Guidance credibility collapsed — INR4,500cr to INR3,600cr in one year.

The first question is on the revenue side. We started on a 34% growth. I just wanted to gauge your confidence on meeting your guidance of about INR4,500 crores. How confident are you that eventually these orders will get executed? And when you give your guidance of INR4,500 crores, is it purely organic or does the inorganic acquisition also form part of it?

So firstly, this INR4,500 crores was the kind of number that we had projected. It has three components in it. INR4,250 crores was the component, which is our traditional EMS business, ESDM business. And then about INR100 crores we are projected for our OSAT business because we'll probably start operations and the commencement of operations by the last quarter. And about INR175 crores is supposed to come in from our business acquisition in Canada. So from the perspective of the EMS business, we hopefully will catch up by the end of second quarter. We probably exceed another INR1,000 crores of EMS business in the second quarter. And then, of course, we'll also integrate the business from August Electronics from our second quarter itself. And by all accounts, the business of OSAT seems to be on schedule. So we maintain our guidance of INR4,500 crores plus on a consol basis. And we've also seen an upward movement in the EBITDA number. As you know, from first quarter itself, we probably are having a product profile, which is leading us to a higher EBITDA. So we could expect a similar thing going forward for the entire year.

The margins you have reported about 17%, 16.8%. Do you think this mix will continue because your guidance to margin is 15 plus 50 basis points? Will this efficiency continue over the next 9 months?

Yes. So for the remaining 9 months, you can expect an EBITDA similar to the first quarter, if not more. And we'll update that sometime during the first half or maybe the third quarter when the actuals will be on the board.

On cash flows - all investors have asked when will the company start generating cash flows. Can you throw some light on from which quarter or direction one should look that the company will start generating cash flow?

So fundamentally, there were some receivables which we had acquired, which were receivables but not due. And we are trying to convert them into collections and had taken time until the first half. So hopefully, we will do that during the first half. So you can expect in FY '26, a positive OCF and significantly positive OCF, not just barely crossing the threshold. And the current small spike in the working capital days is in preparation for the second quarter. Like I said, second quarter is about INR1,000 crores significantly higher than our first quarter number. And as we go forward, the third quarter will also increase and so on. So this is a natural ramp-up process. So in between the quarters in our industry because of cyclicity, the first quarter is small, second quarter is a little larger, third quarter, even larger and the fourth is the largest. So by the time we reach the end of the year, I think we would probably perform on the expectations in terms of both OCF and as well as the working capital days, let's say, coming sub-70.

Can you give an update on OSAT - how much capex has been utilized? When are you targeting commencement of operations and at what utilizations? Any customers you can share? And what kind of sales do you expect in FY '27-'28?

So we already have explained to you that we have 2 major clients. One is an American client. I think most of you know, who they are, and the other is our own Indian client, who has acquired the Japanese business. And we have a third client, which has been lined up now. And it's a German client. And so from the perspective of business, I think we now have a good mix of businesses from 3 different countries. And so, this is pretty much better than what we had expected. The construction is well on its way. And by the first week of August, at least the first building will be ready, along with the design office and so on. And by, let's say, September or so, we'll have operational the Phase 0.09, if you will. We'll start shipping commercial as we have promised in the fourth quarter, but maybe it will happen sooner than that. So as far as OSAT is concerned, now we have three good major clients. And these are clients, which any company would be proud to have in their portfolio. And of course, we do have MoUs signed with another four clients. So by end of FY '27 or so when we — the bulk of the, let's say, almost 50% plus of our total capex of 3,400 will be consumed by FY '27, we would probably have those clients also on board.

Right now the company is hardly exporting anything — probably 10% of overall sales. Are we aiming to majorly export the OSAT output? Or will it be used equally for domestic import substitution and for exports?

So finally, it will get targeted as an import substitution. But being a semiconductor, it goes into semiconductor supply chain, which is outside of India typically. And as you know, semiconductors are generally outside the purview of most of the tariffs because of cross dependence. There are 72 countries, which have to work together to make a semiconductor work. So whether it's US, whether it's China, everybody is careful about not putting semiconductors under the purview of these things. So from that perspective, we think that it will increase technically the exports, but all the consumption will be — bulk of it will be driven by India because India is going to become a large consumer, electric vehicles, industrial production and so on.

