Ladies and gentlemen, good day and welcome to Cyient DLM Limited Q2 fiscal year 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 very much, and good evening, ladies and gentlemen. With me on the call are Mr. Rajendra Velagapudi, our Managing Director and Chief Executive Officer, and Mr. Shrinivas Kulkarni, our Chief Financial Officer. Together, we welcome you to our Q2 fiscal year 2026 earnings call. 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 posted on our website. We are pleased to share that our Q2 results demonstrate sustained positive momentum across all key performance indicators, including order intake, revenue, margin, and cash flow. This progress builds on the solid foundation established in the previous quarter and strengthens our confidence in the path ahead.
Our order book growth is now firmly on track, supported by a robust book-to-bill ratio sustained for two consecutive quarters and with an outlook to sustain further into the rest of the year. Our strategic focus on the India market has strengthened relationships with existing global clients. Our strategic focus on the India market and strengthened relationships with existing global clients has translated into significant wins. We are seeing strong momentum in build-to-spec orders and have secured prestigious awards from global OEMs. These design-led engagements are currently in development and are expected to ramp up to mass production in the coming years, reinforcing our growth strategy and further deepening our customer partnerships. The revenue potential for B2S projects is long, and it is critical because it provides us stability over an extended period of time.
It is great to see our order book building up in this regard of B2S projects. We are also encouraged by the progress in emerging industry segments, especially automotive. We have successfully onboarded a new client and several more accounts are in advanced negotiation stages. Increasingly, clients are engaging us in early-stage product development, which enhances our value proposition and deepens long-term relationships. By engaging in the early cycle, we are able to have a much better control on the supply chain decisions, which eventually leads to better margins and a more sustained business. Our sales team continues to remain focused and optimistic about the promising opportunities ahead. Despite some of the challenges posed by global geopolitical developments, we are actively managing these headwinds to minimize impact on operations.
I think it is important to note that Israel is a key market for us and the geopolitical situation there has had a significant impact both in the quantum of revenue and predictability of revenue. Where credit is due, and thanks to President Trump, we now can expect the stability to return to the region, which will also greatly support our stability in our business given the importance of Israel as a market to us. We are pleased on what is happening in Israel and with some of the stability that is returning in the region. Our U.S. operations, led by Altek, remain a strategic advantage, providing clients with reassurance and ensuring continuity in delivery, even in the worst case, being close to our customers.
This quarter, our revenue mix is significantly stronger, supported by a substantial backlog of high-margin orders which enhances our confidence in sustaining and growing beyond double-digit margins. I am pleased, and you will see in the financials, that we have reported double-digit EBITDA margins, and we continue to see significant traction in those margins. With solid order intake and clear margin visibility, we are confident about maintaining this positive momentum going ahead. In summary, we are excited about the opportunities on the horizon and are confident that the second half will further strengthen our momentum. We remain deeply dedicated to fostering sustainable growth, investing in innovation, and delivering long-term value to all our stakeholders. Thank you for the continued support, and I will now invite Rajendra and Shrinivas to share detailed insights on our business and financial performance. Over to you, Rajendra.
Thank you, Krishna. Good evening, ladies and gentlemen. It is a pleasure to welcome you all and kick off our Q2 results with the business update. As Krishna highlighted, Q2 has been an exciting quarter from both business and financial perspectives. We have made significant progress across emerging sectors, particularly in automotive and build-to-spec areas. I am pleased to announce a new logo to a B2S order from a Japanese eVTOL urban air mobility company focused on the future of mobility. This program is currently in the development phase and is expected to enter mass production in the coming years, reinforcing our global footprint. We also secured a strategic win from a key automotive client specializing in EV charging solutions. This India-based company, backed by a global giant, represents a high potential account with a short sales cycle.
We are optimistic about this relationship evolving into a multimillion-dollar opportunity in the near future. In addition, we are in advanced discussions with several promising companies, and we expect some of these to convert into key accounts over the next one or two quarters. We also strengthened our portfolio of the B2S, and we have made some investments in those areas, and we have seen the order intake from two of the customers in B2S in this quarter. All these wins contributed to a robust order intake for the quarter. We reported order intake of nearly INR 500 crore with a book-to-bill ratio of 1.6. This exceeds the expectation we set in our last call of maintaining a B2B ratio of above 1 and is a testament to the consistency and effectiveness of our sales efforts.
