Ladies and gentlemen, good day and welcome to Apollo Micro Systems' Q2 FY 2027 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Singh from ICICI Securities. Thank you and over to you, sir.
Thank you, Anna. Good morning, everyone. A warm welcome on Apollo Micro Systems H1 FY 2027 and Q2 FY 2027 earnings conference call. Before I introduce the management, I just would like to give a short disclaimer. This call may contain some forward-looking statements which are completely based upon the belief, opinion, and expectation of the management. So this statement should not take as a guarantee for the future performance.
We would like to thank Apollo Micro Systems management for giving us the opportunity to host them. From the management side we have with us Mr. Karunakar Reddy Baddam, Managing Director, Mr. Krishna Sai Kumar Addepalli , Full Time Director and Operation, Mr. Sudarshan, Chief Financial Officer. Without taking any much time, I will hand over to the management for their opening remark. Over to you, sir.
Good morning, everyone. It is an exciting time in Indian defense, and we are glad to have you with us as we share where Apollo Micro Systems stands today. We have delivered our strongest performance in our company's history with record results for both September quarter and first half of FY 2027. This is a defining milestone built on sharp execution, rising scale, and growing customer confidence. The momentum is real, and we are only accelerating.
I trust you have had the opportunity to review our financial results, shareholder letter, press release, tear sheet, and investor presentation. This is our second investor interaction of FY 2027, and Q2 has been a quarter of landmark progress. Four developments define it. First, a regulatory milestone. The CCI of India has approved the Premier Explosives transaction, clearing the way for the open offer to public shareholders. Second, a leap in indigenous precision-guidance.
In this, the distinguished presence of Honorable Raksha Mantri Shri Rajnath Singh Ji, the transfer of technology for the semi-active laser homing system was awarded to us. This technology allows munitions to find and strike laser-designated targets with precision, and it strengthens India's self-reliance in advanced defense capability. Third, a bold new chapter. ShauryAstra Defence Systems. This new Apollo group company will design and develop complete weapon systems, long-range systems, and integrated defense platform for the nation. It is going to be led by promoter Dr. V.K. Saraswat, ex scientific advisor, Raksha Mantri, a celebrated architect of India's missile defense capabilities, and it takes us from building critical components to shaping an entire system. Fourth, scale on the ground. IDL has commissioned its Bolkunda Silo Unit near Asansol and spread over 18.5 acres land with 9,000 metric ton of bulk explosive storage.
It deepens IDL's nationwide silo network and equips us to serve the long-term orders secured from Coal India subsidiaries. Technology, systems, portfolio, and infrastructure, each advances a different front, and together they build the foundation for our next phase of growth, powered by indigenous innovation, disciplined execution, and enduring value creation. Let us come to the numbers that created a history and reinforce a strong confidence in us to serve the nation. Let me now take you through our consolidated financial performance for half-yearly FY 2027, a record-breaking half-year performance. We delivered our highest ever half-year revenue, EBITDA, and PAT. Revenue surged 78% year-over-year basis to a record INR 639 crores from INR 359 crores in H1 FY 2026. EBITDA, excluding other income, grew 65% to a record INR 165 crore from INR 100 crore.
PAT grew by 50% to a record INR 71 crores from INR 48 crores. We maintained positive cash flow from operations of INR 22 crore during the period. Our working capital cycle also showed an improvement, with working capital days reducing to 353 days from 359 in FY 2026. H1 FY 2027 standalone performance is a record on every front, including margins. We delivered our highest ever half-year revenue, EBITDA, and PAT. Revenue grew 29% year-on-year to a record INR 462 crore from INR 359 in the preceding year. EBITDA, excluding other income, outpaced top line growth, rising 56% to a record INR 156 crore from INR 100 crore. PAT grew by 44% to a record INR 76 crore from INR 52 crore. EBITDA margin reached an all-time high of 34%, expanding by 600 basis points.
PAT margin also hit an all-time high of 16%, expanding by 200 basis points. Coming to the quarterly performance of Q2 FY 2027 consolidated, revenue grew by 72% year-on-year basis and 54% QoQ, which reached all-time high of INR 388 crores in the quarter. EBITDA, excluding other income, grew by 88% YoY and 107% quarter-on-quarter, outpacing the top line and reached all-time high of INR 111 crores in the respective quarter. EBITDA margin, excluding other income, reached all-time high at 29%, expanded 200 basis points YoY and 700 basis points quarter-on-quarter. PAT also reached an all-time high ever to INR 46 crore, which grew by 40% YoY and 83% QoQ, outpacing the top line. Turning to the standalone business, Q2 FY 2027 was a breakout quarter.
Our top line hit an all-time high of INR 306 crores, growing 36% year-on-year and 96% sequentially. EBITDA, excluding other income, grew even faster. EBITDA excluding other income soared 82% year-on-year and 122% quarter-on-quarter to a record INR 108 crores. Profitability took a big step up, with EBITDA margin reaching 35%, up 900 basis points year-on-year and 400 basis points sequentially. At the bottom line, we earned a record INR 48 crore in PAT, up 46% year-on-year and 73% sequentially. A number captures the pace of our scale-up in Q1 FY 2027. Our EBITDA, excluding other income, was INR 48 crore. In Q2 FY 2027, our PAT alone was INR 48 crore. What we earned at the operating level a quarter ago, we now delivered at the bottom line. That is the scale delivered with the discipline.
As of September 30th, 2026, our order book stood at an all-time high of INR 1,765 crore. Every headline metric has scaled, and the pace reflects the strength of our execution. We are focused on sustaining this momentum through disciplined delivery, operational efficiency, and continued investment in our capabilities. Thank you for your continued trust and support. We now look forward to addressing your questions.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from Goldman Sachs. Please go ahead.
