Key takeaways of the call

Order inflow in Q1FY23 was Rs 45 crore (a growth of 23%YoY) driven largely by production orders which account for 98% of the OI in Q1FY23.

Order book is growing on rapid fashion. Order book as end of Jun 30, 2022 stood at Rs 453 crore. However as on date the order book stood at Rs 664 crore. Orders for another Rs 343 crore are for which contract negotiation is completed, thus taking the total order book in excess of Rs 1000 crore. Of the RS 343 crore worth of orders for which negotiations completed LOI is already received for Rs 174 crore and LOI not received yet are Rs 169 crore.

Expects revenue growth in the range of 25-30% and EBITDA margin to be upward of 40% for FY23.

Fire control system for BrahMos Missile, Avionics for LCA, RWR for Fighter Aircraft, ELINT for Airborne and Ground Platform and Radar Subsystems are key orders in pipeline for FY23

New manufacturing facility is expected to be commenced from Q3FY23.

Material inventory is going up as the company is importing ahead of time in its strategy to tackle supply chain constraints. The company imports only electronics. The other issue is rupee depreciation.

The company has got back to back order from Brahmos Corporation, which got an export order from Philippines.

In medium term have few thousand crore of order in pipeline. However on long term the company looks at products, partnership for the development of new products.

Orders in pipeline for next 3-4 years are about Rs 20-30 billion.

Large orders amounts Rs 350 crore of which the company has already signed one order worth Rs 180 crore day before yesterday. One of the large orders is for integrated system for space surveillance. This comprises 2 radars. Second large contract is in Avionics worth about Rs 100 crore. Similarly autonomous tank contract from DRDO worth Rs 35 crore is also there in the pipeline. The autonomous tank contract is a development contract.

In development contract the company get 30% advance and stage payments.

Having completed all the major sub-systems in Radar, Electronic Warfare, Communications, Avionics, etc., the company is now focusing on developing complete systems with in-house design to address the huge market opportunities in the Indian Defence and Aerospace segment thanks to the Atmanirbhar Bharat initiatives and defence procurement procedure being modified to enable more ‘Make in India' defence equipment.

Contraction in margin is largely due to order mix. Q1FY22 had the benefit of execution of some high margin orders.