For H1, our cumulative order intake crossed INR 1,000 crore, reflecting a year-over-year growth of 130% year-over-year. With a strong pipeline and continued traction in the India market, we expect this momentum to carry into H2, setting the stage for a strong fiscal year 2027. While we are not providing a formal guidance for fiscal year 2027 yet, early indicators suggest that we are well on track to resume our growth trajectory. On the strategic updates, I think I just mentioned earlier on the investments, what we already made onto the B2S. In terms of some of the inorganic, I would like to just bring it out. Our M&A strategy is focused on enhancing client proximity, strengthening our capabilities, and ascertaining entry into new industries such as rail and automotive.
If you look at our strategy, what we just coined it as is SET, which is Strengthen, Expand, and Transform. Strengthen here, the focus is to mine our existing customers and build the strategic client relationships and focus on the domestic market, which we have seen, where we have just seen some of the opportunities, where we already won an opportunity in the electric charging station. We are in some of the others are in the pipeline, which we are expecting in Q3. That is what the purpose is, continuing on the domestic market to grow. The B2S, I just already mentioned some of the wins which we had, and we will be strengthening B2S going forward. Then the expand.
The expand area, I think we are going to focus mainly on the non-A&D sector, continuing with what we are doing on the A&D, but is on the expansion in the non-A&D is we are more focused predominantly on industrial, medical, and the automotive, in particular, the electric vehicle infrastructure. In terms of organic, I just highlighted earlier, so we are just looking at some of the acquisitions in the North America and Europe regions. On the transform side, I think on the product side, we have a focus internally, which we have identified the investments we are making it to have our own products, which is IP led by us. We continue working on those things in expand. That is what we are looking to transform into IP product-led organization. To summarize, our order inflows are gaining consistent momentum.
Which you have seen a book-to-bill ratio of 1.6 in this quarter. We also expect for the year, as of now, what we have seen is the book-to-bill ratio may go to 1.4-1.5 for the year. Pipeline strength based on the traction what we are seeing it in India and BTU segment are really encouraging. H2 outlook is really promising, setting the stage for the growth to revive year-over-year growth story starting from Q4 fiscal year 2026. Margin improvement is driven by a favorable mix and scale, which will continue for the next few quarters. Just as a closing, as we look ahead, we are entering a phase where our capabilities, global reach, and sectoral diversification will continue to unlock new growth vectors.
With a resilient core and a bold vision, we are confident in our ability to deliver sustainable value to our shareholders and shape the next chapter of our journey with a purpose and momentum. I will now hand over to Shrinivas for the financial update. Thank you.
Thank you, Rajendra. Ladies and gentlemen, thank you for your interest in Cyient DLM and joining the call today. I will walk you through the financials for Q2 initially, and then we will also look at the H1 as a summary. We did a revenue of INR 310.6 crore, which signifies a de-growth of 20% year-on-year. Our order backlog, as Rajendra indicated, we had an order intake of close to INR 500 crore in Q2, which means we have added another INR 159.3 crore to the order book. Further increase in the order book to INR 2,291 crore. EBITDA is INR 31.2 crore. Despite the year-on-year decrease in revenue, we have been able to keep the EBITDA almost flat. The reason being the expansion in margins.
It is more than 100 basis points increase sequentially and 192 basis points increase in margins year-on-year. This margin growth is despite the loss of volume. That means, even though we had under absorption because of the volume loss, we have been able to get to a double-digit EBITDA margin because of the quality of revenue. What I want to show you here is the order backlog that we see has a similar quality of revenue, so that as we grow the business, we will see this further expanding. We reported a profit of INR 32.1 crore. This is 108% growth year-on-year. However, I want to call out an event which is not normal, and therefore we are reporting the normalized PAT as well here.
As you all remember, we had made an acquisition about a year ago, and there were certain performance conditions to which the earn-outs were tied. Those performance conditions have not been met, and therefore the earn-out is reversed in the books, which comes in as other income giving us an extraordinary gain this time. I want to assure you that the acquisition is intact, the company is doing well. It is just that the performance condition is not met. We are looking at Altek as a very key acquisition and a milestone for the company. It does position us very well for growth in the U.S. markets. With that, the normalized PAT margin was 4%, which is an 8 basis points increase. But the reported profit margin was quite high because of the one-time item at 10.3%.
