Netweb Technologies India Limited ($NETWEB)

Ladies and gentlemen, good day, and welcome to Netweb Technologies Limited Q4 FY '26 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Seema Nayak from ICC Securities. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone. On behalf of ICICI Securities, I welcome everyone to Netweb Technologies Q4 FY '26 Earnings Call. We have the pleasure of having with us the senior management team of Midway Technologies led by CMD, Mr. Sanjay Lodha, Whole-Time Director; Mr. Navin Lodha; CFO, Mr. Ankit Kumar Singhal Chief Sales and Marketing Officer, Mr. Hirdey Vikram, Chief Strategy Officer; [indiscernible]; and Head of Uirtus Advisor, the IR Adviser to Network Technologies, Mr. Sanjeev Sancheti without further delay, I'd like to hand over the floor to Mr. Sanjeev Sancheti . Over to you, sir.

Thank you, Seema. Good afternoon to all the participants. Before I hand over the call to Mr. Sanjay Lodha for the opening remarks, I would like to draw your attention to the safe harbor statement in the earnings call presentation. I request each 1 of you go through the presentation thoroughly before the Q&A starts so that you are aware of the same. Thank you, and over to you, Mr. Lodha.

Thank you, Seema and Sanjay. Good afternoon, and a warm welcome to all of you to Netweb Technologies Q4 Financial Year 2016 Earnings Call. We are pleased to announce that Netweb Technologies delivered a landmark year with revenue of revenue from operations reaching [indiscernible] in financial year '26, reflecting a strong year-on-year growth 90% this record annual performance underscores the strength of our business model and accelerating and for high-end computing systems in India. For the Q4 financial year '26 revenue from operations stood at INR 7,737 million, growing at 86.6% year-on-year demonstrating strong execution momentum as we closed the year on a high note. PAT for the quarter stood at INR 706 million, representing 65.7% year-on-year growth with a PAT margin of 9% for the full year, that stood at INR 2,058 million, up by 8.9% year-on-year with a PAT margin of 9.3%. These results reflect not just top line momentum, but disciplined margin sustained across our businesses. The defining highlights of financial year '26 has been the performance of our AI segment, which grew by 459.6% year-on-year. This growth was a result of years of focus in-house R&D, enabling us to design and manufacture some of the world's most powerful latest-generation AI systems combined with disciplined planning and education of large strategically significant national scale orders. AI systems contributed 43.4% of our total operating revenue in financial year '26. Our transfer transformational shift from a revenue mix that firmly positions -- our net debt -- our total operating position lets the sale of AI infrastructure built out. The other 2 core segments HPC and private cloud continues to exhibit robust demand, reinforcing the breadth and resilience of our technology portfolio. The performance is a direct reflection of Netweb unveiling commitment to in-house design and manufacture of next-gen high-end computing system. This fully aligns with global phenomenon of some compute infra needs, which is very well addressed by Netweb and countries Make in India vision. We take immense pride in creating significant impact in strengthening India's emergence as a credible global hub for high-technology manufacturing, which will benefit the nation for decades to come. In our own performance, we believe India stands at a threshold of generational opportunity in artificial intelligence with the world's largest pool of digital users a fast maturing data ecosystem the major boost to indigenous foundation models and decisive policy momentum through India AI mission supported by Makin India. The country is posed to emerge as 1 of the most prominent AI economies of the world. Center in this visas government's clear focus on Sorin AI infrastructure, ensuring that we compute, data and model powering India's digital features is built, owned and operated within the country. The build-out of indigenous AI compute is novel aspirational. It is a strategic national imperative tied directly to economic competitiveness, data security and technological self-reliance. As India's only full-spec domestic provider for high-end computing customs Netweb is uniquely positioned to power this transition. Our strategy remains firmly anchored on our 3 growth pillars, HPC, private cloud and AI systems supported our established technology leadership in high-end computing system space for large order pipeline. As we step into financial year '27 from a position of strength with a firm order book of around INR 2,100 crores and an 11 inclusive order book of INR 2,400 crores, day 1 of financial year '27, we already have on our books more than what we had been for all of last year. We see a long runway of growth ahead. We remain committed to investing in R&D, manufacturing depth and talent to ensure India VI and vision are built on strong foundations and that metric continues to create durable long-term value for all our stakeholders. I now request Ankit to take through the financials. Thank you.

