Ladies and gentlemen, good day and welcome to Netweb Technologies Q2 FY 2027 Earnings Conference call hosted by ICICI Securities. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Seema Nayak from ICICI Securities. Thank you, and over to you, Ms. Nayak.
Thank you. Good afternoon, everyone. On behalf of ICICI Securities, I welcome everyone to Netweb Technologies Q2 FY 2027 Earnings Call. We have with us the esteemed senior management team of Netweb Technologies led by CMD, Mr. Sanjay Lodha; Full-time Director, Mr. Navin Lodha; CFO, Mr. Ankit Kumar Singhal; Chief Sales and Marketing Officer, Mr. Hirdey Vikram; Chief Strategy Officer, Mr. Mukul Kedia; and Head of Uirtus Advisors, the IR advisor to Netweb Technologies, Mr. Sanjeev Sancheti. Without further delay, I would like to hand over the floor to Mr. Sanjay. Over to you, sir.
Thank you, Seema. Good afternoon to all the participants. Before I hand over the call to Mr. Sanjay Lodha for the opening remarks, I would like to draw your attention to the safe harbor statement in the earning presentation. I request each one of you to go through the disclaimer in that presentation before the meeting starts so that you are aware of the same. Thank you, and over to you, Mr. Lodha.
Thank you, Seema and Sanjeev. Good afternoon, and a warm welcome to all of you to Netweb Technologies' Q2 Financial Year 2027 Earnings Call. We are pleased to report that Q2 Financial Year 2027 has been another record-breaking quarter for Netweb Technologies. It is our highest ever quarterly revenue from operations and profit after tax. Both revenue and profit grew four times year on year. H1 Financial Year 2027 PAT reached INR 222 crores, surpassing our full year Financial Year 2026 PAT of INR 206 crores in just six months. In Q2 Financial Year 2027, revenue from operations grew at a rate of 335.7% year on year to INR 1,323 crores.
Operating EBITDA increased by 334% year-on-year to INR 197 crores with a margin of 14.9%. PAT rose 348.8% year-on-year to INR 137 crores, translating into a margin of 10.2%. Our ability to sustain margins while scaling rapidly reflects strong execution and operational discipline amid rising demand for high-performance computing and AI infrastructure. AI systems remain our primary growth driver, contributing INR 773 crores or 58.4% of revenue from operations, registering a growth of 1,068.1% year-on-year. HPC and private cloud also delivered robust performance, contributing INR 248 crores and INR 245 crores respectively, highlighting the strength of our diversified growth portfolio.
As on September 30th, 2026, our order book stood at INR 2,629 crores with an additional L1 position of INR 653 crores, providing strong revenue visibility for the coming quarters. The quarter also marked a significant milestone in our journey where we successfully raised INR 1,200 crores through our first capital raise since listing in July 2023. We are grateful to our investors for their overwhelming response and continued confidence in our business, growth strategy, and long-term potential. Moving to the industry landscape, we continue to witness an unprecedented surge in global demand for AI compute, with India emerging as a significant growth market.
The India AI Mission represents a major structural tailwind for the domestic AI ecosystem with the potential to accelerate development of indigenous AI capabilities, expand access to advanced computing infrastructure, and strengthen India's AI sovereign AI capabilities. Government bodies, public institutions, and large enterprises increasingly view computing infrastructure as strategic infrastructure, prioritizing secure, high-performance systems that enable critical data and workloads to remain within the country while optimizing the AI token economics. Achieving cost-effective token generation requires more than access to advanced compute. It also demands strong engineering, system design, and solutioning capabilities. Netweb has invested in developing these capabilities over the years, positioning us to address the evolving requirement of this market. Global service providers, CSPs, global cloud service providers, CSPs, data center operators, enterprises are expanding their GPU intensive infrastructure to meet the growing computational demand for AI training, inference, and other AI-driven applications.
India is emerging as an important destination for these expansion plans, creating additional opportunities across high-end computing ecosystems. These developments, together with growing need for indigenous computing capabilities and end-to-end technology stack, are reinforcing the importance of sovereign compute infrastructure. With our integrated design and engineering capabilities, in-house manufacturing, and end-to-end solution deployment expertise, Netweb is well positioned to address these requirements. Strategies across supercomputing and private cloud have also delivered excellent results, further validating our capabilities and market positioning. Furthermore, as National Supercomputing Mission 2.0 places greater emphasis on designing and building compute infrastructure in India, and HPC adoption across enterprise indigenous design and manufacturing, along with bespoke solutioning, are becoming increasingly important differentiators in the high-end computing landscape. We believe these structural drivers will support a sustained growth cycle in high-end computing space.
