Premier Explosives Limited (526247) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Premier Explosives Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. I, on behalf of Stellar Investor Relations, welcome you all to Premier Explosives Limited Q1 FY '24 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the first quarter ended June 30, 2023. We have with us today the senior management team of Premier Explosives Limited, Mr. T.V. Chowdary and Managing Director; and Mr. Srihari Pakalapati, Chief Financial Officer. Before we begin, I would like to state that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you. Now I invite Mr. Chowdary to share his initial remarks on the company's performance for the quarter.

Thank you, Vishal, and good afternoon, everyone. Thank you for joining the call. We'll begin the call with company's operational performance during the quarter followed by the key industry update. The recent highlight for the company has been strong order inflow. We had started the physical 2024 with an order book of INR 521 crores and additionally received order inflow of almost INR 725 crores in the year till date. Our current outstanding order book stands at approximately INR 1,108 crores, a strong growth of 71% year-on-year and 113% quarter-on-quarter. And translates into 5.5x of our financial year '23 revenue. Execution of these orders will help us to bid for bigger and better order from Indian defense industry as well as from the foreign defense entities. Let me take you through the new order update as on date. Ministry of Defense IAF supply of chaffs for INR 292.11 crores and supply of flares for INR 260.15 crores, including of GST, each to be executed in 12 months. Ministry of Defense, Air headquarters supplying 50 mm MTV flares for INR 76.78 crores to be executed in 12 months, including GST. Bharat Dynamics Limited supplying of attached booster grains for INR 5.73 crores, including GST to be executed in 12 months. Bharat Dynamics Limited supplying of P1 and P2 motors for QRSAM INR 43.26 crores, inclusive of GST to be delivered in 24 months. And L&T Limited supplying of PSOM-XL motors for INR 13.94 crores, inclusive of GST to be delivered in 12 months. In our previous conference call, we have already informed about the new developments on DRDO technologies, which have been already transferred to us, and we are fully working on those technologies. We have also informed that we have completed the design and development of various products for foreign entities and for export purpose, and we have started supplying the export against these. The bulk export orders we received and we started supplying. Latest things which we have already informed is we have exported 1 container of 160 mm rocket motors, and we have exported 104 numbers of warheads. And we have also exported another 100 numbers of rocket motors in the past 2 months. Coming to quarter's performance, during quarter 1 financial year '24, Premier Explosives supported excellent performance on overall level. Our revenue for the quarter increased by 20% year-on-year and 18% quarter-on-quarter to INR 62 crores, highest revenue post the COVID-19 pandemic. Premier Explosives have achieved highest ever EBITDA margins of 27% in Q1 '24, which is a significant improvement mainly on the back of higher execution and contribution from defense contract. Consequently, the PAT margin of 13% was also the highest ever. And outlook for Premier is, Premier is the only qualified Indian company for countermeasures and the only Indian company, which is in export of fully assembled rocket motors. In addition to the rocket motors and warheads, production of mines against new orders is going on at Katepally. This is expected to give good boost to revenue in the coming quarters and financial year '25 -- '24/'25. In terms of cash flows, we have generated healthy cash profit of INR 10.91 crores with the execution run rate stable and given the nature of our cost structure. The operating leverage of our business will help us to generate better cash flow, which will be utilized towards strengthening of our balance sheet. Coming on the defense industry. The defense industry status about different -- the production, growth from 12% -- rose from -- rose to 12% from year-on-year and crossed INR 1 trillion mark for the first time ever. And exports of the defense products has surged to INR 16,000 crores. The Indian government and Defense Ministry are trying to reduce the dependence on imports from the foreign nations. India was the world's largest arms importer in the past decade and was dependent on Russia for more than 50% of its military supplies. Total value of India's local defense production has jumped to INR 1.07 trillion in financial year '23 and is raising. In order to overcome the obstacles faced by domestic manufacturers and promote local defense products, the government of India is constantly collaborating with the domestic defense companies. Since the Government of India has started with the Atmanirbhar Bharat initiative, it has helped to encourage the domestic technology development to build a self-reliant India in future. The Defense Acquisition Procedure, DAP, prioritizes the indigenization of sourcing, manufacture, research and development as well as software and other high-tech applications. By 2025, Defense Production and Export Promotion Policy 2020 seeks to generate revenue of INR 1.75 trillion, including INR 350 billion in exports of aerospace and defense items and services. It also aims to move away from licensed production in favor of local design, development and manufacture. This program maintains to double domestic industry procurement from INR 700 billion to INR 1.40 trillion by 2025 with the aim to boost the domestic defense industry. Coming on the aerospace industry, with the success in establishing SSLV, that is Small Satellite Launch Vehicle and Government of India's encouragement to private sector to take up satellite launching. On a commercial basis, opportunities are opening in space deals. And these are expected to fructify in the coming 4 to 5 years. And Premier -- as you are aware, the Premier is very well entrenched in this and qualified as a vendor for the propellant casting and around these motors. That is PSLV, PSOM-XL. SSLVs and new area where Premier has already done at Sriharikota. Now opportunity is opening up to do in the private industry. Now we'll share key highlights from the mining industry. The mining industry where the coal is the major mining sector. As per the Ministry of Coal, the domestic coal production has achieved a remarkable feet with a substantial surge in overall coal production during May 2023, reaching at 17.26 metric tonnes -- million tonnes, sorry, surpassing May 2022 mark, with an increase of 7.1% year-on-year. The collect -- the coal production in April, May financial year '24 jumped to 149.41 metric tonnes -- million tonnes from 438.41 million tonnes, with a growth of 8% year-on-year. The all India production of coal during '22, '23 rose to 893.08 million tonnes, with a positive growth of 14.76% as against FY '21/'22, it's 778.21 million tonnes. The Government on Coal India has unveiled a futuristic plan, indicating that the country must move from open cut mining to underground mining, which is more beneficial to the environment by quadrupling production from the underground mine to 100 million tonnes by financial year '28. Government wants to increase the share of underground mining of coal for sustainable mining sector through the Atmanirbhar Bharat model. By 2030, the Coal Ministry is expecting to increase the share of underground mines, coal to 10% from the current mining level of 4%. Also, the CIL has prepared the road map to achieve the target shared by the ministry. To achieve the undergone mining vision, coal companies need to be upgraded itself with the largest technology side -- with the latest technologies and scaling the production of underground mining will help to reduce the importing of coolant, further it will help us saving far more today. Thank you. Now I request our CFO, Mr. Srihari to share financial performance.

