Welcome to the Zen Technologies Limited Q4 FY 2025 Earnings Conference Call. Please note all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the management's opening remarks. Please note that this conference is being recorded. I now hand over the conference to Ms. Tina Virmani from Motilal Oswal. Thank you, and over to you.
Thank you, Swapnil. Good afternoon, everyone, and thank you for joining us for the quarter four FY20 25 earnings conference call of Zen Technologies Limited. We are pleased to welcome the management team of Zen Technologies to this call: Mr. Ashok Atluri, Chairman and Managing Director, Mr. Afzal Malkani, CFO, Ms. Shilpa, Full-Time Director, and Ms. Abhilasha Atluri from Investor Relations. We will start today's call with a brief overview of the company's performance, after which we will open the floor for questions and answers. With that, I now hand over the call to Mr. Afzal first for the compliance-related disclosures, and then to Mr. Ashok for his opening remarks. Over to you, sir.
Yeah, good afternoon, everyone. So the results and investor updates have already been emailed to you and are also available on the stock exchanges. If anyone has not received a copy, please let us know. We will be happy to send it over. Before we begin, I would like to remind you that today's discussion may include a forward-looking statement, which must be viewed in conjunction with the risks and uncertainties that the company faces. These are detailed in our internal reports and other public disclosures. We will start today's call with a brief overview of the company's performance, after which we will open the floor for questions and answers. With that, I now hand over to our Chairman and Managing Director, Mr. Ashok Atluri, for his opening remarks. Thank you.
Good afternoon to fellow investors and other participants here. I'm assuming that you have seen the presentation, and I will not go delve into the presentation itself, but I'll talk about some peripheral points which may be of interest to the investors. One of the questions which should be worrying investors is about the order book position, their order book position. I have indicated that we should be getting about INR 800 crores' worth of orders by the H1, and I think we still are on to it. In addition to that, there may be some other orders which, because of the recent operations, there may be something additional in those areas. These orders that I'm talking about, INR 800 crores, are all simulators. The other segment orders may be activated due to the pressure due to the recent actions that our neighbors have taken against us.
So just to understand the anti-drone systems that we have, we started R&D in 2018. In fact, we were the only private company, to the best of my knowledge, that was discussed. Everybody else was screaming drones, and we were thinking, "Why isn't anyone talking about anti-drone systems?" There was complete silence in that regard. We saw the signal in the silence, and we decided that we should focus entirely on that. Around that time, we acquired UTS, a team of extremely competent experts led by Srinivas Raju and Nagendra Prasad. Dr. Nagendra Prasad and our bet proved very, very prescient. While they were doing a lot of other projects, we tried to focus exclusively on anti-drone systems, and the results have been very, very encouraging. Again, this was a long four- or five-year kind of research, and it's still ongoing.
It's an extreme amount of investment, and it's still ongoing because the threats are evolving. The new threats that are coming are being accommodated in the product. Even though we initially started, the product typically has a lot of components. We initially started with detector and jammer, but later we added the radar, which was again created, which is a multi-year, at least five, six years of effort, which was created in less than a year kind of situation because we were really hard-pressed for time. The electro-optics, everything is now in-house, so we are completely giving a made-in-India solution to the design, developed, and made in India. I always say I hate just made in India because I like design and developed also to be added to that, so yeah, this was a complete design, developed, and made in India solution to it.
While in the initial year, in the first tender that was floated by the armed forces, had by Indian category, you could get a foreign collaborator. In 2023, when they floated the RFP, they insisted on IDDM. That means to say that even the technology and the IP in the product should be owned by Indian companies. And that is where we had, even though initially we had about 12 companies, finally only two companies came for the trials, and only one company emerged as a resultant single vendor in that because we were the only company that was able to comply with the requirements there. What were the requirements? The requirements were very, in the sense, typically most of the anti-drone systems in the world handle only two frequencies, 2.4 GHz and 5.8 GHz, which are basically commercial frequencies.
But the reality is our bet was that in the actual war, when it will happen, it will not be the commercial frequencies that will be tapped, but it will be, it may be any frequency. So we have to develop an anti-drone system that was band-independent, not band-dependent. So that is the solution that we were able to make, and now we have that solution, and that solution has been very, very helpful to our armed forces. So I think the bet was very, very early taken early on, and as we speak, a lot of improvements, a lot of feedbacks are being incorporated, and I think we'll absolutely have a world-class anti-drone system which will help India to be absolutely unbeatable in any war. India and its allies, whichever Indian government fields, will be supplying to them too. So this is the statement with anti-drone systems.
Again, we are hearing a lot of statements about anti-drone systems, but we really have to see whether this is indigenously designed, developed, and made. Again, we have been tested, and we have been proven beyond doubt that we have, by the government, we qualified in IDDM case. So we know that we have been tested. We have to see any competition in this regard from any other vendor. So another question was that with respect to, I have been always saying that we have 50% average CAGR growth is expected. My confidence still is there that the average rate will continue. But again, because of the delay in receiving the order, this year may be muted. But again, from 900 to 900, our prediction was made to run across 900. So on 900, if you take that as a base, 13, 50, 2,000, and 3,000 crores.
