Cyient DLM (NSE:CYIENTDLM) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Cyient DLM Limited Q1 FY 'twenty seven Earnings Conference Call. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Godunapu, Non Executive Chairman, CYIENTDLM Limited. Thank you. Hand over to you, sir. Thank you, Darwin. Good evening, ladies and gentlemen. I'm Krishna Bodhanapu, Non Executive Chairman of Cyient DLM Limited.

0:47 I welcome you to our Q1 FY 'twenty seven earnings call. Joining me today are our Managing Director and CEO, Mr. Rajendra Velgapudi and our CFO, Mr. R. Subramanya. Before we begin, I would like to remind you that certain statements made during this call may be forward looking in nature and subject to risks and uncertainties. A detailed disclaimer is available in the Investor website section posted on our website. The Q1 FY 'twenty seven performance reinforces the message that I shared in our previous earnings call that the underlying strength of our business remains strong and the investments we've made over the last few years are translating into tangible results.

1:32 The quarter was marked by continued geopolitical uncertainties, evolving demand patterns and disruptions across global supply chain, including the ongoing developments in The Middle East that added further complexity to the operating environment. Despite these challenges, CYIENTDLM remained firmly focused on execution, customer commitment and long term value creation. I'm particularly proud of how our teams responded with proactive planning, strategic inventory buildup of critical components, alternative sourcing initiatives and close collaboration with our customers and suppliers. These actions enabled us to maintain uninterrupted execution and consistently meet our delivery commitments, further strengthening customer trust and confidence in CYIENTDLM.

2:24 Our strong performance during this quarter is a testament to the resilience of our business model, the depth of our customer relationships and most importantly, the dedication and commitment of our people who committed to deliver exceptional excellence in a challenging global environment. One of the most encouraging aspects of our performance has been the continued momentum in order book. We closed the quarter with the highest ever order book in the company's history, providing strong revenue visibility and reaffirming customer confidence in our capabilities. Orders inflow remained extremely strong during the quarter, resulting in a robust book to bill ratio of 1.5x.

3:09 This underscores the sustained strength of demand across our target markets and reflects the success of our continued investments in customer engagement, engineering excellence and operational capabilities. Equally encouraging is the return of growth across our key business sectors, aerospace, defense and industrial, all of which delivered healthy performance and continue to present attractive long term opportunities. The increasing diversification of our revenue mix across these sectors enhances the resilience of our business and strengthens the foundation for sustainable growth. We have also made significant progress in strengthening our commercial organization.

3:57 Leadership key leadership hiring has now been mostly completed, including the addition of Rama Alapati as the Chief Strategy and Growth Officer. This enhances our go to market capabilities and positions us to deepen customer engagements, expand into new opportunities and accelerate on our ambitions for growth. While growth remains a key priority, profitable growth continues to be our primary objective. I am pleased that we now have sustained double digit EBITDA margins for four consecutive quarters. This consistency reflects our focus on operational excellence, improving revenue quality, disciplined cost management and increasing value added engagements with customers.

4:48 Looking ahead, we remain excited about the opportunities emerging across our target markets. Rising electronic content, supply chain diversification initiatives, increasing investments across our focus sectors and the broader outsourcing trend continue to create a favorable demand environment. With our differentiated design led manufacturing model, strong customer relationships and growing execution capabilities, we believe Cyient DLM is well positioned to capitalize on these opportunities. Most importantly, we have entered FY 'twenty seven with strong momentum. The first quarter delivered healthy performance across revenue growth, profitability and order intake.

5:34 Supported by a record order book, a strengthened leadership team and a robust business pipeline, we are confident in our ability to continue creating long term value for our customers, employees and shareholders. I would like to thank continued I would like to thank our customers for their continued trust, our employees for their unwavering commitment and our shareholders for your ongoing support and confidence in our vision. We remain optimistic about the opportunities before us. The foundations we have built, the capabilities we have strengthened and the momentum with which we've entered FY 'twenty seven gives us confidence that CYIENTDLM is well positioned for its next phase of profitable and sustainable growth.

6:21 Before I hand over the call to Rajendra, on behalf of the Board, I to thank him for beautifully turning around the business to a situation where we can now be confident in sustained growth for the future. We have an order book, we have the people and we have the customers that will support this accelerated growth. With that, I will now like to hand over the call to Rajendra, who will take you through the business and the operational highlights in more detail. Thank you, Krishna. So good evening, everyone, and thank you for joining us today. I will take you the next few minutes to walk you through the Q1 FY twenty twenty seven business updates for CYIENTDLM.

7:08 I'll keep the discussion simple and clear and I'll focus on three messages. First, the EMS market continues to offer a large and structurally attractive growth opportunity. Second, Cyient DLM has a clearly favored strategy across strengthen, expand and transform. And third, we are seeing tangible business highlights resulting in growth of the business. So with that framing, let me start with the industry outlook, then move to our strategic initiatives and finally cover the key business highlights before closing. So if you look at it, the Electronics Manufacturing of the services market is in a genuinely attractive phase and importantly, the opportunity ahead of us is expanding rather than maturing.

7:59 Today, the global EMS market sits at roughly 25,000,000,000 to $650,000,000,000 but the potential we are planning against is close to $1,100,000,000,000 by 2033. So we are not building for the market as it exists, we are building for a market that nearly doubles over the coming decade. The blended CAGR across the market is around 6% plus and it is meaningfully higher in high reliability segments where we choose to play. That distinction matters for us. We are deliberately not changing commodity, high volume, low margin work. We are positioning where complexity, reliability and engineering content command a premium.

