Ladies and gentlemen, good day and welcome to Azad Engineering Limited Q4 FY 2024 earnings conference call hosted by ICICI Securities. This conference call contains forward-looking statements about the company, which are based on the beliefs, opinions, and expectation of the company as on date of this call. Such statements are not guarantees of future performance and involve risks and uncertainties that are discussed in the rebirth. As a reminder, all participants' lines will be put us in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you be consistent during the conference call, please signal the operator when processing starts and zero on your touchtone phone. Please do as this conference is being recorded. I now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you, and over to you, sir.
Thanks, Tanuja. Good morning, everyone. On behalf of ICICI Securities, I welcome all the participants for Azad Engineering Q4 FY 2024 conference call. At the outset, I would like to thank the management for giving us an opportunity to host this call. From the management today we have with us Mr. Rakesh Chopdar, Chairman and CEO, Mr. Vishnu Malpani, Executive Director, and Mr. Ronak Jajoo, Chief Financial Officer. We will have brief opening remarks from the management. Post which we will proceed for an interactive Q&A. Without much ado, I would hand over the call to Mr. Chopdar to take us forward. Thanks and over to you, sir.
Thank you, Mr. Amit. Good morning, everyone. This is Rakesh Chopdar, Chairman and CEO at Azad. Welcome and thanks for joining today on the annual earnings call. On this call, we are joined by Mr. Vishnu Malpani, Mr. Ronak Jajoo, our CFO, and the team at SGA, our investor relations advisors. The results and presentations are uploaded on the stock exchange in the company website. I hope everybody has had a chance to look at it. I wish to update on a few points, on the IPO success and our financial performance. This year we embarked on a monumental journey with the successful completion of our IPO. This milestone was meticulously planned and executed with perfect movement after years of preparation. I would also like to take this opportunity to give you a quick overview of our financial performance, which will be covered in detail by my colleagues later in the call.
Our dedication and hard work are now bearing fruits, and I am thrilled to share that we have achieved our best- ever performance, both quarterly and annually, with a top line of INR 350.7 crores in FY 2024 and INR 92.8 crores in Q4 FY 2024. Our initial plan for FY 2024 and FY 2025, the growth trajectory planned was around 25%-30%, and I am happy to share the FY 2024 plan has been achieved, and we are on track to achieve the FY 2025 numbers with a growth of 25%-30% in the top line and our EPS facility. The next leg of the growth will come through our upcoming facility from FY 2026. Talking on the business vertical and the energy sector achievements. As you all are aware, our new manufacturing facility in Hyderabad, which will be 10 times the capacity of our existing facility, is under construction and development.
We are building dedicated factories for our key clients within our boundary. The first factory's foundation stone was laid by Mitsubishi Heavy Industries team, and now we have more customers wanting to block capacity, first by requesting for an exclusive dedicated unit eventually. In the meantime, we are running with full or almost full capacity, and we will do as usual business and are eagerly waiting for capacity expansion in our new facility for the next level of growth from FY 2026. A significant highlight in the energy vertical was the foundation stone laying of our new lean manufacturing facility. It was an honor to have the Global President and CEO of GE Vernova's GE Power to officiate this event.
This facility represents a major step forward in our growth within the energy sector and demonstrates Azad's strategic importance in the global supply chain, whose demand can be seen through the executed long-term contracts. Along with the above development, we secured a notable contract from GE Vernova's GE Power business. Phase one of the program valued was around $35 million over seven years as a supplier of high-complex turbine airfoils for the nuclear industrial thermal power industries. We have signed another MoU for phase two. This large order underscores the scalability of Azad's business and our strong relationship with GE Vernova. Aerospace defense concerns, I would just like to mention on the aerospace and defense sector. We achieved a significant milestone by securing a 20-year contract from Rolls-Royce for the defense and the military aircraft engines, as mentioned in our previous call.
It is important to understand that the contract with Rolls-Royce extends beyond the contract value. This partnership opens a big door of opportunities and potential for us, marking the beginning of long-term relationship with vast engines. In the coming years, by capturing more engine programs, very soon we can anticipate such programs from the commercial civil aircraft engine as well. Additionally, we have signed key strategic nationwide contracts, demonstrating our commitment to execute the national projects of importance and reinforcing our position as key industry player in aerospace and defense. For the oil and gas sectors, in the oil and gas sector, we had achieved substantial success. Two major contracts from Baker Hughes. These contracts are strategic and led significant business value over next five years. These orders not only enhance our current revenue stream, but also positions us well for future opportunities in this vertical.
Venturing into this sector was part of our diversification strategy, and I am happy to share that we are on track to achieve this goal. Most important, infrastructure and capacity expansion. This point is very important for every metal worker. Now, let me take a moment to update you all on the infrastructure and capacity expansion efforts, which were key points in our IPO. We made ambitious promises, and I am proud to report that we have not only met but exceeded these commitments. Recently, some of the new lean manufacturing facility in our technical around I.T., Hyderabad is just the beginning. Set apart facility will be dedicated to produce digital larger parts unit, built especially for our customers. Phase one is progressing well, aligning with our strategic plans for long-term growth.
