Ladies and gentlemen, good day and welcome to the Cyient DLM Limited Q1 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 this conference, please signal an operator by pressing star and 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. I am Krishna Bodanapu, Non-Executive Chairman of Cyient DLM. Welcome to Cyient DLM Limited's earnings call. Present with me on this call are our Managing Director and CEO, Mr. Rajendra Velagapudi, and our CFO, Mr. Shrinivas Kulkarni. Today, we will be covering the quarter one performance of FY 2026. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in our investor update, which has been posted to our website.
Firstly, I am pleased to share that earlier this quarter, the board of directors appointed Mr. Rajendra Velagapudi in the role of CEO, in addition to his role of the Managing Director of the company, and as such, will now be responsible for the overall operations of the company. Many of you already know Rajendra, having met with him when he was the Managing Director running some of the operations of the company, and has been instrumental in shaping Cyient DLM's journey over the years. Under his leadership up to FY 2023, sorry. Under his leadership up to 2023, we have achieved significant milestones, expanded our capabilities, and built a strong foundation for the future, much of which is playing out now.
His appointment as CEO comes at a pivotal time as we accelerate our growth trajectory, strengthen global partnerships, and deepen our presence in high-reliability sectors such as aerospace, defense, medical, and industrial. We are pleased to report that Q1 has laid a solid foundation for the year ahead, despite navigating a very dynamic macroeconomic landscape. Our performance this quarter reflects the resilience of our business model, the agility of our teams, and the continued trust of our customers and stakeholders. We are excited to see a significant improvement in our order book and are pleased to say that we will announce the highest ever order intake in a quarter in the past few years.
The new orders are from both existing customers, which demonstrates the trust our clients have on our capabilities and quality systems, and new customers, which is a reaffirmation of the strength of our sales team and our ability to deliver a solid value proposition in the market. Of course, we've faced certain short-term challenges, most notably the delay in securing a repeat order from a major customer, which has temporarily affected our growth. Having said that, and very encouragingly, our current order book shows strong momentum, and we're confident that this is just a short-term pause with this customer. It's worth highlighting that the backlog now contains higher margin orders, signaling a favorable shift in our business compared to the previous periods, which will continue to be reflected in much better margins going forward.
We have also significantly ramped up our sales efforts by deepening engagements with our existing clients and proactively pursuing new business opportunities. Simultaneously, we expanded our market reach, strengthening our footprint both in domestic and international segments, supported by a much more agile, qualified, and empowered sales team. These efforts are already yielding positive results, reflected in the significant increase in order intake. With momentum building, we are confident in sustaining this trajectory and continuing to achieve a book-to-bill ratio significantly above one going forward. I also wanted to highlight some of our Q1 deliveries were impacted due to the conflict in the Middle East between Israel and Iran. This has created a disruption in the supply chain.
The Iranian and Gulf airspace restrictions have forced number of airlines like Emirates and Lufthansa, which carry a lot of the material that we supply to our customers, to reroute, increasing flight times and costs. Similarly, with sea lanes disrupted, demand for air freight has surged, and it has further constrained space on these aircraft or on these routes, which has driven up pricing for us. Of course, this conflict is a stark reminder of how geopolitics can upend even some of the best thought-through supply chains. We are managing these challenges proactively, and the support we're getting from our clients and suppliers is overwhelming. Of course, we pray for the safety of all involved and hope to see normalcy return very soon. Looking ahead, I am optimistic and confident about the opportunities as the year progresses.
With the U.S. tariff situation stabilizing, China Plus One playing to our advantage, the increase in semiconductors, and the use of electronics in various systems, et cetera, we expect demand to accelerate, especially in aerospace and defense, medical, and industrial sectors, all of which are strong areas for us. We remain committed to delivering sustainable growth, investing in innovation, and delivering value to all our stakeholders. Thank you very much for your patience. Thank you very much for your support. I will now hand over this call to Rajendra and Shrini to provide more updates on business and finance. Over to you, Rajendra.
Thank you, Krishna. Thank you very much. Good evening to all of you. This is Rajendra Velagapudi, MD and CEO of Cyient DLM. I will just walk you through on some of the key trends and some of the growth strategies, what we have right now in place. If you look at the key trends, I mean, I won't go in each point by point, but I will just give a key messages from these things. We are seeing a shift to regional manufacturing due to tariff uncertainty. We are still working on some of those areas. We are seeing nearshoring is one of the area to mitigate. Altek being with us in U.S., that's what we are seeing some of the advantages of regional, local-to-local manufacturing.
