Q1 24/25

Aug 6, 2024

Summary

Q1 EBITDA was ₹31 crore and PAT ₹17 crore, while aerospace and defense remain the principal growth drivers. Management expects FY25 to track plan, with defense production and cost improvements supporting stronger performance later in the year.

Ladies and gentlemen, good day, and welcome to the Q1 FY 2025 earnings conference call of AXISCADES Technologies Limited, hosted by Centrum Broking. As a reminder, all the participants' line 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 * then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumeet Khaitan from Orient Capital. Thank you, and over to you, sir. Thank you very much. Good evening, everyone, and I am delighted to welcome you all to the earnings conference call to discuss Q1 FY 2025 results of AXISCADES Technologies Limited. To discuss the results, we have with us CEO and Managing Director, Mr. Arun Krishnamurthi, Mr. Mujahid Alam, CEO Mistral, and our Group CFO, Mr. Shashidhar SK. They will take you through our results and business performance, after which we shall proceed for question and answer session. Before we begin the call, I would like to mention that this conference call may contain some forward-looking statements about the company, which are based on belief, opinion, and expectations of the company as on date of this call. The actual results may differ materially. These statements are not guaranteeing the future performance of the company and involve risk and uncertainties that are difficult to predict. With this, I now hand over the call to Mr. Arun Krishnamurthi for his opening remarks. Over to you, Arun, sir. Yeah, thank you very much. Good evening, everyone. Welcome to the Q1 FY 2025 earnings call. I am joined by Sashi, who is our Group CFO, and Muju, who is our CEO of Mistral. I hope you had the opportunity to review our financial results and investor presentation, which has been uploaded to the stock exchanges. Let me first dwell on the overall ER&D industry growth outlook, which directly impacts the company. The ER&D industry is currently undergoing short to medium-term headwinds in the growth outlook. There are headwinds in certain verticals such as automotive, heavy engineering, and semiconductors, both in U.S. and Europe. Decline in retail demand, slowdown in the EV segment, upcoming U.S. elections leading to slowdown in CapEx spending, client-specific issues, inventory buildup, deferment of R&D spend on innovation and new engineering solutions are all challenges that the industry will have to deal with. Sectors which are still positive are aerospace and defense. Both of which are seeing accelerated spending because of the unique context of these industries. Despite this, ER&D continues to be a growth sector with average growth of around 7.5%, with digital revenues growing at an accelerated pace. The impact of industry slowdown is relatively moderate on AXISCADES because of the effective execution of a focused strategy over the last two years aimed at diversifying our customer base and verticals. We are particularly well-placed in aerospace and defense and have very differentiated capabilities, which will allow us to take advantage of the strong sentiments in these verticals. We are positioned as a fully integrated strategic technologies, R&D, and defense company that delivers a broad spectrum of products and services from engineering, aerospace, and space to defense. Therefore, we will be rebranding ourselves as AXISCADES Mistral, and the name change will be pending regulatory and other statutory approvals. The company's strong presence in aerospace, defense, and energy, together contributing about 60% of the company's revenues, continues to reflect a bullish outlook for the year. Even though defense business, not part of revenue of other ER&D companies, by its very nature, is very lumpy and should not be compared quarter on quarter for its performance. The company is experiencing some slowness in automotive, some specific clients, heavy engineering, and the semiconductor business due to the earlier mentioned macro factors. However, the company is confident that the tide will turn in these verticals from H2. Q1 is typically a soft quarter for ER&D in general and defense in particular. The company recorded revenues of INR 223 crores, growing by 4.5% year-on-year, with constant currency growth at 3%, which was led by engineering services business, which grew by 15% from INR 152 crores to INR 135 crores. Defense was lower by 21% at INR 48 crores as against INR 62 crores in Q1 of last year. As stated earlier, the defense business should only be compared on a year-on-year, as defense deliveries generally shift and roll over between quarters, depending on delivery and acceptance constraints of defense establishments. The EBITDA for the quarter was at INR 31 crores at an EBITDA margin of 13.9% as against INR 30 crores with an EBITDA margin of 15.4% in the same period of the previous year. The EBITDA margin for previous year, Q1 FY 2024 that is, was unusually high due to higher defense service revenues, which had an EBITDA margin of 23%. I would like to reiterate that the total enterprise EBITDA margin in each quarter depends on the proportion of defense production and prototype revenues executed during the quarter, which tends to vary between quarters. The EBITDA margin of engineering services for Q1 of this year is at 14% as against 13% in the same period of the previous year. PAT for Q1 FY 2025 is at INR 17 crores with a margin of 7.2% as against PAT of INR 6 crores with a margin of 2.6% in Q1 of last year. The company reduced its finance cost significantly during the quarter from INR 20 crores in Q1 of last year to INR 8 crores in Q1 of this year. This is as a result of prepayment of borrowings from the proceeds of the QIP. In terms of operational performance, the year-on-year growth of 15% in engineering services was led by aerospace, automotive, and energy, which together grew by 40% from INR 82 crores to INR 115 crores. Heavy engineering and semiconductor business de-grew by 15% from INR 71 crores to INR 60 crores. As stated earlier, these two verticals are impacted by macro challenges of CapEx de-growth and inventory buildup, and we are hopeful that growth will return to these verticals from H2 of this year. While the overall defense revenues in the quarter was lower at INR 48 crores, as against INR 62 crores in the same period of the previous year, its defense production revenues at INR 28 crores is higher by 73% as compared to Q1 of last year. The company's production revenues from defense have record another milestone in FY 2025, with a strong order book of INR 322 crores at the end of Q1 FY 2025 in the Mistral defense business. We continue to deliver counter-drone solutions to Indian Defense and wish to complete the delivery of this anti-drone system in Q3 of this year, which will make us a prime candidate for repeat orders in this category. I will now dwell on the performance and outlook for various verticals. The aerospace vertical accounted for 36% of our Q1 revenues, totaling INR 79 crores and reflecting a 24% increase from the previous year. This growth was driven by higher wallet share from existing customers, ramp up in our services, and the digital automation of our existing processes. Our long-standing partnerships with aerospace OEMs are growing steadily and are expected to contribute further to the revenue as OEMs increase production rates supported by the substantial order backlog, which is driven by a strong demand for aircraft. We anticipate maintaining a healthy growth rate and momentum backed by a broadening scope of digital manufacturing services and engagement with our customers. Our outlook for aerospace continues to be bullish for the foreseeable future. Our automotive revenues at INR 25 crores is higher by 84% from the same period of the previous year, with the consolidation of revenue pertaining to Ad Solutions, the automotive entity that we acquired in August of last year. Automotive revenue today constitutes 11% of the consolidated revenues, which was at 6% in Q1 of last year. We were selected as a preferred supplier by a leading U.K. automotive OEM and are actively expanding in this space by adding new logos. Our major focus going forward will be on digital and embedded solutions as well as