8:46 Let me highlight the structural trends driving this. First, the electronics content for product is rising across the board, more compute, more sensing, more connectivity in virtually every device. The second driver is the growth in AI and AI infrastructure. AI is creating new demand for compute infrastructure, data center systems, power electronics, advanced hardware, networking and related supply chain ecosystems. While this market will evolve over time, it is clear that AI infrastructure will increase the need for sophisticated electronic manufacturing capabilities. We are therefore treating this as an important area to understand, evaluate and selectively participate in where we can build a differentiated right to win.

9:39 The third, the supply chains are regionalizing. The China plus one shift is redistributing manufacturing globally and that footprint realignment plays directly to supply chain resilience which our customers now treat as a strategic priority, not an afterthought. And the last on the semiconductor side, the chiplets two point five and three d packaging and high bandwidth memory are all raising the complexity of back end equipment, test and assembly, exactly the kind of high mix, high reliability work we were built for. Our core segments remain Aerospace and Defense, Industrial and our focus is also on the semiconductor capital equipment, medical and automotive with a sharp focus on power electronics.

10:30 But beyond the core, we see two clear new lanes opening. The lane one is robotics, which needs high reliability subsystems, control electronics and test assemblies. Lane two is AI infrastructure and data centers, where AI is generating electronics heavy, high complexity hardware that is genuinely well suited to specialized EMS players like us. So the takeaway from this slide is, the core business is attractive and durable and adjacencies give us room to grow into. So this naturally leads into how we intend to capture this our long term strategic roadmap. As we mentioned in the past, we coined it as set, Strengthen, Expand and Transform.

11:21 The first phase strengthen is where we are today. This is a foundation we bank on. We operate across four industries aerospace and defense, medical, industrial and automotive with focus on EV. This is our proven core stack and it runs at margins of roughly 9% to 11%. This is a base, reliable, established and the platform everything else is built on. The second phase expand covers FY 2027 to FY 2029. The strategy here is elegantly simple, same stack with the two new sectors. We take the capabilities we have already proven and extend them into two new industries, robotics and AI data center, taking us from four industries to six.

12:13 Because we are leveraging the same core stack into higher value sectors, margins step up roughly to 11% to 13%. We are not reinventing our capabilities, we are pointing them at more attractive end markets. The third phase transform is FA30 and beyond. This is where we build a product and platform mode. We stay across our six industries, but layer in expanded GTS products and new platforms. This is a shift from being a service provider to owning product and intellectual property and that's what yields margins to roughly 13% to 18%. So the true line of this slide is a deliberate progression, widen the industries we serve and steadily elevate the value we deliver moving up the margin curve at each stage.

13:12 Now let me bring this down to what we actually delivered this quarter, because strategy only matters if it shows up in execution. So the headline is, I think as Krishna said, our order book. We recorded our highest ever order book at INR2598 crores. That is a strong signal of demand and of confidence from our customers. Order intake for the period stood at INR551.9 crores with a healthy book to bill ratio of 1.5. And importantly, that was driven by both existing customers deepening their engagement and the new customers coming on board. On customer diversification, we added two new logos during the quarter across the industrial and automotive segments.

14:03 That matters because it broadens our base and reduces concentration, which is exactly the direction our strategy calls for. On capability and capacity, we completed the expansion of our built to specifications to lab from 6,000 square feet to 15,000 square feet, more than doubling that footprint and giving us headroom for the product platform development that underpins the transform phase mentioned earlier as part of our strategy. And we are seeing continued momentum in our B2B product platforms with a strong order pipeline from our key customers. On quality and certifications, we completed the NatCap audit for cable harness assembly for our Mysore unit.

14:53 NatCap is a demanding aerospace grade certification and it reinforces our credibility in the high reliability work that sits at the heart of our positioning. So taken together, to summarize all together, the EMS market opportunity is large and expanding and we are deliberately positioned in its high reliability, high value segments. We have a clear stage strategy to widen our industry coverage and step up our margins over time And this quarter results records order book, healthy book to bill, new logos and expanded our lab capacity. This was a quarter of solid tangible progress against the roadmap I just described.

15:41 So as you have seen, we have started the FY 2027 with a strong momentum driven by disciplined execution and healthy demand across our key segments. The strong order intake demonstrates our readiness for future growth. As we move forward, we will continue to expand our focus on new industry segments such as AI infrastructure, data center technologies, robotics, which require high reliability electronics manufacturing and we will continue to strengthen our position in build to specifications in highly complex and regulated industries such as aerospace and defense and healthcare. So thank you again for your time and for your continued confidence in CYIENTDLM. With that, I will hand it over to RMS, our CFO.

16:29 Thank Thank you, Rajendra for the business overview. Good evening, ladies and gentlemen. I'll now take you through the financial performance for Q1 of FY twenty twenty seven. We are pleased to report a strong start to the year with the DLM Group delivering its strongest first quarter performance to date. Revenue for the quarter stood at million, reflecting a robust 34.3% year on year growth. This growth was supported by healthy order book, improved execution momentum and continued demand across our business segments. On profitability, EBITDA increased to INR392 million, registering a strong 56.2% year on year growth.