Thank you, Mr. Lodha. Good afternoon, ladies and gentlemen, and thank you for joining our earnings call. Before we open the floor for Q&A, I will provide a brief overview of the financial performance for the quarter and the year gone by. I trust by that now, you have had the opportunity to review our earnings presentation and press release. While our CMD has already discussed the macro outlook, I will elaborate on the financial performance, providing a more detailed analysis. First, on the quarterly numbers. Our operating income for Q4 FY '26 stood at INR 7737 million, focusing a growth of 86.6% Y-o-Y. Our adjusted operating EBITDA for Q4 FY '26 stood at INR 1,018 million, showcasing a growth of 71.8% Y-o-Y. Adjusted EBITDA includes the impact of mark-to-market losses on certain payables against which corresponding hedging gains were recorded. As per accounting standard, MTM losses are recognized within expenses while related hedging gains are classified under other income. To better reflect the operating performance, hedging gains of INR 52.4 million have been added back to EBITDA to the extent they offset the MTM losses on the same underlying payables. Our operating EBITDA for Q4 FY '26 stood at INR 966 million, showcasing a growth of 63% Y-o-Y. Profit after tax for Q4 FY '26 stood at INR 706 million, showcasing a growth of 65.7% Y-o-Y with a margin of 9%. Now moving on to the annual numbers. Operating income for the full year FY'26 at INR 21,836 million, a growth of 90% Y-o-Y. Adjusted operating EBITDA for FY '26 stood at INR 2,900 line, showcasing a growth of 82.4% Y-o-Y. Operating EBITDA for the full year FY '26 stood at INR 2,848 million, showcasing a growth of 79.1% Y-o-Y. Profit after tax for the full year FY '26 stood at INR 2,058 million, showcasing a growth of 80.9% Y-o-Y, the margin of 9.3%. Now I would like to throw some light on key balance sheet ratios. Return on equity stood at a healthy 32.9%, while return on capital employed for the same period was 37.5%. The gross fixed asset turnover ratio stood at 33.2x as on 31st March 2026. Our cash conversion cycle as at March 2026, stood at 84 days. Receivable days improved from 114 days December 2025 to 86 days in March 2026 reflecting stronger collections. Inventory days increased from 60 days in December 2025 to 86 days in March 2026, primarily on account of buildup of raw material stock both 2D support, the execution of large strategic orders and to secure adequate inventory of key inputs in light of surging growing demand of AI compute infrastructure. Our balance sheet strength is reflected by us being a 0 debt company. The company had net free cash of INR 833 million as on 31st March 2026. The net cash generated from operating activities was INR 1,215 million for the financial year 2026. The Board has recommended our dividend of per share subject to shareholders' approval. Our strategic road map and growth priorities remains on track, supported by huge demand for high-end computing solution a healthy order book and a solid pipeline, we are positioned to deliver consistent revenue and profitability in the upcoming fiscal year. Looking ahead, we remain confident of sustaining strong momentum and are guiding a growth revenue growth of 35% to 40% over the next couple of years. With this, I now hand over the call to Seema.

[Operator Instructions] First question is from the line of Renu Baid from IIFL Securities.

Congratulations for a good performance. So the first question is, while we had alluded to the fact that sequentially, execution will be broadly flattish -- can you show imports in terms of despite significantly higher share of organic growth coming in from the base business. Our gross margins technically have not improved at margin sequential broadly at 1.5%. So what has constrained the margin expansion despite significant jump-up in base business revenues this quarter?

So Renu, just a couple of things. One that it is not that the strategic orders have been lagging behind. It says that they're spilled over to the next quarter. Okay. So we are on track on that. And we enter the new financials with a very strong order book of about INR 2,100 plus about INR 350 crores of the L1, we enter with [ 2,400, ] which is more than the last year's revenue. As far as the margins are concerned, I think you need to see the margin adjusted of the adjusted of the ForEx loss and gain. So actually, we've done better than the last quarter, and that is reflective of how the margin is proceeded to be and it is within the guidance.

Sure. Because I was looking at the gross margin level, which sequentially does not show improvement there. Understand. That's point number one. And point number two, so how are we looking at the pipeline of order flows, both for the base business? Also on the strategic business, we haven't heard of any meaningful large order wins for L1 in the last couple of quarters. So how is the order pipeline from the private service providers as well as from the direct government orders for the AI infrastructure year?

So, actually, if you really see what I said in my commentary very, very clearly, basically, the way the business is looking to me is real fabulous actually really speaking. I'm showing an order book of around basically INR 2,100 crores if I add the L1, it is INR 2,400 crores, which is more than the order more than my revenue currently as revenue. I think that itself is a very, very solid thing if you really see at the beginning of the year, we are entering a year with a very, very too heavy and too robust order book already, okay? So whatever has to be added will be added. -- and plus so as basically organic business is growing, that means that our run rate on our other business is growing. The company is not dependent on the strategic quarters as I have always been telling you. that primarily the company is running primarily on its own organic way and is growing in its organic way. The strategic orders we are announcing as and when it is coming, -- we have a lot of discussions. You are aware about the kind of AI demand, which is happening not only in India, but across the world, okay? And basically, it seems like it will go on for at least next 18 to 24 months. So we have a huge distally pipeline wherein basically a lot of opportunities are there. And I think there is -- there will be no dress of orders actually really speaking.

