Ladies and gentlemen, good day and welcome to Cyient DLM Limited Q4 FY 2026 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 the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, Non-Executive Chairman, Cyient DLM Limited. Thank you and over to you, sir.
Thank you. Good evening, ladies and gentlemen. I am Krishna Bodanapu, Non-Executive Chairman of Cyient DLM. I welcome all of you to our Q4 FY 2026 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 our Investor Update section posted on our website. I will start by first sharing my perspective on a few key developments in FY 2026 and more importantly, how we are positioned as we step into FY 2027. On reflection, FY 2026 was a poor year on a growth perspective, and I think that is a reality that stares us.
Having said that, I am happy to say, and we will talk about it in more detail, that we end the year strongly with a strong Q4 and a strong backlog in the order book that helps us deliver well into the coming years. Let us start with the order book momentum, which remains a strong anchor for our confidence. Over the course of FY 2026, we have witnessed consistent and healthy order intake across our focused industry segments. Each quarter, we had a book-to-bill ratio of greater than one, which ends up at being 1.5 x for the full year. The ability to sustain the strong order book through the book-to-bill ratios reflects not just the demand conditions, but also the effectiveness of our customer engagement model, our service offerings, and our focus on long-term programs.
I am happy to say that the order backlog is the highest that it has ever been, which bodes well for the coming year ahead. Equally importantly, or I would even say more importantly, is the quality of the order book. We are increasingly winning programs that are more complex, more integrated, critical to our customers. These engagements come with longer life cycles, greater collaboration, higher barriers to entry. All of this substantiates the durability of our growth. What this also means, the type of programs that we are working on, means that we will continue to have better predictability and better profitability, which as you know is very important to the sustainability of our business or for that matter, any business. Margins this year at 10%+ were very good, and we believe that will sustain into the future.
A key driver behind this momentum has been our focused effort to support and strengthen the sales organization. Over the past year, we've hired some very good sales leaders across geographies and industry verticals, and this enhances both our reach and the depth. This has helped us to progress meaningfully from being just a manufacturing partner to being a value-adding strategic partner. I would say we continue to hire sales team and good sales leaders, and we continue to see some very good benefits which will translate into, again, the coming year. Being a good value-add strategic partner is relevant in the segments we focused on where selling is relationship-driven. It is technically intensive, and as you know, it comes with long consultation cycles.
With a stronger leadership bench and more structured go-to market approach, we believe now we're putting into place a sales team that is well-positioned to convert and execute a very strong pipeline into FY 2026 on top of a good year for order intake and a very strong order backlog that we start the year with. Of course, we've had challenges this year. Obviously, the significant geopolitical uncertainties that have characterized this year, initially with the scare with tariffs and with the uncertainty, I would say with tariffs. What continues is the crisis in West Asia. Some of our customers have been directly impacted, and this has led to temporary disruptions in schedules and execution plans in Q4. Of course, there is a stress, and it's hopefully a cyclical stress in the electronic component availability, with what's happening in the memory sector.
Given the complexity of our boards, we end up using memory in a lot of our boards. Also, 60%+ of our revenue comes from exports, and therefore the geopolitics and the global issues have a disproportionate impact on us. Of course, despite these headwinds, we've performed strongly. We did well on our delivery commitments. We protected customer confidence, and we responded with agility across supply chain and execution. Another positive we're seeing is the structural shift in the growing fraction in the build-to-spec engagements, which are higher value engagements. While build-to-print or EMS remains an important part of our portfolio, customers are increasingly seeking partners who can engage earlier in the value chain, contributing to specifications, manufacturing decisions Suppliers, part selections, and of course, the entire lifecycle management, which includes things like service, et cetera.
These wins reflect the trust customers place in our engineering depth, process rigor, and governance. On the subject of margins, of course, I'm thrilled with the company's ability to sustain healthy double-digit performance. As you know, this has been our intent and our ambition, and I'm happy to say that this year we ended with 10%+ EBITDA margin across the whole portfolio, including the operations in India and the operations in the U.S. This is the first time that we have ended with 10%+ EBITDA margin for the entire year, and we believe that we are in a very sustainable situation. Of course, this is not by chance. This is through deliberate actions. We're focused on the right segments. We've invested in operational excellence, and of course, we've maintained discipline in cost and execution.
We remain clear that margin sustainability is as important as growth, and our objective is not short-term optimization, but building a robust business model that will deliver long-term value for all our stakeholders. I can again confirm that we continue to invest where it is needed, especially on sales, especially on technology, which will all lead to some very good outcomes over the years. As we look ahead, I am particularly engaged by a strong entry into FY 2027. The order book, the pipeline maturity, early ramps, all gives us measured confidence as we go into the new financial year. Of course, there are global uncertainties, but we are quite confident that structurally we have a very strong business. Obviously, India's growing role in global electronics, increased defense spending, rising electronic content, all bodes very well for Cyient DLM and presents meaningful opportunities.
Before I hand over for the business update, I would like to thank our employees for their dedication, our customers and partners for their trust, and you, our investors, for your continued support. Thank you once again, and I will turn it over to Rajendra to talk about the business. Rajendra?
Thank you, Krishna. Good evening to all of you. I'm Rajendra Velagapudi. I'll quickly walk you through some of areas of the achievements in terms of business. First, I would like to talk about or give a concise overview that covers six critical areas. One is the current EMS industry outlook and its primary demand drivers, notable highlights and milestones recently achieved by Cyient DLM, and our forward-thinking strategic roadmap augmented around the pillars of strengthen, expand, and transform. To just begin, let us look at the industry perspective. The global EMS market is poised for robust expansion, with projections indicating growth from approximately $650 billion in 2025 to nearly $1.1 trillion by 2033, a solid CAGR of 6%.