So it will be a little more than INR 6,000 crores in the next three years. We still feel confident that we can achieve those figures. And again, we have to be, as a company, this is what we could do, but government, we feel, should be doing a little more aggressively in the sense after the pager incident in Israel, which happened in which Israelis gave the pagers to Hamas and activated it after a long few months, probably a little longer than that, and they were able to kill them. So we actually believe that a lot of this Chinese stuff, which is there in India, is actually that kind of stuff. Their cars, their weapons, because they control the software, especially electric cars are very, very dangerous. Actually, the government should take control of the software. We think that the mobile phones, they're completely very dangerous.
They should look at, probably looking at the software and try to take control of the software. Otherwise, we'll be in big trouble with China. And I'm very sure you might have read the article where even the solar farms can be switched off by the Chinese when they want because they have switched in the panels which can be activated and put off. So I think I'll open the floor for question and answer, and if there is now anything that any clarification required, I'll be more than happy to answer them. Yeah, the floor is open now.
Thank you, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question, may click on the raise hand icon from the participant tab on your screen. We will wait for a few minutes until the queue assembles. Ladies and gentlemen, please stay connected.
Vishek, I think we should keep in mind that we want to end this in one hour. There will be no extension. So we should treat that time very preciously and try to close it. See that everybody's accommodated. And can you request the questions to be, I mean, let them be long, but as brief as possible.
So we will take care of that. Ladies and gentlemen, we will have our first question from Mr. Amit Dixit from ICICI Securities.
Yeah, hi. Good afternoon, everyone, and congratulations for a good performance record quarter and record year. I have a couple of questions. The first one is that in the proposed revisions to DAP, we have seen that there was a mention of simulators being contemplated for reducing the testing time. Have you seen any traction around that particular aspiration of the government and anything you hear on that front? That is my first question.
Yeah, so the simulators are actually now being used in the shipping acquisitions, especially for products where it's very, very difficult to do an NCNC because they are actually built to purpose. It's already there, but I think they want to make it more generic. This is one of the suggestions. DAP was released in 2016 and then 2020. Now it's due for revision, and the suggestions are coming in. One of the suggestions is using simulation as a way to do the trials instead of actually doing the equipment. I have my own reservations, but I feel that it should be applied very, very sparingly. And to your question that what would be our involvement be, we may get involved as the opportunity evolves, but at this point in time, we don't see much role for them to play in this kind of simulated evaluation.
Okay. The second one is essentially on the delay in ordering that we have seen. So do you attribute this to the general delay that we saw last year, I mean, because of general elections?
Yeah, so.
Or is there some more structural element to it because we saw a few orders, a few bulky orders being expedited? But unfortunately, our, I would say, gamut of products or services didn't kind of evolve. But after this conflict, do you see some more chance of at least ADS happening? You mentioned in your prepared remarks, but just wanted to get a little bit more clarity on it. There is a budget of 40,000 crores emergency procurement being talked about. So just wanted to get a little bit more color on that aspect.
Yeah, Amit, I think the orders, again, the government, to be fair to the government, they were actually consolidating the requirement of the anti-drone systems to really understand how much is the requirement, when to procure, etc. So the other bulky orders were placed on other equipment, but even though as an industry, we do feel that they probably have placed, but the fact was they were trying to assemble. But this is a fortunate for us. The Operation Sindoor has been, I would say, a stroke of luck in the sense for the Dastardly Act that was committed. That was a really, really bad act. But post that, what happened was a stroke of luck for us in the sense we were able to actually go destroy 10x of what they did to damage they did to us.
Then we were able to test our equipment, and government was able to see what happens in the real world. Of course, it was also almost like a PR and a marketing span for the Indian equipment. We were proved beyond doubt that our equipment was. I think post the horrific incident, what has happened is actually very good in my estimate. Now we see that there is a sense of urgency, absolute sense of urgency to acquire these new age war equipment, the drones and the anti-drone stuff. Yes, I'd say to your question, the short answer is yes, we think that government has really, really appreciated the role of the drones and anti-drone systems, and they're accelerating the procurement. We think companies like Zen will benefit from this new sense of urgency that the government has.
Thank you, sir. We have our next question coming in from the line of Mr. Krishna P. Mr. Krishna, please go ahead with your question.
Is that audible, sir?
Yes, we can hear you.
Sir, I'm Rudolf Noah. Sir, my first question is regarding that DRDO anti-drone. We are part of the DRDO system. How we are part of that, sir, anti-drone system? What we are supplying to them?
So Zen doesn't supply anything to DRDO. Our subsidiary, which has developed the anti-drone system, they also collaborated with DRDO, and they supply the jammer and the detector. I think maybe a little part of that, but these are the two major elements that UTS has collaborated with DRDO to supply to them.
