Q3 24/25

Feb 3, 2025

Summary

Q3 revenue rose 18.4% YoY and EBITDA 36.9%, with core domains leading growth and margins. FY26 priorities include 1.5x FY25 EBITDA and at least 300 bps of margin improvement, supported by planned facilities investment.

Ladies and gentlemen, good day and welcome to the Q3 and nine months FY 2025 earnings conference call of AXISCADES Technologies Limited, hosted by Orient Capital. 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 and then zero on your touch-tone phone. I now hand the conference over to Miss Sangeeta Tripathi, Head, Investor Relations from AXISCADES. Thank you, and over to you, ma'am. Thank you. Great evening to everyone. Welcome to FY 2025 and nine-month FY 2025 results conference call for AXISCADES Technologies Limited. Today, I am joined by our leadership team, Dr. Sampath Ravinarayanan, our Chairman of the Board; Mr. Alfonso Martinez, our Managing Director and CEO; Mr. Shashidhar SK, our CFO; along with Mr. Sharadhi Babu, President, Defense; and Mr. D. Muralikrishnan, our President, ESAI, that is Electronic Semiconductor and AI domain. They will present an overview of the AXISCADES recalibrated strategy, our business performance, and financial results. After which we will open the floor for questions. Before we begin, please note that this call may contain forward-looking statements based on the company's current expectations, beliefs, and opinions. These statements involve risks and uncertainties, and actual results may differ materially. I now hand over the call to our chairman, Dr. Sampath Ravinarayanan, to discuss the business performance and the strategic direction of the company. Over to you, sir. Thank you, Sangeeta. Good evening, everyone, and hope all of you are keeping well. Thank you for joining our Q3 FY 2025 earnings call. I trust you have had an opportunity to review the financial results and investor presentation that have been made available on the stock exchange and on our website. Basically, if you look at our investor presentation, we are focusing on certain three areas. I will tell the rationale. When I took over, my philosophy is that if we have to be in a particular business, we should have a podium finish. We should be among the top three in the areas we are operating. The best areas we are close to getting there is aerospace, defense, and this ESAI, which is electronic semiconductors and artificial intelligence. Because we have enough leadership team, we have thousands of man-years of experience with us and we are already having a kind of a jumpstart. We are in some kind of pole position in these kind of things. If you go to page six, which you would have seen, the main investor presentation, we have seen our own performance. Aerospace, defense, and ESAI is contributing for about 99% of our EBITDA and 72% of our revenue. Whereas all the other businesses are contributing for only 1% of EBITDA, with almost 1,116 people. The people-wise, it is about 60-40. Whereas the contribution-wise, earning-wise, it is 99 and one. We decided to focus more on the core. We call it the core activities, aerospace, defense, and ESAI. We will focus on that. Non-core, we are deciding. We are just contemplating. We have various options with non-core, what we are going to do. We are just discussing and see what best can be done. But primary focus is going to be on the core businesses, and we are going to recalibrate the non-core to fit into our core strategy. This is our first major important decision. If you look at it in core aerospace and defense and electronic semiconductors and artificial intelligence. In that, as you know, as defense, of course, we are working on few programs. Our main task, we have a three-level engagement with defense. One is with the program, which is essentially driven by DRDO. The other one is direct with DRDO and PSUs, and the second one is direct MoD, something similar to the anti-drone and so on. Third is engagement with foreign OEMs in terms of offset or Atmanirbhar and so on. Defense, in each areas, we are trying to increase our footprint engagement programs, et cetera. In fact, in aerospace, as you would know, there is no new aircraft is being built in the last so many years. Last one was A350, and after that, almost 15 years, no new aircraft. We don't see any new aircraft coming. Basically, our whole revenue comes from repairs and support of the old aircraft and production support, et cetera. Some kind of structural changes, structural designs and improvements, et cetera. We are looking at expanding the aerospace activities by getting into supply chain management, artificial intelligence-enabled MRO manufacturing and design, aircraft conversions, which is happening in a big way. Interior design is also happening in a big way. We are trying to set up speed shops powered by our logistics inspection facilities, et cetera. In terms of electronic semiconductors and artificial intelligence, I want you to understand that we are only into post-silicon. There are hundreds of companies in pre-silicon. We are not focusing on pre-silicon. We are into post-silicon. That is, once the chip is made, we use the chip to make products. Products for various applications, various groups, and so on. We are making box. We are into box building. Earlier, we used to do only design. Now we are building the box. Now we are building some prototype, some batch production. Go up to 1,000, 2,000, 10,000 numbers of batches of these products. That's how we are going to scale up. We are also getting into, we got a company called add-solution. add-solution has certain skills in thermal management. We are trying to build a thermal management capability out of it. Of course, we are trying to get into micro data centers, AI-based quantum data centers, and so on. Edge micro data centers is our focus. Of course, we will probably do ESAI incubation activities so that to get some IPs quite fast. Essentially, the whole approach is that we want to grow nonlinear, meaning that we want to be IP-driven growth, product-driven growth. Our growth should not be proportional to the number of people. It should be more than our capabilities, our IPs, our products, and so on. We want to be globally present, and we should be scalable with quality. These are our three mantras in which we are trying to expand. In order to do this, we need a very formidable leadership team. Of course, we have tweaked the board of directors. I would have seen that a lot of changes have taken place in the board, and maybe there will be one or two changes, final changes, or maybe additions, which will add to our vision and who would be supportive and who could be adding value to these three domains we talked about. That is where our focus is. Total focus, realization of focus is to ensure that everybody connected with us should contribute somewhere to our growth strategy. That is what we are trying to do. Alphonso, of course, we always used to admire him because he was our competition. Alfonso, he is basically an aerospace aerodynamics engineer who started his own company at a young age in 1997, sold the company, exited the company with Altran, took a leadership position in Altran, and drove their aerospace and related verticals more than $1 billion