechanical actuators and all that. So we should have at least about 20% further growth of the product division for this year.

Okay, sir. Noted, sir. And sir, lastly, on aerospace and defense, you have, say, 80% growth, right?

So I would like to explain that. So this is an area where we have -- we are growing substantially well, and it's something which is very interesting. If you look at the company's position in FY '24, we had about INR 9 crores to INR 10 crores of business in this sector. In FY '25, we have done INR 48 crores, especially with our new unit, which is commissioned in Hyderabad. And then in FY '26, we'll be looking at least about INR 145 crores of revenues being generated, so this is growing at a rapid pace. The main reason is we are qualified and certified by a number of MNCs for exports in this area. And we have successfully executed various first articles. Now they have gone into the ramp-up production for these areas. And some of the customers where we have entered into long-term agreement with IAI, we have now already started working on the first articles, which will get converted into mass production as well. So there is a substantial improvement in this area where the margin profile is also very good. So they're all very complicated kind of assemblies which we are working on, and this is something which is really exciting us moving forward. Apart from this, we are also looking at various aerospace projects which we have been asked to work upon in terms of RFPs, which is not part of the discussion right now. So as and when we have some traction on those things, we will obviously inform all of you in that particular segment.

Right, sir. And sir, last question from my end. Regarding Bloom Energy, sir, what's the commentary from their end because Bloom you're seeing a lot of traction in U.S. So what are they communicating to you regarding their order book and their growth prospects?

No, it is more or less -- see what they have done is they have improved their wallet share also they want us to increase. So we are now doing additional assemblies for them within the system, what we are making for them, which we are going to start executing it from this quarter onwards, which will ramp up in the subsequent quarters. So what we have mentioned about 4,000 units, which we are going to dispatch to Bloom with additional wallet share is what's going to happen this year. And there's no change in that. There might be further improvement on that, that we have to see. So ultimately, the kind of guidance we have given in terms of growth and margins, we have factored every instance of what external to the company. For example, the tariff issue, which is going on with the United States, we have considered all those factors in arriving at this particular growth percentage. And we feel that because of our diversification into various countries and exports, we are in a position where we are still able to maintain that growth and achieve the margins that what I have mentioned, 21% plus/minus 100 basis points. And this we have considered all the factors and any other factor which favors the company, then we'll be able to improve much better on what we have said.

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

My first question is on the spillover that you talked about. Can you throw some more light on this? Like it has been during the course of the last -- what was the factor behind the spillover? And can we expect this in 1Q? And because of that, can we see a better margins in 1Q as compared to last year?

No. Basically, what I can say is that one is the spillover is one on the domestic side because if you remember, we are working on the semi-cryo engines, which there have been certain corrections, certain design changes. So now we are trying to finalize that. But more or less, there has been a little bit of a pause on certain export shipments as well because of the -- if you remember the April 2 announcement by the United States on tariffs. So they wanted to wait and watch and see. But post that, once the 90 days pause was released, then the situation became normal subsequent to that. But we have considered all those things in the subsequent quarters. As I mentioned, we have factored everything which is external to us to achieve the growth and the EBITDA percentages. And what you will see here in the current year is we'll have a linear quarter-on-quarter growth throughout the year and as well as EBITDA margins. So that's how it's going to be. And we are also working on reduction on outsourcing, which we are getting qualified for the certain products which we are outsourcing for the coatings. We're going to get qualified for that. So there will be a reduction in the other expenses. And we have actually -- if you remember -- all of you remember, we have worked on investing not only in terms of capabilities, but also in terms of having the right management bandwidth right from different levels in the company across the board, keeping the future growth in mind. So we have done that, and we are in good shape to take the company forward over the next 3 years in terms of our growth and as well as the improvement in margins quarter-on-quarter and year-on-year basis.

