Tembo Global Industries (NSE:TEMBO) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty seven Earnings Conference Call of Tembo Global Industries Limited. 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 would like to hand the conference over to Mr. Hiraj Genya from LLP. Thank you, and over to you, sir. Thank you, Sagar. Good evening, everyone. On behalf of Tembo Global Industries, I welcome you all to the company's Q1 FY 'twenty seven Earnings Conference Call.

0:48 To discuss the performance of the company, we have with us the management team represented by Mr. Sanjay Patel, Managing Director Mr. Shabir Merchant, Director and Finance Team. Before we proceed with this call, I would like to draw your attention to the fact that today's discussion may contain forward looking statements that are subject to various risks, uncertainties and other factors, which would be beyond management control. We kindly request to bear in mind that there may be uncertainties while interpreting such statements. We now start the session with an opening remarks from the management team. Afterwards, we will open the floor for our interactive Q and A. I will now hand over the conference call to Mr. Sabir Merchant for his opening remarks. Thank you, and over to you, sir.

1:38 Thank you, Israel. Tembo Global Industries Q1 FY 'twenty seven Earnings Call. Good evening, everyone, and a very warm welcome to all of you joining us today for Tembo Global Industries Q1 FY 'twenty seven earnings call. On behalf of Tembo Global Industries, firstly, I thank the Almighty, all our shareholders, investors, analysts, customers, partners and employees for their continued trust and support. FY 'twenty seven has begun on a strong note with Tembo Global Industries reporting robust growth in both revenue and profitability during quarter one FY 'twenty seven.

2:25 This performance was primarily driven by the sustained momentum in the high margin engineering and EPC segment. It has recorded an impressive growth of 172.7% year on year. Revenue for the quarter rose by 21.9% year on year to INR $30.02 crores, while the PAT grew by 55.3% year on year to INR 31 crores. This has been supported by strong project execution, operational efficiencies and disciplined cost management. Encouraged by the strong start to the year and a healthy order pipeline, we remain confident on sustaining this growth trajectory and achieving our FY 'twenty seven revenue guidance of INR 1,600 crores.

3:18 The ongoing quarter reflects the successful execution of our strategy to transform TEMBO into a diversified engineering led industrial platform with a growth presence across engineering solutions and EPC, solar power, defense and aerospace. Our focus remains on building scalable businesses, expanding addressable markets, improving profitability and creating long term value for stakeholders. I would now highlight glimpse of our key business verticals. To start off with, engineering and EPC business. Our engineering and EPC business continued to be primary growth driver during the quarter.

4:05 In line with our strategic focus on value accretive businesses, the contribution of engineering and EPC to the overall revenue mix increased significantly to a ratio of 90 nine:one against textiles in the quarter one of FY 'twenty seven compared to the ratio of 44 to 56 in quarter one of FY 'twenty six. This has been supported by an INR 1,500 crore plus of order book and INR 2,400 crore plus of orders, which are bidding in pipeline. We remain well positioned to drive growth across domestic and international markets. The demand remained robust across oil and gas, water infrastructure, marine projects, refineries, industrial, construction, fuel farms and other infrastructure segments.

5:00 Over the last few years, we have consciously strengthened our EPC capabilities, expanded our project execution team and increased our focus on larger and more complex projects. Today, as we stand, we are seeing the benefits of those investments to a healthy order pipeline and improved project profitability. With this increased scale, improved operational efficiency and greater product diversification, we believe our new Versailles facility will place an important role in driving our next phase of growth. The next vertical would be solar business. Our renewable energy portfolio continues to advance steadily in line with planned milestones.

5:47 Reflecting the company's commitment to building a diversified and sustainable growth platform. Four solar project sites have already been commissioned and are operational, while the remaining sites are on track for commissioning in Q2 of FY 'twenty seven. With commercial operations expected to commence in Q3 of FY 'twenty seven, these projects are poised to become an important contributor to the company's revenue stream. Beyond strengthening revenue diversification, the renewable energy business is expected to generate stable and recurring cash flows. It will enhance our earning visibility and reduce dependence on cyclical business segments. This strategic initiative aligns with our long term vision of creating a balanced and resilient business portfolio while supporting sustainable value creation for all our stakeholders.