17:14 Importantly, our EBITDA margin improved to 10.5%, representing an expansion of 147 basis points year on year. This margin improvement reflects the benefits of operating leverage, better revenue mix and disciplined cost management. Profit after tax for the quarter was INR163 million, which is more than double compared to the corresponding period last year with 118.2% year on year growth. Consequently, the PAT margin improved to 4.4% expanding by 168 basis points year on year. The strong PAT performance was driven by revenue growth, margin expansion and a healthier business mix. Our order backlog also remained strong at INR25989 million, increasing by INR $1,832,000,000 quarter on quarter.

18:06 This represents the highest order book level achieved so far and provides a good visibility for revenue execution in coming quarters. Overall, Q1 FY twenty twenty seven reflects a strong operating and financial performance backed by healthy order intake, sustained revenue growth, margin expansion and a record order book. We believe this position us well for continued growth throughout the year. Moving to the KPI trends, we would like to share quarter wise of our revenue normalized EBITDA, normalized EBITDA margin and normalized PAT performance. Starting with revenue, we delivered INR3738 million in Q1 FY twenty twenty seven compared to INR 2,784 million in Q1 FY twenty twenty six, reflecting a strong year on year growth trajectory.

18:53 Revenue also remained ahead of the previous quarter with Q1 FY twenty twenty seven continuing the growth momentum seen in Q4 FY twenty twenty six. On normalized EBITDA, we reported INR392 million in Q1 FY twenty twenty seven compared to INR251 million in Q1 FY twenty twenty six. While EBITDA was lower sequentially compared to $31,000,000 in Q4 FY twenty twenty six. It remains significantly higher on year on year basis, reflecting a strong operating performance. Our normalized EBITDA margin stood at 10.5% in Q1 FY twenty twenty seven, improving by 147 basis points year on year from 9% in Q1 FY twenty twenty six. Importantly, we now have consistently delivered double digit EBITDA margins for four consecutive quarters, which reflects the continued strength in our margin profile.

19:44 On profitability, normalized PAT stood at INR163 million in Q1 FY twenty twenty seven compared to INR75 million in Q1 FY twenty twenty six, meaning PAT has more than doubled year on year. This improvement is aligned with the strong revenue growth and improved margin performance during the quarter. Overall, Q1 FY twenty twenty seven started on a strong note with healthy revenue growth, sustained double digit EBITDA margins and a significant year on year improvement in PAT. Let me now take you through the key operating and working capital metrics. Starting with our order book, we continue to see strong momentum in business intake. Our order book increased steadily INR21.3 billion in Q1 FY twenty twenty six to INR26 billion in Q1 FY twenty twenty seven, reaching the highest level in company's history.

20:31 This provides strong visibility for future revenue growth and reinforces the confidence of our customers in Cyient DLM capabilities. On inventory, One minute. On inventory, our days of inventory outstanding stood at one hundred sixty two days in Q1 FY twenty twenty seven compared to one hundred fifty three days in Q4 FY twenty twenty six. While inventory level increased sequentially, they remained significantly lower than the levels seen during the much of FY twenty twenty six and are aligned with our business growth and execution requirements.

21:19 Days of payable outstanding reduced over last few quarters and stood at sixty three days in Q1 FY twenty twenty seven. This reflects normalization of our supplier payment cycles and continued strengthening of our supplier relationships. Days of sales outstanding remained broadly stable at seventy seven days in Q1 FY twenty twenty seven compared to seventy four days in Q4 FY twenty twenty six, demonstrating continued discipline in collections despite higher business volumes. Customer advances stood at fifteen days in Q1 FY twenty twenty seven compared to eighteen days in Q4 FY twenty twenty six. While advances more varied during the quarter, they continue to support our working capital profile. As a result, net working capital days stood at one hundred sixty one days in Q1 FY twenty twenty seven compared to one hundred forty five days in Q4 FY twenty twenty six.

22:06 This increase was primarily driven by the movement in inventory and customer advances as we continue to support a growing order book and the future execution requirements. Overall, while working capital remained elevated during the quarter, the business continued to maintain a strong order backlog and a healthy growth trajectory, positioning us well for the future revenue conversion. Let me now take you through the revenue mix of Q1 FY twenty twenty seven across the industry segments, product categories and geographies. From an industry perspective, Aerospace and Industrial continue to be the largest contributors to revenue. Aerospace accounted for 42% of Q1 FY twenty twenty seven revenue, while our Industrial contributed 32%. Together, these two segments formed the majority of our businesses during the quarter.

22:53 Aerospace and Industrial also delivered strong year on year growth of 4090%, respectively. The Defense segment contributed 9% of revenue and recorded 35% year on year growth. MedTech accounted for 16% of revenue with growth remaining broadly flat year on year. Auto and others contributed the balance of 1% of the revenue mix. Moving to the product category mix, PCBA continued to remain the largest contributor accounting 48% of Q1 FY twenty twenty seven revenue. The PCA business maintained a high share and delivered 21% year on year growth. Boxwind was the second largest product category, contributing 21% of revenue, but delivered strong year on year growth of 85%.

23:38 Mechanical and others contributed 10%, while cables accounted for 1%. The other categories also include B2F. From a geographical mix perspective, rest of the world continues to account for the major share of business of 94%, while India contributed 6%. The higher rest of world share was driven by all our focus segments such as aerospace, medical, defense and industrial customers outside India. Overall, the Q1 FY twenty twenty seven revenue profile reflects a healthy mix across key industrial segments, continued strength in PCB and Voxel and a strong international revenue contribution led by demand from aerospace, medical and industrial customers. Q1 FY twenty twenty seven was a strong quarter from both growth and a profitability standpoint.

