Ladies and gentlemen, good day, and welcome to the Cyient DLM Limited Q1 FY 2027 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, Non-Executive Chairman, Cyient DLM Limited. Thank you. Hand over to you, sir.
Thank you, Darwin. Good evening, ladies and gentlemen. I am Krishna Bodanapu, Non-Executive Chairman of Cyient DLM Limited. I welcome you to our Q1 FY 2027 earnings call. Joining me today are our Managing Director and CEO, Mr. Rajendra Velagapudi, and our CFO, Mr. R.M. Subramanian. Before we begin, I would like to remind you that certain statements made during this call may be forward-looking in nature and subject to risks and uncertainties. A detailed disclaimer is available in the investor website section posted on our website. The Q1 FY 2027 performance reinforces the messages that I shared in our previous earnings call, that the underlying strength of our business remains strong and the investments we have made over the last few years are translating into tangible results.
The quarter was marked by continued geopolitical uncertainties, evolving demand patterns, and disruptions across global supply chains, including the ongoing developments in the Middle East that added further complexity to the operating environment. Despite these challenges, Cyient DLM remained firmly focused on execution, customer commitment, and long-term value creation. I am particularly proud of how our teams responded with proactive planning, strategic inventory buildup of critical components, alternative sourcing initiatives, and close collaboration with our customers and suppliers. These actions enabled us to maintain uninterrupted execution and consistently meet our delivery commitments, further strengthening customer trust and confidence in Cyient DLM. Our strong performance during this quarter is a testament to the resilience of our business model, the depth of our customer relationships, and most importantly, the dedication and commitment of our people who committed to deliver exceptional excellence in a challenging global environment.
One of the most encouraging aspects of our performance has been the continued momentum in order book. We closed the quarter with the highest-ever order book in the company's history, providing strong revenue visibility and reaffirming customer confidence in our capabilities. Orders in flow remained extremely strong during the quarter, resulting in a robust book-to-bill ratio of 1.5x. This underscores the sustained strength of demand across our target markets and reflects the success of our continued investments in customer engagement, engineering excellence, and operational capabilities. Equally encouraging is the return of growth across our key business sectors aerospace, defense, and industrial, all of which delivered healthy performance and continue to present attractive long-term opportunities. The increasing diversification of our revenue mix across these sectors enhances the resilience of our business and strengthens the foundation for sustainable growth. We have also made significant progress in strengthening our commercial organization.
Key leadership hiring has now been mostly completed, including the addition of Rama Alapati as the Chief Strategy and Growth Officer. This enhances our go-to-market capabilities and positions us to deepen customer engagements, expand into new opportunities, and accelerate on our ambitions for growth. While growth remains a key priority, profitable growth continues to be our primary objective. I am pleased that we now have sustained double-digit EBITDA margins for four consecutive quarters. This consistency reflects our focus on operational excellence, improving revenue quality, disciplined cost management, and increasing value-added engagements with customers. Looking ahead, we remain excited about the opportunities emerging across our target markets. Rising electronic content, supply chain diversification initiatives, increasing investments across our focus sectors, and the broader outsourcing trend continue to create a favorable demand environment.
With our differentiated design-led manufacturing model, strong customer relationships, and growing execution capabilities, we believe Cyient DLM is well-positioned to capitalize on these opportunities. Most importantly, we have entered FY 2027 with strong momentum. The first quarter delivered healthy performance across revenue growth, profitability, and order intake. Supported by a record order book, a strengthened leadership team, and a robust business pipeline, we are confident in our ability to continue creating long-term value for our customers, employees, and shareholders. I would like to thank our customers for their continued trust, our employees for their unwavering commitment, and our shareholders for your ongoing support and confidence in our vision. We remain optimistic about the opportunities before us.
The foundations we have built, the capabilities we have strengthened, and the momentum with which we entered FY 2027 gives us confidence that Cyient DLM is well-positioned for its next phase of profitable and sustainable growth.
Before I hand over the call to Rajendra, on behalf of the board, I want to thank him for beautifully turning around the business to a situation where we can now be confident in sustained growth for the future. We have an order book, we have the people, and we have the customers that will support this accelerated growth. With that, I would now like to hand over the call to Rajendra, who will take you through the business and the operational highlights in more detail. Rajendra?
Thank you, Krishna. Good evening, everyone, and thank you for joining us today. I will take the next few minutes to walk you through the Q1 FY 2027 business updates for Cyient DLM. I'll keep the discussion simple and clear, and I'll focus on three messages. First, the EMS market continues to offer a large and structurally attractive growth opportunity. Second, Cyient DLM has a clearly phased strategy across strengthen, expand, and transform. And third, we are seeing tangible business highlights resulting in growth of the business. With that framing, let me start with the industry outlook, then move to our strategic initiatives, and finally cover the key business highlights before closing. If you look at it, the electronics manufacturing of the services market is in a genuinely attractive phase. And importantly, the opportunity ahead of us is expanding rather than maturing.