Our active pipeline of approximately INR 11,152 crores represents the total value of business opportunity currently under pursuit and serves as an indicator of demand visibility. It is important to distinguish this pipeline from our total addressable market, that is a TAM, which is significantly larger and represents broader market opportunity available to Netweb. Together, these reinforce our confidence in growth opportunities ahead. Beyond our core business, we continue to explore emerging opportunities in physical AI and quantum computing, leveraging our technological expertise and established capabilities. As communicated earlier, we are advancing initiatives in both these areas. In physical AI, we are developing capabilities across technology stack, leveraging our AI systems, digital twins, in-house software support, training, simulation requirements. In quantum computing, we have commenced R&D on quantum simulators and emulators and are engaging with institution hubs and startups across ecosystem.
Further strengthening our focus on technology development, our board has also approved the establishment of a wholly owned subsidiary of Netweb in Taiwan for advancing our R&D efforts. This is an important step towards deepening R&D in IT hardware and strengthening our technological capabilities as India's leading technology OEM. We believe this initiative will further support our pursuit in innovation and our ambition to design and manufacture advanced computing solutions in India. As a leading Indian OEM in the high-end computing solutions, we continue to invest steadily in innovation and chip-agnostic design philosophy.
Our alignment with Make in India vision, a stronger balance sheet with our recent capital raise, and a robust order book position us well to capture growing demand for high-end computing, deliver sustainable long-term growth, and create lasting value for our stakeholders. I will now request Ankit to take you through the financial performance in great detail. Thank you.
Thank you, Mr. Lodha. Good afternoon, ladies and gentlemen, and thank you for joining our earnings call. Before we open the floor for Q&A session, I would like to provide a brief overview of our financial performance for the quarter and the first half of FY 2027. I trust you have had the opportunity to review our earnings presentation and press release. Let me begin with our quarterly performance. Revenue from operations for Q2 FY 2027 stood at INR 1,323 crores, registering a year-on-year growth of 335.7% and a quarter-on-quarter growth of 61.4%. Operating EBITDA for the quarter stood at INR 197 crore, increasing 334% year-on-year and 63.7% quarter-on-quarter. The operating EBITDA margin stood at 14.9%, reflecting our ability to sustain profitability. Profit after tax for Q2 FY 2027 stood at INR 137 crore, growing 334.8% year-on-year and 60.2% quarter-on-quarter. The PAT margin for the quarter stood at 10.2%.
Moving to our first half performance, revenue from operation for H1 FY 2027 reached INR 2,143 crore, representing year-on-year growth of 254.2%. Operating EBITDA stood at INR 323 crore, growing 257.7% year-on-year with a margin of 15.1%. PAT increased 258.5% year-on-year to INR 222 crore with a margin of 10.3%. Our first half performance reflects strong business momentum supported by robust demand across our core segments and disciplined execution. Notably, our H1 FY 2027 PAT has already surpassed our full year FY 2026 PAT, underscoring the scale of our growth.
Turning to our balance sheet, we achieved a zero net debt position during the quarter with net cash position of INR 14 crore as of September 2026. In addition, the company had approximately INR 403 crore unutilized from the QIP proceeds. This improved financial position, supported by our recent capital raise, provide us with greater financial flexibility to fund our growth plans.
Our cash conversion cycle stood at 94 days, with receivable days improving to 62 days, while inventory days stood at 117 days. The relatively higher inventory levels are intentional and reflect our preparation for executing the order book of approximately INR 2,629 crore as of September 2026. Given the strong global demand for high-performance computing and the strategic importance of these deployments, proactive supply chain planning and availability of critical component are essential to ensure timely execution of customer orders. Our return on equity and return on capital employed stood at 31.4% and 38.6% respectively. These ratios reflect the impact of QIP proceeds on our capital base. Coming to the utilization of QIP proceeds, we had utilized INR 767 crore of the proceeds as of September 2026.
We remain grateful to our investors for their overwhelming response to the QIP and their continued confidence in Netweb's growth strategy and long-term potential. To conclude, our growth priorities remain firmly on track, supported by a healthy order book, a strong pipeline of business opportunities, and sustained demand for high-end computing solutions. We remain focused on scaling our business, executing customer order efficiently, and maintaining operating discipline and profitability. With that, I would like to conclude my remarks and invite the moderator to open the floor for Q&A. With this, I now hand over the call to Seema.
Thank you.
We now open the floor for questions.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Mohit Bansal with Eternal Access Capital. Please go ahead. Mr. Bansal, please go ahead. Mr. Bansal, please unmute yourself and go ahead. Since there is no reply from the line of Mr. Bansal, we will move to the next. That is Garvit Goyal. That is Shrenik Mehta from Indo Alps. Please go ahead.