Got it. So basically, extra strategic orders of almost -- the base order book today is about INR 5 billion. And including the L1 orders, it should add up close to INR 900 crores or INR 9 billion, if I am right in terms of numbers. Does that broadly...

So I think the total order book, if you look today is INR 2100 crores plus about INR 300 crores to INR 24 crores plus INR 100 crores is the order book including L1 -- and to that to add INR 4,400 crores of pipeline. So that is stack-up to, let's say about -- how much INR 6,500 yes. So that's the total including pipeline and order book.

So no, I was just referring to the base orders, excluding strategic. So strategic orders in the backlog is about close to INR 16 million, 16.5 billion. And if I knock that off from the INR 64 billion order book, including L1, then today we have close to 800...

You are right, doing that.

Got it. So base business should be on track for 30%, 35% CAGR growth that we have been suggesting?

Yes. Basically, I think seeing the order book you yourself will get that conviction.

Right. And on the operating margins, do we think the cost headwinds in the current environment, you have been fully able to pass through and EBITDA margins of 13%, 13.5%, are they sustainable going forward for '27, '28? And what would be your headline of guidance for fiscal on revenue, EBITDA margins and CapEX?

So basically, it will remain almost all the same. I will let Ankit answer.

Yes. So on the operating EBITDA margins, we are guiding 13% to 14% if you understand that there is a high top line growth, and we are still sustaining the EBITDA margin. So that primarily gives the validation and the resilience in the margins we are maintaining. So in this way, if you see with this growth, the leverage is already embedded in the margins. So that's why we are guiding this 13% to 14% range for the next couple of years. And on the revenue growth -- and on the revenue growth, we are guiding 35% to 40%.

And CapEx for '27, what are the plans there?

So with the current CapEx, we are able to sustain the growth. There is no CapEx expansion, no significant CapEx is expected in this financial year -- so there will be the routine CapEx that will be coming across.

Okay. So we can expect the INR 20 crores, INR 25 crores of base spending will continue.

Yes, more or less.

Next question is from the line of Seema Nayak from ICICI Securities.

Congrats on good organic growth. So how will the time line for execution of the remaining strategic panel? That's my first question. And second question is regarding data center growth, which has slowed down. Can you share the reason behind it? Are we seeing increased competition growth? And what will be the target cash conversion cycle for FY '27. Yes, these are my question.

So basically, strategic quarter time line basically is definitely, as we have mentioned it, I think it is expected it to be done quarter-by-quarter, and we expect that within the next 3 quarters, I think we expect it to be done, okay, as regards the strategic order sales concern. Yes. Basically, I think you need to see it, ma'am, actually very clearly -- there are 3 pillars of growth, which we have. We basically just don't go by the name. The first is the HPC, that is supercomputing, that's already growing, and that has been always been around 30% of our business. But since this year, AI became 43% of our business, still it's 24% of our business. So it's not going -- it's not stagnate growing, but basically since AI is -- AI is growing much faster, actually. Actually, the data center, in our case, is the private cloud and MCI. Please understand that. We basically -- so these are the 3 pillars. Firstly, HTC, second is private cloud and this and private cloud is the data center business, which used to be around 30%, 35% of the business that is showing us 24% because, again, because of the AI was 15% became 43%. So that's the original saying that number. But reality is growing at a good momentum, definitely not growing as good as AI, but definitely, it's growing at a good momentum. The data center which you are saying there is or degrowth, the data center servers, which you're saying that's not a focus area for us. because we are not in the box selling. It was only submarginal 5% of the business, and it's around that. So we don't even track it. For business, if you see totality more than 95% comes from these 3 segments, HPC private cloud and AI systems.

So Seema, so our cash invest typically operates from 90 to under 10 days. Now this is something which cannot be projected for next year, at least, but we would like to say that the range will remain like that. There will be some increase in the inventory days projected for this year also. So -- but we will stay within the range of 90 to 110, that's what we feel.

Next question is from the line of [ Harindra Singh ] from Blackstone.