Looking at the revenue trend, I think as you can see, the growth trajectory is back in Q2 compared to the last quarter. We also have EBITDA growing in Q2 compared to Q1, and the EBITDA percentage is reaching a double-digit number. The PAT is broken into two parts there, which includes the normal PAT as well as the reported PAT. That is what you see in terms of trends. Looking at other metrics which are critical for our business, our order backlog is now showing a continuous. This is the third quarter where we are seeing a continuous increase in the order book. As Rajendra highlighted, we have had more than INR 1,000 crore worth of order intake in the first half of the year. Taking into account the revenue that is reported, the net increase in order book is significantly positive.
We have also made some improvements in the DIO in the second quarter. You will see this seasonality, the Q1 numbers are usually low, and therefore all the metrics around the net working capital show an elevated number. We see improvement as we go through the year. We see that the net working capital has actually dropped to 139 days from 165 days. This also means that we have generated positive cash. This is the fourth quarter in a row where we have had positive FCF. The reported FCF is INR 27 crore, but that is also because there is a land acquisition in Mysuru for building our own factory, which has resulted in that reported number being a little lower than what the operational free cash flow, which is INR 46 crore. We see improvements in DSO. We see improvements in the customer advances as well.
All this has positively contributed to the net working capital for the current quarter. Some of the mix that we have been seeing in the past. You see the industry mix on the left side, where the aerospace is about 37%, defense is 8%, industrial is 30%, and medical is 16%. If you remember this from a year ago, this was very different. We were very heavy on aerospace and defense. It was close to 70% of our business. With the acquisition of Altek and the growth we are seeing in industrial and MedTech segments in the rest of the business, this is a much healthier portfolio and a mix that we are comfortable with as we go along. We are also focused on expanding this industry mix into other areas, without compromising the characteristics of a low volume, high mix business.
From a product category standpoint, we see a higher mix of box builds coming into our business. The box build year-on-year growth stands at around 34%. Because of that, the PCBA mix has declined. This also is well for the business because box build tends to be more sticky in nature. It is also slightly higher margin than the traditional PCBA. The geography mix is there. I think India continues to grow for us. With the large order coming down, I think we had a significant India business ramp down. As we grow the rest of the India business, we will see a higher mix going forward. Currently, we are tracking to about 85% rest of the world and 14% India. This is a slightly detailed view of the financials. I will not go through all the details here.
Important thing here is from a reporting perspective, I also want to highlight the Effective Tax Rate appears to be low because the other income that came because of those extraordinary gains is a nature of a normal profit. It is more on a form of capital gain and therefore excluded for the purposes of taxation. If you remove that, then our ETR standard 25.8%, which is in line with earlier calls. Other than that, I would only say the employee cost and other expenses have increased year-over-year due to the inclusion of U.S. operations, which generally the employee cost there tends to be higher than the resources in India. But the net number to look at there is the EBITDA, which is double digits and a healthy growth of 192 basis points year-over-year. We also have provided a summary of H1 financials.
This gives further color on how we are doing on a half-yearly basis. As you all know, there is some seasonality in the business. Typically, our businesses tend to be between 40%-45% in H1 and 55%-60% in H2. We expect a similar trend in the current year, and therefore, it makes sense to measure first half of last year with the first half of the current year. When you look at that, I think even from that you are seeing the EBITDA margin has increased by a healthy 116 basis points, and even the normalized PAT is lower because of the volume drop. We are recovering from that loss of business steadily. As you can see, the sequential growth coming into the business. By the end of this year, we would have completely overcome from that loss of business, resulting in year-on-year growth.
Our last chart is on the IPO fund utilization. I think we are almost in the third anniversary after the IPO and have used up most of the funds that were raised. The only one that needs to be spent a little more is on the capital expenditures. We will keep updating you in the coming days on how that is getting played out. But we are healthily placed at 93% utilization of the cash that was raised during the IPO. We also have healthy cash balance. Despite the IPO money getting exhausted, we are comfortably placed today to fund any growth that might come in the company. With that, we will open the floor for question-and-answer. Back to you.
Thank you very much, sir. We will now begin with the question- and- answer session. Anyone who wishes to ask questions may press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bala Subramanian from Arihant Capital. Please go ahead.