hardware testing and validation. We are developing capabilities in margin-accretive segments like software testing, cybersecurity, ADAS, and investing in new technology trends, which are in great demand apart from the traditional focus on mechanicals. However, due to macro challenges in this sector, such as a notable slowdown in the European markets and change in strategy by an automotive OEM, we expect the next two quarters to be challenging in this vertical for us. We entered Q1 with revenues from our energy vertical reaching INR 11 crores, which accounts for 5% of our total revenue. The addition of EPCOGEN has provided a strong boost to our growth in the energy sector. We have been selected as a preferred partner for two new projects in the U.K. with a renewable energy solution provider and are expanding our customer base in India and the Middle East. The company has appointed a full-time business head in Dubai and is in the process of opening a marketing office in Dubai to expand our footprint in this major energy geography. With new leads in this segment, ongoing geographic diversification, and development of new capabilities in this vertical, we anticipate the growth momentum in this segment to continue. The heavy engineering and semiconductor business continued to face margin pressures. Revenue in the heavy engineering vertical decreased by 8% year-on-year from INR 40 crores to INR 36 crores in Q1 of this year. This decline is primarily due to macroeconomic factors, a slowdown in the U.S. region, and customer reprioritization of CapEx across various programs. Despite this, we remain a key strategic partner for our customers in their global manufacturing transformation initiatives. The objective is to move away from traditional low-margin staffing model to margin-accretive value-added services and sell digital competencies for internal automation to global and domestic clients. To enhance the revenue quality of this vertical, we are developing several use cases by leveraging our in-house capabilities and those from Mistral. By revamping our cost structure and optimizing operations, we aim to improve margins in the coming quarters. We anticipate this vertical will begin to recover starting in Q2 of this year. Our semiconductor vertical revenues, also known as product engineering services, for the quarter stood at INR 24 crores, which was a year-on-year de-growth from INR 31 crores, down by 23%. This was mainly due to the inventory buildup of semiconductor chips by global semiconductor majors, leading to production decline. Despite the decline, we are diversifying our customers within this space and increasing our efforts in designing and prototyping for future production runs. The Indian government is supporting Make in India initiatives for semiconductor fabrication, and globally, we expect that growth will return to this vertical during H2 of this year upon offloading excess inventory by the OEMs. While I will leave it to Muju to deliberate on the opportunities and status of defense vertical, we remain bullish on our defense potential, banking on evolving production orders from the significant pipeline of prototype developments of Mistral for prestigious Indian defense programs made over the last one plus decade as well as potential in ACAT. Suffice it to say that the defense production orders in FY 2025 will be significantly higher than that of FY 2024, while we continue to add to the pipeline of orders with certified programs, prototypes for new programs. As stated in our earlier earning calls, the company is making significant investment in building its digital strength, which is being horizontally deployed across all our verticals and customers, both in terms of internal automation as well as digital offerings to our existing new customers. The digital investments which are part of our P&L charge and continues to be margin negative, is now fructifying into new order acquisitions as well as internal cost optimization, and will result in new revenues and improved profitability as the year progresses. The company is also bolstering its sales organization and has recently onboarded a head of sales in the U.S. region to expand our presence in the region and acquire new deals. The company's confirmed order book beginning of Q2 FY 2025 is at $83 million. With continued acquisition of new deals both in engineering services and defense. We are also pleased to announce the appointment of Tanmoy Chakrabarty as an additional director in the capacity of Non-Executive Independent Director on our board. Mr. Chakrabarty brings with him a distinguished career spanning across four decades with extensive expertise in corporate strategy, government affairs, and digital transformation. He has held prominent positions in the Tata Group, mainly heading governmental affairs. Looking ahead into the full year FY 2025, we are confident of delivering as per plan, both in terms of revenue and profitability, by leveraging on the opportunities in our growth verticals, as well as overcoming the challenges in some of our verticals. Let me conclude by thanking you for your patronage and look forward to your continued support while we build a marquee institution in the engineering services and defense. I now invite Muju to provide a view of the Mistral business. Thank you, Arun. As we all know, Mistral in the technology design and system engineering company serving customers primarily in the semiconductor and defense verticals for over 27 years. The company have achieved a growth rate of 20% CAGR in the last five years. FY 2024 revenues was INR 328 crores with an EBITDA of INR 56 crores. Besides our strong presence in the product engineering space, we have firmly established ourselves as a major defense solution provider. We work closely with DRDO labs, public sector units like BEL, HAL, and Ministry of Defence. We are an integral part of many radar, sonar, airborne, and aircraft warfare projects. Currently, Mistral has bagged more than INR 800 crores to INR 1,000 crores in certified prototypes across multiple prestigious Indian defense programs and awaiting production orders. Additionally, new design wins with a potential of INR 2,500 crores to INR 2,000 crores in future productions are under development. The company's order book at the beginning of Q2 of FY 2025 stands at INR 335 crores, with over 60% scheduled for execution this financial year. In Q1 of FY 2025, Mistral recorded revenue of INR 52 crores compared to INR 72 crores in the same period of the previous year. Of this, INR 23 crores came from semiconductor business and INR 41 crores from defense business. The company achieved an EBITDA of INR 7.5 crores during the quarter with an EBITDA margin of 11.5%. As Arun mentioned, the defense business experiences variability in both revenue and margins when compared quarter-on-quarter. Defense margin may also get diluted by the quantum of prototype being designed. These prototype developments mostly have negative margins during design phase and become largely profitable during production. Therefore, it's essential to maintain a long-term perspective on the defense business rather than a short to medium-term view. The softness in the semiconductor business due to inventory overrun with OEMs is likely to continue for another two quarters. We are actively working to increase our business from newly added clients in the automotive sector. We are also on track to add two to three new customers in upcoming quarters. The new drone kit based on Qualcomm is under development and will be released in the market in Q3 of FY 2025. Mistral has secured an order for INR 90 crores from BEL, a defense PSU, for eight radar processing systems for the medium power radar, Arudhra. The delivery for the same will begin in this financial year. We are confident the semiconductor business will return to growth and the defense vertical will maintain its previous trajectory supported by a strong order pipeline. I now invite Sasidhar SK, Group CFO, to provide a financial overview. Thank you. Thank you, Muju, and thank you everyone for joining the earnings call for Q1 FY25. On the back of headwinds in certain verticals due to macro factors as explained by Arun and Muju, lumpiness in defense and generally a soft first quarter, the company has recorded good results with operating revenue of