Ladies and gentlemen, good day and welcome to Aeroflex Industries Limited Q2 and H1 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note this conference is being recorded. I now hand over the conference over to Mr. Asad Daud, Managing Director. Thank you, and over to you, sir.
Thank you so much. Good morning to everyone. Welcome you all to Aeroflex Industries Limited Q2 FY 2026 earnings call. Joining me today are members of our senior management team and a representative from SGA, Strategic Growth Advisors, who are our investor relation partner. I hope you have had a chance to review our results and investor presentation which are available on the stock exchange and our company website. I am delighted to share that your company has achieved its highest-ever quarterly performance across all the key metrics. For the first time, we have surpassed a quarterly revenue milestone of INR 100 crore, which is also accompanied by our best-ever EBITDA margins of 23.5%. Both the revenue and EBITDA have shown growth on a year-on-year basis and also on a quarter-on-quarter basis, which underscores our strength and resilience of our business.
This achievement reflects and is the result of the dedication of our team, the trust of our customers, and our continuous focus on operational excellence. Despite certain external challenges which we are all aware of, particularly the imposition of the U.S. tariffs on India, I am happy to share that we have not received any cancellation of our existing orders from our U.S. customers. Although a few shipments have been deferred from Q2 to Q3, but there have been no cancellations, and this clearly reflects the strength of our customer relationships, the quality of our products, and the confidence that our customer has in Aeroflex as a long-term trusted partner. Our subsidiary, Hyd-Air, has started to gain strong traction with its range of products witnessing strong demand.
We expect this momentum to continue in the coming quarters as well, and we also aim to further enhance this product offering and also expand the addressable market. As Hyd-Air continues to scale, it is poised to make an increasingly meaningful contribution to the consolidated growth and performance of Aeroflex Industries. Also, one of the key highlights of this quarter was the strong progress that we have made in our latest business, which is the liquid cooling solutions business. Building on the breakthrough order that we received in the last quarter, Q1, from the large listed U.S. corporation there, I am happy to share that we have now received the second order from the same customer. This development not only reaffirms their confidence in us but it also marks a deeper integration into this fast-growing application of liquid cooling in data centers.
The liquid cooling space represents an enormous opportunity which is driven by the global shift towards high-performance computing and sustainable cooling systems. We are confident that this will become a significant growth driver for the company in the next few years. From an operational standpoint, we continue to focus on enhancing our product portfolio, entering into value-added products, expanding our capacity, and improving our productivity through automation and through process optimization. Our consistent efforts towards innovation, cost efficiency, and our customer-centric product development are one of the key enablers of our growth journey. Now, talking about the financial performance. Our total income stood at INR 111 crore, which is a growth of 15% on a year-on-year basis and 31% on a quarter-on-quarter basis.
This is driven by higher revenue contribution from our subsidiary fittings business, which is Hyd-Air business, and also the higher contribution of sales from the domestic market. The sales of Hyd-Air business stood at INR 9 crore in Q2. We also believe that the performance delivered in this quarter is sustainable over the next few quarters as well, despite the ongoing volatility in the international market on account of tariffs. Additionally, the liquid cooling business will start contributing to the top line from Q3 onwards, with further traction anticipated in the subsequent quarters and also in the next financial year. Our EBITDA for the quarter stood at INR 26 crore, which is a growth of 23% on a Y-on-Y basis and 65% on a Q-on-Q basis, which results to our highest ever margins of 23.5%.
Our margins expanded by about 136 basis points on a year-on-year basis, primarily driven by our focus towards high margin and value-added products, and also a favorable currency movement. Margins are expected to remain within the range of 21%-22% in the coming quarters. Our profit after tax stood at INR 14.23 crore, which is a growth of 4% on a year-on-year basis and 99% on a Q-on-Q basis, with a PAT margin of 12.82%. Our cash PAT grew significantly to INR 20.33 crore, which is a growth of 26% on a Y-on-Y basis and 55% on a Q-on-Q basis, which reflects strong cash generation and improved operational performance. Now in terms of our H1 numbers, our total income stood at INR 195.72 crore, which is a growth of 5% on a year-on-year basis. This is despite the fact that Q1 was not a good quarter for our company.