Our investment in infrastructure and capacity enhance our production capabilities and strengthen our ability to meet the increasing demand across our diverse business verticals. This expansion is crucial as we build a robust order book, providing clear visibility into our future revenue streams. Our order book has increased significantly from approximately INR 1,800 crore to INR 2,000 crore. It was in March 2023, and today it is INR 3,000 crore plus as on March 2024, hence the expansion facilities is of critical importance for the next level of growth. Under capability expansion, I am excited to announce that we are expanding our capabilities through a strategic acquisition. We have integrated a special process and coating company in our portfolio, providing access of VTC substrate technologies.
This has led to a formation of new subsidiary Azad- VTC, which will now cater to our captive special processes coating requirements, as well as the global demand from other OEMs and Tier 1s. This is the first of its kind for Azad, and we are thrilled about the potential this development holds as this capability centers our supply chain and reduce dependencies. It proves Azad has even a lot of comfort and confidence to our customers on their timely deliveries. More on the business performance then, which started since inception six or seven years ago, Azad Engineering has made tremendous strides across all sectors. Our relentless pursuit of excellence positioned us as leaders in the industry with a solid portfolio of high complex components meeting stringent industry requirements.
We have grown substantially from INR 122 crore in FY 2021 to INR 340 crore in FY 2024, representing a 5x in three years at a CAGR of 41%. Similarly from ROCE, 11.5% in FY 2021 to 15.6% in FY 2024, representing a 5x in three years at a CAGR of 72.1%. Our growing businesses is driven by solid order book of INR 3,000 crore plus, providing clear visibility into future revenue streams. The strength of our balance sheet post our IPO has enabled us significantly improved profitability. During the year, we delivered revenue growth of 35% with a six-fold jump in EBITDA. This robust result reflect our strong financial performance with ample room of further margin improvement.
On the long-term basis, our EBITDA is expected to be in the range of 30%-35%, depending on the product revenue mix. In conclusion, the journey of Azad is one of purpose, innovation, and growth. We remain committed to delivering exceptional value to all our stakeholders, and I am confident the best is yet to come. Thank you. I now hand over to Mr. Vishnu Malpani, our Whole-Time Director, to take this conversation further.
Thank you, Mr. Chopdar, and we welcome everyone to this earnings call for, annual earnings call. I want to begin by giving you a quick recap of our product suite portfolio. This is a portfolio of very niche project and life-critical products. Broadly speaking, the market for our key products is highly regulated and has a TAM of over $28 billion. With a valid share, a market share of below 1% of this TAM, there is a lot of scope for us to grow further. Our recent order wins, like Mr. Chopdar spoke about, are a reflection of Azad's readiness to grab a larger piece of the TAM in every sector that we are operating in, whether it's power generation, aerospace and defense or oil and gas. As a result of our continuous business growth, our product mix is evolving as well.
You can see that there's a diversification amongst our business verticals. Energy segment where we had a head start contributed to 72% of our revenue in Q4 2024. Whereas aerospace and defense segment, which has delivered huge growth this year, contributed to about 16% of revenue. Starting Q4 2024, we are seeing some revenues coming in oil and gas sector as well. During the first quarter, that contributed to about 5% of our revenue. This is just the beginning of Azad in both aerospace, defense, and oil and gas sectors. We are confident that we have built enough business momentum, and we will continue to deliver 25%-30% revenue growth annually over the next few years to come. We have a robust pipeline of current business discussions for which qualifications and approvals are awaited.
The pipeline continues to add to our order book and revenues on a regular basis. With the shift in our businesses, we anticipate an improvement both in our working capital and as well as ROCE. Further, following the IPO, our balance sheet has strengthened significantly, and this has helped us to reduce our finance cost largely. Our finance cost, which was INR 37.3 crores in FY 2024, is expected to come down drastically in FY 2025. Going forward, the total interest cost would be to the tune of approximately INR 3 crores , which is in line with our Q4 recurring finance cost. This would be a fair representation of our financial performance going forward, both in terms of profitability and return. Now, I hand over the call to Mr. Ronak Jajoo to talk further about our financial performance. Ronak, over to you.
Thank you, Vishnu. Actually, let me talk about some specific financial highlights of the full year. Revenue from operations grew by 37% to INR 350 crores, which is our highest performance annually in our company. As explained by Vishnu, we had substantial growth in the energy and oil and gas segments, which increased to INR 285 crores in FY 2024 from INR 219 crores in FY 2023, thereby increasing 30% year-on-year basis. Our aerospace and defense segment recorded a robust growth of 95% in FY 2024. The revenue increased from INR 73 crores in FY 2023 to INR 164 crores in FY 2024. During the year, our EBITDA margin has accelerated on account of operating leverage and cost efficiency, resulting in adjusted EBITDA margin improve from 31.6% in FY 2023 to 34.3% in FY 2024, and this is the highest level of EBITDA margin we have achieved within our history.
Going forward, we continue to maintain healthy EBITDA margins in range of 33%-35%. We are working on various initiatives that focus towards realizing last time process improvement. Other contributions of new product, especially in aerospace and the oil & gas segment that we have recently signed a long-term contract with a global OEM. With our investment towards the execution process into the Azad VTC Private Limited, which we have announced recently, which will help to reduce the job work charges from FY 2025 and onwards. It will also help us to streamline our logistics, because whenever we send the parts out for job work, it creates the logistic hassle. Our company had reduced its debt significantly during the year. I would like to share that in quarter three FY 2024, our past CCD investment made with Piramal has converted to CCD into equity worth INR 150 crores.
