Ladies and gentlemen, good day and welcome to the Azad Engineering Limited Q1 FY2026 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve a risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rakesh Chopdar, Chairman and Chief Executive Officer. Thank you, and over to you, sir.
Thank you so much. Good morning to everyone. Welcome, and thanks for joining us today on the Q1 FY2026 earnings call. On this call, we are joined by Mr. Murali Krishna, Managing Director, Mr. Vishnu Malpani, Whole-Time Director, and Mr. Ronak Jajoo, CFO and SGA, our Investor Relations Advisor. Results and presentations are uploaded on the stock exchange and the company website. I hope everybody had a chance to look at it. I am glad to update that we started the year on a promising note with our best-ever financial performance and delivered standalone revenues in INR 135 crores, looking at a year-on-year growth of 36.7%. This robust growth was accompanied by margin improvement in both EBITDA and PAT. EBITDA margin grew from 33.6% in Q1 FY2025 to 36.1% Q1 FY2026.
Similarly, PAT margin rose from 17.4% in Q1 FY2025 to 22.3% in Q1 FY2026. This growth reflects our continued efforts across multiple areas, including capacity expansion in the new plant, qualifications of new components across business verticals, and operational excellence, among other initiatives. With a very strong order book position of INR 6,000 crores plus, we are confident that we will continue to maintain this trajectory. The energy sector, which is our oldest business segment, constitutes the largest part of the order book of approximately around $400 million. That is around INR 3,400 crores. This is followed by the aerospace & defense at $200 million. That is around INR 1,700 crores. Then oil and gas at approximately $100 million, that is around INR 850 crores.
This order book provides us with strong revenue visibilities across all business segments. In anticipation of this growing demand, we are gearing up with our new manufacturing facilities. As you are well aware, we have already inaugurated two of our dedicated lean factories in March and April 2025. Overall, in the next 12-18 months, we plan to have a total of eight dedicated lean manufacturing facilities, including one state-of-the-art world-class forging plant at Tunikibollaram, Hyderabad. However, it has been challenging to match the growing demand with our facility to ramp up. The team at Azad has done a great job handling the situation, including, but not limited to, facility readiness, equipment order, deployment and certifications, workflow firing and training. All of this while ensuring customer deliveries and output of the company are on target. It is not easy.
Of course, it's challenging, but Team Azad is doing a great job. We anticipate to similarly address these challenges to continue for a couple of upcoming quarters. Towards this expansion, we plan to deploy a CapEx of INR 450 crores during FY2026. Also, very happy to share the two subsidiaries that we acquired last year are now EBITDA neutral and should contribute to growth and profitability from FY2026. Guidance, we are progressing with our strategy of positioning the company for sustainable differentiated growth and reiterating our top-line growth guidance of 25%-30% during FY2026. Now I hand over the call to Mr. Murali Krishna Bhupatiraju, our Managing Director. Thank you.
Thank you, Mr. Rakesh Chopdar. It is heartening to see broad-based growth across all sectors. While we remain focused on scaling operations, we're equally committed to driving greater efficiency across our value chain, which is reflected in our growing margin profile. Azad being a key supplier in global supply chain for the OEMs, we see a sizable market opportunity from our end-use industries. Energy OEMs are making unprecedented investments with the need for reliable power, infrastructure, and decarbonization. We also see a demand for turbines in industrial applications as well as a replacement market. Likewise, the aerospace and defense segment is also witnessing strong demand, which is driven by increased commercial aircraft orders, fleet modernization programs, and heightened defense spending. Our existing order book resonates with these growing opportunities. We are actively working with existing and new customers to enhance our wallet share in this space.
Now, I hand over the call to Mr. Vishnu Malpani, our Whole-Time Director, to take this further.
Thank you, Mr. Murali Krishna. The growth trajectory demonstrated by Azad thus far echoes our commitment to high growth while achieving operational excellence. Focusing on our standalone segment-wide business performance this quarter, let me share with you the contribution from energy and oil and gas segment for us in Q1 FY2026 is at INR 109 crores, contributing to approximately 81.2% of the total revenue. This growth represents a healthy 41.7% year-on-year increase, which is largely on account of capacity addition. With significant values of orders in hand that was shared by Mr. Chopdar, we continue to see a healthy growth from here in the years to come.
Talking about the aerospace and the defense segment, this segment contributed to 17.1% of our revenue during Q1 of FY2026 at INR 23 crores of revenue, representing a 26.3% year-on-year growth. We are upbeat about the growth in this segment with the recent order wins, capacity expansion plans, and also the fact that we are moving from component manufacturing to assemblies and sub-assemblies in the future as well. We are confident about the upcoming quarters. By taking small, steady steps now, we can build momentum in FY2026. These efforts will lay the foundation for a significant growth in the future, allowing us to progress from small steps to larger leaps and eventually achieving great strides. Lastly, I would also like to update that our credit ratings have now been updated from A-minus to A by CARE Ratings.