Today, the global EMS market sits at roughly $625 billion- $650 billion. The potential we are planning against is close to $1.1 trillion by 2033. We are not building for the market as it exists. We are building for a market that nearly doubles over the coming decade. The blended CAGR across the market is around 6%+, and it is meaningfully higher in high reliability segments where we choose to play. That distinction matters for us. We are deliberately not chasing commodity, high volume, low margin work. We are positioning where complexity, reliability, and engineering content command a premium. Let me highlight the structural trends driving this. First, the electronics content per product is rising across the board. More compute, more sensing, more connectivity in virtually every device. The second driver is the growth in AI and AI infrastructure.
AI is creating new demand for compute infrastructure, data center systems, power electronics, advanced hardware, networking, and related supply chain ecosystems. While this market will evolve over time, it is clear that AI infrastructure will increase the need for sophisticated electronic manufacturing capabilities. We are therefore treating this as an important area to understand, evaluate, and selectively participate in where we can build a differentiated right to win. The third, the supply chains are regionalizing. The China Plus One shift is redistributing manufacturing globally, and that footprint realignment plays directly to supply chain resilience, which our customers now treat as a strategic priority, not an afterthought. The last one, the semiconductor side, the chiplets 2.5D and 3D packaging and High Bandwidth Memory are all raising the complexity of back-end equipment, test, and assembly. Exactly the kind of high mix, high reliability work we were built for.
Our core segments remain aerospace and defense, industrial, and our focus is also on the semiconductor capital equipment, medical and automotive, with a sharp focus on power electronics. Beyond the core, we see two clear new lanes opening. Lane one is robotics, which needs high reliability subsystems, control electronics, and test assemblies. Lane two is AI infrastructure and data centers, where AI is generating electronics-heavy, high complexity hardware that is genuinely well-suited to specialized EMS players like us. The takeaway from this slide is the core business is attractive and durable, and adjacencies give us room to grow into. This naturally leads into how we intend to capture this, our long-term strategic roadmap. As we mentioned in the past, we coined it as SET: Strengthen, Expand and Transform. The first phase, strengthen, is where we are today. This is the foundation we bank on.
We operate across four industries, aerospace and defense, medical, industrial, and automotive, with a focus on EV. This is our proven core stack, and it runs at margins of roughly 9%-11%. This is the base, reliable, established, and the platform everything else is built on. The second phase, expand, covers FY 2027 to 2029. The strategy here is elegantly simple. Same stack with the two new sectors. We take the capabilities we have already proven and extend them into two new industries, robotics and AI data center, taking us from four industries to six. Because we are leveraging the same core stack into higher value sectors, margins step up roughly to 11%-13%. We are not reinventing our capabilities, we are pointing them at more attractive end markets. The third phase, transform, is FY 2030 and beyond. This is where we build a product and platform mode.
We stay across our six industries, but layer in expanded B2S products and new platforms. This is a shift from being a service provider to owning product and intellectual property, and that's what lifts margins to roughly 13%-18%. The through line of this slide is a deliberate progression, widen the industries we serve and steadily elevate the value we deliver, moving up the margin curve at each stage. Now, let me bring this down to what we actually delivered this quarter, because strategy only matters if it shows up in execution. The headline is, I think as Krishna said, our order book. We recorded our highest ever order book at INR 2,598 crores. That is a strong signal of demand and of confidence from our customers. Order intake for the period stood at INR 551.9 crores with a healthy book-to-bill ratio of 1.5.
Importantly, that was driven by both existing customers deepening their engagement and the new customers coming on board. On customer diversification, we added two new logos during the quarter across industrial and automotive segments. That matters because it broadens our base and reduces concentration, which is exactly the direction our strategy calls for. On capability and capacity, we completed the expansion of our build to specifications lab from 6,000 sq ft to 15,000 sq ft, more than doubling that footprint and giving us headroom for the product platform development that underpins the transform phase mentioned earlier as part of our strategy. We are seeing continued momentum in our B2S product platforms with a strong order pipeline from our key customers. On quality and certifications, we completed the NADCAP audit for cable harness assembly for our Mysore unit.
NADCAP is a demanding aerospace-grade certification and it reinforces our credibility in the high-reliability work that sits at the heart of our positioning. Taken together, to summarize altogether, the EMS market opportunity is large and expanding, and we are deliberately positioned in a high-reliability, high-value segments. We have a clear staged strategy to widen our industry coverage and step up our margins over time. This quarter results, records order book, healthy book-to-bill, new logos, and expanded our lab capacity. This was a quarter of solid, tangible progress against the roadmap I just described. As you have seen, we have started the FY 2027 with a strong momentum driven by disciplined execution and healthy demand across our key segments. The strong order intake demonstrates our readiness for future growth.
As we move forward, we will continue to expand our focus on new industry segments such as AI infrastructure, data center technologies, robotics, which require high-reliability electronics manufacturing, and we will continue to strengthen our position in build to specifications in highly complex and regulated industries such as aerospace and defense and healthcare. Thank you again for your time and for your continued confidence in Cyient DLM. With that, I will hand it over to RMS, our CFO.
Thank you. Thank you, Rajendra, for the business overview. Good evening, ladies and gentlemen. I will now take you through the financial performance for Q1 of FY 2027. We are pleased to report a strong start to the year, with the Cyient DLM Group delivering its strongest first quarter performance to date. Revenue for the quarter stood at INR 3.738 billion, reflecting a robust 34.3% year-on-year growth. This growth was supported by healthy order book, improved execution momentum, and continued demand across our business segments. On profitability, EBITDA increased to INR 392 million, registering a strong 46.2% year-on-year growth. Importantly, our EBITDA margin improved to 10.5%, representing an expansion of 147 basis points year-on-year. This margin improvement reflects the benefits of operating leverage, better revenue mix, and disciplined cost management.
