Ladies and gentlemen, good day and welcome to the Avalon Technologies Limited Q3 and nine-month FY 2025 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 this conference, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Swaminathan from Avendus Spark. Thank you, and over to you, sir.
Thanks, Darwin. Good afternoon, everyone, and a warm welcome to the Q3 FY 2025 earnings call of Avalon Technologies. To take us through the results today, we have with us from the management, Mr. Kunhamed Bicha, Chairman and Managing Director; Mr. Bhaskar Srinivasan, President; Mr. Suresh Veerappan, Chief Financial Officer; Mr. Shriram Vijayaraghavan, Chief Operating Officer; Mr. Venky Venkatesh, Chief Sales Officer; and Mr. Michael Robinson, Chief Operating Officer from U.S. operations. Mr. Bicha will give us an overview of the business performance and will be followed by Mr. Suresh's remarks on the financial performance, post which we will open the floor for Q&A. As we move forward, it is important to bear in mind that any forward-looking statements made during this call are subject to potential risks and uncertainties, both known and unknown.
Now, without any further delay, I will hand over the floor to Mr. Bicha for his initial remarks, the CMD. Thank you, and over to you, sir.
Sir, your line is unmuted. You may proceed.
Thank you, Ravi. Ladies and gentlemen, on behalf of Avalon Technologies, I extend a very warm welcome to our Q3 FY 2025 earnings call. I will quickly introduce Avalon Technologies, especially to the ones who are joining us for the first time. Avalon Technologies established itself as a key player in electronic manufacturing services with a global reach. We take pride in our leadership in high-mix, flexible volume manufacturing. We currently operate 14 manufacturing facilities in India and the U.S. We are also adding a new manufacturing facility in India. Our key differentiators are: one, vertical integration. We offer a complex box build solution right from PCB design, new product development, to final product manufacturing. Two, global presence, both in terms of manufacturing presence and customer base. Three, optimal mix of established industries like industrial, rail, aerospace, medical, communications, and emerging industries. Now turning to our business performance.
We are pleased to share that we remain on the growth path that we guided earlier. Momentum continues to accelerate this year, driven by the recovery of our U.S. customers and our expanding presence in the Indian market. This strengthens our confidence in the growth ahead. We see this year as a pivotal moment, laying the foundation for a significant growth over the next decade. Initially, we guided 14%-18% revenue growth and later revised it to 16%-20% in our earlier earnings call. Now we are further increasing our FY 2025 revenue growth guidance to 22%-24%. We build mission-critical long-lifecycle products and aim to be a trusted partner for our industry-leading customers. By focusing on long-term profitable growth opportunities, we have maintained industry-leading gross margins, staying away from the short term.
We had initially communicated 33%-35% as a reasonable gross margin range in the medium term. Given our progress this financial year, we are now increasing our FY 2025 gross margin guidance to 34%-36%. Moving to our Q3 FY 2025 performance. As discussed in previous calls, key highlights for this quarter include our growing sales, increasing order book, and improved profitability driven by operating leverage. In Q3 FY 2025, our revenues grew by 31.1% year-over-year. Our gross margin percentage improved from 36.8% in Q3 FY 2024 to 37.3% in Q3 FY 2025. As we anticipated, the benefits of operating leverage are now evident with EBITDA margins rising to 12.3% in Q3 FY 2025. Absolute EBITDA grew by 109.5% year-over-year. Our PAT stands at INR 24 crore, reflecting a 264.9% year-over-year increase with PAT margins of 8.2% in Q3 FY 2025.
Our order book grew by 25% year-over-year, reaching INR 1,594 crore as of December 31, 2024, with an average execution period of 12-14 months. Additionally, our long-term contracts, which extend beyond 14 months and span an average execution period of two to three years, increased by 32% year-over-year to INR 1,111 crore. Our net working capital days improved from 161 days in March 2024 to 150 days in December 2024. We had initially targeted an improvement of at least 10-15 days by March 2025. Despite a temporary increase in our net working capital days from 134 days in September 2024, we remain confident in meeting our original guidance of 10-15 days improvement by the end of this fiscal year.
Revenue share from our U.S. manufacturing plant now accounts for 12% of our revenue in Q3 FY 2025, reporting a net loss of approximately INR 3.4 crore, an improvement from the INR 14 crore loss reported in Q1 FY 2025. Meanwhile, manufacturing at our India plants, which serve both our domestic and global customers, represent 88% of our business in Q3 FY 2025, remains highly profitable with an EBITDA margin of 15% and a PAT margin of 10.8%. We have previously outlined our three key drivers of growth. Our existing U.S. business, new U.S. business, and expanding Indian business. The recovery of our existing U.S. customer base highlights the strength of our long-standing customer relationships. We believe the U.S. market is continuing to gain traction, and we are optimistic about the growth potential in this large addressable market.
Our recent successes in the industrial, automotive, and aerospace sectors with leading U.S. companies are progressing to design and prototype stages to commercial production. With ramp-up expected in the upcoming quarters, we are seeing increasing momentum with new wins in the U.S., which reinforces our vertically integrated capabilities and strong market positioning. In the rapidly growing Indian market, our focused efforts over the past two years have resulted in key wins in industrial, rail, and communications sectors. These wins are transitioning to commercial production and are expected to ramp up significantly over the next few quarters. We are encouraged by the traction across all three growth engines, which strengthens our confidence in the growth opportunities available to us over the next decade. Turning to key deal wins. We continue to see strong traction across multiple sectors in both India and the U.S.