This trajectory is fueled by a confluence of long-term structural trends, that is accelerating electronification and digitization across multiple sectors, increasing defense expenditures worldwide, shifting geopolitical landscapes that prompt supply chain realignment and localization, the rapid emergence of AI and supporting infrastructure, and a marked rise in domestic investments within India, particularly in defense and rail. Geographically, the demand is distributed broadly. APAC leads 40%, followed by North America at 35% and Europe at 25%. Segment-wise, consumer and IT remain dominant, trailed by industrial, while automotive, aerospace and defense, medical and rail are collectively gaining strategic importance as growth drivers. The key takeaway here is that the EMS industry benefits from enduring multi-year demand, setting the stage for sustained, disciplined growth. Shifting focus to Cyient DLM's recent accomplishments, we have made significant strides on multiple fronts.
At the Integrated Electronics Manufacturing & Interconnections event, which was held in the beginning of last quarter, Cyient DLM recognized by the Global Electronics Association and also achieved top honors in the fiercely contested Hand Soldering Championship, where our participant emerged victorious among a field of international competitors. These accolades underscore our dedication to excellence and are a testament to the ongoing investments we make in quality, training, and process maturity. On the automotive front, we have successfully completed the International Automotive Task Force audit and secured the letter of confirmation, further enhancing our credentials. In addition, we have commenced series supply for a new automotive product line and initiated series production for a semiconductor mission supply partner. These are not preliminary trials, but full-scale repeatable production endeavors, signaling our growing capabilities and reinforcing our entry into more rigorous customer environments. We continued order intake momentum in Q4, as Krishna said.
I am pleased to share that we secured an order intake of over $208 million for the year, resulting in a robust book-to-bill ratio of 1.5x. This performance is a clear testimony to our focused strategy and execution in our key markets. We witnessed good traction across major industries, reinforcing the diversification and resilience of our business model. With the continued strengthening of our sales organization, we are confident that this momentum will further improve as we move into FY 2027. If you are looking ahead, our strategy is structured into three phases, as I said earlier, to strengthen, expand and transform. If you look at the strengthen, our immediate focus is on fortifying our core. This involves deepening our presence in key markets, pursuing operational excellence, and strengthening our build-to-spec capabilities.
Tactically, we are enhancing our go-to market structures, building cross-functional teams, pursuing large deals and new client logos, and investing in automation to support scalable, disciplined growth. If you look at the expand section, the next phase targets selective growth avenues, particularly in automotive, Indian defense and AI infrastructure manufacturing. We are also aiming for vertical integration across cable, sheet metal and machining, broadening both our market reach and manufacturing depth while capitalizing on global industry tailwinds. If you look at on the transform, finally, we aim to move beyond conventional EMS models by developing products and platforms, investing in product organization capabilities and forging technology partnerships and MOUs. This phase is designed to unlock new long-term strategic opportunities and additional growth levers.
In summary, the EMS industry continues to present a promising landscape, bolstered by mega trends like digitization, increased defense spending, supply chain localization and the rise of AI infrastructure. Cyient DLM recent milestones, particularly in automotive and semiconductor, underscore our momentum. Our phased roadmap strengthen, expand, transform, charts a clear and disciplined path for growth through the years. Looking ahead for FY 2027, the company remains focused on operational excellence, margin improvement and deepening strategic customer relationships, supported by a strong pipeline and order book. We continue investments in capabilities and go to market. Thank you for your continued support and interest in Cyient DLM. Now I hand it over to our R.M. Subramanian, our CFO.
Thank you, Rajendra. Good evening, ladies and gentlemen. This is R.M. Subramanian here. Let me take you through the financial performance of Q4 FY 2026 and the full- year performance. For the quarter, revenues stood at INR 3,691 million, reflecting a strong growth over previous quarters in the financial year. on a year-on-year basis, it is down by 13.8%, mainly due to the large order closure in Q4 FY 2025. We also observed some moderation in customer uptake due to escalation prices and project execution phasing getting extended. That said, from a demand perspective, we are encouraged by the underlying pipeline and the order inflows. Coming to the order book, we ended the quarter with a strong order book of INR 24,166 million with INR 672 million net addition during the quarter. The order book reached its highest level in last 10 quarters.
It is really encouraging as it gives us a good visibility moving into FY 2027. EBITDA for the quarter is INR 431 million, down 24.9% year-on-year, and the PAT came in at INR 224 million, a 27.6% decline year-on-year. While the year-on-year comparison reflects the impact of lower revenues and operating leverage, it is important to highlight the sequential strengthened profitability is improving. at the margin level, EBITDA improved 11.7% and PAT stood at 6.1%. Both EBITDA and PAT margin are the highest compared to all previous quarters of the year, reflecting focused execution on operating efficiency and margin accretive business mix in Q4. Let me now walk you through our full year financial performance. For FY 2026, revenues stood at INR 12,615 million, representing a 17% year-on-year decline. The softness is caused by the one large A&D order completion during FY 2025.