Hi. Good morning, everyone. Congratulations for a good set of numbers. So, couple of questions from my side. The first one is essentially if I look at the performance, and if I try to just subtract standalone from consolidated, looks like some of our subsidiaries, in particular, let us say, IDL or others, are not performing that well. If I look at the console PAT, it is lower than the standalone, while revenue, of course, is higher. I just wanted to understand the turnaround plan we have for these subsidiaries so that they can also contribute to the overall profitability like your standalone business. That is the first question.
T hanks, Amit. Good morning. We have been vocal, and we have been explaining earlier also, IDL was a loss-making company owing to thin margins. We have refined its financials over a period of last few quarters, reduced lot of expenditure and other things. A few more initiatives are being planned and a lot of transformation into entering into full-fledged energy related to defence requirements. Also improving the margins in the commercial and industrial explosives, which IDL is currently doing. It will take a couple of quarters more for us to make all these changes that has to be brought into the company. This is something that we have told earlier also. For four quarters, it will be a kind of a curve of changes that we would be incorporating.
The new plant expansion, which we have done for silos, is also an inching initiative towards that actually. Few more are offing in next two to three quarters down the line. You will feel that there will be an improvement. This particular quarter specifically is a very lean quarter, actually. It is an off-season lean quarter, generally for the commercial explosive companies. The impact is felt a little more. Going down the line, this is something that a lot of improvement you will be able to see in the overall performance towards the IDL Explosives.
Wonderful, sir. The second question essentially is that we are pursuing growth on all fronts across various products. There are multiple initiatives being taken, and now you have two subsidiaries. Congratulations for CCI approval, by the way, for Premier. Now we have Premier, we have IDL, we have our standalone business. We have a host of products that we are developing. Just wanted to understand that this multi-pronged growth approach, what constraints you are facing today, and also how you are managing this multi-location, multi-pronged growth.
The disciplined teams and leadership team already well-built as far as the current subsidiaries, whatever we have acquired, and we are about to acquire. We continue to give the vision, strategy, and the direction for the leadership teams who have been maintaining these companies. A few more acquisitions in the future that we would be doing, we will continue to maintain a similar kind of a structure where we will build the leadership team, we will strengthen the team, we will create layers, accountability, transparency. Obviously, the vision is something that will be given from the company by our MD, Mr. Karunakar Reddy. That is how we will have to do, and we will continue to do the same.
That of automation also, we are now planning, so that now they are sitting at one place, we are able to monitor all the locations and all the units.
Sir, the question was more on the. Of course, multi-location, when I said, there are a lot of products that we are developing. MIGM, for example, is one of them, then the torpedoes, et cetera. These are very varied products, and there are. Torpedoes particularly, there is a company who is already into it. These require a lot of technical excellence apart from the R&D efforts. R&D efforts, of course, I can see that your R&D expense is at the higher end of Indian companies in general, 8%. If you could throw some light on that, the product development initiatives, if you are doing hiring in a better manner or around organization structures, that would be great.
We have a multi-layered structure as far as the development teams are concerned. On the topmost layer, the MD and the Director Technical, Mr. Prasad, both handle it. Under them, there are almost close to around 11 head of the departments who handle different type of technologies. Someone who handles the pyrotechnics, someone who handles control, someone who handles RF, like that. Different head of the departments are there. Under them, there is a team leaders, who have almost close to little less than six to eight years kind of an experience who handle. Under them, we have a layer of zero to four, zero to five years experience team. There is a multi-layered structure with which we do it. We hire teams from some of the local engineering institutes and some from the upcountry.
We hire, we groom them, and slowly we grow them to the leadership levels. There is an architect team who handles the entire, what do you call, the engineering point of view and other things. Okay, so this is a multi-layered structure with which we operate the entire R&D team.
Excellent.
The technologies point of view are generally common technologies will be there, which are being used for different verticals, maybe for the naval defense and for the air defense, for the missile defense, like that. Over and above that, we also have some of the retired scientists from the DRDO and some domain expertise knowledge, which is parted by ex-armed forces retired staff. With which we take certain domain expertise and technological knowledge with the retired scientists from the DRDO, like that. This is how we are able to maintain and sustain and develop and re-engineer the technologies which are developed and come out with the newer technologies based on the current threat requirements. That's how we are operating.
Understood, sir. Thank you so much, and all the best.
Thanks, Amit.
Thank you. The next question is from the line of Abhijeet Singh from Systematix. Please go ahead.
T hank you for the opportunity. Am I audible?
Yes.
Sir, first question is on the standalone business. What has contributed to almost all-time high gross margins there, around 41% gross margins in standalone? That is the first question.
Y ou can go ahead and ask all the questions. I will answer it once.
The second question, sir, is on the path ahead for IDL Explosives. What is the kind of CapEx we envisage in IDL, and what is the plan that we have for the next four, five quarters that you mentioned? We will be sort of in a transition period where you will be restructuring a lot of the business. Lastly, what is the status of the MIGM order? Are we expecting the RFQ anytime soon, or when can we expect the order coming into our P&L? These are my three questions.
The further plans for IDL is something that we will keep divulging as and when we start those activities. On this con call, I would reserve the reply. Okay? As far as this quarter growth is concerned, we have executed decently good production orders, which has driven the margin growth for this particular quarter. MIGM, MD will answer the MIGM.