We are moving from prototype to volume production this quarter for a global auto component company specializing in motion control systems. Our long-standing presence in the aerospace industry over the past eight to 10 years is now translating into significant new business wins as we have advanced through the prototype stage in FY 2025. We will provide further updates in the coming quarters. In India, rail business is scaling up well, with customer performance, stronger performance expected next year. Additionally, we are actively working with our customers on anti-collision Kavach systems, which we believe offer significant business potential in the future. On the infrastructure front, we are pleased to announce that our plant in Chennai dedicated to export is now complete and has started production. Additionally, phase I of our brownfield expansion in Chennai, designed to meet the growing demands of our domestic market, is finished.
Phase II is expected to begin within the next quarter. This positions us well to manage the increased demand expected in the coming periods. With the expected revenue growth in the coming years, combined with our established team and infrastructure, operating leverage will be a key advantage. In summary, we are seeing strong signs of growth, which we expect to sustain and accelerate in the future. I would like to thank each of you for being part of our journey. This has been a pivotal year for us and marks one of the many years of strong performance ahead. Avalon remains committed to building a business focused on long-term profitable growth rather than short-term gains. With that, I would like to hand over the call to our CFO, Suresh Veerappan, for a detailed overview of our financial performance. Thank you so much.
Thank you, KB, and good afternoon, everyone. Thank you for joining the call today. As KB mentioned, all three of our growth engines are advancing at distinct but accelerating rates. The U.S. market is gaining traction and our presence in the Indian market continues to strengthen. Reflecting this positive trajectory, we are further increasing our FY 2025 revenue growth guidance from 22% to 24%. in Q3 FY 2025, we recorded our highest-ever quarterly revenues of INR 281 crores. This reflects a 31.07% year-over-year increase from INR 214 crores in Q3 FY 2024. In nine months FY 2025, our revenue from operations is INR 155 crores, an increase of 16.1% year-on-year.
Our geographical revenue split for the quarter was 45, 55, with India contributing INR 125 crores and the U.S. contributing INR 136 crores. For nine months FY 2025, our geographical revenue split was 42 to 58, with India contributing INR 319 crores and U.S. contributing INR 437 crores. Our gross margin for Q3 FY 2025 reached INR 104.82 crores, reflecting a strong 33% year-over-year increase from INR 78.9 crores in Q3 FY 2024. Our Q3 FY 2025 gross margin was at 37.3%, up by 48 basis points from 36.8%. For nine months FY 2025, our gross margin stands at 36.1%. We continue to maintain industry-leading gross margins. EBITDA for Q3 FY 2025 stood at INR 34.6 crores, reflecting 110% increase from INR 16.5 crores in Q3 FY 2024. This resulted in an EBITDA margin of 12.3%, up by 450 basis points from 7.7% in the same period last year.
For nine months FY 2025, EBITDA stands at INR 23 crores, reflecting an increase of 55% year-on-year. EBITDA margin for nine-month FY 2025 stands at 9.7%, marking an improvement of 245 basis points year-on-year. PAT rose to INR 24 crores, a 265% year-over-year increase from INR 66 crores, with a PAT margin of 8.2%, up by 521 basis points from 3% in Q3 FY 2024. For nine months FY 2025, PAT stands at INR 39 crores, an increase of 87.2% from INR 21 crores in nine months FY 2024. Our profitability continues to strengthen, delivering sustained growth. Our operating leverage becomes increasingly evident as revenue grows, translating into enhanced profitability given that a significant portion of our cost structure remains fixed. This phenomenon is reflected in our Q2 and Q3 results. Moving on to the balance sheet. Net working capital days improved from 161 days in March 2024 to 150 days in December 2024.
Net inventory days came down from 118 days in March 2024 to 103 days in December 2024. Trade receivables increased from 79 days in March 2024 to 94 days in December 2024. Trade payable days increased from 36 days to 46 days over the same period. However, net working capital days have increased from 134 days in September 2024 to 150 days in December 2024 due to increase in receivable days from 80 to 94 days during this period. We remain confident in our ability to reduce net working capital days by 10 to 15 days in FY 2025, in line with our earlier guidance. As of December 31st, our total outstanding debt stands at INR 156 crores, with cash equivalents and investments at INR 129 crores. Our CapEx for Q3 FY 2025 and nine months FY 2025 was INR 11.3 crores and INR 32.7 crores respectively.
With the CapEx light model, our assets turns are strong at 8.8. The budget for FY 2026 is currently in progress, and we will be in a better position to provide detailed insights about our FY 2026 outlook in our next call. To summarize, the momentum across our three growth engines, along with improved profitability and a strong financial position, strengthens our confidence in achieving long-term sustainable growth. With a continued focus on operational efficiency, working capital management, and strategic execution, we are well-positioned to capture the opportunities ahead. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. We have the first question from the line of Rahul Gajare from Haitong Securities India Private Limited. Please go ahead.
Yeah. Hi. Thanks for the opportunity, and congratulations on the strong performance that we've seen during the third quarter. Also, I think I should congratulate you for a very elaborate opening remarks, which covered many of my questions. To start the questions, the first question I want to ask you is on the margin front. Given we've seen significant ramp-up in both the geographies, what do you think is more sustainable margin both in India and U.S., given some of the business will transition from prototyping to full-fledged manufacturing? Thank you.
