Q4 24/25

May 26, 2025

Summary

Q4 rebounded strongly, while FY25 consolidated results remained burdened by Canadian subsidiary losses. FY26 guidance calls for 18%-20% consolidated revenue growth, 25%-28% standalone growth and a possible 10% consolidated EBITDA margin.

Ladies and gentlemen, good day and welcome to the Centum Electronics Limited Q4 FY 2025 earnings conference call hosted by Nirmal Bang Equities Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star, then Zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Jyoti. Thank you, and over to you, ma'am. Thank you, Anushka. Good afternoon, everyone. On behalf of Nirmal Bang Institutional Equities, we welcome you to the Q4 FY 2025 earnings call with the management of Centum Electronics Limited. We have with us Mr. Nikhil Mallavarapu, Executive Director, and Mr. K. S. Desikan, Chief Financial Officer. Without further ado, I would now request Mr. Nikhil Mallavarapu, sir, to start with his opening comments, after which we can open the floor for question and answers. Thank you, sir, and over to you, sir. Thank you, Jyoti, and good afternoon, everyone. Warm welcome to all of you to our earnings call to discuss the performance of the fourth quarter and financial year 2025. Let me first mention a special thanks to our host of today's con call at Nirmal Bang. Now let me start by briefing you on the key performance highlights for the quarter and the year under review, after which our CFO, Mr. Desikan, will take you through the financial highlights. In the fourth quarter under review, we delivered a strong performance with consolidated revenue from operations growing by 24% year-on-year and 31% sequentially. This robust growth was primarily driven by a strong performance in our build-to-specification or BTS business, especially with our domestic defense and space customers. Additionally, our EMS business maintained a solid momentum and contributed meaningfully to the overall growth. EBITDA and EBITDA margins at a consolidated level grew well, driven by higher billings in the BTS segment. Looking at the full year, consolidated revenue grew by 6% year-on-year. However, it is important to note that certain contracts are accounted on a net basis rather than on gross basis. On a gross basis, these contracts were valued at approximately INR 82 crores, resulting in a gross revenue growth of 13% year-on-year. While standalone revenues grew by 18% year-on-year, the subsidiary revenues declined due to softness in certain customer segments. For the full year, while margins in our core business improved, we faced some headwinds from our Canadian subsidiary. We are taking decisive actions to address those challenges. In our French engineering services business, we've initiated certain cost optimization measures and are shifting focus towards defense aerospace customers as we believe this will enhance both utilization rates and profitability going forward. Our total order book position stands at INR 1,736 crores as of March 31, 2025. On a standalone basis itself, the order book increased to INR 1,330 crores, up from INR 1,118 crores at the end of the previous financial year. This was driven primarily by the strong order inflows in the BTS segment for defense and space customers. On the balance sheet front, our working capital has increased at a consolidated level to 87 days, primarily due to higher billings in Q4. As you may also know, we successfully raised INR 210 crores from our marquee investors via a QIP during the last quarter, which reflects a strong confidence in our company's future growth potential. The fund utilization has been for debt reduction of INR 115 crores, out of which we've already repaid INR 110 crores, while the remaining funds are strategically allocated towards CapEx and general corporate purposes. In conclusion, I'm happy to report to you a strong turnaround in our performance in the fourth quarter with a very healthy order book and many strategic initiatives on cost optimization underway. We are confident of a much healthier FY 2026. Lastly, before I hand over the call to Desikan, I'd like to take a moment to reflect on a very important milestone. As you may have read in our board outcome, Mr. Desikan, our long-serving CFO, has decided to superannuate. Desikan has been an integral part of Centum for the last 25 years. His journey has been nothing short of extraordinary, and he has been a key driver for our financial strategy and discipline, but also a pillar of strength through many transformations the company has undergone. His contributions have placed Centum on a solid financial footing and built the strong foundation we stand on today. While we will miss his presence and guidance, we are happy that he leaves the company in a much stronger position with the right systems and culture in place. On behalf of the entire Centum family, I thank him for his unwavering dedication, integrity and service. Mr. Desikan will be succeeded by Mr. Sundararajan Parthasarathy, who has come on board as CFO designate. Sundar brings with him 25 years of rich and diverse experience across sectors such as healthcare, automotive, energy, infrastructure, water technology, HR services, and green energy. A qualified chartered accountant, Sundar was most recently the first global CFO at Agratas, a Tata enterprise, and has previously held leadership roles at Brakes India, Sandoz, GE, Xylem and Adecco. With that, I will now hand over the call to Mr. V. Sukumaran to take you through the financials for one last time in this role. Thank you. Thank you, Nikhil, for those kind words, and thanks, everyone, for their support throughout my career. For the fourth quarter at a standalone level, the revenue from operation was about INR 270 crores, which grew by around 49% quarter-on-quarter and 60% year-on-year. The EBITDA for the quarter was about INR 47 crores, which grew by around 120% quarter-on-quarter and 175% year-on-year. With one of the best quarterly EBITDA margins, we have reported 17.37%. The net profit for the quarter was around INR 30 crores, which grew by around 225% quarter-on-quarter and 240% year-on-year. For the fourth quarter under review at a consolidated level, the revenue from operations grew by 31% quarter-on-quarter and 24% year-on-year to around INR 369 crores. The EBITDA for the quarter was INR 42 crores, which grew by around 115% quarter-on-quarter and 132% year-on-year. With EBITDA margin reported at 11.31%. The net profit for the quarter was around INR 22 crores with PAT margin of 5.83%. For the full year FY 2025 at a standalone level, the revenue from operation was about INR 750 crores, representing a growth of 18.5% year-on-year. The EBITDA for the period was about INR 102 crores, which increased by around 30% year-on-year, with the EBITDA margins reported at 13.6%. The net profit for the period was around INR 53 crores, which grew by 46% year-on-year. For the full year FY 2025, at a consolidated level, the revenue from operations were INR 1,155 crores, which grew by 6% year-on-year. The EBITDA stood at around INR 97 crores, which increased by 12.6%, with EBITDA margin at 8.37%. The net loss for the year was around INR 2 crores. With that, we can open the floor for Q&A session. Thank you very much. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rupesh Tatya from Intelsense Capital. Please proceed. Hello, sir. Thank you for the opportunity. My question is, I wanted to understand which are the programs in Indian defense ecosystem you are present in. I don't think we have ever talked about it. If you can give some color about whether you're present in Sukhoi, some missile programs, what are the naval programs? Some color on that would be really helpful. Understood. Very quickly, as you may have noted from our earnings presentation, defense space and aerospace account for more than 50% of our overall revenues. This comes from all the three different service offerings that we provide. We have certain projects which are in the build to spec domain, where we are responsible right from the design to manufacturing of the products. In the standalone entity on this part, our customers are typically the public sector units, DRDO, ISRO, and also hopefully in the coming future, directly to the tri-services as well. Then similarly, we also do in the EMS part of the business, where we are manufacturing products to customers' designs. In this part of the business, it's largely export-oriented to global customers. These again span different applications and different programs, and we are a strategic supplier and integrator into the global supply chain of these large global OEMs. Then the third is also on the engineering services front. We engage with, again, the global OEMs on designing parts of their global programs and R&D pipeline. To answer your question in terms of more specifically which programs that we are engaged, again, on the build to spec side of it, our strength lies broadly in two domains here. First is space systems. Space has been an area that we have been involved for well over 23, 24 years. We have moved up the value chain from being a niche microelectronic component supplier to now delivering full satellite payloads. To that end, we have certain programs that are ongoing for defense applications where we are designing and manufacturing and delivering payloads for electronic intelligence applications, and a few others. Then apart from this, coming to radar is another area that we have a strong presence in. We build various subsystems for some critical programs, one of them being the VL-SRSAM program. We have an important contribution to that, which we just won a significant order in the past year. Apart from that, also on land systems, it's been an area that we have been present in. We have been on board many different missile programs manufactured by BDL. In addition to that, also on tank electronics, we have a strong presence on the different tank platforms, including the T-90, where we have indigenized various Russian imported items. These are a few, and then in addition to this, on the EMS part of the business, we are also on board with several different programs, both again on a global level as well as in India itself. The key ones that you would hear about is on the Rafale itself, the Rafale fighters, where we are again building critical electronics for the platform, for the radar and the electronic warfare system of the platform. In addition to that, we are also exporting electronics to customers in the Middle East, which are again, more on missile programs, not necessarily for India, but for global requirements as well. So these are just a few examples of the points, but it is clearly an important part of our overall business. Thank you for that detailed answer, sir. In one of the slides, you have given your standalone order books split, right? So BTS is INR 664 crores and EMS is INR 665 crores. So this INR 664 crores, in all of this, is it a correct understanding that we will create prototype, we will give it to one of the DPSUs or directly to the ministry, then we will get a part number, then there will be some production in future. Some of it is already production, and then some of it is production in future, 2, 3 years. Is that a fair understanding on this INR 664 crores of order book on the BTS side in standalone? Yes. That is right. Okay. Then final question, sir, is on standalone between EMS and BTS, can you give some idea about the relative gross margin? I'll maybe speak a little bit more at probably the EBITDA margin level. These are clearly different margin profiles, basically because the build-to-spec obviously involves the whole design and associated value add that goes with it. So your typical EBITDA margin for build-to-spec can be in the range of 20% or so. Whereas on the EMS side of the business, it's more build to print, and that is typically in the 10%-12% level or so. In terms of gross margin, it can vary again, depending on contract to contract, but typically a normal industry benchmark on the EMS side of the business is material cost percentage of somewhere in the range of about 75 odd percent. Whereas on the build-to-spec side of it can be much lower than that, maybe closer to 50% or so. That should give you a high level picture of this. Maybe just to conclude this INR 75 crore BTS revenue, is it fair that it will grow at a high rate in next three, four years and we can hit let's say INR 100 crore revenue in three, four years? Yes, that's the objective. I think with the increase in the order book that we've experienced in the past year, we feel that we are on the right trajectory to do that, basically. Yeah. Okay. Thank you. I will come back in a little. Thank you for answering my questions. Thank you. The next question is from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please proceed. Hello, Nikhil. Congrats on a good set of Q4. A couple of questions. In the beginning of FY 2025, you mentioned that this EMS license will be transferred for FY 2025. This time, which vertical you feel that in FY 2026 will you go to? Second, if I look at your EMS order book growth between FY 2022 to FY 2025, it shows a muted kind of growth, a little slightly negative. Along with that, you mentioned that we intend to move to a new EMS category, SMPV. From which industries those clients are coming, and when you expect that those bookings will start being recorded? Yeah. Thanks, Chirag, for the questions. Could you kindly just repeat again the first question? I got your second question, which was with regard to order book on the EMS part of the