MIGM, we are in touch with the naval headquarters, and we are expecting RFQ next month. November anytime, we are expecting RFQ. Indian Navy plan is before January, February, they want to release the purchase order, so that no advance payment they want to release before financial year end. There is a provision in this order, 20% advance payment also in the sanction it is there. So 20% advance they want to release before financial year end. That is of the Indian Navy team expressed.
Sir, just one follow-up on this. Do you think the trials can happen quickly in a two-month period after RFP is issued? Between RFP and the final order, I am sure the trials would happen, the user evaluation trials, final ones.
Purchase order, we are expecting it before February so that I have to submit the BG before 31st March , we have to avail the advance payment.
Trials.
Trials, MIGM trials already completed. User trials, everything we have already completed. No more trials. They are straight away production. The first lot, we had to do some critical trials. Then after that, series of production will be going up.
Understood, sir. That is it from my end. I will get back into you.
Okay, thank you.
Thank you. The next question is from the line of Pinakin from HSBC. Please go ahead.
Yep. Thanks, sir, for the opportunity. Sir, can you give us some color on the potential export opportunities on the horizon over the next 12- 24 months? How do you see them progressing?
See, like last many years, we were concentrating only domestic business. Based on our capacity, we have not concentrated export side, but our third unit is getting ready. First phase of third unit is now operational. Once it is total operational, then we want to take foreign assignments also. We are building lot of spare capacity. Compared to our present capacity to the expansion, once it is ready, it is going to be almost 12 x bigger than the present facility. We are in touch with many of the overseas companies, and I think maybe next financial year onwards, I'm sure we'll be doing good export orders also. We'll be taking and exporting.
Got it, sir. My second question is, sir, do you sense that there is a delay in the ordering process this year? While there was obviously a lot of expectation that order flow will increase across the board, but so far we have seen muted order flow, especially on the large systems. In your view, sir, what is driving this delay at the ordering level?
S ee, some of the cases now, government is now changing their distinct strategy. There is one case, there is QRSAM is there. QRSAM now, the MoD is supposed to place order on Bharat Electronics and BDL. But, now the MoD is planning to split the order. Particularly, missile first lot of 1,000 numbers, they want to split actually. 50% they want to place on BDL, and 50% they want to consider private industry. That is also one dialogue is going on. I think that is one reason, one of the case now they're getting delayed. But all other things are going on as per the schedule, they're releasing orders. In our case, naval systems and all are going on in a fast track only. In fact, we are expecting some torpedo. Recently, one last order, you must have seen, BDL has received one last order.
BDL is going to receive one more order also, electric heavyweight torpedo order also is in process. They've already received RFQ, submitted quotation also, and any time, next one month time, they're expecting order also.
Got it. Thank you very much.
Thank you.
Thank you. The next question is from the line of Amit Kumar from HDFC Securities. Please go ahead.
Good morning, sir. Congratulations on a great set of numbers, and thanks for the opportunity. I wanted to understand two points. One is on the shorter horizon. In this quarter, which specific orders, if you could please highlight, were executed? In next two quarters, how do you see from this INR 1,700 crore order book, some guidance on how much would be executed and which specific programs you are focusing on? This is one. The second thing, on the longer-term order book trajectory, specifically for Apollo standalone. MIGM, we understand. Apart from that, how do you see QRSAM and Pinaka, these order inflows, how do you see them coming? The third one would be on similar thing on Premier Explosives. How do you see the order inflows for Premier in FY 2028?
Premier, Amit, thanks for joining. Premier, we do not want to comment as of now. Until the full process is over, then we will start giving our guidance and other things jointly. But as far as the order book of Apollo point of view is concerned, the current order book, which is standing at around close to little over INR 1,700 crores, this will grow to around INR 2,000 + odd crores by March, other than MIGM order, which we are going to get.
Yes, sir.
Okay. MIGM, it is for sure that we are going to get MIGM order in this financial year. MD has already told by February, but not exceeding March is something, a guidance that we have been giving right from beginning. We are continuing the same stand as we are continuously in touch with the customer on a regular basis. With regards to the Pinaka and QRSAM MD has already told.
Pinaka already i n process, some 2,000 numbers MoD is releasing orders on two, three companies. We are expecting, already we have submitted, in fact, the RFQ also has come, and we have submitted also for MIL case. 300 numbers, they are going to release the orders. Also, Solar also has received some order, and MIL also received some numbers. Bharat Forge also is getting some numbers. These Pinaka related orders, we are expecting maximum before December end, we are expecting orders. QRSAM, as I told you, only 50% quantity only they want to consider BDL. 50% they want to consider private industries. We are also in that race actually. Because the most of the things in a QRSAM, most of the onboard systems Apollo is doing, and the propulsion side, Premier is doing.
If anybody wants to see the major portion of the weapon, the Apollo group only is doing. I am sure MoD wants to consider two private industries. I am sure that we also will be there in this thing.
Sure. Thank you, sir. Sir, I had one more question which I had highlighted earlier. Next two quarters, which programs you are basically focusing on? If any numbers you could please give me.
We are doing one Indian Navy order we have executed this last quarter, and now also we are doing related to Pinaka also, the execution is going on. There is a strategic program, so I do not want to mention program. That program orders also, execution is going on. Also, Indian Navy requirement related things also, we are in the process of executing. So lot of orders from the other companies also, like private industries also, we are now in the process of completing the production.
Guidance next two quarters.
Next two quarters, yes. I think we have orders from various departments. Some R&D related orders are there, production orders are there. Limited series orders also we received from a number of programs. That order production also is going on. Next two months, I think we will be executing many of the production and R&D related orders. Program names, some of the programs are strategic programs are there. We are not supposed to disclose the names actually.