If you look at on the global EMS industry, it is projected to grow at a 6.9% CAGR. Taking it to $1 trillion in the next seven years. That's what the market size right now, where we are moving ahead. On the emerging sectors, I think we are seeing a lot of opportunities on the renewable areas, plus EV adoption, robotics, automation. We are seeing a lot of opportunities in those areas at this point of time. On the EMS market side, I think we are seeing a growth in India EMS market driven by the PLI schemes, and also on the Industry 4.0. If you are looking at some of the impact on the U.S. tariffs, which I think probably Krishna just highlighted prior to this one.
We are seeing some of the shift which is happening from China Plus One, particularly in the last three to four months. We are seeing those happening with our existing customers from the U.S. OEMs. They are actively de-risking some of the China dependence. That is an opportunity which we see, we being Cyient DLM's India and U.S. hybrid model, it helps to avoid any of these tariffs impact. That is one of the major advantages, what we are seeing. Also India's cost advantage and the dual footprint in U.S., that is one of the area where we are seeing it attracts the U.S. OEMs.
If you look at on some of the RFQs which we are seeing at this point of time, we are seeing a spike in RFQs coming from our existing customers and also some prospects in U.S. to where we are seeing some of the inquiries which are coming, where currently they are making it in China, so they are doing for a dual sourcing. What we feel definitely it is going to give us a positive impact, in the next few quarters, we will be watching on this one very closely. As I said, our growth strategy. One of the things is on the I think probably we all aware of we have the build-to-print and build-to-spec. I think mainly we are also focusing on build-to-spec offerings.
At the same time, we also have a product roadmap, identified some of the products where we want to focus. Some of the key areas, some of the key products have been already identified and working on some of the product developments, which will definitely help us, going forward in terms of revenues and market share. We are also looking at the new industries like U.S. defense, particularly for the tariffs which I mentioned earlier. That's where I think the Altek acquisition will really help us. Our manufacturing center in Connecticut will really help us. We are also focusing on the EV and ADAS segments at this point of time. If you look at on the strengthening core business, what we are doing is we want to strengthen the core business via large deals and the sector diversification.
Those are the three things which we are working out at this point. On the inorganic expansion, we are looking into some of the inorganic expansion strategies, mainly focusing on the technology and also at the geographic footprint, which probably help us to reach our customers there, and ensuring that it will expand our capabilities. Those are the areas where we are looking the inorganic expansion, particularly on our existing business to bring more technology and also add more footprint which is closer to our customers, and also on our product roadmap. Coming to some of the business highlights on the quarter which has just passed by. We had one new logo in Q1, which is Deutsche Aircraft. This is basically a B2S project which we got it, we are working out right now.
We also have two major B2S orders in the finalization stage, which probably we'll be closing in this quarter. If you look at it, I think as Krishna mentioned earlier, the order intake, this is the highest in the last eight quarters. We have close to $60 million order intake in Q1, which is I mean, the book-to-bill ratio is close to 2x here. We are also focusing on the factory automation and digitization, which is going on, which we're working out. Probably by end of this year, we'll be completely closing this particular initiative from our side. Strengthening sales outside of India, I think as Krishna also said in the earlier that we are strengthening our sales team and ensuring that we're focusing on the growth and that's at this point going on and we'll be continuing strengthening the sales team there.
B2S, I just already mentioned earlier, so we'll be continuing strengthening the B2S capabilities through our technology and people investments and also on the product strategy there. The one last point here is on the two new accounts which was added during the last year. We are seeing a visibility to become multi-million dollar accounts within the next one year timeframe. Also some of the things which are today in the pipeline on the B2S, we'll be expecting to see multi-million dollar revenues coming from those accounts too in the near future. I just hand it over to Shrini. You can also look at it.
Thank you, Rajendra. Ladies and gentlemen, thank you for joining the call and thanks for your interest in Cyient DLM. I will walk you through the Q1 financials. This presentation has been shared with you all an hour ago, so hopefully you have gone through it. I will give you some additional color on how the numbers are appearing. After which, we will open up the floor for questions you have. In terms of revenue, we delivered INR 2,784 million, which is a growth of 8% year-on-year. As indicated in the earlier commentary, the growth for this quarter has been muted for a couple of reasons. One, if you see last year, I think we had a large customer order that has come to an end completely.
