Zen Technologies Limited (533339) Earnings Call Transcript & Summary

Welcome to the Zen Technologies Limited Q4 FY 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Ms. Teena Virmani from Motilal Oswal. Thank you, and over to you.

Thank you, Swapnil. Good afternoon, everyone, and thank you for joining us for the quarter 4 FY '25 Earnings Conference Call of Zen Technologies Limited. We are pleased to welcome the management team of Zen Technologies to this call, Mr. Ashok Atluri, Chairman and Managing Director; Mr. Afzal Malkani, CFO; Ms. Shilpa, Whole-Time Director; and Ms. Abhilasha Atluri from Investor Relations. We will start today's call with a brief overview of company's performance, after which we will open the floor for question and answer. With that, I now hand over the call to Mr. Afzal first for the compliance-related disclosures and then to Mr. Ashok for his opening remarks. Over to you, sir.

Yes. Good afternoon, everyone. So the results and investor updates have already been e-mailed to you and are also available on the stock exchanges. If anyone has not received a copy, please let us know. We will be happy to send it over. Before we begin, I would like to remind you that today's discussion may include forward-looking statements, which must be viewed in conjunction with the risks and uncertainties that the company faces. These are detailed in our internal reports and other public disclosures. We will start today's call with a brief overview of the company's performance, after which we will open the floor for the question and answer. With that, I now hand over to our Chairman and Managing Director, Mr. Ashok Atluri, for his opening remarks. Thank you.

Good afternoon to fellow investors and other participants here. So I just -- I'm assuming that you have seen the presentation, and I will not go delve into the presentation itself, but I'll talk about some peripheral points which may be of interest to the investors. So one of the questions which should be worrying investors is about the order book position -- their order book position. So my -- I have indicated that we should be getting about INR 800 crores worth of orders by the H1. And I think we still are on to it. In addition to that, there may be some other orders, which because of the recent operations, there may be something additional in that -- in those areas. These orders that I'm talking about INR 800 crores are all simulators. So the other segment orders may be activated due to the pressure that -- due to the recent actions that our neighbors have taken against us. And -- so just to understand the anti-drone systems that we have, we started R&D in 2018. In fact, we were the only private company to the best of my knowledge that was -- everybody else was screaming drones, and we were thinking why isn't anyone talking about anti-drone systems and this complete silence on that regard. And we saw the signal in the silence and we decided that we should focus entirely on that. And around that time, we acquired UTS, a team of extremely competent experts led by Srinivasa Raju and Nagendra Prasad. So Dr. Nagendra Prasad and our bet proved very, very prescient. And while they were doing a lot of other projects, we tried to focus exclusively on anti-drone systems. And the results have been very, very encouraging. Again, this was a long 4-, 5-year kind of research, and it's still ongoing. It's an extreme amount of investment and still ongoing because the threats are evolving, the new threats that are coming are being accommodated in the product. Even though we initially started, the product typically has a lot of components. We initially started with detector and jammer. But later, we added the radar, which was again created, which is a multiyear at least 5, 6 years of effort, which was created in less than a year kind of situation because we were really hard pressed for time, the electronic optics, everything is now in-house. So we are completely giving a Made in India solution to the design developed and made in India. I always say I hate just Made in India because I like design and develop also to be added to that. So yes, this was a complete design, developed and Made in India solution to it. And while in the initial -- in the first tender that was floated by the Armed Forces had buy Indian category, you could get a foreign collaborator. In '23, when they floated the RFP, they insisted on IDDM. That means to say even the technology and the IP in the product should be owned by Indians, Indian companies. And that is where we had -- even though initially, we had about 12 companies, finally, only 2 companies came for the trials and only one company emerged as a resultant single vendor in that because we were the only company that was able to comply with the requirements there. What was the requirements? The requirements were very -- in the sense, typically, most of the anti-drone system in the world handle only 2 frequencies, 2.4 gigahertz and 5.8 gigahertz, which are basically commercial frequencies. But the reality is our bet was that the actual war when it will happen, it will not be the commercial frequencies that will be tapped, but it will be -- it may be any frequency. So we have to develop an anti-drone system that was band independent, not band dependent. So that is a solution that we were able to make. And now we have that solution, and that solution has been very, very helpful to our armed forces. So I think the bet was very, very early taken early on. And we are -- as we speak, a lot of improvements, a lot of feedbacks are being incorporated. And I think we'll absolutely have a world-class anti-drone system, which will help India to be absolutely unbeatable in any war, India and its allies, whichever Indian government feels, we'll be supplying to them too. So this is the statement with anti-drone systems. Again, we are hearing a lot of statements about anti-drone systems, but we really have to see whether this is indigenously designed, developed and made -- again, we have been tested, and we have been proven beyond doubt that we have -- by the government, we qualified in IDDM case. So we know that we have been tested. We have to see any competition in this regard from any other vendor. So another question was that with respect to -- I have been always saying that 50% average CAGR growth is expected. My confidence still is there that the average rate will continue. But again, because of the delay in receiving the order, this year may be muted. But again, from 900 to -- 900 was -- prediction was made when it was INR 900 crores, so INR 900 crores if you take that as a base, INR 1,350 crores, INR 2,000 crores and INR 3,000 crores. So it will be a little more than INR 6,000 crores in the next 3 years. We still feel confident that we can achieve those figures. And again, we have to be -- as a company, this is what we could do, but government, we feel should be doing a little more aggressively in the sense after the pager incident in Israel, which happened in which Israelis gave the pagers to Hamas and they activated it after a long few months, probably a little longer than that, and they were able to kill them. So we actually believe that a lot of the Chinese stuff, which is there in India is actually that kind of stuff, their cars, their weapons, because they control the software, especially electric cars are very, very dangerous. At least the government should take control of the software. We think that the mobile phones, they are completely, very dangerous. They should look at -- probably looking at the software and try to take control of the software. Otherwise, we'll be in big trouble with China. So -- and I'm very sure you might have read the article where even the solar farms can be switched off by the Chinese when they want because they have switch in the panels, which can be activated and put off. So I think we -- I'll open the floor for question and answer. And if there is anything that -- any clarification required, I'll be more than happy to answer them. Yes, the floor is open now.

