Cyient (NSE:CYIENT) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Cyient Limited Q1 FY 'twenty seven Results 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 call is being recorded. I now hand the conference over to Mr. Krishna Bodhanapu, Executive Vice Chairman and Managing Director. Thank you, and over to you, sir. Thank you very much, Inba, and good evening, ladies and gentlemen. Welcome to CYIENT Limited's earnings call for the first quarter of financial year twenty twenty seven. I'm Krishna Bodhanapuk, Executive Vice Chairman and Managing Director. And present with me on this call are Sukumal Banerjee, Executive Director and CEO and Srinivas Kulkarni, CFO Chief Financial Officer.

0:48 I would like to mention that some of the statements made in today's discussions may be forward looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available on our investor website... Our investor update, which has been emailed to you and also posted on our corporate website. This call will be accompanied by an earnings call presentation. The details of the same have already been shared with you. We continue to report group performance under four segments, DET, DLM, semiconductor, and others. While the focus of this call will remain the DET segment, I will spend some time on semiconductor and DLM since these also represent a significant value of the Cyient group portfolios.

1:35 Group numbers include performance of all four segments. Coming to some key updates for this quarter, I'll first start with Cyient Semiconductors. As many of you would remember, our semiconductor business has three verticals. The services business, where we deliver semiconductor services to companies, the custom ASIC turnkey business, where we design and source chips and deliver chips at a more mature nodes to companies, and the evolving custom productASSP business where we will own the intellectual property and supply chips to companies. The services business continues to grow. You may have seen some announcements on this. We won a deal from the semiconductor complex of India to upgrade their fab in Mohali and many other deals, and we continue to have a very strong pipeline on the semiconductor business, which continues to grow. Now coming to the second part, which is the custom ASIC business.

2:33 The pipeline here now stands at more than $100,000,000 and is building fast, powered by a wave of new design wins and deepening roster of blue chip marquee clients. Our compound semiconductor initiatives continue to advance, anchored by our push into the Indian gallium nitride or GaN power market. We launched seven new GaN power chips leveraging the Navitas technology to rapidly growing demand for high efficiency, high power density solutions across AI data centers, telecom, fast charging consumer applications, industrial power systems, and e mobility platforms. Now coming to the third part or the third pillar, which is the custom ASSP or custom...

3:20 Sorry, custom ASSP business. There are two parts to it, low power and high power. Sorry. To to increase our spread and reach in the low power ASSPs, we acquired Kinetic Technologies. Q one was the first quarter where we operated this recently acquired business, fully consolidated it, and the combined revenue of the CYIENT and the KINETIC Technologies business is $17,900,000 Our semiconductor... Our organic semiconductor group business grew 5% quarter on quarter to $7,500,000 marking our fifth consecutive quarter of organic growth above 5%. Also, if you look at the high powered ASSP business, we continue to make significant progress in research and development efforts.

4:14 While Kinetic gives us access to low power and credibility in power, the high power business is being developed organically, which is where much of our cash flow is going and which is what has led to lower operating profitability. The team is fully on board. The research phase is completed, and now development is in full swing, positioning us to address one of the fastest growing demand areas in the industry. Turning to a major milestone, as we highlighted on May 25, we signed a financing agreement with EAAA at a post money valuation of $500,000,000 I'm pleased to announce that we have closed this round. $30,000,000 of fresh capital raised through a combination of debt and equity is in place. This is a strong vote of confidence in our strategy and our trajectory and gives us the balance sheet strength to invest in growth and scale.

5:09 Looking ahead, we remain confident in our outlook for the year. With the recent fundraise closed and an expanding pipeline and strong underlying momentum across the business, Cyient Semiconductor is well positioned for years to come. Now moving on to Cyient DLM. Q1 FY twenty twenty seven there has begun on a very strong note, reinforcing the message from our previous earnings call that the underlying strength of our business remains intact and the investments we have made over the last few years are translating into tangible results. As you know, this is also starting to reflect in the valuation of CYIENT BLM, which is an encouraging validation of the market's confidence in our direction, our capability, and our credibility.

5:56 The quarter played out against a backdrop of continued geopolitical uncertainties, evolving design patterns, demand patterns, and global supply chain disruptions, including the West Asia crisis. Despite this, CYIENT DLM stayed firmly focused on execution, enabling us to consistently meet our delivery commitments and further strengthening customer trust. Our order book momentum there continues to be a strong anchor for our confidence with the quarter closing at the highest ever order book, supported by a strong order inflow and a book to bill ratio of in excess of 1.5. This was complemented by strong revenue growth year on year across a diversified revenue mix and sustained double digit EBITDA margins for four consecutive quarters.