Okay, I understand. But at least on the numbers side, do we expect similar run rates? Say, we had done INR 400 crore approximately in H2 of last year. Do we see, say, close to INR 700 crore this year?
Yes. We are targeting or aiming for yes, definitely more than that. I think—
Amit, what is the question? Can you repeat?
Sir, I wanted to know that out of INR 1,700 crore, how much do we expect to execute in H2? Or some broader guideline would also be okay.
The growth momentum, what we have been demonstrating, we will continue to keep the same momentum. That is how I would like to—
Anything 35%-45%, definitely we will be doing.
Okay. That helps, sir. Thank you.
Thank you.
Yes, those are my questions.
Thank you. The next question is from the line of Rau Thakur from NVS Brokerage. Please go ahead.
Sir, we are India's premier defense company. Therefore, looking at the humongous opportunity in the defense sector, sir, when do you see our company hitting the big revenues of maybe, say, INR 5,000 crores and maybe some commensurate margins of 20% or 22%?
Coming years, definitely we are targeting. Once this acquisition completes and once the consolidation, all the companies started functioning under one management group, I'm sure the expected, this thing is going to happen. That's all I can say.
Okay, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Ronak Singhvi from NAFA Asset Managers. Please go ahead.
Hello. Congratulations for the good numbers. Am I audible?
Thank you. Please go ahead.
The effective tax rate of this quarter two is around 51% of the standalone. What makes this tax percentage too high?
As per the income tax rules, effective from this year, wherever the turnover was INR 400 crores and above during 2020-2023
2019.
2024, 2025, it was a 25% rate of tax. Now it has been shifted to 30%. That is why the—
—old tax regime. Okay, not 115BAA. My next question is around, in the previous call, about 155mm shells, you have said that Premier Explosives have provided some samples to Indian Army for which testing was in final stages, and once the order will be received, Premier Explosives will provide explosives, and Apollo will provide fuses for it. What is the status like? Did the samples get materialized into order, and is Apollo ready to provide fuses for it?
The Premier thing, we want to comment only maybe after the completion of this acquisition—
Okay.
—SPA. As per the SPA, we are not supposed to discuss about that company.
Okay. Got it, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Shreyansh Gattani from SG Securities. Please go ahead.
Hello. Congratulations, sir. I had just one question. Trying to understand when the government splits an order between two parties, for example, MIGM is between BDL and Apollo, and we provide subsystems. Do we provide-- Is it compulsory for BDL to have a separate vendor for the subsystems, like a complete separation, or is that something that we will be providing the subsystems and also making MIGM for ourselves? Similarly for QRSAM, the portion that BDL does and what is going to the private players. Is Apollo going to be involved in both or is there a separation over there?
See, in case of MIGM, whatever electronic subsystems and other critical sensors and all, Apollo only has provided to DRDO. Okay. Now also, the future production order also, Apollo only is going to provide the electronic processing system and the sensors and all, Apollo only is going to supply. There is no second source for that. Only Apollo is the source. Okay. In case of QRSAM, yes, one case, couple of systems, Apollo only has established so far. We are going to be a proprietary, even nomination basis, I am expecting a couple of subsystems. One or two systems, there a second vendor also is there. The order will be sharing between two companies.
Okay. So there is no restriction that the vendors have to be separate for certain systems when it goes to two different parties. We can be a party to both, right?
See, not we. Like during development, whosoever supplies the subsystems, they have to go with the same vendors, actually.
Okay.
Since we have completed during development time, anybody has to come to us only.
Got it. Okay. That is helpful. That is all I had. Thank you.
Thank you.
Thank you. The next question is from the line of Abhijeet Singh from Systematix. Please go ahead.
Thank you for the follow-up, sir. Just continuing with the previous participant question on the QRSAM scope that we have. You are saying broadly, even if there is a competition in certain subsystems or products, it is limited to maximum two or three players in addition to Apollo, right? In MIGM, we are the only supplier for the electronics part to the system integrator. Is that correct understanding?
Yes. QRSAM, I think if I remember correct, three subsystems, three very critical systems. One subsystem is navigation and onboard computer. We are the only people established so far. Two more other subsystems also, so far Apollo Micro Systems only has supplied with using our technology only, the technical trials, user trials and all happened. So they had to stick on to the same company, in fact. In future, they may be developing couple of more vendors. DRDO policy, they want to have minimum two vendors. So their process is, if at all if they are providing technology to a second company, they have to observe the technology, they have to produce samples, they have to do the qualification test and all, and they have to use in a couple of trials they have to perform, then they will be considering second source, like that. It is like that, actually.
So at present quantity, I think since there is no second vendor is developed so far, we are expecting a couple of systems on nomination basis. Two, three subsystems are there wherein two vendors are there. Apollo is there, one more vendor also is there.
Right. Sir, on Pinaka, you mentioned that this is for the Pinaka long range, right? That you mentioned MIL has the order already, and we are also expecting some order. So that is for—
Pinaka, two versions are there. One is 80-km range, another one is 120-km range is there. 120-km one, so far MoD has not finalized the DCPP partner. Production partner, they have not finalized. We are also in that race, actually. Pinaka, that 80-km range one only, at present, three vendors are there, MIL and Solar and Bharat Forge is there.
Right. There was one order that they got in FY 2025. This is a follow-up of that.
Yes. That order is Armenia order, 2,000 numbers, these three companies have received. The recent listing also, our own requirement, Indian Army also is placing order for 2,000 numbers. That is also there. Already negotiation, everything, RFQ, submission of code, negotiation, everything has completed. Anytime they will be getting orders. In fact, they started procurement also. MIL has already sent the RFQ, we have submitted our code. Once they receive the order—
Overall 4,000 for Pinaka. Overall 4,000 rockets, right?
