In the earlier quarters, you had mentioned that some of your revenue recognition was impacted due to a client request on deferment in delivery. Are those orders now delivered? And is it possible for you to quantify those?
Some of it has got delivered. Some is yet to be delivered. We are still waiting customer clearance inspection for some of them. I wouldn't like to quantify the order value, but I think this quarter or next quarter, that also should get delivered.
Your performance in FY '25 has been robust in terms of your export orders and export revenue as well. Right now, we stand at close to around INR100 crores in export orders. Any export orders which are there in the advanced stages in pipeline?
We are discussing with -- to some requirements. We've quoted for some. We are awaiting results from the quotations. And also, we've appointed some representatives for these products of ours. It's already delivered in India and abroad. We expect some traction to take place during the course of this year. But I can't really comment on exactly which order will come at what time.
This INR20,000 crores to INR30,000 crores TAM, it will be over what period of time broadly?
I can't comment on that, but we should -- it should all be in the -- anywhere between 3 to 5 years, 6 years depending on production requirements from our Air Force and Navy, whatever their requirements are. So it will be around 5 years, 6 years is what I'm thinking. We have to wait and watch really what happens, how long the flight test takes.
Last year, we were indicating probably inflows in '26 could be in INR20 billion to INR30 billion range. Because of the current situation where we have seen a big sharp jump in emergency procurement, do you see that decision-making or finalization of these developmental orders under Make-II program could get potentially pushed back by 6 to 12 months?
See, development contracts are made to go through its own cycle because the products have to be developed, evaluated and based on which the RFPs will be issued based on field trials. So it is going to be very difficult to speed up such programs. But what we are getting interesting requirements is that some of the products we have delivered earlier, repeat requirements are coming up for fast delivery requirements. So these things have started coming in. There's -- definitely, there is some movement, but how this will all pan out, what kind of contracts we are going to get, we have some idea, but we don't want to comment on it at the present moment until it really happens.
Of the INR10 billion to INR20 billion inflow range, which you are suggesting for '26, what percentage in your view could be driven by these emergency procurements?
See, some of the products already we delivered. Repeat requirements are coming up. They could be around INR100 crores, we don't know. Second area is we're also gearing ourselves for some emergency procurement MoD tenders, where in the last 2 to 3 years' time, we have developed product categories, which meets those requirements of the end users. If these were to be successful, we expect some more -- a few hundred crores also to happen. The third area is whatever we have delivered earlier and back to -- contracts have happened to some of the PSUs. Back-to-back, we expect order inflow to take place for our delivery.
Of the export opportunities - globally you're seeing a rise in defence spend. Do we have the technology to actually go out there and supply to Europe in a big way? And on the domestic side, has the government taken any concrete measures for increasing private sector contribution in the defence supply chain or to improve working capital?
We have been an import-centric country in Defence and Aerospace till date. We are now graduating to try to build more in India. So having said that, it's not going to be very easy to export full systems immediately. But that should be a long-term goal. The Western countries have their own internal compulsions to build within their own supply chain within the country. They normally do not import. But having said all that, there are opportunities to look at on a growing European requirement. So we are also in touch with one such company where we can do a joint development of radars, where this will not only look at -- address requirements in India, but also globally, we can build systems together. Some of the ground systems we can definitely deliver, which is what we are exporting today now. Coming to your second question on India, yes, definitely, there is support for Indian equipment, Indian IP. And it is up to us in India, the private sector, to stand up, be counted, build the systems.
The net working capital days is still quite high in FY '24; from 421, looks like we're going to 468. What kind of net working capital days should we be seeing going forward? In terms of revenue when you say INR1,000 crores in FY '26, just from the repeat orders, that looks robust. And why did we in this year, FY '25, do some low-margin contracts?
Okay. First question on net working capital. We are still -- one is it bided about more than 50% in the last quarter. So that also comes as a net working capital looks at -- the ratio looks higher. But more importantly, this business is -- we've done a lot of development centric contracts and integration test, field test, flight test, all of them take time. I think given another 2 to 3 years' time and the development is lesser and the production is more, then the turnaround time will be faster, cash realization is faster, working capital days will come down. So this is a transitory state. Having said that, we're not really -- we are still a 0 debt company.