Are you as of now retaining your FY '26 guidance on sales and margins? And on working capital, are you targeting to reduce them to about 100-odd days by year end?

Yes, we confirm we maintain our guidance that we have given, and you will see a significant acceleration in the second quarter. On working capital, it will be lower than that. Actually, effectively speaking, it's already lower than that. It's just that there was one extra item, which was due to our acquisition of one company, an wholly owned subsidiary. So that amounted to about INR350 crores, and we are finding some solutions, financial solutions for it, financing solutions for it. So which we think that we can probably complete it by the first half. Once we do that, if that portion of the receivables is INR350 crores removed, then we are already around somewhere around 70 days on an average in net working capital. So you can expect even better than 100 days. Obviously, by end of the year, if this extraordinary item of INR350 crores is dealt with, we probably will be around 70 days and lower.

On the recently raised capital, can you talk about the areas of future investment — organic or inorganic, where will the company be making investments?

So broadly, we would like to go more and more into the area of inorganic acquisitions. They are on three fronts. One is in the geography front. And then the second is, of course, we want to strengthen our design portfolio. We have done some small investments like we have talked about it earlier also. We always do a small investment first as a test and then we probably add more to it. It's more like a nibble, a small morsel and then big meal. So that we have done in geography expansion. So you can see some significant acquisition in perhaps North America geography going forward. Europe is a continent of talent for design. So we are going to strengthen our design play, especially ODM play in places like railway, industrial. So next level of investments will go into that. And then, of course, the third one is to deepen the technology footprint by suitably adding backward integration into some of the niche areas, so that we can reduce cost in our total consolidated portfolio. So all of these efforts, whatever money that we have raised is to add fresh initiatives, so that we can increase the scope of our sales by adding geographies. We can increase the value addition by adding ODM and then we can reduce cost by doing backward integration.

I'm confused with your comment on the working capital side. Earlier you shared sub-70 as the target, then you said sub-100. Can you clarify what is the actual aim for working capital for FY '26?

Yes. Sir, our target is 70 days without any extraordinary items. So the extraordinary items, as you have studied last year's balance sheet also. So there's a INR350 crores, which we have got it from acquisition receivable, which is receivable but not due. So we are trying to find financing solutions for it. And most probably in the first half, you will find it out. So once the INR350 crores goes away because it's a definite item, which has nothing to do with our regular operations. So once that goes away, we are already consistently at about less than 70 days of net working capital. And in order to keep it there, we will also work with some of the supplier partners so that some of the inventory burdens, especially the balancing inventory burdens can be transferred. So our target is 70 days without this extraordinary item. Hopefully, we'll find a solution for it before the second half starts.

On the margin side — if I heard correctly you would be maintaining this level of gross margin in coming quarters. Is the understanding correct that you end up higher than your guidance that you guided for in Q4 — are you upgrading your margin guidance?

Yes. So okay, let me put it this way. We had guided for about INR4,500 crores on a consol basis, including all our subsidiaries and so on. And we had said that 15.6% or so was the EBITDA expected. We are saying that looking at the first quarter, the EBITDA might exceed the guidance of 15.6%. Now how much exactly it will exceed, you can probably make a better estimate by the first half yearly results. As far as the guidance numbers are concerned, we maintain the guidance that we have given, and you will see a significant acceleration in the second quarter.

Can you give some color on what is the reason for this margin expansion? Why has it happened after Q4? What has changed?

Yes, yes. So the margin expansion is a direct consequence of two factors. One factor is the gross margin, which has something to do with the material cost reduction vis-a-vis the pricing. And the second one is what is called operating leverage. So you will see both of these in action. We have — like I said, there are, of course, more business in portfolios, where there is better margins. That is a significant contribution to increase in EBITDA number. But in addition to that, we have seen increase in gross margins across the board. That means all the 6 verticals, the orders have anywhere between 50 basis point to 200 basis point increase in the gross margin level. And going forward from first quarter to second quarter, obviously, the sales will keep going up. So we will — we can see an effect of better operating leverage, too. So that's why we are confident that whatever estimate that we had made on the margin because of these two factors, one is gross margin across different sectors going up, certain sectors doing well where margin is good, plus operating leverage. So we think that we can have a significant increase in our EBITDA number by the end of the year two compared to the guidance.