Our EBITDA stood at INR 41.87 crore, which is an EBITDA margin of 21.79%, and we expect this margin to be in the range during this financial year. Our PAT stood at INR 21.4 crore with a PAT margin of 10.93%, and our cash PAT stood at INR 3.43 crore with a cash PAT margin of 17.08%. Our value-added segment of assemblies contributed 53% of the total sales, which is in line with our full-year targets. Also, the domestic sales contribution improved from 19% to 27%, driven both by the increase in sales from the domestic business of Aeroflex Industries and also the increase in sales from Hyd-Air. Also, our cash flow from operations increased significantly in H1. Looking ahead, we remain focused on deepening our focus towards higher value-added products and also expand our presence in emerging sectors such as liquid cooling.
We will continue to pursue growth through new product developments, through optimization of margins, through effective utilization of our capacity, through geographic diversification, and also looking at any inorganic growth opportunities. These initiatives position us to strengthen our market leadership and deliver consistent growth in revenue, margin, and shareholder returns. Before I conclude, I would like to express my gratitude to all our team members for their dedication and support, and also to our customers, partners, investors, shareholders, and board members for their continued support, guidance, and trust to the company. Thank you all for joining today, and with that, I conclude my speech, and we are now open 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 remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. The first question is from the line of Nishita from Sapphire Capital. Please go ahead.
Yes. Hello.
Yes.
Yes. Am I audible?
Yes, you are audible.
You mentioned that we are doing CapEx in the presentation for increased capacity for the hose assemblies and metal and bellows and miniature metal bellows, which will all be concluded by March 2026.
Correct.
I just wanted to know what is the total CapEx amount for all these additional CapEx?
The total CapEx for miniature metal bellows and for the hoses combined, which was passed in January of this year, was INR 77 crore, which is a breakup of INR 54 crore for the hose division and INR 23 crore for the miniature metal bellows. That was the budgeted CapEx.
Okay. Where are we at? What is the development in the CapEx that we have done till now?
Out of the INR 54 crore CapEx for the hose division, we have done a CapEx till Q2 of INR 19.74 crore. In miniature metal bellows, out of the planned CapEx of INR 23 crore, we have done a CapEx of INR 6.08 crore. Some of the machines of bellows, we are utilizing for our liquid cooling project as well. Hence we are using a lot of the machines of the bellows division also in the liquid cooling space.
Okay, understood. From this CapEx, when the whole of CapEx is done, what is the incremental revenue we expect from this additional capacity?
In terms of the miniature metal bellows, once the entire CapEx is completed and at the peak utilization, we are expecting an annual revenue in the range of INR 25 crore-INR 30 crore. For the hose division, at a peak utilization capacity of 20 million meters per annum, considering that about 70% of the sales would be from the assemblies business, we expect a revenue potential of between INR 650 crore-INR 670 crore.
Okay. Can you give a timeline for the ramp-up of the utilization to the peak level from March 2026? Is it going to be in phases?
Yeah. Our entire CapEx happens in phases, depending on the size requirement and the machine requirement that we have. We can expect the peak utilization, once our expansion is completed, we expect the peak utilization to happen in the next couple of years post that.
Okay, understood. My next question is, the INR 7.8 crore of order that you got, received in liquid cooling solution, what is the execution timeline for that?
The first order that we have received, which was in July, that is going to be executed in the current quarter, which is Q3. The second order that we have received in September, that is going to be executed in Q4.
Okay, understood. That is it. Any revenue guidance for FY 2026, FY 2027 you would like to give?
Yeah. Generally we don't give guidance on the numbers. But if you see over the past few years, the growth that we have achieved, we are aiming for the same over the next four to five years as well. Obviously, like I mentioned in my earlier earnings call also, that there could be some quarters where, due to external reasons, the business might be affected. But our aim is that we are looking at it from the next four to five years horizon, where we have a certain target that we want to achieve over the next four to five years. I think with all the developments that are going on and all the new projects and also the existing projects that we have, I am sure that we'll be able to reach our targets over the next four years.
Okay. Thank you so much.
Thank you.
Thank you. Reminder, ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone. The next question is on the line of Viraj Parekh from Carnelian Asset Management . Please go ahead.
Thank you so much. Am I audible?
Yes, you are audible. Yes, you are audible.
Thanks for the opportunity. Just a few questions. First, pardon me if I am repeating, I joined the call a bit late. You mentioned domestic has done well this quarter from domestic and Hyd-Air sales. If I am correct, domestic was around INR 29 crore this quarter, and Hyd-Air was around INR 9 crore out of it. Is it fair to assume that domestic business was flat for us quarter-on-quarter and the growth has mainly driven from the Hyd-Air increase in sales?