Further utilizing the IPO proceed and internal surplus, we have reduced our term loan to the tune of INR 76 crores till date in FY 2024. As a result of our total finance cost over the year increasing, including INR 29 crores as non-recurring cost towards interest and on CCD and a one-time interest of Ind AS on term loan closures as we have short closed the loan. Our non-recurring interest cost is largely extended with neutralized by one-time income of INR 27 crores, that is the sales of the three sales of land, Ind AS interest of loan, and loan closures. A large portion of these non-recurring items which come in quarter three FY 2024 numbers, I am glad to share that adjusted CCD actually these non-recurring items grew by INR 68 to INR 72.63 crore during the year. Our tax for the year stood at INR 15 crores with 17.2% margin.
We expect tax margin to improve in H2 of FY 2024 onwards on account of lower finance cost and improving our EBITDA reach. Looking at the profit numbers, revenue stood at INR 93 crores. This is a 9% growth on year-on-year basis. This growth is led by strong sales in both energy and aerospace segments. Consumption has slightly increased from 12.5% to 17% due to change in product mix and revenue mix. Our employee cost has decreased during the quarter, as I mentioned last quarter also that we are working on various initiatives, and this has decreased to 2.7 in comparison from compared to quarter three FY 2024. Operating expenses was in line with the business. During the quarter, EBITDA stood at INR 31 crores with 36.8% margin.
Depreciation has slightly increased as we have some CapEx during the year, thus resulting into increasing D&A to CCD. Tax for the quarter stood at INR 15 crores with 16% margin, which is our long-term ambition. So we try to improve it further in this quarter. With this, I conclude our presentation and open the floor for question- and- answer. 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 telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue opens. The first question is from the line of Bala Murali Krishna from Oman Investment Advisor. Please go ahead.
Hi, good morning. I hope I am audible.
Can you speak a little louder, please?
Yeah. First of all, I have two bookkeeping questions, but it is a non-recurring finance cost. When can we expect it to be zero? One more thing is the receivables side, I think the trade receivables are almost 50% of the PAT and core revenue. Is this a normal scenario, or do we have any one-off for this kind of trade receivable?
Yeah. So one-time income has already been released because we have released all the CCDs, and there is no Piramal insight going forward. Going forward, you see the normalized net cost from quarter 1 onwards, and the stream is also reflecting in this quarter. Coming to the receivables chart, we have a normal cycle of around 120-180 days credit to our customer. If you see, we have done almost around INR 180 crores of sales in H2, what reflects in this quarter, receivable.
Okay. Second on this, deals which we have won, which are also 500 or more deals. One deal we have with the contract value, and the remaining three deals we have done on a firm basis. What is the potential of these three deals? Like we have in this last deal, we have around 300 installation. Will there be any combined revenue potential of these three deals which we have won since this way?
I would like to say that, during this call, we said our total order book is upwards of over close to about INR 3,000 plus crores, this is what you are asking. All of these contracts put together that we are signing with our customers have a total cumulative value of over INR 3,000 crore. These contracts have to be executed over three years, five years, seven years, or 10 years, depending on the duration of the contract. These are long-term contracts.
Yeah, understood. Whether we are developing any new products to have more value add for our existing customers in a personal accident. Lastly, on this new facility, when can we expect it to be on the commission stage?
Yeah. As we mentioned, let's take an example of Rolls-Royce. Rolls-Royce is one of certain customers to us, and we are very proud to say that we got this very critical component for the engine delivery. If you see, there are two aspects to this. One is that foot in the door. There are so many engines being manufactured by Rolls-Royce in the military applications as well. So we got the chance to enter with the engine programs. Just to give you an example of 10 engines, they've given us two engines to initiate and start the production cycle of that, development, and production. As we developed, as we produced, the doors got opened for two, not for two.
If you see the longer picture, it is very good to see it for the longer picture, not just for this one contract. There are many more which are in the pipeline. Then comes the civil customer layer. This is a step which got our foot in the door. That was the most important. Now it is all that we started using as and when the competition goes on, and you can see the revenue coming from FY 2025 from this. The new facility which is coming up, which we are anticipating to get the FY 2026 revenues out of it.
All right. Understood. Lastly, on this Baker Hughes, are they our existing customer or are they a new customer to us?
As we, in oil and gas, as we said in 2020, we were trying to treat it as a diversification. Again, we are very careful to our selection. The facility what we have, the equipment what we have, very flexible, and we just take customer requirements which are required as a very high specialized component. In oil and gas also, we found that there are certain components which are very high critical in application, and this facility can be utilized the best way to build those products. It was a strategic call of picking up Baker Hughes coming up, and as we interacted with them, the audit period and all the leadership thing happened, and then we entered in a very long-term commitment. It was a strategic call. It was very well planned.
Okay. That's it. Thank you.
Thank you. Ladies and gentlemen, to ensure that the management is free to address questions from all the participants, you have questions two at a time participant. Should you have a follow-up question, we will request you to rejoin the queue. Thank you. The next question is from the line of Kamlesh Jain from Lotus Asset Managers. Please go ahead.