for almost 18 years. When Altran was bought by Capgemini, he joined Capgemini. He was part of Capgemini on the leadership position. Again, doing a similar role, again, handling a billion-plus dollars. Then three years in Capgemini. Then he joined Quest Global as a Group President. Now he joined. After three years stint in Quest Global, he is now there. He assumed office on 20th of January. He came to India for about 10, 15 days there. He got accustomed to everything and then got inducted. Basically, Alfonso is very much there. He is in the call as well. Then we decided that all these three verticals we talked about, we call that as domains, all these three domains we talked about, aerospace and defense and ESAI, we have Presidents separately. Sharadhi Babu, our President of Defense, he is a very veteran of AXISCADES. He has been there since inception. When I was Chairman and CEO of AXISCADES, I hired him in 2008. Since then, he has been driving the defense business for a long time. He understands everything. He understands various programs. Himself is a great engineer and hands-on person. Started his life in the Air Force. He is handling the defense part. D. Murali Krishnan, of course, he is also an AXISCADES veteran. If you notice, except Alfonso, the entire leadership team is from AXISCADES. They are AXISCADES alumni or AXISCADES. The reason is we do not want too many outsiders because currently, we do not have time. We do not have learning curve, we do not have understanding curve just to get into that chemistry, et cetera. We want somebody who knows AXISCADES, how it functions, the leadership, the investors, everybody, just to be part of that, and we retune them. Murali Krishnan also, he was handling in a leadership position for about nearly 2009 to 2016. He was there. Now he is President of ESAI. Great leader, great team builder, and he successfully handled many activities in AXISCADES. Then he went to Cyient, and he is back here. He also assumed charge December 15th, and he is already doing a great job. Then you have the President of Aerospace. Again, AXISCADES alumni. He used to work for me, one of the best guys who ever worked for me. He is my superstar, and he is going to join in month of April. He has done a great job in his current company. Took from almost zero to a huge order books and made it as a kind of a well-known name in the aerospace manufacturing. He brings that experience we need. I talked about supply chain management, aircraft conversion, speed shops, inspection facility, all these things this gentleman is going to bring in. He has a worldwide contact. Not only contact, he has got a lot of respect and affection from the aerospace community. He will definitely make a lot of changes. Of course, Shashi, you know very well, this is our core leadership team. In order to move forward, we need to strengthen a lot of support we require. We have brought in three advisors. Again, they are very world-class. Nick Santhanam, I am very privileged and happy to have him. It is really rare to have such a senior person. Nick was a Senior Partner at McKinsey, driving their global semiconductor practice, industrials practice, and he has served semiconductor clients all over the world, and he knows most of the semiconductor CEOs very well by first-name basis. He is the advisory role. He is a member, of course, business council advisory role in Smithsonian Libraries and so on. Well known. He lives in Palo Alto, in Bay Area, California. Anyway, Nick is an advisor here. Colonel Kuber, again, he is the person who initially was one of the architects of the Defence Offset Policy, was the first in charge of DOFA, Defence Offset Facilitation Agency, and served as members of expert committee, Advisor to the DRDO, and Senior Advisor to NSIC, Ministry of MSME. Colonel Kuber is also, during my initial tenure, he was there when we got challenge programs and all. He was our advisor before, worked with us before. He is well known to us, and he is also Director in DNY. At this point of time. Yves Guillaume is the Head of the Airbus Group in India, President of the Airbus Group for 10 years. He knows India very well, all the offset programs very well. He is a go-to base not only for Airbus Group, but the entire European industry. If something they need, any doubts, they call Yves because he is that much veteran in India, Europe, offsets and defence policies, et cetera. Plus aerospace he knows extremely well. He was President of Airbus Group, and he built the Airbus what it is today in here. He is highly respected in this. He also served in Thales and other companies. He is a very important pillar for aerospace industry around the world, and we are honored, proud to have him also there. Already, Colonel Kuber and Yves Guillaume is on board almost last 1 and a half months, and they are making lot of difference. They are giving us lot of support and so on. As you see that now we have almost aligned more or less our positions, our people, the leadership team, but almost everything is filled up now. One of the main aerospace President has to join. We are also hiring one Senior Vice President from, again, an AXISCADES alumni for ESAI, who is also now working in a very large multinational in a leadership position, directoral position. He is joining us next month. Once this is almost India facing, all the main team will be completed with that. Only thing probably we will be hiring in the future are more sales team. Alfonso feels that we need more sales team and sales presence and different geographies and so on. Alfonso will decide and hire more sales people and so on in this. Other than that, we are almost completely filled all the positions at this point of time. Also the advisory. Maybe we will add one more next level advisors in these categories. With that, we are planning to grow. As we mentioned in our presentation, our focus is to grow about at least 50% on the core domains, on the three areas, aerospace, defence, and ESAI. 50% plus, when I say growth, I have only three things in. As I said, we have to be top of the. We should be top three. We should have podium finish if we are in this area. Secondly, I am mainly looking at EBITDA, not on the revenue, et cetera. I just need a, how do I maximize the EBITDA? That is my second major focus point. The third is the percentage of EBITDA. How do I increase the percentage of EBITDA so that that helps the quality of the company, that helps us into climbing the value chain. These are the three things. Just finishing the top three in the areas we operate, whether it is aerospace, defence, or ESAI. Next 2 years, 3 years, we should be among the top three in the country and a significant player in the world. That is number one. Number two is just to have a best percentage of EBITDA that we can achieve. The third is how do we increase the EBITDA? These are the three things maximize. This is what my goal will be and so on. One thing is that we require large investments in terms of moving forward. In fact, some way, aerospace and defence will be together. We will be creating a infrastructure separately, which will be called DAC, which is Devanahalli Aerospace and Defense cluster. That is, we have owned a 20-acre land just adjacent to Bangalore