Understood. So when we see other companies, other export heavy companies to U.S., we have seen a huge outflow in 4Q in anticipation of this tariff. But when you say -- in our case, we are seeing a pause by some of the customers. So I just want to get some more clarity because the anticipation of tariffs, the shipment from India to U.S. has seen a massive increase across the industry. So that has been the case for us, right?

No, it is not the case. See, pause means there was not technically a pause, but there were few more shipments that could have taken, but not that it really affected us because there was a marginal INR 20 crores -- INR 25 crores plus difference in terms of the revenue that we could have generated in additional in terms of domestic and a few shipments in terms of export. So that's where it got deferred by a few days. Not that it stopped, but post April 2, again, it continued and it's in the normal routine right now. So that's what it is. And there's not -- that's why I said that we have considered all this in the current year also. We have factored all these variables in our guidance for the current year as well.

Understood. In terms of our fuel cells clean energy guidance, can you just -- I didn't get that point. Can you just reiterate what kind of guidance have you given for FY '26 for this fuel cells?

See, fuel cells, we are looking at almost like the hot box units. I can't spell out the number of boxes and all that based on the customers' feedback to us. But we are growing at about -- we'll be growing at a rate of 20% compared to the last year, what we have done. We have done around INR [ 450 ] crores plus last year. So we'll do around 20% more this year.

So will this include any electrolyzers orders? So what kind of orders are we getting for electrolyzers from them?

We have not included the electrolyzers orders as of today. So this is what I'm trying to explain that we have taken the position as of last week is what I'm talking about the numbers. So we are -- obviously, the electrolyzers orders come in, then it will add on to the numbers what we have said, but we have not considered the value.

Understood. And lastly, on this other expense part, we have seen an increase in other expense in absolute terms in this quarter. Any one-offs in that?

Yes. Because if you look at it, the majority of that is the plasma coating, which we are doing in U.S. company called Progressive. And now we have done the samples. We have given it for lab testing, and we are expecting the qualification to be done over the next 1 month. Once we do that, then our outsourcing will drastically come down, and we'll be able to supply without any kind of outsourcing expense that. So we'll see some kind of reduction happening partially this quarter and subsequently for the next 3 quarters. So we are looking at that as well. And that majority of that is that the outsourcing part of it.

The next question is from the line of Balamurali Krishnan from Oman Investments.

So regarding the guidance part, 25% we are expecting, but in case of nuclear sector and aerospace and defense, we are expecting substantial increase. So the clean energy sector, I think there may not be much growth in this year, right?

No, we have -- that's what I mentioned earlier, the clean energy, we're looking at about at least 20% growth this year in the fuel cells in hydro power and those areas what we are working upon. And the nuclear, we have not considered any of those orders, which I said, which will flow in this year, substantial orders. See, one good thing is that now it's already done in terms of Kaiga 5 & 6 purchase order has been released to MEIL. Now they are working with us in terms of finalizing various contracts with us. That process is going on right now and then the refurbishment of reactors. So we're looking at anywhere between -- I don't want to spell out individual numbers because of certain confidentiality, but we're looking at around INR 700 crores to INR 800 crores of orders flowing in over the next 1, 2 quarters. So we have enough on our plate and further, we're going to receive further orders as well. So we have enough on our plate to exponentially grow in the nuclear division moving forward. And we have the capacities to handle this as well.

Okay. So last year -- I think in previous year, we are expecting to close the order book by INR 1,500 crores, end up around INR 1,000 crores. So this year, what would be the expectations in the closing order book considering all these factors?

Look, as I said, whatever number I gave, we'll have a very strong order book because when we said INR 1,500 crores, we factored in Kaiga 5 & 6 orders coming in, but that's getting deferred to this and the subsequent quarters, right? And also the refurbishment of reactors. And then we are getting -- we'll be getting substantial orders from Aerospace division, which we are doing extremely well right now, then the space sector as well. Defense as well is doing really well. We are doing substantially well in various areas. So we'll have a very strong order book, and we'll be able to further crystallize the closing order book for this year probably a month or 1.5 months from now once we have more clarity on all this, but we'll have a very strong order book by end of this year after executing what growth what we mentioned earlier.