Okay, sir. My second question is regarding the chip. Are we designing the chip, sir, for what we are using in our systems?
No, Krishna, we are not designing the chip ourselves. We are making use of ready-made chips. So again, our dependency is not on a particular chipset. What has happened during COVID was COVID and Ukraine war, a lot of there was a shortage of chips. So we had to design multiple times the same chipset, the same PCB with different chipsets. So we are chip independent. We are not tied to any chip, and of course, but the chips are not made by us. They are procured from foreign sources, and we are built to it's like think of the product like a Windows operating system or the Intel chip. We buy it from outside. We build the applications around that. So that's what we have. The chips are still procured from abroad.
We are hoping that with the new policy that the government has done for semiconductors, some of these chips will be made in India eventually. But as of now, most of the chips are procured from abroad, but again, from non-Chinese sources.
Okay, sir. Thank you, sir. Sir, is Bhairava Robotics, they have any patent, sir? They have not mentioned anything about the patent.
They have applied for some patents, and I think the patents have yet to be granted. They have been applied, I think. Yeah.
Okay, sir. One more last question is, sir. Sir, in anti-drone, now we are seeing with laser technology, the drones are killed off. Are you working on that?
No, laser technology we have not integrated. I think the laser technology was found wanting in the current operation, but we have integrated the L70 weapon. We have integrated, and we have launched this remote control weapon stations through AI Turing, and those weapon stations can be integrated with anti-drone systems. And also, those remote control weapon stations can be used independently of the ADS. So this is the market that's showing a lot of interest in our products, and so we look forward to those accretive sales also as we go ahead.
Okay, sir. Thank you, sir.
Thank you. We request participants to restrict to two questions and then return to the queue for more questions. To rejoin the queue, you may click raise hand icon again. We will have our next question coming in from CA Garbhit Goyal from Invest Analytics Advisory LLP.
Hi. Am I audible?
Yes, we can hear you.
Good evening, sir. Congrats for a good set of numbers. My first question is on guidance. Like you mentioned, FY2026 is expected to be a muted one, although medium to longer-term guidance is very much aggressive. So can you put some color on why we are looking for a muted FY2026 despite the current environment that you mentioned? The government is increasing the procurement, emergency procurement, particularly after the incident happened with our neighbor country. So that is my first question, sir.
Goyal, the thing is that while the orders, I think the order book position will improve significantly, and that may happen by the end of H1. By that time, if we get the orders, how much of it can be executed during the current year is a question. That will come to know as we go ahead in the couple of months. I think we'll be in a better position. We are saying that by the end of H1, we should definitely have a very clear picture, possibly a clear picture. As soon as we get, we'll share this year's thing. The reason is even if the orders come, a lot of orders come, the execution will spill into the next financial year.
That is the reason we are saying that this year will be muted.
When we say this year will be muted, is it will be like, can you put any number to it, like 10% kind of growth or anything like that?
I'm not putting any number to it, Goyal. Unfortunately, the thing looks tentative at this point in time, and I'm a very aggressive number giver. If I have even a slightest inkling, I go ahead and give the number, but at this point in time, I'm restraining myself from doing that.
50% CAGR is indexed for next three years, right?
Yeah, cumulatively, we think yes. It comes to about INR 6,000 crores plus of turnover in the FY2026 to FY2028. And we think that that's achievable.
So that means for FY2028, you are looking for a 6,000 CR kind of turnover, right?
No, no. It's a cumulative turnover.
Cumulative turnover.
Yeah. Our prediction was the base is 900 crores. So FY2026 would have been 1,350, which we think will not happen. Our FY2027 would have been 2,000, and FY2028 would have been 3,000 crores. So when we add up, it's a bit more than 6,000 crores. So that was.
Got your point. Got your point. And just last one thing on the margin side, sir. Are we able to maintain the kind of margins that we are doing currently?
We have given a guidance of margins of 25% and 35%, 25% PAT and 35% EBITDA. Even if you see this time, even though it looks a little more, our operational income, if we take out the interest income that we have got from the QIP raise, the net comes to around that region only, 25% for PAT and 35% for the EBITDA margins.
You will maintain that, right?
Yeah, we feel very confident about those margins. Yeah.
Understood, sir. Thank you very much, sir, for your time. All the best for the future.
Thank you, Goyal.
Thank you. Our next question is coming in from Mr. Akshay Patel from A.K. Capital.
Hello. Congratulations, sir, on the great setup number. Sir, my first question is that recently BEL gets order of INR 572 crores for counter drone systems. So are we also expecting some order flow to also come in this quarter as now the government has expedited the procurement for the defense equipments and all these things?
Yes, we are expecting orders to come during this quarter and next quarter. At least in the H1, we are expecting some orders to come through for anti-drone systems. Yes.
Okay, sir. And, sir, just in the context of the industry, so how many players currently are in India that is developing the anti-drone system? And what might be our market share in the anti-drone solutions in India? And also, can you put some light on the global anti-drone defense solution?