6:46 This reflects our focus on operational excellence, revenue quality and disciplined cost management. Alongside this, key leadership hires in strategy, sales and operations are now substantially complete, meaningfully strengthening our go to market engine and positioning us to accelerate growth ambitions. Looking ahead in CYIENT DLM, the structural drivers of our business remain firmly intact. Rising electronic content, supply chain diversification, and the broader outsourcing trend. With our differentiated design led manufacturing model and our strong customer relationships, opportunities. Lastly, during the quarter, CYIENT successfully completed our share buyback program, extinguishing 6,400,000 equity shares at a price of $11.25 per share, aggregating to INR $7.20 crores.

7:45 This represents approximately 5.76% of the company's total paid up capital. The promoter group, directors, and key management personnel did not participate in the buyback, reinforcing our continued confidence and commitment in the long term value of the company. Before I hand over to Sukhmat, I would also like to take this opportunity to announce that we will have an Investor Day planned on August 25 in Mumbai. It will be a great occasion to engage with our leadership team on strategy, growth priorities, and the road ahead. I look forward to interacting with many of you there. With this, I will hand over the call to Sukmal, who will take you through the business performance of DET.

8:33 Sukmal? Thank you, Krishna. Good evening to all of you, and thank you for joining us today. As Krishna mentioned, I'm also looking forward to seeing many of you next month in Mumbai at our Investor Day, where we'll go deeper on where this business is headed. Today, let me give you the direction and the first proof of it. For some time now, we have been focusing on our life cycle engineering capabilities, and that opens up a far larger market for us. E r and d outsourcing today is a market of roughly 80 to $100,000,000,000. Across the full product life cycle, the opportunity in front of us is close to 20 times that. And a lot of that can be shaped and defined by us.

9:22 Our customers are seeing this firsthand. The products they build stay in service for decades. And with far more sensors on board, they now generate more data than ever. Literally, the volume of data is doubling every quarter in our segments. That creates real value for us to capture right across the life cycle from development, manufacturing, through supply chain, and into aftermarket, and in the case of certain industries, MRO. Where much of this growth now sits and much of the economic value created now sits. Our M and A strategy was a promise to move on this opportunity. And this quarter, we delivered the first step. We announced our agreement to acquire Tau Digital Solutions.

10:12 As you are aware, with Tau, we add real depth in data and software engineering, including cloud native platforms, and that help us guide our key customers through their AI adoption journey. Just as importantly, they know how to keep AI running with AIOps reliably once it's live in production. They work in the same mission critical industries and platforms as we do, where the data is complex and there is little room for error, especially in the context of deploying AI at scale. Their employees bring that strength across North America, India, Taiwan and some parts of Europe. Bringing their strengths together with our own domain and engineering knowledge, we can finally make AI adoption real for our customers and at scale.

11:04 This is what carries us further along the life cycle from design and engineering through to operations and aftermarket. We have always believed that AI earns its value only when the people shaping it truly understands the domain. And with Tau, we bring those two strengths together under one roof. Let me highlight this in translating this with an example of MRO. Our agentic AI driven MRO platform is a clear example of this life cycle shift in action. Our customers in the aerospace industry are in early stages of building a robust data infrastructure, encompassing dark data, structured and unstructured data, to create digital threats across the product life cycle.

11:51 What we have built brings injuring the supply chain and the shop floor into one AI operations platform. It turns lost time back into real output from the assets they service. We launched this platform, platform based offering at the Farnborough Air Show this week, and the customer engagement has been really encouraging. The opportunity is compelling. Our product is designed once and built at scale, but maintained across a service life of fifty years or more. And that is where the growing share of economic value now sits. We layer our domain expertise and agentic MRO platform playbook on secure AI infrastructure to deliver intelligent outcomes for our customers.

12:39 Let me now switch gears to talk about our Q1 numbers. As you have seen, overall, we had a satisfactory quarter across broad segments of our business, except one market, which unfortunately had a sharp reversal. This resulted in our overall constant currency to be a degrowth of quarter over quarter to be minus 0.5. And in rupee terms, it was a growth of 2.7% quarter over quarter growth. This in year over year, year over year turns... Turned out to be minus point 9% constant currency, and in rupee terms, it turned out to be a 10.6 growth in constant currency.

