Bharat Electronics Ltd
NSE:BEL
Earnings Call Analysis
Q3-2024 Analysis
Bharat Electronics Ltd
The company has experienced a surge in turnover, reaching INR 11,485 crore, marking a 4.35% increase over the previous year's INR 11,006 crores. Profit Before Tax (PBT) saw a notable rise to INR 2,949 crore, which is an uplift of INR 33.84 crores from the preceding year. Similarly, Profit After Tax (PAT) and EBITDA have both seen improvements, signifying a significant boost in profitability. Fuelling investor optimism, the firm has already exceeded its end-of-December order booking target of INR 20,000 crore with a current tally of INR 26,761 crore and more orders in the pipeline.
Despite encountering obstacles such as the conflict between Israel and Hamas which impacted dispatches, the company is maintaining its guidance of around 15% growth over the previous year, aiming close to INR 20,000 crores in revenue. While there was a spillover effect of approximately INR 400 crore to INR 500 crore in both the last and the first quarter of the respective financial years due to these challenges, the firm remains steadfast in its revenue growth projections.
The company proudly holds a robust order book totaling an impressive INR 76,000-odd crore. These orders span various large-scale projects, likely to be executed over a period ranging between 18 months to 4 years, depending on the nature of the project and associated delivery schedules. It is indicated that deliveries for the current order book will commence from the next year and spread out across the following four years.
Whereas the company had originally projected orders of INR 20,000 crores, governmental procurements that were expedited led to an early receipt of these orders. This front-loading might result in a decrease in orders in the subsequent year, as they span 3-4 years for execution. Nevertheless, the company foresees around INR 50,000 crore worth of orders in the next two fiscal years and intends to maintain an order to revenue ratio of a minimum of 2 years at any given time.
Achieving growth rates of 25% is considered unlikely due to the rising base effect from the ongoing growth trajectory, which saw the company expand by 15% in the last two fiscal years. Future growth rates are projected to hover around the 15% mark, attributing this to the increasing size of the business and the nature of the industry.
Full-year gross margins are anticipated to level at around 42%, with EBITDA margins approximating 23%. Fluctuations in quarterly margins are expected due to differing product mixes and their inherent material costs, leading to varying rates of consumption. However, the overall annual guidance remains consistent, with the final quarter likely to balance the margins to meet the yearly predictions.
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Ladies and gentlemen, good day, and welcome to Bharat Electronics Limited Q3 FY '24 Post Earnings Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Amit Shah from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Rea. Good morning, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to Q3 FY '24 post earnings call of Bharat Electronics Limited. To discuss the earnings, from the management, we have Mr. Bhanu Prakash Srivastava, Chairman and Managing Director of the company; Mr. Damodar Bhattad, Director, Finance and CFO; and Mr. Sreenivas, Company Secretary.I'll hand over the call to Mr. Bhanu Prakash Srivastava for the opening remarks, post which we can open the floor for question and answer. Over to you, sir.
Good morning to all of you. Bharat Electronics Board met on 29th January and then approved the result of Q3. Our turnover increased to INR 11,485 crore, which is an increase of 4.35% to corresponding figure of INR 11,006 crores. PBT has increased to INR 2,949 crore, which is a jump of INR 33.84 crores of the corresponding figure of last year. Similarly, PAT also has increased. EBITDA has increased. So, there has been a significant increase in profitability. Our order booking this year has been very good. Against our guidance of INR 20,000 crore by end of December, we have already received the order of INR 26,761 crore and more orders are coming. So, positive outlook for Bharat Electronics.And I now open for questions.
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Amit Dikshit from ICICI Securities.
First of all congratulations for a good set of numbers and very robust order inflow this year. I have a couple of questions. The first one is essentially on the revenue. So, if I look at the revenue growth so far, it has remained quite, I would say, subdued. And we guided for around 12% to 15% growth for this year. So, given that ask rate for Q4 is quite steep, what kind of revenue growth we can expect for FY '24? And there was INR 400 crores of spillover in last quarter. And this quarter also, you mentioned in the notes that because of the ongoing Israel-Palestine conflict, there could have been a certain shortfall. So if possible, if you can highlight on these points. That is the first question.