Profit after tax for the quarter was INR 163 million, which is more than double compared to the corresponding period last year with 118.2% year-on-year growth. Consequently, the PAT margin improved to 4.4%, expanding by 168 basis points year-on-year. The strong PAT performance was driven by revenue growth, margin expansion, and a healthier business mix. Our order backlog also remains strong at INR 25. 989 billion, increasing by INR 1.832 billion quarter-on-quarter. This represents the highest order book level achieved so far and provides a good visibility for revenue execution in coming quarters. Overall, Q1 FY 2027 reflects a strong operating and financial performance backed by healthy order intake, sustained revenue growth, margin expansion, and a record order book.
We believe this positions us well for continued growth throughout the year. Moving to the KPI trends, we would like to share quarter wise of our revenue normalized EBITDA, normalized EBITDA margin, and normalized PAT performance. Starting with revenue, we delivered INR 3.738 billion in Q1 FY 2027 compared to INR 2.784 billion in Q1 FY 2026, reflecting a strong year-on-year growth trajectory. Revenue also remained ahead of the previous quarter, with Q1 FY 2027 continuing the growth momentum seen in Q4 FY 2026.
On normalized EBITDA, we reported INR 392 million in Q1 FY 2027 compared to INR 261 million in Q1 FY 2026. While EBITDA was lower sequentially compared to INR 431 million in Q4 FY 2026, it remains significantly higher on year-on-year basis, reflecting a strong operating performance. Our normalized EBITDA margin stood at 10.5% in Q1 FY 2027, improving by 147 basis points year-on-year from 9% in Q1 FY 2026.
Importantly, we now have consistently delivered double-digit EBITDA margins for four consecutive quarters, which reflects the continuous strength in our margin profile. On profitability, normalized PAT stood at INR 163 million in Q1 FY 2027 compared to INR 75 million in Q1 FY 2026, meaning PAT has more than doubled year-on-year. This improvement is aligned with the strong revenue growth and improved margin performance during the quarter. Overall, Q1 FY 2027 started on a strong note with healthy revenue growth, sustained double-digit EBITDA margins, and a significant year-on-year improvement in PAT. Let me now take you through the key operating and working capital metrics. Starting with the order book, we continue to see strong momentum in business intake. Our order book increased steadily from INR 21.3 billion in Q1 FY 2026 to INR 26 billion in Q1 FY 2027, reaching the highest level in company's history.
This provides strong visibility for future revenue growth and reinforces the confidence of our customers in Cyient DLM capabilities. On inventory, our. Just one minute. Give me one minute, please. On inventory, our days of inventory outstanding stood at 162 days in Q1 FY 2027 compared to 153 days in Q4 FY 2026. While inventory level increased sequentially, they remain significantly lower than the levels seen during much of FY 2026 and are aligned with our business growth and execution requirements. Days of payable outstanding reduced over last three quarters and stood at 63 days in Q1 FY 2027. This reflects normalization of the supplier payment cycles and continuous strengthening of our supplier relationships. Days of sales outstanding remained broadly stable at 77 days in Q1 FY 2027 compared to 74 days in Q4 FY 2026, demonstrating continued discipline in collections despite higher business volumes.
Customer advances stood at 15 days in Q1 FY 2027 compared to 18 days in Q4 FY 2026. While advances moderated during the quarter, they continue to support our working capital profile. As a result, net working capital days stood at 161 days in Q1 FY 2027 compared to 145 days in Q4 FY 2026. This increase was primarily driven by the movement in inventory and customer advances as we continue to support a growing order book and the future execution requirements. Overall, while working capital remained elevated during the quarter, the business continued to maintain a strong order backlog and a healthy growth trajectory, positioning us well for the future revenue conversion. Let me now take you through the revenue mix of Q1 FY 2027 across industry segments, product categories and geographies. From an industry perspective, aerospace and industrial continue to be the largest contributors to revenue.
Aerospace accounted for 42% of Q1 FY 2027 revenue, while our industrial contributed 32%. Together, these two segments formed the majority of our business mix during the quarter. Aerospace and industrial also delivered strong year-on-year growth of 40% and 90% respectively. The defense segment contributed 9% of revenue and recorded 35% year-on-year growth. MedTech accounted for 16% of revenue, with growth remaining broadly flat year-on-year. Auto and others contributed the balance 1% of the revenue mix. Moving to the product category mix, PCBA continued to remain the largest contributor, accounting about 48% of Q1 FY 2027 revenue. The PCBA business maintained a high share and delivered 21% year-on-year growth. Box Build was the second largest product category, contributing 21% of revenue, but delivered strong year-on-year growth of 85%. Mechanical and others contributed 10%, while cables accounted for 1%. The other categories also include B2S.
From a geographic mix perspective, rest of the world continues to account for the major share of business of 94%, while India contributed 6%. The higher rest of world share was driven by all our focus segments such as aerospace, medical, defense, and industrial customers outside India. Overall, the Q1 FY 2027 revenue profile reflects a healthy mix across key industry segments, continuous strength in PCBA and Box Build, and a strong international revenue contribution led by demand from aerospace, medical, and industrial customers.