13:27 Apart from the market specific impact I mentioned, we did see some slowness in awarding of discretionary projects as customers across the globe were cautious on starting new programs with some of the uncertainty and supply chain disruptions due to the South... Due to the West Asia war and the situation that has unfolded because of that. Despite this slight drop in revenue, our ongoing focus on operating margin improvements resulted in an EBIT of 13.2%, up 79 bps quarter over quarter normalized. This reflected our continued focus on improving both our revenue to cost ratios, but also ongoing optimizations on our G and A and overheads and bring that to industry levels.

14:17 This EBIT outcome is despite higher restructuring costs over our near term quarterly average that we experienced in q one. I will let our CFO, Sini, give more color, on the progress we have made on this front. Underneath the headline, the momentum in our funnel and our order intake tells the full story. Our order intake was up 5.3% year over year for q one. Order intake growth for our new business, existing new EN and NN business came at 64% year over year and 49% quarter over quarter. Over the last two quarters, q four f I twenty six and q one f I twenty seven, we have won five large deals. Additionally, in q one, we have created and qualified nine large deals, giving us additional large deal pipeline of over $300,000,000.

15:12 So our focus on building up larger deals is starting to show momentum. On our EBIT exit goal of FY twenty seven, let me share how we see it today. We are still working towards a 15% EBIT, but we now believe that this may take a little longer than the Q4 FY 'twenty seven we originally aim for. Our plan rested on two things, our internal focus on cost and a certain revenue growth trajectory. We remain firmly on track on the cost side, and it is the revenue ramp up where we are running a little behind. And that is where I think our attention is now. We also took a decision not to cut back on our investments, which are critical for our turnaround in the service portfolio mix, which is important to sustain the momentum for our future growth.

16:05 Let me also add a little more color from a segment performance perspective. As you have seen in our reported segments, transportation and mobility was a real standout quarter. It grew three percent quarter over quarter in constant currency and 14.8% year over year in constant currency and remains our strongest engines, delivering its fifth consecutive quarter of growth. Network and infrastructure rebounded to grow, point 3% quarter over quarter constant currency and 2.5% year over year constant currency, which is what we anticipated post our q four setback and what we had highlighted to be a quarter specific problem. The growth growth numbers would have been even higher had it not been for direct start to some of the programs which we had already won in q four of FY twenty six, reflecting the demand for higher bandwidth and smarter systems, remain strong.

17:04 This is exactly the high value engine led work we want more of, and the same ambition runs right through our portfolio. As I mentioned before, our strategic units did suffer minus 8.2% quarter over quarter degrowth, primarily due to contraction in our energy business. While the results in the near term has been challenged, we have rebuilt our go to market team in several important geographies. And more important, we have created a better perspective and understanding of what we need to take to the market and how we need to play in the market. We are confident that this will start showing market comparable results in the next two, three quarters. Other market segments in strategic units continue to deliver adequate results, and we expect them to gain further momentum as some of the funnel we talked about is reflected in these verticals.

17:59 From a leadership perspective, a quick word on a couple of additions that we have done. We are very happy to welcome Bhaskar Nagarajan, who has joined us as the global head of avionics delivery. Across nearly three decades of experience at Honeywell, HAL, and Alstom, he has led teams of thousands on complex safety critical programs and strengthens our work in the transportation segment. We are also glad to welcome Rahul Sarkar to lead our alliances and partnerships, which was one of our critical initiatives, which I've highlighted in some of our forums. Over, Rahul has, over the last twelve years, AdTech Mahindra has built the partnership and ecosystems across hyperscalers, AI platforms, and OEMs.

18:49 As we take our life cycle strategy further, it is domain expertise and the right partnership that turn technology into real outcomes, and both of them, I'm sure, will help us get there. Before I close, let me leave you with one thought. In our industry, advantage comes from understanding our customers' business deeply enough to know where intelligence creates the greatest value and having expertise to deliver meaningful outcomes. This isn't something AI can take over. It can only augment what experts deliver. That conviction is reflected in everything we have shared today from acquisition and our expanded offerings to how we are sharpening our market focus. We are combining deep domain expertise with AI to solve more meaningful problems for our customers.

19:39 I'm confident in our strategy, our execution, and the team driving it forward. Thank you. And with that, let me hand over to our chief financial officer, Sriniv, to take you through the financials in more details. Thank you, Sukumar. Ladies and gentlemen, thank you for joining today's call. I'll now walk you through the financials. Before turning to the numbers, let me confirm that the only change to the reporting structure this quarter is the inclusion of Kinetic in the semiconductor segment. This call today will focus on DET performance, followed by a brief commentary on the group level performance. Two updates before the quarter's numbers. First, as Krishna noted, the buyback is complete.