business and which customers or segments that we are growing. Could you repeat again the first part? Yeah. So if you look at the FY 2025 full year performance, since you said that EMS has led this in terms of growth and margin and all. So for FY 2026, which vertical you expect to lead the show in terms of growth in standalone business? Just addition to the order book question, if you look at the ER&D order book, it's remaining muted. Is this a strategic call that we are not taking the contracts in that subsidiary which is located outside India to manage the margin too and reduce the cost and all? Understood. Yeah. Okay. At a high level, first of all, I think as you rightly pointed out, we've seen strong growth in the EMS business in the past year, especially when you look at it on a gross revenue basis. We expect that growth momentum to continue. Basically, at a standalone level, both the EMS and the BTS part of the business should grow for us at a blended rate of somewhere in the range of about 25%-28%. You may have a little bit higher growth coming from BTS in the coming year and maybe slightly lesser in the EMS. But we do expect also a healthy growth rate coming in on the EMS business. To answer your question with regard to the view on order book, I think broadly speaking, there's two factors there. One is with existing and new customers, on typical basis, the order horizon of the firm purchase orders from our customers, will vary depending on the way the supply chain situation looks. Now, over the past, if you go back to 12 or 18 months ago, if you remember, there was customers still giving us a longer horizon of firm purchase orders. We're seeing that firm purchase order horizon slightly reducing because the supply chain is a lot more stable now. But we do have customer forecasts which are not included in this order book that is being reported. So with the customer forecast that we have, first of all, the visibility is clearly much more and stronger, compared to just looking at orders. The second thing is also that, as I've mentioned, we've onboarded a couple of important growing customers for us. Those customers are in the final stages or various stages of qualification. Because typically, when we receive an order or when we are awarded a business, we go through a prototyping and new product introduction phase, which is delivered to the customers. Those are qualified, goes through various types of stress testing and all of that. Once they're cleared is when we start getting firm purchase orders. So with couple of these customers, as I mentioned, we already have the forecasts for them. But those firm purchase orders are expected to come in the coming quarter or two, which will help us increase the revenues even in the current year. To answer the question, which sectors these are coming from, we have a couple of different ones there. One being in semiconductor equipment, where we have an important customer that we've added, and another one is in biometric solutions. These are there. Apart from that, of course, our existing customers itself, in the aerospace and defense side of it, we've continued to add new part numbers and also some increased volumes on existing part numbers. I would say broadly, these are the key sectors of growth that we can expect in the coming financial year. I just want to follow up. If you can, provide a bifurcation of the subsidiary revenue between ER&D and BTS for FY 2025. Sorry, can you repeat again, the subsidiary revenue? Bifurcation between ER&D and BTS and the order subsidiary. Maybe, Desikan, if you could help with that. Yeah. Subsidiary revenue for FY 2025 was INR 406 crores, of which INR 187 crores is the BTS and INR 218 crores is the engineering services. Chirag, just to emphasize the point, going back to your question on EMS revenue, the order book coming down. I think the important point to note is that with the stability in supply chain, which Nikhil explained, the existing customers' forecast is there, and which is not included in the order book situation. But I can tell you that the demand from the existing customers are robust, and it's good. What is happening is while you see the order book being lower than the previous year, the forecast portion has increased because of the stability in the supply chain. Desikan, this INR 187 crores BTS revenue subsidiary, the loss or the underperformance in the subsidiary can be 100% attributed to this BTS revenue of INR 187 crores? Nikhil, do you want to take that? You go ahead. Or maybe I will just give a qualitative thing. Maybe you can add later. Yes, please. At a high level, Chirag, a major part of the loss in the subsidiary is attributable to our Canadian subsidiary, which is, of course, doing the BTS part of the business. I must clarify that even in the BTS for the subsidiary, as Desikan mentioned, we did about INR 187 crores or so of revenue in build-to-spec in the subsidiary. Of that, I would say maybe around INR 70 crores or so of that revenue, INR 70 to INR 80 crores of that revenue in the current year was from the Canadian subsidiary, which is where a big part of the loss is coming from. The remaining build-to-spec part remains in France, and that is a profitable business that we continue to operate. Having said that, I think we also have seen some revenue decline in our French subsidiary on the engineering services side, and that has resulted in, I guess, a degradation of the margin compared to the previous year. In absolute numbers, the bigger part of the loss is clearly being contributed by the Canadian part, which is where we are taking some very clear measures to fix that in the short term. Thank you. I will come back in a few slides. Thank you for this. Yes. Thank you. The next question is from the line of Karan Sanwal from Niveshaay. Please proceed. Yeah. Hope I am audible. Yes. Yeah. First of all, congratulations this year for the turnaround at Centum. I have two specific questions. You are working on the satellite constellation for ISRO application. Just wanted to confirm, is it related to the SBS-3 program? Also, if you could highlight the opportunity in that specific program for Centum and opportunity as a whole as well. Yeah. First of all, I think the programs that we are already executing, which I mentioned earlier in terms of the electronic intelligence and all of that, are for defense applications, not specifically under SBS program, but for different applications. Apart from that, SBS is a new program. I am not able to speak too much in detail about that at the moment. But I can say that there will be contributions going from Centum clearly on this program. And some of it is expected. Broadly speaking, this program, a big part of it will be driven by ISRO and also with private sector participation. And