Thank you, sir. Good afternoon, everyone. The result presentation for the quarter has been uploaded on the stock exchanges and on the company's website. I believe you all may have gone through the same. Now I would present the financial results for the first quarter ended June 30, 2023.. The revenue from operations for Q1 FY '24 stands at INR 62 crores as compared to INR 51.8 crores in the corresponding increase last year, which saw a growth of 20% year-on-year and 18% quarter-on-quarter. Our operating profit for Q1 FY '24 stands at INR 16.7 crores as compared to INR 5.8 crores with a growth of 187%. The operating margin for the quarter stands at 27%, which is the highest ever EBITDA margin in the history of Premier Explosives, which is already shared by Mr. Chowdary in his initial remarks. In Q1 FY '24, we reported a net profit of INR 8.2 crores compared to INR 1.3 crores in Q1 FY '23 with a growth of 5% to 12% as compared to the corresponding period last year. And even on the net profit margin, Premier Explosives have achieved the highest ever PAT margin in the history of Premier. Now coming to the order book. The company's current total outlook stands at INR 1,108 crores, out of which the higher margin defense segment forms that majority, which is at INR 908 crores, which is 82% of our total of order book. Explosive segment stands at INR 77 crores and service segment that is the operational maintenance is INR 123 crores. During the quarter -- as on -- or with the order book -- domestic order book contains 87% on export orders that contained 13% of the total order book. The order book represents a solid and strong growth over the previous year. We are very much confident that with our improvement in execution run rate, we expect forthcoming quarters will be continuing with our growth trajectory. With this, now -- with this, we'll now open the floor for questions and answers. Thank you very much.