We view this performance of quarter as a strong endorsement of our operational resilience, commitment to excellence, and it positions us well as we continue to scale new heights. Further, I now hand the call over to our CFO, Mr. Ronak Jajoo, to further talk about our financial performance. Thank you.
Thank you, Vishnu. I would like to begin by sharing our standalone financial performance for Q1 FY 2026. Let me take you through revenue from operations. Revenue from operations stood at INR 135 crores, reflecting a 36.7% year-on-year growth compared to Q1 of FY2025 and 8% growth over the Q4 of FY2025. This growth was primarily driven by DSPS plant, which was operationalized in Q4 of FY2025, and it started contributing to revenue from this quarter. On the consumption side, our gross margins has improved by 3.4% on year-on-year basis and remain stable compared to last quarter, largely due to product and segment mix. Employee cost has increased by 60 basis points during this particular quarter. This is attributable towards the onboarding of key personnel as we prepare the organization for the next phase of growth.
The EBITDA for the quarter came at INR 48.5 crores, making it 46.8% growth year-on-year basis from INR 33 crores in Q1 FY 2025. Our EBITDA margin guidance remain continue to be in the range of 33% to 35% depend upon product and segment mix. We are pleased to announce that we have operationalized the first facility at Tunikibollaram plant, with three additional units scheduled to be go live during FY2026. As a result, we expect the depreciation to step up and projecting to be INR 48 crores in depreciation for the full year FY2026. Other income saw an increase during the quarter, primarily from the treasury income because of unutilized QIP funds. This is expected to taper down in coming quarter as these funds are deployed for capacity expansion.
Profit after tax for the quarter is still at 30 crores with a PAT margin of 20.88%. Here, I am taking denominator as a total income for calculating the PAT margin, up from 17.3% in quarter one of FY2025 and 20.29% in quarter four FY2025. Lastly, I am happy to share that both Azad Prime and Azad VTC has turned EBITDA neutral within just a few quarters of operations, and we are confident they will become PAT positive by quarter four of FY2026. With this, we conclude our presentation and open the floor for question and answers. Thank you.
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 their touchtone 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, in order to ensure that the management is able to take questions from all participants in the conference, please limit your questions to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. We will wait for a moment while the question queue assembles. We have our first question from the line of Amit Dixit from Goldman Sachs. Please go ahead.
Yeah, hi. Good morning, everyone, and thanks for the opportunity. Congratulations for a very good set of numbers. I have a couple of questions. The first one is essentially on the domestic aerospace and defense segment. If we see the focus of the government is now for the indigenization of the engine, that would be probably fitted on AMCA, the co-production of Tejas Mark 2. There have been funds allocated for Kaveri as well. So, in light of these developments, just wanted to get your thought on the potential that Azad sees in the domestic market, particularly aerospace and defense. That is my first question.
Okay. Hi, Amit. Thank you so much.
Welcome.
On the Indian defense, Azad's focus is mainly on the niche components of the engines, and you are right, our focus is only on the components where we can value add, and that is the first engine what we are manufacturing for the DRDO. So, our focus wish to stay here because we have to deliver 2 engines in FY2026. Once they are delivered, that opens the big door for all the programs which are live going on in Indian defense. As this will be the first jet engine to be manufactured, right, in India for this capacity. That is definitely going to open doors, and we are confident once we deliver these engines then the Ministry of Defence will recognize Azad for its efforts, and we look forward and fingers crossed.
Okay. The second one is essentially on another segment of energy, nuclear power. A lot of your customers and peers have been quite vocal about the potential of this space. Azad, as we understand, is the only company in India which is accredited by EDF.
Yeah.
Just wanted to get your thoughts on the potential that we see in both global and local market from nuclear energy segment.
Yeah, Amit. The major worldwide, EDF controls the nuclear power and there are stringent approvals you need to get from EDF in which we broke all the qualifications and we could really get there, and we are now qualified by EDF as an approved supplier globally, not just for one project or 2 projects. That has helped us get recognized worldwide wherever nuclear plants are coming up. Similarly, in India, it is NPCIL. EDF and NPCIL work very closely and definitely there is a massive, big opportunity coming up for the nuclear. Whatever power demand comes up or nuclear power project comes up, we will be the first choice. We are the only choice, to be honest today.
Okay. Great. Thanks so much and all the best.
Thank you.
Thank you. We have our next question from the line of Karan from Jetha Global. Please go ahead.