INR 423 crores, a 4.5% quarter-over-quarter growth, INR 31 crores in EBITDA, and 13.9% in EBITDA margin. The company recorded a PAT of INR 17 crores, which was almost three times the PAT recorded in Q1 FY24. As appraised in the earlier earnings calls, the company's finance costs have significantly reduced as a result of repayment of borrowings amounting to INR 110 crores that created rise in January of 2024. The company's finance cost for Q1 FY25 was at INR 8.07 crores, which is a significant reduction as against INR 20.1 crores recorded in Q1 FY24 and INR 12.51 crores recorded in Q4 of FY24. The company is scheduled to repay another INR 50 crores of its borrowings by end of September 2024, which will further reduce the finance cost. Our net debt as on June 30 is INR 50 crores, considering INR 182 crores in cash, bank, and liquid investments. Our steadfast focus continues to be on improving our operating discipline with a twin objective of improving gross margins and controlling our operating expenses. We have launched many cost rationalization initiatives both on variable cost and fixed operating expenses, especially focusing on below 20% gross margin accounts to improve our blended margin. Our digital vertical, while still is margin negative, is focusing its efforts on internal automation of billable processes to improve revenue per employee, as well as acquiring new digital revenues from existing and new customers at higher billing rates. We have centered the delivery organization with a focus on resource management, optimization of the pyramid, and maintaining the bench. Our offshore onsite ratio stands at 31/29 and fixed cost P&L ratio is at a healthy 65/35 respectively. We added a net 70 FTEs since the beginning of the year, with reduction in attrition rates to 14% from 18% as compared to the same period of the previous year. The annualized ROCE based on Q1 results is at 17%, against 14% where we ended in FY24. Annualized ROE stands at 11%, as against less than 11% in FY24. The annualized EPS is at 16.27, as against 8.40 in FY24. The company has a strong balance sheet with net worth standing at INR 596 crores at a consolidated level as of June 30, with sufficient cash generation to comfortably service our debt obligations and generate free cash flows. Our net working capital cycle as of June 30 is at 118 days, despite working capital-heavy defense business constituting 28% of the revenues, and we continue to optimize our working capital terms. The company has enhanced its governance process by appointing a global controller to oversee internal control risk management and has appointed a general counsel to oversee corporate governance for the entire group. In conclusion, over the past several quarters, we have made significant strides in establishing a foundation for sustainable growth and profitability while strengthening our balance sheet. We are confident in our ability to build on this momentum throughout FY 2025 and beyond. Thank you. Now I request the moderator to open the floor for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw 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. The first question is from the line of Jalaj from Swan Investments. Please go ahead. Hi. Thanks for the opportunity. Hope I am audible. Yes, you are. I had a few set of questions, maybe I'll begin with them. Firstly, I wanted to understand, with regards to defense, and from the past three quarters, we've been having a lumpy period there. We have been talking about defense revenues picking up and order books being strong. What is exactly happening and when do we expect the production revenues to pick up? What sort of at least outlook or number-wise do you have for this financial year in the defense vertical? Yeah. Thanks for that question. If you look at our Q4 results, we had a very strong production run. The defense business, by its nature, is lumpy, because we work with some large PSUs and with government customers. It is hard for us to calibrate this on a quarter-on-quarter basis. Last year, we had a very good production run. This year, again, we are looking at about close to INR 171 crores of production for FY 2025. Q1 was slow in terms of production, and that's traditionally always the case. We do expect that next quarter for us, Q2 will be strong when it comes to production. It will be lumpy, but there are certain quarters that we expect strong defense production runs to happen. Understood. Okay. In the defense, could you talk a little about, maybe that's a little deep diving into it, the contribution from the anti-drone revenues or the vertical product per se. There's one more thing. In this INR 170 crores, have we assumed something with regards to LCA? Because I understand that HAL has- Sorry to interrupt you, but I think your line is not very clear at the moment. Can you just repeat that question? Sure. Get closer to the phone. Sure. Am I audible now? There's too much echo in your voice. Just a sec. You are on your speakerphone. Yeah. Is it better? Yeah. Yeah. I was trying to delve a little deeper into the defense vertical. One thing is, how are we right now positioned on the anti-drone revenues started to flow into the, started contributing to the top line? I understand that HAL in its recent con call talked about the revenues for LCA being a little delayed because there were some issues with the GE engines. In this INR 170 crore target that we have talked about, is there an assumption with regards to LCA something? Or how confident are we about this, and how does that impact us, the HAL issue? Yeah. Let me first answer your question with respect to the MPCDS or the anti-drone deliveries. As we have been reporting, of the 100 numbers which have to be delivered to the Ministry of Defence, 40 have already been delivered and 60 is being scheduled between Q2 and Q3. Talking about revenues, we recognize revenues on a proportionate completion method. So of the INR 65 crores of revenues which belong to us, which is our share, we have recognized about INR 50 odd crores and close to about INR 14-15 crores is still to be recognized, which will be recognized between Q2 and Q3. Yeah. On the LCA production delays, we have factored in the delays in our projections because though the issue is with the GE engines, what we have looked into it is about 14 to 15 numbers of LCA being produced annually, and that is what we have given in our projections or what is there in our planned projections for this year and next financial year. It should not impact in terms of our revenues. Understood. This was with regards to the margins. I do understand that there is some reversal corresponding to the ESOP provisions in the margins this quarter to the tune of almost 12 crore. If I were to adjust them, then the EBITDA margins would have an impact of almost 400 to 450 basis points. Could you talk a little about it, and where are we actually feeling the pressure in the margins? Is it all across or particularly R&D, some vertical specific are we facing issues? Thank you. Yeah. Maybe I can take that question, and Sashi can add on. Okay. I think, like we talked about, there are verticals where we have some seasonality. If you look at vertical by vertical, if you look at aerospace, obviously that vertical is doing very well for us, and I think we are at very healthy margins. If you look at defense, like we talked about it, there is lumpiness. Quarter on quarter, there are different circumstances. This quarter on defense, we had some pressures on margin because of the fact that we had to invest in a lot of prototypes. But like I said, our production revenues next quarter are going to be very strong, so we will see a big uptick happening there. If you look at energy, that business is very robust for us, and it is a very high-margin business. Now, if you look at semiconductor, there are two parts of the business. One part is the NRE or the non-recurring business, which is basically the services business. There the margins are very high. The support on semiconductor is the production slowdown. This, as you know, is an industry phenomenon where there has been high inventory, and we expect that situation to improve as we go into the year. So there has been some stress because of that, because typically production, whether it is defense or semiconductor, comes with very high