24:25 As I explained in key highlights section earlier, our revenue increased by 34.3% year on year to million. EBITDA grew faster than revenue at 56.2%, reaching million, while EBITDA margin improved by 147 basis points to 10.5%. Employee cost increased in line with the business expansion and capability building, while other expenses remained aligned with revenue growth. Material costs were higher due to the business mix and procurement related to B2S. Importantly, finance costs reduced by 29% year on year owing to lower working capital borrowings. Profit before tax more than doubled to million and tax increased to INR163 million, representing a growth of 118% year on year. PAT margin improved to 4.4%, up 168 basis points from the previous year. Overall, the quarter reflects a strong operating performance, improved efficiency and healthy growth healthy earnings growth.

25:32 Q1 FY twenty twenty seven has been an excellent start to the year with a record first quarter performance across revenue, profitability and added backlog. Revenue grew 34%, EBITDA grew 56% and PAT more than doubled year on year. Our record $26,000,000,000 order book provides strong visibility and reinforces confidence in our growth outlook. We as a company remain focused on execution, margin improvement and converting the strong demand pipeline into sustainable shareholder value. Thank you and we look forward for your questions. Thank you very much. We will now begin the question and answer session. Our first question comes from the line of Gaurav Shukla with Finvestors.

26:39 I'm audible, sir. You are audible, sir. May proceed. Thanks, sir, for giving me opportunity and good set of numbers. Sir, I want to understand the asset of risk safety pricing And the last control had said that is driving approval, which are not bad. We're not able to hear the speaker very well. Could you repeat the question? Yes, I'm listening. Now what are you, sir? Yes, better. Sir, I want to understand the effect of rest Asia crisis that is going on. And in last conference, you said that Israel needs approvals in some business are not done. Are they still now pending?

27:42 Vestige, etcetera, Vestige. And two is we last time said that from Israel, we still had some models, etcetera, pending and we were seeing delays. How is that changing? Hey, Daurav, this is Rajan Mehra here. So on the best case, yes, I think still it is there, going up. But as earlier, I think that Krishna also pointed in terms of our planned execution and ensuring that we will be keeping some of the inventory for a long run. I think those are the things really helped us to work on the current challenges what we have in the West Asia crisis. What we are seeing even now today is there are some delays in the logistics in terms of shipments. And we are also seeing some of the costs going up due to these rest of Asia, the crisis at this point of time. But as we are already well planned in terms of our execution, so we have not seen any of those challenges in Q1. And we also just put a plan together to ensure that those things won't impact much in Q2.

28:46 And to another point about the earlier Israeli things, which we are seeing that we are seeing the momentum in terms of the order intake. That's what we had the good order intake we had from the Israeli customers. And we see the continued momentum in Q2 and beyond also going forward. Thank you. Our next question comes from the line of Bipraj Suvastava with PhillipCapital. Please go ahead. Hi, sir. Good evening. Great set of results. Just quickly on the new new entry into the data center side, AI side. Just want to delve deeper there. Any discussion with the hyperscaler, which is happening currently or at a very early stage and, you know, in coming quarters you'll give us more information. Any thoughts on the AI data center entry for the company?

29:38 Yes, certainly we just started this thing, we have our sales directors on board in this quarter. I think we'll be probably giving some updates in the next one or two quarters about where we are focusing and where are we today in terms of our momentum in AI and data centers. Okay, sir. That makes sense, And so secondly, given the West Asia crisis, which has been hampering our growth at least last year, does it have any problem now or it's fully resolved? What are your thoughts on that? I mean, as I said just before to another question from Gaurav. I think just the West Asia crisis is still there. It has not gone. But the planning work we have done to ensure that we'll be getting some of the inventories, holding that wherever we have some challenges for some of the materials.

30:33 I think that planning has really helped us for the Q1 outcome. And similarly, I think the Q2 also we have planned that. So we don't see much of that at this point of time. Right. And sir, last question from my end. The company is also venturing into the semicon side where you mentioned that testing and assembly, the last gen is also in high demand because of the AI play. So any thoughts on that? What kind of product profiles you're looking to enter on the semicon side? And what kind of timelines can we expect in terms of finally that coming in the P and L? So I think what I think we have already I think probably sometime back we just mentioned that we are working with the semiconductor capital equipments, some of the customer.

31:23 Think we are continuing so we are seeing some of the robust growth plans in that area. So we'll be continuing working towards that and where we are building some of the products for our customers in the semiconductor capital equipment. Okay, so that's what basically I mentioned in my earlier one. Just a follow-up, Any thoughts on time line? I mean, when does it materially impact the P and L next year, next to next year? Any thoughts on that? No, I think we will be seeing some of the growth coming in, in that area. So over the next six to twelve months, we'll be seeing more of the revenue growth, which probably in turn will also give us some leverage in terms of the margins. Thanks a lot, sir. Thank you. Thank Thank you. You. Our next question comes from the line of Deepak Krishnan with Kotak Institutional Equity. Please go ahead.