Hi. I just wanted to ask the basic question about how fast is overall Netweb growing outside its top five customers? We see a lot of growth in that top five, but not very clear about how you are seeing the growth outside of the top five customers.
I will let Ankit answer it because I think the presentation mentions that very clearly.
If you see, we had been adding our new customers. We added 49 new customers in this H1, and if we put three and a half year as a period, we have added close to 500 new customers to the order book. This is a very important metric that we always report in our presentation because it accounts for 8%- 9% new customer being added to our revenue book. Having said that, the company has been consistently working on and growing on the customers beyond top 10 and top five. Even these top 10 and top five customers, these are not a static customer. There is a pool of 25, 30 customer which keeps on changing.
Having said that, you will see that we are consciously working on the customers and diversification.
Just to add on to what Ankit said. While you are seeing one particular static top five, top 10, but in every quarter, every year, those change. It is not that the business in the medium term is concentrated to the five, 10 customers. There are new customers who come into those top five. That churn which happens. 25- 30 customers probably have churned over the last two, three years to take the top five, top 10 place. Hence, while in statistic it looks like a very heavy concentration, actually it is not.
Okay. All right. Thank you.
Mr. Mehta, are you done with the questions?
Yes.
Thank you. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Jatin from Bank of America. Please go ahead.
Hi. Congratulations, team. Great set of numbers. The two questions that I have is, the first one is around if you can detail a little bit more about your plans in the Taiwan subsidiary. What do you intend to do there? Are you planning some sort of a partnership with some local company over there? Some additional color would be really helpful. The second one that I had is, what is the progress on the next set of servers that is Vera Rubin? Does our order book already have Vera Rubins in it, or does that form part of the next orders that we will start receiving? Thank you.
Thank you. Thanks for your question. On the Taiwan subsidiary, I would like to state that Netweb has decided to set up its 100% fully owned subsidiary. There is no partnership or there is no with somebody. This is primarily completely owned by Netweb only, and this is primarily only for R&D purposes, because-
We have, since we are a company which is growing at a faster rate and new products are always there in pipeline and with Nvidia and all other solution providers introducing products at a very fast rate. We need design engineers and all that. Getting resources sometimes in India becomes a challenge on the hardware side of it. That is the reason that primarily purpose is to hire more manpower, so that they can be available locally in Taiwan. Since those kind of people are easily available in Taiwan, so that those resources can be used for R&D facilities. This will only enable and help us so as to speed up our R&D capabilities. This is the only purpose of that subsidiary in Taiwan.
Next question, I will ask Hirdey Vikram .
Hi. Thanks, [Vishal], for what is our plan for Vera Rubin. Just to share with you that our plan is very much in time that we will be launching and open platforms in India, and the process of designing, writing schematics and creating the Gerber files and all. That all has already started, and as a result of it, very soon we will be having first Vera Rubin system set up in the country very soon at our facility. The plans are very much intact, and as you have seen that in the past also, we have always kept our product launches matching with worldwide timelines. Same is the process that we are following in case of Vera Rubin as well.
In January.
This will be, I mean, commercial for. Yes. We will be planning to basically start offering this product to be sold to the customers by January. We will see if we can pull in the timelines.
Perfect. Thank you so much. This is really helpful. The Taiwan hiring bit that you plan to do is definitely encouraging. Much appreciated. If I can clip one more, the inventory that you have currently, that INR 1,900 crore bit, fair to assume that we will execute that within Q3, Q4?
Yes. This inventory actually is to support the order book only. There will be churning from this inventory, definitely.
Perfect. Sure. Thank you so much. All the best.
Thank you. Next question comes from the line of Vinay Menon with Monarch Capital. Please go ahead.
Hi, sir, and congratulations on great set of numbers. Couple of questions from my side. Gross margins have declined, and I agree that there are component prices are up and that is adding pressure. What base can we look for in the next few quarters, and where could we see a steady state in terms of gross margins?
Gross margin is very difficult to monitor on a quarter on quarter basis. I think it would be good for us to look at a full year basis, and I think we guide on EBITDA, so we are still well in line on the EBITDA.
Vinay, I would also like to add here, it is important to see the EBITDA framework which is being followed. When we enter into a very large scale deal, the profile is inherently different with the small deal. Gross margin becomes a game of different deal mix, which cannot be judged on quarter on quarter basis. But the EBITDA framework is well-maintained when there is a large deals coming in, with whatever gross margin. There is obviously the overheads cost structure do not grow in that proportion. There is obviously a leverage which comes in when we do large deals, and that's why the company has showcased operating EBITDA margins to remain around 14% plus.