Hi, Azad team. Congratulations again on great results. I just wanted to address obviously the topic du jour, which is tariffs. We do not know how this is going to play out for sure. But if you can help contextualize for us, let us say the 25% holds, how would that, if in any way impact your business? And then, I guess the second question would be, just I guess more generally, on the order book. We have obviously started executing against a very large order book. But what would also be interesting to see is that order book growing and doubling and tripling from here. So, as you think about the drivers of what may, I think you mentioned the domestic defense side, I think we just talked through nuclear. Those could be drivers of the order book growth.
Are there any other drivers that you would like to call out or tease out that could manifest over the next 12, 18 months?
Yes, Karan, first thing, thank you so much for the question. I would like to clarify on this tariff thing. It is a big question mark for everyone in India what is going to happen, right? Let me be very specific on this part. One thing is very sure is if we have got this business now or before, right? Definitely it is before. We have competed someone and got this business. The next competition to us is China. If you talk about Azad's competition, it is in China, Europe, Japan, America, and Korea, right? These are our competitions. Now, if the business has come, I can give you an idea, from China, we are 20% to 25% competitive. From Europe and Japan we are around 30% to 35%. Japan, we are 40% to 45% and similar to the global levels where we compete them.
Today, if we talk about the closest competition, that is China, okay? We are 25% already we are competing them. China has a 30% tariff. India has a 25% tariff. The situation doesn't change for Azad. It remains the same for the customer. Still we are the only option again, no matter if another tariff goes up by 10%, 15% will not matter us, right? If China is the closest, and then Europe and if you talk about Japan or someone, they are already 40%, 50% higher than us. Definitely it is not going to affect Azad for his product line where we are competing. The global peer is what we have at the moment, right? That is one point. Sorry, Karan, I need to have your second question again. I just lost it.
Sure. Just in terms of order book growth, I just wanted to understand what the drivers of that would be. We talked about nuclear.
Okay.
We talked about domestic defense. What would be the other drivers over the next 12 or 18 months?
Yeah. So look, our focus is the facilities which are coming up, already we have order books in our hand and already commitments have been given, contracts have been signed, and we are committed for next 4 to 5 years for the certain contracts we have signed, and the preparations are going well accordingly. We are setting up the plants coming up. However, there are many more opportunities which we are discussing, and we will just pick them up as we get the right time up, right? Current focus is what we have in hand, the conversion of the setting up the plant. It's not easy to set up one massive facility, right? And such eight are going on in parallel.
You can imagine how tough the situation is for the team to handle the growth, to handle the day-to-day commitments, to handle the new facility coming up, the certifications, the machines coming in. I think next 2 quarters is what we assume that we have to just stay calm and focus on what we are doing at the moment, set this up. Opportunities are definitely lined up, and we're not going to stop here somewhere. There is a massive opportunity lining up before Azad. We'll take it at the appropriate time. We'll not lose it.
Got it. Thank you.
Yeah.
Thank you. We have our next question from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, good morning team. My first question is on the capacity addition that we have already undertaken. With this kind of capacity addition, what would be the revenue potential that we can achieve? How much more can we generate from the existing capacity that we are already having? If I heard you correctly, you spoke about roughly INR 450 crore of CapEx for this year. So, what kind of further addition would we see once that kind of CapEx number gets computed?
Yeah, thanks, Aditya. So see, again, I would like to get the same answer what I gave in the previous question what I answered, is the setup is still going on, right? We are talking about a massive facility. We are not talking of adding few machines or we are not seeing the capacity just buying the machines and putting them. These are whole factories coming up, right? So, it is a very big challenge to manage everything. However, the growth trajectory what we are seeing is the guidance what we are giving 25%-30%, definitely that is going to be maintained, right? We have to have these facilities coming up, which we see in FY2026, we stabilize with almost all the facilities coming up in next 12 months. Then we can definitely see an upside once the factories are up. Right?
So, this is where I could answer on the capacity and the growth. We should give at least two, three quarters more to stabilize everything, keeping the growth 25%, 30% together which grows in parallel.
Sure. Rakesh, the way we were kind of thinking about it earlier is that these are modular facilities. We will keep kind of making one operational after the other, ramp them up.
Yeah
and then go for the other expansion.
Yeah.
Has there been a change in that thought process wherein we want to be making operational a few more manufacturing facilities at tandem? Is it a reflection of the confidence that you are deriving from the order book? In that context, can this growth be much, much higher than 25%-30% that we are speaking about?
I agree with you, Aditya. That is why I mentioned. The 25%-30% is coming from the existing orders and as we are adding machines, as we are adding capacity. Definitely once it is up, definitely we expect a shift. Yes.
From the perspective of next year, would you be anticipating a much stronger growth than this 25%-30%?
We expect. Yes, we expect that, Aditya.