[Operator Instructions] The first question is from the line of Aman Vij from Astute Investment Management.

My first question is on the flares and chaffs business, which we recently got. So if you can talk about -- so what we understand, typically, these are consumables. But the usage will be normally looking at the history, is it like the usage is once per every year? Or how long is the replacement cycle, if you can talk about it? And what is -- the annual requirements of India as of now, what we understand is that we are the only approved player in this. So then in that case, is rest of the products imported. So if you can explain this industry a little bit more? And where do we see the repeat orders coming in? If you can talk about that? This is the first question.

Yes. This orders what we got are emergency procurement orders, which we have to meet the requirement in 12 months' time, so that the Indian Air Force can replenish all their things. And afterwards, these have got a shelf life, and they are also consumed for training and practice and all purposes. So after this, then we have regular consumption for this. It may not be at this level that in 12 months we get such a big order, but there will be -- consistently there will be offtake.

I'm sorry. So typically, it's like 20%, 30% replenishment is done every year. And also, if you can talk about where is India currently getting its requirement. Is it through imports? Are we import substitution? What is the addressable market on the chaffs? These were the first question.

It's not clear. It's feature is not clear.

Sir, is it better now?

Yes, yes, please. Go ahead.

I was trying to understand, you mentioned that normally, the product is used in training and exercises also. And the repeat order won't be to the same extent. But typically, it is like replenishment if we talk about, is it like 10%, 20% is used in a year. If you can talk about the same, then if you can also talk about -- as of now, the products plus this players and chaffs were they getting imported in India? We are an import substitution? Or what is the addressable market? Because maybe these are specific for a particular kind of aircrafts, but India will procure more aircrafts, so example, Rafale and all those things which are coming up. So if you can just explain the market what it is currently and also the offtake, like normally every year, replenishment will be like 10%, 20%, 30% or a bit lower, if you can talk about the same.

I will talk about the aircraft and other issues rather than about the quantities. Yes, what we are -- now the orders what we receive are for both kind of aircraft. That is NATO dispensing systems and also for the Russian dispensing systems. The orders what we receive cover all kinds of chaffs and flares used in both. There are always 2 types of systems used on this. And these are being made as import substitution. And as Atmanirbhar India, we are making these. And the quantities, of course, like I mentioned, it will not be such a large quantity in the future. But there will be always consistently, there will be an offtake of something between 10% to 20% of current market value.

Perfect. My second question is on the grenade side. So last time you explained that the trials by the MOD is basically the customer is spending and they are expected to come any time to our facility. So if you can talk about the same when they are expected to come. And also, what will be the time line after that? So if they visit in next month or after that, there will be RFP. When can we actually start supplying the grenades product, which you can talk about briefly.

I don't think we can comment on that because it is not like a consumer industry like coal industry, where consistently this much finding is there, then we can offtake and all those. Because these are need-based orders placed by MOD as per the requirement. So we cannot say that every month or after 1 month or 2 months order will come out like that. So that's difficult to say.

No, no, sir. I was talking about the other product, grenade. For that, we are still expecting the order, right? I'm just trying to understand when is the inspection due? You talked about the first trial, which we were supposed to do is done. But now the customer is supposed to do the trial...

Okay. I think -- like I mentioned, the speech is somehow it's not very clear. We are finding it difficult to understand and reply. But still I understand you asked about the grenade ammunition.

Yes, yes, sir.