Hi, Rahul. Thank you for your question. We believe that we have always maintained between 33% and 35% as the margin we target. But certain years we may be higher, like this year. We hope to do better than that, but we target between 33% and 35% average gross margin between the two geographies.
At EBITDA level, how different will that be, given significant operational cost in the U.S. operations?
Actually, like we mentioned in the last few quarterly calls,
We have reduced our operating costs. There's a good opportunity in the U.S. today. We have to see how the politics of that plays out. We intend to maintain the same margins going forward because we can always increase price.
Okay. My second question is on your expansion plan. You've indicated the phase II construction work on phase II will start in a couple of quarters. I want to know when will that be ready and what could be the peak revenue once the phase II is completed?
We usually build up space six months to a year before we need it. The key for us is now we build the export facility, and that is ramping up as we speak. This will take at least 6- 9 months to complete. Then from that point, we'll have enough space and capacity for the following year, and we'll continue to do this as we go forward because our longest lead time for setting up factories is the infrastructure itself.
More than machines or anything else.
Yeah. My last question is on, I think you probably just touched on that. With Trump at the helm in the U.S. and his view which are not very favorable towards clean energy, renewable, et cetera, how do you think your overall business could shape up given we have a sizable business coming from the clean energy vertical? Thank you very much.
Let me I think there's always been confusion that we are in the solar side. A very small portion of our business will be solar side, which could get affected in the U.S. But we are on the storage side, which is storing the energy. That is growing between 50% and 70% in the U.S. year over year, and we are also in different other clean energy products apart from solar. To explain that it's not rooftop solar that our main piece of business is in. The other pieces actually seeing significant growth.
Okay, fine. Thank you very much, and all the very best.
Hey, thank you, Rahul.
Thank you. The next question is from the line of Meet Jain from Motilal Oswal. Please go ahead.
Hello, sir. Thank you for the opportunity and congratulations for a very strong set of numbers. My first question is regarding our end user mix. As we can see, our initial segments this quarter has seen a very good jump. Can you elaborate on that? Which segment or which product category in which geography have you seen such kind of growth? My second question is on receivable days. Is this a passing kind of increase like a normal operational, or there is some kind of delay in receivables? Thank you.
Let me address the first part of it. We are seeing growth in multiple industries. Because we are well diversified, if one industry slows down, it doesn't affect us as much. We've seen a very strong growth in industrial. Okay? We've seen a little bit of slowdown in communication. That doesn't mean that the whole thing is slowed down, where it's coming next quarter or the following quarters. We are seeing good traction in industrial, mobility, and the clean energy sector there. In Q3, if you look at clean energy, we have grown 53% year-over-year. Mobility, 10%, and industrial, 57%.
Onto the second part of the question on the receivable days. This is more a temporary phenomenon. We were maintaining our receivable days around the 80 days mark, which is what we even saw in September 2024 quarter. What we see as 94 days in December 2024 is more a temporary phenomenon. Like we said in the opening remarks, we are confident of reducing our overall net working capital days by 10-15 days as like what we had guided for the beginning of the year.
Understood. One more question on our manufacturing shift. Right now, we are almost 88% more manufacturing in India, and earlier when we used to have almost let's say 25%, 30% more manufacturing in U.S.A., our pitch was making, made in U.S.A. will be a thing which will need some substantial value addition in the U.S. Is that thing still valid because majority of the manufacturing will be shifted to India and there will be very minimal manufacturing. So a client in the U.S., will they see any impact on this because of that?
Meet, I don't believe there'll be an impact. The way we look at it is the customer has got both options. He can pay a higher price in the U.S. if they want to do it in the U.S. But today, with India's emergence as EMS location, we are seeing customers come directly, rather than what it was 10 years back. You needed to have a stop in the U.S. and then come here. We are seeing customers come directly and start production here. But there are certain type of products which are large in nature, which we intend to continue making in the U.S., because the transportation cost it's not affordable to make in India. Did I answer your question, Meet?
Yes, sir. Thank you. On the margin side, we did almost 12.3% kind of margin this quarter. What will be our sustainable margins going ahead? Will we be able to achieve this? We see increasing operating leverage also, and when we say our gross margin will be in the range of 30%-35%. Can we say this margin to be sustainable, or even if improvement is possible, a sustainable margin of 12.12% will be good assumption?
I think that's a decent assumption. We always strive to do better, but for the sake of this call, I think you can assume it will be close to that.
Thank you. Thank you so much. All the best.
You're welcome, Meet. Thank you.
Thank you. The next question is from the line of Praveen Sahay from PL Capital, Prabhudas Lilladher. Please go ahead.
Thank you for the opportunity. The first question is related to the 25% guidance over 22% to 24% of our growth. That tells that the 40% to 48% of our growth for our Q4 you are expecting. So can you give some more color on from which segment or the order book you have in place which led to a significant growth in the Q4?
Thank you, Praveen, for the question. We are confident of doing this, and it is a broad-based growth as you have seen in the last two quarters. To remind you, a year back, we were saying customers had slowed down in the U.S., so a lot of our industry business had slowed down across industries. We are seeing a lot of that come back not only at the present levels but better than the present levels. And some new customers will also start this quarter. So we are fairly confident if you are looking for that.