[Operator Instructions]

Abhishek, I think we should keep in mind that we want to end this in 1 hour. There will be no extension. So we should treat the time very preciously and try to close it. See that everybody is accommodated. And can you request the questions to be -- I mean, let them be long, but as brief as possible.

Sir, we will take care of that. Ladies and gentlemen, we will have our first question from Mr. Amit Dixit from ICICI Securities.

Congratulations for a good performance, a record quarter and record year. I have a couple of questions. The first one is that in the proposed revisions to DAP, we have seen that there was a mention of simulators being contemplated for reducing the testing time. Have you seen any traction around that particular aspiration of the government? And anything you hear on that front? That is my first question.

Yes. So the simulators are actually now being used in the shipping acquisitions, especially for products where it's very, very difficult to do an NCNC because they are actually built to purpose. It's already there, but I think they want to make it more generic. This is one of the suggestions. DAP was released in 2016 and then 2020. Now it's due for revision and the suggestions are coming in. One of the suggestion is using simulation as a way to do the trials instead of actually doing the equipment. I have on my own reservations, but this should be -- I feel that it should be applied very, very sparingly. And to your question that what would be our involvement, we maybe get involved as the opportunity evolves. But at this point in time, we don't see much role for them to play in this kind of simulated evaluation.

Okay. The second one is essentially on the delay in ordering that we have seen. So do you attribute this to the general delay that we saw last year, I mean, because of general election? Or is there some more structural element to it because we saw a few orders, a few bulky orders being expedited. But unfortunately, our, I would say, gamut of products or services didn't kind of evolve. But after this conflict, do you see some more chance of at least ADS happening? You mentioned in your prepared remarks, but just wanted to get a little bit more clarity on it. There is a budget of INR 40,000 crores emergency procurement being talked about. So I just wanted to get a little bit more color on that aspect.

Yes, Amit, I think the orders, again, the government was -- to be fair to the government, they were actually consolidating the requirement of the anti-drone systems to really understand what -- how much is the requirement, when to procure, et cetera. So the other bulky orders were placed on other equipment. But even as an industry, we do feel that they probably have placed, but the fact was they were trying to assemble. But this is a fortunate for us, the Operation SINDOOR has been, I would say, a stroke of luck in the sense for the dastardly act that was committed, that was a really, really bad act. But post that, what happened was a stroke of luck for us in the sense we were able to actually go destroy 10x of what they did to -- damage they did to us. And then we were able to test our equipment and government was able to see what happens in the real world. And of course, it was also almost like a PR and marketing stand for the Indian equipment where we were proved beyond doubt that our equipment works. So I think post the horrible -- horrific incident, what has happened is actually very good in my estimate. And we -- and now we see that there is a sense of urgency, absolute sense of urgency to acquire these new age war equipment, the drones and the anti-drone stuff. Yes, I'd say to your question, the short answer is, yes, we think that the government has really, really appreciated the role of the drones and anti-drone systems, and they are accelerating the procurement. And we think companies like Zen will benefit from this new sense of urgency that the government has.

We have our next question coming in from the line of Mr. Krishna P.

My first question is regarding the DRDO anti-drone. We are part of the DRDO system. How we are part of that, sir, anti-drone system, what we are supplying to them?