Grenade ammunition, we have participated under DCPP program and the development part and all those are completed as per DCPP. And we have also established our production facility, and we just submitted 2 for our clearance, and it is expected any day clearance. And in the meantime, we started getting queries from the paramilitary forces and other agencies about our status of -- our supply status and on preparedness, we are taking up. And I think coming -- in this financial year, I think we'll be working on that and then probably we'll be participating in RFPs. Our delivery starting is different, but RFPs have to come and participate, and they have delayed converted into others, then deliveries will start.

Sir, these will be small orders like INR 10 crore, INR 20 crores? Or do we expect like INR 50 crore, INR 100 crore of RFPs and orders in these grenades over the full year?

These grenades also orders will be big only. When we get -- if we get army order, they should be large orders. But if we get paramilitary forces orders, there will be multiple orders of smaller value.

And you expect RFP to happen this year only, right?

Yes.

I have more questions, I'll come back in the queue.

The next question is from the line of Niraj Mansingka from White Pine Investment Management Private Limited.

Sir, question on the QRSAM, the orders that we have received, is there any part of QRSAM order that you have received?

No. QRSAM orders have not yet come. It's only smaller quantities from DRDO, we are waiting and then we are -- that is as part of the development of it. But production outlooks have not yet come.

Okay. So can you give us some clarity when you expect that to have come in and what quantum can it be?

We have submitted different queries to answer the queries and all those, but the quantities appear to be 400, 500 numbers. But we have to get response and all those things. But yes, the smaller numbers for qualification trials and all those, we are producing and giving them and they are being tested at DRDO.

And are you the only supplier for the same or is there other partner players also who have got clear some?

As on date, Propellants, we are the only supplier.

Got it. Okay. And sir, can you give some more clarity in the last quarter, you had said that you are participating in RFP for ammunitions for 4 variants.

Little louder, please.

So last conference call, you had said that you had participated in the RFP for 4 variants for ammunitions. Can you give some more color on that.

No, I think in the last call, we have given some answers with regard to the RFPs. So actually, I was asked about the percentage in place and [indiscernible], which we complete large number, which has been materializing now. So RFP is a continuous process which are -- so which is relating to so many products.

Got it. And sir, regarding your Israel export order of rocket motors, do you see more scale up happening from 100 units that you have exported or you see on a run rate of, I think, 50 units a month you average there. So do you see that increasing further from you? Or you can see that continuing on the same rates?

We expect them to increase.

Okay. And in terms of your capacity, how much of the capacity for you to manufacture the chaffs and flares and -- or let me put in this way, what can be the revenue potential from maximum utilization of the chaffs and flares that you have got the order for.

Like you have mentioned, the 50% of the order, we can execute in the current financial year. Balance 50% will go to next financial year.

The next question is from the line of Dhaval Shah from Girik Capital.

Sir, a little bit of repetition of the question asked previously. I would just want to understand of this INR 550 crore order, which we have, after what interval will the replenishment or will be required by the customer, and what is the time line?

I don't think we'll be able to answer this. These are all MOD decisions and these things, I don't think we can comment on this figures.

Okay. Fine. And before we got this order, these products were being imported in the country? Or how was it?

Yes. Earlier, they were being in project. But past 3 years, we are supplying. Premier only is supplying these.

Got it. Got it. And how do you see this -- the order book momentum which we have built up? How do you see that going forward? What is the intensity of orders you expect to get?

As we are delivering, the more and more confidence is building up in the customers and we are getting orders, and we expect this to continue the trend. Whether it is for export, our export customers, our domestic customers, we have proven ourselves as a dependable and deliverable -- delivering people.

So when you say the trend, you mean the trend of getting like INR 500 crores, INR 600 crores order per year? Or what -- how do you define the trend?

Yes, that is -- our target is to grow and although INR 500 crores, INR 600 crores target is there, even higher than that. So...

Okay. Okay. And last question...

I think earlier several interactions I expressed, that we are multiple projects we are in missile and then other projects, which are in development crossing. So as 1 project gets into production and coming to a completion, then the second one takes over. Like Akash 1 has [indiscernible] fuel does and then we have done well and Akash and all those. Now Akash is tapering out and [indiscernible] are taking over. And that similarly exports what we are doing. The more and more others are coming for development and execution. So we hope that the same trend will continue.