Good evening, sir. Thank you so much for the opportunity. My first question, we have added a new logo in the EV space. Given the volatility in the EV market, which are the sub-segments we are focusing on within EV? Like charging infrastructure, powertrain. I just want to understand what kind of margins we are getting in the EV space and how these orders are. These are my first questions, sir.
Yes, Bala Subramanian, this is Rajendra here. You said about Japanese customers, eVTOL, that is the electric vertical takeoff and landing. Sir, I asked about automotive specific, EV charging. Okay, but you said about eVTOL, that is right. Okay. If you are asking about that automotive infrastructure, the EV charging, then basically EV charging stations. We are working out in terms of some of the assembly, sub-assembly, which goes into the electric charging stations, which are available today right away in the public area. That is where we got an order from one of the customers in India. To further elaborate on that point, we are going to go into that part of the automotive sector, which is sort of on the infrastructure side of things. The margins are quite comparable with the rest of the business.
Okay, sir. Sir, regarding this Altek acquisitions, I think it has been increased material cost, employee and other expenses significantly which impacted our profitability. When we can expect Altek operations will achieve profitability, and what kind of synergies we can expect? Maybe what kind of timeframe we can expect?
Yeah. Right now we have some of the opportunities going on with Altek, with our unit there in U.S., in Torrington, Connecticut. Some of our existing customers, we have submitted some of the quotes and they are in the positive direction. We are expecting some of those orders will be coming in this quarter. The similar thing we are also seeing is synergy coming from their side to us here too. Where they are working with one of their customers, we are seeing some synergies here in India too. Okay, that is why the synergies are happening from both the sides and mainly from existing DLM India, we are seeing a lot of synergies happening into the Altek.
Okay, sir. Sir, on that build-to-spec side, I think we are targeting 5% of revenue by this year. I just want to understand what are the factors to scaling this business. I think this is a high margin business. What are the factors to scaling in this business? When we can expect more than 15% kind of contributions maybe in next two to three years timeframe? If you could share more clarity on this business.
I think the contribution going to the number what you said will take a lot of time.
Okay. What we have currently is the contribution, whatever the share of the business, the B2S, it will increase in fiscal year 2027 based on the orders what we have today. Which I said, which we have for one of the one we had mentioned about the eVTOL of a Japanese customer. I think the last quarter, we just mentioned about one another U.S.-based company where we had the B2S activity. I mean, there are a few of other things which are in the pipeline, and we definitely see that our B2S revenues will go up in fiscal year 2027 compared to what we have currently in our fiscal year 2026.
Okay, sir. Sir, my last question on the defense and aerospace side. Defense has grown significantly while aerospace has grown significantly while defense has impacted because of their large on-order completions. I just want to understand, is there any broader delays in defense procurement cycles? What is your visibility on new defense program awards?
Right now, I think we are still working out with the customer with whom we worked with in the past. Still they did not get their orders from the Indian Ministry of Defence. We are just working with them. Once they have it, I think probably we will be getting those orders back.
Okay, sir.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two or three questions per participant. Should you have a follow-up question, please rejoin the queue. We will take the next question from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah, thank you for the opportunity. My first question is related to the margin. On the sequential basis, there is improvement in the margin, while the contribution from the aerospace or MedTech, which I believe is a higher margin business contribution, is declining quarter-on-quarter. Is that the industrial business which you are doing have a higher margin as compared to the other segments?
No, I think most of our businesses are quite homogeneous. I think the margin profiles across the industries that we have are quite comparable. So it is the overall mix that has changed, right, in the order book that we have today. Where up till last year, there was one large customer with a large order with low margins, and that has gone away. The mix of the business is favorable now in terms of the margin now.
Okay. Second question is related to the standalone business, which is 40% down, and that is only because of the one large defense order, or is there something else too also?
That is completely because of that one particular order only. There is no other event leading to that.
Okay. And last question. Yeah. Got it, sir. Yeah.
With that one order out, the growth in the rest of the business has been 50% or so. It's been very significant. 15%.
Mm-hmm. Last question, sir, related to the order book, because last quarter you highlighted around INR 500, INR 550 odd crore of order intake, and out of that, 50% was executable in the fiscal year 2026. Is that the part you started executing the last quarter, Q1 order intake?