20:26 All the 6,400,000 shares were extinguished and the consideration fully settled. Both the acceptance and extinguishment occurs after the reporting period, which is June 30. So there is no impact on Q1 FY twenty seven results as reported. Second, on Tower Digital acquisition that was announced earlier, the closing is progressing well, and we are expecting to satisfy all the closing conditions by August 2026. We have expensed in the current period $1,400,000 in transaction costs in Q1, and this is normalized and treated as non recurring for the quarter. Coming to DET's performance, DET reported Q1 revenue of $162,500,000 It's down 0.5% sequentially and 0.9 on a year on year basis in constant currency.

21:22 In INR terms, revenue was $15.40 crores, up 2.7% quarter on quarter and 10.6% year on year. The divergence between the dollar growth and the rupee growth is explained by the currency tailwinds. On margins, and you will see this noted in the annexures that we have shared, we have refined our gross margin definition this quarter to reflect full accountability of project linked costs by reclassifying project linked costs such as software, hardware, facility seat, and technology incubation spend. This is a presentation change only. This has no impact at the EBIT level, and prior periods have also been restated for a like to like basis.

22:07 The DET gross margins for Q1 FY 'twenty seven stands at 32.7%. It's down 13 basis points sequentially, but up 127 basis points on a year on year basis. On the EBIT margin, DEP delivered 13.2% this quarter. This is normalized for the M and A expenses I referred to earlier, and up it's up 79 basis points sequentially and 100 and basis... 114 basis points on a year on year basis. This is driven by continued cost optimization and favorable foreign exchange from the... From a stronger US Q1 DET profit after tax normalized for M and A expenses is 141 crores. It is up 2.1% sequentially, but down 13.5% year on year. The year on year decline reflects lower other income, as Q1 of FY twenty six benefited from a one off reinstatement gains.

23:09 The effective tax rate for the quarter was 29.2%, broadly flat sequentially, but up three fifty basis points year on year, driven by a shift in the profit mix towards higher tax jurisdictions and some prior period true ups. We are working on initiatives to bring this down and we expect the full year run rate of ETR to be between 2728%. On cash, DET free cash flow for the quarter was 114 crores or 80.5% conversion to normalized VAT. This is down sequentially 49% against a strong Q4 base, primarily due to certain payments for which provisions were created in Q4 but paid in Q1. And the... But the Q1 FCF conversion pattern is consistent with prior years, which is why on a year on year basis, the FCF is broadly flat.

24:03 Also, you'll notice that the CapEx spending this quarter is a little bit higher, which is reflective of the cyclical IT system refresh and as project ramp up. As in prior quarters, DET's EBIT, PAT and EPS are presented on normalized basis, excluding the INR 14 crore of M and A related expenses tied to the tower acquisition. A full reconciliation is in the next year that is presented today. Quickly on the group performance. At the group level, Q1 revenue is $219,000,000 up 4.5% sequentially and 9.1% year on year in constant currency. INR revenue is 2,076 crores, which is up 7.7% quarter on quarter basis and 21.3% on a year on year basis.

24:52 Numbers this quarter includes $10,400,000 from the Kinetic Technologies within the Semiconductor segment, and this is their first quarter of consolidation. Group EBIT margin normalized was 9.7%, up 16 basis points sequentially and 19 basis points on a year on year basis. BET's improvement, partially offset by continued investments in the semiconductor business, is the result of this number. Consolidated and organic semiconductor details are in the in excess. The group profit after tax normalized was 114 crores, with EPS at 10 rupee 32 per se. On a reported basis, group profit after tax was INR104 crores and EPS was INR9.42.

25:38 In closing, this was a quarter of disciplined execution. DET expanded EBIT margin both sequentially and on a year on year basis, even as top line growth remained muted in constant currency. With the buyback now fully settled and Tower Digital on track to close by August, our capital allocation priorities for the year are largely executed. And the team's focus now turns fully to integration and converting this margin trajectory into a sustainable higher base. I'll now hand over the call back to Inba for moderating the Q and A. You very much, sir. Ladies and gentlemen, we will now begin the question and answer question may click on the raise hand icon from the participant tab on your screen.

26:28 We also request participants to restrict to two questions and then return to the queue for more questions. To rejoin the queue, you may click on the raise hand icon again. We will wait for a moment while the question queue assembles. Any participant who wishes to ask a question may click on the raise hand icon. We'll take our first question from Moj Chandani of Ambit. Please go ahead.