So Zen doesn't supply anything to DRDO. Our subsidiary, which has developed the anti-drone system, they have also collaborated with DRDO and they supply the jammer and the detector. I think maybe a little part of that, but these are the 2 major elements that UTS has collaborated with DRDO to supply to them.

Okay, sir. My second question is regarding the chip. Are we designing the chip, sir, for the much we are using in our systems?

No, Krishna, we are not designing the chip ourselves. We are making use of ready-made chips. So again, our dependency is not on a particular chipset. What has happened during COVID was COVID and Ukraine war a lot of -- there were shortage of chips. So we had to design multiple times the same chipset, the same PCB with different chipsets. So we are chip independent. We are not tied to any chip. But -- of course, but the chips are not made by us. They are procured from foreign sources. And we are built -- it's like think of the product like a Windows operating system or the Intel chip, we buy from outside, we build the applications around that. So that's what. The chips are still procured from abroad. We are hoping that with the new policy that the government has done for semiconductor, some of these chips will be made in India eventually. But as of now, most of the chips are procured from abroad, but again, from non-Chinese sources.

Okay. Sir, Bhairav Robotics, they have any patent, sir? You have not mentioned anything about the patent. The acquisition of Bhairav...

We have applied for some patents and I think the patents have yet to be granted. They have been applied, I think.

Okay, sir. One more last question, sir. Sir, in anti-drone, now we are saying with the laser technology, the drones are filled up. Are we working on that?

No, laser technology, we are not integrated. I think the laser technology was found wanting in the current operation. So -- but we have integrated the L70 weapon. We have integrated -- and we have launched this remote control weapon stations through AI Turing. And those weapon stations can be integrated with anti-drone systems. And also those remote control weapon stations can be used independently of the ADS. So this is the market that's growing -- showing a lot of interest in our products. And so we look forward to those accretive sales also as we go ahead.

[Operator Instructions] We will have our next question coming in from CA Garvit Goyal, Nvest Analytics Advisory LLP.

Congrats for a good set of numbers. My first question is on the guidance. Like you mentioned FY '26 is expected to be muted one, although medium to longer-term guidance is very much aggressive. So can you put some color on why we are looking for a muted FY '26 despite the current environment that you mentioned, the government is increasing the procurement -- emergency procurement particularly after the incident happened with our neighbor country. So that is my first question, sir.

So Goyal, the thing is that while the orders -- so I think -- we think the order book position will improve significantly, and that may happen by the end of H1. And so by that time, if we get the orders, how much of it can be executed during the current year is a question. So that we will come to know as we go ahead in the couple of months, I think we'll be in a better position. But we are saying that by the end of H1, we should definitely have a very clear picture, possibly a clear picture. And as soon as we get, we'll share this year's thing. And the reason is -- even if the orders come, a lot of orders, the execution will spill into the next financial year. And -- so that is the reason we are saying that we are not -- this year will be muted.

And we say this year will be muted, is it will be like -- can you put any number to it, like 10% kind of growth or anything like that?

I'm not putting any number to it, Goyal. I -- unfortunately, the thing looks tentative at this point in time. And I'm a very aggressive number giver. If I have even a slightest inkling, I go ahead and give the number. But at this point in time, I'm restraining myself from doing that.

And 50% CAGR is intact for next 3 years, right?

Yes. Cumulatively, we think, yes, it comes to about INR 6,000 crores plus of turnover in the FY '26 to '28, FY '28. And we think that, that's achievable.

So that means for FY '28, you are looking for a INR 6,000 crores kind of turnover, right?

No, no. It's a cumulative turnover.

Cumulative turnover...

Our prediction was -- the base is INR 900 crores. So FY '26 would have been INR 1,350 crores, which we think will not happen. Our FY '27 would have been INR 2,000 crores and FY '28 would have been INR 3,000 crores. So when you add up, it's a bit more than INR 6,000 crores. So that was...

Got your point. Got your point. And just last one thing on the margin side, sir. Are we able to maintain the kind of margins that we are doing currently?

So we have given a guidance of margins of 25% and 35%, 25% PAT and 35% EBITDA. And even if you see this time, even though it looks a little more, our operational income, if you take out the interest income that we have got from the QIP raise, the net comes to around that region only 25% for PAT and 35% for EBITDA margin.

And we'll maintain that, right?

Yes, we feel very confident about those margins, yes.

Our next question is coming in from Mr. [ Akshay Patel from AK Investment ].

Congratulations, sir, on the great set of numbers. Sir, my first question is that recently BEL gets order of INR 572 crores for counter drone systems. So are we also expecting some order flow to also come in this quarter as now the government has expedited procurement for the defense equipments and all these things.

Yes, we are expecting orders to come during this quarter and next quarter. At least in the H1, we are expecting some orders to come through for anti-drone systems, yes.