margins. In automotive, we had a specific client issue. One of our clients in one of the European countries has faced a bit of a slowdown, and they are doing in the middle of a restructuring exercise. So because of that, we have had some margin pressures, which again, I believe, they are a large client and they will come back. We expect that in one or two quarters' time, that customer should come back, and that will contribute to it. But because it is a big part of our portfolio, that has had a specific impact on us. Heavy engineering for us, the margins have been pretty much steady. So it is a bit of a mixed bag. I would say the margin pressures in this quarter specifically are from defense and from automotive and from some parts of PES or semiconductor. Yeah. Just to add to what Arun said, just to take the example of Mistral Defense. In the current quarter, the total defense production of Mistral was INR 28 crores, which is almost about 75% more than what they recorded in the same period of last year. So on this defense production of INR 27.5 crores, the EBITDA, which was recorded, was 24.72%, which is about INR 6.8 crores. But when you come to defense prototypes, the total revenue from the defense prototypes, which is for future pipeline of orders, was INR 13.87 crores, on which the company lost INR 3 crores, which is almost about 21%. On this count, Muju will add to this. There is a lot more. The prototype, I would say, acquisition of order for prototypes has become a lot more competitive. If you look at last year, FY 2024, the whole of the year, the total prototype production was around INR 91 crores. On which we had lost about INR 3.9 crores. Whereas in this quarter alone, on a INR 13.87 crore revenue, we recorded a negative margin of INR 2.9 crores, which is almost 21%. But we have to, of course, do this because we have to add to the production order pipeline. If we do not do this, obviously our margins will improve dramatically. But we are playing for the long term in terms of defense, and we have to continue to manufacture these prototypes. Would you want to say something on this? Defense is a long-term business. What we need to do is, today we need to get ourselves involved into multiple new programs which are being planned by the Indian Ministry of Defence. If we are not there in the program today, we lose out when the production happens. For instance, if we had not been in the LCA program many years back, because we won the LCA program almost 15 years back. Those benefits are being reaped today. This is investment which we do in the long run. But unlike in the earlier years, wherein the benefit happened after 15 years, now we see mostly that what we do today will roll out into production numbers in 3-5 years from now. Basically, the investment for tomorrow. Got it. Understood. One last quick question, if I may be- Mr. Jalaj, may I request you to return to the queue? Thank you for your help. Sure. Thank you. Thank you. The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited. Please go ahead. Yeah, thank you for the opportunity. Just one clarification on the automotive segment side. Like you mentioned, some client issue was there. We are expecting in the upcoming quarter also. Another on the defense side, we are seeing lumpiness, and we are already multiple segment. Is there any— I hope not a focus issue because we are trying to manage n number of segments. What are view going forward from here onward? Yes, Jyoti, thanks for your question. I think in automotive, it's a very specific, like I said, customer issue. Just to give you a bit of a context on automotive, what's happening is that a lot of OEMs are migrating their portfolio towards EVs, electric vehicles. What's also happening is that there's a lot of competition which is coming from Chinese OEMs. Because of this is putting a lot of the traditional OEMs who are trying to disintermediate their business into a lot of pressure. They are trying to adopt ADAS and connected, and embedded strategies in the car, which is happening at a slower pace. What we are seeing is a short-term impact. Given the fact that these are very marquee names, it is just a matter of time before they come back. Since we have a large book of business from this customer, as the customer recovers, we'll see the recovery happening. It is not something which is systemic. I think it is more a time-based issue. As far as defense is concerned, we are very focused actually. I think this is a core area for us. We have two parts of the business which are now merging together. We work with, on one side, with all the labs, like the DRDO labs, NIB, et cetera, and the PSUs, like HAL, BEL, et cetera. On the other hand, we work with the Ministry of Defence. Our portfolio actually is very focused. If you look at it on the lab side, we do a lot of work on the electronic side, which is on telemetry, which is on radar and so on. And again, with the Ministry of Defence, we work on the anti-drone as well as simulators with some of the PSUs. We are actually very focused on the electronic side of the defense business. It is actually very strategic for us. It is a growing area and we are not spread into multiple areas like your question suggests, but actually very focused. This is actually the right place to be in, because there is a lot of growth which is going to happen here as we all know. Uday, anything you want to add on the focus part of defense? As a company, we are very clearly focused because the team which is working on the non-defense portfolio is completely different and the team which is working on the defense portfolio is totally separate. We all have our strength, and we are very clear about what we are doing because the semiconductor business and the general CE business require a different mindset altogether. The defense portfolio requires a completely different mindset, and the people who have been engaged with defense, the average age in Mistral or across both the entities combined together is about more than 10 to 12 years in Mistral alone. That gives a very clear vision saying that these people are completely focused on different sectors. Okay. Great, sir. Thank you so much. Sir, on the semiconductor side, that production issue we are facing, what are the expectations on that front? The semiconductor business, there is still overstocking by multiple OEMs. We expect this business to take off by Q3 or Q4 of the financial year. Okay. Thank you so much. Thank you. The next question is from the line of Deepak Padal from Sapphire Capital. Please go ahead. Yeah. Hi, am I audible? Yes, you are. Yes. Yeah. Okay. Thank you very much, sir, for this opportunity. Just wanted to understand now. We were talking about the margin pressure driven by 2-3 sectors like automotive, defense, semiconductor, as well as automotive not doing that well. I think we also mentioned that all these sectors will take maybe 1-2 quarters for them to revive. How do we see then the growth part and the margins part for this year? This quarter, our adjusted margin was close to 8.5%, right? How one should look as a whole, year as a whole, in terms of growth and margins here? Yeah, a large part of our margin contribution comes from defense, and that sort of accounts for when we have low margins as well as when we have high margins. I think we are going into a quarter now, or rather we are in Q2, where we expect, like I said, the production runs to pick up. We expect a strong margin performance to happen in Q2, a lot of that will be contributed by our defense business. Of course, on the engineering side as well, sectors like aerospace are very strong. Like I mentioned in my opening remarks, I think if you look at the headwinds that are impacting ER&D, the two shining lights are aerospace and defense. Aerospace, one is because it's always a long-term game, and air travel is picking up. People are traveling more, and then some of the OEMs have very strong order books. We are unique that we are one of the ER&D companies who's positioned in aerospace, which is differentiated from a lot of other companies. That will be a strong performer for us. Again, because defense is part of our portfolio, we expect as defense ramps up, that that will grow. Like Sasidhar SK said, last year we did INR 90 crores worth of production in defense. This year we will