6:42 The next vertical would be defense and aerospace business. The most exciting development during the ongoing quarter came from our defense and aerospace initiatives, which represent significant long term growth opportunities for the company. A landmark achievement was the receipt of ammunition manufacturing license to our subsidiary, Tembo Classic Engineering Private Limited in the Q1 of FY 'twenty seven. This marks a major step in establishing Tembo as a meaningful participant in India's defense manufacturing ecosystem. The acquisition of LAN and Ambravati and the planned development of the defense manufacturing facility provides us with a strong foundation to build a fully integrated defense platform.

7:32 As India continues its emphasis on indigenous, self reliance and domestic manufacturing under the Make in India and ATMA Nilberg Bharat initiatives, we at Tembo believe is well positioned to capitalize on these opportunities. In the aerospace, we announced a strategic international joint venture agreement with JR UAV Europe Italy and JR Top Hope Japan through our company, JR UAV Limited, aiming at bringing advanced UAV technologies to India. This collaboration combines global technological expertise with Tembo's engineering and manufacturing capabilities to develop and manufacture next generation UAV systems. We also expect to commence UAV component manufacturing from our facility in Q3 of FY 'twenty seven.

8:27 With the first calendar year revenue target of around INR 100 crores, the joint venture reflects the significant market potential of the business and growing trust among global customers in the platform, technological, engineering and manufacturing space. As we look ahead, we remain highly optimistic about the opportunities across all our key business verticals. Our strong order book, growing bidding pipeline, expanding manufacturing capabilities, upcoming solar revenues and strategic entry into defense and aerospace provides a solid platform for sustained growth. Our objective remains clear: deliver profitable growth, strengthen operational excellence, diversify revenue streams and create long term value for all our stakeholders.

9:18 With that, I would now like to take you through the financial performance of the quarter. The quarter was marked by strong growth across all key financial parameters, reflecting both healthy businesses momentum and the success of our strategic focus on engineering led margin accretive businesses. Revenue from operations for quarter one FY 'twenty seven stood at $30.02 crores, representing a growth of around 21.9 year on year. This growth was primarily driven by the continued expansion of our engineering and EPC business, which remains a core contributor to the overall revenue. Our business mix continued to improve significantly during the quarter.

10:05 The engineering and EPC segment accounted for most revenues, reflecting our successful transition towards higher value engineering businesses and a reduced dependence on legacy trading activity. This shift is not only strengthening revenue quality, but is also driving sustainable margin expansion. On the profitability front, the company delivered an excellent performance. The EBITDA increased by 74.8% year on year to INR 49.2 crores, while EBITDA margin expanded by four ninety three basis points to 16.3%. The margin improvement was driven by several factors: higher contribution from engineering and EPC projects, better product and project mix, improved operating efficiencies, increased utilization of manufacturing resources, disciplined cost management across operations.

11:03 As a result, profitability growth significant, outpaced revenue growth during the quarter. Profit before tax increased by 69.1% year on year to INR 43.7 crores, while after tax grew by 55.3% year on year to INR 31.2 crores. PAT margins improved to 13.3% compared to 8.1% in the corresponding quarter last year. This margin expansion demonstrates our ability to create operating leverage while continuing to invest in future growth opportunities. Our balance sheet remains aligned to support the next phase of expansion. We continue to invest strategically in manufacturing capacity, EPC execution capabilities, solar projects, defense infrastructure and aerospace initiatives while maintaining a disciplined approach to capital allocation.

12:02 Looking ahead, we remain confident about the company's growth trajectory. The strong engineering and EPC order pipeline provides revenue visibility. The solar assets are expected to begin commercial operations during the year, and our defense and aerospace initiatives are progressing according to plan. With a strong start to FY 'twenty seven, healthy profitability trends and the multiple growth drivers coming into play, we believe Tembo is well positioned to deliver sustainable growth and creating significant shareholder value in the years ahead. With that, we conclude our opening remarks, and we would now be happy to take your questions. Thank you. Thank you very much. We will now begin with the question and answer session.