Sir, my question is basically on the India AI demand. So India is somewhere around 1.5 gigawatt current. And by 2030, the country plan is to go up to 9 gigawatt. So first question is the way industry as a country, we are going to grow from 1.5 gigawatt to 9 gigawatts, do you see your industrial growth in line with the country expectation? And second question is a lot of hyperscalers like Amazon, Microsoft, they are going very aggressive in the country, and they are building up more than 1 gigawatt capacity in Hyderabad, Mumbai. So like I saw Yota your 1 of the customer, are you focused on hyperscalers? Or like do you have any growth plans going into directly hyperscalers rather than the colocation providers.

Quickly first thing is that India mission is based on many pillars, actually, there are 5 or 7 pillars out are out there actually really speaking. And government, you know that Prime Minister focus very, very clearly on the basically, India has become a leading country for providing AI solutions actually. So the government has been very clearly focusing upon it, has been working very hard and have been trying to bring AI on the forefront for the country so that India leaves an impact to the world on the AI. And so that is going on very well in track. Government's current spending budget, they are even ready to expense expand that also if they're able to do it. So it's really -- the budget is not the main criteria there. The criteria is how fast they are able to spend the money and how fast they are able to get in the new infrastructure. So there are 2 parts of it, as we have been telling you -- telling every time that 1 is basically government is trying to basically send out GPUs from various new cloud providers like Yoda and others. And basically, another is that government is trying to set up their own infra. So setting up their own in price taking time, but definitely, that process has also started. But in the meantime, basically, they are trying to take up in the RFP model, they are trying to take from various kind of new cloud providers. So that is going on, on track, and that's happening very clearly and the government's sole demand is also there. So as regards to your -- particularly on the side of what is the kind of spend that is happening is basically it's a large amount. They were talking about 10,000 GPUs, which became 225,000 GPUs. Now they are even ready to go up the 100,000 GPUs also. So government's focus is very clear. Very clearly, they want to create the infrastructure in the country. So all the AI start-ups and all the people who want to work on AI, they don't build the pinch of it, and the GPUs are made available to them so that they can really do their work. If you've got a chance, you might have even seen the success of AI India AI summit the kind of traction it got, the kind of people who are attending it. It was only targeted at 100,000 people. but more than 700,000 people really attended it. So we kind of basically the prime minister himself was there for 3 days. So you can very well understand the kind of focus and attention they are trying to give it. As regards to your question basically primarily that are we targeting hyperscalers. At this point of time, my answer is that at this point of time, we are not targeting really hyper figures. Because India is a market in which basically still is not a hyperscaler driven market. It's primarily more of a sovereign and those kind of market activities currently it is -- but definitely, hyperscalers come. And if they are interested, we can definitely bid for them. We can definitely work with them. But at this point of time, we are not targeting hyperscalers, and I don't feel India is a hyperscaler market. We are trying to set up large data centers. The still -- these are in greenfield projects. They will take time for us to basically come up. Maybe Hirdey can add.

Yes, I think you have already covered all the details -- and as we got demand is concerned, river, I can definitely tell you the way the investments are going up, especially from the government side and now the enterprise investment has also started coming in. So it clearly paves a way for us, and we find a lot of headroom for us to grow. And as you rightly mentioned that we currently the capacity which India holds in terms of data center there is anything that's going to go up. So that clearly shows that there is no dearth as regards to demand is concerned. So we definitely want to engage the opportunity, and this is what we are doing. So you can find a lot of good quarters coming our way.

Yes. So these are the 2 questions. So the way the industry and the AI industry is changing for a lot of companies like TCS they have come up with a company like hyperbole, where they are serving these hyperscalers them colo services where they are making huge 50%, 55% of margin in future, if you see growth into this business and happy to see you in other areas also where -- and you can add value because you are contributing to a major part of the terms, which goes into the data center. Yes.

All these initiatives really add to our business, actually, Aldi basically, you see all the recall them global service providers actually are basically GSIs, like TCS, Infosys and basically Wipro and all these. So basically, they are all evolving, and they are all developing different kind of products so as to service the AI workload. So all these basically offer us more opportunities and all these are our customers or our affordable customers we are under NDA, so we cannot disclose which customer what they are trying to do. But all these definitely add because they need the Ai infrastructure, they need the AI stack and everything it needs to be done on that -- on that other subjects to the customer. So more and more workload is coming with them. And so that AI workload delivery is there. So definitely, that's a good business opportunity for us.

[Operator Instructions] Next question is from the line of [ Akshay from AK Investments. ]

Congratulations for the great set of number.

Your voice is low.

Okay. So my first question is regarding the promoter in the quarter 4. So the promoter have nearly sold 4% stake what was the reason for the same? And do we expect any further dilution in the promoter holding going forward?

Yes. So I think first, to answer the second question first. We are not going to dilute this textile was done in the month of February. We have not going to an 12 months from there. So that's already confirmed. As stake, of course, it was done because there was -- there were some -- it there was limited liquidity. So by this textile, we have been able to increase the liquidity of the stock.