Just give me a minute. Hyd-Air had a sales of approximately INR 9 crore in Q2, there was a clerical error in the presentation, as compared to INR 1.5 crore in Q2 of last financial year. So obviously there is significant growth in Hyd-Air. But if you see our quarter-on-quarter in terms of our top line, our top line on a quarter-on-quarter basis increased from about INR 85 crore to almost INR 111 crore, which is almost a INR 26 crore jump. Out of that, if I account INR 7.5 crore to Hyd-Air itself, or about INR 6 crore to Hyd-Air itself, then the remaining is purely from the business of Aeroflex Industries. And that also, the exports grew by 3%, so say about INR 2 crore- INR 3 crore in terms of value terms was in export, and the remaining is from the domestic.
There is a significant growth in the domestic business of Aeroflex on a standalone basis also.
Just wanted to understand again, Asad, you said that the typo. So in the presentation it is written INR 9 crore for Q2 against INR 3 crore for Q1 FY 2026.
Yeah. So the INR 3 crore is basically for H1 of FY 2025. So there was a typo error in the presentation.
Okay. So basically
I will just give you the brief num-
Right.
Yeah. I'll give-
Give me the Hyd-Air brief for the H1s.
Yeah. The Hyd-Air brief for the H1, I'll just give you a comparison of H1 last year versus H1 of this year, which will help you in better analysis. Hyd-Air H1 last year was INR 3 crore as compared to H1 of this year is INR 15 crore.
Q1 was INR 4 crore.
No, Q1 was-
INR 4 crore.
INR 6 crore.
Sorry. INR 6 crore.
INR 6 crore. I'm giving you ballpark figure. Yeah.
Got it.
It is like INR 5.9 crore something.
Okay. Thanks. Also, just wanted to understand now, given that there may be potential decrease in tariffs for us, how does it pan out for us in America? We've had a bellows capacity being, s orry, the hoses capacity being almost doubled.
If you can just shed some light on the demand environment there. Have you recently visited the country and taken a stock with customers of how things are planning, how are they sentiment and how is the order book looking for you going ahead? Not talking about FY 2026, I'm more concerned for FY 2027. Same question could be for the bellows business. I'm assuming a CapEx is on stream to commercialize in 2026, March 2026. Given that, how are you trying to build the order book in terms of reaching out to customers and ramping up their capacity? Because I believe that is the main thesis for our margins expanding going ahead. All questions are 2027. Nothing to 2026.
Yeah. Just to give a brief overview of the U.S. business. Like I mentioned, as soon as the penalty tariffs, the oil penalty tariffs were imposed, we started to have discussions with our U.S. customers immediately. Discussing with them on their existing orders, the potential impact on their business, what help do they require from our end. A lot of the discussions happened, and I'm happy to share, like I also mentioned in my speech, that we did not receive a single cancellation of orders from our U.S. customers. Which shows that there is a huge demand for our products and there is no immediate alternate supplier for them who could fulfill their demand. That is one extremely positive aspect that we've seen from talking to all of our U.S. customers.
Our Vice President who handles the entire U.S. business, he was almost in the U.S. in the entire month of September, to discuss with all the customers and find a suitable solution for us to continue supplying them the products that they demand. With some of our customers from the U.S., we have also received further orders as well in this month for supply in this quarter and also for supply in the start of the next calendar year. We feel that despite the 50% or more tariff, we are still seeing demand from our U.S. customers continue. Although a few of the smaller ones have, like I mentioned, have asked us to defer shipments from September to some in October and some in November. But largely, the existing orders is on track.
In terms of talking for the next calendar year or the next financial year for specifically the U.S. market per se, I think with expectation that over the past couple of days, the developments that have happened, expectation is that by the end of this calendar year, which is probably by December or something, we expect tariffs to go down. When that happens, I think we can see a significant uptick in demand, especially from the U.S. business. Also, if you see that the exports on a Q-on-Q basis increased by about 3%. Out of that, about 1.5%-2% was increase in business from the U.S. market itself. So far we have not seen the significant drop in the U.S. business.