Yes.
Near term demand. Half of that is export and half of that is Indian domestic demand, right?
Correct. Yes.
Okay, sir. Lastly, just on heavyweight torpedo, I think you mentioned that RFQ is out already and you are expecting an order. Is that correct? I heard that correctly or you want to correct that?
RFQ is there for small quantity, around 30 numbers RFQ has risen on urgent basis. Indian Navy has I think raised the RFQ to BDL. I think any time this November month, they are expecting orders for 30 numbers. That is only on fast track we have to do, in fact. That order will be finalized during November month.
But the advanced heavyweight torpedo order, that is the volume order for that, which is submarine torpedo, that is going to come in FY 2028, right?
See, these 30 numbers they want on an emergency basis within nine months only they are expecting, okay? After that, they are going to place order for some 125 number requirement also is coming up. But this 30 number is on emergency basis, so we have to supply. They will be giving only nine months time.
Understood, sir. Thank you for answering all the questions.
Thank you.
Thank you.
Thank you. The next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.
Hi, thank you for taking my question. Firstly, during the H1, our standalone revenues have grown about 30% versus the guidance we have maintained is around 45%-50%. Do you expect H2 will cover for that, or this year will be lower than what we had earlier guided for the standalone business?
We already gave a guidance. We will continue to keep up with the guidance that we have given.
See, one side, capacity we have increased already. Unit 3 phase one, we have already started, and we have already order base is there. As I was talking to another gentleman also, what is the guidance? Anything 35%-45% of growth, definitely we are going to make.
Okay. Secondly, sir, BDL has received around INR 1,700 crores of orders recently for, I think, a torpedo. Would it be possible for you to share how much of that will flow towards in terms of subsystems?
I think we have to work at Varunastra thing. You are talking about Varunastra thing?
I think they recently got in last month about INR 1,700 crores.
Yes. The Varunastra thing we are expecting, I think around INR 100 crores + order we are expecting.
Okay. That was all. Thank you.
Thank you.
Thank you. The next question is from the line of Gaurav Shukla from [inaudible]. Please go ahead.
Can I order, sir?
Yes, sir.
Sir, congratulations for very good results, sir. Q2 EBITDA margin improved to 28.6%, while H1 margin was approximately 25.8%. What drove the Q2 improvement and what sustainable EBITDA margin should we think in respect of FY 2027 and FY 2028, sir?
Sorry, I am sorry, can you repeat the question?
Sir, as we see that Q2 EBITDA margin improved to 28.6% and H1 margin was approximately 25.8%. What drove the Q2 improvement and what sustainable EBITDA margin should we think for FY 2027 and FY 2028? That is my question, sir.
See, actually, quarterly margins, they keep varying sometimes few hundred basis points here and there. But this is not like a kind of neither can be construed as a kind of an annuity performance nor any this thing. The product mix generally varies from quarter- to- quarter, hence the margin also keeps varying. As far as the drive-in margin is concerned, during my opening presentation, I already explained that there is some production orders that we have executed vis-à-vis some development projects, which has drived the margins actually. Okay? But broadly, we can give a guidance that we will continue to maintain the good amount of momentum going forward for the further quarters as well, in line with the top-line momentum that we have already given a guidance.
Okay, sir. One question more, sir. What is the company's target for operating cash flow and FCF, free cash flow in FY 2027? When would we expect cash conversion improvements related to reported PAT?
Totally on an annual basis, the positive operating cash flow throughout all quarters, you will start seeing it from FY 2029 onwards, okay? Where the anchoring orders majority will be the production orders.
—production orders.
Compared to the current orders, combination where we are doing development projects more and production orders lesser. FY 2029 onwards, the anchoring will be totally by production orders. That is where there will be both advanced payments, regular cash flow momentum will be there as and when the quarter-on-quarter execution takes place, where you will start seeing a good amount of positive cash flow.
Okay, sir. One thing more, sir. As we have INR 17 crore order book, sir, what is the exposure of QRSAM, Akash-NG, Pralay? Other major programs, what is the exposure of these all in this order book?
Currently, we are not giving any breakup of the order book, sir. We would refrain. We have not received.
No, sir.
Final is HAL, we are there in. In fact, production as a complete missile production also, we are one of the company participating for production. BDL has not yet to place order. Okay. That is in RFQ stage only.
Okay. RFQ only. Thank you, sir, and all the best for very good result, and all the way for future, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Raj Rishi from DCPL. Please go ahead.
Yes.
Mr. Rishi, you are not audible. Mr. Rishi? Sir, the line for the current participant in the question queue seems to have disconnected. May we move to the next question? Sir?
No.
The next question is from the line of Ronak Singhvi from NAFA Asset Managers. Please go ahead.
Hello. Thank you for the follow-up question, sir. My question was how much of order book is of standalone, sir? Out of INR 1,765 crore, standalone order book is?
INR 1,300 crores.
INR 1,300 crores. Okay. Thank you, sir. The rest is of IDL?
Yeah.
Okay. Thank you, sir.
Thank you. The next question is from the line of [inaudible] from Bharat Petroleum Corporation Limited. Please go ahead.
Can you hear me?
Yes.
The Defence Secretary, Mr. Rajesh Singh, has constantly talked about opening up the missile production, especially for the private sector. He also talked about how the conflicts which are happening, Ukraine, Russia, et cetera, and Iran and U.S., how Ukraine has a capacity for many times missile production compared to, say, India. How do you see Apollo Micro Systems in this context, sir?