Yes, as far as revenue growth is concerned, still we stick to our guidance of around 15% growth over and above what we did last year, which amount to closer to INR 20,000 crores. Yes, there has been an impact of, because of the Israel, that Hamas conflict, which has been affecting in dispatches. But along with our partners in Israel, we are working on that. We overcome INR 400 crore to INR 500 crore last quarter. But still this quarter, again, there was a spillover of around INR 400 crore to INR 500 crore, which landed in first week of January. So, these are the challenges which are there. Traditionally, Bharat Electronics has been robust in Q4. And we are very confident that in Q4, though, ask rate is steep, but we will be able to achieve that.
Okay, so that's very comforting. The second question is essentially on the order book. Now, we have a very, very significant order book of INR 76,000-odd crore. Is it possible to mention the average execution period of this? So, it will be executed over what time frame. This is what I wanted to ask, because some of these orders are pretty particularly pertaining to shipyards and [indiscernible] seem to be quite long-ranged orders. So, I wanted more of actually clarity on the FY '25 earnings, what we can expect as a result of execution of this order book. So, if you can just mention the average execution period of this order book, that would be great.
See, if you see that all big ticket projects, they have execution period starting from 18 months to anywhere between 4 years, 3.5 to 4 years, depending upon the availability and execution plan of the platforms on which these products are going. So, even though we can execute it early, but deliveries are linked to that delivery or that production plan of that platform. So, the INR 76,400 crore what we have ordered till Q3, deliveries are starting anywhere from next year to another 4 years you can take and that will keep on adding.
Next question is from the line of Nitin Arora from Axis Mutual Fund.
Sir, this year, just to understand directionally, and I think we remember completely the way you were guiding last 1.5, 2 years that order intake will remain strong which you have showcased last year as well and this year as well. When we go -- and I'm not asking more from because there is an election next year, but generally, can you talk about little more on platforms which are bigger which can drive your order intake further, let's say over the next FY '25-'26? Can you talk about a little bit more on that? That will be helpful.
See one of the -- in this year, if you see Shakti System, that is the EW System is in pipeline. Then there is a program for BMP-2 upgrade which is there in pipeline. Next year if you see that both Air Force and Army they are working on making [ QR tents ] which is likely to materialize. Some EW System on avionics platform, airborne platform are likely to come. So, these are all linked to big government program. Apart from that there are always upgrades, refits from shipyards, standalone requirement from services keep on coming. So that's how that business is.
Can you talk about a little more on the amount of pipeline with respect to these orders for '25-'26? And going forward, do you think that momentum will be sustained going forward because that asking run rate will increase significantly for you for the next 2 years? So, if you can throw some light on the asking run rate or in the absolute terms that how much order intake you think you'll be able to get over the next 2 years based on the opportunity size.
See, if you see opportunity size, we have been guiding the INR 20,000 crores, INR 25,000 crores. This year we guided INR 20,000 crores, but there were many procurement of the government which were fast-tracked and that's how -- which was supposed to come next year, they have come in this year itself. So, to that extent if you see that next year it will be lesser because these are all orders for next 3 to 4 years execution period. So, our assessment is that seeing that all upgrades and standalone requirements and platform because big platforms there is always a risk of spilling over to next to next financial year. But if you see if you are asking me projection of next 2 years, '24-'25 and '25-'26, I am expecting around INR 50,000 crore worth order in 2 years should come. We expect to maintain an order to revenue of at least minimum 2 years at any point of -- 2 years plus at any point of time.
And sir, lastly, just on execution as you are still very confident on Q4, but let's assume that given the backlog is strong in Q4 because of the ongoing Israel issue remains. Let's not take a quarter view, but generally, do you think this will get subsided going forward in the quarters and '25-'26, the growth should be material for you, let's say closer to 20%, 25%. Can this be doable? I'm just not trying to ask what will happen in Q4, but generally, in '25-'26.