So, I think, in the indigenously developed IDDM category in India, I am not aware of any other company than Zen where all the products like detector, jammer, radar, EO, any hard kill integration has been done. So we are the only company in the private sector for sure. And we expect that again, to the question, in 2023, we participated in a tender a year and a half back, and that was an open tender with the specifications which were absolutely suitable for actual operations. And there is no other, no public sector or private sector company even qualified in the trials. We were the only company that qualified. So to your question, the answer is that Zen is way ahead in terms of technology in these products. And if they want war tested technology, Zen is the way to go.
But again, to your question, who are the other players? DRDO has transferred technology from 56 companies. So they are the other players with the DRDO technology. But again, no one has done the self-funding like we have done, and no one has the technology that we have, and nobody has been tested the way we have been tested in actual situations.
All right, sir. And can you please put some light on our U.S. business expansion and what is the traction over there? We are expecting the significant orders to come in FY2027. So are these things intact?
Yeah. So, yeah. So, the work with the U.S. is going on. I think he's getting a lot of business for the U.S. And our move to the U.S. was well planned. We have now at least four people working there for us, very senior resources who are dedicated, going and meeting customers, attending exhibitions. And we think we will be getting some business. FY2027 should be the year in which we should get the orders. Yeah, the plan is intact.
Okay, sir. All right. And the order book, consolidated order book, is consisting of all three recently acquired companies like ARI, BYRO Robotics, and Vectra AI or is it our standalone order book?
The 692 crores is our standalone thing. They have additionally, I think, at least 100 plus crores. So that would be another 100 crores. Consolidated would be way bigger than that. Yeah. But yeah, the 692 crores is standalone only.
Okay, sir. Thank you so much, and best wishes for the next year.
Thanks, Akshay.
Thank you. Our next question is coming in from the line of Mr. Rajamohan Vaikunda Raman, who is a professional investor. Please go ahead.
Yeah. Thank you for the opportunity. And congratulations on a great set of numbers. Basically, in the anti-drone, especially in the light of Operation Sindhur, you had also indicated two use of our equipment in an interview. Could you quantify the value of anti-drone of Zen that got used? Was our hard kill used? There were mentions of D4 anti-drones. I was just trying to understand how did Zen fit in terms of value as well as in terms of quality?
Obviously, Rajamohan, these are the questions that we will not be able to answer the specific use. So again, my feedback is based on the ground feedback that I received from the forces. And where was it used? How much was it used? Is something that I don't know. And even if I knew, I would not be able to share that because of the restrictions that we have. But broadly, our systems were used, and we have got a lot of thankful notes from the people who were there. And there were significant interceptions. We know that if they were not there, probably it would have been a bad situation. But yes, for a significant intervention were done by our ADS.
That's really great. Congratulations on that. Next, on the acquisition, especially on ARIPL and the synergies that Zen would provide. From your internal assessment, does it feel combining weapon with commercial simulator could create a scale multiplier different to the growth trajectory of ARIPL? Like Zen from what it was three, four years back, about 150-odd crore company to 900 crores now, could a similar thing play out here in ARIPL?
So Rajamohan, it's a very insightful question. I think you're really doing good homework on this. So this is exactly the plan that for what we did for the army, we want to do in the field of naval simulation also. And there is a lot of demand for the naval simulation. And the ARI has all the products that are required, minus the weapon simulator, which Zen has, which are used in naval products. And Navy is suddenly acquiring very, very big role. Again, I maybe shared earlier, but we just focus with the land borders that we have. But when you turn around the map of India, the huge ocean that is there, where everyone from America, US, Russia, everyone is interested in that part of the ocean. And it has a lot of sensitivity, a lot of trade that's happening.
Yes, I think this is a very good acquisition that we have. And I really want to thank Shravan, who built that company, so that we really, really think that this was a great acquisition. And it was good for it is going to be very good for the country and also for the friendly navies around the world. Yes, I think this is a very big story. If we crack the code, this could really run into multiple. Of course, INR 900 crores includes the anti-drone systems also. So this INR 4-5 crore, INR 100 crores kind of turnover is something that can be achieved with ARI. I definitely feel maybe much more than that.
That's great. One final question. Similarly, for, say, Vectra AI, basically, what is the kind of market opportunity they indicated to 23 product lines in the last quarter call? Generally, I wanted to understand in terms of scale of opportunity that this company provides.
So as we speak, post the recent event, these guys have gone they're going really big. And they're getting a lot of calls at that speed for the component that they are developing. And they're also getting pressure to develop new R&D. So one is the develop products they are setting up the manufacturing facility so they can deliver on scale. Second is developing new products which they have prototype to be into commercially available products. So Rajamohan, I think it should be tens of crores in the immediate future. But eventually, it's running into at least 300 crores kind of thing.
Thank you very much, sir, for your insightful answers, and though I understand there's a lot of pressure in terms of objectively determining and expressing, you are trying to be as best as possible, trying to give us answers. Thank you very much and best wishes on bagging quicker orders.