Got it. And last question, so we did INR 60 crore in September quarter also September '22. And then -- and now also that similar top line where the margin difference is huge. So if you can elaborate on that on the product mix side, what explains this big margin improvement.

This is mainly due to the product mix, which can be even in defense. There are some products which can give us a good margin. Some products which may give us the less margins. But in this particular case, the product mix makes the difference.

And how do you see your margin trajectory for the current year?

No, it will be improved. As explained in earlier question, it will be improved. And actually, if you remember the previous call, [indiscernible] selling to be around 20% range kind of margin EBITDA. So I think we will stand by with that.

The next question is from the line of Prabir from Ratnabali.

I'm Pankaj Gupta from Ratnabali Investments. Sir, congratulations for the excellent set of results and also the historical order in which you have received in this quarter. Sir, my first question is slightly repetitive. But sir, whether this emergency orders, which we have received from chaffs and flares, will it be able to suffice the entire backlog of our country? Or this is just a part of initial part, which the MOD or our government is giving as an emergency measures to fulfill a small part of it.

Again, we will come back to the same question about quantities. I don't think we can comment on the MOD's requirements and what future procurement plans and all those things. From our part we can say is, definitely, it will not be at this level every year, this is an emergency procurement. But we have bouquets of products. It is different like that's what I was explaining. 1 year, 1 product make a core another other product. So we hope that we will sustain this kind of momentum and the overall turnover and base.

And sir, can we assume that we would be the only suppliers of these kind of requirements in the near to medium term?

As on date, we are the only qualified vendor, Indian vendor. And MOD has taken a decision to procure from local supplier only. So as always, we are the only. In future, of course, we can't say if somebody has developed are coming to it.

Sir, excellent. Sir, last quarter, you were saying that there were some approvals pending for the export order to dispatch, whether we have received the entire approval and the pending export order of say, INR 100 crores plus when we expect it to deliver.

This export deliveries, yes, they are [indiscernible] some of them have won and some even deliveries to MOD, which we're waiting for inspection has been completed. So the reflection of those deliveries has appeared in the first quarter performance and the results. And balance, it is like the deliveries have to be made periodically like it's not every month. We -- every 3 months, the inspections are done and the lots are dispatched, whether it is [ claymore ] or our export commitments.

Okay. And sir, over the last few years, we have deliberately been slow on getting the orders from the commercial, mining and explosives because of very high volatility in our raw material prices. So what is our view going forward? Is there any new RFP requirement, which is coming for bidding and what would be our strategy? Because right now, the raw material prices have stabilized. So if you could give some color also on our exclusive business.

You're right, in the past 2, 3 years, we were slow on the industrial explosives part because the prices were -- selling prices were low and then the raw material prices have gone up like anything, major raw material cost. So that was becoming a burden. But still where we -- our commitments are there, we still service those commitments. And new commitments, we are not taken where it is not. So that helps pay dividends, and then we have come back to our healthy profit making process. And now the raw material prices also have stabilized for industrial explosives and the costs have come down and prices also have stabilized. With that, we are again back into the business in full swing. So we'll continue to be in that line. We are not going to quit that.

Okay. Okay. Sir, one more question. Sir, do we -- we also foresee any kind of strategic tie-ups, et cetera to enhance our capability and get into new things where India may not be self-sufficient, technology-wise.

Yes. Lot of activities going on, which -- where more and more products are being added for this thing. You have seen the past 2 years how many are added in the defense line. Aerospace, aerospace is another area where the strap-on motor, if you see it in Katepally facility 3 years back, it started. And slowly, it picked up and we qualified. And today, now we started servicing the bulk production after. That L&T are one of them. And so new things which we are going to add, which are in the development stage and going all on various other mines, ammunition and warheads, these are continuing.