Okay. Okay, sir. And sir, my second question is regarding the presentation. So there is 1 line in the presentation that we have commissioned the new set of the ad products and facilities finding across 15,000 square foot. So is this the new manufacturing facility that we have commissioned or years, then how much capacity or how much incremental capacity does it bring?

Yes, this is a state-of-the-art ampakine facility, which we have set up. And largely, the target was to start manufacturing the range of those systems, which we had not been manufacturing earlier -- and now as you can see, that we have introduced the new architecture of our latest emission systems as well. So keeping that in mind, this facility has been set up, and you will be happy to know that with this facility, we'll also be designing the complete range of core systems as well. And now the idea was to increase the density per rep in our case, and that is what we have -- the facility has helped us. And now we'll be able to scale even beyond 150-kilowatt per that kind of an architecture -- so this facility was very important for us. So that was in the process earlier. So now we have completed it, and we'll be targeting the larger deployments with the help of this facility.

Okay, sir. So currently, what is the total revenue capabilities that we have from all our capacity?

So basically, actually, you'll have to understand the company very well. This is a technology company. This is not a capacity-driven company actually. We are a capability-driven company. We have never said the number open came on capacity. Our capacity utilization would be around 65% to 70% only primarily, we are not driven by just a volume sale or something of that nature. You have to understand the basics of the company, actually, the company doesn't work on capacity. We work on capability. If tomorrow NVDIA new where rupee is coming up as a new -- we are already set up for the partnership for that. Tomorrow, if we have to look at where base servers and their racks and all that, they definitely we need to set up something we'll definitely set up. But again, that will not be capacity based, that will be capability based.

Thank you. Next question is from the line of [indiscernible].

Sanjay, congratulations on the great year. I have 2 questions. Number one, global we've seen this a genetic AI phenomenon year-to-date, driving up...

Your voice seems very low. We are unable to hear you. Can you be a bit closer to the mic?

So my first question is the genetic AI impact on the CPU Year-to-date, we see a lot of demand after the open floor launch. So driving a lot of CPU usage. So we saw the Intel reported very, very strong earnings and outlook -- so for Netweb, I think the relationship is on the high-performing computing segment where you sell the CPU server. So last year, apparently, the AI system is very good. but then the HPC segment is more steady. My question is because of this agentic AI trend, do you see a much faster acceleration in the HPC segment revenue this year and maybe next year? That's my first question.

So basically, telling you [indiscernible], thanks for your question. the agent AI is definitely, again, 1 of the factors which is driving the AI actually. And as regards to your relation between basically agentic AI driving HPC sales, I don't think that is going to impact I don't think in this current year at least in this geopolitical region for tappoint. HPC in itself is growing very well. Basically, you are seeing HTC basically growth around -- it has grown by around 31%, which is not less actually. But you are seeing the number low because the AI has grown too much -- so that is showing it that way. But let me tell you, the HPC because that's an [indiscernible] mission 2.0 is really there, plus basically adoption of adopt and AI together is also happening across verticals, across 3. If you see the automobile industry is using it, -- we basically -- there's quite a lot of use in the oil and gas and different areas. So I personally feel that the HPC will keep on growing. But definitely, AI will grow at a larger pace -- but as regards to your question on interest, the current development, I feel that will take some more time to create an impact to the HPC market growth in India as such, what I can understand.

Okay. Understood. My second question is regarding the healthiness of the India AI investment by the supplement because I saw some articles saying that the investment in the downstream data center, the takeup rate is quite low, so that some of these data centers, they have to rent it out to the other customers outside of the India AI mission. Can you from your perspective comment about how healthy is the downstream adoption of the Indian AI vision investment by the government.

Answer the question. So as we have explained earlier also, so covered of India is very clear at the moment that they want India to become the service industry for the world. And for that purpose, this process of India emission has been going on for last almost half a decade. And the process started long back. And this mission is very clear that the investments are going on 2 fronts. One, that they want to basically build facilities through the CSPs. And the second is that they want to build the facilities on an on-prem basis. So investment outlays, whatever has been outlined by a govern of India so far has been as part of their first tranche of investments and that itself clearly signifies the efforts by the government of India and there is going to -- there is any way leaving an impact all over country because enterprises and CSPs all are putting off their efforts to build up the facilities. And now going forward, the expectation is that the investments are only going to go up from here by government also and by the enterprises. So the opportunity gives us a lot of headroom to grow. And we are also going to widen the opportunity with open hands. And the kind of work we are doing. And as you can see, the new inviting facility, which we have set up, that is also keeping in mind that we wanted to add a new capability of designing dense DP systems, which can serve such kind of requirements coming from both the fronts, be it CSP front or the on-prem requirement front of government of India. So we are absolutely cable absolutely ready to address the requirement. So I think this is quite a good opportunity for us.