Although I would say on record that if not for the tariffs, I think our results would have been much, much better than what. Our performance would have been much, much better as compared to what we had in Q2. I think we would have had a significantly and even more better performance in Q2 if not for the tariffs because a lot of our customers had orders with us. We also had orders which we had to, like I mentioned, defer some of them to October. Otherwise, this would have been by far the best quarter ever for our company, and even better than what we had. That is one. In terms of the bellows business, we are seeing now, for example, in the past couple of months, we have started to get orders from Europe, from Canada.
We recently just got an order of bellows from Argentina. The one thing in bellows is that due to the tariffs, the U.S. tariffs, I think that is one of the areas where we got affected was the kind of business that we were expecting in the bellows from U.S., that has seen a bit of a delay because for them, bellows from Aeroflex was a new product, and hence, due to this tariffs, the spike in orders that we were receiving or we were expecting from the U.S., that could not be materialized. I think once the tariff issue is resolved, I think we can see a lot of orders from the U.S. market for our bellows. But saying that, we have already about approximately INR 2 crore-INR 2.5 crore orders in hand of bellows from the other markets which includes Europe, Canada, and South America.
In terms of the expansion of bellows, like I mentioned, some of the machines of the bellows we are utilizing for our liquid cooling project as well, where the same machines are used for liquid cooling. Also, we are ongoing with our expansion on the miniature metal bellows in terms of the machines that we require specifically for that. Plus, we are also planning to do further capacity building for the liquid cooling. I think probably once it is finalized, we will share it with everyone once it is approved by the board.
Thanks, Asad. Just one follow-up. About the first U.S. business you are talking about. Given that the first year we grew at 5% first half, are we confident given that we are getting new orders, there is no cancellation of orders. Can we expect something around mid- double- digit to high double- digit CAGR growth over the next two years in terms of revenue? When you say in terms of U.S.
Yes. Definitely, I think that is definitely achievable.
Right. Our overall guidance can be in the range of mid to high teens kind of a range, like 20% growth should be achievable going ahead from 2027 onwards, given if things fall in our favor in terms of tariffs.
Yeah. See, there are a lot of ifs and buts. But yes, our aim is obviously growth in the top line and growth in the bottom line as well. That is where we are extremely conscious where we want to grow profitably, where the growth has to be on the top line and the bottom line. Like I mentioned, we have a lot of projects ongoing. Obviously, the liquid cooling is the latest one, but apart from that, we have the bellows one which is ongoing. The U.S. business also, there is a lot of demand that's coming in in terms of higher diameter sizes for the metal hoses division. That is an area also that we are focusing where we are seeing more inquiries, more potential business that can come.
Definitely, I think mid to high teens is a growth number that is definitely achievable over the next few years.
Right. Just last two questions I will get in line. First is on the liquid cooling project, which you have said is ramping up well, and you have two orders to deliver in this quarter and next quarter. What is the potential do you see? I believe there is some customer with whom you have tied up. What potential do you see this business growing with them? If you can share some details about the arrangement and the tie-up with them.
This company is basically the Indian subsidiary of the U.S. company. We have signed a contract with them to supply them liquid cooling solutions for data centers. Like I mentioned, we have already received one order in July. We received another one in September. The first order is planned to be dispatched in this quarter, and the second order is planned to be dispatched in early parts of Q4. Also, we are discussing with them to ramp up our capacity as they have given us some of their plans for the next calendar year. They have asked us to ramp up the capacity in order to serve them in the next couple of years. We are already working on that in terms of the ins that are required, in terms of the machinery required, in terms of the ancillary equipment, and also in terms of the capital required.
Probably, I would say in the next month or so, we will be able to give more details on further expansion in this particular segment. Obviously, it is a contract with them that we have exclusives for India, so we will be their sole suppliers for the liquid cooling project in India. We have been speaking to the top level of their company in India. Also there is potential, obviously it is very early stage, but they have also said that once they are satisfied with our quality, our supply, and our service, there could be a potential that they could explore us to deliver this product to their international customers as well. That is something in the future. But yes, definitely, I think this segment over the next two to three years would be a significant contributor to Aeroflex Industries, for sure.
Got it. Just last question, sir. I think you mentioned that we expect margins to be range bound and between 21% and 22%. This quarter t here was a good enough rise in our gross margins, which eventually flowed to the net. Was there any one-off, which you can explain?