On the 10% stake being given to US Tech India Private Limited and 8.25% to AOS in the OSAT subsidiary — what exactly is the agreement? Do you have offtake arrangements with technology partners? Who are all your technology partners on the OSAT side?

So we fundamentally, the partnership is like a marriage, right? You need to cement it with some economic benefits flowing to each of the parties, right? So in some cases, if you have noticed when we acquired the business from L&T and Fujitsu, we purchased their equipment so that we make sure that they have to come to us as far as that particular product category is concerned. So we invested some money. Similarly, for the others, they are supplying us material, but they are supplying us with the critical equipment, which is a bottleneck equipment from their point of view. And we want to cement the relationship, so we offer them skin in the game. But in any case, we will limit the total skin in the game to less than 20%. The idea is that when we have more and more customers and more and more technology partners on your side, then there is also effort from their side to improve the business prospects. And then going forward, they also benefit and there is a lot of interest in them to move businesses to us and probably even profitable businesses because then they also stand to gain as their investment value also goes up in the company. So this is to give them an economic incentive to partner with us and also to give them a slightly better control in the relationship with us.

Can you give an update on revenue subsegments — the ramp-up in smart meters, EVs, and aerospace and railways, where not much seems to have happened in the current quarter?

So smart meter, like we said, we are aiming at about 15% of the total market. And every year, we definitely minimum INR1,000 crores to INR1,200 crores of business we should probably end up doing in that area. And also, we don't want it to be a huge portion of our total revenues. So smart meter will now probably go at the speed and smart meter is not a cyclical thing, right? Once you have the orders every quarter, you have a fixed amount of implementation, installation and go-live and so on. So as far as electric vehicle is concerned, we've got significantly — we've got one of the largest 2-wheeler manufacturers as a client now and the evaluation phase is completed last year, and now we're getting some very good orders in the 2-wheeler segment. And already existing clients are there. And even in 4-wheeler segment, we are working with some of the upcoming model launches. So you will — so this quarter, we have worked a lot in terms of getting new customers on board. So you will start seeing some traction in EV. As far as aerospace is concerned, lots of new orders have come in. In fact, from one large client of aerospace, we have got referrals. So we work with 3 divisions, one in the automotive components area, the other one will be in some one of their US-based businesses. And third is, of course, aerospace. So the biggest business growth has happened in aerospace this year, even though we have not done billing because billing will start off probably second quarter, third quarter, fourth quarter. As far as railway is concerned, with Kavach project, we are into pilot phase. And hopefully, maybe it takes a few months. And after that, we start getting routine orders. And our design is, of course, based on German technology. There are two German partners for this design. And we have also acquired companies like Sensonic in the railway area. And another recent acquisition was also announced. We invested about INR40 crores of money into another company, which is into railway ODM. So going forward, you will start seeing more and more business as a percentage of total. First quarter, of course, was predominated by automotive, industrial and EV segments. Second quarter, aerospace will increase. So that for the year, you can see aerospace to be about maybe around 8% or so of the total and the railway also should exceed about 10%, 10%-12% of the total sales by the end of the year.

Can you give so far how much of the capex in OSAT and PCB has been spent? Around INR313 crores for OSAT and INR114 crores for PCB — is that right? And there is no government funding so far received related to OSAT?

Just one second. Yes. For OSAT, actual spend so far is about INR313 crores. We have another INR443 crores balance, which we have raised in the QIP. Similarly, for PC board, about INR114 crores have been spent. And of course, we have — we will have some left this year. But going forward what will happen is, this is a running account, right? So every day, there will be some thing or the other happening. The QIP, which funded these was the previous QIP, QIP number one, we have raised about INR1,400 crores. So what happens is in the land and buildings, the government funding is not too much. It's all the plant and machinery normally. And so plant and machinery orders have been placed. The moment they come, we'll start getting government funding. It's already a proven case. The central government subsidy is pari-passu. So that means when we raise the order at that point in time, the funding is done. And the state government one is, of course, based on commencement of production. So that comes with a delay of about 6 months.