13:15 Your first question comes from Deepak Podar with Sapphire Capital. So just first, I wanted to understand what would be our engineering and EPC revenue mix this quarter? The revenue mix is in consolidation basis. So the bifurcation, we will give you later on, but it's coming into the total segment of manufacturing engineering and all goods. Okay, understood. And regarding can you just update on your status on your Amravathi defense, the proposed manufacturing facility? So what state is it right now? And when do you expect to start? Deepak, what I understand is that land has been acquired.

14:10 The project planning consultant has been appointed, and we are there is already a plan which is being in place for the construction of the head manufacturing facility. Okay. Okay. And by when we expect the production or commercialization of this So facility to we are planning to manufacture the first batch to come out in the Q4 of FY 'twenty seven. Okay. Okay. For 4Q FY 'twenty seven? Yes. So the production and the prototypes and all will be starting in the Q3 of FY 'twenty seven, and this would spill over to Q4 of FY 'twenty seven.

15:03 Okay. So do we expect any kind of revenue to come through in this year? Or will it So start we expect the revenue to come in this year because it's a buyback agreement with the performance guarantee attached to it. So there will be whatever production which takes place will be, of course, accounted in revenue coming in. And so how much we're targeting? So it would be a percentage to we look at around in a range of around 70 crores to INR 100 crores of revenue in this particular quarter. I mean, this particular, yes. INR 70 crores to INR 100 crores of revenue. Okay. Understood. And regarding the JV that we are planning at Versailles, so any contribution we are expecting from that JV this year?

15:53 Yes. There will be a revenue so I'm talking about a combined revenue which comes in from both verticals, and it will come from this JV as well, and it will come from the manufacturing at the Ambravati plant as well. Okay. So total combined, you're saying INR 7,000 crores 100 crores? Yes. Okay. Because I was just looking at the presentation. So there, it was mentioned that the commercial production of Amravati, we're expecting to start from 1Q of FY 'twenty eight, right? Yes. That would be the full capacity production. That would be in FY 'twenty eight. And of course, there will be commercial production starting in Q4 of FY 'twenty seven, and that will then, of course, spill over in the next year coming on.

16:41 Okay. Okay. And what sort of margins we can expect in defense? So we are looking at around 30% to 35% of PAT. 30% to 35% PAT margins? Yes. Okay. And then on the debt side, I mean, what would be our current debt and how much debt we would require for all this CapEx? So in defense, currently, are looking for around INR250 crores of debt for the first phase. And what would be current debt levels? Sorry, in defense, there's no debt right now. At the company, I was just trying to understand the company level, what would be our current debt and what would be additional debt we would require?

17:27 So current debt is around crores at consolidated level outstanding because we have solar also, so it is also funded by debt partially. And we would require $250,000,000 for defense and what for other projects? Sorry? So yes, so solar for solar, we have around $3.50 crores of debt. So that $3.50 crores is additional debt requirement? Sorry? This $350,000,000 $250,000,000 you mentioned for defense, will require additional debt? Yes, right. Right. And so $350,000,000 additional debt you require for solar? No, no, no, no. So solar, we already have three of 50 debt. And any additional we would require in No, no. We do not require any additional.

18:20 Okay. Okay. Understood. And just one last thing on the margin front, EBITDA. This year, what sort of EBITDA margin we should look at a company level? So we are looking at around 16% to 18% of EBITDA. 16% to 18 Yes. Percent Okay. Okay. That's very helpful, sir. I mean, I would like to wish you all the best. Thank you so much. It from my side. Thank you. Your next question comes from the line of Manan Wandoor with Walbert Yes, yes, you are audible. Yes. Thank you so much for the opportunity. So my first question would revolve around the defense ammunition part. So just wanted to understand that from Q1 FY 'twenty eight onwards for the whole FY 'twenty eight, the Ammunition part would add how much revenue and what would the EBITDA margins be for them?

19:19 In the first, I'll speak about the EBITDA. EBITDA would be around 45% to 50% of EBITDA, that will come around. For the EBITDA because I was speaking about TAC initially. So this would be 45% to 50% of EBITDA, right? And as you speak about the revenue towards the ammunition, not the arms, okay? I'm talking about the ammunition right now. We look at around 200 crores to INR 200 crores of ammunition of revenue, which could be added. Yes. When I say ammunition, I am meaning to say the defense part. I'm not trying to go into the aerospace, which is why I said ammunition. You're talking about the armored ammunition. You're talking about... Yes, yes, defense, AMZED ammunition part, Around full part, INR 300 crores to INR $3.50 crores of revenue.