Okay. And one more question. We've seen neoclouds like Yotta, E2E announcing CapEx for FY 2027 and even beyond. And we also saw an RFP from C-DAC for some about 10,000 GPUs. Are these part of our current pipeline or do we see any additional pipeline and order book coming from these kind of dealings where we could play a major role?
Thank you for pointing it out. But basically all the names which you mentioned all are customers, and they are very much in the order book, in the funnel everywhere. But basically, we don't specifically state the numbers of the orders or the quantities of particular customers because basically, I hope you'll understand the reason for that. But still, you can see the order book is still after execution of such a robust revenue this quarter, still the order book has also increased. It was INR 2,500 crores last quarter. It is INR 2,500 crores. If you add basically the L1, it would be around INR 3,100, INR 3,200 crores approximately, which is substantially large order book.
Okay. And one last small question, sir. In terms of NSM 2.0, when can we start expecting some orders from it? Maybe early 2027?
You are right.
Thank you. All the best to the team. Thank you so much.
Thank you. Next question comes from the line of [Zayf Sheikh] with Aditya Birla. Please go ahead.
Hi. Thank you for the opportunity and great set of numbers. Congratulations on that, sir. Would like to ask about the Taiwanese subsidiary that you are setting up. Will this kind of enable us to kind of put our company on the same set as that of the Taiwanese ODMs? Will we be able to launch out new products at the same pace as that of a Wiwynn or Supermicro, et cetera? Second question, I would like to follow up on the working capital cycle. First, if you can answer this question.
I didn't get your second question. What is your second question?
The working capital. Net working capital. How is the net working capital expected to shape up in the forthcoming year?
Networking and working capital.
Basically, first I will answer the first question. I hope you'll appreciate that basically, company has been very clearly a Make in India company, and we want to focus on manufacturing in India itself, because the company is a 25-year-old company, and from very beginning, since inception, the idea has been to design, develop and manufacture in India. That was the idea, actually. Plus basically, there are two major differences between the ODMs and Netweb is primarily one is that we are India-focused. The second is that we are not box sellers. Most of the ODMs which you mentioned, they primarily manufacture boxes and they just sell the boxes actually. Basically, we don't intend to become an ODM kind of basically the names which you mentioned, because they are a different kind of companies, we are a different kind of a company.
Primarily, the Taiwan subsidiary will be only used for R&D purposes. That is only to speed up the R&D efforts from our side. You know that most of these technology providers, they also have basically their main R&D centers in Taiwan. Being nearer to them also helps actually. These are the reasons why we have this. Primarily the idea is only R&D at this point of time. Thank you. The second part,
I'll get on that. In regards to the net working capital conversion cycle for September was 94. What we anticipate that our cash conversion cycle will operate between 90-110 days, considering how the quarter growth goes in. 90-110 is the range where our working capital cycle will operate.
Got it, sir. Sir, I think last year we kind of operated at some 14 days net working capital. Is that a one-off thing? Every year it is expected to operate in the same 70-80 or 90 days range?
Yes, if we talk about last year, it was 84 days, the cash conversion cycle. It has gone up because in this year we had been doing the efforts on the inventory days, considering the large order book we have in hand. Even going forward, we will operate in this range only.
Got it, sir. Thank you.
Thank you. Next question comes from the line of Sandeep Shah with Equirus Securities [Pvt. Ltd].
Yeah, thanks for the opportunity and congratulations for a strong quarter. Just the gaining traction from the Chinese memory chip maker like CXMT or YMTC. If this scales up, are we ready in terms of making schematic changes in our design of the server to incorporate these kind of a new partnership?
Sure. Sandeep, thanks for the question. Currently, the architectural changes are not very swiftly moving towards the technology that you are referring to. That is going to take some time. This is also important to share with you that in case if there is some architectural change which happens very shortly or very fast, then we will also be able to adapt to it and there will be other comparable or competing players who will also be able to offer the platform. I think for now we are having a good roadmap available, which will serve at least for two to three years in terms of introducing the new product line and even catering to the current one. That ways we are confident of the product line that we are carrying.
Okay, thanks. Just a related question, to optimize the token cost world over, some of the Fortune 100 clients are preferring multi-model architecture where they are using frontier models, small language model, open source model. Does that also changes our server design, in terms of incorporating various model options? Does those kind of a server demand is increasing even in India?
One thing which is very important, which you must have also noticed by now, which we have already been highlighting, that we have always been focusing on all the layers of our solution. When we design the solution, we focus on providing compute, interconnect storage and the layer above that, which includes our cloud stack also. By virtue of that only we have been able to achieve better token economics for our end customers. It is not basically demanding the architectural change in the server architecture. Rather it is demanding a better design solution, which includes optimized design and going by the reference architecture of Nvidia chips. That is how we achieve better token economics, and we have been helping our customers basis on that only. I think we have been able to justify whatever token maps we have to give to our end customers.