27:27 Yeah, hi, good evening and thank you for taking my question. My first question was on the three segments, right? Starting with strategic units, you've seen, I think, a decline for the last two quarters. Do we think that we're now at the bottom for this segment or do you think that there is still some further impact because of some of the delays in discretionary spends that you noted in your remarks? Yeah. Hi, Boise. To answer your question, as I mentioned, there are essentially three markets incurred over there, and we definitely see strong potential, and and and the numbers are also reflecting that in terms of growth in two of them. For one of them, which is energy, as I highlighted, we might have one or two more quarters.

28:18 I won't say of softness, but for growth through rebound, we probably will need one or two more quarters. So Understood. Our overall attempt should be to narrow the gap, if not, make it flat for quarter... For this particular quarter. That is what we are working towards. Sure. Understood. And then just on your transportation and mobility, obviously, growth has been strong for you there. Again, is there a particular project or ramp up that is driving this or that's more of a function of the broader aerospace sector where we are seeing growth going forward? Sure. No. It is not driven by one project. In fact, as you know, it is the transportation mobility constitutes of aerospace, rail, and automotive.

29:09 Have growth in all three of those segments quarter over quarter, as well as double digit growth year over year in each of those three segments. So it is pretty holistic growth that we are driving, across, these three markets. Sure, understood. And then lastly on semiconductors, I know Krishna, you highlighted a fairly strong demand environment for the entire segment. Any sense in terms of how do you see breakeven coming through for the semiconductor business, especially on a pack level given that we've already taken some debt for the Kinetic acquisition and also your expectations in terms of growth for the rest of the year?

29:56 So Mohan's growth will continue to be very strong. I mean, we we see a strong pipeline both for the CYIENT organic business and the acquired entity, which is Kinetic Technologies. So from a growth perspective, we're not overtly worried in that sense. I think there's a very, very good growth opportunity. Now in terms of breakeven, it looks like breakeven will happen only in FY '28. We... And and most of it... And if you look at at a gross level, it has a very healthy gross margin. Our semiconductor business has a higher gross margin than the services business, which is expected. But as I said, there's two parts to the custom product or ASSP business. One is, of course, what we acquired, but the second is the design and development of high voltage products.

30:53 Now, that still will consume cash for the next four, five quarters at least. That's why I say breakeven in FY '28. But also you have this amortization and depreciation... Amortization, sorry, because of the acquisition of Kinetic, and that's why there's about $3,000,000 a quarter there that we have to cover up. That's why net net growth is good breakeven in 'twenty eight. Got it. Thank you for taking my questions. Thank you. We take our next question from Hasmukh Visharya from Tata MF. Please go ahead. Yeah. Hi. Thanks for the opportunity. Am I audible?

31:38 Yes, you are. Yeah. So my only question is on the energy vertical within the strategy. Right? So if I think about two years back or so, we were going exceptionally well here in in this vertical. But let's say in last, let's say, three, four, five quarters, the momentum has faded away. Whereas if I look at one of your peers, a larger peer, they are continuously winning good deal once you are If you could elaborate on Rational with respect to the loss or market share loss, why is that? Yeah. So I think to answer your questions, two parts.

32:27 The numbers that you are referring to, which were strong a couple of years back, were built on one single very large project. And I think we have in our commentary over the last four, five quarters talked about the ramp downs we were facing in that project, which is now completely over. The project is completed. What now we have been working on is... And I understand the comparison you are making. And that's why in my commentary, also said that steps we have taken and the changes we have done, we feel very confident in next two, three quarters, we'll be showing comparable numbers to the market. And those are to do with two, three different things. One, as I mentioned, change in the go to market team, which had to be done in some pockets, to align with what the market needs are.

33:22 Second, to prioritize on which offerings, that we take to the market, given the current market conditions. And third, to broaden the service portfolio that we have been taking to that market, instead of just depending largely on planting strength, we have broadened our service portfolio. In fact, it is already reflected in one of our large team wins in Q1 where we won, and I think it's highlighted in the key deals as well, with one of the large energy OEMs. We won a multiyear large deal for digitalization of their service parts catalog. And these are the kind of projects which expands our service portfolio to these customers that we already have as as our logos.

34:09 And those are the three steps we are taking to make sure that the turnaround gets done towards the results that we are seeking. Understood. Thank you. Sure. Thank you. A quick reminder to our participants. If you wish to ask a question, you may click on the raise hand icon. Our next question is from Dipesh Mehta of MK Global. Please go ahead. Yes. Thanks for the opportunity. Two questions. First, on the revenue growth side, considering if I understand correctly, you're indicating energy, most of the weakness is behind, growth will take some time. So considering the negative headwind is largely behind, and other two segments you expect growth to continue.