Yeah. Congrats for the excellent performance on financial year. Just one question on the part of the order book. How long or what period this order book gets executed in, let's say, one, next three years, four years?
Yeah. Major, you see, it can be from three, five years maximum. These are the years which we sign up these three order books. Yes, as I mentioned in the previous question also, we are just adding up that. As I told you, in Rolls-Royce, we've got two engine programs. We can expect another six or eight of the engine programs. These are certain things which we are blocking contracts.
And sir, how much you think the CapEx we would be spending over these four, five years? Because spending on CapEx would result in the revenue getting or order book getting executed. As you have mentioned earlier as well, that you have a great asset plan. So how much CapEx we will be paying for next three years?
For this year-
I know.
For this year, we have planned to deploy 120 crores.
As these equipment are very specialized. As we all know that we are in a very specialized field. We have deployed, you perceive an IPO from the top of this year. As I mentioned earlier also, FY 2025 was very well planned, that we will have a 25%-30% growth these two years, and we have successfully done that for FY 2024 and FY 2025. Whatever CapEx we have planned is for that. This will be incremental from FY 2026. This CapEx, if you see, it will come from the FY 2026 from the new facility.
Let's say, as we want to reach INR 3,000 crore top lining in the next five years, then we need to spend roughly around incremental, let's say, roughly around INR 1,800 crore CapEx. Probably on that path, since we want to achieve incremental turnover of INR 3,600 crore over next five years, then we need to spend roughly around INR 1,800 crore CapEx. How that could be?
Not necessary. Not necessary we should complete. That depends on the product mix. What we have done is, whatever orders and contracts we have committed and we have signed and we have already committed to our customers, these CapEx is planned only for specific contracts what we already have. This is nothing for future. Whatever we have signed up, whatever orders we have, we have very well planned for this particular thing. As and when the product mix changes, as and when we go and see like we are into military and civil stuff. In commercial assets, we will have a different kind of investment. If you go in oil and gas, there is a different kind of investment. We are well-diversified, and we try to take the most advantage of the facility what we have.
We can take it to all the three, four segments which we are in. We are not depending on one particular, the whole shift does not depend only on one particular vertical. All the four can be, the capacity can utilize all the four verticals. That was the original plan.
Great, sir. And best of luck for the future.
Thank you.
Thank you, sir.
Thank you. Next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much for the opportunity. You mentioned that new facility, expanded facility, which is like 10x in terms of manufacturing capacity compared to what currently will operationalize in FY 2026. So FY 2026 could be the year when incremental contribution, or is it FY 2027 since the contribution will come?
Thanks for your question. From day one, we have been, you know, past when we. I remember, I recollect my age when we started. That FY 2024 and FY 2025, what existing capacity we have, the growth of 25%-30% has been done. That is what we have committed. All this planning and proceeds what we are utilizing, it will come in FY 2026. Next, we have, according to 10x, if you look into it, that is we have it around eight. There are many more which are lined up. There are many more. As I mentioned, from defense, we are going into civil, we are going to commercial, we are going in many directions. So growth is very big market. Because of that, when we have a plan, because factories cannot be built now and then. We have already utilized 10x capacity.
There is a reason behind it why we have chosen to do 10x. So the incremental will come from FY 2026.
Sir, what is the current capacity utilization of existing facility?
It is around 80%, 80%- 85%.
Still we are expecting significant growth in FY 2025?
Yes, this was the plan. This was the plan from day one. This was the plan from FY 2024. We had a plan that we will grow 25%, 30%, but luckily we grew 35%. Same thing in FY 2025, we are on track.
FY 2026 and 2027 could be on year for us in terms of.
Yes, you can see a big, I think you can notice a shift and a movement from FY 2026.
Thank you. The next question is from the line of Jeevan Patwa from Sahasrar Capital. Please go ahead.
Sir, congratulations. You have the numbers. I just want to understand what is the composition of the order book. How much is it from the aerospace and defense, and how much is from power, and how much is from oil and gas?
Yeah. I can give you some specific numbers.
Right.
Just a minute. I will just open the page. If you notice, we have around oil and gas and energy, if I pull up this flow, that is amounting to around INR 1,500 crores and around INR 1,800 crores from the aerospace and defense. These are all signed. Hello, am I audible?
Call disconnected. Next question from the line of Prasheel Gandh i from Anand Rathi . Please go ahead. Prasheel, please go ahead.
Am I audible? Hello.
Yes, ma'am.
Yeah. Sir, just one question from my end. On the segment-wise basis, could you give a bit more color to your revenue guidance? We have guidance of percent growth, but could you give a segment-wise guidance on how you are seeing within each segment?
Yeah. I will actually do that. Overall, as Mr. Chopdar was saying, you would have seen that we have grown from about INR 122 crores in FY 2021 to about INR 350 crores in FY 2024. This has been the growth. Now, we anticipate the blended growth of the business to be 20%-30% even this year. Right. But if you look at each of our segments, energy business will continue to grow at 25%-30%. Aerospace also has a larger growth, but you can assume that it will grow at least about 25%-30%. Oil and gas, because it is smaller, it will potentially grow at 38% also.
Okay. Thank you, sir. Thank you very much.
To you as well.
Thank you. The next question is from the line of Deepak Shah from B. R. Choksey Securities Pvt. Ltd. Please go ahead.