Okay, sir. And sir, just in the context of the industry, so how many players currently are in India that is developing the anti-drone system? And what might be our market share in the anti-drone solutions in India? And also, can you put some light on the global anti-drone defense solution?

I think the indigenously developed IDDM category in India, I'm not aware of any other company than Zen where all the products like detector, jammer, radar, EO, any hard kill integration has been done. So we are the only company in the private sector for sure. And we expect that this -- again, to the question, in 2023, we participated in a tender 1.5 years back, and that was an open tender with the specific specs which were absolutely suitable for actual operations. And there are no other -- no public sector or private sector company even qualified in the trials. We were the only company that qualified. So to your question, the answer is that Zen is way ahead in terms of technology in these products. And if they want war tested technology, Zen is the way to go. But again, to your question, who are the other players? DRDO has transferred technology to from 5, 6 companies. So they are the other players with the DRDO technology. But again, no one has done the self-funding like we have done, and no one has the technology that we have and nobody has been tested the way we have been tested in actual situations.

All right, sir. And can you please put some light on our U.S. business expansion and what is the traction over there? We are expecting significant orders to come in FY '27. So are these things intact?

Yes. So yes. So the work in the U.S. is going on. I think he's getting a lot of business for U.S. and our move to U.S. was well planned. We have now at least 4 people working there for us, very senior resources who are designed going and meeting customers, attending exhibitions. And we think we will be getting some business. FY '27 should be the year in which we should get the orders. Yes, we are still -- that's -- the plan is intact.

Okay, sir. All right. And the order book -- consolidated order book consist of all 3 recently acquired companies like ARI, Bhairav Robotics and Vector Technics or is it our stand-alone order book?

INR 692 crores is our stand-alone thing. They have additionally, I think, at least INR 100-plus crores. So that would be another INR 100 crores. Consolidated would be way bigger than that. Yes. But yes, the INR 692 crores is stand-alone only.

Our next question is coming in from the line of Mr. Raj Mohan Vaikundaraman, who is a professional investor.

Congratulations on a great set of numbers. Basically, in the anti-drone, especially in the light of Operation SINDOOR, you had also indicated 2 use of our equipment in an interview. Could you quantify the value of anti-drone of Zen that got used was our hard kill used? There were mentions of D4 anti-dronees. So I was just trying to understand how did Zen fit in in terms of value as well as in terms of quality?

Obviously, Raj Mohan, these are the questions that we will not be able to answer the specifics. So, again, my feedback is based on the ground feedback that we received from the forces and where was it used, how much was it used is something that I would not -- I don't know. And even if I knew, I would not be able to share that because of the restrictions that we have. But broadly, our systems were used, and we have got a lot of thankful notes from the people who are there. And there were significant interceptions. We know that if they were not there, probably it would have been a bad situation. But yes, for a significant intervention were done by our ADS.

That's really great. Congratulations on that. Next, on the acquisition, especially on ARIPL and the synergies that Zen would provide. From your internal assessment, does it feel combining weapon with commercial simulator could create a scale multiplier different to the growth trajectory of ARIPL. Like Zen from what it was 3, 4 years back, about INR 150-odd crore company to INR 900 crores now. Could a similar thing play out here in ARIPL?

So that, Raj Mohan, it's a very insightful question. I think you're really doing a good homework on this. So this is exactly the plan that what we did for the Army, we want to do in the field of naval simulation also. And there is a lot of demand for the naval simulation. And this -- the ARI has all the products that are required minus the weapon simulator, which Zen has which are used in naval products. And Navy is certainly acquiring very, very big role. Again, I told -- maybe I shared earlier, but we just focused with the land borders that we have. But when you turn around the map of India, a huge ocean that is there where everyone from America, U.S., Russia, everyone is interested in that part of the ocean, and it has a lot of sense -- a lot of trade that's happening. So yes, I think this is a very good acquisition that we have. And I really want to thank Shravan who built that company so that we really, really think that this was a great acquisition. And it was good for -- it is going to be very good for the country and also for the friendly navies around the world. Yes, I think this is a very big story. If we get the -- if we crack the code, this could really run into multiple. Of course, INR 900 crores includes the anti-drone systems also. So this INR 4 crores, INR 5 crores, INR 100 crores kind of turnover is something that can be achieved with ARI. I definitely feel maybe much more than that.

That's great. One final question. Similarly for, say, Vector Technics, basically, what is the kind of market opportunity they indicated to 23 product lines in the last quarter call. Generally, I wanted to understand in terms of scale of opportunity that this company provides.

So as we speak, post the recent event, these guys have gone -- they're going really big, and they are getting a lot of -- lots of calls as I speak for the components that they are developing. And they are also getting pressure to develop new R&D. So one is the developed products, they are setting up the manufacturing facility so they can deliver on scale. Second is developing new products, which they have a prototype to be into commercially available products. So Raj Mohan, I think it should be tens of crores in the immediate future. But eventually, it's running into at least INR 300 crores, INR 400 crores kind of thing.