This is also a year of moderated demand across certain customer programs and deliberate execution phasing. However, the business demonstrated strong operating resilience through the year despite the softness. On the profitability front, normalized EBITDA after factoring one-offs for Code on Wages impact and M&A expenses stood at INR 1,302 million, a decline of 10.2% year-on-year. While reported EBITDA stood at INR 1,268 million, down 12.6% year-on-year. Importantly, margins remained stable and double digits driven by an improved business mix and tight control over operating expenses. At the bottom line, normalized PAT after factoring earnout impacts for FY 2026 was INR 563 million, down 24% year-on-year, largely reflecting operating deleverage and normalization adjustments. However, reported PAT increased by 7.7% year-on-year to INR 733 million, with margin improving to 5.8%, up 133 basis points year-on-year.
Coming to the order book, we closed FY 2026 with a record order book of INR 24,166 million, which is INR 5,105 million higher than last year. This is the highest order book levels for us since two and a half years. This is providing us a strong revenue visibility and the confidence as we enter into FY 2027. In summary, FY 2026 was a year of subdued revenue. However, we sustained double-digit EBITDA margins and built a record high order book. These factors underline the robustness of our operating model and position us well for a gradual recovery and profitable growth in the coming year. This slide captures the quarterly trend of revenue and margins. Starting with revenue, we saw a steady ramp-up through FY 2025, peaking in Q3 FY 2025, followed by a moderation in FY 2026.
Despite the softer revenue environment in FY 2026, the quarterly trend shows a sequential improvement towards Q4 FY 2026, reflecting a gradual normalization in customer schedules and improved execution momentum as the year progressed. The margin follows similar trend as revenues with gradual improvement sequentially in FY 2026. While EBITDA moderate in early part of FY 2026, we saw strong recovery in Q4 FY 2026. Same is the case with PAT as it shows a healthy upward trend. After the softer start in FY 2026, profitability improved sequentially, culminating in INR 224 million Q4 FY 2026. To summarize, while revenue trends were subdued, both EBITDA and PAT margins show a clear upward trajectory, particularly in the second half of the year. This reinforces our confidence in the structural strength of the business and our ability to convert growth into profitable outcomes as volumes recover.
The next slide highlights the quarterly trend of our non-P&L metrics. Starting with the order book, I mentioned earlier that we see a clearer and consistent upward trajectory. The order backlog has increased from about INR 21.3 billion in Q1 FY 2025 to INR 24.2 billion by Q4 FY 2026, making it at the strongest level the company has seen for quite some time. Inventory days remains elevated through FY 2026, largely driven by advance stocking for the long lead component and program ramp-ups. Importantly, we are seeing reduction in Q4, reflecting tighter material planning and improved execution alignment. DSO has improved steadily, moving from the low 90s to the mid 70s, driven by stronger collection and billing discipline. DPO on an average is higher in FY 2026 compared to FY 2025. During the FY 2026, we saw elevated working capital, typical of a ramp-up and revenue moderation phase.
As we move into Q4 and forward, we are seeing clearer signs of normalization with sharper control on inventory, stable receivables, and a healthier cash conversion cycle. We expect to improve it further as we move into FY 2027. In terms of revenue share, from an industry perspective, aerospace, industrial, and medical continue to be our largest contributors. Defense share is low and having year-on-year decline of 58% due to large order coming to an end in FY 2025. The others segment shows stronger growth, largely aided by B2S business. From a product category standpoint, PCBA remains the largest contributor at around 48% of the revenues, reflecting its continuous strength across industry segments. It is also encouraging to see the box build revenue share going up. Others category recorded strong growth, supported by B2S and value-added offerings.
Geographically, the rest of the world continues to account for over 90% of the revenues, driven by strong demand across those industries we operate. It is expected to remain same in near term. Overall, the Q4 mix reflects a balanced portfolio, increasing contribution from strategic programs and strong overseas demand, which positions us well moving forward. The next slide is a financial detail overview. This slide provides a detailed P&L view for the quarter. As mentioned earlier, revenue is lower year-on-year due to large order completion in FY 2025 and moderate offtake from few clients due to West Asia crisis. However, the quality of the revenue significantly improved along with supply chain efficiencies. As a result, we post a healthy double-digit margins at 11.7%. Although it is lower by 174 basis points year-on-year, the traction is sustainable and hence provides more confidence moving into FY 2027.
With better control in finance charges and benefits from other income, normalized PAT stands at INR 224 million, a significant growth sequentially, but a decline 27.7% year-on-year due to strong Q4 FY 2025. Next slide. Revenue for the year is INR 12.6 billion, down 17% year-on-year growth, primarily impacted by the completion of a large order in the previous year and delayed ramp-ups in a few programs. Material costs are lower year-on-year, mainly due to improved revenue mix. With the revenue contribution from high margin business increasing, we see this trend sustained. The overall margin in FY 2026 have improved due to business mix and better supply chain efficiencies. Normalized EBITDA stands at 10.3, 77 basis points higher year-on-year. Reported EBITDA margin also improved to 10.1% up 103 basis points.
At the bottom line, normalized PAT declined to INR 563 million due to operating leverage and one-time cost during the year. However, reported PAT increased by 7.6% to INR 733 million with 5.8% margin up 133 basis points year-on-year. Overall, despite revenue headwinds, FY 2026 demonstrate margin resilience, disciplined cost management, and improving profitability positioning us well as revenues recover.
