On EBITDA margins, what product mix has led to such strong EBITDA margin and out of the order book, what kind of EBITDA margins can we expect going ahead?
We have a differentiated product line. There is a strategic program where we've taken a contract at a lower cost and lower margin, but it's helped us built us a capability to build a complete system. We take some contracts with lower margin consciously to ensure that we build our capability and allow future expansion. The rest of the margin is normally where our complete product development is done in-house. Where all the IP is created in-house, we don't import anything and integrate. Since there is no bought-out in last quarter revenue, the margin profile was different. You can't give a direct guidance on contract to contract.
Over and above that, are we expecting orders to the tune of INR15 billion to INR20 billion for FY27? And in the order inflow, what will be the proportion of production order inflow / short-cycle orders?
We have developed products earlier. And those products during the course of this year will have repeat orders. So that has been for INR1,900 crores. These are all single tender orders just expected during the course of the year. The timing is not exactly visible. The repeat orders for INR1,900 crores will all be production orders because already we've done the development. On the existing INR2,000 crores, some are service orders, some are already developed orders and some are new development. I can't give you exact ratio now.
On order inflow for the year, would it be correct to assume you'll be ending the year with around INR3,500 to INR4,000 crores of order book?
It's a bit early for that. We will come towards the year-end before we give you the numbers. There are a lot of programs we're working on. If the order starts coming in, the order book size will grow, plus the export revenue. To exactly tell you end of March, what will it be, towards Q2, Q3, depending on how we get the orders going ahead, that will give you a better answer.
Over the next 2 to 3 years, how much conversion from EBITDA to cash flow are we expecting? Cash flow from operations has been very weak.
The cash conversion cycle today is at 365 days. We are seeing improvements year-on-year. We expect it to probably settle down at 320 to 340 days going forward. But year-on-year, at the beginning of the year, it's very early to calculate all that. We are definitely focusing on reducing the working cycles, and it is also showing some improvements year-on-year.
Apart from BrahMos missiles, which missile programs are we delivering products to and for which products are we L1 vendors?
Other than BrahMos product, there's one other program for the air defence. We've done a seeker that is under delivery mode now. But there are no other programs on the missile area. We're working on seekers. We want to take up initiatives to build other kinds of seekers, electro optic, etcetera, seekers on our own. As of now, we don't have anything else because we work on whatever DRDO allows us to do. It's really controlled by DRDO or missile program itself.
On product development - Virupaksha Radar component supplied to IAF, any update? Also new areas around anti-drone system, drone detection - when can these products start getting commissioned and we can expect some revenue from them?
Virupaksha is not our product. Virupaksha is a DRDO project, name for the Super Sukhoi radars. We have our own versions of it. We believe that, that will also be taken up by Air Force in the coming years. But because of the uncertainty and timelines, which I can't predict, we've not given revenue expectations. On anti-drone, products are getting done. We will be participating in demonstrating the products to army and air force. We don't have clear timelines when what will happen. We have started quoting in some locations. These are all things which is again a quote and competition basis. On new product development, we don't do revenue projections unless the clarity is there for the market. Anti-drone is a smaller system, so it can happen quickly. But the other, the EW suite for self-jammer is a 2-year, 2.5-year initiative, which we've taken on. And that is in the next 1 year, it will come to conclusion.
Astra Microwave is in line with providing more complete system similar to us. How are we positioning ourselves vs competitive peer Astra Microwave?
I wouldn't like to comment on specific competition on open line. So, I will refrain from answering this question.
On the INR2,000 crores of order book where roughly INR1,000 crores is already in books and INR1,000 crores expected — any timeline on finalization of those INR1,000 crores where negotiations are completed?
In the next 1 to 2 months' time, we should expect the contracts to happen. Unless, of course, there is some -- see these are all government customers. So, I can't predict for them. But our feeling is that it should happen in the next 1 to 2 months time.
You indicated that you're working with global OEMs. What's the traction around that? Anything apart from UK? And when can we expect to get the order for BrahMos seeker? Will media reports of hampered production have material impact on FY27?
On global OEMs - a number of them have started visiting us and quite impressed with whatever we've achieved in terms of capabilities and products. So similar products are required in Europe. In the next 2, 3 months' time or 4 months' time, we should start getting some contracts from these global OEMs. We're going not just UK, but other than UK also in Europe, inquiries have started coming in. Other people who are visiting us are also from US from civil aviation. Regarding BrahMos seekers, the first variant of the development seeker order is under execution. Once the execution is completed, in the next 4, 5 months' time, the production orders would start coming in. They want it to be delivered before next year, middle. Our timelines for delivery is quite fast with respect to other competitors. So I don't think there will be a revenue offset based on BrahMos even if there's a delay.