Q1 FY 2027 was a strong quarter from both growth and a profitability standpoint. As I explained in key highlights section earlier, our revenue increased by 34.3% year-on-year to INR 3.738 billion. EBITDA grew faster than revenue at 56.2%, reaching INR 392 million, while EBITDA margin improved by 147 basis points to 10.5%. Employee costs increased in line with the business expansion and capability building, while other expenses remained aligned with the revenue growth. Material costs were higher due to the business mix and procurement related to B2N. Importantly, finance costs reduced by 29% year-on-year owing to lower working capital borrowings. Profit before tax more than doubled to INR 222 million and tax increased to INR 163 million, representing a growth of 118% year-on-year. Tax margin improved to 4.4%, up 168 basis points from the previous year.
Overall, the quarter reflects a strong operating performance, improved efficiency and healthy earnings growth. Q1 FY 2027 has been an excellent start to the year with record first quarter performance across revenue, profitability and added backlog. Revenue grew 34%, EBITDA grew 66% and tax more than doubled year-on-year. Our record INR 26 billion order book provides strong visibility and reinforces confidence in our growth outlook. We as a company remain focused on execution, margin improvement and converting the strong demand pipeline into sustainable shareholder value. Thank you and we look forward for your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Gaurav Shukla with [Finvestas]. Please go ahead.
Am I audible, sir?
You are audible, sir. You may proceed.
Thanks, sir, for giving me opportunity and congratulations on good set of numbers. Sir, I want to understand the effect of West Asia crisis. In last concall, you said that Israel needs approval which were not done.
Sir, we are not able to hear the speaker very well. Could you repeat the question?
Yes, sir. I repeat, sir. Now audible, sir?
Yeah, better.
Sir, I want to understand the effect of West Asia crisis as going on. In last concall, you said that Israel needs approval and some business are not done. Are they happen or till now pending?
Okay. Effect of West Asia crisis. Two is we last time said that from Israel, we still have some orders, et cetera, pending, and we were seeing delays. How is that now changing?
Okay. Hi, Gaurav. This is Rajendra here. On the West Asia, the crisis is certainly still is there, going on. But as earlier, I think Krishna also pointed in terms of our planned execution and ensuring that we will be keeping some of the inventory for a long run. I think those are the things really helped us to overcome the current challenges, what we have in the West Asia crisis. What we are seeing even now today is there are some delays in the logistics in terms of shipments. We are also seeing some of the costs going up due to this West Asia crisis at this point of time. But, as we are already well-planned in terms of our execution, we have not seen any of those challenges in Q1.
We also just put a plan together to ensure that those things will not impact much in Q2. To another point about the earlier the Israeli things which we are seeing, that we are seeing the momentum in terms of the order intake. That is what we had the good order intake we had from the Israeli customers. We see the continued momentum in Q2 and beyond also going forward.
Thank you. Our next question comes from the line of Vipraw Srivastava with PhillipCapital. Please go ahead.
Hi, sir. Good evening. A great set of results. Just quickly on the new entry into the data center side, AI side. Just wanted to dive deeper there. Any discussion with the hyperscaler which is happening currently or at a very early stage and in coming quarters you will give us more information? Any thoughts on the AI data center entry for the company?
Yeah, certainly. We just started this thing and we have our sales directors on board in this quarter. I think we will be probably giving some updates in the next one or two quarters about where we are focusing and where are we today in terms of our momentum in AI and data centers.
Okay, sir. That makes sense, sir. Secondly, given the West Asia crisis which has been hampering our growth at least in last year, does it have any problem now or it is fully resolved? What are your thoughts on that?
I mean, as I said just before to another question from Gaurav, I think just the West Asia crisis is still there. It has not gone. But the planning what we have done to ensure that we will be getting some of the inventories holding that wherever we have some challenges for some of the materials. I think that planning has really helped us for the Q1 outcome. Similarly, I think the Q2 also we have planned that, so we do not see much of that at this point of time.
Right. The last question from my end. The company is also venturing into the semicon side, where you mentioned that testing and assembly at the last end is also in high demand because of the AI play. Any thoughts on that? What kind of product profiles you are looking to enter on the semicon side? What kind of timelines can we expect in terms of finally that coming in the P&L?
I think we have already, I think probably sometime back we just mentioned that we are working with the semiconductor capital equipments, some of the customer.
Right.
We are seeing some of the robust growth plans in that area.
Okay.
We will be continuing working towards that and where we are building some of the products for our customers in the semiconductor capital equipment. Okay. That is what basically I mentioned in my earlier one.
Just a follow-up, sir. Any thoughts on timeline and when could it materially impact the P&L next year, next to next year, any thoughts on that?
No, I think we will be seeing some of the growth coming in that area. Over the next 6-12 months, we will be seeing more of the revenue growth, which probably in turn will also give us some leverage in terms of the margins there.
Yeah. Thanks a lot. Thank you.
Thank you.
Thank you. Our next question comes from the line of Deepak Krishnan with Kotak Institutional Equities. Please go ahead.
Hi, sir. Am I audible?
Yes.