Sure. Even for this year, Rakesh, we have started the year at a good rate, and you also mentioned that you expect this kind of momentum to be continuing. But for the year as a whole, we are retaining the guidance.
Yeah
We are just being conservative and we actually are from our internal targets, we are looking at more like a 35%-40% growth, but speaking of 25%-30% only?
Yeah. Look, I have to be a little conservative, right? I should have once the facilities are up, because it's, again, I mentioned it's not a small thing what is happening here in Azad, right? And managing all together and 25%-30% is what we look forward. But definitely we all know once the factories are up, once things are stabilized, we'll definitely see a shift, for sure.
Understood. And one just last kind of follow-up on the same aspect. You've spoken about, let's say, interest returns of over one time, closer to like 1.5 times.
Yeah.
Now that we are doing INR 450 crore of CapEx, does that mean that we will have the additional level of doing maybe somewhere around INR 500 crore-INR 600 crore of revenues over and above what we are already doing? Is that the magnitude of investment that we are undertaking and consequently growth over next couple of years? Can be significantly faster, not by a magnitude of 10%, 20%, but significantly faster than what we've seen in the past?
Yeah.
Would you like me to take this?
Yeah.
Hi, Aditya. Thanks for the question.
Hi, Vishnu.
Aditya, we are looking at a deployment of roughly INR 450 crores, and this deployment would happen towards three broad areas. One is infrastructure, one is towards plant and machinery, and we are also investing in some strategic assets like forging hammers, et cetera. If you look at the overall deployment, we should be deploying anywhere between INR 250 crores to INR 300 crores towards creating capacity. When you look at a INR 300 crore investment, I would suggest that with an asset turn of roughly about 1.8, we should be able to generate INR 550 crores of incremental revenue, right? We had already delivered INR 450 crores, so this should be good to go to take us to about INR 1,000 crores. That's the right way to look at it.
Understood. From that perspective, this year possibly is the peak CapEx year, and from next year, CapEx drops meaningfully?
We will efficiently deploy CapEx looking at the demand that we are having, looking at the capacity that is needed to achieve the numbers that we have committed to our customers. It takes us back to the guidance where we are pretty confident of delivering 25%-30% that Mr. Chopdar said in the coming years.
Sure. Thank you so much.
Perfect. Have a good day. Thanks.
Thanks.
Thank you. We have our next question from line of Vikas Singh from ICICI Securities. Please go ahead.
Good morning, sir. Thank you for the opportunity and congratulations on very good set of numbers. Sir, coming back to the tariff again, you explained about the orders, we are cheaper than most of the countries, but what about the existing orders?
No, this is-
I mean to say, is there any clause which protects us for the existing orders, any tariff changes and does not impact our margins?
No. Thank you for the question. This is what I am trying to say, is we have already competed and got these contracts. It is already done. It is nothing that is going to be effective more from this. This is already we are competing them already. We are competing the whole world, right? So, we are the best cost. The next competition to us is around 20%-25%. They are expensive than us. For example, I will give you an example like, for example, China is INR 100 for a component A. Azad is INR 75 for the same component for the customer. Right?
Yeah.
China has got 30% to 40% tariff. India, they have put 25% tariff. Still, we compete. We still compete.
Sir, where I am coming from, we have, let us say, competed and got the orders already. Post that there is a 25% tariff which has been imposed. We have exposure to U.S. as well.
Yeah.
Is the additional tariff would be borne by the buyer? That is in the clause because if you have to bear that, then your margins will get erode. That is what my-
Okay. I will give you another example. Again, I take back you to 100. 100 plus, say example, 30% China is the tariff. It becomes 130 from China. 75 plus 25% tariff. Still we compete, right?
Oh, okay.
We are still at 93.
Understood, sir. Understood.
Got my point?
Yeah, I got your point.
Okay.
Yeah.
Just adding to Mr. Rakesh Chopdar's point. Also, it is important to note that our scope of production or manufacturing is FOB Hyderabad, right? So it is Ex Works and so that is why it does not impact us.
Yeah.
to that extent. Also, we need to understand that this is an ever-evolving situation for all parties in this ecosystem. So far, I think our deliveries are lined up perfectly for the next few months and quarters, and we don't see any impact as of now.
No, there is no impact. Actually, there is no impact.
Noted, sir. My second question pertains to the aero and defense segment. Now that we have already 29% in the order book, you have a long-term plan of taking it to 40%. Just from the margin perspective, would aero and defense incremental share in the revenue have a positive impact on the overall margin in the longer term? How should we look this segment increasing on our working capital requirement as well?