32:18 Hi, sir. Am I audible? Yes. Sure. Maybe just wanted to delve a bit on a similar set of questions. So we have this expand target till FY '29. Wanted to just, you know, pick your brains in terms of how do you see the overall growth CAGR for the company in this time frame, '26 to '29? And how much of the contribution would be from, you know, AI data centers or vortex in, say, '29 in terms of revenue? And where are we in terms of, you know, client approvals and how long after client approvals do things come into numbers? Second, maybe in the transform phase, when you say margin over 13% to 18%, steady state, what are you looking as B2S to an overall contribution to revenue? And what would be the margin delta between, say, what we do today in B2S so that we can probably see how we bridge the gap to about 13% to 18% and then I'll come up with a follow-up question.

33:13 I think on the expand phase, so when I said about expand phase, think some of the new things which you mentioned about robotics and the AI data centers and infrastructure, I think that is the area where we'll be focusing in FY 2028 and 2027 to 2029. Okay, so that will be taking some time for us to see the revenue coming in, but the order intake is where we'll be seeing it in the series itself. Okay. So I think as I said, we already have the people on board. I think so we are driving that growth in those new areas. So that will really probably give us some leverage in terms of the margin expansion there too. And coming back to your other thing on the transfer side, so you just mentioned, I mean, that is one of the B2B.

34:00 So we already have internal plans, both in terms of your expansion stage, which you are here, you asked the question about what percentage of the revenue will be coming from each industries and also these new two segments. So we already have the plan of actions in that and what will be our CAGR growth going towards for the next two years. And also for FY 'thirty and beyond, the plan what we have for the BTS, the percentage of revenues coming from the BTS in FY 'thirty and beyond. So based on that, that's where we have just arrived at the margin profile ratio what we mentioned there. Sure. Any range on AI data center, what is that you could give and by FY 2029 what percentage? And maybe just another question, given you're a net exporter, what factors drove to an FX loss in this particular quarter, if you could sort of highlight that as well?

34:53 Maybe both these two questions if you don't get back. I think as I said, we are not giving that guidance how much of that growth will be coming from these new sectors, okay. As I said, there is internal thing which we are which we have a plan of actions to take, Okay. So we'll probably once we have some new customers in the area, then definitely we'll probably let you know in the next two to three quarters. On ForEx, let me try and answer that. Last quarter, the last month was rupee appreciated a bit. So as you know, our balance sheet is pretty exposed in terms of our businesses on the export side pretty large both on exports and imports. So the net impact is what you're seeing on the balance sheet with respect to the last one month where the impact is seen.

35:46 Sure, sir. Maybe just one follow-up also order book, any sort of range that you want to end the year with in terms of book to bill ratio? Book to bill ratio will be at the same thing where we are today at 1.5x. So we will be at that number for the year too. Sure, sir. Those were my questions. I'll get back on the queue. Thank you. Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict yourselves to two Our next question comes from the line of Shubhi Gupta with Tri Netra Asset Managers. Congratulations on the numbers. So I wanted to understand, we see that the medtech segment growth is quite flat. So wanted to understand why is that and also how do we see that progress for the rest of the year?

36:49 Yes, I think the metric is where we have some seasonal impact in terms of one of our customer right now, which is there. And in terms of the growth for the metric, yes, I mean, we don't see any of the concern. We have the pipeline, which is available right now in our sales pipeline. We already have some of the opportunities in that particular sector. So we don't see a challenge anything in terms of the MedTech there right now. Sir, how much of the pipeline is coming from MedTech? MedTech is around that same what we have today in terms of our revenue mix, maybe around 17% to 20% range is where we have today our sales pipeline for the NetApp too.

37:39 Okay, sir. Thank you. Thank you. Our next question is from the line of Bala Subramanian with Arihant Capital. Please go ahead. Good evening, sir. Thank you so much for the opportunity. So pipeline nearly 4,000 crore, what is the breakout in terms of vertical like aerospace, defense, industrial and medtech? And that platform, sir, why is like legacy of this lean and lean too? I mean, if you're looking at the distribution of that order book or if not order intake, you're asking about order book you are looking at? Sir, order pipeline, sir. So order pipeline? Sir, we have nearly INR 4,000 crore. Order pipeline, no. INR 4,000 is more than that. So I would say, we don't get we are not mentioning our order pipeline... It's $500,000,000 sir.

38:37 Yes, that is the order intake. Where are you getting the number of order book? No, sir. That's a future pipeline, it's around $500,000,000 It's anywhere INR 4,000 to INR 5,000 crores range. No, I think we have more than that out of pipeline, okay. So the number, I don't know from where did you get that one, but we have a substantially higher Higher pipeline at this point of time, yes. Very, very high sales pipeline. Yes. And we report order book and order intake and order pipeline is obviously not second of it. That's something which we don't report or disclose on this number. No. Actually, I'm trying to understand that we have a new growth vectors like AI and data centers and our robotics side. So I'm trying to understand that point of time. We could explain in terms of platform side whether like the legacy businesses like aerospace, defense and data share and medtech and how that lane one, lane two. So how that things are moving up in terms of pipeline?

39:54 Yes. I think, see, if you look at it, the various segments, what we have in Aerospace and Defense, close to around 48 will be there in Aerospace and Defense in terms of the pipelines what we have. And close to 40% roughly less than 40% roughly is on the industrial and semiconductor equipment side, capital equipment side. And the balance is predominantly coming from medical and yes, it's basically coming from medical industry and automotive is a small one there. Okay, sir. Thank you. Thank you. Our next question is from the line of Praveen Sahib with PL Capital. Please go ahead.