Thank you, Rajamohan. I appreciate your wishes.
Thank you. We will have our next question coming in from the line of Mr. Mehul Panjwani from 40 Cents. Please go ahead.
Sir, thank you so much for the opportunity. Am I audible, sir?
Yes, we can hear you.
Okay. And first of all, I would like to congratulate the entire Zen team because we are talking about that we are playing a very significant role in our nation's defense system. So that's amazing to be associated with such a great company. Sir, I have a question on UTS, which is you mentioned that primarily the anti-drone system developed by UTS was provided to the DRDO. So when did we acquire UTS? And how much is it contributing to the turnover of Zen?
So the acquisition was between 2018 and 2019. We acquired the company and we started developing these anti-drone systems. And in terms of the turnover, I think the exact turnover, I'll ask Afzal to share. But yes, UTS has single-handedly developed the complete anti-drone of all the components of the thing. Of course, the electronic optics, which is now becoming very important, has been developed by AI Turing. But the other part, including the radar, radar is a decade-long project, but UTS pulled it off very, very fast. Of course, we started the effort and we kind of lagged between. But this was a really short term that Raju and Nagendra were able to pull it off. And yeah. So again, Afzal, could you just share the figures?
Yeah, sure. Sure. So out of the total revenue, it's around INR 125-130 crores.
This is the round the contribution.
Yeah.
The quarter.
For total for the year.
Okay. So my next question is, I'm new to the company. I'm newly tracking this company. So I would like you to please list down all the subsidiaries which we have and how much is our holding. Is it like we are 100% holding each of the subsidiaries or how much is?
Do you want the holding of the companies in each of the how much we hold in each of the companies, right? And the list of the companies.
Yeah, list of the companies and what are they specializing in? Sorry.
I think I'll tell you UTS is there, of course. And then we have ARI, which is into naval simulation. Then we have AI Turing that is into remote-controlled weapon station. And then we have Bhairava that is into robotics. And then we have Vectra that is into the drone ecosystem. So these are the major ones that we have. Of course, we have subsidiaries in the U.S. And these companies also have their own subsidiaries. But these are the major segments that we play in.
Right, and do we hold 100% of these subsidiaries or?
No, some are 51. Some are even in fact, BHAIRAVA is 45% or so. It's different. ARI is 100%.
Right, sir. So last question from my side. So where do we see that some of the defense areas where we don't have products, where are the gaps which we have still? I mean, I know defense is a very wide area, but pardon my ignorance here.
So, I mean, there are a lot of things, artillery, tanks. We don't do a lot of things. But what we have taken a call is what is the Pareto focus? Initially, we were just focusing on training because training was the most here. But now we are trying to focus on two areas. One is the drone ecosystem, anti-drone systems and drone. We think these will absolutely determine who's going to win a war. So we're really focused on that. The second is the robotics part of automated weapon systems and robots themselves. So these are two things we think are really, really Pareto in determining who is going to win a war. And so we are focused on that. And the rest of the thing, we don't have any plans as such. And so we'll be just focusing on them.
Right, sir. Thank you so much. Once again, it feels great to be associated with this organization. Thank you.
Thank you.
Thank you. We will have our next question coming in from Rudresh Kalyani, Kalyani Private Business. Please go ahead.
Hello, sir. Am I audible?
Yes, we can hear you.
Yeah. Recently, Indian government project from Armenia. So have we got anything from that bucket or?
You are saying, "Did Zen get any orders from Armenia?" So again, Rudresh, unfortunately, we cannot name the countries from which we have got the orders. But we have done almost INR 300 crores worth of order execution this year of exports. And typically, our countries that we deal with are Africa, CIS, and Middle East. So this is the broad classification that we have. But with the countries, when they sign the contract, they make us. They tell us that we cannot share the details of what we have purchased, how much we have purchased. And we honor because they kind of give away some kind of their preparation levels. So that's the point, yeah.
I think on this, with our products being tested in operations in the war, so get any inputs and the Indian Army products so that when we relaunch in the next version, we can make use of it and come up with a better product?
Yes, Rudresh, absolutely. As we speak, the inputs are helping improve the products that we have. And typically, what we do is not only for the new products, but existing products also, we try to give the technology away free so that the government is better prepared and they don't have to buy new equipment. So yes, the inputs are being. Some have been gathered. They are still being gathered. And as and when we get the things, they will be incorporated into the new systems to make them absolutely state of the art.
Okay and see, I think this is the first time we use product in the domestic market. So what are the lessons for us from this versus the lessons which we got from when we used it Armenian region?
I don't know. You're so sure your intelligence says that we are in Armenia. I can't help that, but anyway, so the thing is that there is no. I won't say that there is what was that gap there, but here, what we got is really, really good inputs, and again, I think that this is not the end of the war and this is just a pause. This is the pause where we should really, really regroup and put in our best efforts to upgrade our systems, and next time, it's not going to be a simple war. I think it will not be with one neighbor, but it will be a multi-front war, and we should be prepared to handle multiple enemies at the same time, so that means to say that we really need to ramp up from domestic technology only. We cannot import this technology.