The slide is on EBITDA and PAT walk. The slide explains the bridge from our reported to normalized margin. The first one relates to M&A evaluation expenses amounting to INR 17.75 million. We incurred this expense to evaluate a deal that did not go through. The second one is the wage impact totaling to INR 16.4 million resulting from the new Code on Wages, 2019, the government of India. The third item is the reversal of earnouts from the earlier M&A deal. All these expenses above are exceptional in nature and not reflective of normal business. The PAT walk reflects the tax impact of these adjustment as well. The next slide in terms of IPO proceeds utilization. As of March 2025, we have fully utilized the IPO proceeds in compliance with objects we defined during the IPO. We are glad to report that IPO proceeds are fully utilized and the account stands closed.
In summary, FY 2026 performance. This brings me towards the end of the finance presentation. Before we move to Q&A, let me summarize our performance in four key points. Order books remain strong with four consecutive quarters of growth in book-to-bill ratio of greater than one. Revenue was impacted by FY 2025 large order completion, but we are well-positioned for a strong FY 2027 backed by order book. Margin remains healthy at double digits with further improvement possible with scale. Fourth, industry and product mix are diversified and moving in the right direction, supporting the long-term margin expansion. With this, I'll bring to the close. Thank you for your kind attention, and we can move to Q&A from participants.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handcuffs while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Vaibhav Mishra from Finvestor. Please go ahead.
Hello, sir. Good evening. Congratulations for the release from vendors in respect of margins and very good cash flow and order book and all. But I think, sir, there is a small hiccup. You see the year-over-year revenue, I think in the quarter 3 call, we were confident of beating our revenue year-over-year as well. What could be the reason? I think U.S. tariff or West Asia war or any other reason for that?
Yeah. First of all, thanks for that. It is a question which is very important for everyone. I think the challenge and the headwind what we had is one is the West Asia war impact. Because of that, the materials got delayed, because usually all our materials comes through the West Asia in terms of all the fights and all, they got delayed and very late we got the materials for the quarter to finish it. We also had other headwinds in terms of the Israelis where we are working some of the different programs. We could not get some of the approvals, clearances, again, because of West Asia war which is going on there. Added to that, we also have some of the NPA approvals from our customers.
These are the three main reasons where we could not able to meet our commitment what we said in the last investor call.
All right, sir. Sir, it is not in the presentation. How much exposure we have in West Asia in terms of our supply chain or delivery? Going ahead, we expected very strong FY 2027. How is it going to affect our targets? What are the targets that we have set in terms of revenue and margin for FY 2027?
FY 2027, I think the revenue, I think we are not giving any of the guidance right now on the revenue side, but we definitely. However, FY 2026 has gone by. That is a year which was not a good year for us. I think now FY 2027, we will be starting seeing the growth, year-over-year growth. We will be seeing it in all the quarters, four quarters, which is a very strong. I think by looking at the order backlog, what we have, and also the pipeline which we have currently. It gives a strong reason for us to look for higher growth.
Okay, sir-
Thank you. Vaibhav, I request you to join back the queue, please, as new participants waiting for their turn.
All right.
Thank you.
All right. Thank you so much.
Next question is from the line of Sameet Sinha from Macquarie. Please go ahead.
Yes. Thank you very much. I have a couple of questions. Obviously, very strong order book growth, that sounds promising. It is not converting into revenue, and I can understand the reasons you have provided. Can you give us some sense of how do you define order book and backlog, and has that definition stayed consistent over the last few quarters?
Yeah. When we say order book, those are the purchase orders which we have got from our customers. Okay? Only that we will take it where we can take material actions. That is where we will consider the order book. We will not take anything which is a TCV. All those, we will not take it as a part of our order book. Order book is very clear. It is a purchase order which are available with us, executable in this financial year or beyond the financial year. It is a total order book what we have. For the year FY 2027, order book is very strong and solid right now. That is what I think in terms of order book. Order intake is, I think as we said, is only again, the POs what we get from our customers. That only we will take it as an order intake.
It is not anything about the full TCV of five years. We will get around $40 million so that we will not take care the part of our order intake.
Got it. Okay.
Hope I made it clear , Sameet.
Yeah. Just one question. I think in your guidance, you mentioned you are still looking for acquisitions. But the IPO proceeds that you used up over 100%. Any thoughts on what structure are you thinking about as you look to make acquisitions?
Ananth, let me take that. We continue to look for both organic and inorganic growth and as Cyient DLM, which is we continue to look at opportunities. We will look at both from a product perspective in terms of what we do not have and geographically. This is our, in terms of the playbook of what we look for. Based on what comes in our market, we continue to evaluate it, and depending on the fitment, we will look at it. We looked at sometime in the last quarter, but it did not go through. But we continue to look for opportunistically, and as long as it fits in our portfolio in terms of growth geographically or product wise, where we do not have that expertise, we will look for that. So it depends on opportunities.
Got it. One final question. In terms of you identified some new product areas. You kind of spoke about semiconductors, spoke about AI. It seems like you are getting into more sort of critical product segments. Can you spend a minute talking about what product sites are you contemplating building there and give us a sense of when we should start to see the results of those new forays?
I mean, particularly, on the equipment manufacturing for semiconductor equipment manufacturing. We are doing a lot of the power boxes for the customers and a lot of those products which goes into the PCBA, wire harness, and complete integration of those machinery, the sub-assemblies which goes into that. That is where I think we are focusing today, and we are seeing a lot of traction from existing customer and also from the new customers in semiconductor area. Okay. That's what, and again, on the AI side, as I said, we are expanding. That's why I said we are now focusing more on those areas. Probably we will explore more on that and probably come back in the next quarter if we have some update on that.
Got it. Thank you.
Thank you. We'll take our next question from the line of Disha from Sapphire Capital. Please go ahead.