20:13 Okay. INR 300 crores to INR $3.50 crores for FY 'twenty eight. Okay. Got it. And sir, the second question would be that what is the share of Tembo in the aerospace venture because you said that it's a JV. So can you explain the capital structure, please? So it is basically, this is a collapse with so the structure is yet in process to be made. And in due course, it will be informed in the exchange. Okay, sir. Understood. And sir, last question would be that do we have guaranteed offtake Just in one thing to add on, but it would come in the defense space only. And the defense vertical would have majority shareholding of this.

21:05 Okay. Okay, understood. So the last question is that do we have guaranteed offtake from the aerospace venture too, just like how we have for the defense? So what it is basically, it is an expansion of the current manufacturing facility, which is operated by the Colab, and it would be a mirror effect coming out in India. And after that, the facilities, which they are already manufacturing in Japan and Europe and in Malaysia would be transpired back to India. And the orders are already so it is actually getting into larger manufacturing and larger production for orders which are already in place. And of course, there are certain products which we would get into components getting into manufacture, which we would be the and I can rightly say we would be the only company in India to do this.

21:59 And that would give us an edge of not even an edge, it would give us a complete advantage in the existing defense or this UAV platform of corridor, which is existing in the country. But apart from that, as you say about the buyback, there is an already business in place, which needs to be sufficed. So there are already orders in hand. That's the reason we can give you guidance for revenues. Understood. Understood. And just the last question with along with this would be that same, sir, for FY 'twenty eight, what could be the revenues and the EBITDA for the Aerospace division, please? So as I said that there would be INR100 crores of addition is from the time we start our manufacturing, that would be 100 crores of additional revenue and approximately INR 100 crores of additional revenue and the EBITDA remains same.

22:53 The... About INR 45 crores. INR 45 crores to 50 Yes. Okay, okay. That's it from my side. God bless you. Thank you. Your next question comes from the line of Abhay from Shah Investment. Yes. So my only question would be that what is our TEMBO Global subsidiary in the TEMBO defense sector? So Tembo Classic Engineering Private Limited is the subsidy. Yes. And what is the percentage of holding Tembo Global has in subsidy? Around INR $7.06 around $7.05.

23:55 Your next question comes from the line of Nachiket Kalia, an individual investor. My question is around the Versailles facility. So could you talk us through how the capacity utilization is shaping up there? And what is the utilization currently? And by closure of FY 'twenty seven, where would we stand? Nachiket, what you mean is the facility at the moment, we are looking at around 35% to 40% of capacity utilization. And we by the year end of FY, we look at around 65% to 70% of capacity.

24:47 And the guidance which you have given for FY 'twenty seven includes like in sync with the sixty five percent, 70% utilization? Yes. Yes, dear. So we look forward to overcome our guidance. Idea is always to go beyond what we have guided. Yes, I got it. And so by course, this is commendable that we'll almost double the utilization in a short period. So what would be the peak utilization? And by when do we target to reach it? So idea is to get the peak utilization in around one point five to two years. That's the idea, okay? And of course, as a manufacturer, as an entrepreneur, we would like to capitalize as soon as possible.

25:40 Yes, sir. And we have around one lakh mTPA capacity split between ARW and strut channels, right? Yes. So could you break down the split further as to what would be for the price? Sorry, sorry, sorry. What were you trying to say? Sorry. So how is this one lakh capacity split between ERW struts and other existing... So ERW would be the maximum component, okay, almost about 40% to 50%, but other businesses and other components are also increasing during this period in the last one. Yes. So now probably ERW will become a little less contribution, but the other soft channels and other components of the business are also increasing. So one on one, our orders are coming to the peak level, and every month is a better month than the month coming ahead. So we expect that both all of them to surpass a lot of things for the Yes. And like the commercial sales for these products have already commenced or they are still on the horizon? So there are certain products for which commercial production has already commenced and certain are in line to get.

