Q1 framed Israel-Iran shock + AI/ML posture.

On margin performance for the quarter - we have seen a very sharp increase in margins year-on-year. Could you share insights behind these improvements? What was on the account of material savings, localization and how much was on the account of product mix?

Last year overall margins were almost 27%, so this is slightly better than that, which is a good sign. The annual guidance for this year is 27% and we are trying to adhere to it. Damodar Bhattad added that gross margins were better in the first quarter due to product composition having more in-house manufacturing, driven primarily by product mix.

Update on large ticket ordering opportunities - QRSAM program timeline, MSR program through shipyards, and project Kusha development phase?

On QRSAM, DAC approval was given on 3rd July 2025, with RFP awaited; we are confident to receive the order in Q4 of this year itself. For MRSAM/MSR subsystems, shipbuilders have orders and a considerable portion of subsystems orders is expected over Q3 and Q4 with some spillover to Q1 next year. For Kusha, we are still in joint development with DRDO and order conversion will take a minimum 3 to 4 years.

On Virupaksha radar - there was a press release about another company receiving order for exciter unit and certain components. Have we also received the order or in which phase are we?

Virupaksha radar is mainly for 230 with various subsystems. We have received one developmental order from DRDO and are in the execution stage. The other company also got developmental orders for two subsystems. The main order is with BEL and Astra Microwave for the main systems, but bulk orders will only come after prototype evaluation and testing are completed.

On emergency procurement - last call indicated INR40,000-50,000 crores potential. Things appear to have cooled down. What are you hearing? Are recent orders part of emergency procurement or over and above this?

Emergency procurement activities have started and we have received one or two orders already, including one LLLR radar. September is the cut-off and we expect many more orders in the next two months. All these orders will be part of our INR27,000-plus crores order inflow target. We have already received more than INR10,000 crores and EP will help us cross the remaining INR17,000-plus crores.

Any impact of supply chain since this quarter we did about 5% growth despite strong order book? And how are we dealing with the rare earth magnet ban from China - any exposure?

We could only register 5.19% growth versus our internal expectation of double-digit, because the Israel-Iran geopolitical conflict affected at least INR200-plus crores of revenue execution; we are confident of compensating in Q2. On rare earth magnets, this is not affecting BEL directly because we are not a big player in EV; the issue mainly affects automobile sector and other companies.

Could you share timelines for the Shatrughat and Samaghat electronic warfare system orders? Also, how large would these orders be?

Good progress has happened on these interrelated programs. We have already received the RFP for the Samaghat program and are responding to it; the next RFP for Shatrughat will follow with similar configurations (one for plain/desert, one for mountain). Total order value for Shatrughat and Samaghat together will be around INR6,500 crores plus.

On the Next-Generation Corvettes program - subsystems orders worth INR60-100 billion. What is the overall addressable electronics pie in this order, and what is the indigenous content?

All subsystems are totally homegrown barring MF-STAR/MRSAM which has roughly 50:50 work share with our foreign OEM. Other subsystems may have some IC or component-level dependencies where India lacks manufacturing capacity. Overall, around 60% to 70% minimum, more likely 70%, indigenous content can be assumed for the NGC program for BEL.

Revenues are now almost touching INR300 billion annually, but order inflows are about INR270 billion and the order book stood down slightly. Thinking three to four years out, can we sustain 15% plus revenue growth from this large base?

Certainly yes - 16% is not at all a challenge and we are internally aiming for 17.5% plus. Several large programs (QRSAM, Kusha worth INR30,000-40,000-plus crores), missile programs (Pralay where BEL is DcPP partner with BDL), radars and equipment for ships/submarines/airforce form a strong pipeline. We will not go below 15% growth and expect to stabilize in 15-18% range over the next 3-4 years.

On employee base and R&D spend - what is current employee base, additions on technical side over last 3-4 years, and R&D spend as percentage of revenue?

Employee base was around 9,000 (slightly less); this year we will cross 9,600-plus and next year definitely 10,000-plus. Almost 70%-plus of new recruitment is going into R&D, including 200 scientists from premier institutes for our CRLs. R&D investment was 6.2% of turnover last year and this year we are targeting 6%-7%, which translates to INR1,600 crores to INR1,800 crores - not less than INR1,600 crores.

On modern warfare technology shifts in AI/ML and quantum - do we have these technologies in India or do we need ToT with other countries? Where do we stand vs US or China?

We are almost at par with these countries in AI/ML technology. We have created AI incubation centres for Navy and Army at BEL, working closely with defense forces and startup ecosystem. All major C4I programs already have AI/ML components and many more are planned as value addition. We can deliver these cutting-edge solutions for modern warfare without any support from foreign countries.

On exports - how will export revenue look over next five years? And on LCA Mark I, with engine availability delays and HAL planning to finish 5-7 LCAs, what would be contribution from LCA platforms this year?