Airport called Aeroland, very prestigious place. We will be building a huge cluster to do this. Meanwhile, we are doing two other activities. That is our first investment is improving our electronic city facility. We are going to build our own hangar. We are going to get the hangars integrate and so on. Also for drone building and so on. So anti-drone. We are building a hangar immediately. Also building one more floor so that our direct defense team and the radar team and all can move there, that too, in the electronic city. The second is we are already almost the core shell is completed for the near our Bengaluru airport, our own facility, but we have on a joint development with another builder. This will be ready by February end. We will do interiors, et cetera. We will move into this facility by around end of May. That's the plan. By June 1st, we'll be in this facility. It will be 180,000 sq ft facility. Just put it in perspective, it is almost more than double of all the facilities we have at this point of time. This allows a world-class electronic manufacturing facility and also in the ground floor, it'll have a strategic partners. Some customers whom we have a long-term strategic relationship. They will be there until they move to the Devanahalli Aerospace and Defense cluster. This will house some of the foreign OEMs also. Of course, this will also have the entire ESAI and the ecosystem for that, and AI skill development, AI delivery facilities and all will be there. This is something, the electronic city and the AL work has already started. We will be moving in by hopefully completing and moving by June 1st. Definitely the second, that is the Aeroland will definitely move by June 1st. Here, depending upon the construction and monsoon, et cetera, there may be some delays, but still we are planning to by June 1st. DAC, we have a plan almost ready. We are doing a virtual walkthrough. We want to showcase this to our customers during the Aero India. If any of you are. Probably we'll circulate a video version to you at some point of time. We'll put it in a private mode in YouTube or somewhere and share the link with you so that you can understand our vision as far as DAC is concerned. This is what our investments and this thing is all about. Rest of the things about numbers and all, I leave Shashi to talk to you. I just want to. Performance. Yeah. Shashi will go to the numbers. Before going through, I'll just give the call to Alfonso. He can just introduce himself, and you can talk to him. Then Shashi can go through the numbers. Thank you very much. Okay. Thank you very much, Dr. Sreen. Good evening, everyone. I am thrilled to be part of this call, as this is the first time I interact with you all. Well, as Dr. Sreen said, I am bringing to AXISCADES my more than 25 years of global experience in engineering and technology services. I have been in piloted roles such as global business head for transportation across global, and also hold several managing positions at Altran Group and Capgemini Engineering. I have led global and complex teams, driven business transformation, achieving transformational growth. Let me remember in 2008, when it was my first visit to India, and at that time, India was clearly leading IT services, and then starting engineering services. But I realized that a similar trend will happen in engineering. Since then, I have visited India every year for the last 17 years. Joining now AXISCADES as CEO is super exciting. I have been advocating that India will be the center of gravity for the engineering worldwide, and now it is a reality. Being a key actor on that is a real privilege. Joining AXISCADES for me is an incredible opportunity to build on a very strong foundation. My immediate focus will be boosting our technological capabilities and aligning our strategies with client needs. Let me emphasize that having led global technology corporations, I can vouch for the exemplary capabilities and competence of AXISCADES engineering, the programs, the delivery teams. In the last 2 weeks since I joined, is one of the best I have ever seen. Let me tell you also to introduce myself, that I will be hands-on. I always have been leading my teams from the frontline. Engaging with customers is my passion and motivation. I have never done in my life nothing like that, engaging with clients. In a few days, I will start early to do that. In fact, well, I already did in my first 2 weeks. But now they are coming to important industry events in which we are participating, Aero India and IDEX in Abu Dhabi. Of course, I will be there supporting the team in building long-term relationships and big deals with the clients. The opportunity in aerospace, defense, and high tech is there. We have the right positioning, the competencies, and the capabilities. As Sreen explained very well, we have a very clear focus plan. In most of my career, I played a global role and building relationships in many different countries. In particular, aerospace and defense industries is where I have been mostly active in my previous companies. With my industry knowledge and global network, I am committed to helping the company to transition from going into a more product-focused to achieve non-linear growth strategy, as Sreen explained very well. We are being a more asset-based service company than a labor-based. This is recalibrating all the business. We have to do an action, as Dr. Sreen said, on recalibrating the low-margin non-core businesses and then making this strategic shift that will drive the sustainable profitability and enhance value for our stakeholders. For your information, I will be spending more or less 50/50 my time between India and Europe and U.S. As I said, very clear, my focus will be big deals, elevate our positioning, and building long-time relationships with our clients. Dr. Sreen has already mentioned that we need to enhance even more the sales team, to allow this more relationship-based and long-term engagement with the clients. We are missing big deals, and this is coming now. Also very exciting to be in a company that is really technology-driven. Now the world is AI-powered systems, from chip to system, et cetera, and the company is building a beautiful position in there. A few things more, I will be happy to take questions. I ask you to understand that I have only been two weeks in the company, so for many things about our internal questions, it will be the rest of the team answer, and I can take the questions on the market and the perspective. Thanks to you for your attention, and I will pass the call to Mr. Shashidhar, our CFO, to walk you through our financial performance. Shashi, floor is yours. Thank you, Alfonso. Good evening, everyone. It is a pleasure to be here and share our performance with you. We have seen a healthy growth across all segments. That is the good news. Our consolidated revenue grew by 18.4% year-on-year in Q3 to INR 274 crores, with a 3.7% sequential increase, largely driven by strong growth in our core vertical. Defence posted an impressive 88% year-on-year growth, while aerospace grew by 11% year-on-year. Our EBITDA for Q3 FY 2025 rose by 36.9% year-on-year to INR 40 crores. The EBITDA margin expanded by 200 basis points