Yeah. The margins in this quarter, Q2, was almost 23.5%. There were a couple of reasons for that. One is if you see our material margins was at an all-time high. That is due to a lot of the value-added products, like I mentioned, that we have supplied. For example, we supplied a lot of the assemblies which are into bigger size diameters, where the margins are obviously better as compared to when you are supplying the smaller sizes. That was something that helped. Plus also, if you see in terms of our material, our engineering team continuously work on developing the products such that we plan to reduce not only our costing but the costing to our customers as well. That was one reason. Also, like I mentioned, I think favorable foreign currency also helped in this.
Obviously, the rupee depreciating over the past three to four months from the levels that it was. That also contributed some amount to the higher margins. Hence, I mentioned that if you see on an annualized basis, and if you see for this year, we expect the EBITDA margins on a full year basis to be in the range of between 21%-22%.
All right, sir. Thanks a lot. Wishing you the very best.
Thank you.
Thanks.
Thank you.
Thank you. The next question is from the line of Lokesh Maru from Nippon India Mutual Fund. Please go ahead.
Hi. Thank you, sir. A couple of questions from my side. One is, like you mentioned, the sales to the Indian subsidiary of a U.S. company. Is it counted within our domestic business, or is it counted in exports?
It is counted in the domestic business, but there has been no sales as yet. So far there has been no billing.
Understood.
As of right now, there is no sale.
So the incremental sales that you have done in domestic, if you could help understand which are these pockets, how are they picking up, and what is the outlook for domestic?
For domestic, obviously one was the increase in the sales of the Hyd-Air business. In terms of the Aeroflex, the increase in sales was on account of multiple areas. One is we saw increase in sales from the steel plant. We also saw increase in sales from ports and terminals. Then we have seen increase in sales coming from the power sector as well. So there are multiple regions where we have seen an increase in sales happening in Aeroflex also and in the subsidiary Hyd-Air as well.
Understood. Sir, just one key question from my side is, like you said, there has been no cancellation in our U.S. orders, right? There has been some bit of deferment. Just to understand, since there is not a significant impact on our sales or orders from there. Can you help understand, you had highlighted earlier that the market leaders in this segment are from the U.S. predominantly, right?
When you make a sale there, for them, if we were to look at price differential, like for us, it is 50% right now, but for them, what does their supply chain look like? How much is domestic manufacturing for them in the U.S.? How much do they maybe import? If you could help understand the scenario, it would really help.
Yeah. In terms of those manufacturers in the U.S., a lot of their raw material is also imported by them. In that case, their imports are also subject to the 50% tariff. Then on top of that, obviously, they have their own cost of operations, which is much, much higher as compared to what we have in India. That is the reason why you have seen that we have not seen any cancellations, is because in our industry, it is unlike a, say, a consumer industry where the supplier or the vendor can shift from A supplier to a B supplier very easily. In our case, it is not that easy. I am not saying that it can never happen, but it takes a lot of time.
Because for somebody else to build up that capacity, to build up that efficiency, and to give that kind of a quality at that kind of a price, it takes time. Hence, that is why we have seen that the business from the U.S. has not dipped. In terms of our international competition, they have customers, they have their manufacturing across the world, whether in Europe, whether in U.S.A., whether in India, whether in Southeast Asia, or anywhere across the world. But their strategy remains to have a certain segment where they cater to, and we are catering to a certain segment. Which shows that despite the tariffs, I think we have been able to negotiate and to overcome it right now. Obviously, expecting some relief on the same in this quarter, so that we can see a significant uptake in the business over the next few quarters.
Sir, now that the shipping lines and shipping has settled, is it fair to assume or understand that our exports to Europe can also come back? I mean, can accelerate. Earlier, if let's say Turkey was in vicinity now, since everything has settled, what is your expectation from Europe sales going forward?
Yeah. Europe, after the U.S., Europe is our second-biggest market. That is where we have been focusing on over the past two quarters since the time the announcement of the proposed tariffs happened in the month of April. But Europe has its own legacy issues. But I think Europe will see some uptake in demand from the next calendar year onwards. The only issue that Europe is facing is because there are tariffs on Europe as well. Although it is much lesser than India, but it is much higher than what it was earlier. And Europe being a higher price or a higher value-driven economy, for them, additional tariffs on top of their cost becomes very significant. That is why I feel Europe would take about a couple of quarters, but I think from the next calendar year onwards, I see demand picking up in Europe as well.
We have already seen in some countries of Europe, we have seen uptake in demand in this financial year as compared to the last year.
Thank you so much, sir. All the best.
Thank you. Thank you so much.
Thank you. The next question is from the line of Chirag from Keynote Capitals. Please go ahead.