We have been able to justify that. Based on that only adoption of our platforms are happening across multiple customer segments.
Okay, thanks. Just last question, in the AI-led order intake, is the traction also coming from the private organization within India, or is it largely skewed towards government? What is the typical average size of AI-led server demand or order?
Basically, that question is very varied. It can lie from somewhere between INR 5 crores to maybe INR 1,000 crores. As regards the size of the order is concerned, to answer the first part of your question, there is a major thrust from the private bodies on the demand. Government demand as well as private demand, both are in buoyancy and it is no more primarily AI is a government play. The private demand, enterprise demand is also very heavy.
Okay. Thanks. All the best.
Thank you. Next question comes from the line of Prateek Singh with IIFL Capital. Please go ahead.
Hi. Thanks for the opportunity and congrats for the set of numbers. My first question is about 2H. How should we be looking at it, given that the bulk of the strategic order of [INR 52 billion is now largely behind us, maybe INR 3 billion, INR 4 billion is left. I understand that we should not be looking at the business from a quarter to quarter perspective. Just so we can-
Yeah, your voice is not clear. We are not able to understand. Can you speak clearly?
You are coming loud-
Mr. Singh, can you speak a little louder? We cannot hear you.
Is it better now?
Yes.
Yes, please go ahead.
Yeah. I was asking, how should we look at 2H, now that the bulk of the strategic order of around INR 22 billion is behind us? I understand that we should not be looking at it from a quarter-to-quarter perspective, but just so we can get a sense, 2H revenue would likely be higher than 1H as it has been in the past, or we can see a change of trend here?
Basically, I can only tell you, if you see the order book, that will itself give you an indication how the 2H will look actually. Basically, I leave that calculation on your end, but I can only assure you one thing, that we are targeting to achieve INR 4,000 crores of revenue this particular financial year.
Understood. Can we get a sense as to which segments are driving the order book increase? Is it largely AI or it is broad-based across all segments?
I think you are not audible.
Okay, sorry. I will join back with you.
Thank you. Next question comes from the line of CA Garvit Goyal with Serene Alpha. Please go ahead.
Hi, am I audible?
Yep.
Good evening and congrats for the good set of numbers. I wanted to understand on the growth perspective in FY 2028 and onwards. I understand that your pipeline is INR 11,000 crore plus. But in order to grow at the higher base, the kind of execution people have delivered in FY 2027, it is actually mind-blowing, right? On that base to continue a growth of 30%-35% in 2028 and onwards, we need to close a significant portion of the pipeline into confirmed order book by FY 2027. Can you put your view on that, like where we are in the terms of closing this pipeline into confirmed orders? If you can put some probable number, what kind of order book it will look like at the end of financial year 2027.
Garvit, I think you have followed the company for last five years. I think so. You might have seen basically whatever we have committed, we have delivered. If you see the base, which was basically INR 400 crore while we did the IPO, and basically today I am suggesting that we will be doing around INR 4,000 crore. So we have done that 10 x actually. We have always constantly kept our growth numbers around 30% to 40% CAGR kind of growth which I promised year on year. Seeing the current AI demand and the kind of technology innovation which we are trying to do, the kind of unique proposition which Netweb brings on the table in the Indian AI ecosystem, definitely we are very confident to maintaining that growth for at least next two to three years actually.
You see the pipeline has been also very robust. It has been clearly growing at a constant pace. But basically if you tell me that in a minute it will change something or basically the conversion ratio will change, these things does not happen this way. It basically happens only gradually. We have a conversion ratio of around 60% of pipeline, and the pipeline keeps on adding every day. So that gives us a confidence that basically we will keep on growing at the same rate of 30%- 40%.
Also just to add here. Sanjeev, let me add here. If you look at last quarter's order book, after was about INR 2,400-INR 2,500 and after billing about INR 1,300 plus crores, we are actually above the last quarter's orders. The second thing is that we cannot have a confirmed order for the whole of next year right away. The conversion happens gradually but the strike rate is 50% and we are sitting on a pipeline of more than INR 10,000 crores. I think mathematically you can yourself do a model for yourself.
Understood, sir. Secondly, I wanted to know your view. Perhaps, you might have addressed it in the opening remarks to an extent. But I wanted to understand, from the perspective of AI CapEx that is happening in the global market. If I look at the rising cost of capital, the capital that was available to these players maybe six months or 10 months ago, the cost of that capital has increased significantly now. Are these people hearing any kind of hindrances or any kind of reduction in the CapEx by these hyperscalers globally due to rising cost of capital, sir? I just wanted your view on that.