Hi, am I audible?
Yes.
Yes, sir.
You will have to be slightly louder, please.
Yeah, sure. After congratulating this set of numbers, my question on the inventory side. When we share that data, you have 136 inventory. How much would be your raw material work in progress on this day?
Yeah. I will check. You have to understand this inventory into two parts. One is the aero inventory, as we mentioned, that this is long-term, where we are leading the future inventory where we have to order some minimum orders on a longer period of time. To be very precise on your question, we have raw material to the tune of INR 52 crores to INR 53 crores, work in progress to the tune of INR 16 crores, and balance other consumables and inventory to the tune of INR 56 crores. Also, we have signed long-term contracts with GE this year, as we have mentioned in our feed. We are teaching some stock for those types of contracts that raise the inventory looking slightly higher as of March end.
Okay. What I am trying to understand out of this qualification field, as you said, you mentioned lower inventory. How much out of this would be for the qualification?
Totally, it will be around INR 35 crores, roughly INR 30 crores to INR 35 crores. Somebody should check for the qualification cost.
INR 30 crore to INR 35 crore.
Yeah.
Okay. The second question is, earlier call, you mentioned the fact that you are targeting for indigenization of raw materials to normalize the working capital numbers. What is the progress on that?
We have done quite a good progress in quarter 4 of this year, where we have got two of our key raw material qualified with the Indian customer, and we are on the track, and probably in FY 2025 and FY 2026, you will see the impact on the inventory side. Whatever we have purchased, we have also placed order based on the previous POs and previous order book. The further incremental purchase, what we do is start from FY 2025 onwards. We have rest of qualified and we can't place order right now because we have already placed and this is where the lead time for the inventory gets higher.
Okay. One last thing from my end, sir. You have very, very good return ratios. Like maximum growth in FY 2024. You're talking 25%-30% next year, right? We have INR 10,000 crore order book. When we look at your margin, it's everything on the stable side. We are seeing those numbers going down. Trader days are kind of going down. When we are targeting digital store, on the other side, our trader days going down and the other days are also getting elevated. Would we be able to sustain at this level of debt levels that we hold right now? Or we might reach at this higher level of debt going ahead to manage the working capital?
Vishnu here. I'm just trying to understand, I think the number on trade payables or the number that you're sharing. Can you just explain on that because we didn't quite catch that.
If you see your day table on FY 2023 was INR 576, and for FY 2024, it's around INR 396. As an effect, if you compare with, then your cash conversion cycle is going up for FY 2024. How are we going to manage this? Is there any change with the trader days that will come, that we are getting less number of days as well as this credit from the suppliers? That's why I was trying to understand how it will impact us to manage the working capital. How does it work? If you can share, it will cover.
If you see my AG today, it's around INR 70 crore plus in my balance sheet, and we have enough cushion at least to manage the FY 2025 number.
For FY 2026, as we mentioned that we have already have a purchase from Micro plus additional working capital line from the bank side. My current debt is close towards working capital debt is zero and trade accounts receivable is around specific crores and I hope that it keeps enough. We have a sufficient cushion at least for now growth and that should not be a problem for us going forward.
Just a reminder. I would request you to rejoin the queue for your follow-up.
Yeah.
Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your questions to one per participant. Should you have a follow-up question, we will request you to rejoin the queue. Next question is from the line of Vishal Singh from Makrana Capitals. Please go ahead.
Hey, guys, this is Mickey, not Vishal. Congratulations on a good set of numbers. I specifically had two questions. Number one, assuming in FY 2025 you grow at 20%, and I vaguely remember you had said that for you, FY 2024, 2025 was the year where capacity is going to be constrained. Given that you were at 340 odd crores for FY 2024, slap in 1.7%, that gets you for FY 2025 at approximately 435 crores. Given that we're long-term investors and you mentioned that coming FY 2026 will be the inflection point. I mean, what kind of revenues are you guys projecting for FY 2025 to demonstrate that it is really an inflection point from a revenue standpoint? That's my first question.
Yeah, Mickey, I think you're right, and thanks for the question. Right from day one, we've been saying FY 2024, 2025 is very well planned, and we have achieved FY 2024 as per plan and on track for FY 2025. So we are quite happy with what we have planned, we achieved. There are no constraints in that. Now, if you see that we are growing around INR 120 crores this year, and this is incremental to whatever we were doing for FY 2026, FY 2025. It will be seen from FY 2026. This is a continuous process. As you notice that these machines, equipment, they are not on the shelf. They have certain delivery times and it will come in phase manner.
And you can see deployment of these revenues, if you go into the model detail, if you try to see the asset turn what we have been talking, and based on the asset turn, more and more equipment as quickly as possible, we try to bring. Today we have massive order book. We have massive customer base. And we are really coming up in a very special way. You see FY 2024, the President and CEO of GE Vernova coming in, talking. That is the big, big gesture to our business and to India. He came in all the way just to suddenly flew back in six hours. That means he wants us to raise this facility as quickly as possible. Now it depends on various factors on the equipment. These equipment are majorly imported. And they have a longer delivery.
So we are now very desperate to get this capacity up and running as quickly to deliver this on time. So it is that the more quickly the equipment comes in, more performance you can see in this case.