And sir, I think -- are we also a part of this Chandrayaan mission?

Sir, may we request that you return to the question queue. There are participants waiting for their turn.

Sure, sure.

The next question is from the line of Jayesh Shah from Ohm Portfolio Equi Research.

Congratulations, sir, for super solid numbers. I'm new to the company. So perhaps my question is basic. But just wanted to get a sense on, what do you think is the normalized operations that you can have in terms of, say, sales revenue? Where are your capacities right now? And is it fair to expect as you had been indicating that now we can look at an order book inflow of between INR 500 crores to INR 700 crores per annum? Or is it more?

As on date, we -- of course, the citing is different, but we foresee a consistent order book of the same around INR 500 crores, INR 550 crores per annum.

I see, I see. And what will be the peak revenue potential of your existing capacities?

Product mix, different products, different capacities, facilities and all those. We have all the products so that it is not that one product will depend. And defense products, today what is an emergency procurement bulk tomorrow, it cannot be there. So we have built up our bouquet that this product or that product and all it keeps on coming. So that way, we have enormous capacity.

I see. So do I understand that this means that your revenue can be volatile quarter-on-quarter pertaining on the product mix.

Yes, quarter-on-quarter it will not be consistent because it depends on the deliveries made. So we may be producing but holding it and then when we deliver it, it comes. So there will be fluctuation in revenue.

I see. I see. But is it fair to expect that given the order flow and the order book that you have, you are looking at a sizable jump from your current scale of, say, INR 200 crores per annum to stabilize at something like, say, INR 300 crores to INR 400 crores per annum?

We are expecting even bigger than that. Like I mentioned, we are looking at something like above INR 500 crores per annum not INR 200 crores.

I see. So in a way, INR 500 crores plus of order book and INR 500 crores of revenue could be a sustainable thing.

Yes.

And how is the working capital cycle, sir?

So actually, in defense, the working capital cycle is more compared to these but now at this moment, the defense working capital, which is about almost INR 120 billion to INR 140 billion.

Okay. And is there some retention value that one has to actually leave on the table? And how much is the upfront advance that you normally get?

So normally, there is -- there are only few cases where there is an advance clause, at least in these 2 large orders, there is an advanced clause, which we are going to claim for these. Second thing is not necessarily mean that there should be advanced in every contract, need not be.

Right, right. And how is the retention thing?

Retention is not there, at least in this order. Yes, there are retention money. Some of the small contracts from DL kind of thing, but even that can be claimed by submitting the bank [ FDF ] not that money is stuck there.

The next question is from the line of Milan Shah from Urmil Research.

Congratulation for great number and wish for the same. Sir, my question is we have got this huge order, we have that capacity or we have to add for fulfill the order?

We have the capacity, sir. We have already built in the capacity.

Okay. And what is the percentage raw material of imported for these orders, or raw material we are used for manufacturing, which is required to import.

This will be within the parameter special with the MOD.

The next question is from the line of Dikshit Doshi from Whitestone Financial Advisor Private Limited.

Congratulations for a good order win. Sir, my first question is regarding the orders. So as of today, let's say, how much worth of orders we have tender or bidded and awaiting the results?

I don't think we'll be able to add up the tender. There are so many tenders and it's a regular ongoing process.

Okay. But then roughly -- so last quarter, you mentioned that we have participated in INR 600 crores...

That time, we had this big one in our range. So we could mention that. But every tender cannot be a big tender like this. So we have multiple so many so that's a little difficult to do content on.

Okay. And secondly, sir, on the margins. So you guided that we can do a sustainable 20% kind of margin. But at the same time, you also mentioned that in the current quarter, due to the product mix, the margins are at historical high of 25%. So now going forward, that the product mix will be very much tilted towards the defense side. So do you feel that the 20% margins, which you are guiding is too low or you feel that the current execution and the future orders have a different margin.