The Q1 order intake will be executed or executed between Q4. That's what we said, around 50% of that order of the $60 million will be executed between Q2- Q4.
Okay. And that's-
Yeah.
Yeah, sorry.
Which is in the pipeline right now. For our H2 revenues, whatever we have is based on some of the orders which we got in Q1 also.
Okay. Is there any part in this quarter?
Yeah. Whatever we got in Q2 order intake, in that, one-fourth of that will be happening in H2.
Okay. Got it, sir. Thank you and all the best.
Thank you. We'll take the next question from the line of Sameet Sinha from Macquarie. Please go ahead.
Yes, thank you. First question as it relates to Altek. Can you talk about Altek in the broader context of the geopolitical environment? I know you mentioned about Israel, but can you just talk about the new tariff situation and your exposure to that and what's the underperformance at Altek? And if you can talk about the clients, the inbound inquiries that you're getting over there. Then I have a follow-up question primarily related to B2S about what sort of investments are you planning to make here and how do you see value proposition improving because of B2S, and if you can talk about the higher margin versus the core business. Thank you.
Okay. On the tariffs. What I think for some of our customers, we are also working out with them in terms of executing some of the work from Altek. We are just working with them. Where they are also interested to see that how effectively, I mean, basically since we are already working on those products. They just feel that it is easy to transition from India to U.S. to manufacture those products. We are working out to ensure that they won't be losing any of the gains here. Probably they'll be seeing some momentum and some gain here by moving from India to U.S. We are working out some of the things.
Otherwise, for rest of the customers, we have not seen any major impact in terms of the tariffs. On your second question, which you asked about the previous investment, the investments which you said we are making right now, the investments we are doing it for the last, I think four or five years we are investing on this, and we are seeing some of those things right now, which we are already manufacturing. The revenues are coming right now for us. That's what we are seeing, those 5% of the revenues this year. You'll be seeing some of those things, the revenues going up. Our investments will continue. I think we are also doing our own IP product, led IP. There also we are putting the investment and we are developing the design and products on our own.
Then going back to the customers and working with them to win some of the things. We have anchor customers available in those IP-led products. Which we are working right now.
Got it. Thank you.
Thank you. The next question is from the line of Viprav Srivastava from PhillipCapital. Please go ahead.
Hello. Hi, sir. Am I audible?
Yes.
Yes.
Yeah. Okay. Thank you. Sir, just quickly on the other current liability, which has gone up, which is the customer advancement which has gone up. I know, I think last time it went up-
I am sorry to interrupt you. Mr. Srivastava, your audio is not clear, sir. I would request you to use your handset, please.
Hello, can you hear me now?
Yes, sir. Please proceed.
Sure. Yeah. The customer advance has gone up. Because of that, obviously the network capital improved. Last time it went up because of the particular kind of order we had from the defense line. This time, any specific reason why it has gone up, or is this the kind of orders we should expect in coming quarters? Any thoughts on that?
No, we constantly look for opportunities to seek advances from our customers. It is not unique and specific to one defense customer that we had. Even with our other customers, wherever we expect a slightly longer inventory blockage than what is within the threshold of our pricing, we now go and seek that. We have been able to get some advances from other clients as well.
Okay. Sure, sir. And, sir, quickly on the aerospace side, in the coming quarters, what kind of traction you are seeing there? Is the geopolitical situation in Europe helping you out? What kind of growth prospects you are seeing on the aerospace side?
No, I think not specific to the geopolitical situation. I think it has its own way it plays out. I would say we are seeing traction in our business overall, not just in North America, but also in Europe. We are on a growth trajectory and that is continuing through this year and so forth. Nothing specific. In fact, some of the recent, last couple of days, whatever you've seen on the Gaza-Hamas situation with Israel, I think that should help us further. While there was no major disruption to business, I believe some of the decision-making had slowed down. That should come back into the forefront again. We'll see positive changes going forward.
Right, sir. Sir, last question from my end. This Japanese digital customer which you have landed, what kind of ramp-up to expect from them, and how many years you can expect them to start contributing to the P&L?
This is just building a BTS project. Initially we are just working out right now, doing the BTS design wide. The actual products will happen only after two and up to three years it will take, but it continues for a nine-year period.