year-on-year and 220 basis points quarter-on-quarter, reaching 14.6% for Q3 FY 2025. Our core domains comprising aerospace, defence, and ESAI, which is electronics, semiconductors, and AI, demonstrated robust growth of 33.1% year-on-year, with Q3 FY 2025 revenue reaching INR 207 crores compared to INR 155 crores in Q3 of FY 2024. This strong performance was primarily driven by an impressive 88.7% year-on-year growth in the defence segment, fueled by increased order execution. Meanwhile, aerospace posted a year-on-year growth of 11%. The core segment EBITDA grew by 68% year-on-year, with a significant margin expansion of 450 basis points from 16.8% in Q3 FY 2024 to 21.3% in Q3 FY 2025. Core EBITDA amounted to INR 44 crores, up from INR 26 crores in Q3 of FY 2024. Both defence and aerospace segments saw notable improvements in EBITDA margins. Defence EBITDA margins surged to 18% in Q3 FY 2025, up from about 8% in Q3 of FY 2024, driven by enhanced order execution and operational leverage. Aerospace posted an EBITDA margin of 24% compared to 20% in the same period of last year. The non-core business, predominantly driven by automotive, experienced an 11% decline year-on-year, with revenue decreasing from INR 76 crores in Q3 FY 2024 to INR 68 crores in Q3 of FY 2025. The non-core segment reported a negative EBITDA of INR 4 crores in Q3 FY 2025 compared to a positive EBITDA of INR 3 crores in Q3 of FY 2024. As articulated by Dr. Sreen, our endeavor is to recalibrate the low-margin non-core business in the next six to nine months. Finance costs were reduced by 38.7% year-on-year to INR 7.3 crores, reflecting improved debt management. Profit after tax grew by 96% on a year-on-year basis from INR 7.5 crores in Q3 of FY 2024 to INR 14.8 crores in Q3 of FY 2025. The PAT margin came at 5.3% for the quarter as against 3.2% in Q3 FY 2024. With respect to nine-month performance, the total operating revenue for the nine-month period grew by 9.4% year-on-year to INR 762 crores. EBITDA for nine months FY 2025 stood at INR 104 crores with a margin of 13.6%. PAT reached INR 44 crores from INR 24 crores in the same period of last year, highlighting significant profitability improvement. Net debt was at INR 35.5 crores as of 31st December. The EPS has almost doubled, up by 96% from INR 1.75, not annualized, of course, to INR 33.44 in Q3 of FY 2025. The order book as on 31st December was at $83 million or about INR 610 crores. As we embark on this exciting new chapter, our strategy is centered on advancing along the value chain and focusing on product and solution-driven offerings. With a strong leadership team and ongoing investments, we are well-positioned for sustained growth and to maximize value for all our stakeholders. Thank you, and we now open the floor for questions. Thank you. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Nirali Gopani from Unique PMS. Please go ahead. Yeah, hi. Thanks for the opportunity. Sampath, congratulations on joining AXISCADES Technologies and you coming in have really changed the perception of the company. With the change in the strategy that we are seeing. We have seen this huge change in the strategy. The last two acquisitions, which were very recent, have now been qualified as non-core, and which at that point of time we believed to have huge potential. As investors, how should we look at this change, or how confident should we be that this new strategy will work in our favor? See, basically, the core activities, we are very confident about taking it. Already it is doing, if you see the numbers, the EBITDA and performance of the core, they are doing well. The leadership team is very much plugged into that and have a lot of experience. Who are the people? All of us have from the top to Alfonso, myself, Mohan, Mr. Babu. Everybody has tons of experience in aerospace and defence and also in IT. Murali comes with huge experience in operations and so on. Given that, we are very confident we have enough pipeline, we have enough customer support to take this forward on its own to a great height. If you look at the numbers we have presented, if you remove the non-core from the equation, then you will see almost our EBITDA is 18.7%. Not 99% of the same EBITDA value is presented at 18.73%. But as you see as a combined, the percentage comes down to 14. What is it? Nearly 13- 13.7%. 13.7%. If you combine that. It just adds 1%, but drops the points by almost like 4.5%. Anyway, we have no choice but to recalibrate, relook at it. We are doing it in a manner that it will always help the shareholders. As I said, my whole goal is to make sure that your EPS is maximized and we also climb the value chain by increasing the percentage of EBITDA. These are the two definite focus for us, and we'll make sure that everything in our commitment to make it happen. That's what I can say at this point. Just to add, Nirali, you see the fact why we are calling it as non-core is because always we have maintained that the heavy engineering vertical as what we are serving is predominantly a staffing business. With respect to automotive, as all of us know, it is undergoing some macro challenges and customer-specific issues. While we definitely are talking about a recalibration of these businesses, we are agnostic to which service to customers and what we are actually offering to customers. We are agnostic to which domain they belong to, as long as they fit into our offerings in our three core domains. For example, in our ESAI domain, we'll horizontally serve a range of clients and markets, which may also include aerospace, defence, and our legacy domains of heavy engineering, automotive, energy, space, medical, et cetera. Our singular focus and objective will be that all our businesses and customers should serve to be margin accretive and should not dilute the margins of our core verticals. That's the message we are trying to do. It's not that we are completely going away, as long as it fits into our core, I would say, verticals, especially where in terms of heavy engineering, automotive and all of that. If it fits into the ESAI business, which is high margin, that's where we are going to kind of focus on, not the predominant staffing business. Just to add one point. As you said, ESAI is sector agnostic. We are, for example, the world's leader in SDVs and new generation automotive. Now we call it a technology. Tesla calls itself as a technology company, not as an automotive company. Given that, we are serving Aptiv. Aptiv is one of the largest ADAS and SDV companies. They are our customers. Will continue to be our customer, but they are our customers in ESAI Group. So is Apple, so is Amazon. We can proudly say that we are one of the few Indian companies who can have Axon, Apple, Amazon, and Aptiv as our customers as of today. That is what I can say. So ESAI will be sector agnostic. Some of this non-core will be put in here so that we can deliver a higher value to the customers. Right. This investment that we have announced in the presentation, which we call strategic investment 1 and 2, what kind of investments will this need, and how do we plan to fund them? See, the 1 and 2 probably will take about INR 150 crores to INR 200 crores. We have probably pegged it around INR 180 