Thank you very much, sir, for your insightful answers. And though I understand there are a lot of pressure in terms of objectively determining and expressing you are trying to be as best as possible trying to give us the answers. Thank you very much and best wishes on bagging quicker orders.

We will have our next question coming in from the line of Mr. [ Mehul Panjwani from 40 Cents ].

Okay. And first of all, I would like to congratulate the entire Zen team because we are talking about that we are playing a very significant role in the nation's defense system. So that's amazing to be associated with such a great company. Sir, I have a question on UTS, which is you mentioned that primarily the anti-drone system developed by UTS was provided to the DRDO. So when did we acquire UTS? And how much is it contributing to the turnover of Zen?

So we -- the acquisition was between 2018 and 2019, we acquired the company and we started developing the anti-drone systems. And in terms of the turnover, I think the exact turnover, I'll just -- I'll ask Afzal to share. But yes, UTS has single-handedly developed the complete anti-drone, all the components of the thing. Of course, the electronic optics, which is now becoming very important, have been developed by AI Turing, but other part, including the radar. Radar is a decade-long project, but pulled it off very, very fast. We started the effort and we kind of lagged between, but this was a really short term that Raju and Nagendra were able to pull it off. And yes, so again, Afzal, could you just share the figures?

Yes, sure. So out of the total revenue, it's around INR 125 crores to INR 130 crores. This is around the contribution, yes.

The quarter?

Total for the year.

Okay. Sir, my next question is on -- I'm new to the -- I'm newly tracking this company. So I would like to understand -- I would like you to please list down all the subsidiaries which we have and how much is our holding? Is it like we are 100% holding each of the subsidiary or how much is the...

[indiscernible] in each of the -- how much we hold in each of the companies, right? And list of the companies.

Yes, list of the companies and what are they specializing in, sorry.

Yes. Okay. Thank God. You did ask. So I think I'll tell you UTS is there, of course. And then we have ARI, which is into naval simulation. Then we have AI Turing that is into remote controlled weapon station. And then we have Bhairav that is into robotics. And then we have Vector that into the drone ecosystem. So these are the major ones that we have -- of course, we have subsidiaries in the U.S. and these companies also have their own subsidiaries. But these are the major segments that we play in.

Right. And do we hold 100% of the subsidies or...

No, no. Some are 51%. Some are even, in fact, Bhairav is 45% or so. It's different. ARI is 100%.

Right, sir. Sir, last question from my side. So where do we see that some of the defense areas where we don't have products, where are the gaps which we have still? I mean, I know defense is a very wide area, but pardon my ignorance here.

So we -- I mean, there are a lot of things, artillery, tanks. We don't do a lot of things. But what we have taken a call is what is the Pareto focus. Initially, we were just focusing on training because training was the most hit. But now we are trying to focus on 2 areas. One is the drone ecosystem, anti-drone systems and drone, we think these will absolutely determine who's going to win awards. So we're really focused on that. The second is this robotics part of automated weapon system and robots themselves. So these are 2 things we think are really, really Pareto in determining who is going to win award. And so we are focused on that. And the rest of the thing, we don't have any plans as such, and so we'll be just focusing on them.

Once again I'm really -- feels great to be associated with this organization.

We will have our next question coming in from Rudresh Kalyani, Kalyani Private Business.

Yes. Recently, Indian government project from the Armenia, so have we got anything from that bucket?

You are saying did Zen get any orders from Armenia? So we, again, Rudresh, unfortunately, we cannot name the countries from which we have got the orders. But we have done almost INR 300 crores worth of order execution this year of exports. And typically, our countries that we deal with are Africa, CIS and Middle East. So this is a broad classification that we have. But the countries, when they sign the contract, they make us -- they tell us that we cannot share the details of what we have purchased, how much we have purchased. And we honor because it kind of gives away some kind of their preparation levels. So that's the point, yes.

Yes. On this -- with our products being tested in Operation SINDOOR, so get any inputs from the Indian Army products so that when we relaunch in the next version, we can make use of it and come up with a better product?

Yes, Rudresh, absolutely. As we speak, the inputs are helping improve the products that we have. And typically, what we do is not only for the new products, but existing products also we try to give the technology away free so that the government is better prepared and they don't have to buy new equipment. So yes, the inputs are being -- some have been gathered. They are still being gathered. And as and when we get the things, they will be incorporated into the new systems and to make them absolutely state-of-the-art.

Okay. And see, I think this is the first time we use product in the domestic market. So what are the lessons for us from this, what was the lessons which we got from the -- when we used it in Armenian region?