See, 25% growth rate is something I don't think we will be able to achieve because our base also is increasing if you see. When we are growing, last year we grew by 15%, this year 15%. So, base also is increasing. So, I don't think we will be able to go to growth rate of 20%, 25% with our kind of business. It will be hovering around what we said, that in the range of 15%.
My question was that if Q4 still remains the ongoing issue of Israel, then that execution should catch up next year. I was asking more from that perspective.
We are confident that whatever business given, because there are Plan A, Plan B, Plan C, as we have, whatever we have committed, we would like to...
The next question is from the line of Ankur Sharma from HDFC Life.
Just on Nitin's question, on the execution side, if you could just help us, how big would be the LRSAM order for us in the order book or if there's any other order which you're working with the Israelis. So, what would be the quantum of that at this point?
See, if you see, as of now, our exposure to Israeli LRSAM is around INR 6,500 crores. Then there are other projects like EW Systems projects. It is around INR 1,000 crores there. Then some electro-optic projects around INR 500 crores. So, if you see the total exposure to -- our dependency on Israel is there around INR 4,000s crore, INR 5,000 crores in execution in next year and this year. So that is the extent where there is an impact. But we are working with that. Our partners in Israel, they are very confident to sort out the temporary setbacks what they say.
And I think if I remember it right, you said you got something early part of January. Right? Some of the deliveries have started to come through.
What did not come around INR 500 crores, they landed up in January. They were supposed to come in December.
So that's a positive. Sir, second given that the general elections are around the corner, do you think that could impact ordering for us, say, in Q4 or Q1 or generally, elections don't really have any impact on defense ordering?
I don't think there will be any impact because already government has fast-tracked many procurement for this year. And that's why you see that last year, most of the orders, they got finalized in March, whereas this year, seeing that election and all, government fast-tracked and they have concluded many contracts much before that election starts. So that was some positive action taken by Government of India MOD, concluding the contract before the start of the elections and all. So, I don't think -- and the next year's procurement process will be post-election, which is that post-April-May. So, I don't think there will be any impact on procurement process of government because of elections.
Just last one is on the balance sheet, if you could just share numbers on your debtors and cash balance, please and inventory.
Just hold on.
The receivables at this point are -- receivables are around INR 7,700 crores.
Inventory and cash, please.
Inventory is INR 7,000 crores, contract asset is INR 5,600 crores, cash balance is INR 8,000 crores.
The next question is from the line of Mahesh Bendre from LIC Mutual Fund.
Sir, how much revenue we lost in the quarter because of the Israel conflict?
You see that it's very difficult to quantify, but around INR 500 crores, we could have done more. That's what which landed up in January. There are other delays also, which will be compensated in this Q4.
So, whatever the revenue we could not book, that will book in the fourth quarter?
That's what we are trying. We are making efforts.
And, sir, on export side, any initiative or any opportunity for us?
See, it's a continuous, ongoing process. We are working with many government agencies. So, if something concrete comes significant value, we'll definitely share with you.
Sir, last question for my end. What is the capital expenditure plan for next 2 years?
Next 2 years, it will be in the range of INR 700 crores to INR 800 crores each. Each year.
Every year.
Each year? Okay.
Yes.
Next question is from the line of Gagan Thareja from ASK Investment Managers.
Can you hear me?
Yes.
The first question is around your gross margins and operating margins. Year-to-date, while sales have not really grown, your gross and operating margins have expanded substantially and they are currently above the full year guidance that you generally maintain. So, how should we think of full year gross margins and full year operating margins?
Gross margin for the full year should be around 42% and EBITDA margins would be around 23%.
Which would mean that in the fourth quarter there will be a steep fall in both gross and operating margins, because otherwise...
It is only the composition of product mix which is sold in the first 9 months and in the last quarter. There are various products. So, there is a composition of product mix which has sometimes higher consumption, sometimes slightly lower consumption. So that mix determines the gross margin. So, going forward at the full year, we should have around 42%. There is some products which are having higher material composition which will be sold in the last quarter. So that way it will average out to 58% and we end up with a gross margin of 42%.