Okay. My second question is, just from a quarterly perspective, how does one— I know you guys think about from a yearly perspective, but listen, you are a public company now. So from a quarterly perspective, in terms of your revenue and numbers, how should one project it? There is seasonality, there is no seasonality. Obviously, there has been a little bit of slowdown in your Q4. So I am just trying to figure out from a public company now that you have to give out quarterly results, how should one factor the growth there?
Thanks, Mickey, for the question. This is Ronak here. I would like to say that first of all, in our business, there is no seasonality. I think this question probably, I am guessing, might be arising out of a smaller growth that you would have seen from FY 2023 Q4 to FY 2024 Q4. But I would like to clarify that when we are looking at, say, a 9% growth from FY 2023 Q4 to this year, the base that was taken, the base quarter, if you look at our four quarters for last financial year, we were doing on an average of about INR 55 crores in quarter one, quarter two, quarter three. While we were able to add some capacity last year, the quarter actual capacity was closer to INR 75 crores, but because some delivery had pushed to Q4, the quarter had become elevated to about INR 84 crores.
If you normalize it should have been about INR 70 crores for FY 2023 Q4. When you compare ourselves from a INR 70 crore normalized quarter from last year to, say, a INR 92 crores of quarter, you will be able to see a growth that we have been talking about, which is about 30%. That is one. That elevated base, which wasn't normalized for last year, is actually leading to this wrong growth data that is coming out. But ideally, it's about INR 70 crores for last year's quarter and about INR 92, which is about 30% growth. However, the other thing that I want to say is quarter on quarter in our business, there are certain shipments based on the customer's requirements are either pulled or pushed out. That's why when you're evaluating our business, I would say that you look at a longer period.
Maybe club two quarters or look at a longer horizon because we are constantly growing at this rate, and that's why it's important. So we have zero seasonality and the elevated base of last year, which has led to, say, a slightly smaller growth. But if you are to evaluate us for FY 2024, I would recommend that look at FY 2024 over, say, the next two quarters. Maybe you can look at the June quarter and the next quarter together to see how we are able to grow at this rate. I hope, Mickey, I'm able to answer.
Absolutely. Just one last question. From a margin perspective, obviously, there has been some variability. So both at a gross margin level and at an EBITDA margin level, what are the bands that need to be factored in for fiscal year 2025 and 2026?
I would say there has been a lot of variability in our business. I think that the change in the variability is because of the sort of revenue mix change. But even if the revenue mix changes, the range would be anywhere between 33%-36% to 37%. That's it. This is the only range that our EBITDA margin is going to be at. And our gross margin, despite the change in revenue mix, et cetera, will always be between 82%-86%.
Another point that I would like to add here, Mickey, is these numbers what Ronak has given you is a very signed contract. These numbers are very secure. Some of the valued orders for three years is all secured. That's one big advantage.
These numbers also include for fiscal year 2026 and beyond, which is an inflection point, correct?
All the order book. All the order book what we have in hand. We have a strategy, we reach out with the same customer. All the order book signed has this number.
I'd just like to explain this a little further. If you look at it from FY 2021, our EBITDA margin was closer to 20%. If you look at this year, we've delivered one of the highest ever EBITDA margins for us in years. We were only projecting, we were targeting about INR 110 crore, but we've been able to deliver about INR 117 crore, which is over-delivery because of certain margin expansion that has happened on operating leverage that we were able to get. If you look at our revenue numbers also, our current financial target was to hit INR 340, and we were certainly able to do it.
Now we are on to. Along with the revenue numbers, I think one of the important things that we should all be focusing on is, okay, while we have hit our numbers and we have met our targets, there are a lot of qualitative developments that have happened in our business. We placed our first NVOCC, we signed two additional contracts with three OEMs, and we are doing strategic defense contracts. There is a lot of improvement. We have done an acquisition for Azad VTC, which will improve our margins further. There is a lot of developments that are probably not visible in the numbers that have been showcased. But there is a lot of work that has happened in this year, which should probably help us in FY 2025, 2026, and on and on. Right, going on.
I agree with everything you are saying. All I am just saying, sir, starting fiscal 2026 is going to be a paid inflection point in terms of the capacity and the revenue.
Yeah.
Given all the internal developments you have done, the way it.
Sorry to interrupt, Mr. Vishal. I request you to rejoin.
Margin should be able to be sustained, right?
Absolutely.
Yes.
Absolutely.
Thanks, guys.
Thank you. The next question is from the line of Abhijit Mitra from Aionios Alpha Investment Management. Please go ahead.
Yeah, thanks for taking my question. I hope I'm audible.
Yeah.
Just to understand the 2025 expense, right, so current book interpretation is INR 106 or INR 110 in that range. And when you're talking of CapEx revenue over, say, a four-year period or five-year period, that's an incremental revenue of almost INR 3,500 crore in incremental working capital-
We're talking about CapEx capacity addition. We're not talking about CapEx growth in the next year.
Yeah. The INR 4,000 crore revenue target is by which year, sorry?
Okay. Just like that, we are talking about. Currently our business we have limited capacity. With the contract and the demand that we are seeing from our customers, we are coming up with a facility which has 10 times more capacity. This 10x more capacity is obviously going to fill. It is going to be made over a stated period and will be filled over time. We do not mean that it will be filled over the next four years or five years, right? Our business will continue to grow at 35%, 36% this year. Then once we are at an inflection stage in FY 2026, you will see that the growth rate improves from 30% to a higher number and will continue at that for a few years.