The data center investment also is increasing from the corporate side also, people are really interested because they have demand on hand. And so they are also trying to open government is a ready buyer. So people are trying to put -- take some time to put up the data center investment as you understand that. But people are already working -- there is a lot of interest around that. If you see the current -- the government taxation and also which they announced. So they are promoting data centers. So more data center investments are coming in. So we are pretty sure the kind of basically the demand we are seeing and kind of interest on the government is seeing. So things will roll out very well.

Next question is from the line of Sandeep Shah from Equirus Securities.

Contacts on a good execution despite supply chain management issue and its impact on the raw materials Sir, the first question is the guidance of [ 35, 40 ] and with a margin of 13%, 14%, both of which is for the base business, excluding strategic deal, how to consider this guidance?

So the revenue growth, 35 -- EBITDA margin -- so it's overall. Overall, this is the enterprise level guidance.

But strategic orders you are saying in the first 3 quarters, it would be executed. So that itself is a big growth driver for the coming year.

Correct.

So the growth has to be higher than 35, 40, right?

So we -- on the we are guiding you the best case don't worry at all Sandeep. Because we are entering the year with INR 2,400 crores already as order book, okay, including the L1 that itself is a robust signal that basically we are entering the year with a bit the order book, which is more than the last year's turnover, that is the more business addition will happen. But you understand that we are not box Sandeepji, we are primarily more into proactive sellers rather than reactive sellers. So basically, we just don't want to pick up a box pusher also always the intention of the company has been to engage into more and more value-added kind of deals. -- if you see my customers also, our 50% is government, 50% in enterprise and enterprise customers are also large customers primarily. So basically, those kind of business really takes time to completely look in and get in, so I feel the kind of revenue guidance which we are giving, we will like to maintain 35% to 40%.

Okay. Okay. And sir, in terms of the current inventory level, it is fair to assume that the current order book to some extent can be compensated with the current intent which in turn to soften will help you to maintain margin because these entry could be built at a price lower than the end spot rate for us.

I think we will not like to guide on the inventory and the margin. Actually, overall, I'd like to guide you the margins will remain at the same 13% to 14%. We have been always been -- you see that last year also we performed as per our guidance. and we are very sure that we will do it this year also.

Okay. Okay. And just last question in terms of export sales and progress you want to share what percentage of revenue it has fallen.

Sorry to interrupt Mr. Shah your voice is breaking.

I will take this call. I understood Sandeep's question. So Sandeep, basically, you know the AI demand is unbetted. It's very difficult to fulfill the domestic demand itself -- so really, frankly speaking, we are -- we focus on exports. We are not getting time to do it. And currently, the worldwide AI demand is embedded in. So basically, let me first surprise the domestic demand, then we look into exports. So it will remain around 5%, which we have been currently doing, it will remain around that.

And sir, last question, apart from Google, even AWS and other hyperscalers are introducing their own chip -- so in this scenario, are we geared up in terms of tie-up beyond the top 3 chip providers or manufacturer because if this scale increases through hyperscaler, produced chip design. Can you share the progress how we are tying up and making sure that the motherboard design also meet a variety of chip designs.

So Sandee, this has been -- these efforts have been going on at there and for quite some time because emergence of TPU is not something which has happened just now. So we are aware of the progress which is happening on the other side of the market as well. And we are open to in that direction also. As long as the significant development has been shown -- and as you know, that we have got our in-house design teams also, that is the reason we were able to take up the risk-based architecture so fast. So same way, we will be able to look at the other chip makers also. As long as there is a significant technological advancement at there, which has got an acceptance in the market. So as a design team, as an OEM, we don't have any reservation to it.

Next question is from the line of Vinay Menon from Monarch Network Capital.

Congratulations on great execution in this quarter. A couple of questions on my side. On the component pricing, are you seeing any kind of softness or are we still looking at component prices being at these levels for maybe the next few quarters?

So basically, really speaking, I cannot -- I'm not supposed to guide on the component pricing on my call actually. But let me tell you, the AI demand is really unbated -- so that is really putting pressure on the components actually, really speaking. So if it will remain unabated, definitely, there will be pressure on the component prices and competed supply chain. But basically, as I have been always been saying that we are proactive sellers, we have good projection of what is going to come, what is not going to come. So we plan our inventories and our contracts, our relationship we basically are aligned that way. So it doesn't impact us much. In case there is a price increase and it -- so basically, we can always pass on to the new customers.