Yeah, thank you for the opportunity. Heartiest congratulations to Asad and team for the amazing set of numbers. Sir, my first question is to understand, in Hyd-Air, if I'm not wrong, at optimum utilization, the revenue that we can do is around INR 30 crore, INR 35 crore. And on a quarterly level w e have already reached INR 9 crore number. Are we focusing on expanding the capacity over here?
Yes, that is already under discussion, and probably in the next month or so, we will be announcing the same. Yes, there is plan to increase the capacity in Hyd-Air very soon.
Perfect. Sir, second thing I wanted to understand, if I am able to see utilization levels in hoses specifically, we have made a production of about 11 million- 11.5 million volume in meters. Last year in H1, it was around 13.4 million . Was it strategically reduced because of the scenario, or am I reading something incorrectly?
No. Our capacity is 15.5 million meters. 11 million meters for half a year, the figures are not correct. Maybe you might just want to
It was given in the presentation that our utilization was around 68.65% for H1.
Yeah. 68.65% is of 15.5 million meters, but that's t he 15.5 million meters is actually annualized. You will have to take half year.
On an annualized basis only I was asking that. On an annualized basis. It is coming around 11.3 million , which on last year H1, it was around 13.4 million .
Yeah. There are a couple of reasons. One is, we have seen more orders coming in. Like I also mentioned just previously, a couple of questions back. We have seen a lot of orders coming in for bigger diameter hoses. In case of a bigger diameter hose, in case the number of meters are lower as compared to a smaller diameter hose. Hence, if you see from meter to meter, you might see a reduction, but if you see in terms of volume or in terms of the value, it is much higher. There has been a focus of the company to focus on higher diameter of hoses because the margins in the higher diameter hoses are much more as compared to when you are selling very, very smaller diameter hoses.
Obviously, competition in smaller diameter hoses is much more as compared to competition in high diameter hoses, where we are one of the leaders in the space in the higher diameter hoses. If you see the meters-
Could you just repeat that? I lost you somewhere when you were explaining-
Sorry.
the competition part. Could you just repeat that one?
Yeah. I am saying the competition in smaller diameter hoses is more as compared to the competition in higher diameter hoses, because not everybody can produce such wider diameter of hoses. Plus, also the machines required to make the same are big. The investment required is much bigger. The engineering skills required to make the high diameter hoses is much more as compared to a smaller diameter hoses. We have seen over the past two quarters that the sales of higher diameter hoses has increased significantly. Hence you would see that difference in the meters as compared to last year. Because in last year, the sales of smaller diameter hoses was more.
Right. Thank you for the clarification.
When I talk about higher diameter hoses, I am talking about 16 inch, 18 inch, 20 inch and all of those things.
Right. Next thing from my side is that from an industry split perspective, I am able to see that we have again reached to the level of INR 30 crore quarterly revenue in the new age industry, which we had earlier in last year, Q3. Can I expect that going forward, this is going to be the base, and we are on an annualized run rate of INR 100+ crore for the new age industry now?
Yeah, I think that is going to grow significantly now with the liquid cooling vertical. I think that is going to grow leaps and bounds over the next few quarters and the next year as well.
Great. That is it. Thank you so much, sir. Thank you so much for sharing.
Thank you so much. Thank you.
Thank you. Ladies and gentlemen, to ensure the management can address questions from all participants, please limit your inquiries to two per person. If you have a follow-up, kindly rejoin the queue. The next question is from the line of Aaryan Khot from LIC Mutual Fund.
Great. Thank you for the opportunity. Just wanted to have color on the existing tariff-
I beg your pardon. I am not able to hear you. Can you just repeat again?
Hello. Am I audible?
Yes. Now you are audible.
Just wanted a color on the existing tariff impact on our business. How is the arrangement in terms of who is bearing the cost in between us and our customers?
In terms of the tariff, obviously, initially when it was announced, the customers obviously asked us, like any customer would do, would ask us for a hefty discount. Obviously, we have given some discount, but not in the range of what was demanded by them. The majority of the tariff is being borne by the customer themselves with small rebate that we have given to them to help them temporarily to overcome this situation. For us, the impact would be not so significant.
The major of the tariff is being borne by the customers themselves.
Okay, thanks.
The next question is from the line of Shubham Thorat from Perpetual Capital Advisors. Please go ahead.
Yeah. Thank you for the opportunity. Hope the line audible.