40:43 Yes. Thank you for opportunity and many congratulations for a good set of numbers. My first question is related to the ROW sales because they are the 40% of the growth on the Y o Y side we are seeing, but there would be some element of a rupee depreciation as well. So in the same currency terms, how was the growth there? In terms of reporting, normally, do the reporting in INR, okay. In terms of dollar growth rate, okay. We can give the numbers separately to you in terms of we can get back to you on it. Yes. Okay.

41:30 Second question, sir, is related to the as you had a report, negative your operating cash flow is still negative. So what's the time date reason? And when do you expect the working capital to normalize? Yes. As I explained to you earlier, the negative free cash flow is essentially coming up from higher inventory and lesser customer advances. And we have talked about it earlier as a company we're growing and we need to keep making sure that the growth is well fed in terms of inventory because inventory is something what we need to do as leading indicator. We have to stock enough to make sure during this difficult time, our revenue is not impacted in any way. And we're happy to say that, that's something which we're being able to achieve and as you can see in the results, okay? So as long as we have this growth, these investments which we need to do it, But once we have the growth and the inventory coming under control, which we are working on, the cash flow will turn positive and that's what we are all working towards.

42:39 Last question is regarding the B2S platform. So when do you expect the meaningful revenue contribution from B2S product? And what would be the margin compared to the EMS business? Probably you'll be seeing, mean, already started having some revenues coming from them in the BDS. So we will be seeing it substantially a good revenues from them in the next one year to eighteen months. That's what we're seeing in revenues. And in terms of margins, as you said, overall, when you just look at the combined one, you will be getting additional two fifty bps to 300 bps additional margins when we have a consolidated EBITDA margins due to the VTS opportunities.

43:31 Okay. Thank you, sir. And all the best. Thank you. Our next question is from the line of Sameer Sinha with Macquarie. Please go ahead. Yes. Thank you very much. So in context of the strength that you saw in the first quarter, can you talk about any sense of guidance for the year? I know last time you said didn't give hard guidance, but you said sequential growth. Second my second question is, in terms of your revenue increased sequentially, but gross profit and gross margins declined. Is there a mix issue? Is there a tariff reimbursement? Can you talk about that please? Yes. I mean, in terms of the Q2 and going forward, we will be seeing a similar momentum in the range, okay? So we don't see any of the major concern on the momentum in terms of our revenues and our intakes.

44:29 And in terms of the gross margins, what you said, even though it is slightly higher and it is lower than the last quarter, it's because of some of the investments what we have made into our organization. So the investments are where we have already budgeted and we already kept it, because that is the one thing probably which is just driving our gross margins slightly lower. Got it. Thank you very much. Thank you. Our next question is from the line of Santosh Seshadri with Aventis Spark. So can you walk us through in detail on your... Sorry to interrupt, Santosh, but your voice is slightly echoing. I request you to please use the handset mode while asking your question.

45:19 Is it better now? This is much better. Sir, please go ahead. Yes. So my first question is on the targets to drive margin expansion in the medium term. Can you provide us some color on how much of that margin expansion is coming from new categories like semiconductor equipment, AI, servers and robotics? And also how much of the expansion is coming from operating leverage? As I said earlier, in expansion phase, we will continue to do what we are doing it, right. And those are the industries we are behind the focus. That is our basically our core.

46:06 We will continue that. We will sustain that. And the new industries like AI data centers and robotics coupled with of the semiconductor capital equipments, I think those are the things which probably expand us between FY '27 and FY '29, which will be giving us the margins of I mean, the EBITDA margins of 11% to 13%. If I may add, I think today the margin expansion or what you're seeing is essentially because of filling the hopper and the operating leverage. What Rajendra talked about is in terms of what is going to come in the future, which will be in addition to that part. Thank you. Just to follow-up on that, so what product categories are we specifically targeting within AI data centers? Because just if I look at the margins of some of the global players in the AI server segment, it's in the mid single digits.

47:03 And given that we are anchoring on some of these new segments for long term margin expansion. So is it just the product margin, no product category difference that is driving up margins? Or do you see any inherent cost advantage for Asian players? No, it is not an inherent cost advantage or anything. It is basically the products which we will be working out, which we will be working for this area and data centers and also the robotics, which has basically high profile margin business. Okay. So we have domain. So as I said, we have I mean, had the strategy in place. We have put those action items, which are those products which we will be working in these areas, in these new sectors.

47:51 And what are the revenues we are going to have for the next two years and how that margin profile is going to be. So based on that, this is what we are putting there, where we will be going to be in FY 2027 and 2029 in the expand phase. Got it, sir. And one final question. So in terms of winning businesses in these new categories like robotics and AI, do we so is it something that can be delivered with existing capability or do we need some sort of acquired capability to gain exposure in these segments? No, I think for all these, we can use our existing capabilities and probably we need to have some of the skilled experience with people in some of the areas in terms of application engineering. So that's where I think we are working out. I mean, we have some of the people on board and some probably will be getting the people on the board. But otherwise, the existing the missionaries will be sufficient for us to execute that.