Okay. Sure, sir. Thank you.
Thank you. We will take the next question from the line of Bhavik Mehta from JP Morgan. Please go ahead.
Hi. Thank you. So a couple of questions. Firstly, it is nice to see an order book improving through quarters, but how should we think about the duration of this order book in terms of conversion to revenues? Are these more like 18 months- 24 months order, which leads to faster conversion, or these are more longer duration order, hence the revenue conversion should be more gradual?
I think most of the orders are 18 months- 24 months. Wherever we have the BTS orders, which we just said there, that is initially the design work. I think even that also will be only within less than two years, whatever is the order book right now. Yeah.
Okay, got it. The second question is, can you break out the order book in terms of the different verticals? Which vertical is driving a lot more orders compared to others? Just a rough split of the order book as per your four verticals.
I think it's quite similar to our current revenue mix. We don't see any significant shift in the composition of the order book compared to our current mix today. The only addition is about 20% of the orders are coming in from the build-to-spec, which is very encouraging as far as we are concerned because we are pushing that business more and more. Build-to-spec tends to have a longer registration cycle as Rajendra explained. There is a design element to it and therefore the sales cycles are a little longer, but they tend to be stickier and very long-term in nature, right? Once the production starts, it's about 10%. The only other thing I'll say in this quarter that's very encouraging for us is automotive.
I think we had a very good order, significant order coming in from an automotive customer, which is a segment where we consciously put efforts to expand our portfolio.
Okay, got it. Thank you.
Thank you. The next question is from the line of Param Vora from Trinetra Asset Managers. Please go ahead.
Hello. Thank you for giving me this opportunity. What I wanted to ask was, what is company exactly doing to broaden the customer base and reduce dependency on top five clients? Are there any targets or timelines for this diversification?
Yeah, I think as you have seen in terms of expanding the non-A&D sector, is where we are working out, and we also have the sales team which is basically right now focusing on the new customers. We are seeing some of those things in the pipeline. There's a lot of the orders on the pipeline, in terms of new customers where we are driving. Also the focus on the Indian-based customers. We'll be seeing those trends in the next fiscal quarter. Majority of the things will be happening from India-based and the new customers.
Okay. Another question is, there's a visible shift towards strengthening Indian operations. Do you see India becoming main growth engine, and will exports always dominate? Is there a scenario where India's share could exceed exports?
India, we are focusing on India, but our exports, probably if we look at the mix, exports will be the highest, then comes to the India. India market growth, we are seeing a good growth in India right now based on the opportunities what we have on the pipeline. We'll continue to focus on India and at the same time, I think our aerospace and defense is our core, where we'll be strengthen those things and focus on the non-A&D customers going forward. I mean, particularly in industrial and other sectors.
Okay. Thank you.
Thank you. The next question is from the line of Adhiraj Singh from Amicus Capital. Please go ahead.
Good evening, sir. A couple of questions. First, on the order book. I just want to understand in the next six months, how much of the order book are we planning to execute?
You mean from the Q2, what all we got, you said?
Yes. Outstanding, so INR 2,300 is what I see. How much of this would be executed in the next two quarters into Q3, Q4?
No, we will not be able to provide that specific number because that would then amount to giving the guidance on the revenue itself. What I will just say is that there is a healthy amount of that order that is executable for the current quarter.
Okay. My second question is on the U.S. business. How much of the revenue do we get from the U.S. market? With this tariff coming in, you had mentioned that some of the customers, you are not having discussion, the business is going as usual. What is the reason for that? Are you the sole supplier or what would be the reason? Secondly, with the customers you are having the conversation, they are looking to move their supply chain to the U.S. itself, or you are working out some other destination, like let us say going to Vietnam or I do not know. Something if you can help me understand.
Our U.S. business is roughly, I think for this year, we expect 40% of our business to come from the U.S. Look, I think there are many conversations going on with customers to see how we can offset the impact of the tariffs. There is no one solution. It works differently for different customers. Some customers want us to change the ship-to location to where their customers are so that the product is prepared there. Some others are just paying the tariff right now from their profit, and they are waiting for some change to happen in the regulations. Few others are trying to see if we can route the products differently and through different geographies. I mean, there is no one solution. Frankly, it is very customer specific, and it depends on the usage of the part as well. We are open.