W e are also shortlisted for the competitive weapon manufacturing. If you see it, once Premier Explosives acquisition completes, we are going to place in a different position. Addressing complete ecosystem producing a missile, the complete electronics, mechanical, propulsion, rack and butts, all together, we are the only people going to have that facility, that kind of this thing. Many of the programs we are participating in a DPP, this thing, and everybody's coming in a different route now.
Some eight, nine programs, they're offering ToT actually, technology transfer. Once we issue technology, then we have to produce some samples to show the performance. Based on that, they'll be considering production orders.
Okay.
Okay.
And sir—
Yes.
Can I come in?
How do you see the entry barrier in this, sir? Both domestically and internationally.
See, entry barrier for the new companies coming into this business, one has to understand the quality standards of the defence. Overnight getting into this business is not that easy.
Okay.
This is not any commercial, this thing. One has to understand first quality process, and they have to face the audit levels and all. Once they clear, then people can get into this thing. At least in my this thing, I can say at least four or five years time it will take for anybody getting into defence business.
Okay.
Although I would like to add, although the government in last few years have been continuous and quite bullish about, and the remark which you talked about, what DefSec has told, it is the ability of the new companies who would like to come into this business. Earlier, there was a huge entry barrier, but now although there is an encouragement given by the government, it is their ability to sustain in this business, as it will continue to be a lumpy business. With one or two products trying to do, sustain, and because again, to get a similar size of orders, their ability to go offshore and market it and match the quality requirements of the international standards. It is a very long-term bet and a long-term plan, not just by means of there is a push by the government.
It is an interest that to be and to continue in the defence is something that will decide the core entry barrier as the day stands, actually.
Okay.
That is how you will have to also understand. Also to the question of what you have talked about the Ukraine having a mass, this thing. Yes, more number of players are being encouraged as the arsenal requires very large quantities, and ability to produce large quantities with the similar levels of the quality expected by the armed forces is something which is paramount at this point of time.
Right.
So with the—
—and sir, last. Can I put in one more question?
Yeah.
Yes. Sir, the MD in a South Indian channel had talked about his aspirational target. Not aspirational, actually. He talked about a target of overwhelming figure of INR 25,000 crore in five years. So, is—
See, it is like this, as a total group of companies, we are aiming that, because now, we are now planning for the big expansion in IDL also.
Right.
We are planning to start 15 types of manufacturing plants. We are planning. That investment and all, we will be releasing very soon, we will be releasing, and we are going to raise a big investment.
Also, we are in the process of acquiring 2,000 more acres close to Hyderabad. We are already holding 1,200 acres.
Okay.
Many big plants that they based on, all that big plants, I told that I am aiming to achieve so much. Now also, I am telling you—
Okay.
—I am aiming for that kind of number for years, definitely.
Okay. All the best, sir. It will be great for all of us.
Thank you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Sagar Shetty from [inaudible]. Please go ahead.
Hi, good afternoon, sir, and congratulations on the great set of numbers. Most of my questions have been answered, so I have just one more question.
Sure.
It is regarding the order book replenishment. We have seen a really good revenue execution in Q2. At the same time, the sequential order book, like the incremental order book, there has been only a minor jump. Going forward, what are the key drivers that will help us achieve the revenue goal which we are targeting? If you could also give us some visibility on how, apart from QRSAM and MIGM, what kind of orders do we have going forward as well, and what is the execution timeline for the same?
See, this QRSAM and all are big production runs. There are so many projects now, limited series, 50 number, 100 number kind of things. Many are there, actually. Few hundred programs are going on. Okay? These programs are highlighted programs where everyone knows about QRSAM, everyone knows about Akash and all, everybody knows. Pinaka and all, people knows. There are so many strategic programs are there, where nuclear-based and all will be there. We are not supposed to talk about such programs. So many programs are going on, okay? Not just Pinaka and all, only two, three programs only people knows, public knows, general public. But several other programs also are going on.
Okay. Why was there a lag in the sequential incremental order book? In the previous quarter, we had like INR 1,700 crores of order book. Now we have INR 1,765 crores. What is the reason behind this?
See, orders-wise, every month we are receiving some R&D orders, production orders and all, we are receiving. As I was telling, the growth point of view, if you ask me, anything 35% - 45%, this thing we are projecting. Orders-wise, there is no problem. At present, we are having some INR 1,700+ crore orders we are having. But every month we are adding orders, okay? I am sure by this financial year end, MIGM order, once they place, it is going to be anything INR 4,500 crore- INR 5,000 crore kind of orders we will be holding.
What would be the execution timeline going forward of new orders coming in?
Anything, they will be having 18 months time, generally. MIGM, I think will be having time for I think two and a half-years.
Thank you so much.
Thank you.
Thank you. The next question is from the line of Jimeet Jain from Wealthmine Advisory Services LLP. Please go ahead.
Am I audible?
Yes, sir. Please.
Yes, actually, you have given a bit of a guide of INR 5,000 crores to be achieved in the long term. So when and in what percentage will be achieved in which year? Any ballpark number?
Your voice is not clear. See, one side, as I was telling you, we had production capacity, we are increasing to almost 12 x. My first phase of this thing already started. Orders-wise, lot of orders are in pipeline. everyone knows that so many big programs like QRSAM you take, MIGM you take, Moored Mine you take, and so many programs are in pipeline. Many of the programs we are also participating in, programs like Pralay, we are also one of the participant, like the complete weapon manufacturing. I think MoD has shortlisted some three, four companies. Out of three, four companies, Apollo also is there. There are so many programs. Some of the programs we are doing subsystems, some of the programs complete sections we are doing. Some of the programs, the complete weapon also we are doing. MIGM complete weapon we are doing.