No, that actually we are -- normally, we have given the guidance of 20%. There will be some improve -- I mean, there may be some improvement again, maybe that lets us think in the -- let me tell, in the quarter-to-quarter because some quarters, it may be high but on an average of I think it should be [indiscernible].

Okay. And this quarter, was there any significant improvement in the margins in the exclusive business, commercial exclusive?

They also contributed to some extent there. It's not that they have significant, but they also -- all division of the company have contributed to some extent to reach this level.

Okay. And my last question on the export side. So over the last couple of years, we were getting a small, small orders. And obviously, the client were also testing our products. But now we have started the deliveries like you mentioned in last 2, 3 months, the deliveries have gone up. So do you expect any significant order wins over the next 12 to 15 months from the defense side? Or you feel that this current INR 100 crore, INR 130 crore kind of order book of defense can significantly go up over the next 2, 3 years?

I think we have already announced orders, which earlier what you said about small orders for development orders and from development orders, we already -- 4 are from development others. Now we already got the bulk supply orders, which time to time we were announcing and they are being executed now.

The next question is from the line of Vivek Gautam from GS Investments.

Sir, congratulations on a good set of numbers. Hopefully, it's not a one-off and sustainable. Sir, one thing I just wanted to know about was the upcoming projects like basically, the BrahMos and SSLV products, what are the likely time line for them? And second question is our company is one of -- we have started recently [ tracking ] the company, our company is one of the oldest company -- and is it the best time you are facing and so far the business journey. The company was founded way back in 1980 by Dr. Gupta. And that's just what about the second generation, who is the next generation, what are the succession planning? That is also important for the investors in the company.

As you said, this was started in 1980 by Mr. Gupta. Until recently, he was leading the company and even guiding us. Now because of [indiscernible]. Now this is now run by the professionals, this has been run by professions with the guidance of Mr. Gupta.

Yes, right from the beginning, Mr. Gupta, himself being a professional Gold medalist in the Mining Engineering and then with his professional background, he has run the company as a professional company and then with full delegation and all those. So today, yes, because of that, even though he doesn't sit every day on every issue. So the company is running, and it is progressing based on the foundation. So this -- and as far as the succession is concerned, right now, I am the CEO and Managing Director. I am associated with the company for the past 36 years. So -- and the next generation, next generation, yes, we have our own plans and within the company, the people who are growing and also family, Dr. Gupta's family members are also in queue. So I think we have enough safeguards put in place so that the company runs in the course in which it is put. And even today, Dr. Gupta is available to us. His long experience is available to us on every day if we need, and we will keep on using that.

Okay, sir. And what about the...

And likely time line for business, BrahMos and SSLV products and other pipeline -- upcoming projects in pipeline, if you can throw some light, sir?

It may take 5, 6 years, not less than that for fully targeting commercialized.

And we had -- BrahMos also some point was -- technology transfer and...

Yes, it is still going on -- BrahMos technology transfer is going on. See, when technology transfer process what happens is, we have to conduct several trials of the composition. And finally, when you achieve all the characters needed, then you have to go in a cast big models to small models and then big models and all those. So we are going through that. I think by the end of this year, I think we'll be fully qualified for BrahMos.

And lastly, sir, about the basically, is it the best time in the business ever since on cooperation, we are facing, thanks to the Atmanirbhar scheme. And because the company is listed since a very long time. And now the better triggers are coming in and the future look much better than earlier time?

Yes, yes. In fact, if you look at the list -- positive domestic production list if you would see that, you can identify which are in our line and then those are all -- we are working already on that, and those are expected to give us the future revenue from defense.

The next question is from the line of Mousumi Paul from Equentis Advisory.

So congratulations on the good results. I just wanted to understand that your order book has doubled in the last 1 year. And are we expecting the same order book trajectory in the coming quarters? Can you tell me in percentage wise, what we can expect?