crores, let us say. Some of them as building and facilities and creating new equipments, et cetera. Mostly the money will be consumed for the radar hangars and integration facilities, testing facilities for radars, et cetera. Similarly, electronic high-end manufacturing for defense components, defense assemblies, and also testing and so on. These are the facility costs, and this includes buildings and customized buildings, et cetera. As you see that this is a new facility of about 220,000 square feet, which is 180,000 square feet will come in the Aeroland and about 40,000 square feet in the Electronic City. This is something like 2 times or 3 times more bigger than what we have currently. This number 1 and number 2 put together is INR 180 crores, and we are having few options of how to fund it. Probably in another 2, 3 months, we'll have one call or we'll brief you sometimes on how we are going to do this. Currently, we are exploring various possibilities, but definitely we have a plan to fund this first INR 180 crores. The third is a fairly huge project, which is DAC, which we'll address it separately. We are coming with a strategy, but basically that will be addressed in the Q1 of FY 2026. That will be separate as investment 3. But 1 and 2, your answer, the question is approximately INR 180 crores. Essentially, just to add to Dr. Esaran, this facility of 180,000 square feet also is coming in a company-owned land parcels around 2.3 acres, which is being co-developed. That means we are not investing any money in terms of building. It is actually being kind of, I would say, put in by the actual joint developer. Our contribution is the land value. Essentially, we are going to be leasing the entire facility once the 180,000 square feet gets built. The investment as what Dr. Esaran is talking about is in terms of building an integrated manufacturing facility, the interiors and all of that with respect to the core verticals as what is going to operate from there. Right. Sir, given you are also planning inorganic acquisitions, the total CapEx number will be quite large, right? Over the next two, three years. The total investment. We are not planning anything right now on inorganic acquisitions as of now. Okay? Our focus is only these two things. We have a different strategy for ESAI. Again, we will come back to you. It is not inorganic acquisitions, but there will be certain requirements there also. Currently, we will say that safely you can assume for FY 2026, we will probably peg our requirement around INR 180 for this year one and two. We are not looking at any inorganic acquisition unless something exotic comes in our way in FY 2026. Okay. Right. One final question. The business that we have classified as non-core. Say if we decide to exit, let us say, add-solution or the energy business, given the situation today, how confident are we of getting some buyers on that side? One is add-solution, we are not exiting. We are recalibrating. We are making it as a thermal management company. They have very good capabilities and will be part of our ESAI group, seamlessly integrated. That is not going to happen. In the other energy, Epcogen, et cetera. In fact, we have not even thought about exiting, but we have two major buyers lined up already. They came and approached us on their own. There is no dearth of buyers, but we are not very sure is that an option we want to pursue. These things we are evaluating, but there is no dearth of buyers or this situation and so on. But in any case, we are not giving it up. We are just making sure that they are strengthened. Even if we are going to exit that, it should be on our terms. We should be in a position of strength then while we exit. That is what we think. Perfect. That is it from my side. Thank you so much for answering my questions. Thank you. Participants, I request you to kindly restrict your questions to two per participant. Participants, I request you to kindly restrict your questions to two per participant. We have the next question on the line of Deepak Poddar from Sapphire Capital. Please go ahead. Hello. Am I audible, sir? Yes, we can hear you. Thank you very much, sir, for the opportunity. Sir, now going through the presentation that we have laid out our strategic roadmap. We are talking about growth of more than 50% in our core business. Right? That 50% plus is what we are targeting towards 60%, 70% is what we might look at, right, going ahead? Yeah. Some areas, yes. Come again, sir. Some verticals, yes. There are three verticals when we say. We are looking at around 55%-60% at defense, 50%-55% at ESAI, and 45%-50% at aerospace. On an average it will be 50%, 55%, right? On average, it will be more than 50%. I am only talking about EBITDA. I am only talking about EBITDA, not on the EBITDA of the whole company. Only through core we will exceed in the next year. This growth that we are talking about is on the EBITDA, not on the revenue. Not on the revenue. I will just put it this way. If X is going to be my FY 2025 EBITDA, we will be 1.5x EBITDA in 2026. FY 2026. And this we are specifically talking about on the core domain, right? Non-core also. I am talking about the whole. Let us say the total EBITDA of the company is X as of FY 2025. Our EBITDA, you can safely assume, will be 1.5x by FY 2026. Understood. The entire 1.5 times may come from the core domain. That is what I said. Yeah. Fair enough, because that is what is happening currently here. So what we are talking about, let me just reiterate, whatever total EBITDA we have, we are looking at 1.5, 50%, 55% growth in total EBITDA in FY 2026. Absolutely. That also factors in the improvement in EBITDA margin you are talking about, I mean 300 basis point improvement you are talking about, right? In next year. That is also there. There are two parameters we are trying to control: the absolute value of EBITDA, which will be 1.5 times the FY 2025 figures, and the points, that is the percentage of EBITDA, which is going to be at least 300 basis points higher than this FY 2025. These are the two parameters. That will decide what the revenue is going to be. That is going to decide what the revenue. We are not going to be worried about revenue. These two parameters will peg. Automatically, the revenue will get picked. Okay. One can take this as a CAGR as well, I mean, going into FY 2027, a similar kind of growth is what one can envisage given the tailwind you are seeing in this core sector. See, FY 2027 will be also dependent on how fast what we are going to do with our investment one, two, and three. We have FY 2027, 2028, 2029 growth. We want a phenomenal growth that will mostly depend on a lot of things are totally depending upon how the DAC is going to come in, what are the things we are going to do in the investments, et cetera. Of course, on a normal way, it will have a similar, if not, I don't know about the 50% growth, but it will have a similar kind of growth. In fact, internally we are looking at a good growth, extremely good growth. Okay? Well, as high as 50%, 55% that we're targeting this year as well, I mean FY 2026? See, we have our numbers in mind, but it will be closer to that. As I said, because FY 2026, what are the efforts we are putting in terms of