The other thing is the conflict in the Middle East has also led to a certain right shift of revenue. This is not revenue lost. We will make up for it in the coming quarters. For this quarter, because of these two events, our revenue growth has been a little bit muted. Having said that, the margin profile of the revenue that we have delivered is significantly better than what it was. We are showing a 125 basis points improvement in the EBITDA margin, which therefore means even though the revenue growth is 8%, our EBITDA growth is actually 25.3% year-on-year at INR 251 million. PAT is at INR 75 million with a margin of 2.7%. The PAT margin is also impacted by the impact of amortization that has come into the P&L.
This is a non-cash item, but when you do an M&A, you do the purchase price allocation. There are certain intangibles which get charged off to the P&L over a period of time. That is sort of impacting the margins a little bit. From an order backlog perspective, we are at INR 2,132 crore, which is a growth quarter-on-quarter of INR 225.7 crore or INR 2,257 million. The order backlog increase is a result of a record order intake, as mentioned earlier. We had an order intake of INR 515 crore during the quarter. This is the highest quarterly order intake in the last 10 quarters. The good news is nearly 50% of this new order intake is actually executable in the current year itself.
We will see the benefit of this new order being executable through the rest of the year. The healthy EBITDA growth is also a function of better revenue mix. This is a sustainable change. What I mean to say is even the new orders that have come in have come in with very healthy margin numbers. This is a sustainable change and we will see EBITDA from this point growing. The 9% number is also a result of a lower revenue base this quarter. As the revenue base picks up, there is a significant leverage flowing into the P&L and we are extremely confident of a double-digit EBITDA at this point in time. The consolidated free cash flow for the quarter is about INR 80 crore or INR 802 million.
This is the third quarter in a row where we have generated positive cash and the outlook for the next quarter is also quite good. In terms of the net operating cash flow metrics and the net working capital, we have done a good job and we do not have any adverse pressure on the P&L because of additional working. As I said, the PAT YoY growth is a result of two things. One is the amortization of intangibles, non-cash items. Other is also reduced other income. I think last year we still had a lot of the IPO funds which were not used, whereas that number has now reduced. I will present later in the slide how much is the money left from the IPO proceeds and that is resulting in lower other income. These are some of the drivers for the profit change.
Moving ahead, if you just see the trend of the revenue, EBITDA percentage, and PAT. I think it is important to present this because there is a lot of seasonality in our business, as you are aware. Usually, our first half is quite weak and then the pace picks up in the second half, as you can see from the four quarter numbers that we have seen in the earlier period. A good number to compare is YoY. In all of these matrices, I encourage you to look at the Q1 2025 number and compare that with the current quarter number. In terms of the EBITDA growth, it is healthy due to the mix and marginal increase in volumes. It will further benefit by the increase that we will see in the coming quarters from the indirect costs playing out over a larger revenue.
Looking at some of the other key KPIs, the order book has shown an increase after several quarters. We are at INR 2,138 million. Our DIO is high at 185 days, but this is also the denominator effect of a lower revenue. In absolute terms, our inventory has not grown much. DPO is healthy. It has grown by about 15 days. DSO is in control. Customer advances are in control. Even though the net working capital shows an increase, year-on-year, there is a reduction in that number. Plus, in absolute terms, the working capital metrics are looking good for the quarter. That is why there is a positive generation of free cash flow.
Going forward, in terms of giving you some of the other metrics in terms of how our business mix is changing, I think the first point to note is the industrial mix. If you remember from a year ago, this chart used to look very different, with a huge presence from A&D. This is a well-balanced portfolio with the acquisition of Altek a couple of quarters ago. So where we have a healthy mix of business coming from industrial and med tech areas as well. From product category perspective, more or less, the business mix has remained consistent. The last chart there, which talks about the mix in terms of export versus domestic. This is again, a big shift in our business. We used to be at around 60%-65% rest of the world and remaining in India.