48:52 Thank you very much, sir. Good luck for your execution. Thank you, sir. Thank you. Thank you. Our next question is from the line of Deepak with Unifi Capital. Please go ahead. Hello, sir. Thank you for the opportunity, and congrats to the management on a good recovery. Sir, my question around the order inflow. Actually, this INR $5.50 crore order inflow under that we saw in this quarter, I just want to understand how much is it from the existing business, which is our core business, like, aerospace, defense, medical, etcetera, and from the new logos that we've onboarded last year. Basically, I want to understand how much scale have you achieved from the sales efforts we did last year and how much, you know, more can we juice out from the new logos addition.

49:41 So that's the first question. Next thing is this $5.50 crore, were there any lumpy one off orders in this, or this should be the new sustainable run rate for the company? And can one extrapolate this run rate for the full year? So that's the next question. And, sir, thirdly, you've mentioned AI data centers and robotics in your slide. So can you just, you know, give up... Give some details on, you know, what products and data centers that you're targeting or robotics that you're targeting, what capabilities that you've built in? So I just want to hear the strategy that you guys have in place to get the business from these two new segments that you're targeting. Thanks.

50:27 Okay. I think in terms of the order intake which we had, there was no lumpy order intake in that. That is all as we see from our existing customers plus the new customers. Okay? And also, your other question is, are you going to maintain the similar things for the year? As I said earlier, so probably we'll be there at 1.5x of the book to bill ratio in that range for over the year also. And the other thing which you asked about is on mix between the new segment from the existing customers versus the new customers whom we added in the last one or two years. So if you look at that one, probably close to around 70% of that is where it is from our existing customers and the balance 30% is from the new customers whom we added in the last four equipment, at least in the last four to six quarters.

51:30 And I think to extend that to a question you asked, there's a lot of opportunities still with those customers. Yes, absolutely. There's a lot of opportunities from that existing and the new customers there. And the other thing which you asked about, I think earlier also you just mentioned about on the AI and data centers, I said we have the people on the board, we have put the strategy in place, probably just we'll come back to you in the next two to three quarters when we will be seeing the products, which we are going to focus. And as I said, we don't need any additional CapEx for that. So existing machine, this will be sufficient for us to execute any of those products which we are looking at. And we also, as I said, we have some people on board who will probably working with our new prospects in these areas, going and talking with them. So I think it is going to be the expansion plan from FY 2021 to FY 2029, okay. So this is what we just want to just make sure that the focus is there, that's where the growth is going to be and that's where I think you'll be seeing the both the revenue growth and also the expansion, margin expansion growth.

52:34 Okay. Sir, just on the order inflow run rate, you mentioned one and a half times order book to revenue. So we are already at that rate today. So if I assume that you're going to grow at a healthy twenty twenty, 30% this year, Your order book is already 2,600 crores, which is, you know, more than one and a half times. So what kind of number that we should look at in terms of order inflows for this entire... If you can help us understand that that would be useful. Probably I think we're not giving that guidance in terms of the number right now. As I said, you'll be seeing it, we'll be having 1.5 times what I will just say that we'll be there for the year.

53:21 Yes. So I think the guidance wise, we are not giving that where you are going to be, what the order book is going to be by end of the financial year. Deepak, RMS here, I think Rajendra talked about the aspirational revenue growth rates and the book to bill ratio. I'm sure you are good enough to calculate it. Yes. You. Okay. Thank you. All the best. Thank you. Our next question comes from the line of Aditya Pal with MSA Capital Partners. Please go ahead. Hello. Am I audible? Yes. You're audible, sir. Yeah. Thank you so much, and congratulations on the great set of results. Question for Arjinder. So just wanted to quickly understand, because if I see over the last three years, right, there's been a lot of defense going very fast, then beating out and then completely vanishing from f 25 number and because of the bell order, then industrial seeing the up and down. But out of all this, aerospace is the is is the one place where we've continuously grown.

54:29 Over the last three years on a quarterly run rate, we've expanded forex. Wanted to understand what is the strategy, how are we able to grow and maintain the space, and also a large customer like Honeywell, Aerospace, and and. They are more and more talking about that they want to expand our closing from India. How are we placed on that? So it's a bit of on the what has worked and how are we placed. So a bit of strategic question rather than a guidance question. I think we are... As probably I just mentioned earlier, so we are very well placed on the on the aerospace side. I think Honeywell, we just mentioned about some of the big work which we have which we had won several years back.

55:17 I think that is where now right now some of the initial builds are happening. So we will be seeing the ramp up coming on those things in the next eighteen months. So that's where we'll be seeing a big growth coming from the Honeywell Aerospace. So I think we had we have a very good engagement with them at various levels and that account and you also said about the Thales, I think both of the accounts is where we'll be seeing an extraordinary growth in this year. I may just add to that, the aerospace business is a double edged sword. It's very, very difficult to get into. But once you're in, you're in. And we are fortunate that we're pretty much in with every single major OEM or significant Tier one that buys any electronics.

56:03 I mean, obviously, Rajinder mentioned two, Thales and Honeywell, those are the large ones. But there's also many, many others. So I think it was a deliberate choice. And now, of course, for the first few years, aerospace is always an investment. But it was a deliberate choice to build a very strong aerospace business because aerospace and defense gives you a steady revenue stream on which we can build many other things. Like look at the data center business, the reality of that is it is up now, it will go down. That's just how some of these technology related businesses work. But aerospace, what really differentiates us is a strong aerospace capability because that's a moat that's impossible to or it's very, very difficult to breach for a new entrant. And we're in the mode and we're very strongly placed in the mode.