The problem is different that basically as the demand increases, definitely basically the repricing and the cost of capital, the memory prices have gone up by 200% or maybe even more than that. Do you think that has impacted the demand? That has not impacted the demand. Plus, please keep in mind, my complete business is not dependent upon the overseas kind of a demand which is coming to India. Basically, we have a very balanced kind of a demand we have from various areas. But my personal view is that definitely cost of capital and all those things basically will go up because the demand will go up, but that will not deter the demand.
Got it. Thank you, sir. All the best for the future. Thanks.
Thank you. Next question comes from the line of Nishita from [CARE Ratings]. Please go ahead. A reminder to all participants, please restrict yourself to two questions.
Yeah. Am I audible?
Yes.
Yeah. Hi. We have a very good order pipeline of around INR 10,000 crore. Our conversion ratio is also of around 60%. You saying that we can achieve a 30%-40% CAGR, is that conservative? Because from where I see and from how much we can convert our pipeline, we can easily achieve around 50%-60% growth. Are you being conservative?
We can't hear you anymore.
Hello?
Our line got disconnected.
Hello? Hello?
Have you completed your question?
Yeah. Am I audible?
Yes, Nishita, you are audible.
Yeah. I just wanted to understand if we are being conservative when saying we will grow 30%-40%.
I cannot give a guidance on a guidance. My guidance stands where it is.
Okay. My next question is, I just wanted to understand the execution timeline of our current order book.
Basically, it depends. It is 10- 16 weeks.
I'm sorry. 10- 16 weeks?
Yes.
Okay. Understood. Yeah.
That's the standard timeline which we have, not of the current order book. That's the standard with any order that's basically the execution timeline we have.
Okay. Got it. Yeah. Thank you.
Thank you. Next question comes from the line of Seema Nayak, ICICI Securities. Please go ahead.
Congratulations on a record quarter. My question is on the order pipeline. If you could please give a breakup of the pipeline between India AI, foreign AI, and organic, that would be helpful. What is your outlook two years down the line?
Ma'am, thank you for your question, actually, but unfortunately, we don't share the breakup of the order book actually. But basically, I can tell you it's a very healthy mix. The enterprise is also very active these days, and basically the demand is from the government and enterprise, both are mixed together. Definitely, if you ask me in today's order pipeline, I can only tell you that maybe enterprise will be more than the government at this point of time. But basically, this keeps on changing quarter on quarter actually. So that I will not be able to mention to you. But other things basically as regards the growth is concerned, I already indicated you the number which we are targeting this year, and we also plan to grow by 30%-40% CAGR continuously for the next few years now. So we are very confident about that.
What percentage of NSM 2.0 outlay are you targeting?
NSM 2.0 is basically, we are definitely targeting a good percentage. More than half of it we should be targeting. It will not come in one go because that is a five-year program. That will come slowly as it comes, but we will be very well positioned because a lot of indigenization and local manufacturing and all these things have been given weightage under that program. As soon as it rolls over, I think that we will reap all benefits of that.
Got it. Thanks for taking my question.
Thank you.
Thank you. Next question comes from the line of Divyesh Mehta with Invesco India Mutual Fund. Please go ahead.
Thanks for taking my question. What I wanted to understand is actually two things. First is, in my understanding, I think beyond the working capital of 90-110 days which we need, a lot of orders will also require us to block a certain amount of cash in terms of fulfilling that order, right? Any color as to how that would have impacted our cash flows in the recent times? I think that's the first question. The second part is, take for an example, hypothetically, if C-DAC issues a tender for around creating a GPU cluster of around 10,000 GPUs via some vendor. In your understanding, such large orders, how fast do they get executed? Do they get executed 10,000 GPUs in one single slot, or do they go to a single vendor and then that vendor buys from you?
In your understanding, typically, if there's an open tender of something of similar from C-DAC, how would the timeline flow down? Any color on that? Those are the two questions.
Okay. As far as the first question is concerned regarding the b lockage of any cash flows. We haven't seen any such situation because if you see, there is a significant improvement in the receivable days in this quarter. All our debtors that is being reported are all very healthy and top-notch, and there is no such case of any bad debt or being elongated beyond 1 to 10-day cycle. There is no as such on these cash flows.
Whereas inventory is concerned, it is a bit intentional that we are preparing for the upcoming orders. The order book is significantly large. If you see, it's of INR 2,600 crore. So the investment is going basis the supply chain demand and the kind of lead time which has gone up. In order to secure the execution of these orders, we have done so. There is no any pressure on that, I would like to say in terms of-
Thanks, sir. But when I look at our presentation, we give a specific disclosure called free cash in the balance sheet, in the presentation. When I look at the same number, which is in our actual BSE filing balance sheet, both numbers are different.