do INR 175 crores. A lot of that hasn't happened. You can expect a lot of that to happen over the next three quarters, but we are looking at getting into a quarter where we'll have good defense business, so that will provide a lot of the margin benefits. For the year as a whole, for FY 2025 as a whole, in terms of growth and both margins, how do we see that? Yeah, we are doing a combination of things. One is, of course, because the defense production is high, that will be a contributor. The second thing is that we are also, like I mentioned in my opening remarks, we are looking at a lot of digital as well as cost optimization initiatives which will happen, which have already played out. Some of these cost initiatives take 3, 4 months to actually show up on the balance sheet. So we expect all of that to start appearing in the next few months, the next few quarters. So we believe that for the whole year, I think we have a good plan in terms of both top line as well as EBITDA. Both top line as well as in terms of. Are we still maintaining FY 2026 that we had guided earlier, 3-year vision of INR 1,600 crores kind of a top line and a bottom line of maybe, what, INR 160, INR 180 crores? Yes, we are. That's a plan we are still working on. So, we're hoping to have a strong year this year, and then that will build into what we get into next year. Okay. Just one last small thing. Finance cost, we spoke that we are repaying some debt, so we expect some finance cost reduction. So what sort of finance cost we are looking at for this year? It will be around 30 odd crores. Okay. Out of the INR 56 crores as what was there for FY 2024, we should be around INR 30 crores in terms of finance cost or more than that. Oh, I got it. I think that is it from my side. All the very best to you. Thank you so much. Thank you. The next question is from the line of Kaushik Mohan from Ashika. Please go ahead. Hi, sir. Sir, I just wanted to understand one basic question. What are our components in the other income that we have? Because this time we have recorded a huge other income, right? Can you give the breakup? See, essentially, the other income, a major part of the other income of INR 11 crores as what we see in Q1. INR 6.59 crores of that is capital gains. We had a property in Noida, which was kind of unused, so we monetized that, and we made INR 6.59 crores capital gain out of it. The rest of it is, of course, the interest income and all of that in terms of the increase as what we have faced majorly. Okay. This one-time income of capital gain, if I remove, then our PAT is not having such a kind of a growth now, sir. Where are we lagging? Which division is of concern? Because I joined very late, so if I'm repeating the question, I'm sorry. You see, as Arun explained, for us, aerospace and defense are the frontrunners in terms of both revenue and margins. As Arun was saying, with respect to aerospace, our EBITDA margin is close to 19%, and with respect to defense, as I told you in the first quarter, we had about INR 28 crores of production revenues, and that gave us about 24% EBITDA margin. Even with respect to Product Engineering Services, our EBITDA margins are, of course, up 18%, only that the growth has to return as what Mujus stated. The ones which are compressing the margins are the heavy engineering vertical, where predominantly it is a staffing business. That's where Arun said that we are completely revamping this entire heavy engineering vertical. If you, in fact, remove the heavy engineering vertical from the scheme of things, which is about 20% in terms of revenue, our EBITDA margins will actually go up by about 100 to 150 basis points. That is where we are taking a major correction in terms of moving away from this staffing model as what we are talking about. The other vertical where, because of the de-growth in terms of the OEM business, is the automotive business, where we saw a compression of margins, and that will come back from about Q2 and Q2, Q3 onwards. Energy, of course, is a high-yielding margin business for us. I would say close to about INR 40-11 crores of revenue, which we recorded for the energy business. The EBITDA there again is of course, of 20%. Got it. Sir, are we sticking onto our guidance of INR 170 crore guidance or are we upgrading? Are we looking at it, rechecking it? I am not sure as to where it was this number, but the guidance with respect to the EBITDA, as we are progressing from Q2 to Q3 and Q4, we are as per plan. Okay. Thanks, sir. Thanks. Thank you. The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead. Good evening, sir. My first question is, you have talked about INR 800 crore to INR 1,000 crore of approved production wins. If you can talk about how much can we expect in FY 2025. We currently have production visibility of INR 300 crore worth of production based on the effort which we have put in the past. These are the efforts which Vishal and the team has put in the last 15, 20 years. These are yielding us production revenues. As of date, we have approximately about INR 335 crore of order book on hand. Out of which, different stages of INR 300 crore in hand, and most of this will be executed in the next one to three years. No, sir, that number is known, but I was asking that the number which you mentioned, INR 800 crore to INR 1,000 crore of approved wins. Only INR 300 crore do you think will come for FY 2025 and next year, FY 2026, out of this INR 1,000 odd crore, how much can be the order inflow for us? As has been reported in the investor presentation, of the 324 crores of order book as what we have in defense, about 60% will be converted this year. The rest of it, more to the next year. Again, of the total INR 800 crores to INR 1,000 crores as what we have stated, where they are all approved prototypes, where we have a part number and a reasonable visibility in terms of when the production orders are going to kick in. We will start with a strong order book at the beginning of FY 2026 again. Essentially to say, this INR 800 crores will perhaps convert over the next 2 to 3 years. Sure, sir. If you can talk about how much of these will be L1 tender based versus how many of these INR 800 crores to INR 1,000 crores we would be the single vendor? No, I think most of the cases which have been ratified and approved in the past, where it is only a part reissue of the order because there will be no other competition as such, because we have been engaged with the customer in building the prototype and the designs which we have done have gone through multiple testing cycles and certification cycles. So this part typically will not be changed, so it will be almost single tender basis. As we have been talking about it from the past so many earnings calls. Once a prototype is developed and certified and we have a part number, that becomes an IPR for us, and when a total system is developed, that part number purposed have to be there in that system. So it almost becomes a single tender. Okay. My assumption is correct that most of it will be single tender out of this INR 800 crore-INR 1,000 crore? There won't be even a second player? Yes, your understanding is correct. Sure, sir. Next question is, if you can give updates on two of the programs. We used to talk about it a lot more in earlier presentations, like Uttam AESA Radar, as well as the new Ashwini Radar. Another player is winning a lot of orders in this. If you can talk about Your voice is not audible. It's not clear. Yeah, just a second. Is it better now? Yeah. Yeah. I was saying, sir, I just wanted an update on two of the projects. One is Uttam AESA Radar, and the second is on the Ashwini Radar. A lot of orders are coming for other players in this. If you can talk about what kind of order inflow we expect from this Ashwini Radar. The Ashwini Radar, the ToT in the past was given to only one single company, which was Bharat Electronics, and today there has been an amendment in the ToT transfer agreement, and ToT has been given to three different companies. There is a portion of the AESA Radar, which will definitely come to us, and as on date, while we talk, we have given a quotation to all the three companies. So who has wins, we will get our pie. As far as the AESA Radar is concerned, which is under FPA, the trials have been good, and on 15th of August, the first prototype we make will fly out with the indigenously developed radar. Yeah. Sir, just wanted to understand what product are we- Mr. Amar, may we request you to return to the question queue for follow-ups? There are several participants waiting for their turn. Yeah, ma'am. Just I'm finishing the question, and the next question I'll ask later. Just this part, just a little bit clarity I wanted. Sir, I was asking that on the Uttam AESA Radar, typically, the radar costs a lot, but what part are we doing? Is it a very small value addition or a big value addition, if you can talk about the same? There is a part called exciter receiver in the radar that is being done by us. This costs around few crores or these are like INR 50 crore plus kind of- It will be in the range of about INR 2.5 crores to INR 5 crores, approximately. Okay, thank you. I will get back in the queue. Okay. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. I repeat, please limit your questions to two per participant. The next question will be from the line of Dipesh from Emkay Global. Please go ahead. Yeah, thanks for the opportunity. Couple of questions. Just want to look, if I look organic basis, overall revenue is down on year-over-year basis, and sizably down. Even if I look the vertical which you indicated is seeing a headwind, even if you adjust for their flattest performance, revenue is down on organic basis. Just want to understand, it seems to be relatively more broad-based, particularly defense side. Defense is fairly weak compared to where we used to run a hundred perspective. Even from production and design which used to be stable, showing weakness. If you can give some sense how one should look defense business, because you said it will pick up from production perspective, but then overall is not showing any material strength because of the design-related softness. If you can address two-part question. First is, organic fairly weak number on year-over-year basis. Second, even defense is showing weakness. If you can address it. Thanks. Yeah. The way we look at our business is that there are certain areas where we are legacy, where we have strong capabilities. Typically, that is in aerospace, it is in defense, and it is in heavy engineering. Like I had outlined earlier as well, our strategy is to diversify. So that, when there are seasonalities which happen, like what is happening now, we are present in sectors which are strong as well. To that end, we make acquisitions, and for us, automotive, we grew through an acquisition, and energy through an acquisition. So your question should be seen in the context that we have acquired new capabilities. So it is not that we are growing aerospace and defense through inorganic. The growth that you are seeing in aerospace and defense is completely inorganic, and defense for us is lumpy. That is something that there is not much that can be done, because when we have production orders, it is a very high quarter. Like Q4, for example, was very strong for us because we had a strong production run. Like I have been saying, even the next quarter is looking good for us. Q1, which comes in between, is where we have to invest in a lot of prototypes. The way I see it is that, when one has to grow an overall business, one has to invest in certain areas, and there will be growth in other areas. Of course, meanwhile, there are also macro trends that you have to deal with. I think given this whole context, I would say that the performance has to be looked at as organically, the sectors where they are strong have done well. I think the new sectors for us, where we have to grow quickly, and these are sectors where we could have grown organically, but then it could take 5 years instead of doing it in 1 year. I think the contribution which comes in for specific sectors where there are inorganics is because we wanted to grow quickly. We feel that because of the different seasonality, this quarter has been a little bit weak, and of course, there is a client-specific issue in one particular vertical. But other than that, I think the health of the business looks pretty robust as far as we are concerned. So if you can answer the defense products and design, one should look combined number from defense, growth trajectory perspective, or emphasis would be more on products and design, lumpiness may continue. Because design is weak this quarter-on-quarter as well as on year-over-year basis. In terms of production business, for the year we are well set and as per the plan, because typically when you talk about production, you need to have your orders in hand at least about 9 to 18 months in advance, otherwise you won't be able to deliver. So we are in good shape for the year and whatever investment which we are doing today is still for the future. No, that is true. But design, let's say when weakness was there, typically margin benefits should get reflected. If I adjust for some of the one-off, margin it seems to be weak. Even design revenue was weak. No. I think just to clarify, design for us is prototyping. So typically when a new defense program comes out, it is a competitive tender and we have to bid against other companies. And usually there is a lot of pricing pressure when that happens. So you usually come in lower on price. Plus there is an investment because you need to do R&D. So design by the very nature of its tender will always be more in investment mode. But the reason we do design is because when the design finishes, once the certification finishes, the production which happens at the end of it is very substantial and that's where the high margins are. When we have a quarter where there is more design and less production, that quarter will have lower margins because design by definition is more investment and production by definition is where we harness all the margins. Next quarter, like I was saying, we have higher production as a component of our defense business and therefore we expect that the margins will be very strong. I think it is just important to understand the life cycle we are in and in quarters in which there is more design, the margins are lower. I hope that clarifies. No, sir. This clarifies and that is why the question I raised. Your design is lower this time compared to let us say quarter-over-quarter, year-over-year, whichever one look absolute number. So it should have benefited your margin. Your production is also higher. No. Just a minute. I think I answered this question earlier. If you look at Mistral Defense this quarter, the total defense production for Mistral was INR 27.5 crores in this quarter, which recorded an EBITDA of INR 6.8 crores, which is 24.75%. Now, coming to defense prototypes. The total revenues from defense prototypes was INR 13.87 crores, where we lost INR 2.9 crores, which is almost 21%. So if you take the total defense margin from Mistral, it was about INR 41.37 crores of revenue and INR 3.9 crores of EBITDA, which is about 9.43%. So that is the reason as to why Arun said that, depending on the mix between prototypes and production revenues, the margin profile with respect to defense changes. It so happens that in Q1 there was substantial prototyping of around INR 13.87 crores of revenue. Also because of the competitiveness as what is there in the prototype bidding now, the loss that is what we took on. The book is much more than the whole year loss of last year which we had incurred for prototypes. Understood. Thank you. Thank you. The next question is from the line of Manju A. from JM Financial Services Limited. Please go ahead. Yeah. Hello, sir. Good evening. Am I audible? Somewhat, yeah. It's not very clear, but we can sort of hear you. One second. Is this better, sir? Yes. Yeah. First question is regarding this reversal in the notes to accounts. There is a mention about certain reversal of the share-based payments to employees to the tune of INR 10.82 crores. How should we treat this, sir? Is this an exceptional one? Because if you do not include this, then whatever margins that we are seeing at the EBITDA level would have been even more lower and there would have been a significant drop on a year-over-year sequential basis from an EBITDA perspective. How should we read this, sir? Basically, we have programs and compensation which we roll out for employees, which are retention-based, which