investment, in terms of the setting up the. See, I will tell you, put it this way. In FY 2026, it's a taxiing mode. Okay? 2027 is going to be our takeoff, and 2028 will be cruising and going on and so on. Basically, this how we are going to plan and what is going to be the lot of dependencies are there, but we have a great plan to overcome all these things, and definitely we will give a formidable numbers for 2027 years. Okay? Understood. Fair enough. I think that would be it from my side, sir. Okay. Very best to you. Thank you so much. Thanks. Thank you. We have the next question on the line of Aman from Astute Investment Management. Please go ahead. Good evening, sir. Just a couple of questions on defense side. We were expecting some orders on the counter-drone side, some big orders. We were expecting, say, by next year, we might do maybe INR 250 crore-INR 300 crore in counter-drone. Is it on track? I leave this to Mr. Babu. Sharath Babu is going to answer. Our President of the company. Hey, thanks for the question. Right now, yes. As you know, we have already delivered the first anti-drone system that has gone into the army, and we are expecting on the repeat order and also certain upgrades on the same. Also already we are participating in many RFPs. As you know, there are several RFPs that have come in, and we are in the good pole position to participate and also win some of these RFPs. We are in a very strong position on the counter-drone systems. We are demonstrating and then showcasing all our product portfolio in the air show. I strongly urge all of you to come and then view the product portfolio, in both drone and counter-drone domains. We have very strong, new product portfolio and also very attractive things for the future. Sure, sir. On the offset business, if you can talk about how is that scaling and what kind of growth to be expect in the next 2, 3 years? Can it become like a INR 200 crore, INR 300 crore business for us in the next 2 years? In the offset business, certainly, there is a very strong growth happening. As you know, already the Ministry of Defence is working out on placing certain new orders on Marine Rafale and also certain other naval projects. AXISCADES has been the prime offset partner to these specific global OEMs in the last 10 years. Certainly, this relationship is very strong, and it will continue in future. Certainly, we expect the order of magnitude to be probably what you've mentioned, probably more than that. Sure. On the LCA/Sukhoi upgrades, sir, could you give some updates because, I believe you were supposed to get orders after the 33rd plane. Is it expected, say, next two quarters maybe, we will start getting that orders for upgrade on LCA side? Sukhoi also, if you can talk about it. Yes. As I mentioned, we are already on the course of delivering for the LCA, Mk1A is going on. The Sukhoi upgrades also, FY 2026, there are certain numbers which probably you will know from the market. Yes, they are on track, and our production is also on track. Okay. Can this combined Sukhoi and Tejas be like a INR 100 crore business for us in FY 2026, or do you expect it to be bigger than that? Combined between Sukhoi and LCA, it will be more or less, yes, you are right. Because it depends on the exact number of Sukhois that are getting upgraded. The number what they have announced, yes, it will meet the same numbers. The big scale-up will be in FY 2027. Sorry to interrupt you, Mr. Mohan. Rikush, you may come back. There will be further scaling up in FY 2027. You are right. Sure, sir. I will have more questions, but I will get back in the queue. Thank you. Sure. Thank you. We have the next question in line of Koushik Mohan from Ashika Group. Please go ahead. Hi, sir. Congratulations for the new team. Sir, I just wanted to understand on one basic thing. With the new team, what is our vision for the longer term, and how are we immediately looking for the next coming year? Thanks, Mr. Koushik. Basically, first is we are happy to announce a formidable team, not only the leadership team, but as you would see, that world-class advisory team. We are looking at. Actually, the mandate or the request from the investors to me is that I should exponentially grow the company. It should be a very well-known, very respectable company with a good, formidable growth, et cetera. We need all the support we require. The team is in place. Some of the core team is in place. Each one has their job cut, and very simple, that they have to grow as big or as faster than anybody else. In defense, we are pretty confident of things happening. Aerospace, it's on track with Alfonso. He's a big name, and he's there. We are also getting our new President, who is also a well-known name. I'm talking about big name in the whole world. These people are extremely well-known. In fact, one good advantage with both Alfonso and the new President of Aerospace is they are very complementary. For example, the new person who is coming is well-known in U.S. also. Even Alfonso has a lot of things going on in the U.S. They will bring additional geographically and also in the different parts of the value chain, they'll help us climb in the value chain. Regarding ESAI, as you know, approximately we are going to be around 20% of our core is coming from ESAI, around 40%. Our immediate target is to bring ESAI on par with aerospace and defense. Almost like two years from now, we want to see that it is all 33%. Given that ESAI is the one we are trying to focus more and trying to do that. We have some kind of a strategy. Basically, we will probably announce it a little later, but just give you a hint. We are trying to create a deep tech fund, okay? We are trying to incubate several companies. Instead of going and buying companies, we are trying to develop on certain technologies we require for aerospace, defense, and our own, the growth areas. That we are planning right now. Maybe in another 2 months, we will be almost ready in a position. Again, it is in a very preliminary process. I do not want to announce it at this stage. Do not take it as an announcement. It is a loud thinking. But that is the only way we are planning to grow the ESAI very quickly. We will create a good deep tech fund and start investing into certain niche technologies. That is a plan we are at present having. That will probably take a shape in another 2, 3 months time. Probably when we enter Q, that is FY 2026, we will have all this arrangement. At least the The template is ready for that, and through which worldwide we will be taking up certain incubating or taking seed funding or certain funding into interesting areas in AI and ESAI, basically. That is what is our plan. In this team, we are putting in place, keeping all this in mind, next five-year plan, who all can help, who all can support, who all can ensure and back up. If somebody fails, who is the backup like that. We are creating a very formidable team that can create a redundancy, create a foolproof kind of team setup, and that is what we are planning at this stage. As I said, this is the overall. We have an ambitious plan, I would say, for the next 5 years. Hopefully, as I said, if you ask me, we should definitely become the top three in India in every category we