we will be looking to contribute our part in terms of the payload electronics for this program. I will stop at that. Understood. Yeah. Also, second question regarding the performance of the subsidiary we have been talking about in this call and last call as well. Just generally trying to understand how are we looking at this segment as a whole, and if things are not looking good in the long term, any plans to sell it off or divest this business in a longer term, anything as we are looking at the lower subsidiary segment, if you could highlight. Yes. The subsidiary, as I have just mentioned, as I said broadly- Two parts to it. One is in France, where we are doing engineering services and some build-to-spec work. And then the second piece, which is our Canadian subsidiary, where we are doing passenger information systems for rail applications. A big part of the loss is being contributed from the Canadian subsidiary. And we are, I would say, in advanced stages of discussions with our customer, basically to explain to them that we are not able to sustain taking these type of losses. And we are exploring a couple of different strategic options that would enable, I would say, a transition to happen in a smooth way with the customer and the ongoing programs, but to be able to plug our losses in the short term. There will be something that we will be doing, and we are targeting to have this completed by September or sooner. And that is what I mentioned in the last call, and we continue to work towards that. Coming back to our France engineering services business here, the focus remains on operational improvement. In the short term, as we mentioned, taking cost optimization measures and improving utilization by focusing on improving our sales is the focus for the short term, at least. Long term, we will reevaluate at a later stage. Understood. One last question. You talked about the differential between the gross and the net basis revenue that we were accounting for. Would that effect be continuing in the current financial year, or was it just related to the last financial year? Just clarity on that. No, it will not continue. It is only for the last year. In FY 2026, the confusion between gross and net accounting will not be there. Understood. Thank you so much and all the very best. Thank you. Thank you. Before I take the next questions, ladies and gentlemen, I would like to remind you that please limit your questions to two per participant. The next question is from the line of Nirali Gopani from Unique PMS. Please proceed. Yeah, hi. Thanks for the opportunity. Nithin, my question is on the growth side. You said that you expect the BTS and the EMS revenue to grow by 25%-28%. Assuming the console revenue grow somewhere above 20%. What gives us this confidence? Because in FY 2025 also, on the gross basis, we were expecting growth of 18%-20%, which came somewhere around near 13%. How confident are we of achieving this kind of growth in the coming one, two years? Yeah, I think as I mentioned, there's two things. One is on the build-to-spec side of the business. With the order intake that we've had, I think the demand side of it is relatively secured. Similarly, on the EMS side of the business as well, we have a clear plan and visibility of which specific products and customers will be driving this growth based on either firm orders or customer forecasts that we have received from them. Firstly, on the demand side, I think we have a reasonable visibility. The point where we maintain a close watch is obviously on the delivery side of it. On that front, I think the key is, in the coming year, to focus on some of these new product qualifications that we are moving quite aggressively on. As that progresses and comes to maturity in the short term, we feel the ability for us to meet the revenues are quite strong. In summary, we do feel confident that we should be able to grow at a pretty healthy rate in the coming year. Great to hear that. If we solve the Canadian subsidiary problem, say by the September quarter, for the full year, do you feel on the console basis an EBITDA margin of 10%, which you were guiding earlier, is possible in this year itself? Yes. Yeah. I think Yeah, go ahead, Nithin. Please. Yeah, that should be definitely possible at a console level. Okay. Yeah. That's it from my side. Thank you so much. Thank you. The next question is from the line of Shriram Ramdas from Green Portfolio AIF. Please proceed. Hello, can you hear me? Yes. Yes. Hello, can you hear me? Yes, we can hear you. You can go ahead. Hi. Yes. You were doing a project for RAW agency, right? The satellite. What is the progress? Where are we with it? Sorry, I am not sure where you were told we were doing something for RAW. I am just saying that we make electronic intelligence-based payloads. We do not disclose it for confidentiality reasons, who is the customer or anything. Okay. The electronic intelligence program that we are executing is progressing well. We have delivered the first set of engineering models for the customer, and it has been well-received. We are progressing on to the subsequent part, and we expect this year that we will have some substantial revenues and billing from this program as well. Yeah. Is this the INR 187 crore project, or is this some other project you are talking about, sir? It was totally a INR 300 crore program which split into two different Yes orders. Exactly. Okay, got it. Last question. What is our order bidding pipeline? If you can share some numbers. The pipeline of orders is healthy. I have mentioned this in the past. We are roughly looking at something in the range of about INR 2,000 crores of booking in the next three to four years. That is what we are targeting. Of course, this clearly depends on the timelines associated with government procurement processes and so on, which have some uncertainty associated with it. But our target and visibility is to try to book something in that range. Okay. INR 2,000 crores in three to four years. You are talking very specifically about the build-to-spec side of the defense and aerospace business? Yes. EMS. Yeah. Okay. So, pipeline, do we have any pipeline? Like the orders that we are bidding for, not the potential order book in 3 or 4 years, but a pipeline of orders that we are bidding for. That is what I was looking for. Yeah. I cannot disclose very specifically that, but yeah. What we are saying is based on pipeline of specific opportunities we are bidding on. I would probably add saying that as we maintain, we should be able to grow the revenue by around 20% consolidated, and our pipeline is sufficient enough to cover that growth rates. Understood. That helps. That helps a lot. Great. Thank you so much. That is all from my side. Thanks. Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please proceed. Thanks for the opportunity. Nikhil, if you can give the split of BTS order book of INR 664 crore, out of which, how much is for space defense, and in defense, how much is for army, navy, and air force? We typically don't give very specific breakups in terms of the order book. At a high level, I would say space applications are, I would say, in the range of somewhere in about 40%-50% of that part, and the rest is non-space or more defense side of the business. This will cut across different applications. Yeah. The 40%-50% split that you have given for the space, it increases entirely for ISRO or for some defense application that we have been working on for some time now? It's not only for ISRO. We also work with DRDO on certain defense programs. Sure, sir. Any update on the emergency procurement which has been announced and the space satellite orders that we have been. Some news reports have been coming that the procurement timelines have been pushed on significantly. If you can give some updates on the ground situation that you are seeing for our company and overall. Yeah. We had actually had to release a note to the stock exchanges shortly after a lot of these articles that come out. We'd confirm that we have not received any firm requests or anything of that sort right now in terms of the expediting SBS-3 or anything like that. So we have no specific comment as such on that. Having said that, yeah, there is clearly a need for some of the emergency procurements, and we'll have to just wait and see how things turn out eventually. Sir, but any talks, of course, you wouldn't have got the firm orders. It will still be in discussion, but have you seen some urgency from the government side for this? Certainly. I think there is, yeah. Sure. Okay. Thank you. Wish you all the best. Thank you. The next question is from the line of Pranav Shriman from PNC Wealth. Please proceed. I hope I am audible. Most of my questions have been answered. Just one question, sir. The order book that we have, what would be the timeline till we execute the order? This varies again from business to business. Typically, our BTS order book is executable over somewhere between 2 to 2.5 years in terms of time horizon. Whereas the EMS order book is typically less than 12 months, at this stage at least. On the engineering services side also, it can be even shorter than 10 to 20 months, maybe less than that, I would say. That is broadly how the order book splits up and maybe at an overall basis, something in the range of about 15 months or so, 15 odd months, I would say 15 to 18 months is what we could look at. Got it, sir. Coming to the Canadian facility, how much is the loss that we have accumulated on our books? Nikhil, will you take that? Yes. For the year, the loss was something like €2.8 million. We have been having around €2.5 million loss for the past two years as well. Approximately 5-point-something million total loss in our books. Euro. Okay. Got it, sir. And this loss can be carry forwarded for a Do we get any certain tax benefits there? In Canada, yes. Like India or like France, these losses are accumulated and can be offset against the future profits. Okay, sir. Do you see any sort of vision of the facility becoming profitable post the talks that we are having with the customers? As Nikhil was mentioning, the focus right now is to stop the bleeding in Canada. The bleeding is basically because we have manpower there, which is the main cost, and we don't have sufficient revenues to cover that. We are exploring different options, talking to the customers, multiple options. To answer your question, the focus is on to stop the bleeding more than looking for profit in Canada. Got it, sir. That's it from my side. Best of luck, sir. Thank you. The next question is from the line of Sai Vijay from Capstocks and Securities. Please proceed. Hello, sir. Am I audible? Yes. Yes, please. Thank you for the opportunity. My question is regarding the two DRDO orders received last year. Could you share how much revenue has been recognized from these contracts so far? Again, we do not give specifics about every order that we execute. If you are again referring to the program which I just mentioned in terms of the space-based electronic intelligence program, there we have delivered the engineering models, but we are still in the progress of completing the flight models and all of that. So we are still in the initial period of delivery or the first part of the delivery in terms of engineering models. Okay. My second question is, on a consolidated basis, what is the revenue growth expected? I think you mentioned about 18% to 20%, right? Or 20% to 25%, I am little confused about that. Could you just clarify on a consolidated basis? Yeah, on a consolidated basis, what we have been going for is 18%-20%. That is basically driven by a higher growth rate contribution from the standalone entity, which is at over the 25% level. Whereas at the subsidiary level, we will be roughly flat, I would say. Okay. Thank you very much, sir, and all the best to the entity. Thank you. Thanks. Thank you. The next question is from the line of Harsh Mehta from Perpetual Capital Advisors. Please proceed. Hello, can you hear me, sir? Yes. Hello. Yes. Congratulations on the good set of numbers, sir. My first question is, could you clarify whether your company is involved across the entire satellite value chain, specifically the ground station, satellite launches, and satellite manufacturing, or are you focused on one of the parts across the value chain? Yeah. We are absolutely engaged on the different parts of the value chain in space from the launch vehicles to the satellite. Even within the satellite, there are satellite bus and satellite payload. And we are on board both of those pieces. We cut across various aspects of the value chain. Perhaps a little bit, in terms from a revenue perspective, major part of it comes from the satellite itself, and a little bit lesser from the launch vehicle and ground equipment at this stage. Right. Sir, now that the Indian government is planning to invest around INR 900 crores in the domestic ground station network to monitor satellites over the Indian airspace, do you see this as an opportunity for Centum to grow their revenue in these areas of the satellite also? There's many different programs ongoing in terms of the overall build-up of space infrastructure, and we continue to actively monitor all these opportunities. As a player who's been in the industry for a long time, I think we are confident that we'll continue to grow in the overall space business itself. Right. Sir, can you also mention some of your competitors in the satellite payload business? I typically don't give specific names of competitors over here. As