Yeah. First of all, the product line Azad Engineering is in is very differentiated. We don't do what this. We do only the niche. As I spoke earlier on the engines, we are the only company. We are the only company in India who's producing those engines. There's no competition to us today. It's 100% awarded to us. We don't go in such segments where we see a lot of competition or we participate in such kind of programs where we need to look at sometimes, like if you talk about the Indian Ministry of Defence requirements coming now. We don't participate everything. We participate where we can value add. So engine is a nation pride project. It's a need of the hour, and we are contributing to such projects.
It is really, really appreciable for us to be there and keeping the growth in A&D in total. Likewise, in MoD, what we are doing in India is also in the global scale. We have only chosen the products where we can really have a value add. We are very secured in whatever margins we are adding while we take our orders. That is also secured.
Excellent.
I would just want to echo Mr. Chopdar's thoughts that the way we are estimating these components across sectors, we ensure that these are not margin dilutive in nature and the blended margins of the business will remain consistent at 32%-36%.
Noted, sir. That is all from my side, and all the best.
Okay.
Thank you. We have our next from the line of Pratik Dharmshi from Union Mutual Fund. Please go ahead.
Yeah. Thanks for giving the opportunity. Many congratulations, Rakesh Chopdar and team, for a splendid set of numbers. Couple of questions from my side. On the product side, do we see in terms of new product introduction, is there a material scope for improving the wallet share and introducing a lot more products for our customers where we can do more of R&D and get through with higher share of the wallet of the customers from here? Or is winning new clients our goal, basically? How should one see it from slightly medium term point of view?
Yeah. Good question. The products where Azad Engineering plays in are very niche. Okay? That is very clear that it is very niche and it is not easy to just produce these components, right? So it takes massive time to get the qualifications approval per product, per family. Right? If you talk about the wallet share, first of all, we are on average around 2%, 1.5% to 2% of every customer's wallet share Azad Engineering is holding today. For the program which we have already qualified and approved. So one way it is going to increase the wallet share from 1% to 2% to 3% to 5%. Okay? That is one way which the facility is coming up. The other way to look at it is what to add more to add more families in qualification and all.
That is the second activity parallelly which is going on, which we are just waiting for. That is a continuous process. That will never stop. That keeps on going. Only thing is to ramp up. Once you get approvals, you have to ramp up immediately. So that is why these facilities are coming up. So we are also very curious and very excited to close all the upcoming facilities to start the production ASAP in those.
Got it. And when we hear likes of Boeing, Airbus talking about lot of opportunities coming to our side of the world in terms of their order backlog is completely full. They want to move the value chain outside the western side. Considering the large opportunity which lies ahead of us in terms of catering the global clients as well, margin trajectory from what we have been guiding, the 32% to 35%, 36% band. As more and more niche and more and more aerospace related stuff would come through, trajectory-wise, I am not talking about next one or two years, but trajectory-wise, ideally this band should go up. Is my understanding right?
Yeah.
Or how should one see it?
Yes. Primarily, we in Azad is a component manufacturers for the engines components and assemblies. Boeing and Airbus doesn't manufacture engines. They buy engines from Rolls-Royce, from GE, from Pratt & Whitney, from Safran. So our main focus is these companies. Also, we want to do a lot business with Boeing and Airbus, but not all. Not all, and we would like to enter in the niche segments also in Airbus and Boeing of getting into the landing gear systems or something, which is again niche. So again, the prime focus stays with the engines where we have already committed, we have already taken the responsibility of completing a lot of projects in this coming next 2, 3 quarters. And definitely, as you rightly said, the massive growth opportunity is already there, and we'll be going step by step.
Got it. Many congratulations once again. All the best.
Thank you.
Yeah.
Thank you. We have our next question from the line of Jayesh Shah from OHM Portfolio Equity Research. Please go ahead.
Hi. Thanks for the opportunity. My question is to Rakesh, and again, it is from the similar lines as the previous questioners. Based on your answer, do I really come to a conclusion that Azad will continue to operate in niche areas and perhaps over time will cap the customer wallet share to 4% or 5% to protect the margins? Or Azad has ambitions to really grow with each customer and perhaps become a system integrator where the long-term margins may come up to 20%-25%. I mean, at what point would you choose growth versus margins, and when would the trajectory change? Is that 5 years, 10 years down the line, or what is it?
Okay. On a lighter note, what if we have both growth as well?
Yeah, that is an ideal scenario and we will be very happy to go wrong here.
Just for your information, the contracts which are signed have already covered these both aspects.
Ideal.
Here we are saying 25%-30% growth, consistent growth with high margins. These are already captured, covered, signed off. That's the good news for everyone.
Right. Right. But when we have seen global companies like Apple, Airbus, Boeing, beyond a point, they do end up checking your bill of materials and do really negotiate and come to some kind of a cost-plus understanding, because they become as meaningful for you as you become as meaningful for them.