No.
I was just trying to triangulate because I think one of that numbers says around INR 350 crore, the other number is slightly higher. My understanding was a certain amount is probably sitting as a guarantee or a lien to fulfill some order.
There is a calculation behind this thing which might not be apparently appearing on the balance sheet phase. There are two components. One is the free cash that we have. There are some deposits which do not primarily appear in the free cash, but they sit in every bank deposits which are of slightly longer days. So it appears in a classification of bank balance and other than cash and cash equivalents.
Classification.
There is just a classification.
A large part of the difference is because of the money which was raised in the QIP, that is also there invested.
That is also there.
That is the INR 400 crores.
400 crores.
The rest is on certain bank guarantees and deposits. So it's a mix of both.
Correct.
Large part of it is because of the money which was raised in the QIP and not yet utilized. So that cannot be considered as free cash.
Yes, sir. Thanks a lot. That's the last of C-DAC question. That's it.
The second question, just to answer your question, what C-DAC has rolled out is an opportunity which is for request for empanelment. Under this RFP, they are going to empower CSPs who are going to ultimately offer them the count of GPUs that they are targeting to have. This is definitely not going to stop at 10,000. They are going to demand more because this is the kind of requirement that, because this is on behalf of India AI, by the way, this is not basically on C-DAC's own behalf. That is one. Yes, this is an opportunity which will give us the space to basically create more opportunities for ourselves also because we are already in touch with those CSPs and many of them are already served by us.
In fact, there are certain new players who will also be participating and we are in touch with them. That way, we are pretty much on top of it and this is definitely going to result into more pipeline addition for us.
Okay. Just clarification on this part. In your understanding, is it the case that the existing capacity for India AI Mission which was sitting with those CSPs is rapidly now utilized? Do you think that C-DAC will roll out 10,000 clusters in a single shot and then increase, or is this 10,000 also going to be staggered?
You are a bit confused actually. Basically, there are two parts to it. One is that the earlier India AI RFP which was there. Actually C-DAC is doing the RFP on behalf of India AI. Okay? This is not C-DAC personal requirement, this is India AI requirement. The earlier RFP which they had done where people had offered GPUs actually, those were being utilized. Currently what is happening is that the international rates of the GPUs per hour has gone up. Hence basically the India AI is not able to get the GPUs at the older rates. Hence they are trying to come out with a fresh RFP which they have just rolled out, which people will be bidding and definitely it will be prevailing as per the market rate. As soon as they offer the GPUs they are getting allocated.
Various CSPs will definitely have installations and they can place orders. They have an option of placing orders on us and as the orders are placed we will be delivering. This is how this will work actually. This is not C-DAC trying to deploy these many clusters.
Okay. Thanks a lot. Thank you.
Thank you. Next question comes on the line of Mansimer Singh Sethi with Sethi Capital. Please go ahead.
Yeah. Am I audible?
Yes.
Okay. So in the presentation I have noticed that HDFC and IDFC First Bank are listed for the first time are customers. I just wanted to know that since you mentioned in the opening remark that the data sovereignty and data localization especially in the Indian banking system and financial service is key. Could the banking and the BFSI segment emerge as a significant growth driver for Netweb over the coming years?
Very good observation, sir. Thank you so much.
Hello.
Very good observation, sir. Your observation is absolutely correct.
Okay. Thank you, sir. My second question with respect to that is, recently Nvidia has launched supercomputers in a computer. In the sense they are replacing the traditional PCs and laptops. I just wanted to know how does Netweb view this emerging opportunity and are you evaluating or planning to expand into this segment?
Basically, Netweb is a very focused company into the data center and enterprise workspace. We normally don't get into client devices and selling boxes. I don't think the areas which you are mentioning, it's not very clear to me what exactly you're mentioning, but basically we don't intend to get into laptop space and the client space at all.
Okay. That's all, and all the very best to you and the team.
Thank you.
Thank you.
Thank you. Next question comes from the line of Vinay Menon with Monarch Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. One follow-up. Employee costs have come up on a quarter-over-quarter basis, and if I look at last five, six quarters, this number is increasing. Is it because we are adding talent or is it maybe if you can give a break-up of ESOP costs also in that would be helpful.
Vinay, there are two, three factors behind this increase in the employee benefit expenses. First is this quarter is basically a quarter where increments has been coming in as a cost of eight years. Secondly, there is always a variable pay which comes in line with the growth that we do for the quarter. It's a bit variable because there is a provisioning of incentives and all which goes in. Lastly, yes, there is increase in the headcount. If you see, we have grown by 120 + employee strength as compared to last year's quarter headcount.