Exports have consistently grown 20% year-on-year and we target reaching 10% of turnover via exports in next five years (currently 4-5%). On LCA, despite engine delays at HAL, our electronic components supply is on track per contractual timelines and is not impacting our revenue. HAL contribution this year (LCA components plus helicopter components plus radars) will be around INR1,000 crores plus/minus INR100 crores.

Can you give the breakup of pending orders in your current order book - top 5-10 large value contracts?

As on 1st July, top programs are LRSAM around INR5,000-plus crores, Fuses around INR4,500-plus crores, Akash Army around INR3,000 crores, BMP upgrade around INR3,000 crores, Ashwini-Arudhra radar around INR2,500 crores, Shakti EW system around INR2,000 crores. The top 10-12 programs together account for around INR35,000-40,000 crores of the order book.

On the recently received air defense ATULYA radar from Indian Army - what is the execution cycle? And for Mi-17 V5 Electronic Warfare suite, would it also be 3 years?

ATULYA radar will be executed in roughly 3 years for 24 radars, since prototype and early production model are ready and there is no FOPM. For Mi-17 V5 EW suite the cycle was 4 years total since user has to provide helicopters for upgrade per their plan; one year has already passed leaving 3 more years in the schedule, on track.

On order book constitution - which major programs will contribute to executing the roughly INR22,000 crores of balance revenue in next 9 months at 15% guidance?

Major executable programs in next 9 months include LRSAM around INR3,000 crores, HimShakti around INR1,700-plus crores, Akash Army around INR1,300 crores, D29 LRU for LCA, BSS and Rudra around INR600-800 crores each, IACCS, Shakti EW, BMP-2 upgrade around INR500-plus crores. We have planned execution to achieve at least 15% growth this year.

Are we into the SONAR system - have we participated in the tender for the ATAS SONAR?

BEL is the largest supplier of SONAR and a trusted partner for NPOL, the main SONAR designer in India. We are doing proactive investments jointly with NPOL, have our own subsystems development including Side-can SONAR, and are planning export-worthy versions. We are adding AI/ML value addition and barely depend on foreign countries for SONAR.

What is the sales mix between component, assembly and product in our total sales?

We are primarily a product company - assembly is part of the product but not a separate business case. We sell modules, systems or systems of systems. Component direct business through our component foundry is very minimal and strategic in nature (mainly ISRO requirements). Our sales mix is mainly products and solutions.

On product mix change driving 9-10% gross margin improvement on 4-5% revenue growth - what changed? And impact of in-house manufacturing on future margins?

Clarification - it is in-house design and indigenization, not in-house manufacturing. We promote MSME partners for manufacturing wherever quality is assured, only doing in-house when no MSME partner is available. Indigenization drives margins. The Q1 5% growth shortfall (vs internal target of 10%-plus) was due to Israel-Iran conflict delaying INR200-plus crores of critical Israeli component supplies; this will compensate in Q2. Margin guidance of 27% remains - product mix variations are averaged out over the year.

Anything we are doing with live simulation - providing services for export or domestic companies?

We have a simulator business that we are exporting to several countries; we have already exported 2-3 leads recently and are doing marketing in many more countries. We also develop advanced simulators for Indian needs in radar and missile segments. The simulator business is roughly 2% of total business (less than 5%), with one SBU primarily focused on it.

What is the defense versus non-defense revenue ratio? And does our exports order inflow guidance remain intact?

Defense to non-defense ratio is typically 88-90% defense and around 10% non-defense. Exports order inflow guidance of $120-plus million remains intact and we are confident of meeting it - good progress has been made and recent orders include some export portion, though we don't disclose quarterly export breakups.

On services business - we set up a SaaS SBU but services contribution is still 10-11% despite large defense installed base. How will services revenue as % of total go up over medium-to-long term?

We are trying to increase services from 10-11% to 13-14% over the next 2 years. New non-defense areas like financial services-related business through our software SBU are picking up. Services contribution should grow to 13-15% over time. On exports/offset, services and offset are not gelling together right now since offset is mainly contract manufacturing or B&E subsystems supply, but there is scope.

What portion of the INR75,000 crores order book is recognizable as revenue beyond FY27? And what is nomination versus competitive bid mix?

Around INR14,000 crores is for more than 3 years, with another INR8,000 crores in the 2-3 year bucket (so ~INR22,000-23,000 crores is 2 years plus). Nomination versus competitive ratio is around 90:10 across both defense and non-defense combined. Programs like Fuses (10 years) and EW system solutions (4-plus years) are the longer-tail items.

On the export opportunity - which projects developed by BEL are finding good traction in export markets? And what is the FY26 capex figure?

Strong export traction across radars, missiles, communication systems, software solutions, drones and especially anti-drone systems. Post Op Sindoor, C4I solutions are seeing increased interest from many countries seeking customized versions. Contract manufacturing of TR modules and LV racks is also growing. FY26 capex will be INR1,000-plus crores, committed and not less than that.