are performance-based. I think time to time we need to review this. I think this quarter we had a review of some of these processes and in discussion with our board, we felt that some of the old programs need to be rolled back and we need to sort of launch some new programs, which is what we are in the process of doing. I anticipate that over the period of the years, this is something that will balance out. Okay. This is based on the milestones that were set for the employees and they have not reached those milestones and hence this reversal of the compensation. Let us assume that things get better, this cost can come back to us. Is that the right way to understand? Yeah, you can say that. It is a combination of factors. One is partly milestones. There have been some stocks which have vested. It is also in terms of the ambitions of our company, the aspiration that we have, that changes from year to year. When we have a different ambition that we want to enhance our performance, we would like to revisit some of our compensation programs. Partly that is what we have done is this. We wanted to reset it to the future growth potential and to some of the sectors where we feel that there can be superior performance. It is a combination of both of those. Sure. Sir, a lot of questions were on our defense and this production revenue run rate improvement which you talked about. Just a few data clarifications here. The Mistral revenues last year FY 2024 fully overall was somewhere in the range of INR 328 crores. Am I correct in that? Vis-a-vis some- You are right. Sure. This number for the current quarter Q1 2025 is INR 49 crores. Is that right? No. The total revenue from Mistral this quarter is INR 55 crores. 55, is it? 65. 65 odd crores. Okay. This 65 on a comparison basis is 72 in Q1 of 2024. Is that the right comparison or any changes there? That's right. Okay. Out of this INR 65 crores, you said somewhere INR 20, 26 odd crores is the production revenue in this quarter of 65. Yeah. So let me break this INR 65 crores for you. The defense production revenues is INR 27.5 crores. The prototype revenues are INR 13.87 crores. The semiconductor revenues are INR 23.62 crores. Semiconductor is 23 point something, right? Correct. The margins, the EBITDA margins on that production revenue of INR 27.5 crores is 24.7% EBITDA margin. Is that the number? That's right. And we incurred INR 3 crores loss on this prototyping and revenues of INR 13.87. Correct. Okay. Sure. Semiconductor is also in losses or- Semiconductor, we have made a 15% margin. On the INR 23.62 crores, we recorded an EBITDA margin of INR 4 crores. Okay. INR 4 crore EBITDA is what we have generated there. Understood, sir. The visibility for this INR 27.5 current quarter production revenue is INR 170 crore the full year, is what you are indicating. Right. This number, the same FY 2024, the corresponding comparable number was somewhere in the range of INR 112 odd crore, is it? INR 112 is going up to INR 170. That is the visibility. That's right. Okay. This INR 800 crore to INR 1,000 crore of the number that is there in the presentation about our confirmed or design-led production revenues that can accrue to us, where you talked about a cycle of 2.5 to 3 years, when this can be achieved. Over here, this entire INR 800 crore to INR 1,000 crore is convertible into order book in, let's say, 3 years, and that order book to revenue could happen in maybe another year's timeframe or so. In 4 years timeframe, the entire INR 800 crore to INR 1,000 crore odd can translate into revenue. Is that the correct way to understand? Many of the radar programs and sonar programs, the revenue recognition will happen in the next 3 to 4 years. There is also some amount of revenue in this INR 800 crores-INR 1,000 crores, which is part of the right operator with Tejas aircraft. Here, the production cycles are a little bit longer. Sir, sorry to interrupt. You were echoing a bit, sir. I got the point that in next 4 years or so, this can get translated into revenues, but after that I lost you. The programs which we work on today are multiple radar programs, sonar programs, electronic warfare programs. These programs, I expect things to be recognized in the next 3 to 4 years. Whereas the revenue which we have calculated here, which is for a Tejas aircraft, the production schedule is for a longer duration. That revenue will be spilled over till the Tejas are produced. That money, 100% will not be consumed in 4 to 5 years, some of the revenue will be over a period of next 7 years. Okay. The revenue conversion will happen over the next 7 years, but order book conversion from this INR 1,000 crore could happen over the next 4 years. Is that right? Obviously, most of the time what happens is that whenever we get orders, for instance, for Tejas aircraft, we know for a fact that there were 190 Tejas to be produced. They issue the order to me for the 35 numbers, 40 numbers in year on year or in every 2 years, they build orders in batches. We may not have the order for the complete lot in one go, but we are completing the orders which are secured for the future also. That is a part which is already pre-approved. At the same time, I know if you look at the other ones which are designed, under development, that also will realize into revenues. It needs a number of years, but at the moment, we are not very clear in terms of how the program is shaping up. Because, see, in terms of the INR 2,000 crore to INR 3,000 crore of prototype under production, in some of these cases, our portion of activity is completed, but my system is going into a larger system. For instance, if I am developing something and that is getting into a radar program, my piece which we've been designing under this plan is already delivered to my end customer. My end customer is putting the radar. The radar has to go through field trials. That's when the production will happen. There are little bit long cycles, but unlike in the past, wherein the design cycles were about 10 years plus or 20 years plus, now it has shrunk to 4 to 5 years. Okay. Got it. The translation will take much longer, could be even up to 10 years, is what you're saying, because there are multiple parties involved, and hence there could be a delay there. Right? That's right. Sir, I got the point on the auto and the client-specific issues that you're having and how you believe that things can get better over the next two quarters or so. But aerospace on a sequential basis is largely in the similar run rate only looks like. There has not been any material improvement on a sequential basis in the aerospace revenues. Is this on expected lines or you think anything that you can elaborate here, sir, on this point? Yeah. Just on aerospace from Q1 of last year to this year, there's been a 24% growth. From Q4 of last year to this year, it's been similar. The reason being that if you look at large manufacturing plants, whether it's in aerospace or automotive, they typically have shutdowns of two periods. One is the summer shutdown, which happens, and the second is during the Christmas period. So in Q1, we had almost two to 2.5 weeks of summer shutdown. Because of which, the revenues from the aerospace segment were a little bit lower, which we expect to see that coming back. Because for us, when the factories are humming, when the products are being generated, that's when the business for us is robust. Okay. In that sense then, Q2 on a sequential basis should be a good number to look at in the absence of the shutdown which impacted us in Q1. Yeah. Q2, we do expect the revenues to be much better. Okay. Understood, sir. Sir, just another point on the interest cost. You said interest cost for the full year could be in the range of 30-odd crores vis-à-vis 53-odd crores where we closed in FY 2024. Right? The current quarter interest expense is in the range of INR 8 crores therein. You have also talked about further reduction in the debt which can come through there. Can you please clarify these numbers, sir? What is the current net debt, and what is the current gross debt and net debt on books? See, the current gross debt is around INR 230 crores, and the current net debt is about INR 50 crores, five, zero. As I was saying, the total interest cost for the entire year would be in the range of around 30-odd crores. Because