The one large business deal that has ended with a key customer is resulting in this changing. But what we see is a higher traction coming from the India business. So we will see this come first and is going up in the coming quarter. Our tabular view of the cash. The P&L is given for your convenience to sort of check. Only thing I would caution is when you are comparing year on year, last year's numbers did not have the U.S. operations through the acquisition. So some of the numbers might look a little uncomparable. Like you see, material cost has actually gone down. So the financial footprint of U.S. operations are very different from what we have in India. But at an EBITDA level, they are quite comparable. So I would encourage you to look at it in that light.
Lastly, on the IPO proceeds, we have used up about INR 60 crore towards working capital in the current quarter. We have about another INR 100 crore left to be used for the rest of the year, out of which INR 60 crore is towards working capital and about INR 40 crore towards CapEx. So this is in terms of the IPO proceeds usage. As I mentioned, I think we have been completely compliant in terms of the issue proceeds as stated in the RHP. We will continue to show this through as we continue to use the rest of the funds. There is no pressure to sort of raise funds there because we are in a healthy cash position as of this quarter. So that sort of concludes the finance presentation. We will now open it up for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Vipraw Srivastava from PhillipCapital. Please go ahead. Vipraw, your line has been unmuted. You may proceed with your question. As we are not receiving a response from the current participant, we will move to the next. Our next question comes from the line of Balasubramanian from Arihant Capital. Please go ahead.
Good evening, sir. Thank you so much for the opportunity. My first question is regarding B2S. The company added one global logo and is finalizing two major B2S orders. What is the expected revenue contribution from B2S in FY 2026, and how does this align with long-term profitability goals? Thank you.
Thank you very much for the question from Rajendra here. On the previous, as I said, I think in FY 2026, immediately we won't be seeing much revenue coming over on this one. It will be probably 5% of the one which will be having a revenue in FY 2026. Otherwise, we will be seeing, as I said, and some of the things which are right now in the pipeline where we are already working on this, probably those things will be having, I won't say it's a win, maybe INR 100 + millions of the revenue which we will be seeing over the years.
Okay. Sir, on that, U.S. operations have seen a significant growth, especially in industrial, 425% year-on-year and med tech 142% growth. I just want to understand what is our long-term strategy for balancing our India and U.S. production, especially given tariff uncertainties?
Yeah. I think as I said earlier, I think we are all working out right now with our customers and also the new prospects, where we will be bringing a value in terms of working at a low cost at offshore and probably doing the final assembly at the customer end at our U.S. operations. That way we can bring in value to our customers in reducing the final product price. Those are the things which right now a lot of our customers are in discussion. Some RFQs we are working out with them, so we will be seeing those tractions. Some work probably will be moving from there to here, some will be moving from here to there. We will be working with our customers to ensure that we bring value by having both offshore and onsite models.
Okay, sir. Sir, under different segments last year, we have seen a sharpest degrowth because of the large orders completions. How do you look at in this segment whether we can expect a rebound in shorter period of time? Otherwise, we are pivoting away from the defense side. How do you mitigate in upcoming years?
No, I think the defense sector we will keep focusing, as you have seen quarter. But otherwise, for the last year, that is mainly because of one customer. I think that is not a cyclic business. We will be working out with the customer for the other opportunities and some other big business there. At the same time, we are also working with the other defense prospects at this point of time, both for U.S. and also there is a lot of focus on the Indian Navy defense.
Okay, sir. Sir, on that inorganic expansion side, which are the specific focus on the target side? Is there any timeline for additional M&A? How these IPO funds will be utilized in coming years?
Yeah. So in terms of IPO funds, I think those have been whatever was earmarked towards M&A have already been used. So if we do a new M&A, we will reach fundraise. In terms of the targets, I think we have identified the areas, like Rajendra explained. I think there are customer proximity, the regional capabilities, and technology focus are the areas. We are in early stage conversations with a few companies that have advanced stage at this point in time. As in we commit, we will. But for now, I think it is more of a clean slate first part and then we can sufficiently raise the board, do any sort of debt or equity fundraise if required to make the acquisition.
So in terms of our appetite to do acquisition, as well as from the market perspective, whatever is available, I think, we will wait and watch to see what is the right target for us that fits our strategy and then we will go ahead. But the current IPO proceeds have all been utilized, whatever was set aside for it.
Okay, sir. Sir, on that margin side, what is the margin profile between acquired entity of Altek Electronics compared to our Cyient DLM business? This margin, how do we understand margin profiles between India and U.S. operations?