Got it. That is very clear. Secondly, just to understand the nature of this, as you scale up, do you have to maintain this nature of working capital intensity, or it can improve on it?
See the working capital intensity of the business is a function of what is your qualification that you do. Qualification in our business is where the working capital gets stretched because you are supposed to stock material, you are supposed to buy minimum order quantity, whereas it takes a couple of years to get qualified. The benefit is once the product qualification is there and your production ramps up, you will see that progressively working capital comes down. Ideally, we expect our business's working capital on a blended level to be anywhere between 130 to 150 days as the cash. Our energy business segment was already at that point, right? Now with some of the stocking programs that we are doing, we improve our relationship and business with the customers.
It would look like it is stretched a little, but ideal business working capital, cash conversion cycle should be anywhere between 130 to 150 days overall, which you will eventually see.
Got it. The last question is the margin guidance which you are giving, 33%-36%. What are the risks to that margin guidance? Are there any open-ended clause on the commodity or on the currency or anything else that you feel can impact this guidance?
If you look at our historical numbers, we always are gaining margins. These margins have been able to sustain because when we sign up with our customers over a longer period contract or a long-term contract, these prices have been set to lean on. Over time, we are only building more operating leverage, which helps us improve our margin further. During the process, when we are sitting in our customer, our margins are fixed. We do not take an order where we do not meet the margin criteria. Over time, we only help improve the margin through our operational excellence and operating leverage in our business. 33%-36%, 37% range which I've shared will be the same for a longer period of time.
Got it. That's all from my side. Thanks, and wish you all the best.
Thank you.
Thank you. The next question is from the line of Alisha Mahawla from Envision Capital. Please go ahead.
Hi, good morning. Over more-
Can you please speak louder, please?
Sure. Sir, CapEx that you are doing in Hyderabad for the latest facility, is this only INR 120 crores?
No. Let me try to answer this. We are coming up with a CapEx capacity, right? INR 120 crores is the deployment that we are going to be doing in FY 2025, which will improve our revenue for FY 2026. These machines that we deploy in our business, these are high-end specialty order CNC machines. They have a longer duration for deployment and production. When we order these machines, we are going to be investing INR 120 crores in plant and machinery only. I want to be specific. For the infrastructure development, we are going to be deploying about INR 80 to INR 100 crores. So INR 80 to INR 100 crores will develop the infrastructure, whereas this financial year, INR 120 crores will be deployed in plant and machinery.
Over time, whenever we attract the capacity, it does not make sense for us to deploy INR 500 crores and create the capacity because obviously, there has to be a progressive way that this plant and the ecosystem is developed. So right now, the initial start, you will see INR 120 crores or so in current year, and then next year will be further, and we will continue to do that.
So in the FY in total, we are seeing about INR 120 crores going to plant and machinery and infra which is INR 80 to INR 100 crores. Also we heard a bit earlier also for the plant will be ready by 2026.
Yeah, we have only started deploying that from last year since the infrastructure was started. There will also be deployment in infrastructure this year, but plant and machinery, we will roughly deploy about INR 120 crore.
One more point I would like to add here is this is not just for FY 2026, it is from FY 2026. The infra which is being built is just not for FY 2026. It is a part of the plan which is coming up, right? We cannot build factories one by one. There are a lot of plans which I am happy to, if you travel to Hyderabad, I can show you all the plans in detail.
Tentatively in FY 2026, by when do you expect this first phase to be ready?
From FY 2026, you will be able to see incremental revenue of FY 2026 coming out of the new factory. Whatever growth, say when we do 25%-30% growth in FY 2025, and say, let us say that number is X. From X, any incremental revenue that we are targeting for FY 2026 will come out of the newer contracts, which will be our institutional side. Then you will be able to see the rate of growth for us in our business will be faster. Our business has a sustained growth of 25%, 30% because the market is very large, and we can continue to grow at this rate for a very long period of time with sustained margins and the top line clientele as per our plan. I think the way to look at business would be on these lines.
That's just one question. Contracts that were signed with Alstom, Siemens, Baker Hughes, et cetera, will these also start from FY 2026 or will they start today?
Yes, ma'am. As you can notice, they are five and seven years, right? So that was in that scale of time.
Yeah.
No. A few of them can start from next quarter, FY 2024 also. There are certain contracts which have quotes from FY 2025 or FY 2026. So it's a very carefully planned not signed just today. There is hard work of the last one year we've been negotiating with them. As we show them the capacity, right? This is not just, "Here's a paper contract," just like that. So we showed them, "Client, we are raising money. So this is our factory coming up. This is our line which is coming up." In order to have these done, they watch, they see, and then only the contracts are signed. We would have presented contract last year, but we told them, "Yeah, we are raising money. We need all the strong team to execute all this." So all these have been executed. It doesn't come like that, ma'am. These are large companies.
They see each and every corner, and then only it line up here.
I mean, we have delivery commitments. So whenever a customer signs a contract, we agree on what needs to be delivered at what time. So there are several very detailed schedules which have been agreed between our customers and us, and we work towards it from a similar basis for every contract.