Yes, these are three factors, whereas as far as ESOP cost is concerned for this quarter and sequentially the quarter, there was not significant ESOP cost because the tranche which we had given before the IPO, they got vested fully last year itself, so there is not much ESOP cost. Whenever the new ESOP schemes are being distributed, then it will have an impact in this.
Okay. Thank you, and all the best. Thank you so much.
Thank you. Next question comes on the line of Pradeep Nagori, an individual investor. Please go ahead.
Yeah, thank you for this opportunity. First, congratulations, Sanjay , and the entire team for super numbers. Most of my questions are answered, but I would still like to ask one particular question, which is from a future perspective. On your presentation, you mentioned that the new opportunity that we are trying to tap is physical AI and quantum. Could you give me some more details in terms of what exactly we are doing in this space and how large this opportunity can be for Netweb in next couple of years?
These are the new areas that you know. These are the areas which are developing very well, and we are spending into R&D. Actually, at this point of time, we are not willing to disclose more about exactly what we are trying to do, because as you can very well understand, still we have our own reasons, actually, wherein we are not really talking much about it. But some brief information, which I have already shared on my opening remarks as well, that basically is covered under that.
But from a timeline perspective, how do we see in terms of that opportunity getting monetized? Meaning, like what, next one year, two year, three year? How far your estimate is in terms of monetizing that opportunity?
I think this is just presently in initial development stage, and I believe as and when we believe that we are ready to envision the exact numbers, we will get back to it. I do not think we want to speculate on how much we can do at this point in time.
Okay. Just last question. Very short period of time, if you look at year-over-year numbers for both H1 and the quarter numbers. H1 numbers are growing by about 2.5 x and year-over-year quarter numbers are growing by about 3.3 x. But it seems that there is no operating leverage that is kicking in because the PAT numbers or the operating margin numbers more or less remain in percentage terms exactly the same. So, I would assume that when such growth is coming in short span of time, there will be some operating leverage that would be coming in.
You will appreciate that with the scale of growth which we have seen, obviously the size of the business has also increased. The whole structure of the customer profile itself has changed. So for us to be able to maintain EBITDA is something which we are really focusing on. I think we have always very clearly mentioned that we will maintain our EBITDA and PAT, and I think we continue to do that. Ankit, you would like to add something?
Yeah. If you see the revenue and PAT, both have grown 4 x if we compare with the YOY numbers. Having said that, with this scale, maintaining the EBITDA margins, what we have said that 13%-14%, we have slightly crossed that in this H1. Not to be quoted for the entire year, but yes, the EBITDA framework, while maintaining this large scale is what we have been appreciated on.
Also you appreciate that we are a technology-heavy company and we have to keep reinvesting in R&D, and we monetize all the R&D costs. For us to be able to keep developing new products coming out in the market to continue to remain relevant, I think this is a very sweet spot, and none of our competitors are even close to what we earn. I think we are happy to be with this as long as we keep getting the lion's share of the business.
Great. Thank you so much. If I could just push one more question. Who do you see any other competition for us in India, in the space that you are?
We have no idea about that.
Okay. Thank you so much.
Thank you. Next question comes on the line of Basant Bansal with NBC Investment. Please go ahead.
Yeah. Good afternoon, sir. From the results, from your opening remarks, and from the question answers, it looks that everything is good. What are the concerns and challenges that makes you worried, more particularly given the fact that the AI sector itself has a lot of concerns?
Basically there are tools to basically, you have to see if the glass is half full or half empty, actually. To us, it looks basically, in my view, AI sector doesn't have much challenges. Definitely, any sector which grows at such a fast rate, definitely more eyebrows are there. People will think about it. I personally feel AI, or the three areas we work into, one is the supercomputing. Supercomputing is an area which we are working for 25 + years. And basically private cloud and HCI, we are working for 10 + years. AI, we are working for 15 + years. So we have seen basically the entire journey of the complete technology development. So we are very robust and we completely feel that the industry seems to be robust to us, and we feel that this will keep on growing.
And these small concerns will keep on coming and up and down. They are more of investor-related concerns. I personally don't feel there are any fundamental issues with the AI demand or something. The way the AI adoption is happening, the use cases are increasing day by day. It's entering into normal persons' life, actually. So I personally feel that this is only a booster. I don't feel that there is anything negative about AI.
Well, this has just started, I mean, as of now.
Yeah.
This is not basically even the mid of the story. This has just started. So the way token consumption is going up, you will see that there is a lot of headroom for AI as a technology to grow in coming years. So I think there's nothing that, first of all, concerns have started coming up or saturation has started coming up, nothing of that sort.
Thank you, sir. This is very helpful.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Thank you.
Thanks a lot.