far as addressing the requirements in India, in terms of the technical capabilities that we have, especially on the payload side, I would say we have a very strong capability, and very few other private sector companies would be able to demonstrate. We have a quite unique differentiated capability, both in terms of design and IP, as well as manufacturing capabilities as far as this goes. Right, sir. Sir, lastly, what led to the decline in other expenses? It's down 11% for the whole year compared to last year. This was due to a specific cost reduction initiative that was undertaken in the subsidiary because we knew that the revenues are not growing, rather it is coming down. We specifically looked for some kind of a restructuring plan. You will see not only in other expense, also in the manpower expenses and other expenses both. It was a specific cost reduction measure. Is this going to be temporary or is it a permanent change for the company for the future? The revised levels will be continued, and our endeavor is to control it at this level and not to allow the increase. Okay. And sir, Centum had recently signed an MoU with Indra Sistemas from Spain. What is the update on this MoU? The MoU was with regard to a specific opportunity for space debris tracking radar. That was an opportunity that we had bid on, but there has been no progress in the specific RFQ in the past couple of quarters. Right. Sir, the space-based surveillance, which we talked about earlier also, has the government accelerated this program after what happened in Telangana? As I mentioned earlier, I am not able to comment anything specifically with regard to this program. We do not have any specific insight. That is it from my side, sir. Thank you. Thank you. Thank you. The next question is from the line of Nirali Gopani from Unique PMS. Please proceed. Just one small clarification. What is the effective tax rate that we should work with? It will be 26%-27%. On the consolidated basis, right? Yes. Because there is no profits. The tax is only on the standalone profit. Okay. Got it. Okay. Yeah. Thank you. Thank you. The next question is from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please proceed. Yeah. I have a question on CapEx front. So what CapEx are we looking for FY 2026 and 2027? Chirag, did you ask CapEx for the year FY 2026? Yeah. We are planning to invest about INR 40 crores. That, again, only in the standalone, essentially to augment the capabilities and increase the capacities both in the BTS segment as well as the EMS segment. The equipment which we are going to procure can be interchangeably used for BTS and EMS too, right? Yes. Thank you. Thank you. The next question is from the line of Pranav Bastawala, an individual investor. Please proceed. Sorry to interrupt, Mr. Pranav, I would request you to unmute yourself and then speak. Yeah. Thank you very much. Nikhil rightly pointed out, we are going to now lose Mr. Desikan, and I must say that what a journey just to be in brief that from 2001 to 2025, and a INR 30 crore-INR 35 crore company, now we are seeing INR 1,150 crore turnover and where it will lead to, nobody knows. That is the kind of a journey this organization has, and he is one of the pillar of this particular journey. Thank you very much, Mr. Desikan, for your contribution to this company. The investors are very happy, and we will miss you a lot. Thank you, Pranav, for your kind words. Thank you so much. Thanks for all the support for all these years. I know you entered in probably 2002 in Centum Electronics, and you have been a long-term supporter with your valuable inputs and guidance. Thank you so much. Please continue to do so. Thank you, Nikhil. A lot of questions have been asked, but just want to say that people are asking about defense and aerospace. This is one of the sectors and which last time also, in the AGM also it was raised that Indian contribution is rising. Currently, exports are 75% and 25% from the domestic, which is again going to rise. My question is, that is fine, but what about the other applications? For example, we are talking about semiconductors. Are we looking at nuclear also, which is also likely to be a very big opportunity over the next five years? Already government is doing a lot in nuclear space and another space area where I know that Centum has been doing a lot of research and doing a lot of work with ISRO, that is space. But when we look at it, nothing much greater in terms of the value has been happening. So what is the likely scenario in next five years, and what is the kind of contribution we are looking in space, both military and not military part? Where Centum is likely to be? Are we going to have some kind of collaborations or JVs in different spheres, like even semiconductor is going to be a bigger opportunity even in India at a later date? So in nuclear or semiconductor or any kind of other industrial applications, where you would like to see apart from defense and others? Thank you. Thanks, Pranav. First of all, thanks again, I guess to recognize, as you rightly did, Desikan's tenure and as he mentioned, I think we continue to rely on your support and feedback as things progress. Coming to your question in terms of sectors, clearly, defense is an area that we are bullish on. So we continue to have various initiatives on that front to be able to continue positioning ourself to go up the value chain and be part of larger programs and key programs at the national level. Space as well, while I mentioned defense, what we see is even for space, a big target application is in defense or military applications itself. So we continue to leverage and build and grow our space capabilities in the coming years. But perhaps with still military or defense-oriented application. We are still not seeing a huge firm demand in terms of non-defense applications, but we continue to monitor and see that, especially in India. Apart from these two sectors, I think, yes, as you mentioned, semiconductor equipment is something that we continue to look at, which we've added a customer that can be a big driver and contributor to growth for the coming years. In addition to that, industrial applications is an area that we are also exploring more. Various aspects of industrial applications, I think we're looking at the nuclear specifically. Still, like I said, the early stage, not much to say about that as yet. But we are seeing some clear opportunities as far as industrial equipment for renewables, grid automation, electrification, and so on. That's an area that we have been in, and we are also seeing more indigenization with the increased CapEx at the national level for these kind of products. Industrial is certainly an area that we will be in, and will continue to grow. Then I also talked about