34:58 Should we expect positive growth to return starting quarter two? And as year progresses momentum to accelerate in FY twenty twenty seven from revenue growth perspective? That is question one. Second question is on the EBIT margin what you indicated. You are differing some of the timeline of 15%. Can you provide more detail around it? When now one should expect your margin trajectory to be 15 and above 15 kind of trajectory? Thank you. Sure. I'll take the first question, and I'll ask Srini to comment on the second one. On the commentary that you made is largely correct. I think the growth numbers that we are trying to pursue will obviously build up slowly over the quarters, but that's definitely the visibility and the perspective we have at this point in time.

35:50 Sriniv, on the margin question on EBIT? Yeah. So I think like, Sukumar explained on the call, I think our EBIT trajectory and growth has two elements to it working in tandem. One are the the cost levers and optimization levers, which are largely in our control. And the second is on the absorption that we would expect from growth. Now the... On the first part, which is in our control, those are on track. I think we are working on a number of levers, like the rate increase from customers, the the, you know, the productivity and automation related savings, the... Now the pick... Picking the the g and a optimizations, etcetera. But on the second part, since growth has been muted, I think we will see the absorption coming in a little late. We've also taken a conscious call not to stop any of the investments that we are making, which is required for the rebound and for the growth momentum to come back. So we will see a a path towards 15%. It will take us a couple of quarters into the next year, by which time we we hope to get there.

36:59 Understand. And any thought around the wage hike during this period when you say, let's say, my understanding is you are indicating somewhere in h one end, we should be reaching 15 percentage. And how to look wage hike in this period? No. No. I said we will we will reach the 15% in h one of next year, not this year. Yeah. FY '28, I said. Yeah. Yeah. Yeah. So the wage hike is a is a different conversation, I think, that that is driven by the market forces. We will take a call looking at at all all the scenarios in in the beginning of h two, right, on on on on the wage hike itself. Okay. Thank you. Thank you, Mr. Mehta.

37:46 Our next question is from Shraddha Agarwal from Asian Market Securities. Please go ahead. Yes. Hi. Just on the revenue question again. So I think earlier, we had broadly indicated that revenue growth in '27 will be in the mid to high single digit range. With whatever commentary you have around the strategic unit, So what is the outlook on revenue that we want to give now? And with Tau Digital acquisition getting consolidated, say, from 3Q or probably one month of 2Q, how should we look at the revenue including Tau? So so I'll I'll answer the first part, and then we'll come... I'll hand it over to Sukumar. See, on on on the revenue, first of all, there was no guidance from us. Right? We were... We said we were aiming towards a a mid mid to mid single digit growth.

38:38 Now, of course, that will be challenged given just the way the mathematics works. If you have not started the year with a growth, I think the ask rate for the rest of the year does become very hard. But, of course, we are very hopeful of growth returning in a meaningful way in h two of this year. We are still working through the numbers. We don't have the details to give a specific commentary on what... Where that, you know, that... That'll land us. Right? Tao will definitely add. I'll one more to add on. Yeah. Sure. So, Tao, as you might be aware, we are still in the closing process, and it is anticipated to be sometime in the late q two time frame. And I I think we had indicated regarding the revenue it brings. And once we close, we'll be able able to be in a better position, but it definitely will be closer to about a $4,050,000,000 dollar range, if you are able to close with the timelines that we are sharing right now.

39:34 Right. And I understand that the order book number for this quarter has been quite strong. So what has driven that? It is mostly led by the new business, but what about renewables in the existing order book? Has that seen a decline because of some client specific issues or what has been the reason? I think two, three broad factors. Number one, a lot of project based work which came to end, and some of them were already planned, so it's not a surprise, or most of it was already planned, not a surprise. Second, as I mentioned, the start in some of our segments or discretionary projects to restart, there has been a delay. And that is where we have... And some of these we count as renewals because these are more regular projects that our customer hands over to the same team.

40:27 So there are some delays in that, and that is what, has depressed on the existing business. And, those were the two primary reasons why existing business was, renewal was a little depressed. But having said that, it has nothing to do with any structural issues or market issues. It has more to do with some of the timing and both from a project perspective as well as customer willingness to commit to new projects. Got it. Thank you. Thank you. Our next question is from Sandeep Shah of Equiris Securities. Opportunity and congrats on a good execution especially on margins in the DET.