are operating, and we should be a significant player in the world. We should be well-known in the world. These are our ambitions. Hopefully, we should get somewhere there. That is what it is. Thanks, Koushik Mohan. Congrats, sir. I have one other question. Sir, what can be our sustainable margins when we look at our peers and then when we look at ourselves? I can understand till date, though, it's a different story. From today, what can be our sustainable margins going further for next 5 years that we are aiming at? Kaushik, if you look at page 6 of our thing, that is our investor presentation, you will see Defense is the robust like 21 point something. ESAI is also. Sorry, Aerospace is at 21 point something, and Defense, ESAI is also at 21.6. Both are very healthy. Defense was 14.6 this year because of mostly when things were in prototype development stage and things like anti-drone were very new. We had to do a lot of trial and error, et cetera. Now that they are all shaped up very well, Defense will have a higher margin. If you just ignore the non-core and take only core, and plug in that we are just crossed the learning curve and to prototype phase, it should be technically at least at 18.7 average. Okay. We have plans as the product matures and as more products coming in, and so on. One thing, we are not going to increase any manpower. It can be reduced. Our total headcount is going to be the same or much less. Given that we have only one way, we can go only up. We do not know how much we can go up in terms of EBITDA margins, but we are trying to do everything to make it better. Almost most of our cost structure is finalized, except for some sales team, et cetera. We need to see. Any new additions will be at the cost of the total headcount will remain the same, absolutely or less. That is what. We are planning to do everything possible to get a robust EBITDA, and you can see that in page 6, whatever is here in the left-hand side is our not only aspiration, that is what we are doing currently. We will try to sort of maintain it and grow on that. Okay. Got it. Sir, and if we currently look- Kaushik, could you kindly come back in the queue for follow-up questions? Sure, sir. In the interest of time, we request the participants to kindly stick with two questions per participant. We have the next question on the line of Rupesh Tatiya from Intelsence Capital. Please go ahead. Hello, sir. Am I audible? Absolutely, we can hear you. Yeah. Sir, my first question is on Mistral side. I wanted to understand our contribution to missile programs. I think in the past you have mentioned, I think Pinaka on the presentation, and also, I think you have mentioned Astra missiles on our presentation. So what are the components that we supply to these two missiles and what kind of revenue or per missile contribution? What is our per missile contribution for these two programs? Yes, we are contributing to the missile program, and we have been part of the Akash program, and also we are supplying the telemetry for Akash. The exact values per program, per missile, I would like to right now keep it within ourselves. Okay. But we are part of these programs. Also, I would like to update you that we will be part of the upcoming missile programs also. We are looking at two large programs which are coming up. Okay. So that also we will update you in the forthcoming days. Yeah. But, sir, Pinaka, I mean, there's a large order out for at least INR 10,000 crore order for Pinaka missiles is out. I just wanted to understand, do we contribute to that program? Pinaka, yes. We have contributed in the past. Akash, yes, right now currently we are part of the program. Okay. Second question is Ashwini Radar, I think we were expecting some order. Bharat Electronics was declared L1, and I think we were expected to receive an order. Can you maybe give some update on that? Yes. We are part of the Ashwini Radar program. We are supplying three different subsystems to this radar. Already the order is placed on BEL, and we are part of the BEL ecosystem. We have our order book for FY 2026. Ashwini is part of our order book. Okay. Okay. How about our contribution to QR-SAM, LR-SAM, and then this XR-SAM, sir? These three programs, as I said, QR-SAM, LR-SAM, MR-SAM combined now, they are the more focus. As mentioned earlier, there is a new program which is kind of superseding all these programs. This program, we are very much part of it, and we have very good value in this. We are looking at certain good value in each of this new program, which is almost like superseding all these three programs we have talked about. Okay. When can I expect some tangible updates, like prototypes? Okay. Thank you. We have the next question on the line of Shweta from Orion Capital. Please go ahead. Thank you so much for the opportunity. My question is regarding GCC facility. Will this facility also support civilian application of UAV technologies? Or if you can share how much percentage of revenue growth we will expect from this facility once it is fully operational. Mr. Babu, you want to take this question? Because we are looking at UAV, we are looking at for all the homeland security as well as for defense at this point of time. Correct. Most of the activities will take place in our electronic city, because doing an UAV or drone near airport is going to be very challenging. So we are keeping it under electronic city, and this will definitely help our growth, and we may expand somewhere around there. Here, the DAC facility will take care of a lot of other things. UAV may not be one of the items, but a lot of other things will be there. As I said, I will be circulating a detailed Not circulating. I will put it on a nice video. We are preparing for the air show. We are explaining what we are going to do and then send you a link quickly. Okay. My second question is regarding the chiplet product services. You have spoken about it. Are there any partnership or project in the pipeline for this vertical? Yes. As you know, we are working with all the four at least major chip manufacturers, Texas Instruments, Nvidia, NXP, and Qualcomm. We are working in partnership with them. We are trying to get into new partnership with STMicroelectronics and other companies. But these four, we have a very good relationship. We are working in partnership with them, and they refer the customers to us. We have all these three. Especially, all of them are world among the top ten, and we are already working with them in partnership. The partnership has been finalized or it's in process? Sorry to interrupt you, Ms. Shweta. We are working with them. We are already working with them. Not finalized. We are working with them already. Okay. We are almost done. Working with them already. Okay. Thank you, sir. Thank you. We have the next question from the line of Nirvana Laha from Badrinath Holdings. Please go ahead. Yeah, thanks for the opportunity, sir, and congrats on the clarity of communication and your presentation. Sets the strategic tone very well. Thanks for that. My question is regarding Q3 FY 2025. Can you call out the production defense revenue and which programs contributed max to it this quarter? What is our current defense order book? Babu. Yes. The