What has been the response on the product you developed quickly that was displayed in Aero India? Have you received orders on that?
The response is very good, but that doesn't convert into orders so fast because we need to put it to go through trials, and you see, because only after the trials are completed, the product is then -- can be absorbed. But yes, there is a lot of discussion taking place with the users. We believe that they will give us opportunity for the trials. And then once the trials go though, there will be opportunities of converting into a fairly substantive business. The foreign OEMs, who have come, visited us and seen the product, are also quite happy and the kind of development we've done and the capability we have built.
I wanted to understand a little bit about the R&D expenditure pattern for the company. Going forward, how would we attribute this R&D spends from a revenue standpoint? Are we able to attribute the R&D spend to any specific customer base or revenue segment?
Okay. See, traditionally, whatever product development we were taking we used to write it off by revenue expenses because this is all part of our requirement, which is posted against an inquiry or the inquiry tending to happen. Today, we are trying to get into a full-system business. So the development expenses is going to be far, far higher. And all of them have to go through what is called as flight trials and trials on the field, which is going to be a longer-term duration. So these are not products which you develop, which you'll get contracts in the same year. It is going to take 2, 3 years before a contract can happen. That is why we sold shares and got some QIP money, which we dedicated to perhaps, which is -- which we're developing. And that we have spent more than INR140-odd crores on product development in the last 1.5 years' time.
Out of the total cost of BrahMos, can you share what would be our opportunity size, in terms of the percentage? And maybe 2, 3 years down the line, this production and service business contribution to the revenue, can it inch up to 70-odd percent from currently roughly around 55%-odd?
I'll answer the second question first. As long as the product development has happened and approvals happen, definitely, the production should start growing 70% and above. This is what we think we'll do. We'll continue to develop products maybe 20% or 15%. That is how this has to go for a mature model. Regarding the first question on BrahMos, I can't really tell you because I can't forecast this. We have quoted somewhere, the orders have to happen. And we are a bit premature to say what is the value of the contract now and what percentage of the overall contract. I don't want to address that now, sensitive.
In your PPT, you've mentioned that BrahMos seeker has now been successfully tested. Any feedback or any clarity in terms of when you will get any orders? Are there any further processes that are currently undergoing?
Yes. We've been waiting for the flight tests on the missile to happen for quite some time now. We're happy to announce that the flight was carried about three to four weeks back. There's an excellent flight, textbook flight and textbook performance, we expect that in shortly, we should get more -- some more orders from BrahMos for the development of additional units will be asked. Following up with that, we expect also production contracts to happen. Maybe in the next month plus probably another year, the production orders also should happen. May happen this year, but it will happen early, but they are also -- they would like to replace imported seekers with Indian seekers as per mandate.
Can you help us with what are the systems that you're supplying for BrahMos?
Today, we do all the launchers for them. Ground-based, mobile-based launchers for all three services; Navy, Air Force and Army. We also supply the air version on Sukhoi 30. And the test systems for all of three areas. As now the seeker is also tested, hopefully, we'll get some contracts to deliver those also.
I have two questions on future order intake prospects. The first is slightly longer term - what is the opportunity size that you are trying to address through all the R&D and the development efforts that you are making, say, over next 4, 5 years? And for FY '26, what will be the size of order intake?
The products are developed -- basically, we have taken advanced development of various products in radars and EW and communicate systems as well as seekers. We expect that the size of opportunities or the TAM for all this probably vary between INR20,000 crores to INR30,000 crores. So each -- this is why we took out -- took money from the market in product development. These products are in advanced stage of development. Regarding FY' 26, some of the orders have got delayed, what we were supposed to get in FY '25, but we expect those contracts to happen. And maybe it's somewhere between INR1,000 crores and INR2,000 crores is what we expect during the course of this year to get orders.
So can one infer that this could be almost between INR5 billion to INR6 billion for us in order size for the short-cycle delivery projects from all these three areas?
It should be more than that. It should be above INR1,000 crores.
Within the longer-term projects, can you share some updates in terms of how is the progress on the Make-II projects, the R&D team ramp up? And any notable new products where you think it could be in advanced stage for approvals?