Yeah. See, when the acquisition happened, we had mentioned this, the margin profile of the acquired company is similar to the margin profile that we have. As we integrate, I think the businesses, there is a lot of synergy benefits flowing into the India books as well. So it will be hard to sort of give that split going forward. We want to operate as one independent entity in the spirit of really integrating the acquired company. But when the acquisition happened, the margin profile was similar to what we have.
Okay, sir. Sir, is there any margin difference?
Sorry to interrupt. We request you to please rejoin the queue if you have follow-up questions. Thank you.
Okay.
Our next question is from the line of Vipraw Srivastava from PhillipCapital. Please go ahead.
Yeah. Thank you. Sorry for being inaudible last time. Sir, quickly on the order book side, as we have seen, obviously a very good ramp-up in quarter one, any plans you have, where will you end up by the end of this FY? I mean, any rough idea?
I think, as said earlier, I think probably our aim, I think we are very confident that we will be just more than 1x. I mean, the book-to-bill ratio will be more than 1x. Okay?
Okay.
She will be beyond that 1x, probably we will be working. But otherwise, by end of the year, definitely the book-to-bill ratio will be more than 1x.
All right, sir. And sir, obviously on the Israel side, as you have suggested, there is some supply chain issues in the short term. But sir, obviously with this whole war thing shaping up, defense spending and aerospace spending is going to increase in these regions. So, are you optimistic that you might see an increased order flow from Israeli clients in coming years?
Yeah, absolutely. I think we actually seeing more of those things, RFQs coming now from that region. Okay? So we'll be seeing it. Some of those things will be coming up in this year too, with some other geographies as well.
Right. And sir, last question. Obviously, the BEL order has been consumed entirely. Any further order wins which you are targeting for in a domestic defense market or the company's current focus is going to stay on exports only? Any thoughts on this?
I mean, the India defense is one of our strategy, so which we have continue focusing. We also have the teams to strengthen there in that area. And probably be seeing those things in the next few quarters on the India defense focus.
Sure, sir. Sure. Thank you. Thanks a lot.
Thank you. Our next question is on the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah. Thank you for taking my question. The first is related to the order book. As there is a good improvement in the order book, and also you had highlighted about the INR 515 crore of order in that quarter, which can be executable over this year only. Is that orders going to change your segment contributions or that is quite in line to the segment contribution at current level?
It is going to be the same level where we are today. We don't think there is any change in any of the sectors. Whatever you have seen, the order intake which we got in the Q1, I think it is more or less in the industries where we are focusing, in the industrial and major. Yeah.
Okay. Order inflow is similar, the segment where we are operating, and that will not change materially for a full year segment contributions. Right, sir? Second question is related to the. Hello, am I audible?
Yeah.
Yeah. Sorry. Second question is related to the book-to-bill ratio. As you had highlighted, your book-to-bill ratio has been highest in the last eight quarters. Can you further elaborate more on that? What exactly is working out for you right now? Is that a kind of order book you are booking in, which has improved that and/or the automation or digitization has something to impact on that? What exactly has happened?
No. Order intake is not on the other. Basically, it is on the sales focus from our team. That is what we have seen some of those order intakes. It is not anything which has happened just like that. There is a lot of effort which has gone in by the sales team to improve this order intake. Right? Probably this is the highest one what we got in the last eight quarters. That goes to 1.9x. But as I said, we are confident that for the entire year it will be more than 100%. But we are working towards that number. Probably you all will be seeing that where we will be standing by FY 2026.
Thank you, sir. Those are my questions. Thanks.
Thank you.
Thank you. Our next question comes from the line of Madhav Marda from FIL. Please go ahead.
Yeah. Hi, sir. Good evening. Just interacting with the company, so initially some maybe very basic questions. Could you give us some sense in terms of revenue growth outlook for FY 2026 and 2027 maybe, and which could be the key segments which could contribute? If you could provide some color there, that will be very helpful.
Yeah. Madhav, we are refraining from giving a full year guidance. I think what we have said that in the past is over a long-term period of five years, I think we can confidently say that we will grow 30% CAGR. Right? There will be odd years where it will be down, another year where it will be shipping, revenue will be higher than that. I think this is a year where we are pivoting, right, as a business. There is a very large order that we executed over the last two years, and that comes to an end. The pivot is also an interesting pivot for us because it is actually the new orders that are coming in are at a significantly higher margin than what that particular order was delivered at.