See, yearly when we project, we project on all product mix how we are going to do in a total year. So, it's not a quarter-to-quarter fall or that increase it. It so happens that items which have got lesser material content, they got executed earlier and those which has got slightly higher material content, they will go in Q4.
I completely take that point, sir. My question was that simply that year-to-date, first 9 months is 47% gross margin. If you are implying that full year will be 42%, then effectively fourth quarter should be less than -- much less than 42%, right?
No, gross margin up to December is 45%. It's not 47%, it's 45%. And year-end it should be around 42% based on the product mix and EBITDA margin, it'd be around 23%. There will be slight differences. It will not be a very constant that it will continue in the same manner. Because of the product mix it could be slightly different in the last quarter. But overall guidance we gave around 42% gross margin and 23% EBITDA, we maintained that.
When you say 45%, are you including other income in your sales also to calculate your gross margin?
No, it is basically sales plus accretion to WIP and to material consumption. The percentage is taken as for margin, sales plus accretion to WIP to material consumption.
And your other expenditure year-to-date has also grown substantially despite the fact that sales has grown at 4%.
Based on the nature of operations, basis of operations, growth happens the other expenses also grow. Like for example, when the growth happens in turnover, there could be a little more traveling and normal employee expenses will also increase based on the dearness allowance and increments, so that growth is there in other expenses.
Would it be reasonable to assume that margins, operating margins for the full year could line up closer to 23% rather than to 21%?
No, 23%. EBITDA margin should be around 23%.
When we started, we gave guidance to 21% to 23%. Now we are giving guidance that it will be 23% in the year. Lower, you can ignore that, lower guidance.
The final question from my side. Sir, HAL announced that they had received Acceptance of Necessity for the Sukhoi upgrades additional combat helicopters and as well as the LCA. Is it possible to help us understand what could BEL's scope of work in these projects? I would presume there should be substantial scope of work for BEL.
There are avionics packages which go in this. But it's only Acceptance of Necessity they have received. So, what will be your products will be going, LCA that initial we are giving avionics package. Next what will be there? What will be upgrade? All these things. Pricing, all these things, we have to work with HAL and then finalize. So, at this point of time it is premature to say that -- give an exact figure.
Sir, the INR 25,000 crore order intake guidance that you're giving for next year, how much of that is going to be dependent on QRSAM? Or are you keeping QRSAM separate from that INR 25,000 crore?
See, QRSAM if you see that it will be around INR 20,000 crores if you see Air Force and Army taken together. So, we are expecting, we are factoring at least half of that in this projection. So, when we say that around INR 50,000 crore in next 2 years then we are factoring total requirement of QRSAM.
So INR 50,000 crores -- in that INR 50,000 crores, INR 20,000 crores is from MRSAM.
Yes, QRSAM. It all depends upon how government...
2 years intake will be INR 50,000 crores. INR 20,000 crores could be QRSAM, Army, Air Force. Depending on in how many installments we order regiments and squadrons. They will decide based on their budgets.
And MRSAM also I think there was a reasonable pipeline left, right. So, what could be the contribution of MRSAM in that INR 50,000 crores of intake?
MRSAM, see they are still started discussing. So, let some concrete progress happens, then we will...
MRSAM is not factored in this INR 50,000 crores.
Not factored. Okay.
Next question is from the line of Harshit Patel from Equirus Securities.
My first question is on the Uttam radar. Has there been any progress on this front? Have we supplied the prototype? And if you could -- how will the production quantity be divided between us and the competition?
See at this point of time I would not like to comment because under DRDO process. Prototype we have worked. I have to check it, whether we have supplied or not. What division will happen, how they will go, when they will induct, all is a long drawn process. It's a premature to say on Uttam radar at this point of time.
No problem. Sir, my second question is on the Medium Altitude Long Endurance drones, the TAPAS or the Archer UAVs. So, what is going to be our scope in this project? What kind of payloads will be supplied by us? I believe the defense forces have consolidated the requirement of 155 numbers of such drones. But we are still facing competition from Israel on this, both Heron, as well as Drishti, which are going to be assembled by Adani Defense. So, in which direction this project is going as per your opinion?