the biometrics area, which again, is something that we feel can be a revenue contributor of something substantial as we go forward. We're building a good partnership with a global OEM on that front. We feel that can also be a good opportunity. These are, I would say, the areas that we're looking at. Automotive is an area that we've also been pursuing, especially on the EV side of it. While we've started, we've added certain customers, but the past year we've seen this, I guess, be relatively muted. But we still continue to explore and look at that and feel we can play an important role in the overall electrification in automotive side also in the future. Nikhil, just to add one question that we are very good in payloads. We can now build lot- Sorry to interrupt, Mr. Pranav. Okay. Sorry, ma'am. Yeah. Okay. Thank you. That's okay. Thank you. Thank you. The next question is from the line of Harsh Mehta from Perpetual Capital Advisors. Please proceed. Hello? Hello. Yes, please. You can go ahead. Yes, sir. Sir, I wanted to know, what has been the historical utilization of your engineering team in France over the last 5 to 10 years, and how has this changed recently, and what is the current level of activity? Yeah. in the past, I would say it has been at a reasonably good level. In the past year, however, that has slowed down a little bit, more specifically in two sectors. One is automotive, which I don't think would come as a surprise to many people. That's been a sector, especially in Europe, which has had an impact. The second one also, in fact, as far as some of the engagements and programs and customers that we have space, actually was something that had picked up quite well for us in FY 2023 and FY 2024, but has slowed down significantly in the past 12 to 18 months. Some of our key customers there have had, even in the past year, announced significant layoffs and resizing of the team, to be able to manage the slowdown in the activity and demand that they've seen there. These have been two sectors that have, in a sense, impacted us also. That is where we are looking to double down and strengthen again the engagements with our defense customers in Europe, because that is an area that there is investment and growth happening and will continue to happen over medium-term. Hope that answers. Sir, could you also describe what is your order selection criteria? We typically have different modes of engagement. I am assuming your question is with regard to engineering services or the subsidiary specifically, or are you talking about more generally? I wanted to know about both the part of the business. Okay. They vary obviously in terms of each service offering. Typically, in the build-to-spec kind of business, our typical order size has now increased to a 30 crore to 50 crore kind of either annual revenue or order value. Whereas on the EMS side of the business, we want to target a customer that can get us to at least 100 crore revenue per year kind of rate. Obviously, that happens over time with multiple different part numbers and so on. But that's the objective. On the engineering services side of the business, that again, varies depending on the model. We have certain time and material or consulting type of engagements. Then on the other hand, some service center work unit kind of engagements. Here again, what we look for is how to grow with the customer to be able to get to a $5 million plus or $3 million plus revenue range with several customers, and with some of our top customers, how to increase that to $7 million to $10 million kind of engagement over the coming years. That's it. Thank you. Yeah. Thank you. Thank you so much, sir. Thank you. The next question is from the line of Jay Jesrani from Mountain Lion Partners. Please proceed. Hello, am I audible? Yes, please. Hello. Yes. Yes. I think congratulations again on a wonderful result, Centum. I've though not interacted as much as Pranav, but last 10 years you've been fantastic in terms of giving us clarity and openness in terms of approach towards understanding the company. Gone through the tough times. Unfortunately, you're not going to see the great times, but I hope you're associated with them, in some way or the other because you have complete knowledge on the company. Nikhil, just taking your question, I just want to know whether China Plus One is still a talk or is just defense, which is a talk. Last time when we had interacted during COVID time, you said there's a lot of prototypes are being done where you want to get to the INR 50 crore or INR 100 crore orders, but it takes 2 to 3 years of investment to create those prototypes to get it to the floor and get it to manufacturing. Are we any close to any of the orders on such type of companies because of China Plus One? Second is, what is our current employee strength and how much do you see growing in next 2 years? Do you see manpower being very important, bench strength to be very important to grow this business? Thank you. Thanks, Jay. Just to answer your first part of the question, which was with regard to the China Plus One. Absolutely, we continue to see that as a team, and we have added those customers. In fact, I touched on it also earlier on in the Q&A, where we are in advanced stages of qualification with the customers and we expect this year itself from the firm order flow and revenues coming in from some of these new customers that have been pursuing this China Plus One approach. We absolutely continue to see that, and it exists with both some of our existing customers as well as new customers that we have in various stages of the pipeline. That's I would say the point on the first. The second question, can you just restate that again, please? Typically, from the employee standpoint of view, because the demand Employee will grow and you need to, yes, you need to grow the employee, do you need a good bench strength or you need to invest in employees from first to train to a certain level? And what is the current employee strength and where do you see it in next two years? Yeah. First of all, very important for me to just clarify that employees' cost and strength is something that needs to be looked at again separately at a standalone level and at a subsidiary level. Mainly because at a standalone level, we are at the end of the day delivering a product, whereas in the subsidiary we are delivering a service. And so, manpower is, you can say, what you're billing is basically the time of our engineers that are working on the projects and so on. Yeah. That's the first thing. So with that in mind, I think, talking about the standalone part of the business where we Yes, more on the standalone. Yeah. Yeah. We continue to see growth. Yes, we have a program at different levels, where we need to keep adding. I