If we import, we are on our own. We have seen this time. Everybody was, no one came to our aid. Everybody is busy with their own life, or they will not help you. So this has to be indigenously developed. And Zen is moving earth and heaven to see that these technologies are developed. Our teams are really sweating out the days and nights to ensure that we have the absolute number one technology in the world. I think we are on track for that, Rudresh.
Okay. And my final question is, if you see Zen five years or ten years down the line, how will be our revenue breakup between the simulation and drone like that?
So I think anti-drone, when you start adding the hard kill and the EO and all the other options, we think that anti-drone will become a significant segment. And of course, we have drones also now. We'll be getting into drones also. So that will, I think, probably be around 70% of the business. Drones, anti-drones, and hard kill options will be about 70%. And five years' time, maybe 30% will be training and simulation.
Okay. Thank you. All the best.
Thank you. Our next question is from Gyanprakash Yadav, who is an individual investor. Please go ahead.
Hi sir. Good afternoon. Am I audible?
Yes, we can hear you.
Hi sir. Congratulations for the good set of numbers. Just wanted to know what's the present cash balance we have on hand and what's the plan for the utilization of same. Secondly, then I would like to verify what was the revenue from the ARI. That's all, sir.
So I'll pass it on to Afzal to answer this question. Afzal, the floor is yours.
Yeah, sure. So total cash balance is around INR 1,037 crores, out of which INR 410 crore is from the proceeds of the QIP and INR 625 crore for the Zen's internal accruals. So total cash balance is INR 1,037 crores. Most of the cash balance we are going to utilize for this organic and inorganic growth, both. And financial year 2024-25, ARIPL revenue was around INR 137 crores.
So, sir, the ARI got included to us, I think, only in February. So whole 137 is for them for the whole year, right, sir?
Yes, for the whole year. Yes.
Okay. And sir, any acquisition planned in future because we have lots of cash in hand?
We have been working on that. Okay.
Noted, sir. Thank you. That's all. Thank you, sir.
Yeah. Thank you.
Thank you. Our next question is coming in from the line of Raj Rishi from DCPL. Please go ahead.
Hi, sir. Can you hear me?
Mr. Rishi, can you speak a bit louder?
Can you hear me, sir? Hello.
Can you please try again?
Yeah. Can you hear me now?
Yes, we can hear you.
Yeah. This constant news flow of defense spending being increased or being forced to increase after this Trump administration has come in. The talk of EU upping the percentage of GDP to almost 5%. That's what Mr. Trump is asking them to do. So significant, some people say it's like sort of a defense supercycle world over. So how do you stand to benefit from, say, Europe upping the defense spend the way it's being talked about?
I think the impression was that wars have ended and there will be no significant wars. So that has been that belief has been completely upended by Ukraine and Russia and prior to that, Armenia and Azerbaijan. And so the thing is a strong neighbor is a good neighbor kind of thing. It's better to have stronger neighbors. So this spend of GDP of 5% is a welcome change because especially if it is defensive and not offensive use. And how is Zen going to benefit out of this? One is that we are setting up our office in the U.S., and I think that decision was a little prescient, and we are going to benefit a lot from that. And asking E.U. to spend, and E.U. themselves said that we are going to spend $800 billion, and it will be mostly internal.
The good news was we were talking to somebody, again, a NATO consultant, and what they told us was that this is a very good opportunity for Indian industry, not only for Zen, because there will be a free trade agreement that may be signed with them. We are trying to prepare for that free trade opportunity with the EU. I think this is a very, very big opportunity, especially if your products are world-class. We feel our simulators, naval simulators, and anti-drone systems are world-class. As we speak, even our drone ecosystem, for the drone ecosystem, Vectra is being approached by European and American companies. I think we are there to take advantage of this.
So one more question. What's your vision about Indian defense spend? Right now, it's around 1.9%. Do you expect this? What would be your perception over the next year or so?
So, Raj, very frankly, there is X and a function of X. The function of X is how much am I getting out of the total spend? So I would be really focused on that. They should spend smart. I don't think they should just increase for the sake of increasing. Can they leverage? Can they? Somebody was saying they should buy F-35. F-35 is the worst kind of aircraft. Elon Musk has gone on record and saying it's broken at requirement. It is Jack of all, worst value for money in military history. But still, some people are talking about it. So if they spend smart, I think they really don't have to increase the thing. Spending smart would be the key to thing. So I don't have any wishlist that from 1.9%, they should spend 5% or 3%. I don't have any wishlist like that at all.
The only thing is they should spend strategically on Pareto technologies. I think we are in that field. If they act in a focused and Pareto way, we will benefit from that.
Thank you, sir.
Thank you, Raj.