While we may not see a big revenue growth this year, we will definitely see better margins and higher profit growth. But then, as we continue this trajectory of the book-to-bill ratio being higher than 1x, it is almost 2x this quarter. It will be higher again in Q2 as well. What you will see is that when the growth comes back, there will be a definite much higher quality of revenue that will support that P&L, right? So yeah, we do not give a specific guidance for a year. I think the business is very dynamic. One order can completely change that guidance. It is a growing industry. It is not a mature industry. It is not predictable. So, that is where we stand too.
Okay. The EBITDA margins, you said that it was at 9% in Q1, but you said that new business can come at much better gross margin, plus there is a lot of operating leverage scope.
That is right.
So you are saying basically on maybe two, three year basis margins, you said can be double digits. So are we looking at teens or low double digit? What is the sense? What is the potential for the business? I do not need a FY 2026 outlook, but if you were to think three, four years out, where do you think the margins could settle eventually?
Yeah, I mean, clearly there is a line of sight to get to teams at least. Early teams is not the only team. It all depend on the mix of business that we grow. For now, for the current year, we will definitely be a double-digit margin company. I think even with such a low revenue in Q1, right, compared to what we have seen in, let's say, H2 of last year, we are already at 9%. Imagine the next bit of the next INR 100 crore of revenue coming in at the same gross margin without any growth in the indirect costs. The leverage will play out very strongly in our favor. We see a line of sight. Again, this is not a guidance, but we definitely see a line of sight to a 12%- 13% sustainable gross margin.
Okay. How should we better understand the scope for operating leverage in the business? Maybe if you could help us understand what is the capacity utilization or how much revenues we can grow without adding too much to a fixed cost. Just to understand the extent of underutilization of fixed costs which can benefit us in the margin side. Whatever you can share will be helpful.
Certainly. I think our current capacity utilization is quite low. On a full year basis, we will be close to 55%- 60% of capacity utilization. We have potential to even. This is running at two shifts, right? If we actually run three shifts, we can potentially double the current revenue without having to add any new factory or new SMT line. We have a huge runway in terms of growth without having to spend any further significant CapEx. There will be some maintenance CapEx, et cetera, but those will not be substantial. What will play out is not just the factory capacity, it is also the indirect costs.
You see our d irect cost. It is built for a run rate of $400 million- $500 million. I don't think there will be any substantial addition, or at least it won't grow linearly. It will be a non-linear growth in terms of the indirect cost, as we scale the revenue. That will play out even stronger as the factory capacity gets raised. Both those two levers will ensure that the leverage will play out very strong in half as we grow.
Sure. Just last question. Our legacy business and obviously our exposure to the domestic business has been smaller. If you were to think from a medium-term perspective, do we think domestic can grow faster? Because some of your peers have been doing well here. Do we plan to realign and sort of target the domestic market more versus the past? Or will export/domestic be similar growth?
No, absolutely. A very good question. I think domestic market holds much higher potential than the export market. Our export market is more a legacy where we have strengths that we've played to in the past, which has led to a higher growth. But domestic market has high growth. What we've done over the last 18 months is to build a solid foundation there, which we see results of already. So even in our current order intake, there's a lot of domestic order intake that is coming. We see that growing in the coming quarters.
Got it. All right. Thank you.
Thank you. Ladies and gentlemen, to ask a question, you may press star and one. Our next question is from the line of Deepak from Unifi Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. First question, on your order book, can you give a split between India and Altek? If you can also spell out the execution period of our order book.
We will not be able to provide that split going forward. As I said, I think the acquisition is completely consumed, and we are one company now, right? A lot of the customers are looking for manufacturing capacity in India. Similarly, a lot of our existing customers are looking for manufacturing capacity outside of India. That split would be a little misleading, and therefore, we will continue to provide numbers as one operation going forward. In terms of executability of order book, between 18 and 24 months, depending on the order. But yeah, that's the range of the current order book.
Got it. Sure. Okay. Got it. If one works with 18 months period, INR 100 crore per month should be the run rate in terms of revenues.
Sorry?
Would that be a good assumption to take for the FY 2026 revenue run rate, INR 100 crore per month?
No, Deepak, I think the schedules are very different. You can make an assumption based on a certain run rate, but it will be hard to sort of comment on that because frankly, the customer schedules are what when they need the parts, and that is what is loaded in our ERP today, for which I said 18 - 24 months. But how it plays out has a lot to do with those customer schedules.