Related to that, for a quarter, definitely there is some up and down in the contribution. But one in the opening remark you had mentioned related to the auto, you are focusing on the volume product and motion control system you are getting an order. So, can we assume that auto is going to be one of the big drivers for FY 2026 for your revenue?
No, I wouldn't completely. It's one of our sectors, okay? It is a part of what we do, but we are doing a lot of the auto for export. So it's not a margin strain. It will be like rail or air. It will be one of our sectors. Our business is not based on auto. Auto is just one of our sectors.
Okay. So you'll be able to maintain the contribution where you are even after all this?
Yes. Very much so.
Yeah. Related to the Chennai plant, the phase one has been completed. So how much is the contribution so far you had received from the Chennai? Like that started contributing in the revenue, or we will see the major revenue contribution from FY 2026?
The export plant is fully operational. We are already starting to see revenues. That is why we always said that year-to-year for a couple of years, we need INR 40-45 crores of CapEx. Today, explained the numbers to you. This revenue from this plant is only going to increase. That is why we are confident even if the rate of growth is higher, we can meet that with our capacities.
Two questions. Last one is if you can give any color on your order book, domestic and international, and reason for increase in other income. Thank you.
On the first part, the order book proportion also is very similar to what you see in the revenue proportion between 45% and 55%, what we see on India and U.S. That is on the order book. The second part on other income, one component of that is the returns that we have generated from our investments. The second component is on the Forex income.
Okay. Thank you. Thanks a lot. All the best.
Okay. Thank you. Thank you, Praveen.
Thank you.
Thank you. The next question is from the line of Dhananjai Bhagarodia from ASK. Please go ahead.
Hello, Bhagarodia.
Hi. Congratulations on very good set of numbers. I just wanted to understand now, obviously, our benefit is that we are present globally in terms of we have a good facility in U.S. Are we seeing any intake in terms of new clients coming in, or how is the pipeline that could see that as a factory which we have ample capacity and which can ramp up significantly? Any thoughts on how that's coming along?
Thank you for your question, Bhagarodia. For us, U.S. is always a beachhead. We need it to bring business into India. Our goal, 88% of what we do delivers 15% EBITDA and a 10.2% PAT today.
The best business for us is to have U.S. clients we can make in the U.S. But to make sure that they come directly, if you have a factory in the U.S., that eases the process because there are multiple ways customers look at because they have service centers in the U.S. itself when they have changes or when they need something expedited. So it is just a plus one. Our goal is always to make in India, but make in India for the world. And saying that, our India business, which we technically got into two to three years back, is starting to pay dividends. Our order book as well as our production will increase.
Okay. So and-
Dhananjai, you are still there?
Hello? Hello?
Yes.
Are you all seeing, now with the customer interaction, now Trump has come in your word. Are you all seeing a lot of customers who are coming in who wanted to diversify from other regions to U.S., because no one wants to lose sales. Are we seeing a big uptick in that in order pipeline?
Yeah, we're seeing a lot of activity. Actually, we have seen a lot of activity of customers moving products from Mexico to us. That's only because we have a factory in the U.S. In the sense not to U.S., but directly to India. Okay.
Okay.
There are some. They look at the risk profile, which country to be. The U.S. is expensive. We move to India. We are seeing some of that activity. I think that will replace for us also.
Okay. How should one look at U.S. in terms of? Or how should we look at our U.S. segment as growth? How much growth could we look at that? Or is it too early days right now?
Yeah, because with Trump, you do not know what can happen. We are there in both locations. If a customer wants to make in the U.S., he makes with a higher price. Our goal is to move that to production in India. I think we are covered both ways. If any of the tariff or anything come into play, I think we are very much ready for it either way.
Yeah.
If any of the tariff or anything come into play, I think we are very much ready for it either way.
Okay. And any other risks we are seeing along those lines?
We don't see anything as of today, and it is a positive time in the evolution of our company. What we've been kind of telling over the last six quarters is we slow down, and last two quarters we've seen growth, and we will see the same growth for the midterm period also.
Okay. Fine. Sure. Thank you, sir. Thank you so much. And best of luck.
You're welcome.
Thank you. The next question is from the line of Renu Baid from IIFL. Please go ahead.
Yeah. Good evening, team, and congrats for the good performance. My first question is on inflows. I see broadly inflows have been status for last couple of quarters, and order backlog is in INR 1,400 crore range. So how should we look at the execution timeline of the orders in hand after the upward revision in revenues for FY 2025? How does the growth pattern look at this point in time based on the order inflows and pipeline that we have for FY 2026? That is the first question.
Thank you, Renu, for your question. So like I said in my opening remark, for the 12 to 14-month period,
which we have confirmed POs of INR 1,594 crores. For the 14 months to three years, we have got INR 1,111 crores, which is a year-over-year increase of 32% on the second. We do not count anything. We have contracts for 15 years in certain cases. We do not count those contracts in these numbers. So we are looking at a short-term to midterm picture, where executable orders are there, and we intend to increase this. So there is a clear revenue guideline that this is there and increasing as we speak. For year over year, we have seen a 35% growth, and we will continue to see that in the coming quarters.
Sure.
Yeah.
Second, will it be possible for you to share any updates with respect to where are we in terms of completing the prototyping and pipeline for of new products with our large U.S. clean energy customers there, be it Lunar Energy or Narca. Any updates on how are we doing on the ramp-up with them?
Yeah. So Keshav, I think in our lives, we are past that. That's a small part of what we do going forward. Two years back, it was a big part. But to say that, we have started production.