This we have to wait and watch. That's only I can say.
But do you think the user trials, et cetera, those things are moving as per plan? Is there some delay in this whole process?
[Technical Difficulty] where DOD is their other partner. HAL is there, BEL is there. So, it's moving. But how it takes the shape, how services look into it, what is their priority, what they want. So, at this point of time, it is very difficult to tell anything concrete on this.
Next question is from the line of Dipen Vakil from InCred Equities.
My first question is, out of a total order book of over [ INR 750 billion, INR 770 billion ], are there any slow moving orders which have been in your order book for say more than 2 years or 3 years?
No, there will be orders in our order book because execution time itself is around 3 to 4 years. So, there are orders which are slow moving also. But depending upon that customer's requirement and all it happens.
So, any orders beyond that which are not being executed or which are just sitting in the order book right now?
No INR 76,000 crores is fully executable orders only. Whatever orders you are talking of slow moving is not slow moving. It is just the tag that delivery based on customer requirements. But if your question of INR 76,000 crores any order is not executable at all, it's very old order. It's not the case.
Next question is from the line of Lavina Quadros from Jeffries.
Congrats on a good set of numbers. Just wanted to understand on the non-defense side. I remember in the last call you mentioned that your ATC Tower Management System was progressing well. You had installed it at Bhubaneshwar Airport. Generally, on non-defense side, is there any other updates on your...
Lavina, non-defense side, yesterday we signed a contract with the Central Board of Indirect Taxes and Customs for their infrastructure, IT infrastructure upgrade, around INR 665 crores plus taxes. A month back, I think 2 months ago, we signed a contract with UP Government for their upgradation of UP 112. Bhubaneshwar Airport, what we did for Air Traffic Management System, that process is undergoing in AI. So, depending upon their priority when they place the order but discussions are going on. So, non-defense site also we are working.
And sir, just want to check first 9 months your non-defense revenues with the EVM delivery, what is it as a percentage?
It is around 15...
20%.
20% now.
Okay. 20%.
Next question is from the line of Deepak Krishnan from Kotak Institutional Equities.
I just wanted to check on the order backlog. And in longer-term, how are we looking at gross and EBITDA margin based on the platforms that we have. That's a steady state normal sort of credit cycle, [ '25-'26 ], how do we look at it?
You are talking of '25-'26?
In general, based on the backlog that we have, the platforms, how do you kind of see our gross margin and EBITDA margin trend? Because as such, we are on an improving trajectory. So, just wanted to check on that.
I think once this year-end financials are over, when we have the April, this one, we'll give you the guidance for '24-'25. Okay. You are asking for '25-'26, I think we'll go one at a time. We'll give for '24-'25 once this year end, this commentary we give. But generally the orders, they are all long-term orders and the same orders we are executing. So, we expect the things to remain in the same margin regiment, same range.
Next question is from the line of Aditya Agrawal from Ambit Global Private Client.
So, a couple of questions. The first one is on the non-defense piece, as the previous participant had asked. So, I understand currently, as you mentioned, 20% is non-defense. So, in non-defense, what would be the subsegments that you'll be focusing on? So, metro and civil aviation, I understand are there. But anything else which you are seeing, the momentum picking up there and what would be this mix that you will target, let's say 3 years or 4 years down the line?
See, apart from metro, civil aviation, cybersecurity is one thing, which is coming up. We have established a new strategic business unit for cybersecurity. We are working with AIMS to ramp-up their cybersecurity. Then we have a lead from Ministry of Health also. They have given us letter for MOD cybersecurity. Among that, we are working with them. So, this is cybersecurity is one area which is giving us an opportunity apart from that. And then IT infrastructure upgrades, establishing IT infrastructure. Smart city is one area where we have done. So, these are the area in civil sector where we are working.
Smart city and [ EU ] effect will continue to be there and more entry could be there into metro, civil aviation and cybersecurity.