Okay. I'll tell you one thing. Mitsubishi, I'll not name a customer, but I'll say Japanese customer, is placing an order. We know we are 40% to 50% cheaper.
Right.
If they are spending INR 100 in Japan, we are at INR 40 to INR 50, right? While maintaining your EBITDA. I know and they know that we know they are paying INR 100.
Right.
Will they come and ask us, "Okay, reduce further?" Rather, we can say, "Okay, you want me to increase the prices further?" This is again on a lighter note, right? I do not see any challenges. That is the transparency Azad maintains with all and enjoys the customers' attention. That we are very transparent. They know everything about us, we know everything about them. I do not think we will see any such kind of thing of having this price thing. They may not challenge us or something like that, though everything is open.
I think, just adding to Mr. Chopdar's point, I think it is really about a balance that we are trying to strike. We do not want to compromise on our growth or our margins. We are trying to balance both of them simultaneously.
Yes.
If you look at our growth for the last five years between FY2021 to FY2025, we have grown at a CAGR of about 40%. If you look at our CAGR in terms of EBITDA, we have grown at upwards of 45%. If you look at our CAGR impact, we have grown at a CAGR of 60%. Ultimately for us, I think the focus has been to scale the business by improving our wallet share and keeping our margins intact or attempting to further improve margins. We are on the same path.
Thank you very much. Best of luck and best wishes.
Thank you.
Thank you. We have our next question from the line of Rakesh Roy from Boring AMC. Please go ahead.
Yeah, morning, sir. Sir, I missed it. How much is our order book, sir, currently?
INR 6,000 crores.
Sir, our order book is approximately INR 6,000 crores.
Okay, INR 6,000 crores, sir. Sir, yeah. Sir, my next question regarding, sir, now oil and gas prices is coming down. Do you see any decline in future order flow in oil and gas?
No, we don't. We've seen no impact.
Okay.
Yeah. We focus on a very niche segment, which is mission-critical and life-critical. These are essential components for the segment, and we do not see a demand drop there.
Okay. And defense business, sir, we are mostly focused on aerospace. Do you see any new product addition for other like Army or Navy in near future, sir?
I would just like to slightly correct you. We are not just an aerospace company. We are an energy, aerospace, defense, oil and gas. We focus on each of these sectors equally. That one, and we are adding a lot of products. If you look at the way we are diversifying our business and product, four years ago, 90% of our product was airfoils in energy. Today, that business is about 75%. 25% in energy, we have diversified. Aerospace and defense, we are adding a lot of new products, components. Like we said in our previous call, we are also working on nationwide contracts where we are looking at manufacturing an engine end-to-end. A lot of products have been added to our portfolio.
Okay. And sir, last question. Sir, you have guidance, sir, 25%-30% revenue growth. This growth will come from energy same, like Q1, energy and oil and gas?
Sorry. Can you please repeat that question again?
Sir, for FY2026, you have guided 25%-30% revenue growth. This growth will be supported by, again, like Q1, energy and oil and gas sector?
No. I think we are anticipating aerospace. All of our segments should be delivering one of the best performances in their history. We anticipate aerospace also to grow significantly this year, including our energy and oil and gas business also. Each of these verticals will be contributing to phenomenal improves, and I think we should, towards the end of this year, have record performance in each of these business segments.
Right, sir. Thank you, sir. Best of luck, sir.
Thank you.
Thank you. We have our next question from the line of Manish Ostwal from Nirmal Bang Securities. Please go ahead.
Yes, sir. Thank you for the opportunity and good set of numbers. My question on your Slide 25, where you mentioned that the company has signed MoU for expansion into Saudi Arabia. So, what are the plans for that market? What we have done so far in the medium term? What we can anticipate from Azad?
Yeah, this MoU was signed with Saudi government. This is from our customers who are already spending massive money there to do a localization program. As I mentioned, our focus right now is to come up with our own facilities here.
Those discussions are going on, but we have put it in the second priority for that. But definitely we will go there, but our prime focus is right now to build all the factories here in FY 2026, currently in Hyderabad here.
Okay. The second question, sir, in terms of technical capability with respect to human resources. How is the attrition rate, how we are in the company? Secondly, on a yearly basis, how much money we are spending on R&D and the training stuff to increase the capability and improve the efficiency for the delivery of our products?
Yeah. Human capital, I think if you have noticed the commentary that Mr. Ronak Jajoo shared, we have added a lot of key leaders in our business. Today our business is fully manned. If you are looking at the key management people or the senior management people that we have hired, we have onboarded business leaders for each business segment as well. Lastly, we had senior leaders from Mahindra who had joined us, senior leader from Tata who had joined us. A senior leader from another aerospace organization that has come on board. Mr. Murali Bhupatiraju came on board from another large precision manufacturing company. This process is a continuous process for us.