Okay. Okay, understood. And just a couple of more things. One is we're seeing demand move from training to inference in the last few quarters. So that is obviously less GPU dependent and more as like Sandeep maybe TPUs are also coming in. So how are we going to get a backed in terms of the demand shifting? Are we going to see more demand with inference demand improving? Or how does the anomic look for us there?

Answer the question. So first of all, as regards our readiness is concerned, we have always been ready to address the demand coming from the training and the infant side, both sides of the market. And that's the reason that was reflected in our new introduction of our products as well because we have kept on adding those products also which can take care of inference exclusively or even the products which can take care of training and inference both. So from the readiness perspective, we have been seeing the market development and accordingly, only we have designed our products based on that. And secondly, as regards whether the requirement will go up from here or it will go down. So I can definitely tell you that the demand is only going to go up from here. Reason being, on 1 hand, the training kind of a work has already been going on in the country and outside already. And at the same time, whatever development has been done on the training side earlier. Now the time it inference will also generate the additional demand. So I think it is good for us that inference is also taking up, and this is only going to add to the overall demand. So I think it is a good situation for us to handle. And we are pretty much ready with both the type of products and both the type of solutions, which can take care of the requirement.

Okay. Okay. And just 1 more thing on the guidance of 35%, 40%, that is inclusive of the AI vision deal, which we will execute over the next 2, 3 quarters?

So the guidance on the top line is not inclusive of the strategic quarter. It is the -- it is the normal -- organic order, which is about 35%.

Next question is from the line of [ Puja Seth from Securities. ]

Okay. Thank you congarts for having a good set of number. So just want a clarification. In your strategic order book, whatever when you read, it comes under your AI segment?

Yes.

[indiscernible] 25% to 40% growth. So could you throw some light on the segment price in which segment you are seeing a set for AI because HPC business had HP and HP. We are in about 26% of growth this year. So how will see this further on...

So I think we give guidance overall basis is too much of detail to be given for a guidance, we would like to stick to the guidance on an overall basis.

But there is some sort of guidance, like in the segment you are seeing.

So basically, our -- all the 3 segments, a, if you understand 3 segments today, please understand our core business, okay? You understand the business of our ebusiness is HPC of our business is private cloud and AI. Now you tell me this segment will not grow I'll give you a reverse question. We see the segment, which will grow very heavily. private cloud data center is going unbended -- but AI is worldwide grown. So all the 3 segments, 95% of business is coming -- the company is into 3 businesses. And all the 3 segments are really growing at a very good pace. So finally, HPC AI should grow at a faster pace, but I personally see in future, I was guiding that AI should be around 25% to 30%. I can tell you that I will remain around 35% of my business. Balance will be shared equally between the HPC and private cloud.

Okay, sir. And sir, 1 more question. As this further, we have seen there was a net borrowing has increased about INR 270 crores. So could you give a breakdown of why that happened?

So really, the part to only strategic orders that we had been these are very short-term borrowings. These are no long-term borrowings. And these are primarily to execute the working capital required for any large strategic orders or at the same time, any regular orders which are going through, and this gets settled in a very short span of time.

So I mean, you can take it that this borrowing is transitionary.

Next question is from the line of [indiscernible] from Capital.

Sir, I wanted to know regarding our cash conversion cycle, like order being asked a question, but how -- the thing is the cash for cycle is more than 100 days. So don't you think with increasing ROE and ROC it will be difficult for us, like will be -- that we need to reduce the cash on other cycle drastically for that?

Drastically -- so just -- so I don't think it is 100 days. I think we have shared the presentation if you had a look at the present it is 84 days. And primarily, because of inventory, which we have -- which we have created an inventory for our large orders, which we are carrying in hand as of date. Ankit, you can add to that.

Yes, correctly mentioned by Sanjay, sir. So it's not 100. It's around 84. And still the increase is because of the inventory days. If you see the receivable days from the last quarter, it has significantly improved and inventory days has gone up on the account of for stocking the critical components for potential and large orders.

And plus basically, we have always guided that our basically our kind of business remain between 80 to 90. So I think this is not a surprise.

Okay. Actually, it was guided here only in the con call like more than 100, 120, that's why I was asking.

[indiscernible]

Okay. Okay. And my last -- second question is regarding our exports -- so in the -- in the last con call, you were saying that you're tracking different exports also. So I wanted to know regarding that any pipeline regarding our exports per se?