I don't know for sure your intelligence says that we are in Armenia, I can't help that. But anyway, so the thing is that there is no -- I wouldn't say that what was the gap there. But here, what we got is really, really good imports. And we -- again, I think that this is not the end of the war, and this is just a pause and this is a pause where we should really, really regroup and put in our best efforts to upgrade our systems. And next time, it's not going to be a simple war. I think not with one neighbor, but it will be a multifront war, and we should be prepared to handle multiple enemies at the same time. So that means to say that we really need to ramp up from domestic technology only, we cannot import this technology. If we import -- we are on our own. We have seen this time, everybody was -- no one came to our aid. Everybody is busy with their own life or they will not help you. So this has to be indigenously developed. And the Zen is moving earth and heaven to see that these technologies are developed. Our teams are really sweating out the days and night to ensure that we have the absolute #1 technology in the world. I think we are on track for that, Rudresh.

Okay. And my final question is, if you see then 5 years or 10 years down the line, how will be our revenue breakup like between the simulation [indiscernible] like that?

I think anti-drone when you start adding the hard kill and the and all the other options, we think that anti-drone will become a significant segment. And of course, we have drones also now. We'll be getting into drones also. So that will, I think, probably be around 70% of the business, drones, anti-drones and hard kill options will be about 70%. And 5 years' time, maybe 30% will be training and simulation.

Our next question is from [ Gyan Prakash Yadav ], who is an individual investor.

Congratulations for the good set of numbers. Just wanted to know what's the present cash balance we have on hand? And what's the plan for the utilization of same? Secondly, then I would like to verify what was the revenue from the ARI? That's all, sir.

So I'll pass it on to Afzal to answer this question. Afzal, floor is yours.

Yes, sure. So total cash balance is around INR 1,037 crores, out of which INR 410 crores is from the proceeds of the QIP and INR 625 crores for the Zen's internal accruals. So total cash balance is INR 1,037 crores. Most of the cash balance we are going to utilize for this organic and inorganic growth, both. And financial year 2024, '25 ARIPL revenue was around INR 137 crores.

Sir, ARI got included to us, I think, only in February. So whole INR 137 crores is for them for the whole year, right, sir?

Yes, for the whole year, yes.

Okay. And sir, any acquisition planned in future because we have lots of cash in hand?

We have been working on that. Okay?

Noted, sir. That's all.

Our next question is coming in from the line of Raj Rishi from DCPL.

Hi sir, can you hear me?

Mr. Rishi, can you speak a bit louder.

Can you hear me now?

Yes, we can hear you.

Yes. This constant news flow of defense spending being increased or be forced to increase like after this Trump administration has come in, talk of EU upping the percentage of GDP to almost 5% that's what Mr. Trump is asking them to do. So significant -- some people say it's like sort of a defense super cycle world over. So how do you stand to benefit from, say, Europe upping the defense spend the way it's being talked about?

I think the impression was that wars have ended and there will be no significant wars. So that has been -- that belief has been completely appended by Ukraine and Russia and prior to that, Armenia and Azerbaijan. And so this -- the thing is a strong neighbor is a good neighbor kind of thing. It's better to have stronger neighbors. So this spend of GDP of 5% is a welcome change because especially if it is defensive, not offensive use. And how is Zen going to benefit out of this? One is that we are setting up our office in U.S. and I think the decision was a little prescient, and they are going to benefit a lot from that. And asking EU to spend and EU themselves said that we are going to spend $800 billion, and it will be mostly internal. So the good news was we were talking to somebody who are a neighbor consultant and what they told us was that this is a very good opportunity for Indian industry, not only for Zen because there will be a free trade agreement that may be signed with them. So we are trying to get prepared for that free trade opportunity with EU. So I think this is a very, very big opportunity, especially if your products are world-class and you -- like we feel our simulators, naval simulators and simulator and anti-drone systems are world-class. And as we speak, even our drone ecosystem -- for the drone ecosystem, Vector is being approached by European and American companies. So I think we are there to take advantage of this.

Sir, one more question. Like what's your vision about Indian defense spend? Like right now, it's around 1.9%. Do you expect like this -- what would be your perception over the next year or so?

Raj, very frankly, there is X and a function of X. The function of X is how much am I getting out of the total spend. So I would be really focused on that. They should spend smart. I don't think they should just increase for the sake of increasing. Can they leverage? Can they -- somebody was saying they should buy F-35. F-35 is the worst kind of aircraft. Elon Musk has gone on record and saying it's broken that requirement. It is jack of all worst value for money in the military history, but still some people are talking about it. So if they spend smart, I think they really don't have to increase the thing, spending smart would be the key to thing. So I don't have any wish list that from 1.9%, they should spend 5% or 3%. I don't have any wish list like that at all. The only thing is they should spend strategically on the Pareto technologies, and I think -- and we are in that field. If they act in a focused and Pareto way, we will benefit from that.