Yeah. Just in light of INR 120 crores, just because we raised INR 90 crores for the balance. Are we going to now again raise some debt since it is completely INR 120 crores every year of CapEx?
Yeah, we have to keep the incremental debt as right now we know that hardly around INR 40 crores is in our balance sheet. So we have a sufficient room available for this new debt.
Thank you. The next question is from the line of Chirag from Neo Multi Family Office. Please go ahead.
Yeah, hi. If you can give me a breakup of margins in terms of segment-wise. Let's say currently you are getting a revenue contribution from aerospace which comes up around 30%, 32%. How much could that go up to in let's say next four to five, three to four years or so? What effect does it have on your margins?
We don't look at margins on a vertical level. If you look at our business, this year we delivered some level of diversification, or if you have to say 82% of our revenue this year was from energy and 12.9% was from aerospace. Until last year it was about 87%, 88% from energy. We were never looking at margins at a segment level. We always looked at it together because the way we quote for our parts is also similar in both those areas. However, going forward, our plan is that once we are able to scale aerospace to the same level of orders of INR 75 crores, INR 80 crores, we would start tracking the margins separately for the business as well.
Until then, large part of the business is towards qualification, which optically might not give you the right indication for margins at a segment level because qualification is a zero-revenue business. You have to invest a lot in terms of manpower, your equipment, and et cetera. Until we are able to reach a scale where the business reaches upwards of INR 20 crores, INR 25 crores, it does not make sense for us to look at margins at a segment level. However, we don't see that number far off. Maybe in a year's time or so, we should be able to track segment-level revenues. But again, we will not be able to track this for oil and gas because oil and gas is now very small. It is blended with energy.
When oil and gas also reaches the point where we are delivering and the quantum of qualification versus revenue is comparable, then we will start doing it separately. To give you some comfort, our blended margins are always going to be in the range of 33%-36%, despite any change in revenue mix or segment mix whatsoever.
You currently have a wallet share of roughly 1% in existing TAM. What are the opportunities and challenges that you see also in growing your wallet share? How much could it grow to for next few years?
Yeah. I will take this answer. If you notice when we say TAM and the wallet share, signing contracts and getting these orders is evidence to show that we are now ready to take up and now customer believes us, and now they give us the complete program of allotting these orders to us in the long term. This comes as I mentioned in 2020. We were sitting at around 23, 28,000 crores. This year we did 3,000 crores.
Comfortable. This thousand crores comes from development which we did this year. This rate is going to continue. When you see the next capacity, you can imagine what opportunities are coming up next year and following year.
Just to add to what Mr. Ronak was saying, I think for us, what are the ingredients you need for an organization to scale up? You look at capital, you look at contracts, you look at customers, you look at capacity, and then you look at the rest. Today, as an organization, we have all the four boxes which we have checked. Only capacity is coming up. So that is going to lead us to a higher expansion in our market share. This is not a function of reduced demand. We have more demand than what we can supply. Even if we were to set up capacity immediately, it is going to get consumed. You can see how our customers have been growing and how each of these segments or industries are growing. We work with customers in every sector. Every sector is having tremendous growth.
Our customers are great. For us to grow, we only need to add capacity. One of our questions that had come up is once the new capacity comes up, that is going to be the inflection point. Having said that, growing 20%, 30%, since 2021 till today we have grown at 40%. Hopefully, this growth will continue. When you see inflection point as well, that is something that I would say. It is only capacity that needs to be added.
Do you see any risk in competition or any other risk in achieving your goals of increasing market share?
Competition, we have competition in China, Europe, Japan, and India. That is our competition. If we complete, we complete these four regions, countries I would say. We do not see any risk from that perspective because our revenues through the next few years have been tied up already. We do not have to look at just wind energy numbers which we are targeting and executing. We already have a contract with us. That is committed. We do not see a risk from that perspective. That is why I am saying, coming back to this, like in my previous answer, I am saying for us to grow, we need customers, contracts, others, which is there with us. These products have been qualified. The only thing that is needed to be added is capacity. For us to add capacity, we needed capital, which we have raised, and now we are deploying that.
We don't see any risk to execution from that perspective.
Okay, thank you.
Thanks. Due to time constraints, this will be the last question for today. I will now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you. Over to you, sir.
Yeah. Thank you, Tanuja . I would like to thank everyone for attending this call and to pull this session we had today. You can see that there is a long queue over there, so you can get in touch with the manager, SGA for your query. I would now like to hand over the call to Mr. Chopdar for any closing comments. Over to you, sir.
Thank you, Mr. Amit. Thanks, everyone, for joining this call. I believe, as I mentioned before, this plan what we are planning 2024, 2025, 2026, 2027, we are perfectly on track. We have checked and as we prove that FY 2024, we achieved our plan and on track operation we said, on track on FY 2026. We have all the ingredients. It is just the capacity that we are eagerly waiting to add capacities. We have enough orders. We have big demand in the global supply chain. Even now there are so many customers asking us, "When are you going to add capacity?" Contracts are already in place, everything in place. I think it is a very beautiful journey going ahead. There is a lot of excitement coming weeks and things, and you will listen what is yet to come yet.
That is what I wanted to give a last message. It is really a wonderful journey we covered, and there is a long way ahead to cover up.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you can now disconnect your lines.