Yeah. Sure. Maybe just wanted to delve a bit on similar sort of questions. So we have this expand target to FY 2029. Wanted to just pick your brains in terms of how do you see the overall growth CAGR for the company in this time frame, 2026 to 2029, and how much of the contribution would be from AI data centers or what takes in, say, 2029 in terms of revenue? And where are we in terms of client approvals and how long after client approvals do things come into numbers? Second, within the transform phase, when you say margin could be 13%- 18%, in a steady state, what are you looking as B2S to an overall contribution to revenue? And what would be the margin delta between, say, what we do today and B2S?
So that we can at least see how we bridge the gap to about 13%- 18%, and then I'll come up with a follow-up question.
I think in the expand phase. So when I said about expand phase, I think some of the new things which we mentioned about the robotics and the AI data centers and infrastructure, I think that is the area where we'll be focusing in FY 2028 and 2029. So that will be taking some time for us to see the revenue coming in, but the order intake is where we'll be seeing it in this year itself. So I think as you said, we already have the people on board. I think so we are driving the growth in those new areas. So that will really probably give us some leverage in terms of the margin expansion there too. And coming back to your other thing on the transform side. So you just mentioning, that is one of the B2S.
We already have our internal plans, both in interim. So at your expand stage, which you earlier asked a question about what percentage of the revenue will be coming from each industries and also these new two segments. So we already have a plan of actions in that and what will be our CAGR growth going forward for the next two years. And also for FY 2030 and beyond, the plan what we have for the B2S, the percentage of revenues coming from the B2S in FY 2030 and beyond. So based on that's where we have just arrived at the margin performance ratio, what we mentioned there. Yeah.
Sure. Any range on AI data center, the wattage that you could give and by FY 2029, what percentage? Maybe just another question. Given you are a net exporter, what factors drove to an FX loss in this particular quarter? If you could sort of highlight that as well. Maybe both these two questions, if you would get back.
Okay. I think, as I said, we are not giving that guidance, how much of that growth will be coming from these new sectors. As I said, that is internal thing which we have a plan of actions to take. Once we have some new customers in that area, then definitely we will probably let you know in the next two to three quarters.
Yeah. On Forex, let me try and answer that. In last quarter, the last month was pretty appreciated a bit. As you know, our balance sheet is pretty exposed in terms of our businesses on the export side, pretty large both on exports and imports. The net impact is what you are seeing on the balance sheet with respect to last one month where impact you are seeing.
Sure, sir. Maybe just one follow-up. Also, order book, any sort of range that you want to end the year with in terms of book-to-bill ratio?
Book-to-bill ratio, we will be at the same thing where we are today at a 1.5x. We will be at that number for the year too.
Sure, sir. Those were my questions. I will get back on the queue. Thank you.
Thank you. Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have any further questions. Our next question comes from the line of Shubhi Gupta with Trinetra Asset Managers. Please go ahead.
Hi, sir. Congratulations on the numbers. I wanted to understand, we see that the MedTech segment's growth is quite flat. We wanted to understand why is that, and also how do we see that progress for the rest of the year?
Yeah, I think the MedTech is where we have some seasonal impact in terms of one of our customers right now, which is there. In terms of the growth for the MedTech, yes, we don't see any of the concern. We have the pipeline which is available right now in our sales pipeline. We already have some of the opportunities in that particular sector. We don't see a challenge or anything in terms of the MedTech there right now.
Sir, how much of the pipeline is coming from MedTech?
MedTech is around that same work we have today in terms of our revenue mix, maybe around 17%-20% range is where we have today our sales pipeline for the MedTech too.
Okay, sir. Thank you.
Thank you. Our next question is from the line of Balasubramanian with Arihant Capital. Please go ahead.
Good evening, sir. Thank you so much for the opportunity. Sir, pipeline yearly INR 4,000 crores. What is the breakup in terms of vertical, like Aerospace, Defense, Industrial, and MedTech? And that platforms-wise, like legacy SS lane and lane two.
If you are looking at the distribution of the order book or is the order intake you are asking? The order book you are looking at?
Sir, order pipeline, sir.
Oh, order pipeline.
We have yearly INR 4,000 crores.
Order pipeline, no, 4,000 is-
Well, it is more than that.
Yeah.
We don't get.
Vinay was mentioning order pipeline.
[Audio distortion].
That is the order intake.
Okay.
Sir, where are you getting the number of order book?
No, sir. That's our future pipeline is around [$7.5 billion]. That's anywhere INR 4,000 crore- INR 5,000 crore range.
No, I think we have more than that order pipeline. Okay? The number, I don't know from where did you get that one, but we have a substantially higher
Pipeline
higher pipeline at this point of time. Yes. Very, very high sales pipeline.
We report order book and order intake, and order pipeline is obviously much ahead of it. That's something which we don't report or disclose any of those numbers.
No, actually, I'm trying to understand if we have new growth vectors like AI and data centers and robotic side. So I'm trying to understand that point of time. You could explain in terms of platform side, whether the legacy businesses like Aerospace, Defense, and Industrial, and MedTech, and how that lane one, lane two. So how that things are moving up in terms of pipeline.