[Operator Instructions] We have our next question coming in from Vinay Anand, who is a private investor. Mr. Anand, please go ahead and ask your question. It seems there is a connection issue Vinay Anand. We will go forward with our next question from [ Aryan Oswal from Finterest Capital ].

Congratulations on a good set of numbers, sir. Sir, my question is on the line of cash conversion cycle. We have seen a significant decline in the last couple of years. So are we expecting further decline? Or where do we expect the cash conversion to be for the next year?

I'll let Afzal answer that.

So last quarter, our cash conversion cycle was around 237 days. And on 31st March 2025, our cash conversion cycle was reduced to 160 days. If we give the further breakup, then receivable was 148 days, 20 days for the inventory, 9 days for the advance to supplier. The total of these 3 comes 177 days. And if we deduct 5 days for these payables and 12 days for the advance from customers, then net working capital cycle is 160 days. And going forward, we are expecting in the range of around 135 to 140 days.

135 to 140 days, is that correct, sir?

Yes, for next year.

Okay. And sir, one more question is how much are we looking to spend on R&D for the next year and for the next FY 26' and '27?

So there is INR 70 crore expenditure that we are doing for setting up the R&D facility and another INR 5 crores for the equipment, et cetera. But again, Aryan, the thing here is that we are very opportunistic. We get -- so these are -- even though people give 5-year plan budgets and all that, we do give the budgets. But as and when the opportunity arises, as and when some new gap is seen in our product, we go after that. So at present, we are doing already R&D expenditure of around INR 35 crores. So we expect this to go to INR 50 crores to INR 60 crores on a consistent basis. But there may be a large investment when required to ensure that we are able to supply the required technology that is asked by the armed forces.

Next question is coming in from Dipen Vakil from PhillipCapital.

Congratulations on a great performance and also in your role in Operation SINDOOR. Sir, my first question is on the line of, sir, your fourth quarter performance was largely driven by the export segment, which has even more or less dried your export order book now. So any outlook in terms of export orders that you're expecting in near term? And so how do you see your export business panning out in say [ FY '16 ]? How is the visibility on export business?

So export business, our discussions are ongoing. And I think there's a large -- now post the recent crisis, we think that the conversations have changed, and they want the equipment that we were initially offering, but they said we don't want that. They were trying to buy the commercial drone neutralizing version. It is only a toy actually. And most of the 90% of the companies make that anti-drone system, which only neutralizes 2.4 and 5.8 gigahertz, DJI drones. But now with this thing, people have come to know that this is a band independent field and people will come after us. So that has changed the conversation in the export market for us and the export guys have been now asking about this -- these information. So once we are able to fulfill the extraordinary need for the Indian Armed Forces, then post that, we'll definitely be focusing on exports also. But the conversations have started, and there is a huge demand for anti-drone systems in the abroad. And of course, the training simulator demand is still going on. We are talking about the Army simulators and naval simulators. There's a lot of demand for naval simulators, a lot of conversation. ARI themselves have a very large export setup for INR 100 crore company, they have a really very, very robust export setup. Even though it's more commercial focused, we are leveraging them to get into the Navy also in various foreign countries. So I think the exports -- we'll start getting the orders. We don't have orders in hand, but we should be getting -- start getting the orders sometime maybe a couple of quarters from now.

Got it, sir. Apologies for the repeat question, but possible for you to reiterate your order inflow guidance?

Yes. So we think by H1, end of H1, we should be having about INR 800 crores. Out of that INR 150 crores we have already received, another INR 650 crores we will be receiving by H1, and that's our expectation. That is what I have said earlier also, and still we feel that holds good.

And that is largely coming in from the simulator side?

Yes, it's all simulators as of now, yes.

Ladies and gentlemen, due to paucity of time, we will take questions from 2 more last participants. Our next question is coming in from Ajay Surya from Niveshaay.

Sir, looking at the recent war the necessity along with the opportunity the size for anti-drone is quite big and important. But sir, if you can break the opportunity size and share more details because even under the anti-drone there are several type of components and based on the requirement of Indian Army, maybe like the radar sensors, jamming, hard kill, command control, et cetera, so I wanted to understand if you can break the opportunity size and does the Indian Army give order as a single segment order or a multiple segment order, like, maybe they require a jamming, anti-drone, so they'll give an order to a player like us or do they want jamming plus hard kill, so is it a multiple segment order? So if you can also share details on how does the order cycle or procurement happens?