41:14 Just first question, there is a consistent growth in the transportation and mobility. Sukumal wanted to understand is this a restructuring of the portfolio where dependence on project based versus annual sticky kind of revenue which is helping us, or is it more to do with the higher demand? I think it's a combination of both. I think there's no question that the market has some tailwinds. But let us also understand that this was a large part of what we are achieving today in terms of our results came through discovery of where those opportunities lie. And what I talked about in terms of life cycle injury had a lot to do with making sure that we can expand our footprint beyond just the ER and D dollars or R and D dollars of our customers.

42:12 So it's a combination of both. And I think as I've been highlighting in our previous calls as well, what's happening in this industry is a volume growth, as in volume of number of assets. And that is what drives, some of these revenue streams, and that is what we went ahead, identified very early on, and it's translating into the numbers that we are seeing. Okay. Okay. And, within your, sustainability or strategic unit, which it also includes, energy, utility, and sustainability. One of the participants asked this question. The peers are showing very high double digit mid teen kind of a growth.

42:57 I believe the Cyient Limited asset when we acquired it was Europe centric and we wanted to cross sell to the other set of accounts. So do you believe that exercise has started or will like to start because generally Europe has a seasonal weakness in the 2Q because of the holiday season. So with the widespread portfolio across market on these kind of verticals or industry will help us to negate the volatility in the growth rates. So how should we see the growth path and the cross selling, upselling to different markets through Cyient? Sure. So just to clarify first, strategic units is a composition of energy, mining and minerals, and health care.

43:50 And coming back to your question on energy, yes, the cross selling into North America especially has started. We probably will not have meaningful results for this quarter too, but the idea is to make sure that we build up the momentum so we can do some geography mitigation for next quarter too. That's definitely an aim that we are working on. And some of the other things that we are working through has to do with multiple other dimensions of expanding the business, including taking the same capability to other segments. We also have a very unique capability in nuclear engineering. And obviously, there's a lot of tailwinds in that market as well, both in North America, as well as some of the recent announcements which have happened in Europe.

44:43 And we are working on making sure that we can tap into that. We are in, I would say, mid stages of conversation of some of these new customers. So we anticipate to start seeing wins in nuclear energy in about a quarter to two quarters in a significant way. So it's a combination of geographic dispersion, taking capabilities which are in energy into some of the other market segments where plant engineering capabilities are definitely required as well as making sure that we take full advantage of our capabilities on nuclear engineering. Okay. Okay. And just some clarification about Tahoe Digital. Srini, just wanted to understand whether the progress in the first half of the calendar year CY twenty six, one can assume still the EBITDA margin of closure to 20% and maybe EBIT margin of high teens or the assumptions have changed because of macro headwind impacting many players in the industry?

45:53 So, Sandeep, I think it's not prudent to talk about their numbers before the closing. We are... As a part of the closing process, we are awaiting their updated financials. That's one of the deliverables. And I think upon closing, we'll be able to confirm what their numbers are and what their sustainable number. Okay. Fair enough. And just, Shini, with the tau and the 30,000,000... The 20,000,000 debt in the semiconductor, our overall debt, if I'm not wrong, may go to $250,000,000 or so what average cost of debt we should model for the upcoming debt financing for the M and A? Yeah. So the the debt in Kinetic is a a Singapore based debt, which is at a quite a low interest rate.

46:46 It is... It's roughly, you know, 1.25% plus the spread. Right? So including spread, it will be less than 3%. The debt for Tau will be a US dollar based debt. So it'll again be SOFR plus some spread, Sandeep. So it it is also fairly low compared to the... To our cost of capital. So these are all, you know, you know, substantially lower than the the debt that you raised in India. Okay. Thanks and all the best. Thank you. Our next question is from Bhavik Mehta from JPMorgan. Please go ahead. Hi, thank you. So just one question, just going back to the growth side of things.

47:41 How are the client conversations progressing over the last three to four months given the geopolitics uncertainty remains supply side issue remains. I mean, this backdrop, do you think the growth what we saw in transportation at any pump can sustain or, you know, it's difficult to call out given the volatile environment? Sure. So the way we... Since you called out transportation, the way we see right now, on existing programs and programs which have already been budgeted for, we are not seeing any impact yet. But theoretically, if, the disruption continues longer, definitely there's a threat to the number of flying hours, which has already had had some impact. And if this continues for a longer period of time, it can definitely create some disruption.