We are also hiring a lot of people in the middle management and lower management, and there is a dedicated training and development program where each of these individuals are put to in-house, and then they are eventually deployed on the real projects. This is what we are doing from a human capital perspective. We do not spend a lot of money on R&D because we are a build-to-print company. We have a team which focuses on new product development, but we would not call them as R&D, but NPD.
Okay. The last point, just a small clarification. Is it right, the company was not taking orders because of capacity constraint? Now with the eight facilities, our order book will further grow in a faster way? That is the right way to-
I think that's a wrong statement because if we were not taking orders, our order book to sales wouldn't be eight to nine times what it is today, right? We've always been pro at taking orders, but at the same time, this is an industry where commitment is valued. We do not go ahead and do it if we see challenges in terms of delivery. We've always been supportive of taking newer orders, growing in newer segments with our customers.
Okay, sir. All right. Thank you.
You're welcome.
Thank you. We have our next question from the line of Jainis Chheda from Kemfin Family Office. Please go ahead.
Good morning, sir, and congrats on the great set of numbers. Sir, one question from my side in terms of client addition. If you can give us what were the clients that were there as of June 2025, and what are the new clients that you are likely to add going forward in considering the order book clients that we have?
Yes. We won't be able to share a lot of customers that we would be adding, but I can tell you that we are in advanced conversations with some of the sector leaders in each of these business segments that we operate in. In the next coming quarters, you should be able to see announcements that will give you more info on this.
I understand not naming it, but can you just share a ballpark number if that's possible?
Sorry, we won't be able to share that.
Oh, thank you so much.
Thank you. We have our next question from the line of Maitri Shah from Sapphire Capital. Please go ahead.
Yeah. Hello. Am I audible?
Yeah.
Hello.
Yeah, you are. Please go ahead.
Yeah. Congratulations on the great results. We have a lot of capacity expansion happening. We are also introducing new products and the new projects that we have signed in. So, the peak revenue capacity expectation is about INR 1,000 crores. Do we expect to achieve that by FY2027? Is that a correct assumption?
Ma'am, the right way to think about this would be to take our guidance and do it because we are very confident of meeting our guidance and also delivering. You have seen our historical performance. We have always beaten the management guidance, so we would want to stick to it. But yes, we are working very hard internally trying to push everything to beat our estimates as well.
The INR 6,000 crore order book, what kind of timelines do we have on that, if that is possible?
We are looking at developing this entire plant and all the investments that we would do this year and the next couple of years. We anticipate all of this to get realized over the next five to six years.
Yeah, that is it from my side. Thank you.
You are welcome.
Thank you. We have our next question from the line of Kamlesh Bagmar from Lotus Asset Managers. Please go ahead.
Yeah. Thanks for the opportunity, sir. Just one question on the part of workforce. If I see last year we had 1,300 employees, and as of the quarter it is 1,330. So, where all have we seen this increase? Because it's just 1%, if I compare it year-over-year or even quarter-on-quarter.
Thank you, Kamlesh. I think we are adding people across domains and some of the people, employees that get onboarded for us, which are on the lowest leg. They are a part of the contract workforce initially sometimes. And then once they're trained and ready to be deployed, then they move into a skilled workforce that we have. So, that is generally the model. But if you look at the top hits for us, all the positions are perfectly manned with respect to SBUs. That's something that's happening. Yeah.
And lastly, I believe 80% or you are not providing direct how much is the U.S. share in our revenue. If I assume like roughly around 75% would be going to U.S. So how are we navigating with this tariff imposition? Is it like the entirety is taken up by the customer, or how are we proceeding on that? How are we navigating that particular issue?
Yeah. Kamlesh, I think two things. Our exposure to U.S. is not 70%. For the last two years, it's been consistent at about approximately 40%. So, one point is that. Second point, I think, Rakesh in his previous questions tried to explain this. See, for us, I think, as of now, we are not seeing any impact in our business. We are good to go. Deliveries for the next couple of months and quarters are lined up with absolutely no change in the way we are doing business.
Okay, great.
Yeah.
And congrats on a very strong set of numbers. Excellent performance.
Great. Thank you.
Thanks a lot.
Thank you.
We have our next question from the line of Balasubramanian from Arihant Capital Markets. Please go ahead.
Good morning, sir. Thank you so much for the opportunity and congratulations for good set of numbers. Sir, on that order book side, we have 6,000 crore kind of order book. What is the mix of long-term contracts versus short cycle orders?