Yeah, I think if you look at it, the various segments, what we have in Aerospace, Defense, close to around 48% will be there in the Aerospace and Defense in terms of the pipelines, what we have. And close to 40%, roughly, no less than 40%, roughly is on the Industrial and Semiconductor equipment side, capital equipment side. And the balance is predominantly coming from medical. And is basically coming from the medical industry. And Automotive is a small one there.
Okay, sir. Thank you.
Thank you. Our next question is from the line of Praveen Sahay with PL Capital. Please go ahead.
Yeah. Thank you for the opportunity and many congratulations for a good set of numbers. My first question is related to the ROW sales, because there is a 40% of the growth on the year-over-year side we are seeing. But there would be some element of a rupee depreciation as well. So in the same currency terms, how was the growth there?
In terms of reporting, normally we do the reporting in INR. In terms of dollar growth rate, we can give the numbers separately to you. We can get back to you on it. Yeah.
Okay. Second question, sir, is related to the, as you had a report, the negative, your operating cash flow is still negative. So, what is the primary reason, and when do you expect the working capital to normalize?
Yeah. As I explained to you earlier, the negative free cash flow is essentially coming up from higher inventory and lesser customer advances. We have talked about it earlier. As a company, we are growing, and we need to keep making sure that the growth is well-fed in terms of inventory, because inventory is something what we need to do a leading indicator. We have to stock enough to make sure during this difficult time, our revenue is not impacted in any way. We are happy to say that that is something which we have been able to achieve and as you can see in the results. Okay. As long as we have this growth, these investments which we need to do it.
Once we have the growth and the inventory coming under control, which we are working on, the cash flow will turn positive, and that is what we are all working towards.
Okay. Last question is regarding the B2S platform. When do you expect the meaningful revenue contribution from B2S product? What would be the margin compared to the EMS business?
You probably will be seeing, we already started having some revenues coming from them in the B2S. We will be seeing substantially good revenues from them in the next one year to 18 months. That is what we are seeing the revenues. In terms of margins, as I said, the overall, when you just look at the combined one, you will be getting additional 250 to 300 basis points additional margins when we have a consolidated EBITDA margins due to the B2S opportunities.
Okay. Thank you, sir.
Thank you. Our next question is from the line of Sumit Sinha with Macquarie. Please go ahead.
Yes. Thank you very much. In context of the strength that you saw in the first quarter, can you talk about any sense of guidance for the year? I know last time you said, didn't give hard guidance, but you said sequential growth. My second question is, in terms of your revenue increase sequentially, but gross profit and gross margin declined. Is there a mix issue? Is there a tariff reimbursement? Can you talk about that, please?
Yeah. In terms of the Q2 and going forward, we will be seeing a similar momentum in the range. We don't see any major concern on the momentum in terms of our revenues and order intakes. In terms of the gross margin, what you said, even though it is slightly higher and it is lower than the last quarter, it's because of some of the investments what we have made into our organization. The investments are where we have already budgeted, and we already kept it. Because that is the one thing probably which is just driving our gross margins slightly lower.
Got it. Thank you very much.
Thank you. Our next question is from the line of Santhosh Seshadri with Avendus Spark. Please go ahead.
Yeah. Hi, good evening. Thanks for taking up my questions. Can you walk us through in detail all your-
Sorry to interrupt, Santhosh, but your voice is slightly echoing. Request you to please use the handset mode while asking your question.
Is it better now?
This is much better, sir. Please go ahead.
My first question is on the targets to drive margin expansion in the medium term. Can you provide us some color on how much of the margin expansion is coming from new categories like semiconductor equipment, AI servers, and robotics? How much of the expansion is coming from operating leverage?
As I said earlier, in the expansion phase, we will continue to do what we are doing it. Those are the industries we will be having the focus. That is basically our core. We will continue that. We will sustain that. The new industries like AI data centers and robotics, coupled with some of the semiconductor capital equipment. I think those are the things which probably expand us between FY 2027 and 2029, which will be giving us the EBITDA margins from 11%-13%.
If I may add. I think today the margin expansion of what you are seeing is essentially because of filling the hopper and the operating leverage. Rajendra talked about is in terms of what is going to come in the future, which will be in addition to that part.
Thank you. Just to follow up on that. What product categories are we specifically targeting within AI data centers? Because just if I look at the margins of some of the global players in the AI server segment, it's in the mid-single digits. Given that we are anchoring on some of these new segments for long-term margin expansion. Is it just a product margin, product category difference that is driving up margins? Or do you see any inherent cost advantage for Asian players?
No. See, it is not an inherent cost advantage or anything. This is basically the products which we will be working for this AI data centers and also the robotics, which has been basically high profile margin business. As I said, we have the strategy in place. We have put those action items, which are those products which we will be working in these areas, in these new sectors. What are the revenues we are going to have for the next two years and how that margin profile is going to be. Based on that, this is what we have put in there, where we will be going to be in the FY 2027 and 2029 in the expand phase.
Got it. One final question. In terms of winning businesses in these new categories like robotics and AI, is it something that can be delivered with existing capability? Or do we need some sort of acquired capability to gain exposure in these segments?
No, I think for all this we can use our existing capabilities. Probably we need to have some of the skilled, experienced people in some of the areas in terms of application engineering. So that's where I think we are working out. We have some of the people on board, and some we probably will be getting the people on the board. But otherwise, the existing machinery will be sufficient for us to execute that.
Thank you very much, sir. Good luck for your execution.