Hello. Am I audible?
Yes.
Please go ahead.
Yes. Thank you so much for the opportunity. Sir, you mentioned that some of our revenue was impacted due to the West Asia. Will it be possible for you to quantify the amount that was deferred? I believe that is the reason our inventory has gone up because the shipment did not go through.
Yes, exactly. We have already planned for that. That is what the revenue which we have missed there. That is where I think the inventory which has gone up, the DAO and the absolute value of inventory has gone up. That is one of that reason, because of West Asia. Yes.
Can you quantify the amount of revenue that we lost out due to this? Will it be possible?
No, I think, as I said, there are basically three areas where we have just impacted our Q4 revenues. I think we don't have. I mean, yes, we have the numbers. Probably, I think, we don't know-
Maybe I can get in here. We don't want to get into exact quantification of this stuff, but if you look at it, some of them are postponed in terms of pushing it to the next quarter, et cetera. But what we can broadly say is these are the reasons why there's been a gap between in terms of what we expected and what happened. But overall, the way we ending this quarter is based on the order book and what we have on hand. This is a confidence that we should continue to grow quarter on quarter.
Is there any color on the order pipeline that we have, and what sort of inflows will be expected for FY 2027?
I mean, we are looking at the order book. I mean, the book-to-bill ratio is greater than one, as we said. I think we'll be focusing on that. I think we are very, very confident by looking at the current order pipeline, what we have. We will be working towards that, and probably you'll be seeing those order intakes for every quarter. You'll be seeing the positive things going forward. Okay. Yeah. That's what I think probably I can say on order intake side, yeah.
Just maybe one point to add to what Rajendra said is, from an order intake is broadly the direction of what we want from a sectoral perspective. The non-A&D segment is growing, and that's the direction we want to go on. There are some focused new areas of what Rajendra talked about in the hazard strengthening of that aspect. So overall, directionally, we are happy with the way the order book is shaping up, and that gives the confidence for going forward.
Okay. All right. S ir, what was the contribution from the B2S segment this quarter?
We're not getting into the specifics of section-wise. I think B2S is a long-term play. Last year we did not have, this is the first year we are having it. For the first year it has done well, and this will, in terms of certification, the series order and volume production, it will have a couple of years down the line is where it will come up. But overall, we are very happy with the way the performance has come up. It's better than our expectations. But we should give that division a little more time in terms of what to do. But otherwise, it continues to be a profitable division.
So this margin of 10%-11%, we sort of expect that to sustain, right, going ahead?
Yeah. Basically, on the margin front, let me try and answer this bit of it. If you look at it, our revenues could have been softer, but we have been able to consistently maintain the margin. It is because based on the quality of the revenue and the order book what we have. Since the current order book continues to remain strong and we are happy about it, we can say that we are confident of sustaining it. If we have the top-up in terms of the growth, the operating leverage impact will start kicking in, and we can have something on top of this bit of it. Okay. So that is what we are confident about in terms of sustaining and performing better as the volume grows.
Also, given the strong order book that we have, can we expect somewhat like 25% or 30% sort of growth for FY 2027? Would that be a fair assumption?
On revenue guidance, we are clear that we will not be giving any guidance on that. Having said that, what I can say is Q4 was a good quarter in terms of the growth Q12, and also the order book and the visibility of what we have, gives us the confidence it will be going to be a strong year, which will make everybody happy. But I do not want to be getting into the numbers, and let us leave it at that.
Okay. All right. Thank you.
Next question is from the line of Adityap al from MSA Capital Partners. Please go ahead.
Hello. Am I audible?
Can you move to handset mode, please?
Yes, sure. Is it better now?
A little better. Please go ahead.
Thank you so much for the opportunity. Great performance on the margin front. Sir, I had two questions on Altek, and then on the investment that we made on our sales team. Let me start with Altek. Altek historically operates on a much shorter book-to-bill cycle compared to the 18-24 month gestation that we usually see in our standalone base. How do you see this impacting our projected FY 2027 consolidated revenue? Because there is enough and more cross-sell synergies. If you can highlight between the growth that we are seeing in standalone vis-a-vis Altek.
Altek, I think as you rightly said, Adityapal, we usually get it, the order intake in the same year. Most of the deals getting converted in that year. Almost 50%, I can say, will get converted. I think we are seeing a good. We also have a good order backlog right now available, and we also see a lot of pipeline from the existing customers. Also to add, I think we also added one of the new customer, the synergy customer from the Cyient DLM standalone side. Now, they also just started working with the Altek. We got the first PO there in the last quarter, and we will be seeing more of those tractions happening from the synergy coming in.
With the order book which we have, plus the pipeline which we have, we are very confident that we will be seeing the growth in Altek business in FY [2027].
Understood. The growth rate that we are seeing in our order book is not explicitly reliant on specific cross-sell synergies. If it happens, it is an addition. Correct?
Correct. Exactly. Yeah.
On the point that you highlighted in your introduction, that you have invested in our sales team. When I look at the standalone EBITDA margins, vis-a-vis the difference between the consolidated and standalone, the EBITDA margins have gone down in Q4 specifically. This is purely because of our investments that we made in Altek in employee expenses. Correct?
Yeah. Let me answer this question. In terms of the average EBITDA margin between the India and U.S. business, U.S. business is going to be lower, and that is something which is expected because U.S. manufacturing will have a lower EBITDA margin. This is in terms of expected lines. That is point number one. Point number two, overall, Altek and the growth in Altek continues to have a bit of a overhang with respect to the tariff overhang still continues to be there. There is no clarity in terms of how this direction is going, which I think we are all aware of. Overall, the synergy benefits and the cross-pollination, there is a little bit of a slowness in it. Hopefully, things should settle down, and then it will lead to it.