Okay. And you're seeing the ramp-up as scheduled or as planned, or it's slightly softer?
No, I think as per plan, but we have taken a very conservative number on it.
It is progressing as planned. In the last call, we had mentioned that in Q4 the commercial will happen, in Q1 is when the ramp-up is going to start. It is progressing as per plan.
Got it. Lastly, within the autos, would it be possible for you to share what are we doing to improve our exposure to the EV portfolio and simultaneously any investment in R&D to step up capabilities on this side?
We are looking at as one of those sub verticals, like an aero or a rail. It is not a do-or-die for us.
Yeah.
We are looking at it globally. It is going to be just not EV. We are in the, what we call, the normalized engine also. It is just-
not EV related, especially outside India.
Got it. Thanks much, and best wishes, team. Thank you.
Thank you, Renu.
Thank you. The next question is from the line of Chirag from Keynote Capital. Please go ahead.
Yeah. Thank you for the opportunity. Sir, I just want to know that as we are growing at a high double-digit rate.
Yeah
I just wanted to understand what is our current capacity utilization? What are our CapEx going forward as we might be already reaching INR 300, INR 350 crore top line on a quarter ended?
Chirag, I think we have enough capacities that we've always said that we have planned this for doubling our growth in three years. So we're not too concerned on the capacity. Of course, there are some issues here and there, but it's all solvable. Mostly it is how fast we can get space organized. And we've always said for the next couple of years, we'll need a CapEx of around INR 40- INR 45 crore, and we are maintaining that because we always believe that we should operate in a, I'd say, terms of 8%- 10%. That's always been our goal.
10 times.
Yeah, 10 times, sorry. 8 to 10 times.
Right.
Any further question?
I got that. As we are almost reach a cash flow company, which is going to be almost 100 crores cash flow on annual basis. It would be just 50% of that would be into CapEx, and another 50% we are keeping it for some kind of inorganic growth, or we are going to provide some dividends to the shareholders. Any thoughts on that?
My thought on that is very clear. We are hoping to see some substantial business. We are hoping, okay? I am not saying we have. We need the cash at that point of time, okay? We hope that it comes through in the next year or so. We still maintain the CapEx will be INR 40 crores to INR 45 crores a year at least for the foreseeable future. But if something substantial breaks, of course, we have got to look at it differently.
Fair enough. Just one clarification you have also given to the earlier participant, I might have missed it. But once the second phase of the CapEx is getting completed, what kind of revenue we can actually expect at optimum utilization?
Like I mentioned, we build up buildings ahead of the business. Right? What we're doing is this building will be utilized nine months from now. There's a lot of business coming in, so we just need space to operate. We are building a building and deciding what to put in there 3- 6 months from now. We are always ahead by 9- 12 months.
Fair enough. And sir, as our revenue from box build is inching up again to 50%, if I am not wrong, can we expect that the margin from current level can even go further up as revenue from box build improves?
I think our commitments on margins, of course, we are pushing for higher box build and more complex box builds. We'll strive towards that, but we want to guide low.
Okay. Last from my side. Sir, as you just mentioned in your initial comments that still the U.S. plant is still making losses on PAT levels. Any clarity on that? Because as you said, new orders and new order book is coming from the U.S. at this moment, and there are a few of the products that cannot be built over here. The larger products have to be built in U.S. only, right? What is your guidance towards this? Will it become PAT positive in the next year itself?
I believe it could, but it is also an insurance policy for us. Right? If there is something which the political situation drive towards U.S., we can always make some of the products in the U.S. I think we stand in good ground in that sense, that the business does not move anywhere. In case there is anything coming up, we feel very good having that facility there. Today, as the losses are reduced, I think it is in a state where I think in the next 12-18 months, you could possibly see some positive numbers out of there.
Right. Just last one to squeeze in. Is it fair to assume that we have almost reached a monthly order book intake of INR 125 crores- INR 130 crores now?
Monthly order book intake, yeah, it is INR 350 crores- INR 400 crores. You are correct.
Right. Fair enough. Okay, sir. Thank you.
You are welcome.
Thank you. The next question is from the line of Vineeth, an individual investor. Please go ahead.
Hello.
Hello, Vineeth.
Good evening, sir.
Good evening, Vineeth.
I just want to understand on our subsidiaries, how they have been structured, like what is the work we are undertaking in our subsidiaries as the Sienna and how is the business flow over there? Could you please throw some light on it?
Could you repeat it? I did not hear you really well in the beginning. I heard subsidiaries.
I just want to understand on this subsidiaries part, how are we positioning them? I see some design elements in the Sienna ECAD division.
Yeah. If you look at it-
Could you throw some light on that?
Okay. ECAD, we all operate as one subsidiaries for a reason. The Sienna ECAD is a design company where we do design as a service. Sienna, which is in the U.S., is our U.S. company, which is a 100% owned subsidiary, which we do production in the U.S. And ATS is where we do our metals and certain other products which are not PCB related. Did I explain-
Yes. Are we looking at any chip design sort of ventures from these subsidiaries going forward?
Yeah. In a lot of cases we do design, but we don't create the IP. We create the IP for the customer for our service fee.
Okay. Any plans in the form of to this into this venture design IP, owning the IP?