Our order book is all in terms of long-term contracts, et cetera, because our long-term contracts convert into purchase orders. Right? Every purchase order that we have is coming out of the long-term contracts only. If you want to know the split of long-term contracts, Rakesh mentioned it, but I will repeat it. It is about $400 million for energy, $200 million for aerospace and defense, and about $100 million approximately for oil and gas.
Okay, sir. Sir, we are moving components to full engine assemblies, especially for GT gas turbine engine projects. What is the margin implications and scalability challenges?
No, we are not saying that we are moving. We are building capabilities in that department. The current market for us in component manufacturing, where we are doing mission and life-critical parts is extremely huge. But for us to build a layer of capability in component manufacturing to assemblies and sub-assemblies is something that we are doing today. Because the moment we enter that space, it improves our target addressable market to a really large extent. So, that is what we are doing, but that is more from a capability development perspective today. But the market is significantly large on the component manufacturing piece that we are today doing. So, we want to keep focusing on that and improving our volume share, while at the same time we keep building capabilities in moving up the value chain for manufacturing.
Okay, sir. Sir, on that export side, we have more than 90% of revenue. On the segment side also, like energy, gas, these things are more than 80% of revenue. How do you look at exports and the segment side, whether we will maintain same kind of share or is there any plans to reduce it to focus on other sectors?
I think we are not looking at reduction from any perspective. I think our business model is pretty straightforward because we work with largely global OEMs. That is why our business is export-oriented, and that should continue for the longer period.
Okay, sir. Thank you.
Thank you. We have our next question from the line of Nitiksha from Anvil Capital. Please go ahead.
Hello? Hello.
Yes, ma'am, we can hear you.
Yeah. Congratulations, sir, on a great set of numbers. I just wanted to understand, sir, as you mentioned, we are a build-to-print company. In general, we have seen that build-to-print companies have lower margins, sometimes low single digits. How do we distinguish ourselves for a BTP company to have such good set of margins, sir?
Good question. But again, what we have been telling is we operate in niche. That's exactly when we say it's niche, everything is niche in that, right? When we say we are the only one company for major of the components manufacturing in the country, that means there is nothing called what every. It's not a normal business. They are 3D components, three-dimensional components, right? It's not easy to manufacture them, and it's more over a process engineering, what we do on the floor, and this is where we generate the margins from.
Okay, sir. So, the technology is provided by the customers, right?
No, ma'am. No, it's all in-house. It's the teamwork what we do here.
Okay. Because generally build-to-print, the technology and everything is provided by the customers, that's why the margins are lower. In build to spec, it is more the process is innovated from our end. Where do we fit in, actually?
Correct, ma'am. It's a very long story. I invite you to the facility here. I would like to demonstrate how we do this. It's a very long story.
Okay. Okay, sir. Congratulations and best of luck.
Thank you.
Thank you. We have our next question from the line of Tejas Mehta from Norwest. Please go ahead.
Thanks for the opportunity. Congratulations on a great set of numbers. One quick question. Between Q4 FY2025 and Q1 FY2026, the aero revenue just had a slight dip. What would you attribute this to? Would this mainly be cyclicality that you see along the quarters?
Yeah. See, the first thing what I would like to mention is, we have a lot of families of components per OEM, per segment, per part number. So, there's a cycle of qualifications, and there's a cycle of after you qualify, get approvals, and then you add capacity, and then you start doing the revenue. So, it's definitely there is not one family, there are many families of many OEMs which are falling in the pipeline, in the queue. So, unless you don't qualify, don't get approvals, you can't generate much revenue. So, that's the cycle, that's the process. So, this is not that we have declined somewhere, or it's not that we have not grown in that. Definitely, there is a lot of qualifications parts on the floor there. That's very understood. However, the capacity is what we are increasing is not just for one segment.
We are going in energy, we are going in aero, we are going in defense, we are going in oil and gas. So, all the four simultaneous capacities are getting increased. So definitely, I would say that there are a lot of parts which are under qualifications, and qualifications don't generate much revenue. And if you don't qualify, you don't get approval, you will not generate revenue. So it's a cycle.
Yeah. Having said that, just to add to Mr. Chopdar's point. I wouldn't call it decline if the number's gone down by a few crores, I wouldn't call it decline. I think the right way to look at the segment, which is aerospace and defense, I would suggest, please look at fair overall number when you look at it over a period, when you look at our numbers for, say, H1, or when you look at our numbers for the full financial year, you will see that this vertical would demonstrate one of the best growth segments for this year.
Thanks.
We don't see any challenge from that system. Yeah.
Thanks a lot. No, appreciate the robust growth demonstrated in the past. Thanks for the clarity.
Yeah.
Yeah.
Thank you. This will be the last question for today, and I now hand the conference over to the management for closing comments.
I am sorry, do you have one more question, or are you saying
Sir, this was the last question and
Okay.
All right.
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