think we have a pretty good program in place, especially from the technician level, to be able to scale up the resources as we grow. We also have a strong program around productivity to make sure with the existing resources itself, we are able to do more. We continue to spend a lot of time especially on the management and indirect, or middle management, you can say, level, or engineers, that are part of the new product qualifications and so on. That's going to be a critical area and an area where there is a lot of demand for, and so we do look at ensuring that we are investing in the people and the resources a little bit ahead of when we actually need them. Just to add, Jay Jesrani, I think on the manpower, your point is absolutely right. Today, more than the business, the challenge or the point is on talent management. I think the employee retention and attrition are being closely monitored. Plus, like what Nikhil said, the middle management, we have identified the high potentials, and then we are putting them through training programs. Plus also the productivity measures that Nikhil was talking about. So there are a lot of focus on the talent management, which definitely will guide the growth for this company. From my side, I thank you so much, Mr. Jay Jesrani, I think for your kind words and also the specific inputs you have been giving from time to time. It may not be continuous, but they are all taken very seriously and discussed internally, and then actions taken upon. I'm sure you- Thank you. Thank you. Thank you. I appreciate that. Thank you. Thank you. The next question is from the line of Anshul Saigal from Saigal Capital Advisors LLP. Please proceed. Good afternoon. Thanks for taking the question. Our contribution from India is about 29% just now. As we get into the next few years, where do we see this contribution going? Will it remain in the same proportion or will it rise? Thanks for the question. I think it's important to note that already in the last three to four years it has been increasing. That's a combination of the Make in India push that we've seen in the different sectors that we experience. I don't want to put a very specific number at the moment, but we will see probably a little bit higher contribution from India. Having said that, we continue to have a very healthy pipeline of export customers, especially on the EMS part of the business, and we will continue to develop and grow those customers for us. You will not see a complete sort of 180 in terms of major change of going from 30% or 29% to 70% or something like that. We will see a gradual increase in terms of India as part of our overall revenues. It is what we are actively pursuing also. Sure. I would assume that most of this business is BTS, if not all. Yeah. Most of the domestic business is contributed by our build-to-spec business. But we do also have some EMS customers that we deliver for globally, but also for their demand in India. Right. Is it fair to assume that this 29, given the trend in recent years, can go to as much as, say, 35? Not really 70, but, say, 35. Is that a possibility in the next three years? Yeah. Certainly, yeah. Okay. Which also then raises the question, given that BTS- Certainly, as in, maybe let me just clarify that when I say certainly, I mean it is clearly a possibility. As I mentioned earlier, what we are looking at in terms of the contribution from build-to-spec as well as some of the growth that we are seeing in the EMS of business for domestic customers, we should see an increase on the domestic contribution. Sure. Thanks. That then raises the point that this being a higher margin business, this will mean the mix change will kind of add to margins. Say in the next three years, Mr. Desikan just mentioned that next year it is quite likely we will be at about 10% consolidated EBITDA. Say in the next three years, where can this number be? Can it be like 11% to 12%? Yes, definitely. I think that is our goal, to improve that from 10% to probably around 12% in the next two years. Okay, great. Also, given the standalone growth numbers that you mentioned, say of around 28% odd percent, what could be the In the next three years, this INR 1,150 crore revenue, is it likely that it will double given this kind of an run rate? As we have been maintaining, we are targeting 18%-20% CAGR for the next three years. 18% to 20% CAGR. Okay. That is very helpful. Thank you very much. Thank you. Thank you. Ladies and gentlemen, we take that as the last question, and would now like to hand the conference over to the management for closing comments. Perfect. First, thank you all for participating in the earnings conference call. I hope we were able to answer your questions satisfactorily, and at the same time, offer insights into our business. If you have any further questions or would like to know more about the company, please reach out to our investor relation managers at Valorem Advisors. Once again, just in closing, I would say that we've continued our path of revenue growth as well as margin expansion. We have a clear plan around that, and we are working towards that. Please don't look at us as a quarter-by-quarter company. Please continue to look at us as a full annualized company, because we do have some lumpiness in our revenues. But I think we are on the right path and we continue to focus on these opportunities and converting them. One more time, I want to once again place on record our deep gratitude for Desikan and all that he has done for the company. He has been a mentor to me, and to many of our business unit heads. His wisdom, his steady hand, and calm counsel have been invaluable. For our chairman as well, he's been more than just a finance leader. He's been a trusted partner through the thick and thin. So thank you again, Desikan, and maybe some last words from you also, please. Thank you so much, Nikhil, for those kind words. I think, anyway, as you rightly mentioned, I'll be here till 31st August. So another quarter to go, probably, I will be, along with Sundar, meeting the investors. But I think it has been an excellent support from Rao and from Nikhil, without which I don't think I could have completed 23 years in this company. I'm very happy and proud about my exciting journey here, and I think for many shareholders with whom I have been associated for a long time have been very supportive. Thank you so much, the investors, and thank you, Rao, and thank you, Nikhil. But that important remark that you made, Nikhil, that is, we should be looked at as a year-to-year company and not a quarter-to-quarter company, I think that's a very important remark. With that note, I thank everyone, and thank you so much. Thank you. On behalf of Nirmal Bang Equities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.