Okay. And this electrolyzer part I think there is some PLI scheme also announced on that one. So are we looking to participate in that one that PLI scheme?

We have already done the electrolyzers. We have proven it. But as I said earlier, we are yet to receive any further orders on electrolyzers as of today. Once we receive it, then we will look at our numbers at that point of time. So we have not considered that as of now, which I mentioned earlier.

But I think there is some traction in the domestic market also because some PSU entities are very aggressive on the electrolyzer hydrogen production. So maybe other than Bloom, we have some other scope in the -- good scope in the domestic...

See, to establish this to be very transparent about it will take time in terms of the facilities and the infrastructure that we need to build for hydrogen storage, various other aspects. So that is where we are right now. So -- but good thing is we've already developed the product. So we're just waiting for the traction to happen internationally. So that's where you get the real volumes. I understand the domestic requirements, but that's something which I don't want to comment right now. So as and when something happens, we'll definitely inform all of you.

Okay. Lastly, on this new product to be developed for the [ naval valves ]. So what could be the expectation from this product, sir, if it is the -- go to the limited production on bulk production...

No, the requirements are very high because we have developed -- designed and developed it along with the D&D naval area. So we are expecting substantial volume production requirements coming in from that segment in the defense side of the business. And that's what we are doing, right? Every year, we keep developing these products, and you'll see the traction happening subsequently in terms of volume production. So we are taking up -- our product development team is taking up such products where it makes really economical sense in terms of having that kind of volumes moving forward. So what all you are seeing in our presentation is relevant to volume production moving forward. So those things as and when they happen, they'll add on to our order book and the execution cycle, which we have not taken today, but it will definitely happen.

Okay. Lastly, on this Fluence Energy, there's no further update. Any progress on that?

No, we have already mentioned about the update. See they have given us to do the prototypes. We have already done the first one. The second one is in progress, which we will most probably try to complete in this quarter. Once that is done, then we move on to the batch production and volume production. So that's what we're going to do. So we have not considered any of that volume production or batch production in the current growth what we have taken because we wanted to be very -- reasonably conservative in what guidance we give. But that's in the advanced stage of discussion in terms of not only the completion of the prototypes, but also in terms of signing of the agreement with entire, which can happen this quarter or the next quarter moving forward.

Yes. I think as per our earlier discussion, I think when they receive any orders from India, so that we are going to execute. So as of now, do they have any orders on hand from India for execution purposes...

No, that situation has changed right now because what they are trying to do right now is that they're going to buy the [indiscernible], the entire assembly from us. And the batteries are going to be installed at the site. So now we are open to the whole market. So that's a big advantage. That's how they changed their whole business outlook in terms of manufacturing in India.

The next question is from the line of Utkarsh Maheshwari from Reliance General Insurance Company Limited.

I just want to understand our medium-term perspective in terms of how we are guiding and how we are delivering. I mean this is like on a very pretty consistent basis...

Can you speak little louder because we are not able to hear you.

Sure. My question is more from the structural thought process. I mean, from every time what we have guided, we have been running somehow short of our guidance. So this time, do you think that our guidance is like almost at the lowest point of the thought process and maybe like we can outperform this?

That's exactly the idea. See, what you've said is right. But what you have to also understand is that we have done over the last 3 years, we have guided. But over the last 1 year, there was some misses in terms of guidance, but the current financial year, we have ensured that we have given a situation of the worst-case scenario where we stand in terms of various external and internal factors, and we have guided in such a manner. So you can be rest assured that what we have guided for this financial year is what we'll be able to achieve for sure.

And maybe like margins, so I mean, we were thinking like 24% or now we are guiding 21%. So could this be the bottom? Or I mean, we can expect some kind of outperformance on these margins? I mean, just want to understand the thought process?