Moored Mine also complete weapon we are doing. The limpet mines, complete weapons we are doing. RGB-60 rocket complete weapon we are doing. We are expecting couple of more programs. I think very soon we are going to announce. I think you are going to hear next 15, 20 days time.
Couple of more DCPP distinction going to finalize in Apollo. We will be announcing very soon.
Understood. As you said that the new capacity will come live in March [audio distortion]
Your voice is not that clear. The sound is coming. Can you repeat your question?
I was saying that the new capacity will come live—
I am sorry to interrupt you, sir. Your voice is not clear. Can you please use a handset?
Hello, am I audible now?
Yes, sir. Please go ahead.
Yes. I was saying that the new capacity Unit 3 is going live by March 2027, as you said. What peak revenue can we expect from the optimized utilization?
The quantifiable peak revenue is not something you have to understand. But the capacity size is increased largely, fairly by also equipping with multiple machinery, by scale of machinery, and by scale of the test equipment. We will be able to effectively reduce the overall cycle time of the production when large production orders are coming. Quantifiable point of view, we supply multiple types of system for several hundreds of types of programs, and quantification is not something possible. But whatever the scaled-up revenues which we are talking for next five, six years, I think for all that, current type of business on the subsystem level, whatever we are doing, this facility is good to go, actually. On a scaled up, level of something like, larger systems like, MIGM and other thing, minus explosive, for that also, the integration and other things, this facility is good to go.
That is how we wanted you to understand.
One more important thing is, qualification testing and all, at present, we are using third-party facility, wherein we are losing a lot of time. Now we are going to have our own facility. Installation is going on. By next one month time, we are going to have the complete EMI test facility, complete navigation system and all. We had to do calibration and all. We had to do the calibration system also, installation is going on. All that we are building in-house now. The production time will be reduced, actually. At present, what is happening, some of the very critical test now we are depending on DRDO facility, where we are not getting on a continuous basis. We have to wait for weeks together, months together, sometime. A lot of change, like we are going to see a lot of change near future.
Okay, sir. That was helpful. That is it from my side. Thank you.
Thank you. The next question is from the line of [Vishant] from DB Wealth. Please go ahead.
Hi, management. Congratulations on the good results. Our inspiration, as you have said in the last few quarters, is also Solar Industries and how we aspire to be like them and even be better than them, knowing the quality of management and execution that we have done so far. What I really want to understand is with the opportunities that we are seeing right now, and with the integration of the explosive business we have already had, what kind of more acquisitions will we need to do to become better or at least at par with our inspiration? That's point one. Point two is that we are now in the integrated side, or we are close to getting integrated with our CapEx that we have done so far.
How long do you think that this CapEx will be enough for us to scale to the ambition of INR 25,000 crores, before we need another set of CapEx to start? Point three is that, what is the sort of importance of our explosives, new acquisitions that we have done? What is the sort of importance in the integration that that will help us with? Any particular product program that it will help us with?
Okay. The last question is quite a lengthy one. I think that is something that we can take one on one.
Not something that I cannot explain just over a few words. Broadly coming back to your first question, we don't aspire to compete with anybody in the market, neither in the private nor in the public sector thing. We independently are growing strength by strength, brick by brick, we have grown ourself from a grassroot level, building the core intelligence that forms part, either a weapon system or any other platform system. That is the strength with which we have grown. Now that a lot of push and encouragement is being given by the government, that the private industry can start building a larger systems, because larger quantities are also required, which cannot be catered by the government-owned, state-owned entities.
That is how we also continue to aspire ourself to start building a larger platforms, keeping the existing capabilities and strengths that we have in building the intelligence systems which form part of the platforms. We are looking forward to emerge as a global OEM in next five to six years, rather than trying to compete with anybody in the industry. All the industry players and partners which are in India, we want to either partner, collaborate with them, and jointly work towards the sovereignty of the country in building good systems at a— what do you call, cost competitive price for our armed forces. That is how we want you to understand. I want to set the tone by taking your question as a platform, and thank you for asking this question.
As far as the energetics is concerned, this is a very strategic move that we have made, and we will continue to build and scale the size of the energetics in our subsidiary company, IDL Explosives. They are already, MD has told, and we have been vocal earlier also, we have large investments that we would continue to do in IDL Explosives. This is something that we will continue to grow as the arsenal requirements are required in a very large quantity going forward. Right, sir. Any question I missed out?
Sir, how long do you think that this current CapEx will last us before we start another cycle?
CapEx is something that what we are doing now, for Apollo as a standalone in three phases, we are doing. But incremental CapEx, we will keep continuing to do. As the scale of the business keeps growing, the CapEx is something. There are two fundamental things with which we are running this business. All the while, for the last 15 years, we have been consistently investing on R&D. But as the policy change has started in an aggressive way by the government, we are encouraging the private industry. We have also started increasing the CapEx and infrastructure. Augmenting the infrastructure will be on a continuous basis. As the scale of the business keeps growing, so will be the size of investment that we will do in R&D. That is how we want you to understand.
Sir, one more question. Now that IDL has started positively contributing to our consolidated business, what sort of guidance do you think you can give us one year down the line or two years down the line? Because we are also now integrating with the new business that we have an open offer for, and now that integration will also come in. What kind of consolidated outlook do you have for the next 12-24 months, on the bottom line?
The overall thought process towards the energetics and the guidance related to the revenue of our entire energetics business is concerned, once post acquisition is complete, we will start giving effectively. Now we want to refrain from giving any idea because we want the entire platform to be coming on one umbrella first and then pan out a proper plan on a pan-India basis, and then we will give a better guidance to you from then onwards.