48:33 So far, we have only seen this, in very select, discretionary projects, and value add projects. We have not seen it in the business as usual. That's how we see it today, and we have seen it over the last two, three months. But obviously, if flying hours continue to be affected, revenue gets affected in the industry, and that obviously will translate to some compression. So that's, what I would say. A lot depends on how long this war goes on. Thank you. And similarly, on the telecom side, any comments? On telecom side, as you know, a large part of our business is focused on fiber build out. And there is significant CapEx spend, have been announced by almost all of our customers, significant customers.

49:27 So in terms of, what is ahead for us in building out the infrastructure that they have committed as part of several government initiatives. And again, just to clarify, not funded by government, funded by these organizations as private corporations. That visibility remains strong. There are some seasonalities that get this business is affected by, especially around their fiscal year and how they start off spending their funds for these new projects. But other than that seasonality aspect, I think we see very clear visibility. As you know, with the Celfinite acquisition, which happened a couple of years back, we also started diversifying into more holistic offering in the connectivity market.

50:18 And a large part of the funnel growth and some of the deals that I talked about, is actually coming from, the diversification efforts we are driving. So, once that starts translating results, I think it will also help us cover for some of these seasonality aspects that I I mentioned a little while back. Okay. Got it. Thank you. Thank you. We'll take a last question from Rajesh Joshi from CRIS Capital. Please go ahead. Yeah, good evening and thank you for the opportunity. I had a question regarding our current group structure. So as things stand, DLM is a owned subsidiary for us.

51:04 And is there a plan for a clean demerger given how things have shaped up over the past few quarters now? Because that would help with regards to significant value unlock for shareholders in the main CYIENT entity. Right now, we're still not considering that because there is quite a dependence between DLM and CYIENT. I think DLM still benefits quite a bit from CYIENT's engineering capability and vice versa. If you look at even a lot of the engineering deals we win are because of the manufacturing capability that we have, because that brings in a huge differentiator compared to anybody else in the market.

51:49 So we believe that the intent of establishing its own capital structure was to provide an avenue towards value unlock. So obviously that value has been established and that value is available to the CYIENT shareholders, of course, indirectly, and we'll continue with this structure at least full force in the future. Thank you for the detailed answer. Thank you. So we have one more question. That's from Ankur Pant of IIFL. Please go ahead. Hi, thanks for taking my question. I'm going back to the growth and the delayed decision making again. So the delayed decision making and ramp ups that you have seen, is that still persisting, or have the the the deals which had been delayed, have they started ramping up which could actually result in a better outcome in two q than you initially expected?

52:50 How are you looking at at that aspect? Okay. So let me clarify first. I think it's an industry specific answer. The point that we had shared in Q4 and what I mentioned earlier in my commentary was specifically about connectivity. That's number one. The other point that I made in today's commentary was related to the disruptions caused by the West Asia war, which has generally put customers on a more conservative note when it comes to discretionary projects, and that is across many segments. So I just want to clarify that difference between the two. First was the delay in starting projects which were already awarded to us, and the second is more driven by a macro issue.

53:39 And is that largely behind? So the connectivity deal, has it started ramping up now in 2Q? Or... And and the and and the the the delays in decision making that is still persisting, I believe. When it comes to connectivity, yes, most of the most of the ramp up that had to be done, is is done with. And, I quite didn't get your second part of the question or comment. Was it The overall uncertainty around decision making in the energy vertical, that is still persisting, I believe. That is correct. And not just in energy. As I mentioned, even in aerospace, flying hours is becoming a concern. That has stopped some new kind of projects that we had gotten go ahead verbally.

54:28 So there is a degree of macro overhang that we should be keeping in mind, but nothing which affects our existing business. Sure. Thank you so much. All the best. Thank you. Thank you. That was the last question for today. I now hand over the floor back to the management team. Over to you, sir. Thank you very much. And ladies and gentlemen, thank you very much for your time. Obviously, Q1 was a good quarter from all aspects of the group. Of course, we do still have a little bit of work to do on DET growth. But as Sukumar articulated, I think we've had some issues over the last couple of quarters, many of which are under control now. So we're back at looking at the future, and we continue to be very optimistic across the EET, or in the EET, but across the rest of the companies also. So thank you for your support. And like I said, August 25 is our Investor Day. We will talk about strategy in in much more detail. So I look forward to meeting a lot of you over there. Thank you.

55:35 Thank you, members of the management. On behalf of CYIENT Limited, we conclude today's call. Thank you for joining us, and you may now click on the leave icon to exit the meeting. Have a good day. Goodbye.