Yes. Actually if you see our order book, most of the order book around 720 orders has been added in the first 3.5 month. Okay. So we will be getting the orders on a continuous basis, but it may not be as big as -- so -- but current year, in FY '24 -- '23-'24, we already received INR 725 crores. Okay. So we will keep getting the orders on a small scale.

Okay. So how much time does it take for you to execute the orders?

Next 12 months to 18 months. Next 12 months to 18 months most of the orders.

Okay. And with this kind of strong order book, what is the scope of margin improvement in the coming quarters?

So we have given the guidance which is more or less a guidance, which we were talking about an average of 20% per quarter.

Next question is from the line of Naitik Mohata from Sequent Investment.

Sir, I wanted to understand on the margins side again. So we have a domestic book, which has large chunk of defense order. I just wanted to understand if defense has a very high margin compared to other 2 segments of the business. Then why we are like guiding on the conservative side of 20%, cannot we do around maybe in the range of 23%, 25%? Just wanted to understand why are we guiding on the conservative side on margin.

No. We can -- I mean, it is not that we have given at around 20%. I think if you see the last year, it was 13%. So we are already making it to 20%. Yes, we are able to give them much better this time line.

So this -- I think that -- if you can give the breakup of this margin, so we have a difference of INR 900 crores, order book of INR 900 crores of an explosive and then service segment. So can you give the margin breakup between these 3 segments?

No, sir. We normally don't give that in segment wise.

Okay. Okay. Okay, sir. And sir, if you can give any color on the order pipeline, which we are looking for the next 2, 3 quarters. So just want to understand, we have a very like large order book as of now. So any color on the pipeline, what kind of pipeline we are seeing, a quantitative ballpark number will be helpful, sir. I just wanted to understand on the revenue side, like what...

Received INR 725 crores in last end of month. So getting some orders on a regular basis on this thing, but it's not that we will receive [indiscernible] in the next 3 months. It is a -- we'll keep on getting the orders, so that is the case.

So maybe our order book will again go back to a normalized number of INR 100 crores to INR 150 crores per quarter. Is my understanding correct?

Yes, we will be receiving, because we are producing so many different products, not only space -- so many other products. We will keep on getting the orders that will be added to the order book. And at the same time, we will be executing orders. That is a regular process.

The next question is from the line of Rushabh Doshi from Nirmiti Investment Advisory LLP.

Yes. I'm [ wondering ] on the great set of numbers. So I had one on bookkeeping question and another question. So I just wanted understand like what is the GST rate on the orders which we receive? So I just wanted to reconcile the order book and revenue. And secondly, like this quarter, we just talked to that other expenses are quite low. So could we assume that depends on other expense line item be structurally lower? And secondly, on the employee cost side, last year, like INR 200 crore revenue, the employee cost was around 25%. And I don't think that we have a plan of significantly increasing this number. So on a INR 500 crores, INR 550 crores of revenue this cost would shrink materially. So I just wanted to understand like is 18%, 20% EBITDA margin a conservative guidance? Or it can be high because the employee cost was only add, I guess, 8%, 9% additional on the EBITDA.

So there are 2 questions. One other expenses. Other expenses have gone down. Yes, because there was a significant reduction in the export expenses because last year similar quarter, there was an export of about INR 12 crores to INR 13 crores [indiscernible] expenditure of about INR 2 crores, which is not the case in this present quarter, first part. So because of that significant amount of [ fire ] have come down. Second thing, actually employee cost. Yes, there was -- because we are going forward, we have most of the employee costs related to the fixed component, which will not be increased in line with the revenues. Going forward, when the revenues are going up, automatically the employee costs will come down, that will be reflected mostly in '23-'24 and especially in '24-'25. You can see that the significant reduction in employee percentage on the overall revenues.

Yes. And the GST rate for the difference of orders?

Sorry, I didn't get you.

I just wanted the GST rate on defense orders, like if it's a construct rate across products.

What's the rate you are asking.

GST rate, Goods and Services Tax.

I can't hear you, sir. Can you please say again?

I just want -- am I audible now?