So that's what I said. We wanted to make sure that we are making every efforts to improve our operating margins and also our EBITDA margins. But we wanted to ensure that we guide in a manner that what we can definitely achieve. And probably if things go in the right direction, probably we'll do better than this, but we don't want to say that right now. But this is a basic minimum guidance -- what we have given is the basic minimum guidance.

The next question is from the line of Aayush Bansal from Niveshaay Investment Advisors.

Sir, like I wanted to ask, we make actuators for Tejas aircraft, right? And with more focus on indigenization and government planning to add almost 300 Tejas aircrafts. So how big opportunity do we see here? And like out of the 36 Tejas aircraft in operation currently, how many of it has actuators provided by MTAR?

See, the electromechanical actuators, we have supplied to the defense and they have actually tested it and they've proven -- they performed very well. And in fact, they also used our roller screws to test its EMAs, indigenous roller screws and they also performed very well. They passed the load test, they passed all the relevant tests to do it. So this is what I'm saying. When you have developed the product, you can see the traction happening in terms of EMAs in a big way. And in fact, we had a series of meetings with them recently as well because of the certain emergency procurements, what they're looking at, and they're looking at a lot more EMAs, which are going to come in the way of MTAR in the current financial year and the future years as well. So when we talk about certain guidance, as I keep repeating that we have not considered any of these opportunities, which are already developed by MTAR, but you still have to get those volume orders coming in from the defense sector, which will happen very shortly. So that is where we stand. So we have a great opportunity because we already executed it. We have proven our product. So we are right on top of it to ensure that we can deliver such EMAs to the defense sector moving forward.

And sir, like who are the other competitors providing the similar product? And how much do we contribute to a single Tejas aircraft?

No, we can't quantify how much we contribute. But when you specifically talk about EMAs, our EMAs have proven the best in the market in terms of quality, in terms of performance. That has been also mentioned by the defense sector. And we are in good shape in terms of delivering the maximum requirements for the defense sector, because ultimately, they look at the quality and the performance of the EMAs. Most of the EMAs we are also importing earlier and that also we have changed the whole scenario right now, because of our capabilities to handle it. So we not only manufacture right from the basics right from the component level to the assembly level, the entire system. So that's what we have done. So let's hope for the best in terms of getting the maximum kind of orders moving forward.

Okay, sir. And do you have any idea on LCOE of fuel cell versus solar? And how do you see demand for fuel cells shaping in the foreseeable time?

No, there is enough demand. I see that's why we are able to grow at that rate, right? We are -- 4, 5 years back to what we are today, we have done a lot of innovations to make it from where we are right now. So it is growing at a rate of 20%, it might grow even further higher. So it all depends on how the market moves, but we are in good space as far as the fuel cells are concerned.

And sir, can you just comment what's the cost of a hot box and how technically difficult component it is to make like do you see high competition or something?

I won't be able to comment on the numbers on the hot box because they were asked not to disclose that by the customer because they have certain issues with that. But the entry barrier for manufacturing these systems is pretty long and it's not easy as well. So it's not that competition can be created overnight. It is not going to happen that way. For MTAR itself, it took number of years to develop it and also to innovate various products that we are indigenized with. So that's where we are. So we are in a very good space as far as the fuel cell technology is concerned.

[Operator Instructions] The next question is from the line of Vipraw Srivastava from PhillipCapital.

[indiscernible]. Sir, quickly on the recent bill which has come out in U.S. where they are revoking subsidies for solar. So any thoughts that does that impact MTAR and Bloom positively? And can it be a potential trigger for MTAR in the longer run?

I don't think so because Bloom is in a very comfortable space right now in terms of their own order book and requirements. And we don't have any such information. And in fact, they're trying to increase their wallet share as well, which we are doing right now, as I said earlier, Vipraw. So I don't think we have any kind of effect or a figure which might create an issue for us. So there's no indication of that.