So there are different kind of necessities that they have. For example, they may have a very, very small portable requirement where they say, listen, I just want to neutralize commercial range of drones. So that's a different thing. So -- but a comprehensive solution, good that you brought up command and control center also, that's the software that binds all the hardware together and it's the soul and the heart of the thing. So I've not been speaking about it, but that's a very, very major thing that we also -- we have developed and we use that. So when they need a comprehensive solution with the radar detector, jammer, electronic optics and a hard kill with a robust command and control center and ability to handle noncommercial band independent drones, Zen is the vendor to go to. We don't think anybody else is doing that at this point in time. And that was, again, in '23, there was a tender, and we didn't have anyone qualifying there. So I think Zen is positioned for these high-end kind of simulators. To your question, if somebody just wants to buy a radar or a jammer or a detector, typically, they would be very useless in case of an attack, especially from the armed forces point of view. So -- and given the fact that even though earlier, most of the drones were -- even now in this, there are a lot of drones that were coming through with a ground control kind of situation. But in future, we expect them to be autonomous. So for handling the autonomous, it's a different game altogether because the videos are also very advanced. Autonomous will probably be doing hard kill kind of situation. They're no longer the soft kill will work. So that evolution is happening as we speak. But I think as on today, Zen is the go-to company for giving this full threat solutions to the Indian armed forces.

So sir, based on this, the bigger opportunity lies in maybe the hard kill and command control, is my understanding right? And this is the area which Zen is dominant and want to focus going ahead. This is my understanding...

No, no. Command and control center is a software which binds together. So it has to go along with the system. Some people say that our command and control is independent. Maybe it is, but we have our -- think of Apple versus PC. PC world, you can keep buying everything in assemble, but Apple gives a complete full-fledged solution. Think of it as Apple Mac kind of a solution. And yes, we think the whole has a lot of market. What was your second question, we don't sell CMC separately. We sell it only as a package.

Okay. just like breaking the opportunity, the bigger -- larger opportunity even in the anti-drone segment wise, if you can break that up, like -- maybe like INR 5,000 crores, INR 10,000 crore market. So maybe the hard kill would be INR 1,000 crores kind of market or...

So we -- I think you are right, Ajay, your sense that the thing is moving towards hard kill is absolutely right. So we'll have -- that thing is right. But we got the estimate for this project to be around INR 10,000 crores. This was about 2.5 years back. But that figure is no longer valid. It's much, much larger than that at this point in time. And we -- it's a multiple of that, not just a little percentage. So we think that market size has increased tremendously as we speak. And we think that we should be getting some reasonable chunk out of that.

We will take our last question from Manan Vandur from Wallfort PMS.

It's been a pleasure speaking with you for so many quarters. Sir, in Q1, okay, you spoke about you all had a SIM Expo, which happened in Orlando. And you said that you had a stall over there and you got inquiries for containerized tank simulators in that export. And you said that at Orlando -- in Orlando, the next 5-year budget of Orlando, they are having huge demand for that. And you said that we are already making it for the Indian Army for the decade. And you said that we will -- we might start exporting, et cetera, et cetera. So it's been a year. Any update on that, sir?

This was last November, last November, December with the expo is called ITSEC, it's a simulation exhibition. So in that, they were -- they came to approach us for -- with the R&D proposal for doing R&D for -- out of -- for the next 5 years, they were having R&D budget. They said, can you make containerized tank simulator with our funding. So we said we already have it and we connected to India and showed it live to them. And so yes, the fact that we have is known to them now. So the budgets are being formed and we have informed them that these are the things. So we -- now we are waiting for them to actually float a tender. The tenders may be floated next year, not earlier than that. Typically, that's a 1-, 1.5-year cycle before the float the tender.

Okay. Understood. And sir, the next question -- the last question is on that we had numerous new products like Hawkeye, Barbarik, Prahasta, Sthir Stab 640. All of those -- all those new products we have started supplying?

No, no. So we have started -- some of them, we have started conducting trials. And we think that during the year, some orders will start trickling in, but they will become much, much larger next year. But this year, we should definitely be getting some orders in this -- in the segment that you spoke of, RCWS and surveillance stations.

Okay. Understood. Because for those products itself, you had said that these new products itself will become new revenue streams and thousands of crores, hence...

Eventually, they will, if we are able to integrate them with anti-drone system, they will be the hard kill part of the thing and they can become very, very big for us. There's no doubt about that.

Ladies and gentlemen, that was the last question for today. I will now hand it over back to Ashok, sir. Over to you, sir.

So thank you, fellow investors and other participants who are here. It's always a pleasure interacting and the questions that are asked usually are high quality, and I'm pleased that the tradition continues. Again, we are open the [email protected] is address -- e-mail address that you can -- if any of you have not been answered the question, you can send your questions there. And we look forward to your continued association with the company. Thank you so much.

Thank you. On behalf of Zen Technologies Limited, that concludes today's conference call. Thank you for joining us, and you may click the leave icon to exit the meeting. Thank you for your participation.