Sure. Sir, secondly, this order inflow run rate was quite encouraging. If you can spell out which clients have contributed to this, basically existing clients and which sectors, that is one. I understand that your business is lumpy, so what kind of quarterly run rate or annual run rate in terms of order inflow that one should work with?
I think the order intake, as I said, it is between all the three industries which we had. I think majorly from the A&D, the existing customers. On the medical and industrial, that is coming from the new customers where we got the new orders. That is one of the positive things what we have seen in this quarter, where we receive those accounts will be growing further going forward. So it is an equal distribution between all the three segments currently.
Sure. The order inflow run rate, any guidance that you can give for the full year?
It will be more than 1x. The book-to-bill ratio is more than 1x. definitely. So, that’s what at this point what we are seeing.
Okay, sure. Sir, lastly, on your margins, if I have to break up your margins, India standalone is at 12% EBITDA, while the subsidiary is still at breakeven. When we had acquired this entity, we were assuming that the subsidiary makes a higher margin, definitely more than breakeven. How should we look at standalone and subsidiary margins? If you can spell out for the two entities and then the console margins as well.
When we acquired the company, Altek had a similar margin profile as us. The subsidiary includes the Cyient DLM Inc as well, right? Therefore, I think it's not a comparable number from that perspective. I think it's best to look at this completely because the financial footprint of the two operations are also very different. If you look at India operations, there's a certain mix of materials, labor, and other costs, and with U.S. operations, it's a little different. Then with the synergy benefits now playing out between each of those entities, it's not a right comparison to look at India and U.S. separately. I think for now, let's look at the composite picture, right? From a consolidated perspective, we are confident of exceeding the 10% margin this year, right?
As we grow through the rest of the year, we will see better margin reporting.
Understood. Sir, on the BEL repeat order, if you can give an update as to what's happening there, and why there is a delay in getting orders, and when should we be positively getting the repeat order from BEL? If you can spell out that as well. Thanks.
We don't have any clear indication of the repeated order, when it is going to happen. Basically, BEL has to get it from their end customer, basically from the Indian Navy. We still don't have that visibility, so we are working out the.
Sure. Understood, sir. Thank you. All the best.
Thank you.
Thank you. Participants, due to paucity of time, we request you to please restrict yourselves to just one question per participant. Our next question is from the line of Naushad Chaudhary from Aditya Birla Mutual Fund. Please go ahead.
Yeah. Hi. Hope I'm audible. Two quick one. First, on the inorganic acquisition side, what are the gaps which we are thinking to fill? If you can touch upon this, and any size in mind, beyond which you will not go for. This is first. Second, on the margin side, apart from operating leverage, what are the levers you have for the expansion?
Yeah. See, on the inorganic side, rather than gap that we have, I think it's more to enhance the capabilities of what we have. We currently are into PCBA box build, cable wire harness. Now we have design capabilities, and we can offer build-to-spec, right? So what we'll be looking for is something that enhances this. We've given out broad themes where we look for making that acquisition. So it's not to fill a gap somewhere that we have. Second is on in terms of size. Look, I don't. I think we are quite open there. It all really depends on how it fits the strategy. Right? So, we are comfortable to make a large acquisition as well, if need be. So there is no restriction in our mind. Of course, we have to keep in mind our size as well.
I think that's the only point I will make there. Second, on the margin lever, I think we already spoke about it. Indirect cost is definitely a margin lever. The capacity utilization is another margin lever. The mix of business between build-to-spec and build-to-print is the third margin lever. As the build-to-spec business scales up, our margin improves even further. So you have better control over the bill of material. The design services are, and NRE work is also at a, comes in at a higher margin. So these are all the three things that will play out as levers when it comes to margins.
Sure. All the best. Thank you.
Thank you. We will now take our last question from the line of Amit Shah from Antique Stock Broking. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. My first question is on the order backlog. Is it possible to share the proportion of orders, order backlog, say from how much is from the aerospace? What is the kind of mix basically that we have on the order backlog side? How much from aerospace, defense, industrial, med tech, if you can share that.
I think as I said earlier, I think it is right now for the Q1, for the order, integrated order backlog, we said earlier, right?