Sure, sir. And sir, secondly, quickly on the Fluence part. So again, Fluence also supplies lithium-ion batteries for U.S. market. And if U.S. market issues, do you see [indiscernible] market? Or are these 2...

No. See, right now as I said earlier, we are creating assemblies for them, excluding the batteries for now. They're going to do that at site. So that opens up the entire market. That's what Fluence is looking at. So it's a new design of theirs, which we have developed -- designed and developed it along with them. We have done -- we have successfully completed the first prototype and now we are moving on to the second prototype. And once that is done, then we move on to the batch production and then the mass volume production as well. So we have to create -- mostly, as I said earlier, the finalization of all this will happen either in this quarter or next quarter where we're going to sign up a long-term agreement with them before we get on to the volume production.

The next question is from the line of Piyush Sevaldasani from Sundaram Alternates.

So my first question is on the Bloom Energy fuel cells side. So if you look at the guidance of Bloom Energy is much higher versus what we are guiding. So can you help me understand why are we being conservative or we wait for more orders to come and then we see an upgrade there?

See, that's what I've said earlier. So we have taken -- see, this is what we have guided the growth as well as [Technical Difficulty]...

Sorry to interrupt, there seems to be a disturbance in your line.

Can you hear me now?

Yes, sir. Please go ahead.

I think my line is fine actually. So what I've said earlier is that we have considered the guidance or the numbers based on what -- where we are today. But over the next 1, 2 quarters, many things can happen, but we have not taken any of those into account. So as of today, this is what we have done. This is what the guidance we have given as a base minimum. So the reason why we have done that is that we would like to make sure that what guidance we give, definitely we'll achieve that and probably we might do better than that based on a lot of external factors, nothing to do with us. So a lot of good things are going to happen, for example, whether it's Bloom or whether it is Fluence Energy where we're going to sign an agreement, we're not -- we have not considered various things, what we're already working upon. But as and when those things happen, then we look at it and we keep informing our investors on a regular basis. So that's the game plan for this year.

Sir, my second question is on the CapEx. We have done INR 100 crores CapEx for FY '25. Can you help me understand what was this done for? And incrementally, how should we see CapEx moving which segments and what would be the quantum?

See, it depends. Right now, this year, we might -- the basic minimum bottleneck areas, we're looking at about INR 50 crores to INR 60 crores of CapEx going in, not only for the requirements, not for this year, but for the next year -- the next couple of years. But if we look at the specific projects, like we are working on some very big projects, which I'm not able to disclose right now. But once those projects and agreements are signed, then it will be a separate CapEx required for that. We already have enough land bank both in near the airport in SEZ and a few other land banks that we have taken. So these will be used not only for our future projects and for the expansion programs, which we have a road map over the next 3 to 5 years.

Just lastly on the nuclear segment. So the execution in FY '25 was slightly on the weaker side. Can you help me understand why it was impacted? Was there any project delay or some clearance delay? And why are we expecting INR 260 crores in FY '24?

See basically, that's what we have dispatched, right? So we are working on 2 major projects. One is the FMBC, the fuel transfer systems, which are long-term projects. We have done a substantial work in that, which is under work-in-progress, and we'll be executing those projects for the current financial year. So even though the sales are at INR 19 crores, we have done substantial work in these long-term projects over the last 1 year, and now we're going to move on to start dispatching them in the current year and the subsequent year. So what orders we are going to receive the substantial orders, we have not considered that in our business plan for this year. But you can see a nice exponential growth in nuclear division since everything is right there on our table right now in terms of order booking and execution will happen over the next 3 to 4 years. So we're looking at a pretty good exponential growth in nuclear division, which obviously got delayed, right, in terms of order booking because of the delays from various areas. But now it's already -- the paperwork has started moving, and we'll be able to book those orders over the next 1, 2 quarters.