27:00 So pipes are being sold already? No, no. They will be they are yet to contribute to the revenue mix. They are yet to contribute. But the channels and all have already commented, and they are already updated. Okay. Understood. So just lastly, how is the margin like EBITDA margin outlook on these product categories? So it is slightly better, almost at par at the current EBITDA what we are looking at. Okay. Like around 1618%, right. So I do add to this particular comment. What we manufacture is also used in our EPC division.

27:45 So then that's how we leverage on better margins. Some of the... So a lot of engineering also comes in play. But the one is the physical side of a product and one is an engineering side, which is so both when you combine both of them, it always helps in your profitability and margin growth. Yes, absolutely. So but sir, our preference would be then to have more captive utilization, have value added engineering upon it or to sell outright to So captive utilization plus value added engineering is the best combo which you kind of succeed in the long run because then you don't just become a person who's manufacturing, but you add value by putting engineering in place.

28:46 Thank you. The next question comes from the line of Nitin Babulal Gandhi with Innoquest Advisors Private Limited. Please go ahead. Yes. Thanks for taking my question. As I understand, currently, it is 400,000,000 out of which solar contribution is almost $350,000,000 And some parties of solar will start flowing this year 'twenty seven. So can you share what is the overall game plan for solar? Where do you see the big potential? Your question is not clear. Can you please repeat it? At present, we have a debt of INR 400 crores, and we have deployed in solar business substantial money, and INR $3.50 crores is outstanding against that, right?

29:40 No, no, no. I think it is a little bit. See, my current debt is INR 400 crores on a consolidated basis, which also includes solar in that. So additional which for solar so solar total debt would solar as a division, total debt Now would be INR 400 crores, ask me the question. Now now tell me. So how is the solar business revenue contribution going to be lower on debt? So solar business so solar would work out in an IRR between 15% to 16%. That would be the that's how the revenue contribution would work out to be. And there is a subsidy also attached to it, which is not calculated while deciding this.

30:31 And what will be a set turnover? Sorry? A set turnover from this business? Sorry, I can't can you be a little loud? Sorry, I can't hear you. What will be the revenue contribution coming from this division? Of course, there will be this there will be a revenue contribution coming from this division as well. There will be around in current year, what we are looking at around INR 50 crores to 60 crores of revenue in this year. And at peak level, what will be the contribution? Around INR 80 crores to 90 crores. Okay. That will be somewhere around INR 28 crores, right?

31:20 Yes. Okay. Now coming to the other business, defense, said you have a twenty five year PPA. It's a twenty five year PPA, right? Correct. And coming to the defense business, INR 300 crore is additional borrowing required? Or it's going to be the total project cost, which is INR 300 crore? You said INR 300 crore So is going to be the revenue, the first there will be two phases, okay? We intend to grow this defense on the initial first to three years at INR 1,000 crore basis. The first set of investment would be around INR $5.50 crores and second would be around INR 400 crores, INR $4.50 crores, that would be. So in that, there will be debt also and internal accruals and equity participations.

32:15 For the first phase, you are going to out of INR $5.50 crores investment, 300 is going to be the date which you are going to borrow in... Around INR 100 crores to INR $2.50 crores. INR 200 crores to INR $50.50 crores. Okay. What would be the asset turnover coming from this business? Would be the? Asset turnover. So we will talk revenue possible from this division. Okay, revenue. So as we mentioned earlier in our question, the first year in FY 'twenty eight, we look at around INR 300 crores to INR $3.50 crores of EBIT by FY 'twenty eight. No, I'm asking what is the peak potential, maximum what we can... Which potential is it will keep on increasing, dear. We are going to put in there will be a lot of that we would that you will come to know during the course of time.

33:04 Okay. Out of INR 1,600 crore guidance, you are saying INR fifty-sixty for solar and INR 100 crores for the other business. So the rest will come from EPC, right? So from EPC engineering and a part would come from textile as well because there are orders already in hand, which we have to fulfill. And but of course, as you have seen over the trend, the textile is getting plateaued and would be plateaued. Okay. Can you give us breakup of order book of INR 1,500 crores or division like... It is not possible. Honestly, it's not possible at the moment. So during the next guidance and the next quarter, it would be very much visible how we are going.