Sir, I am asking for the order backlog. INR 2,100 odd crore order backlog that we have. What proportion of our order backlog is coming from aerospace? What is the proportion from defense? What is the proportion from industrial? And how much is getting contributed from med tech?
Yeah. I think if you look at it, that is almost the same play right now between all the three industries. In the A&D, whatever you have seen in the earlier A&D, closely around 40% and 9% was the defense side and the balance equally between the industrial and medical. Even our unexecuted order backlog also is almost in the similar range right now.
Okay. Sir, secondly, you highlighted that we are pivoting more towards industrial and med tech post the acquisition of Altek. I just wanted to know if I look at your historical order inflow on a quarterly basis, that was quite volatile and lumpy in nature because of our dependence on the defense side of the business. With this pivot, can we expect more of a consistent kind of an order inflow, quarterly order inflow? Is that the kind of conclusion that we can arrive post your pivot?
Absolutely.
Would be more consistent as compared to historical numbers that we have been disclosing on the order inflow side.
Absolutely, Amit. I think as I said, we have 1.9x. I think as Shrini said, next quarter it will be more than 1x, which we are already seeing it. And by the end of the year, as Rajendra said, it will be more than 1x, the book-to-bill ratio. So you will be seeing this consistency. Probably you will not be seeing any volatility in terms of the order intake based on the current visibility and the sales pipeline and at what stages some of these opportunities are there. So we are very confident on that front.
Okay. That is helpful. Thirdly, on the gross margin side, right? So this particular quarter, gross margins have improved to almost like 40% kind of gross margins that you have reported. And a very sharp jump on a YoY basis as well as on a sequential basis, supported by your revenue mix. On a sustainable basis, given that your order backlog is now tilted more towards industrial med tech kind of business. Is this the kind of gross margins that one should work with, or what is the sustainable gross margin number for the full year or annualized basis, if you can share that?
I think what you refer to as gross margin is actually the contribution margin where you are just taking the material cost. Yeah, it is similar. I think in a specific quarter, the mix can change, and that will have an impact. But broadly, this is the range which we can assume going forward.
On an annualized basis, sir, should we work with a 30% kind of a number? Is that what you are highlighting?
No, I am not giving out any numbers as guidance. If you look at the current quarter, whatever you are seeing as the mix of direct material cost to the total revenue is the same mix we can expect in the coming quarter.
Sure, sir. Lastly, on the standalone numbers. If I look at your standalone numbers, the revenue has declined almost by 20% on YoY basis. Given that large lumpy defense order has got executed in the previous year. As a standalone business, how should I look at the annualized revenue run rate? What is the kind of growth that we can anticipate in FY 2026? Is it possible to share any order backlog number for the standalone business?
No, I do not think it is fair to give that split now because the businesses are integrated. The only thing I will say is from a standalone business, yes, you are right. The large order has come to an end in the quarter, which was there earlier. But the rest of the business is growing impressively. This quarter also, we had a little bit of an issue with the push outs due to the conflict in the Middle East. But that will sort of correct itself within a quarter. Thankfully, that situation seems to be in control now. But as we go forward, we will start seeing growth in the other areas of the group.
Okay. Is it possible to share, sir, what is the kind of mix that we have on the revenue front because of this Middle East issue?
No, I mean I'll—
In sequential quarter, we'll be able to recoup. Possible to share that number?
It will be recouped through the rest of the year, not necessarily all in Q2, because that's how the schedules work.
Yeah. Okay, sir. Thanks a lot. That's it from my side. Thank you. Thank you so much for answering the question.
Thank you. Ladies and gentlemen, we take that as our last question. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments. Over to you, sir.
Thank you very much, and thanks everybody for participating. As you see, we have had a very good quarter from an order intake perspective and also from a margin perspective. The third element I will also highlight is we had a very good quarter from a cash flow perspective, having generated almost INR 80+ crore of free cash. This gives us the confidence that as growth comes back, and I say as growth comes back because Q1, there has just been a few one-off issues in terms of some of the new orders, some of the push outs because of the Middle East. We are quite confident that with the order backlog and therefore the order intake and the order backlog and therefore the order book. We are quite confident that we will have a solid year.
Not just a solid year from a revenue and a growth perspective, but more importantly, a solid year from a margin and a cash flow perspective. Thank you very much for all your support. Thanks for your time, and we will speak again soon. Thank you.
Thank you. On behalf of Cyient DLM Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.