The next question is from the line of Balasubramanian from Arihant Capital.

Sir, earlier guidance of working capital days to a target of 175 days, what are the strategic initiatives we are taking it right now? Because right now, it's about 220 levels?

Gunneswara, do you want to answer it?

Yes. See, we have guided working capital days 225 days for FY '25. So we have achieved 229 days. 175 is a long-term goal. It cannot happen...

I was taking FY '27 target, sir, I think.

FY '27, see the moment we have the operating leverage and growth, we are expecting 25% year-on-year, and we are working closely on the receivables and inventory levels, definitely, that number can be achievable. And we have the calculations also.

Got it, sir. Sir, in that Middle East side, oil and gas, especially D&T and CapEx are picking up? And how is our business are doing in oil and gas? How the things are shaping up?

So we are working with the oil and gas customer where -- with Weatherford. We are going to execute the first articles completion in this quarter -- by end of this quarter or beginning of next quarter. And mostly the agreement -- a long-term agreement is going to be signed off most probably in this quarter itself. And then we create the required infrastructure once the agreement is signed off for batch and volume production. So that's going in the right direction. And that's something which we have not again stated in our business plan right now because that's how we have conservatively estimated our growth plan. So as and when it happens, we'll inform the investors...

Sir, we have taken a separate debt for this oil and gas segment, INR 60 crores to INR 80 crores kind of debt or still...

No, we have not yet taken that debt.

Okay. So when we can expect plant for this oil and gas, sir?

That's what I said. Mostly in this quarter, we will be able to sign off the agreement. And once we do that, then the whole process will start, because we are simultaneously doing the first article, which will be done by end of this quarter. And once that is done, then we move on to the batch production within our existing facilities. But for volume production, we have to create a separate infrastructure for them for which we have the land bank. And once we do that, once we sign off the agreement, the whole kickoff will start off on the oil and gas, which will happen mostly in this quarter, we'll be able to sign off the things.

Got it, sir. Sir, my final question on aerospace and defense. I think we have initiated development order for compression assemblies of transit engines. And so when we can expect volume orders for this hypersonic missile developments?

No. First, we have to execute the transit engines, we have to do that. We are in advanced stage of that. The raw material has come in, the manufacturing is going to commence. The sooner we do that, the whole team is working on it. So once we're able to do that, then progressively, we'll be able to see a proper traction in this area as well. And that's a very highly sophisticated order, which we are executing in terms of transit. So let's see how it goes, and we are on top of that issue. The whole team is working on it, especially right from the nuclear -- sorry, new product development team and the execution team, they're working on it to take it forward.

[Operator Instructions] the next question is from the line of Isha Murthy from IM Capital.

Sir, can you provide me the guidance for clear energy like civil nuclear power and aerospace and defense? And what are your plans to improve your cash flows?

So the improvement of cash flow, I think, Gunneswara, you want to answer that first, then I can go on that.

We are monitoring -- see, as you know, once the revenues are increasing, profitability increasing, the internal accruals will be there. And also, we are working on the working capital days also, closely monitoring it. So we have achieved INR 101.9 crores, but we are working with a lot of suppliers also to improve our credit period. So definitely, every year, our target is to make the positive cash flow from operations hence forth.

So the second part of the question is, see, we are into various segments, multiple segments, as I mentioned earlier. And we are seeing similar kind of growth pattern happening in every segments, especially in aerospace and defense, we are seeing a huge traction happening there. We have created those facilities. Our products have been approved. Certifications, we have received, including our special processes for aerospace, and we are entirely one-stop though for various multinationals. They have been certified by NASCA, which is a big achievement, which we will receive the certificate now. So we have done a lot of work in terms of where we are today in terms of moving forward with the right growth that we are looking at. So that's where we are today. And I really congratulate the entire team to create that platform to have a consistent and good growth over the next 3 years with improved margins.