defense programs that are going on right now contributed, belong to multiple programs. It includes the Arudhra, which is the medium power radar program. It also has our direction finding system also, it being deployed across multiple programs. Also, we have the LCA and Sukhoi upgrades which are going on. We have contribution to that. Also, there are many other communication systems. Also, they are part of the airborne early warning program, which is the AAAU and the RPU programs. These are the ones which mainly contributed to our Q3 revenue in the defense programs. Also, as I mentioned to you, our anti-drone systems, we have delivered out of 100 systems, we have delivered 75. That is also part of our Q3 program. Okay, sir. What is the number for this quarter in terms of production revenues from defense and what is the order book, the outstanding order book for defense? See, you can assume that 6X is the order book. From quarter numbers, you can say, you can derive into 4 is our yearly number, and our order book is approximately, because it all depends on the AoN and acceptance of necessity. It will be approximately we have visibility for about- Eighteen 4X of the value on the each year's value. In other words, our Q3 value, you can safely multiply 16 times, will be our order. Okay. Just to talk about Q3 in terms of defense, the total defense revenues for Q3 was INR 92 crores, of which the prototype revenues, which is for the forthcoming orders, was around INR 40 odd crores. The balance of it was production revenues. Got it. Sir, when you are saying 16 times, so this INR 50 crore production number. So 16 times 50, so INR 800 crore is the visibility, right? Am I reading it right? Both. You have to combine the production and prototype, when you say 16 times. Because production are continuous, so you can safely assume 92 into 16. Okay? Got it, sir. Last question from my side, sir. What is the expectation of revenues from counter drone system in FY 2026, and in which quarter are we expecting to land a new order? On ESAI side, sir, you were very bullish on drone controllers. Any update on that? That's all from my side. On the counter-drone systems, as you know, the immediate one we are looking at is the repeat order and also the certain upgrades that are required to be done on our 100 systems which have been delivered. There are several RFPs, almost more than about 10 RFPs that we have already responded, and we are in a very strong and pole position on many of them. Each of them, you will see these upgrades and this thing will be appearing in immediate subsequent quarters and certain RFPs which are in progress, the delivery is expected to happen in Q3 and Q4. You will see the counter-drone systems spread across the entire financial year. Sir, and the drone controller? As a drone controller, we have certain designated customers for which it is being supplied. You will see those numbers also over the next quarters. Currently, our drone controllers are deployed by Axon. They are evaluating it. It's a very high-end customer, almost like that first responder drones, et cetera. Once we have the complete evaluation is completed, we have to get a NATO certification, et cetera, for global sales. We are in the process of doing that. We are hoping to get very good numbers in drone controllers. Sure, sir. And sir, logistics- Sorry to interrupt, Mr. Nirvana. We will let you go to the next question. Please join back the queue. Thank you. Due to interest of time, we will now take the last question from the line of Mr. Sanjay Shah from Pragnista. Please go ahead. Hello, can you hear me? Yes, we can hear you. Thank you for the time. A lot of things were discussed during the course of this call, and you gave very articulate observations and expectations on what you expect in each of your businesses over the next couple of years. In the interest of new investors, would it be all right if I were to ask you to just give us your vision over the next four to five years? Where do you expect the company to be in terms of size, and what kind of investments would be required to achieve that, if it is okay for you to do so? Yeah. Basically, if you ask me, my personal this thing is, we want to, in five years from now, or 2029, we should be at least I want to be, I don't know whether it is appropriate to say, should be a billion-dollar in revenue, and it should have at least 25% EBITDA. This is my wish. Don't hold me responsible for that because I have to take permissions from, I don't know whether I can tell that. But if you ask me, that's what I would like. Basically, the investments we are trying to make, if this comes the way I am thinking, that Devanahalli Atmanirbhar center is a huge investment, and it is the shaping of the way it comes, and possibly it is something very achievable because we are in space and defense. Similarly, in ESAI, as I said, the plans we are making, if it is going to fly, it's not going to be a difficult thing. See, this is our wish. It's ambition. Certainly, I can say that if I put it in a non-financial way, we just want to be top three. We don't want to be in less than that in any activities we are doing, whether it's aerospace or defense. Definitely, we should be among the top three in India in terms of revenue, in terms of EBITDA, in terms of percentage of EBITDA, whatever measures you are talking about. That is what we are up to. That is going to be something we will be chasing. Okay. No, that is brilliant. Thank you very much. Sorry, what did you say the kind of investments that you would require to make to possibly I know it is more like a wish list or some kind of like As I mentioned earlier, the first two parts is INR 180 crores. The third part is huge, very big. We are going to sort of circulate. What we are going to do is a dry run with our customers during air show and see how many people are interested, how many people are taking, and that will help us recalibrating our vision. Post that, it is going to be February. Whole February, we are going to see how it is accepted by our customers, received by our customers. Based on that, we will come with a number, and we will present it to you. In fact, the next Q4 call, investor call, I will definitely give you the number with certain support from the customers. We are going to circulate it among all the customers who are coming for Aero India to do a dry run. I will not be able to give the numbers, but it is huge. It is an investment required is pretty high. But we are planning already how to make it happen. Okay. Super. Thank you so much, and thank you for your candid responses. Thank you. Thanks. Thank you. That was the last question. I would now like to hand it over to the management for closing comments. Sangeeta? Yeah. Thank you. Thank you to our esteemed leaders and participants for your time and interest in our company. We greatly appreciate the engaging sessions and the insightful questions. Should you have any further questions or need any additional clarification, please feel free to connect with us. We will now end the call. Thank you. Thank you. Thank you. On behalf of AXISCADES Technologies Limited, that concludes the conference. Thank you all for joining us, and you may now disconnect your lines.