33:52 Okay. And do you arrange for a visit personally? More than I'll be interested. Yes, please. You can connect with the institutional relation people, and they can guide you further. Your next question comes from Keesha Shah with Malhotra Family Office. Sir, what were the company's working capital days as of the end of Q1 FY 'twenty seven? And by when do you expect a meaningful improvement in the working capital efficiency? So we are looking at around ninety days of working capital days at the moment, and we look forward to get more efficient to between 80 to 90 in the coming days, and that's how our plan is.

34:52 Okay. And so my second question is what led to textile revenue contributing just 1% to the overall revenue mix of Q1 FY 'twenty seven? Total we had our current EPC and manufacturing had we had a lot of contribution from the EPC and manufacturing base. And textile, the contribution of textile was because of the current total expansion towards the EPC, and we had certain orders to fulfill in this quarter. That gave us the efficiency and proper management of productivity towards our manufacturing gave us this boost towards expansion towards the EPC and manufacturing division.

35:45 Thank you. Thank you. Your next question sorry, your next follow-up question comes from the line of Manan Vandoor with Walford PMS. Please go ahead. Yes. Thank you so much for the opportunity again. Sir, my question was on the Wasei plant where we have expanded to one lakh metric tons. Just wanted an understanding, sir, how are we going to use that because we are doing now defense also than aerospace also, but we have capacity over there for ERW pipes and structures. So that's how we will capitalize for defense or if not for defense, then how are we going to capitalize as much of expansion? So defense, at the moment, defense would be mirrored to immediately suffice the current orders, which are already there under collapse, okay? And this would expand this would expand to our facility going back to Umbravati, and we would get into a new facility for the JRUAV.

36:48 This is what it is. And as and when we require the additional space for expansion, we will get into that, and we will make sure that the capital production reaches this level. Okay. But then what will happen of the one lakh metric ton that we have made for Strike Channels and ERW? So that we already have a facility in place. So that's why I said that we have a facility where we can accommodate these things. And apart from that, as this is a temporary arrangement to suffice the ongoing orders in hand. And in future, as I said, we would expand to a new facility and take this division over there.

37:48 Your next question comes from Disha with Sapphire Capital. Yes. Hello, sir. Am I audible? Yes. Yes, Disha. You're audible. Yes. Thank you so much for this opportunity. A couple of questions. Firstly, on your FY 'twenty eight revenue, I just want to get a sense of how much revenues are we targeting? What will be the mix between solar, engineering and defense? And what sort of FAT margins can we look at? So this guidance will come in due course of time for FY 'twenty eight. This guidance will come to you, but it will come in due course of time. But as we if you see our CAGR in the last five years, and you can we are positively looking at growing.

38:35 And every time we come up with a figure, which is actually which surprises. So the Almighty is kind, and we look at this positive growth going forward as well. But the overall contribution from defense, we're expecting three hundred and three fifty around from the ammunition and 100 CR from the aerospace division. Is that correct? This is coming from in FY 'twenty eight in the defense. Yes. Right, right, right. And that will be at a 30%, 35% sort of PAT margin? That will be EBITDA at 45% to 50% of EBITDA. And 50% to 85% PAT margin? Yes, yes. I'll mention it.

39:21 Okay. Okay. And just the next thing from our overall pipeline that we're currently looking at, what sort of budget order book target are we looking? So we have see, this is an ongoing thing. So there are a lot of projects for what we have fitted. And as mentioned, so there are around INR 2,400 crores plus of projects in pipeline. And current order book is INR 1,500 crores. So this is an ongoing process. So every quarter on quarter, we have certain targets of orders and to come in place and all. We are working towards that. The next follow-up question comes from Najiket Kalai, an individual investor. Just a small follow-up.

40:12 We have raised funds around 3x in the last two years. So I just wanted to know, like we are on this ambitious growth track. So do we need another fundraise or the funding part is taken care of? Sorry, I could not hear you before. So since you have already raised funds thrice in the last two years, do we need another fund raise to fund our growth plans ahead? So as of now, this is a strategic decision, which will come in place only after our management discussion. And as and when required, we would notify the exchange accordingly.

41:07 Thank you. That was the last question for today's con call. And on behalf of Tembo Global Limited, that concludes this conference. Thank you for joining us. And in case of any further queries, please reach out to Tembo's Investor Relations team at csthembo. In. I repeat, that is csthembo. In. You may now disconnect your lines. Thank you.