Once we have a cross-pollination where Indian customers start going through Altek and the U.S. customers start moving to India, we will see those benefits. Those benefits are just started on a trial basis happening, but not in a full-fledged. When that happens, we will have an uptick in the margin. As of now, none of them is factored in. As you rightly said, the margins are lower, but that's an expected. The more we start moving to India and using Altek as the bridge head in terms of U.S. business is where the uptick will come in. That will take some time, and it also dependent clearly on the tariff overhang getting cleared, which should happen over the period of time.
Understood. Just let me squeeze in one more question. The question one is on the current investment that we made in employee, in the sales team, how much sales can they generate, and what is the revenue potential of the sales team? Also if you can just help us understand the build-to-specification, right? Because last couple of quarters back, you had said that mass manufacturing orders I agree for the four new enterprise clients that we had onboarded will start coming in from FY 2027, Q3 or Q4. We will see actually scaling up in FY 2027. Is this still on or do you see this happening later, earlier than expected? If you can just comment on that.
No, I think as you rightly said, that's what is going to happen. We'll be seeing it from uptick in the order intake because of these new people who are on board. We are also adding few more people where we are in the process right now. With all that, we are definitely seeing more order intake in Q3 and Q4 and beyond. We have some of these new people coming in.
Understood. Also in the build-to-specification that you had mentioned last quarter that we onboarded four new clients in the defense vertical.
Yeah. You will be seeing, yeah. We will also seeing the previous, the revenues and also an order intakes for the next year. Yes.
The inflection point will be back end of FY 2027 or will see the visibility more coming in FY 2028?
No, it will be on the back end of FY 2027 and also in FY 2028 more. Yes.
Perfect. No, this clears a lot of things. Thank you so much and wishing you and the team all the very best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at a time. You may join back the queue for follow-up questions. We also request participants to keep their questions brief. Thank you. Next question is from the line of Harsh Sheth from Pi Square. Please go ahead.
Hi, sir. Good evening. I just want to understand a bit more about the dip in margins that we saw this quarter. I think you answered it previously. I just wanted to get to know more a bit because, we moved out of the aerospace, sorry, of the defense orders, which should give us higher margins, but we saw a dip there. Can you explain a bit more?
From a margin perspective, what I think as we reported, we continue to sustain the double-digit EBITDA margin, which is our focus on. In terms of the absolute numbers, obviously, there has been a drop in terms of the margins. But moving forward, as we move along and if the product mix remains the same, these margins are sustainable in terms of what they are.
Could you just go more into the reason for the dip there in the EBITDA margins?
The EBITDA margins in terms of overall, if you look at it's actually improved in terms of-
No, I'm talking about this quarter, to be specific.
Sorry.
We saw a dip.
Yeah. That's more reflected on the revenue drop and the operating deleverage impact because the fixed cost continues to remain the same. That's the impact of it.
But shouldn't we have seen better margins from not taking up the orders from the defense space?
No. The percentage-
Wasn't that the reason that we moved out of that space in the first place?
That is why I said at the absolute level, it has come down, and at percentage level it is improved or maintained. That is what I explained, which is because of the revenue degrowth and operating deleverage impact.
Okay. Got it.
Thank you. Next question is from the line of Shashank Jha from SB Capital. Please go ahead.
Hello.
Yes, Shashank. Please go ahead with your question.
Yes, sir. I have one question, which is regarding the order book. When you say book-to-bill order of 1.5x, then the order book continues like INR 400 crores this year. It seems that we can do INR 1,600 crores plus of revenue in FY 2027. Can you confirm something on that?
No, I think, see, order book, whatever is there in that is executable order book in this financial year. Then I think as I said earlier, the order book, whatever we have is probably 18 months to 22 months, 24 months range. Right. Not that everything can be happening only in one financial year.
Can you give us a number there, sir? I am asking for some numbers.
That is what I said. We are not giving any guidance right now on that, in terms of how much of the order intake will be converted as a revenue in FY 2027. We are not giving that guidance, but probably you will be seeing that in the next quarters itself. Starting from next quarter itself, we will be seeing that growth.
Okay. Second thing is that, like order book pipeline when you say. Can you give a how big is the pipeline, some numbers, and relative also will be helpful.
Are you talking about sales pipeline, what we have?
Yeah. Order book pipeline that we are negotiating right now or we are seeing from next one year.
I think we have a very good order pipeline right now. As I said, it is closer to a $500 million order pipeline, which we have today. The sales pipeline where the teams are working out to make those things as an order intake. That's where I think the focus is going to be in the FY 2027 order intake target, which we are driving it internally.
Thank you.
Okay. Last thing on the margin-
Shashank, I request you to join back the queue, please. There will be participants waiting for their turn. Thank you. Next question is from the line of Vipraw Srivastava from PhillipCapital. Please go ahead.
Yeah. Hi, sir. Sir, quickly, one line item on the balance sheet, which is contract assets. Can you please explain what is that?
Contract assets is the unbilled revenue which we have. Okay? That is more from the B2S things. Yeah.
Okay. Fair enough, sir. From a working capital perspective, what kind of targets you have for this year? I mean, do we see further improvement from here on, or do you expect to maintain the current level?