Okay. I also have one more question. Like you have indicated a sharp ramp-up in aerospace revenue from like FY '26 and higher in FY '27 as well. So what gives you the confidence in the steep growth? And also long-term contracts or visibility from MNCs already secured to support the scale up?

Exactly. So the confidence level is one is we have already done a lot of first articles and moved on to the volume production. In some cases, we are already doing the first articles and they're getting approved. We got the required certifications as well. And that's why you can see in the current year itself in aerospace and defense, like it was not there before. As I mentioned earlier, in the aerospace sector, we did INR 9 crores and INR 45 crores last year. And this year, we're doing close to about INR 145 crores. It's purely the effort of the team not only to develop the products for the MNCs in aerospace sector and getting it approved and certified. And that's what we are seeing the numbers growing rapidly. And we're also having the customer confidence in MTAR in terms of quality and performance, what we have already delivered. So these are the factors which have gone into it. And we have created the right infrastructure in terms of special processes and the missioning and assembly of these products for us to be where we are today and how we are growing in this sector.

The next question is from the line of Aayush Bansal from Niveshaay Investment Advisors.

Like I had one more question that back in 2020, '21, we were sitting at gross margins of somewhat 67%, 68%, which now stands at somewhat 47%, 48%. So can you just tell for this drastic drop of 20% in gross margin? Is this due to raw material cost or something else?

It's basically the product mix, right? So earlier, the gross margins for the clean energy segment are lower, the volumes are higher. The operating leverage is much better. But if you look at the way we are moving forward, we have diversified into the aerospace and defense sectors in a big way where the margins are much higher. So basically, the gross margins are also going to be higher in terms of these segments. And also, we are moving into the volume production as well. So you can see a better gross margins moving forward as we move on in terms of diversification. And we are actually literally implementing it and executing those orders right now. So we can see that happening over the next 3 years with improved gross margins as well.

The next question is from the line of Maitri Shah from Sapphire Capital.

Yes. I just had one question on the battery storage system. So we were developing and designing it. So where have we reached with the prototype? And has there been any qualifications that we've received from it?

Yes, we have done the first prototype. So that's been approved by the customer. And now we are moving on to the second one with a little bit more changes in the design. They wanted some improvements from their side, nothing to do with it, we're working together with the design and development. So once we do the second prototype, so that will be the basis for our batch production moving forward. That's what I've said and which we are mostly planning to complete it by end of this quarter or beginning of next quarter. Once we do that, then we move on to the batch production. We said all the designs will be frozen and then we move forward for batch production and volume production.

Okay. And what kind of expectations do we have from this product in terms of revenue in FY '27?

FY '27, we'll have a substantial revenue, but I'm not going to -- we'll disclose that more in terms of numbers once we sign off the agreement with Fluence, because we have to finalize the pricing and everything because we are doing the prototype right now. But it's a fantastic opportunity for the company, and we are successfully executing the prototype right now. So the market has also opened up because of batteries being installed at the site. So let's see how it goes. And once we sign off the agreement, we'll inform -- then obviously we know the kind of volumes, which is -- it will be substantial numbers that we're looking at.

Okay. And just one clarification. Sir, you mentioned that we'll be growing at 25% for the next 3 years. Is that right? Is that -- did I hear that right?

Can you Repeat that question?

At 25% for the next 3 years?

Yes, that's right. Absolutely right.

As there are no further questions, I would now like to hand the conference over to Mr. Srinivas Reddy for closing comments.

So I would like to thank everyone for taking time to attend this call. And I would like to mention that we are continuing to work towards our growth and also to improve our margins on a linear fashion quarter-on-quarter basis. Even the growth we are expecting to grow on a linear basis, quarter-on-quarter basis, year-on-year basis. And we are on track in terms of what we have done, which you cannot see in the form of numbers, but you can see moving forward over the next few years what the kind of work we have done in the various segments that we are working on right now. Thank you so much.

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