Sometimes it's very counterproductive because, let's say we are doing five different type of inverters for the sake of argument, for the best guys in the world, and if we have our own inverter design, the other five will not stay with us. We are a true manufacturing company, and we do design as a service. We still have 150, 200 people in design, but we design products for customers with the hope that manufacturing comes to us.
Okay. Thank you. That answers my question.
You are welcome, Vineeth.
The next line of question is from Sumit Kumar. Please go ahead.
Yeah. Hi, sir. When talking about Avalon, say industry is growing at 30% CAGR. What are we doing to outperform the industry when we see the diversification, we have a different diversification across industry we have a presence. We are also focusing on domestic side. What about the guidance and the growth we are talking about? When we see the other companies, some companies are growing more than 40%. What is our aspirational number for the growth and what are we doing for the higher growth? In which segment we are focusing? Where we are lacking? Can you talk on that?
Yeah. We always have said that we are not going to do growth at all costs. We are going to do profitable growth. In the sense, we are not going to sign businesses for the top line. Okay? That is a very clear mantra and goal for us, and we have maintained that over the years. If we wanted to solve the top-line problem, there is enough business out there at lower margins. That is why we are not in the consumer space, that is why we are not in certain spaces where we cannot achieve that. In the longer term, we will continue to do that. And we believe that we can grow at a faster rate, in our own business, which is the more complex, the more mission-critical, the more difficult to do, the more effort. And that has been our goal always. We have not changed anything.
There is enough business out there to cater to that. Did I answer your question, Sumit?
Yeah. Let me see, because we have seen through FY 2024 the growth, and 2025 onwards, we have seen the recovery. For that, what are the risk mitigation? What are the diversification we are thinking of? We have a higher contribution of export now focusing on domestic. In that, we have seen that clean energy is not doing good in U.S., our growth is muted. If this kind of scenario is not going to arise in future, what are other segment we are diversifying?
Sumit, it is correct that if that is okay with you, clean energy, which is 22% of the business, grew 53% year-over-year.
Okay.
Okay. Our growth is going to come from sectors. There are a few couple of industries we are entering into, which we will talk about a few quarters later, okay? Which we are specifically targeting. Again, the same business model as we have today. I think there are subverticals in the five verticals we have, and we are very confident that things will be a different set of growth rate than what we have today, in these five verticals.
What about railway? How things are going on the railway side?
Railways is a good part of our revenue, and a lot of that is in India, and we are seeing tremendous growth this year as well as we are going to see more next year. We have added a few more products added to our railway portfolio which I think, as a country, as India, as we grow, we are going to see a large pattern of growth and complexity.
Okay. Thank you.
Thank you, Soham.
The next line of the question comes from Deepak Krishnan from Kotak Institutional Equities. Please go ahead.
Hi, sir. Hope I'm audible.
Hi, Deepak. You're perfect.
Yes. Congratulations on a good set of results. I will just add more from the previous participant here, sir. You said three levers of growth. I think first, recovery of the existing base, that will definitely come through and there could be further growth there. Further, in terms of incremental growth-
Deepak, you sound a little bit muted. Can you repeat the question again? There was some disturbance.
Is this better now?
Sorry about that.
Is this better now?
Yeah. It is much better now.
Yeah, just wanted to sort of understand the increment.
Deepak, are you there?
Okay.
Deepak?
I think his call got disconnected. Should I promote
Okay.
Next one?
Yeah, go ahead.
Thank you. The next line of question is from Bhoomika Nair from DAM Capital Advisors . Please go ahead.
Yeah. Congratulations, sir, on a good set of numbers and strong growth in the current quarter. Sir, just wanted to get a sense in terms of the new clients and the order intake that we are seeing. Which areas, if you can talk about which are seeing a strong scale-up from an end user perspective, how large are they? If you can give some color in terms of that aspect, sir.
Hi, Bhoomika. As usual, you ask the most difficult questions, but I will try to answer it as best way possible. See, the key part of it is export is back. That is where we were struggling for two, three quarters, and that is where our business was. With that, the India piece is growing. So, we see a broad-based growth, especially the industrials have done very well in this quarter.
Will continue to do well in the following quarters. But as we target to have 25%-30% in each of these verticals. So what you are seeing is, in India, you are seeing a lot more of the mobility that is per se rail business and the air business coming through. Industrial is a 50/50 mix. The order intake is very similar to what we are seeing in the past. It is a healthy mix between the three. Communications, you may see a bigger upside in the future. Medical, of course, we do not focus as much now.
It is going to be split 50/50. Our goal has always been to get the company to be 50% in India and 50% outside India. Because if you go back three years, we were 70% outside India and 30%. So we will never be caught in the wrong foot like what we were caught 12, 18 months back. So, in that sense, it is a broad-based growth. We have, like I mentioned before, a couple of verticals which are exciting for us. As we get deeper into that business, we can talk about it.
Sure. That helps. The other aspect is, with this whole administration change in U.S., where you obviously have both offerings, right? We shifted a lot of manufacturing to India over the past year and a half. Are you seeing some of the clients rethinking their decision, wanting to come back to U.S. manufacturing or anything of that sort? You are sensing they might not have yet taken any decisions as such, but are you sensing any of that kind of conversations with your clients?
In fact, we're seeing the opposite of that.
Okay.
The clients with the move, now they're moving other products directly to India.
Which is a good sign. The way I look at it is in case there's a tariff or something put on it, we can always make it back in the U.S. at a higher cost. Okay. Of course, the charges will go up. But I believe that, the move to India is true.