Yeah. On networking capital, which we talked about is slightly elevated. So we definitely see possibilities for improvement, and we are going to continue to work on it. Okay? Our target is to reach about 100 - 120 in terms of the number of days, but we have some distance to go. Maintaining, what do you call it, profitable, efficient operations and growing volume is a challenge, but we continue to do it, and we continue to work on improving it. Okay? It will take couple of years, but that is a work in progress.
Sir, last question from my end. From an aerospace perspective, the company has mainly European defense companies as clients there. Are we targeting new geographies or are we continue to be limited to European Middle East?
You were just fast. Can you repeat the question, please?
Vipraw, can you use your handset mode, please?
Yeah. I wanted to know, sir, from an aerospace perspective, we currently have clients in Middle East and Europe. Israel and mainly Rafael and Thales and all these companies. Do we have plans to switch to other clients also, or we plan to increase our volume stream with these clients?
No, that's what I think earlier R.M. Also was mentioning that we'll be also focusing more on the non-A&D side of the business. Which we'll be seeing that. I think if you look at some of the order pipeline, what we have. That's where I think it gives a strong signal to us saying that, yes, we'll be seeing more of the non-A&D along with the A&D growth. Whatever we have the pipeline will be continuing. But yes, not that because of whatever is happening today in West Asia or in other areas. But we see a traction definitely in the non-A&D, and we'll continue that along with the A&D growth.
Right, sir. Thank you.
Thank you. Next question is from the line of Ritvik Agrawal from 3P Investment Managers. Please go ahead.
Hi.
Can you use your handset mode, please?
Yeah. Is it better?
Yes. Please go ahead.
Yeah. I wanted to ask two questions. One was on the directions on margin in the future years and on the areas of growth. Where do we see growth coming from in terms of revenue and order book? Secondly, we have had some days in the quarter. During the war season, are we seeing any positive commentary from the Israeli defense customers?
I will take the questions on the margins. In terms of the margins, we are confident of sustaining the margins moving forward. This is based on the order book in terms of customers and what we have. With the current mix, we can continue to maintain and with the growing volumes, there will be a couple of basis points improvements with respect to the operating leverage impact, which is on the positive side. That is what we will continue to aim for in the next year. In terms of the business growth-
Yeah. I mean, as I said, I think if I can answer your last point in terms of the defense, Israeli business side. I think we will be seeing a lot of traction there, which we are seeing it right now. There are a lot of RFQs in the pipeline which we are working out currently, and we will be seeing more of the order pipeline and the order intake coming from the Israeli customers. We see the growth not only from that one area. I think even from existing customers, both in aerospace, non-aerospace and also the new verticals, electric vehicles, where we are focusing. We are seeing a lot of traction in that one. We will be seeing more of the revenues growth coming from those areas too.
Yes, sir. Thank you.
Thank you. Our next question is from the line of Deepak from Unifi Capital. Please go ahead.
Thanks for the opportunity. Firstly, if you can cover the geopolitical aspect. The U.S. is a big portion of our revenues, so with the reduced tariffs, have we seen any pickup in the demand and order book? That is one. Also the West Asia crisis. I did not understand how much proportion of our revenue is coming from the Israeli client, and I am assuming he would have not given you the delivery timeline yet because nobody knows when the war ends. But on the freight aspect, are you able to read out from other lines or other modes of transport that you are getting the supplies for your raw material that you elaborated. On these two fronts, I wanted your clarity.
Okay. So yeah, sure. Definitely, Deepak. On the tariff side, yes, there is slightly, I mean, there was some clarity, but still the cloud has not gone away. Correct? I think so. We still do not know. But the customers are still waiting. We are seeing some opportunities coming right now asking us for submission of the quotes, but it was not what we were having in the past. But I think probably it will just clear that cloud in the probably the next one quarter or so once we get full clarity from the U.S. tariffs. Okay. But otherwise, yes. But to your question, yes, we are seeing the new opportunities coming in right now. The second one on West Asia, it is not that it is only from one region there where we are not able to make the revenue. Sorry.
It is mainly the supply chain where we are getting it through the air cargo. I think all that cargo comes either from Dubai or Doha. That's where I think we had a lot of challenges in getting the materials. It is not that our final goods are only for the customers there in the UAE region. It is not for that. It is basically for all the customers where we got impacted because of not getting the materials on time.
On this aspect, are you able to fix this issue? Has there been any solution to it that you found which gives you a good visibility going forward? You can answer this, then I have another question.
Yeah, I think we are taking actions wherever we see the impact now. I think that's where our inventory also has gone up because of the materials, where we have some partial materials, and we are working out to ensure that we get the materials. Also, as Krishna said, there are also some challenges in terms of the lead times gone up for the memories. Correct? So those are the things where we had some impact on inventories. Now, if you ask me what are some of the actions, we have already ordered the materials for a long, for the entire FY 2027, particularly for the critical items where there are long lead items, we already placed the orders. So we are ensuring that. That way, at least it will ensure us that we will meet our commitments for FY 2027.
Okay.
Thank you.
Understood. One more question I have...
Sir, I request you to join back the queue, please, as we have participants waiting for their turn. Thank you. Next question is from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah, thank you for the opportunity. Sir, my question related to the order book is, first one is there any order from the associate companies of Cyient you have? How is the mix of the geography in your order book? Because highlighting the RM delay or the Israel defense orders, these which has impacted your revenue. Are these orders also, in the near terms, expected to get a delay in execution?