Yes, you're audible.
Okay. First of all, I would like to know how the products fair in U.S. and Europe after this tariff by the U.S. What are the price differences with local players there?
Part of the question I had already answered. First of all, in Europe, obviously there is no tariffs from India to Europe, so the situation remains what it was earlier. With regards to the U.S., there are tariffs on India, obviously, but a lot of the manufacturers in the U.S., manufacturer of our products, they import the raw material. Hence, the tariffs are also applicable to them on their raw material. Hence, there is not a lot of difference in the pricing after the tariffs. Obviously, the tariffs portion on the conversion cost, which is the difference between the raw material and the selling price, obviously, that would be there, but that is still much lesser than as compared to the cost of manufacturing in the U.S. Hence, we have not seen major changes in demand so far in the U.S. market.
Okay. Thank you so much for that. The second and the final question I had is, post the current CapEx that we are doing, what would be our capacity?
20 million meters per annum.
Okay. This is for metal bellows, right?
No, for the hose. For metal bellows, one second. Metal bellows, currently, we have done about 120,000 pieces per annum. The miniature one that we are doing is about 240,000 pieces per annum.
Okay. That's it from my side. Thank you.
Thank you.
Thank you. The next question is from the line of Tushar Sarda from Athena Investments. Please go ahead.
Yeah, thank you. Am I audible?
Yes.
Okay. On the U.S., you said that the orders have been deferred. If you can just explain the U.S. business in a little more detail. What is the annual size? How many orders have been deferred? What turnover you actually did in the last quarter? If you have already answered, I am sorry, because my line has not been good, so I have been on and off the call.
Okay. In terms of, actually, I will give you the data. Let me get that. In terms of the contribution of U.S.A. to our overall export business, that continues to remain at about 60% of the overall export. That includes the entire Americas, North and South. If you take U.S. which is the major portion of that remains to about 40%-45% of our overall export business. That has remained the same in Q2, in terms of the percentage. In terms of the deferment of shipments, approximately about INR 5 crore-INR 6 crore worth of material has been deferred for shipments from Q2 to Q3. That is the broad figures.
Okay. If and when the tariffs are rationalized or reduced or whatever, do you expect this contribution, 60%, to move up significantly?
Yes. I think if not for the tariffs, I think this contribution would have moved up in Q2 itself. But obviously, we expect that, I think once the tariff situation is stabilized, I think this contribution would definitely increase. To what percentage, it would be slightly difficult to say at this stage, but definitely with the discussion that we had with the customers pre-tariff, I think this contribution would have definitely gone ahead. And we expect it to increase because of the recent news that we are hearing that hopefully the tariffs will be eased out over the next couple of months.
Okay. Apart from deferment of orders, are customers also holding back placing fresh orders?
The large ones have not. The large ones are continuing to place the orders. But obviously the smaller ones are taking their time. But for this calendar year, I think we already have the orders that we planned, and the discussions for the next calendar year have already started with a lot of our customers with the potential for the next calendar year. And we are seeing in terms of the business that a few of our larger customers are discussing with us. I think the next year their business is definitely going to be much higher as compared to this year.
Sorry to squeeze in a last question. On this cooling product, what is the turnover in Q2 and how much big can it become when you actually start servicing it fully?
There is no turnover as yet in Q2 because we have not yet supplied the product as yet. It is going to be supplied in Q3. We have already received orders of approximately INR 8 crore + INR 8 crore , so approximately INR 16 crore already. Difficult to give an exact number on how much it can be, but from our discussions that we have with our customers, with whom we have this contract, I think, like I mentioned, over the next couple of years, this division would contribute significantly to the overall performance and the growth of Aeroflex.
Oh, thank you. Thank you very much.
Yeah. Thank you.
And all the best.
Thank you so much.
I must also add that your presentation is very nice, and the way you answer also, I really appreciate it. Thank you.
Thank you. Thank you so much for those kind words. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand over the conference over to Mr. Asad Daud, the Managing Director, for the closing comments.
Thank you so much, everyone, for your questions. If in case I have not been able to answer your questions, or in case if you need any other information from our end, you can get in touch with SGA, who is our investor relation advisor. You can also get in touch with me or our team. Thank you so much again, everyone, for joining today's earnings call, and hope to see you in the next earnings call.
Thank you. On behalf of Aeroflex Industries Limited, thank you for joining us, and you may now disconnect your lines.
Thank you.