We have convinced these customers that we can make in India what they were paying to do it in the U.S. And we have done that, because we are lucky that we did that a year before the election, because right now we do not know which way it is going. Every day it changes, right? We cannot make a guess, our customer cannot make a guess on what is happening. But the interesting piece for us is, even the places close to the U.S., we are seeing some traction with business moving to India. To us.
Okay. That is interesting. Even the new customers are happy to just directly move to India rather than wanting to have a production in U.S. Would that understanding be correct?
I would say, by far that is always been our goal, to make it in India. If the guy wants to start there, they are more than happy to do it and transition out in six months to a year, however it feels like. But certain products cannot move. Like the quasi-military stuff which we do cannot move outside the country. So we will focus on that, and I think there is a huge potential there, too, to make stuff in the U.S. and we look at it from that context.
Sure. The other aspect is, you have scaled down on U.S. quite a bit. You have moved to India. We are seeing clients coming to India as well. But the U.S. business continues to be a bit of a drag. Had it not been for U.S., we would have actually reported a much better margin profile. How are you seeing that loss kind of tapering down, given that there is not really much of revenue momentum that is happening and the negative operating leverage in U.S. is really hurting us. Not materially as it was perhaps a year ago. It is obviously come down dramatically. But where do we get into a break-even situation or some bit of a profitable situation in the U.S.?
So end of the day, in our minds we are very clear that U.S. is our beachhead.
A lot of the activity, a lot of the conversations happen there. And if they want prototypes, we can still do it there. So at this point, we believe it is absolutely essential to have that front end, especially when you're dealing with very complex products where you have engineering interactions. Because you have to understand the 12-hour time difference. To convince an engineer to talk to somebody in India is always a convincing story, right?
Sure.
And we have teams of engineers, whether it's 18 or 20 engineers involved in a project from the U.S. and from our side. That actually helps in a big way. That's probably the most positive thing we have because 25% of our business is in the U.S., and that is support structure-
Right
with. So we believe that even if there's a small loss on that and we hopefully we break even, our goal is to make it profitable.
And we will strive towards that.
Okay.
But it's at a lower cost now.
Yeah. So, more like one can possibly view it as perhaps a small cost center to get the volumes or get the customers in, perhaps.
Absolutely.
Got it. Perfect, sir. Thank you so much.
Thank you. The next line of the question comes from Karan Sandal from New Vision. Please go ahead.
Hello. Hope I'm audible. Hello?
Karan?
Hello. Hope I'm audible.
You're audible. Please go ahead.
Yeah, audible.
Yeah, great. Congratulations on the set of numbers. I have a few questions regarding, like we talked about reducing our networking capital for the full year. Would it be predominantly through decrease in receivables?
Suresh, you want to answer that?
It's going to be a combination of all three aspects. We are working as a team on receivables, payables, as well as inventory. Yes, we are confident on reducing the accounting casualties from where we are today to March 2025.
Okay. Also, could you get us the nine monthly figure for the cash flow from operations?
Approximately it will be negative INR 10.6 crores on a nine-month basis.
Okay. Would we be trying to convert this to positive for the full year? Or would it stay negative? Yes. Okay.
For example, we had $30 million of positive cash flow operations in the first quarter.
It is just in this quarter with the increasing receivables we saw that. With the increasing sales and a positive operating leverage, I think in the coming quarters we should start seeing that.
Okay. There's no challenges in collecting receivables, right? It's just the sales have increased, that's why it has increased. Am I correct?
Yes. You're absolutely right. There are no challenges. These are very large entities, kind of like Fortune 500 companies. It is just a temporary phenomenon which was collected in the first fortnight of January.
Understood. Also, you talked about the businesses that we do in the subsidiary. Any specific segments that are covered only through subsidiary or is it all interrelated within the company?
We operate as a single group. Just for practical purposes, we have different subsidiaries. But the way how we operate, it is a single group.
Okay. One last question. If you could talk about the coverage opportunity that we are doing with our vendors. When are we expected to start field trials or bid for those tenders? Any progress on that part, if you could, anything you could highlight for that?
Yes, Karan, this is KB. So we are in different forms of field trials now. Some products are being built and the trials are customers approved by the Indian Railways. And hopefully in stage 2 or stage 3, we should see a good part of business coming to us. So the trials are going on.
Okay, great. Thank you so much, and all the very best.
You are welcome, Karan. Thank you.
Thank you. The next line of question comes from Jeetu Panjabi from EM Capital Advisors. Please go ahead.
Hi. Thank you. The numbers are great. Thanks so much for that. I have two broad questions. in the backdrop of what has been happening in recent weeks and since Trump has come in, there seems to be a fair amount of global distrust that has come up. My question really is there any change in the tone of discussions of customers when they are engaging with you all? Is there any sense of caution, or do you think that they would think about the business in any different way?
No. See, because it is the second coming of Trump, most of America is used to the first coming. Okay?
Okay.
He did something very similar, and it's what he, as a personal opinion, is more of a negotiating tool more than trying to get things done. But of course, from a business, from an Avalon standpoint, if the patriotism, of course, plays out in America, you have a choice to make it in the U.S. Or you can make it in India, but of course, cost prevails. And the first preference is where it is cost-effective. Every meeting starts with talk of Trump. But to us, it's what you read in the newspapers today and what will be tomorrow will be two different things. You can't plan for that.