Thank you. We request participants to restrict their questions to one. We have our next question coming in from Vinay Anand, who is a private investor. Please go ahead. Mr. Anand, please go ahead and ask your question. It seems there is a connection issue with Vinay Anand. We will go forward with our next question from Aryan Oswal from Finterest Capital. Mr. Aryan, please go ahead.
Hello. Yes, sir. Am I audible?
Yes, we can hear you.
Yes. Congratulations on a good set of numbers, sir. Sir, my question is on the line of cash conversion cycle. We have seen a significant decline in the last couple of years. So are we expecting further decline or where do we expect the cash conversion to be for the next year?
I'll let Afzal answer that.
So last quarter, our cash conversion cycle was around 237 days. And on 31st March 2025, our cash conversion cycle was reduced to 160 days. If we give the further breakup, then the receivable was 148 days, 20 days for the inventory, nine days for the advance to supplier. The total of these three comes 177 days. And if we deduct 5 days for these payables and 12 days for the advance from customers, then net working capital cycle is 160 days. And going forward, we are expecting in the range of around 135 to 140 days.
135 to 40 days. Is that correct, sir?
Yes. For next year.
Okay. And sir, one more question. How much are we looking to spend on R&D for the next year and for the next FY2026 and FY2027?
So there is the INR 70 crore expenditure that we are doing for setting up the R&D facility and another INR 5 crores for the equipment, etc. But again, Aryan, the thing here is that we are very opportunistic. So these are, even though people give five-year plan budgets and all that, we do give the budgets. But as and when the opportunity arises, as and when some new gap is seen in our product, we go after that. So at present, we are doing already R&D expenditure of around INR 35 crores. So we expect this to go to 50 to 60 crores on a consistent basis. But there may be a large investment when required to ensure that we are able to supply the required technology that is asked by the armed forces.
Okay. Thank you so much. That's all.
Thank you, Aryan.
Thank you. Next question is coming in from Dipen Vakil from PhillipCapital. Please go ahead.
Thank you so much for the opportunity and congratulations on a great performance and also in your role and operations in those. So my first question is along the lines of, sir, your fourth quarter performance was largely driven by the export segment, which has even more or less dried up your export order book now. So any outlook in terms of export orders that you're expecting in the near term? And so how do you see your export business panning out in, say, FY2026? How is the visibility on export business?
So export business, our discussions are ongoing. And I think there's a large now post the recent crisis, we think that the conversations have changed and they want the equipment that we were initially offering, but they said we don't want that. They were trying to buy the commercial drone neutralizing version. It was only a toy, actually. And most of the 90% of the companies make that anti-drone system, which only neutralizes 2.4 and 5.8 GHz DJI drones. But now with this thing, people have come to know that this is a band-independent field and people will come after us. So that has changed the conversation in the export market for us. And the export guys have been now asking about this information. So once we are able to fulfill the extraordinary need for the Indian armed forces, then post that, we'll definitely be focusing on exports also.
But the conversations have started and there is a huge demand for anti-drone systems abroad. And of course, the training simulator demand is still going on. We are talking about the army simulators and naval simulators. There's a lot of demand for naval simulators, a lot of conversation. ARI themselves have a very large export setup. For a 100-crore company, they have a really very robust export setup. Even though it's more commercial-focused, we are leveraging them to get into the navy also in various foreign countries. So I think the exports will start getting the orders. We don't have orders in hand, but we should be starting getting the orders sometime, maybe a couple of quarters from now.
Got it, sir. Apologies for the repeat question, but possible for you to reiterate your order info guidance?
Yeah. So we think by H1, end of H1, we should be having about INR 800 crores. Out of that INR 150 crores, we already received. Another INR 650 crores we will be receiving by H1. And that's our expectation. This is what I have said earlier also. And still, we feel that holds good.
That is largely coming in from the simulator side.
Yeah, it's all simulators, as of now, yeah.
Got it, sir. Sir, thank you so much for answering my question and all the best for the FY2026.
Thank you, Dipen. Appreciate it.
Thank you. Ladies and gentlemen, due to paucity of time, we will take questions from two more last participants. Our next question is coming in from Ajay Surya from Niveshaay. Please go ahead.
Sir, thank you for the opportunity. Sir, looking at the recent war, the necessity along with the opportunity size for anti-drone is quite big and important. But sir, if you can break the opportunity size and share more details, because even under the anti-drone, there are several types of components. And based on the requirement of Indian Army, maybe like the radar sensors, jamming, hard kill, command control, etc., so wanted to understand if you can break the opportunity size. And does the Indian Army give order as a single segment order or a multiple segment order? Maybe they require just a jamming anti-drone, so they'll give an order to a player like someone like us, or do they want jamming plus hard kill? So is it a multiple segment order? So if you can also share details on how does the order cycle or order procurement happens.