So as you could -- I hope you heard our answer earlier also that see the kind of market we see in the domestic space -- so we are -- right now, we're trying to fulfill the demand coming from the domestic market itself because there is a lot of heat for us to grow address the overall incremental growth in the market and all that. So first, once we are able to address the complete market here in India, definitely, we'll be going out as well. But the priority right now is domestic. And since domestic is anyway giving us the required quantum of growth. So there is no harm focusing on this. But yes, going outside, India is definitely in our pipeline, and we'll be focusing on that as well.

Sir, my last question, like you have a INR 4,000 crore of pipeline, right? Can you tell me what percentage of that can be converted on the safe side in this financial year?

60%. No, no.

Generally, conversion is about 60%, but this will fuel about 1.5 to 2 years of -- Yes, 18 to 24 months. So it's not that all of the 60% will happen this year.

Okay. So...

Sorry Mr. Seth, please request you to rejoin on the queue, sir, for the follow-up question. [Operator Instructions] Next question is from the line of [ Vatsal Agarwal from a retail investor. ]

Given the strong cash position on the balance sheet, can you explain the reasons behind increase in the short-term borrowing because it appears counter...

So it's not that there is a -- the bonds have some covenants when we borrow the fund, we have to maintain the period of time. And these are the numbers basis at reporting date. So there are RBI guidelines where the WCDL are supposed to be maintained for a certain period of time. So to abide that, that's why it's coming here. And we do have cash, but we cannot settle the borrowings with them. So there are the commitments which are given to lender and the coordination with the RBI circular. .

And secondly, sir, I was just trying to understand the business segment. Can you please explain the difference between the private cloud business segment and the AI systems business segment?

See, we have talked about it in the earlier quarters also. So the difference is that private cloud is basically catering to a different side of the market, where the where the convergence of compute, network and memory happens, whereas the AI side of the market, AI system is largely taking care of the AI workloads. If you're trying to know about what is the difference in the workload type from these 2 markets, then the answer is this. And if you want to know about what is the difference from the business side of it, that who all are the table customers from the private cloud and who all are the probable customers on the Aside, then my -- I can basically further explain. I hope I have answered you that the private cloud is largely for the convergence of compute network and the hyper conversion put together in a single platform, that is for the private cloud and SCI, whereas AI system is largely met for the purpose of workloads.

No, because my question is that for data centers, it should be in the AI systems business rather than the private cloud, if my understanding is correct.

The data center assets, see 1 thing is very clear that data center is assets, which is across all the verticals for us, product verticals, but largely data center is largely focused around the private cloud and NCI for us. Reason being that the data center molds what we talk about are the workloads wherein the convergence of compute with the storage and the network put together happens. So that is basically with dealt in case of private cloud and CI. That's the reason we don't count it as part of AI system, but we count as part of private cloud. And that's how these 2 are related.

Next question is from the line of [ Raja from Weltwire. ]

My first question is that as to what earlier partisan has said that or your total pipeline, 60% would be converted. And out of that, some of the orders would be passed on to 1, 2 years. So did I hear that correctly?

I think, basically, what we mentioned is Basically, what we mentioned is that the -- somebody asked us that pipeline at how much time in pipeline we convert. So pipeline is a very, very dynamic situation, which keeps on changing every day. So whatever on the reported rate, whatever the pipeline is, that pipeline normally gets 60% of it gets converted, but it takes around 1.5 years, around 18 months to get converted. All of it total of it.

So just to explain to you, the conversion happens like every day, right? What are saying that the pipeline which is sitting today may convert the 100% of converted by 1.5 years, but it will happen in transfers and new pipeline will also keep in this -- it's a very dynamic thing, right pipeline. convert into orders, somebody go out of it. New patent get entered. So there's a very dynamic situation.

Okay. And your order book amount is [ INR 2400 ] including the -- so I believe, as to what I'm able to understand, like is it gets executed in 3 to 6 months, right? So the remaining is like for this order book is 3 to 6 months only or am I missing something in this?

Basically, as I -- or normally, our shipping cycle is very different. There was normal our order cycle is somewhere around 10 to 20 weeks, we normally set out. okay? It used to be 10 to 16 weeks, but it can be 10 to 20, it can normally go up. But I think as strategic orders are concerned, we are not guiding on the execution. But basically, what I said is that the statistic order should go in the next 3 quarters, actually read as wise. And as regards to organic order book is concerned, we feel that within the 18 to 20 weeks, you should get built out.

Okay. Sorry, can you the strategic order and your door I'm sorry, that attachment is not...

I mentioned very clearly, INR 1,600 crores is the strategic order, INR 472 crores is the organic and INR 327 crores is L1 which is again organic.

Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand the conference over to the management for the closing comments.

Thank you. Thank you for taking your time and joining us. Thank you so much. Appreciate your interest. Thanks a lot.

Thank you, on behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.