We are discussing with all of the customers. Obviously, we will not be able to pay the tariff ourselves, given the low margins in this business. It has to be a solution that we work out with the customer to support.
Sure. Understood. Thank you.
Thank you. The next question is from the line of Maitri Shah from Sapphire Capital. Please go ahead.
Yeah. Hello, good evening. Am I audible?
Yes, ma'am. Please proceed.
My first question is, the orders that we currently have in backlog, what percentage is from the-
Ma'am, sorry to interrupt you. Can you keep your mic a little bit farther from your mouth because there is an airy disturbance which is coming.
Yeah. Is this fine?
Yes, ma'am. Please continue.
Okay. What percentage of build-to-spec order do we have in our order backlogs?
No, the question was not clear. Can you say it again?
Our share of business spec orders, what is the percentage in the backlog currently?
What is percentage of backlog? I am not very clear about the question.
Percentage of build-to-spec orders in our backlog.
Ma'am, I am sorry to interrupt you, but if you will use your handset, that will be nice.
Yeah, I am using my handset. Is this not audible? Hello.
Okay, ma'am. Please continue.
Thank you. You got the question. I will respond. I think basically your question is how much is build-to-spec in the overall order book that we currently have?
Yeah. Correct. Yes.
We do have more than 10% of the order book in build-to-spec in the current order.
How do we see it growing forward in the next six months, fiscal year 2026?
Absolutely, we see it growing significantly because we are focusing on build-to-spec as a focus area as far as we are concerned. I think that's how we differentiate ourselves compared to some of the other competitors that are there in this space. Design capability is very unique to Cyient DLM. I don't think anybody can boast of having such a large design setup to service our clients. With the large experience we have working with clients, they also trusted on giving more design to us. It's a focus area. We are growing. We are seeing a lot of traction. In fact, there's a very healthy sales pipeline that we are working on, and we expect the build-to-spec business to grow quite heavily going forward.
Quantification by the end of fiscal year 2026, what percentage do we see this in our order?
It will be hard to quantify because I think it all depends on the win rates and the customer cycles, et cetera. What I can tell you is that it's on a growth trajectory, and we continue to see growth in that.
Okay. And so the BTS orders going into mass production, do we have any idea of how many contracts do we see them going into mass production next year, fiscal year 2027?
So almost all of them will go into mass production, but not in fiscal year 2027. We have long design cycles. I think the first manufacturing order we might see is from 2028 onwards. But some are already happening now, small things. Small ones are happening currently, and that will continue in 2027 as well. But a lot of the bulk of the manufacturing orders will come in a little later.
Yeah. Now that we're expecting a growth quarter-on-quarter happening in the revenues, do we see a full year-on-year growth for this year? Or will that happen in the first quarter of fiscal year 2027?
Yes. We are absolutely working towards that, and we expect the growth coming in the fourth quarter of this year.
Fourth quarter or first quarter?
Fourth quarter of the current financial year.
Okay. You do see also. This will be more heavily. That is from the defense side and more from the industrial side of the business. Is that correct?
Yeah. That is correct. Yes.
We do see the quarter-on-quarter margin improvement as well happening.
Yes.
Okay. Thank you so much. Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments. Thank you, and over to you, sir.
Thank you very much. I just want to thank the leadership team and acknowledge what we've achieved this quarter. We've refreshed the [inaudible] revenue. At least the order book is completely refreshed with a much better margin revenue, which gives us confidence that we will maintain the double-digit EBITDA margins at least into the foreseeable future and really grow the double digits because this time we barely scratched 10. We strongly believe that will grow. The team has made sure that the backlog is built in such a way that we will grow some very good business, both good margin business, but also what you heard about, which is the B2S business. Some of the contracts that we're talking about run into 20 years, which gives us the stability to then aggressively grow the rest of the business. B2S is important for multiple reasons.
One of which is, of course, the control we have over the supply chain, the stability of the business, and the longevity of the business. I can assure you that after a tepid, of course, Q1, we've seen some good growth in Q2, and this growth will only accelerate and continue through the rest of the year. I just think it's appropriate to pass on what the board said and compliment the management team on where we stand. I want to assure you that a lot better times are coming, and we are seeing this based on our order book and where we see the business. Thank you very much for your support, and we will again speak next time after the results. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Cyient DLM Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.