Yes. The major revenue stream we're expecting, where investments have happened, to the extent of INR140 crores to INR150 crores were spent in the last 1.5 years in product development, comes in the category of fire control radars, airborne fire control radars, airborne electronic warfare suite, including receivers and jammers, ground and airborne or ship borne communication equipment. We've also done a lot of work on the ground based ELINT, COMINT and the jammer. We are working on the Make-II programs for ADFCR. We're also looking at detection of very low cross-section UAVs, detect and jam. And the other area, which is going to help us, is because of the seeker -- successful seeker flights, we expect some more contracts to happen. We're also developing additional seekers, not just for BrahMos, also on air defence seekers.
You said that you would have something like INR1,000 crores just from the repeat orders because of the emergency procurements?
No. I did not say that. I did say emergency procurement is going to contribute INR1,000 crores. From what is clear, it's probably about INR100 crores. I said repeat orders from what we've done earlier, which -- back-to-back orders which you've start getting should be a more of -- more than INR1,000 crores is what we are saying. That is only -- that is not revenue, but the order book. And we expect the revenue between INR1,000 crores to INR2,000 crores order book in the course of this financial year. On the third point, you talked about a lower margin. We took this contract strategically to say the margins are not important. It is important that we build capability in the company. So that is why we took it.
Could you please elaborate the primary reasons and factors that lead to significant sequential and year-end contraction in the margin and what is the sustainable margin at gross level and EBITDA level we expect?
That depends on the contracts. It depends on the contract, whether it is fully designed by us, in which case, the margins is expected to be slightly higher because we don't buy and integrate. We're not spending money on product development. So it cannot be across-the-board answer, but whatever we are trying to do is a sustainable product margin because there's a lot of IP development happening and which gets written off. See that's what we have told 35% to 40% EBITDA margin, we will be able to sustain.
Since the last 1 year, we are talking about the order inflow pipeline of INR2,000 crores to INR3,000 crores and our completion timeline is around 18 to 24 months. Last year, we did not achieve the order inflow that we projected for. Can you elaborate on the key factor or the structure of hurdles that are delaying this pipeline conversion? Are we losing the orders to our competitors?
Okay. See, whenever I talk about projected orders, we do not consider competitive tenders because competitive tenders can go either way. So we do not take that into consideration in our projections. Whatever projections we're talking about in pipeline, these are all single-vendor contracts. Second is we've not lost those orders, it's only got postponed. Some of the programs have got shifted, and the contract is supposed to happen. Some orders which our customers are supposed to get from MoD has got postponed. So back-to-back, the orders should start happening to us in the next few months' time. Third, because of what has happened with our border, it also likely that we'll get some orders, which is getting fast-tracked.
When we are saying for next year INR1,000 crores to INR2,000 crores, are we pretty much sure like minimum INR1,000 crores will be there?
No. We are sure about this order because these orders have already been received by customers and back-to-back inquiry should start in the next month or so. And we will be the single vendor contract for all of them based on our earlier delivered products. So we are sure of those orders. It's a question of 1 or 2 months here and there may happen. But nevertheless, since we want to develop some -- deliver some part of those contracts, we've already started the necessary groundwork to see the delivery models can happen.
In the last couple of quarters, we were talking about some shifts from part product supplier to end-to-end solution provider. Can you update us on the progress in this regard?
See, getting into full systems is what we're attempting to do. We have done successfully in some of the contracts. We have delivered the precision approach radar to Air Force and Navy. One more order came, that also has been delivered. So we have developed -- based on that, we've developed a product radar for the international market. That has been accepted and delivered. So like that, we have started development products. We were also -- earlier, we were doing only receivers for EW. And now, we are trying to do a full system with our own direction finder. So wherever possible, slowly, we are doing -- adding up on existing competencies and product capabilities and finishing the product to end systems, but to transfer it into end system order, it will take a bit more time because all of them have to go through demonstration trials.
On the guidance part - approximately 4 to 5 quarters back, you were targeting around 30% earnings growth in bottom line. But this year, we ended up with 22% growth. Can you provide insight into whether this change reflects a revised internal outlook? How should investors think about the sustainable earnings growth over the next 2 to 3 years?