Thank you.
Thank you. Our next question is from the line of Deepak with Unifi Capital. Please go ahead.
Hello, sir. Thank you for the opportunity and congrats to the management on a good recovery. My question around the order inflow. Actually, this INR 550 crore order inflow run rate that we saw in this quarter, I just want to understand how much is it from the existing business, which is our core business, that is aerospace, defense, medical, et cetera. And from the new logos that we have onboarded last year. Basically, I want to understand how much scale have you achieved from the sales efforts we did last year and how much more can we juice out from the new logos addition. That's the first question. Next thing is this INR 550 crore, were there any lumpy one-off orders in this or this should be the new sustainable run rate for the company? Can one extrapolate this run rate for the full year?
That's the next question. Sir, thirdly, you have mentioned AI data centers and robotics in your slide. Can you just give some details on what products and data centers that you are targeting or robotics that you are targeting, what capabilities that you have built in. I just want to hear the strategy that you guys have in place to get the business from these two new segments that you are targeting. Thanks.
Okay. I think in terms of the order intake which we had, there was no lumpy order intake in that. Okay? That was all as we see from our existing customers and the new customers. Okay. Also, your other question is, are we going to maintain the similar things for the year? As I said earlier, probably we will be there at the 1.5x of the book-to-bill ratio, in that range for over the year also. The other thing which you asked about is on the-
Mix.
Mix between the new segment from the existing customers versus the new customers whom we added in the last one or two years. If you look at that one, probably close to around 70% of that is where it is from our existing customers, and the balance 30% is from the new customers whom we added in the last four equipment. At least in the last four to six quarters.
And I think to extend that into a question you asked, there is a lot of opportunities still with those customers.
Yeah, absolutely. There is a lot of opportunities from that existing and the new customers there. The other thing which you asked about, I think earlier also, I just mentioned about on the AI and data centers. I said we have the people on board. We have put the strategy in place. Probably just we will come back to you in the next two to three quarters when we will be seeing the products which we are going to focus. As I said, we do not need any initial CapEx for that. So existing machinery will be sufficient for us to execute any of those products which we are looking at. We also, as I said, we have some people on board who will probably working with our new prospects in these areas, going and talking with them.
I think which is going to be the expansion plan from FY 2027 to 2029. Okay? This is what we want to just make you sure that the focus is there, that is where the growth is going to be, and that is where I think you will be seeing the both the revenue growth and also the expansion, margin expansion growth.
Okay. Sir, just on the order inflow run rate, you mentioned 1.5x order book to revenue. So we are already at that rate today. If I assume that you are going to grow at a healthy 20%-30% this year, your order book is already INR 2,600 crores, which is more than one and a half times. So what kind of number that we should look at in terms of order inflows for this entire. If you can help us understand that would be useful.
No, but probably I think we are not giving that guidance in terms of the number right now. As I said, we will be seeing it. We will be having 1.5x, which is what I will just say that we will be there for a year. I think the guidance-wise, we are not giving that where we are going to be, what the order book is going to be by end of the financial year.
Deepak, I do not know, sir. I think Rajendra talked about the aspirational revenue growth rates and the book-to-bill ratio. I am sure you are good enough to calculate.
Yeah.
Thank you.
Thanks. Okay. Thank you. All the best.
Thank you. Our next question comes from the line of Adityap al with MSA Capital Partners. Please go ahead.
Hello. Am I audible?
Yeah.
You are audible, sir.
Yeah. Thank you so much, and congratulations on the great set of results. Question for Rajendra . Just wanted to quickly understand, because if I see over the last three years, there has been a lot of defense growing very fast, then petering out and then completely vanishing from FY 2025 number and because of the bell order, then industrial seeing the up and down. But out of all this, aerospace is the one place where we have continuously grown. Over the last three years on a quarterly run rate, we have expanded 4x. Wanted to understand what is the strategy, how are we able to grow and maintain this pace? And also our large customers like Honeywell Aerospace and Safran and Thales, they are more and more talking about that they want to expand outsourcing from India. How are we placed on that?
It is a bit of on the what has worked and how are we placed. A bit of strategic question rather than a guidance question.
I think as I just mentioned earlier, we are very well-placed on the aerospace side. I think Honeywell, we just mentioned about some of the big work which we had won several years back. I think that right now some of the initial builds are happening, so we will be seeing the ramp-up coming on those things in the next 18 months. That is where we will be seeing a big growth coming from the Honeywell Aerospace. I think we have a very good engagement with them at various levels. That account, and you also said about the Thales. I think both of the accounts is where we will be seeing an extraordinary growth in this year.
Sorry, just to add to that. The aerospace business is a double-edged sword. It is very difficult to get into. But once you are in, you are in. We are fortunate that we are pretty much in with every single major OEM or significant tier one that buys any electronics. Obviously, Rajendra mentioned two, Thales and Honeywell. Those are the large ones. But there is also many others. I think it was a deliberate choice. Now, of course, for the first few years, aerospace is always an investment. But it was a deliberate choice to build a very strong aerospace business because the aerospace and defense gives you a steady revenue stream on which we can build many other things. Look at the data center business. The reality of that is it is up now, it will go down. That is just how some of these technology-related businesses work.