I think to your first question. We don't have any intercompany orders. Okay? It is all from the customer orders, whatever we have today with us. All order books are from our customers, not from any intercompany. Okay? Second thing is, yes, I think in terms of [audio distortion] . What is the second one?
RM delays which has impacted your revenue. The second is Israel defense orders. You have such kind of order books you have already. In the near terms, we may see execution challenges of your order book because of these.
Yes. Today, what happened, whatever revenue we missed in the Q4, that has just moved into the Q1. Some of the revenue has come into the Q1. Correct? There we will be working. That way, you will be seeing some of the right shift, and probably once the issues get settled down, probably I think everything will come on track. Yeah.
Last question on the margin. That is gross margin. Your gross margin, if I look at on the sequential basis, there is a contraction, and that is definitely because of the memory or the RM electronics availability and all. How you are seeing this gross margin movement in the coming quarters or even 2027, considering such kind of challenges to continue?
Let me take this question. Gross margin, it is not seen a huge movement. A couple of basis point movement has happened. This is a reflection of product mix in terms of what we manufacture quarter on quarter. It is not going to be uniform right through. That is point number one. Point number two, there are also near-term factors of what the supply chain and the disruption and few things like that. It is a combination of both. Hopefully, our target in the long run is to maintain the EBITDA at the double-digit level and in terms of what we are doing. Okay? That is what we will do. There will be a bit of volatility between all of this for the reasons I said, but hopefully, we have been able to manage and sustain the margin, and that is what we will aim for to do in the long run.
Thank you. All the best.
Yeah. Thank you.
Next question is from the line of Kiran from Table Tree Capital. Please go ahead.
Sir, thank you so much for the opportunity. Sir, a two-part question. One, other expenses have significantly gone up this year, even this quarter, despite the year-on-year. Despite the significant drop in revenue, our other expenses have gone from INR 29 crore to INR 44 crore. Q3 was the same. This is obviously differing our EBITDA margins quite significantly. So what accounts for these other expense increases despite severe degrowth in revenue?
Yeah. In terms of our expenses, what you are seeing is a mix of both U.S. and India operations are put together, what you are seeing that. Moving forward, once we see the revenue growth, these are the expenses in terms of we will have the operating leverage effect of it is going to be broadly fixed. We will keep a tab on in terms of what we do with that part.
Sorry, sir, it is not clear at all. I mean, your voice was clear, but your answer is not clear.
What I am saying is, the other expense is a mix of both the India and U.S. operations put together. As we move forward and when the volume picks up, this item specifically will have in terms of a fixed nature. So you will have the operating leverage impact. But what you are seeing is the volume as a percentage is gone up. Hopefully, as we move forward, this will be under control.
Got it. The second question is, in Q3, I guess Krishna Bodanapu did speak about 25% year-on-year growth next year in FY 2027. So if I just do rough numbers, again, I am not looking for exact numbers. We end up at around INR 1,600 crore revenue next year. If we do a 25% growth roughly, and our remaining order book will be INR 800 crore and year-on-year, we will add like quarter-on-quarter INR 500 crore, so INR 2,000 crore. Are we really, I mean, despite all other competition increasing their order books at 40% and similar spaces, right? A&D, aerospace, industrial, medical, quite a few competitors are there. There seems to be some structural. Is there a structural issue why we are not able to grow? Altek acquisition didn't go according to plan, when you say, because you reverse the earnout, right? So that tells that you do not have expectations.
We are not growing our order book by 35%, 40% like the rest of the company who cater to industrial, medical, aerospace and defense, and not even considering consumer. Is there anything structural that we are seeing, a problem within the organization, or is there some industry issue, or is it a West Asia exposure issue? It is just not clear around the strategy of what we are paying for. I mean, the similar numbers, EBITDA double-digit EBITDA margin, all that is taken, but there seems to be something missing in the entire jigsaw, which we as investors are not able to understand.
That is a very good question from your side. I really appreciate that. You can look at it, the investments, what we have just made in terms of our team sales schemes. We just started. I think we have a few people on board. As I said, we are still getting some more people in this quarter. I think those are the things which probably gives us a good order intake and also the new pipelines coming up to us. There is no structural challenges, anything in our organization, because we are running the business since how many years. We have not seen any of those challenges. It is predominantly having the right people there on the ground so that we can get the new orders and go to the new customers and acquire them.
I think as you said about the growth percentages, I think we will be within the ballpark range here for the next financial year for the FY 2027, and we are very confident on that one.
Thank you.
Just to add to what Rajendra said, I think we did have a challenge in order intake in FY 2025, and that's why we had to make some changes in the organization. That has translated to the order increase in FY 2026. If you look at our order intake increase, I mean, you mentioned competition at 35%-40%. We are also at such percentage between FY 2025 and 2026. Yes, I mean, extrapolating that, yes, we did have a problem in 2025 in order intake, which translated to obviously the revenue that we're seeing in 2026. But the fact that we are at competition or even I would argue higher than competition in 2026 should translate or will translate, sorry, into a very strong FY 2027.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. Krishna Bodanapu for closing comments. Over to you, sir.
Thank you very much, and thanks everybody for joining today for this investor call. Obviously, we've talked about a lot, but I'll just say thank you for the very insightful questions and thank you for also giving us some food for thought on where we should be looking at and what we should consider. Like I said, it was a good start to the year, given that we're coming off a very strong order book. So I'm confident that we will have a strong FY 2027. Thank you for your support, and we'll again speak next quarter. Thank you.
Thank you. On behalf of Cyient DLM Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.