Mm-hmm. Okay. Are you doing anything different on the back or you just say status quo and business continues?
Business continues because, see, these changes can only happen over a period of a year or two, even if things are transferring from XYZ to one location to another. It takes time because our products are complex. And most customers would not want to change that because some of the lifetime of our products is 5 to 15 years. So it is not in their best interest to start moving things just because of a change in governance. So we believe in the longer term, the customers who are here will always be here. If any customer wants to make in the U.S., they're more than welcome to do that.
Okay. My second question is, you've given a guidance of 22% to 24% going next year, which is actually a great number. So thanks for that. But I have a question. In a scenario where you say, "I want to step on the gas and I want to grow at 35% and not 24%," is there a way to get there? Does the opportunity exist? Do you think you can execute to that opportunity? And is there a model to sustain the business model at a higher growth rate?
Absolutely. You have seen the 30% growth rate already in the last two quarters, and we think it will be a little bit better this quarter. We are confident. We have set up our operations, the leadership, the factories, to have this sustained higher growth. Okay? For the next 12-18 months, we do not anticipate having an issue with that. Of course, we do not know what we do not know. But as it stands in the existing type of business, we are very confident.
Oh, okay. Excellent. One last piece, if I may sneak in, is in the context of these 25%, 30%, or whatever number you would grow at, what will be the toughest part of the business to manage?
In that context, on the technology side, it is broad-based because one, the startup of the businesses will take time because there is a lot of engineering content. It is not step and repeat. Some of our products are INR 1 crore-INR 2 crore sellable by one product, right? Some of them are fairly complex in what we do. So when we plan for a cut-in in four months or six months, that may go to eight months. Both sides, there is a lot of engineering involved to cut in the product. So that I would say is trying to time the pieces of business which are coming in, would be difficult because of the cut-over, which is they are transferring from different parts of the world.
They are introducing a new product, and we have to be very, very engineering intensive.
Okay. Good wishes. Wish you all the best, and looking forward to great performance next year or two or three. Thank you.
Okay. Thank you, Jeetu.
Thank you. The next line of question comes from Ashutosh Agarwal from Northbridge India. Please go ahead.
Hello, sir. Is my voice audible?
Yes, Ashutosh. Perfectly audible.
Yeah. Firstly, congratulations on very great set of number, and I am thankful to you being an investor since IPO. Company has done very well throughout this period. Firstly, I want to give my gratitude and thank you to you for all the efforts.
Ashutosh, you are welcome, and we try to make our goal is to make shareholder wealth creation, which needs to happen over a period of time, and it is not instant. Over a period of time, we are going to create that. And thank you for being an IPO investor and staying with us through the course.
Yeah. Thank you so much, sir, for kind words. Just that I have two queries. Firstly, as a part of long-term vision, can we have a ballpark number for revenue or PAT for the next three to four years?
See, we have aspirational goals in the sense what we want to be, but we want to kind of get closer to that and announce things or give guidance. We have been caught on the wrong foot in the past couple of years. I think from a sense of the future, the growth is there. We believe that India is getting accepted and there is a push to America, where we are all in both locations. We do also operate in sense of sales activity in the other geographies also, which will grow over a period of time.
Okay. In terms of number, can we have a ballpark figure? Are we looking to grow at maybe 25% CAGR, revenue and PAT-wise? Is there any margin expansion probability? Just wanted to take an idea about that.
This is Suresh here, Ashutosh. We are working on our budget for now. We will be completing it in this quarter, and then probably during the next quarter, we will be able to give more details. But on your question on revenue growth, I think the industry is growing at a higher pace. We just started our growth momentum. It is only going to get better, and we will build stronger from there. In terms of margins, with the scale operating leverage effect, we will keep continuing to impact the spot treasury, which is what we saw in the last two quarters. Expect to relatively the same the coming quarters.
Okay. My next and last question is, with respect to, I know many investors have already discussed this, that after Trump, what is the impact? We are seeing a lot of positive and negatives from the EMS industry as a whole after Trump. Do you feel that there is a substantial or maybe a reduction in orders or a reduction in business with the U.S. after coming of Trump in the EMS industry? Or do you feel that it is just a social media hype and practically there will not be a major disruption?
Yeah, I think, see, both India and U.S. stand to gain out of this. Unless Trump says something else tomorrow, which I don't know about. But for us, we are seeing both sides. We are seeing a lot of activity, and we always said previously, our goal is to do 50% in India and 50% of sales as export. So we maintain that, and it counters each other. Because last time we went through a downturn, though we are diversified, we were a lot U.S.-based. Today, we have come out of that, and we have a combination of India, U.S., and of course, a few other countries also.
Okay, sir. Thank you so much for answering the queries. Looking forward for more longer-term relationship. Thank you.
Thank you, Ashutosh, for being a shareholder and being with us from the IPO days.
Sure, sir. Sure. Looking for long-term relationship. Thank you.
Thank you.
Thank you. I would now like to hand over the conference over to the management for closing comments.
In summary, we are seeing strong signs of growth, which we expect to sustain and accelerate in the future. I would like to thank each of you for being. I am sorry. I am sorry. We are encouraged by the robust support from our investors. We are committed to reinforce the trust that our investors have in our company. I sincerely appreciate your steadfast support and confidence in Avalon. Together, we are set for a remarkable journey of profitable growth and success. Thanks to everyone attending the call. Thank you very much.
Thank you. On behalf of Avalon Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you.