So there are different kinds of necessities that they have. For example, they may have a very, very small portable requirement where they say, "Listen, I just want to neutralize commercial range of drones." So that's a different thing. But a comprehensive solution, good that you brought up command and control center also. That's the software that binds all the hardware together. And it's the soul and heart of the thing. So I've not been speaking about it, but that's the very, very major thing that we have developed and we use that. So when they need a comprehensive solution with radar, detector, jammer, electronic optics, and a hard kill with a robust command and control center and ability to handle non-commercial band-independent drones, Zen is the vendor to go to. So we don't think anybody else is doing that at this point in time.
And that was, again, in 2023, there was a tender, and we didn't have anyone qualifying there. So I think Zen is positioned for these high-end kind of simulators. To your question, if somebody just wants to buy a radar or a jammer or a detector, typically they would be very useless in case of an attack, especially from the armed forces point of view. And given the fact that even though earlier, most of the drones were even now in this, there are a lot of drones that were coming through with a ground control kind of situation. But in future, we expect them to be autonomous. So for handling the autonomous, it's a different game altogether because the videos are also very advanced. To handle autonomous, we'll probably be doing Hard Kill kind of situation. There, no longer the Soft Kill will work.
So that evolution is happening as we speak. But I think as of today, Zen is the go-to company for giving these full-fledged solutions to the Indian armed forces.
So sir, based on this, the bigger opportunity lies in maybe the hard kill and command control, is my understanding right? And this is the area which Zen is dominant and want to focus going ahead. Is my understanding?
No, no. Command and Control Center is a software which binds together. So it has to go along with the system. Some people say that our command and control is independent. Maybe it is, but think of Apple versus PC. PC world, you can keep buying everything and assemble, but Apple gives a complete full-fledged solution. Think of it as Apple, Mac kind of a solution. And yes, we think the whole has a lot of market. What was your second question? We don't sell C&C separately. We sell it only as a package.
Okay. So just breaking the opportunity, the larger opportunity even in the anti-drone segment-wise, if you can break that up, maybe it's a INR 5,000-10,000 crore market. So maybe the hard kill would be a INR 1,000 crore kind of market or.
So I think you are right, Ajay. Your sense that the thing is moving towards hard kill is absolutely right. So we'll have to. That thing is right. But we got the estimate for this project to be around INR 10,000 crores. This was about two and a half years back. But that figure is no longer valid. It's much, much larger than that at this point in time, and it's a multiple of that, not just a percentage. So we think that market size has increased tremendously as we speak, and we think that we should be getting some reasonable chunk out of that.
Okay, sir. All the best for the future.
Thanks, Ajay.
Thank you. We will take our last question from Manan Vora from Wallfort PMS. Please go ahead.
Hello.
Yes, we can hear you.
Yes, yes. Okay, okay. Hello, sir. It's been a pleasure speaking with you for so many quarters. So sir, in Q1, okay, you spoke about you all had a Sim expo, which happened in Orlando. And you said that you had a stall over there and you got inquiries for containerized tank simulators in that expo. And you said that in Orlando, the next five-year budget of Orlando, they are having huge demand for that. And you said that we are already making it for the Indian Army for the decade. And you said that we might start exporting, etc., etc. So it's been a year. Any update on that, sir?
This was last November, last November, December. The expo is called I/ITSEC. It's a simulation exhibition. In that, they came to approach us with an R&D proposal for doing R&D for out of the next five years. They were having an R&D budget. They said, "Can you make containerized tank simulator with our funding?" We said we already have it and we showed connected to India and showed it live to them. Yes, the fact that we have is known to them now. The budgets are being formed and we have informed them that these are the things. Now we are waiting for them to actually float a tender. The tenders may be floated next year, not earlier than that. Typically, that's a one, one and a half year cycle before they float the tender.
Okay, okay. Understood. And sir, the next question, the last question is on that we had numerous new products like Hawkeye, Barbarik, Prahasta, Sthir Stab 640. All of those new products, we have started supplying?
No, no, so we have started some of them, we have started conducting trials, and we think that during the years, some orders will start trickling in, but they will become much, much larger next year, but this year, we should definitely be getting some orders in that segment that you spoke of, RCWS and surveillance stations.
Okay. Understood. Because for those products itself, you had said that these new products itself will become new revenue streams and thousands of crores. Hence, just.
Eventually, they will, if we are able to integrate them into anti-drone system, they will be the hard kill part of the thing and they can become very, very big for us. There's no doubt about that.
Okay. Understood. Thank you so much, sir. All the best.
Thank you.
Ladies and gentlemen, that was the last question for today. I will now hand it over back to Ashok sir. Over to you, sir.
Thank you, fellow investors and other participants who are here. It's always a pleasure interacting. And the questions that are asked usually are high quality. And I'm pleased that the tradition continues. Again, we are open. The investors@zen-technologies.com is an email address that you can, if any of you have not been answered the question, you can send your questions there. And we look forward to your continued association with the company. Thank you so much.
Thank you. On behalf of Zen Technologies Limited, that concludes today's conference call. Thank you for joining us, and you may click the leave icon to exit the meeting. Thank you for your participation.