Actually, I think the mistake is in probably communication or understanding. We did not say 30% bottom line growth would happen on '25 -- '24-'25. We told only about 20% and our topline growth of 20%, 25%. Bottom line, we talked about guidance of 20%. Today also, I'm saying the same top and bottom line growth. 30% happens, may -- can happen on the bottom line, but that we're not at the present moment in order to tell. But today, we are looking at a 20%, 25% topline growth and a 20% bottom line growth is what we're looking at. And we want to stick to that guideline.
On the TAM that you have mentioned previously, with regards to new age defence products such as UAVs and the next 10 years of how defence procurement is looking - how would we be positioned today in terms of both R&D as well as execution? Would this also have a correlation with the 20% bottom line growth?
Presently, our focus area is in radars. It can be radar airborne, ground, naval, et cetera. As far as UAV is concerned, we're looking very small cross-section UAV to be detected a few kilometers away. We are building radars for that also. Second is on electronic intelligence and jamming. We're working on both airborne and ground-based systems. The third thing to do, secure communication across all platforms. Fourth is integrated systems, including vehicle, vehicle support system manufacturing. Fifth, as long as we can supply correct to the platform supplier or weapon system supplier, we can also look at some kind of seekers to do this. Today, we are nearly 1,600 people working in Data Patterns, nearly 1,100 engineers are working here, rapidly enhancing our engineering capabilities and design capabilities. We're also spending about INR150 crores in the next 1 to 2 years' time to create infrastructure to production, test and validate systems.
This INR150 crores is a forward guidance for the R&D expenditures or is it for capital expenditure?
Capital expenditure. R&D expenditure, already we have budgets and we've already spent over INR140-odd crores in the last INR150 crores, INR107 crores, I don't know, some number we have spent. We have seen our kitty some more -- these are all approved programs we've taken up in-house. And additional expenditure will also happen.
First question is on Ashwini LLTR radar - we were expecting a fairly decent-sized order, but you have said that the bid is competitive. Question two is on Sukhoi 30 upgrades - which products are we involved in? When do you estimate when can we see commercial orders? And the third one is on FDR - if you can map out the opportunity and our positioning?
As regard Ashwini Radar, BEL has got the order last year, I think March -- February-March, they got the order, '24-'25. So we are in discussion with them. We expect that their requirements will flow down to us, and based on which we should be able to make an offer, and hopefully, when there's a contract in the next 3 to 6 months' time. As regards Sukhoi 30, this is a contract which is already placed on HAL and HAL back-to-back has to do something. We are developing products against it. We don't have a contract on this. We have developed the radar warning receiver. It's flying in both our early warning radar, Netra, as well as the LCA. Based on which we believe that this RWR we will configure for Sukhoi 30. We've also designed -- as part of the larger view of increasing TAM, we've also designed the AESA fire control radar hardware. We have to do the software. We have also developed the jammer parts as an EW suite fully. Only last -- a few months back, DACH cleared about INR7,400 crores for the jammer parts. As regards the SDR, we have developed with DRDO the hardware for airborne SDR, which is already flown in the LCA and is likely to fly in other platforms in the coming months.
In the last conference call, you mentioned that two large space radar contracts account for approximately 50%, 60% of your inventory. Could you please clarify whether any orders related to these contracts were delivered during this quarter? And given that deliveries have been made, why have the inventory levels not decreased?
Yes. We've delivered the hardware for one of those radars. Second radar will be delivered probably in the next 6 months. Inventory has come down with respect to what has been delivered. But the second radar, the inventory is still with us. It's a very large inventory because, as I told you, we don't have much of margins in all these contracts. So it is very high inventory oriented, and that is still in our books. The third is for contracts we expect to deliver this year, we also work ahead of time in buying electronics to see that we can deliver. So we've already started manufacturing against those things. So third point is you must look and understand the inventory in our defence equipment is going to be on the higher side because not only development takes place. But after development and testing, there is customer certifications, acceptance trials, all of this takes enormous amount of time. So test cycles are long, lead times are long.
What would be the estimated execution cycle for the current order book? And for the order pipeline that you have mentioned, say, INR1,000 crores to INR2,000 crores in FY '26, how quickly can the execution cycle be over there as well?
More than 70% to 80% of the existing orders on hand will get executed this year. And we expect that some portion of the orders, which is coming this year, we'll execute this year itself. We are taking advanced action in terms of procurement and design, which is going to be done. All that is happening as we speak.