On the order book mix, the share of services is roughly INR350 crores. In the negotiated orders of INR1,090 crores, what part pertains to services vs products? What execution cycle do you expect on the product order book?
Venkata Subramanian: About on this INR1,000-odd crores, maybe INR100 crores will be on services, so the rest on product delivery. S. Rangarajan: The execution depends on the program requirements. Some of the program requirements are spread over 3 years delivery. Some is delivered in a few months. That varies from contract to contract. We have projected about 20%, 25% revenue growth. If the other INR1,900 crores things come in early, some part of it can be executed this year also. We don't have the exact timing, we have only projected this 20%, 25% growth.
In the last concall you said we might receive INR1,100 crores in 1-2 months timeline, which has been delayed. Is there an INR1,007 crores Tejas Mk1A order — is it the same order or different?
S. Rangarajan: These are not Tejas one. Tejas one is part of - some inquiries have come, we quoted for whatever products are going, avionics is going into Tejas. So this - hopefully, the orders should come during the course of this year. It normally goes through a really large negotiation cycle with HAL. We have to wait and watch when the order is placed. Venkata Subramanian: The orders negotiated of INR1,000-odd crores shown in the previous conference call is not a single case, it's multiple cases. Some of them we have got the contract. That number now stands at INR1,090 crores. So including that, our order book today stands at INR2,000 crores plus, INR2,062 crores to be precise.
You mentioned about some delays of certain programs. What kind of programs are these? If these delays are deferred to FY27, then fundamentally growth should be more than 25% — why are we speaking 20-25%?
I never said anything like that. I never said anything like that. I've only compared quarter 2 to quarter 4 performances. There are expected orders from what we delivered in quarter 2, but I never talked about any delays. I've only talked about orders, which is expected, let's say, another INR1,900 crores for repeat contracts. I'm not able to give you timelines on those orders because these are all government contracts.
On the largest Q4 order — IMD radar development and service order — what would be the execution cycle? Since services mix has increased significantly, would that mean trade receivable days improve?
S. Rangarajan: The requirement is between over 18 months. We're trying to see how fast we can deliver it. Trade receivables will not increase because we don't bill for services until the services are carried out. The only product delivery happens, we bill only product development. The services part of the contract, we will bill as and when the services happen. Venkata Subramanian: Service orders represent our AMC revenue. AMC is actually for multiple years. It's not a single year AMC. S. Rangarajan: There is a process for revenue recognition. IMD is the first case, which is taken up now. So, until we get some money transfer from IMD, we won't be able to generalize.
38% of current order book is from services with elongated execution cycle. Does that put pressure on our 25% growth target?
INR1,090 crores I gave approximately about INR100 crores to be services. The rest is product delivery. So it will not affect the - our top line revenue growth projected 20%, 25%. There are a number of repeat contracts we're expecting during the course of the year. We believe it will be substantially higher than the guidance number. We've developed products to ensure that we can scale the company very quickly into multiple thousand crore company rather than scale it 20% year-on-year. We're actually looking at some very high scalability in the coming years.
Any update on our consortium's position for the AMCA program? And what would be our opportunity within the AMCA program regardless of consortium winner?
AMCA program, the RFP is expected any time now. The glass cockpit is developed by us. The mission systems is developed by us for the LCA-Mk2, which is going to be taken to AMCA. We are hoping that as we go along, more such - on the sensors and RWR and radar and things like that, as and when we are able to develop products and it is acceptable to the customer. All such programs will follow. At the present moment, we have only the cockpit solutions and machine management system is being done by us.
Out of the negotiated orders of INR1,000 crores, you said if delivery schedules allow we might deliver some this year. Would that growth be over and above the 20-25% guidance? Is there any capacity constraint?
We are building large capacities. For export contracts already capacity we have built, plus we are building something about nine floor of factory space to build in additional capacity to see that the larger - as we - the program size has increased and the volume of contracts increase to scale to multi thousand crore company. For seekers and other things, we already put the building blocks and infrastructure necessary to ramp up production. We have taken a cautious view of not overspending in infrastructure and the contracts don't happen.