But what really differentiates us is that strong aerospace capability because that is a moat that is impossible to or it is very difficult to breach for a new entry. We are in the moat and we are very strongly placed in the moat. I think that is a very key element for us, and that is why I just want to highlight that.
Understood. Just last question from my side before I come back in the queue. One on the aerospace. SkyDrive has started receiving a lot of certifications from the aerospace or airplane authorities, and it is one of the large B2S pipeline. How are the discussions going over there? Do you think that it can certify much sooner than expected? Second is on the entire defense spend. This again ties to that we are in, I would say, each and every European defense at this point of time. How are we seeing that pan out?
Sorry, the defense spend. You're asking about the defense spending?
Yes. Two questions. One is on SkyDrive B2S, and because they are getting certification much faster than expected. Because they want to start making their aircrafts. Is there a possibility that we start booking the B2S revenues much sooner than expected on SkyDrive, if those are the discussions that are going on? On the defense side, specifically on the European defense. The reason I'm asking this is that because we are in, I would say, in each and every defense company in the Europe side, maybe BAE Systems, Safran, Thales, and then we also onboarded a few other defense companies over the last four, five quarters. How are we looking that pan out? Two questions, both on aerospace and defense.
Okay. I think the one which you mentioned about Japan customer, which we mentioned earlier. They're all the UAVs, which we are working out with them. As I said, we are doing it currently the engineering designs for their products, for B2S products. That will be probably taking another year to 18 months for us to come into the production line. Okay. That is the one which is probably very high end, and it is a long term for us. As Krishna said, those are the customers once you come in and particularly if they are on the build to spec, I think we are the ones who will be doing it throughout the life cycle of the product. We will be maintaining the product there. Okay. That way I think that is the one business which we are very strong with that customer in Japan.
The other ones which you said about the other aerospace customers, I think we are continuing with them. We are working with them. The value what we provide, I think in terms of their-
No. The second part is on the European defense. Aerospace I understood that. Krishna and you also spoke in detail. But on the European defense, are we seeing a lot of negotiation pipeline building up on that side?
Yeah, I think there is one right now, that is also a part of the build to spec, which we are working out with one of the European defense organization. For early stage at this point of time, that is there in the order pipeline. We are working now towards-
Is your question specifically B2S for European defense or
No. This is on the demand side.
Okay. On the European demand side, I think we said, I think one of the thing which you already mentioned with Thales earlier. Correct? We are working out with them. That is again a defense customer, so we continue. I think we are very strong in terms of our engagement with them, the value what we provide to them. We also have other defense customers in Europe, which probably I don't want to name it at this point of time, based on the confidentiality agreement which we have with them. We are working on the build to print. Apart from what I said earlier in the build to spec is another one going on. But build to print is continuing, the momentum is still there. I think very strong momentum both in North America and Europe.
Understood. If I can just-
Sorry to interrupt you. I request you to please
No, this one last. This one last, if it is possible.
Please go ahead.
Yeah. On Oiltech, because our strategy on MedTech is a barter strategy, where we also deal with a lot of early-stage and startups in the product side. With Oiltech and with ITAR, is there any possibility that we can start working with defense technology in North America?
Yeah. That is what I think. We have now one project going on right now for one of the defense customer there. We have the ITAR facility. As you said, it is the ITAR-certified one. We are working out with a few more other U.S. defense customers there. It is still at the early stages of our pipeline. But we see a value where, what we can bring into our customers in U.S., the defense customers in U.S.
Thank you. Ladies and gentlemen, we will now take one last question, which will be from the line of Neel Mehta with Equirus Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity, and also very congratulation for the good set of number. Sir, my first question is that, as you are going in expansion phase in FY 2027 to 2029, particularly in the AI data center and robotics projects. Just wanted to know, in that segment, particularly which product side that you are answering. It is from a rack side or a cooling side or power supply side. That is, if you can share light on that. Secondly is that how much incremental CapEx, particularly for the expansion phase and from the transformation phase, that we are going to spend for next couple of years. If these two things you can share. Thank you so much.
Sure. I think, as I said probably earlier, I think we are still working out on that to get the strategy in place. I think the team is in place right now. Probably we will be letting know in the next two to three quarters where the focus, which are the product lines which are working, going to work, and which are working out in that area, both in the AI data centers and the robotics. Okay? The other one is the CapEx, correct? The CapEx, I think as you said, whatever we have today, closely around 1.75x to 2x of the revenue. So we don't need any such additional CapEx apart from a regular annual CapEx, which we will be working out for our running the business.
Clear. Thank you so much.
Thank you. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments. Over to you, sir.
Thank you very much, and thank you everybody for joining the call this evening. Obviously, it has been a very good quarter. Again, I want to compliment Rajendra and his leadership team for delivering an excellent set of results. I also want to assure you that I think a lot of the challenges of the past have been overcome. We find ourselves in a very good position, both with the core business, which is aerospace, medical, defense, and industrial, but also with some of the expansion that we are looking at, which includes semiconductor equipment, data centers, et cetera. I think we find ourselves in a good spot. Thank you for the patience. Thank you for the support. We will again speak next quarter, but I want to assure you that we will keep our focus on delivering again, continuing to deliver a good set of results going forward.
Thank you.
Thank you.
Thank you. On behalf of Cyient DLM Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your line.