we are putting in some CapEx for which we are borrowing at a very reasonable and competitive cost. As a result of which, the total finance cost will not be more than 30-odd crores, in that range. Okay. INR 230 is the gross debt and INR 50 is the net debt. That is the number, no? That's right. We are having about 182 crores in terms of cash, bank, and liquid deposits. Okay. What was the operating cash flow? I think you mentioned about net working capital of somewhere in the range of 120-odd days or something. Is that the number, sir? Did I get it right? Yeah, that's right. If you look at most of our engineering services business runs at a networking capital cycle of around 65, 75 to 90 days. Whereas in the case of defense, it is a little bit more because you hold inventories as well as receivables. Okay. Got it. Sure. Thank you very much, sir. Thanks for your time. Thank you. Ladies and gentlemen, I would request you to limit your questions to two per participant strictly. The next question is from the line of Dhruv Shah from Ambika Fincap. Please go ahead. Hi, team, and thank you for the opportunity. Arun, my question is on your PES segment. Our EBIT margin is around 11% this quarter, and that also includes this INR 12 crores of write-back you guys have done on the stock-based payment. When do you see our EBIT margin on the PES coming back to the industry level of 13%, 14%? There is also industry reports around 15%, 16%, but when do we get to that 13%, 14%? I understand you are investing in automotive and energy, but at the same time, our EBIT margin on aerospace will be much higher. If you can just elaborate on the same. Yeah. Dhruv, like I said, next quarter when we have our defense production runs to be higher, we will see a higher margin when it comes to Q2. But I think for us, every quarter, we have certain rhythm of our business. I think this quarter, because of the fact that we had lower production as well as a time-sensitive issue, the margins were a little bit lower. If you look at last year, we closed FY 2024 at close to 13% margin. We are looking at taking that up in FY 2025. We have a plan in place to sort of recover that over the next three quarters. When you say production, but that would be related to defense, right? I am talking only about- No, engineering services, to answer your specific question, as I said, the current, I would say there are two verticals which are undergoing correction, which is, of course, automotive as well as heavy engineering. To answer your question as to when we will be able to scale up another 200 basis points, we would assume that by the end of this current financial year, we should be able to scale up at least about another 150 to 200 basis points on the engineering services. Okay. By end of this year. So every quarter we should see this going up from 11% EBIT margin? Yeah, because we are doing a major correction in heavy engineering verticals, and that is in fact turning to be margin accretive rather than as against total margin decreative position as where it was in FY 2024. Right. Sasidhar, on the thing which we were supposed to start on heavy engineering to increase the margin, which we said on the last call also. Is the exercise on and should we start seeing results from coming quarters? Let me tell you. In fact, if you look at the total revenues of last year from the heavy engineering vertical, the total revenues from heavy engineering vertical was INR 152 crores last year, with an EBITDA margin of negative 0.5%. Whereas in this year, in Q1 FY 2025, the revenues from the heavy engineering vertical is INR 36 crores, where the EBITDA margin is now 3%, plus 3%. This correction has kicked into place largely in Q1, and there is more to come. Right. Fair enough. Thank you. Those are my questions. Thank you so much. Thank you. The next question is from the line of Jalaj from Swan Investments. Please go ahead. Hi, sir, this is Devaki from Swan Investment. Thank you so much for the follow-up. I have just one question. Most of the questions have been answered. You were sticking to the guidance of INR 1,600 crores of top line and INR 160 crores of- We're completely losing you. Rupesh, we're completely losing. We're unable to hear. Is my voice clear now? Yes, sir. The question that I have is, if I see the guidance that you are giving for FY 2026, which is INR 1,600 crores of top line and INR 160, INR 170 crores of bottom line. Now considering the current run rate and considering the guidance that you are providing for this year, I think we'll be ending somewhere around INR 1,100, INR 1,150 crore. At best case scenario, INR 1,200 crores this year at the top line level. To get the INR 1,600 crore next year, you need to have INR 400 crores of addition. Just wanted to get some sense, do you have this kind of visibility, in terms of your existing order book or existing pipeline to get this kind of number? Or it's just aspirational number? No, these are all numbers which have a backing, with respect to how this has been computed. The biggest driver here, of course, is the defense vertical, where we have been talking about 39 crores going, how production revenue is going to 111 crores, 111 crores, going to 170 crores. The pipeline of orders as well as we confirmed the prototypes of what we have, resulting in the production revenues on defense going by much more multiples going forward. Of course, the other vertical with respect to energy is still a small base, but that again is going to pick up quite a lot going forward in terms of the bases what we have now in the Middle East and the various other strategic plans we are kind of getting in this vertical. Of course, aerospace, because of the production run rate and what is going to go up, and the order backlog as what the OEM has, that's another vertical which will also go at a faster clip. The entire 1,600 crores is not purely organic. We have baked in some amount of inorganic also in that, and that's something which we have to play out. Yeah, I think what we're also doing is that, obviously in order to realize those ambitions, we are also investing in our sales force. So we are recruiting more people so that we can improve our new logo addition and large deal addition. So definitely it's work in progress. I mean, this is the direction of travel that we want to traverse. There are investments that we will plan, and we will expect that we'll have outcomes on those investments. So not everything is in the bag right now like it is for any other company. But with the investments that we are putting in and with the growth rates that the industry is seeing, we feel that this is an ambition that we can sort of work on. Sure. If I may know, sir, how much is the inorganic you are building in this section and this current number? About 10% is the inorganic revenue. 10%-15% would be inorganic. Sorry, sir, I missed that. Sorry. 10%-15%. Okay. 10%-15%. Okay. Thank you so much for answering my question. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. We thank all the investors and the participants in this call for participating in the call, and we also thank you for your support throughout. We also thank Orient Capital for arranging this call. Arun? Yes. Sorry, just one closing remark I wanted to make is that I think, like I mentioned, as we see the industry going forward, our strengths are in aerospace and defense. Like I mentioned, we will be looking at how these are two verticals which we believe has a lot of juice left in them. So we will be wise. Of course, all the engineering services verticals are important to us, and we will look at those. But I think as a company, we will see our pivot happening more towards aerospace and defense. We will expect to see superior growth coming from that. I just wanted to leave that and we are also looking at bringing a lot of the embedded capabilities from Mistral into our portfolio. Therefore, the logic for our rebranding is to, one, focus the whole defense portfolio that we have. The second is the digital engineering and the embedded capabilities that we have, which is something that we will play upon going into the future. Thanks a lot for all your questions and good talking to all of you. On behalf of Centrum Broking, that concludes this conference. Thank you for joining us and you may now disconnect your line.