But sir, my apologies for harping on this a little bit, but I know for a fact, and we really appreciate that as your investors. You will be looking for more acquisitions also. So having some light, I completely understand you can't discuss that today, but having some light on the consolidated going forward would really help us, sir. That's just a request.
No, it's not very far away. I didn't memorize your name, sir.
[Vishant], sir.
[Vishant].
[Non-English content]
[Vishant] , I am not deferring your question forever. The acquisition process is due only a month. I am not asking you to wait for, what do you call, a quarter period of time to wait for this question to be answered. Let the acquisition process be complete. Once it is complete, then we will make one more proper call. Post-acquisition, we want to make a joint call and give an effective thought process, guidance. We are a very transparent company, and what is the vision of the company in the energetics line is something that we will be vocal about it. Coming back to the aggression, what you are talking about. Thank you for understanding that we have been aggressive. We are not doing anything great, nor is our thought process anything great.
Exactly what the government wants the industry to be, we are just responding to it, that is all. Government wants a private industry to be aggressive, invest in R&D, invest in infrastructure, and build scaled-up systems at a cost-effective price. Only that we are doing.
Sir, we 100% admire your aggression, and thank you so much for the growth that you have been giving to the shareholders.
Thank you, Mr. [Vishant].
Thank you. A reminder to all the participants in the conference, please limit your question to one per participant. Our next question is from the line of Rahul Gupta from [inaudible] . Please go ahead.
Hello?
Yeah.
Yes.
Hello. Sir, my question is that as the major anticipated order under QRSAM or MIGM or Pinaka are delayed, what alternative program or existing order can support the FY 2027 revenue guidance? And which program represents the largest execution risk today?
The existing order book that we are having and the order book where we owe the orders from our existing customers, which means that we being a Tier 2, Tier 3 supplier for larger system integrators, both government and private, that orders are bound to come to us, that also is a very strong number. I do not want to spell out any specific number now. That is also a very strong number. Under any circumstances of a last mile that a month here and there, MIGM order to be getting delayed, if that is the question which you are asking, still the momentum of the business are going to continue owing to the current order book that we are having and the orders that are already there with my customers, which I am only supposed to get, where I am the proprietary supplier for it.
Keeping that in view and the regular orders that we keep getting every year for various programs, this is something that will maintain to continue the momentum, sir.
Okay. My second question is, how much contribution from new order or old order?
There is no old or new.
In the sense?
Execution, you mean to say?
Okay, sir. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Abhishek Kamdar from Value Plus Advisors LLP. Please go ahead.
Hi, am I audible?
Yeah.
Yes, sir.
Congratulations on a great set, and thanks for the opportunity. I just had a question around ShauryAstra, the new associate company. Just trying to understand the opportunity here and how will the IP and the commercial economics work over here?
Super. ShauryAstra is started with Dr. Saraswat , former Chairman, DRDO, and former NITI Aayog member also. Wherever gaps are there, DRDO is doing so many programs, but certain programs DRDO is not doing. Dr. Saraswat wants to take up certain programs, wherever gap is there, he wants to take up. Let us say, Pinaka, we have only up to 120-km range only we are having. Wherein now the armed forces are looking for 300 km kind of thing also they are looking for. 500 km, 900 km kind of this thing also they are looking for. So all that we want to address, in fact. You are asking about IP and all. We will be doing joint development. The development this thing will be doing by ShauryAstra and production is going to take up by Apollo Micro Systems. That is our understanding.
IP will be holding as a joint this thing. Apollo is holding 33% stake in that. At present, Dr. Saraswat is there, a few more people are going to join. 34%, sorry, 34% Apollo is holding right now.
Right. In the projects that we do under ShauryAstra, are we looking to be a lead integrator and lead development of these long-range and new systems?
Complete weapon design, we have already started doing. Complete weapon design we will be doing our own.
Okay.
That is how we are aiming, yes.
All right. Okay. Thank you and all the best.
When Dr. Saraswat is there, then naturally we will be doing our own design only. He is a highly experienced person.
Sure. Okay. Thank you and all the best.
Thank you.
Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks.
Thank you so much. Before I conclude, a word on the bigger picture. India's defense sector is entering a structural growth phase. Strong tailwinds are converging. The government's push for indigenization and military modernization, Telangana ambition to become a leading defense manufacturing destination, and rising global demand for Indian defense exports. Globally, initiatives like ReArm Europe, are reshaping procurement and supply chains, opening a real and a very high opportunity for Indian companies to participate beyond the domestic market. Our view is simple. The winners will be those who design in India, manufacture in India, and earn the trust of customers worldwide. Apollo Micro Systems is built for this moment. We develop mission-critical technology-driven solutions for the increasingly complex demands of modern defense platforms. Our principle is clear: build for today's challenges, invest in tomorrow's capabilities, and create lasting value through disciplined execution.
I thank the Ministry of Defence, Government of India, our customers, and our partners for their trust. To our investors and analysts, thank you for your engagement and constructive perspectives. We know confidence is earned through performance, transparency, and consistent delivery, and that is our commitment. We would welcome you to our facilities to see our manufacturing and development capabilities firsthand. For any questions, please write to our investor relation team at investors.relations@apollo-micro.com. India's defense ambitions are expanding, technology requirements are deepening, and the opportunity for indigenous companies is growing. We intend to meet it with innovation, execution, and unwavering commitment to the nation. Thank you for your time and trust. We look forward to updating you on our Q3 results. Wishing you and your family a very happy Diwali in advance. [Non-English content]
Thank you, sir.
Thank you so much, ICICI Securities.
Yes. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.