56:52 So I think that's a very key element for us, and that's why I just want to highlight that. Understood. Understood. Just last question from my side, if I come back in the queue. So one on the aerospace. So SkyDrive has has started receiving a lot of certifications from the the aerospace or airplane authorities, and it is one of a large b two s pipeline. How are we... How are the discussions going over there? Do you think that it is the... It can to to find much sooner than expected? And second is on the entire defense spend. And this, again, ties to that. We are we are in, I would say, each and every European defense at this point of time. How are we seeing that pan out?

57:47 I'm starting with defense spend... Sorry. You're asking about the defense spending? Yeah. So two questions. One is on Sky... SkyDrive b two s. And because they are getting certification much faster than expected, how... Because they'll they'll have to start making their their their aircrafts. And the is it the... Is there a possibility that we start booking the b to s revenues much sooner than expected on SkyDrive if if those are the discussions that's going on? And on the defense side, specifically on the European defense, because the reason I'm asking this is that because we are in, I would say, in each and every defense company in The USA, maybe, I mean, base systems, software and and then we we also onboard a few other defense companies over the last four, five quarters.

58:40 How are we looking that pan out? So two questions, both on aerospace and defense. Okay. I think the one which you mentioned about the one is one of the Japan customer which we mentioned earlier, they are all UAVs, which we are working out with them. And as I said, we are doing it currently the engineering designs for their products, for BTS products. And that will be probably taking another year to an eighteen months for us to come into the production line, okay. So that is the one which is probably very high end and it is a long term for us, Krishna said, those are the customers once we come in and particularly if they are on the build to stack, I think we are the ones who will be doing it throughout the lifecycle of the product, who will be maintaining the product there, okay. So that way I think that is the one business which we are very, very strong with that customer in Japan.

59:36 And the other ones which you said about other aerospace customers, I think we continue with them. So we are working with them, the value what we provide. Think in terms of their The next the second part is on the European defense. Aerospace, I understood that Krishna and you also spoke in detail, but on the European defense, are we seeing a lot of negotiation pipeline building up on that side? Yes, I think there is one right now, which we there is also a part of the build to spec, which we are working out with one of the European defense organization. So, at this point of time, there an entire order pipeline. So we are working out towards Is your question specifically B2S for European defense or European? Not, not there. It is on the demand trend.

1:00:27 Okay. So on European dimension, we said, I think, so one other thing which you already mentioned with Thales earlier. So we are working with them, again a different customer. So we continue I think we are very, very strong in terms of our engagement with them, the value what we provide to them. And we also have other different customers in Europe, which probably I don't want to name it at this point of time, based on the competencies equipment that we have with them. So, we are working on the build to print apart from what I said earlier in the build to spec is another one going down, but build to print is continuing the momentum is still there. I think very, very strong momentum both in North America and Europe. Understood. If I can just... Sorry to interrupt you. We request you to please...

1:01:15 No. This one last, it's possible. Please go ahead. Yeah. So on all tech, because our strategy on med tech is a modern strategy where we also deal with a lot of early stage and startups in the products. In all taken with ITAR, is there any probability that we can start working with defense technology in North America? Yes, that's what I think we have now one project going on right now for one of the defense customer there. We have the ITAR facility, as we said, ITAR certified one. So we are working out with few more other U. S. Defense customers there. So it is still at the early stages of our pipeline. But we see a value there what we can bring into our customers in U. S, the different customers in U. S.

1:02:11 Thank you. Ladies and gentlemen, we will now take one last question, which will be from the line of Anil Mehta with Iquiris Securities. Please go ahead. Yes. Hi, sir. Thank you for the opportunity and very congratulation for both set of number. Sir, my first question is that, you know, as we are going in expansion phase in FY twenty seven to twenty nine, particularly in the AI, data center, and robotics projects. So just wanted to know in that segment, particularly in this product side that we are on services. It is from our side or a billing side or power supply side. That is... If you can shed a light on that. Secondly is that how much incremental CapEx, particularly for the expansion phase and from the transformation phase that we are going to stand for the next couple of years? So if these two things you can share. Thank you so much.

1:03:03 Sure. I think as I said probably earlier, so I think we're still working out on that to be able to strategy in place. I think the team is in place right now. So probably we'll be let you know in the next two to three quarters where the focus, which are the product lines we are working, going to work and we are working out in that area, both in the AI, data centers and the robotics, okay? And the other one is the CapEx, correct? The CapEx, I think, you said, whatever we have today, closer around 1.75 to 2x of the revenue. So we don't need any such additional CapEx apart from a regular annual CapEx, which we'll be working out for our running the business. Thank you. I would now like to hand the conference over to Mr. Krishna Bodhanapur for closing comments. Over to you, sir. Thank you very much, and thank you, everybody, for joining the call this evening. Obviously, it's been a very good quarter. And again, I want to compliment Rajendra and his leadership team for delivering an excellent set of results.

1:04:08 Also, I want to assure you that I think a lot of the challenges of the past have been overcome. We find ourselves in a very good position both with the core business, which is Aerospace, Medical, Defense and industrial, but also with some of the expansion that we're looking at, which includes semiconductor equipment, data centers, etcetera. So I think we find ourselves in a good spot. So thank you for the patience. Thank you for the support. We'll again speak next quarter, but I want to assure you that we will keep our focus on delivering again, continuing to deliver a good set of results going forward. Thank you. Thank you. You. On behalf of Cyient DLM Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.