And so just to understand, so currently it's 80/20, right. So, 20 is non-defense. So going forward, this 20, you expected to go towards 25, 30. And this is what you'll be targeting or it will remain at similar level?
Defense also is increasing at a much faster rate.
That is one. And second thing, EVMA/VPAT execution has made it actually 20% this time non-defense. But otherwise it will not be in that range. It will be lesser than 20% only. Because of the EVMA/VPAT, larger chunk of sales happening. It has happened to be 20% till December.
Just to understand, usually, let's say in terms of margins, so defense, non-defense broadly in the similar range or there is a difference between the 2?
We would not like to tell on the segment as where it is more, less and all. Overall margins we tell it is 42% we'll maintain gross margins and 23% EBITDA margins. So, we'd not like to comment on defense or non-defense. Anyway, point you can understand is non-defense is going to be much lesser, the overall business itself is more on defense only. Okay.
What's currently exports mix for the quarter?
Exports up to December has been around INR 400 crores. Next question is from the line of Abhijeet from YES Securities.
Continuing from an early participant's question on drones, a more broader question on Unmanned Aerial Systems. Sir, last 2 years, what we have seen is that UAS has been a very effective strategy in the battlefield and a lot of countries have been using it to very good effect. So, as a pioneer in electronics industry in the defense segment, what will be our role in the development of the ecosystem in India going forward? It's more of a long-term question.
There are 2 parts if you see that unmanned system, drone system. One is that drone. Another is the payload on drone. And third is the anti-drone. Once drones are coming, you should have an anti-drone system. So, we are very strong in anti-drone system. We have developed along with DRDO a very robust anti-drone system and we have supplied it to Army, Air Force and Navy. We have given demonstration to Border Security Force also. And they are also working and placing the order for that. This anti-drone system is a very, very advanced which has got RF jamming apart from radar system, electro-optic system for detection of the drones. For countermeasures like RF jamming and directed energy weapon like immobilizing it with the directed energy weapon, laser. So this is the one area where we are very strong and we are consolidating.Second area we are working on is using these drones for some of our product payloads. Like we are developing low-weight EW Systems which can be mounted on drones which will effectively increase the range and reach and coverage of our EW Systems on land based also. And now there is a requirement for these EW Systems for sea based also. So, this is another area. As far as drone is concerned, low-end drones, we are not working, but definitely high payload, we have one strategic business unit working, trying to collaborate, work with various partners. So that is the third area which we are working. So, we are addressing this unmanned system area in all 3 aspects.
And as far as the high payload drones are concerned they're right now in our revenue, there is not much contribution. But going forward you are saying that directionally...
These are upcoming. Our major contribution, if you see that from drone side is from anti-drone side as of now.
The next question is from the line of Sumit Kishore from Axis Capital.
I have 2 questions. First on QRSAM, what is the likely delivery timeline for the INR 200 billion contracts that you expect to book over the next 2 years? Would it be less than 3 years or more than that?
It will be somewhere starting from 2 years to 4 years.
2 years to 4 years?
Yes. It will involve, see, first is FOPM, First Off Production Model which we have to give, which will get cleared. After First Off Production model, then the bulk supply will happen. So, FOPM will start anywhere around 18 months. We should be able to give FOPM which will be validated, evaluated. Whatever additional requirements are given by services, you have to prove and post that delivery will start. So, another 2, 2.5 years if you see that for remaining delivery, so total time should be around 4 years.
So, till you reach the FOPM stage, percentage revenue booking I'm assuming will be much lesser?
Lesser, lesser. But what we do is that we start manufacturing process because for bulk supply also because this in FOPM also there are certain capabilities which are to be demonstrated, certain items to be evaluated. But because that whole system has been evaluated as a whole so we don't expect anything in FOPM, not major changes. So, we start that production also. And once FOPM is cleared very quickly we ramp-up and we start delivering.
But till FOPM stage, is it reasonable to say that less than 20% of the revenue would be booked in 18 months?
Yes, less than [ 18 ]. See, major revenue will start only after FOPM.
Second question is if you see 15% revenue growth in FY '25 and your order inflows are in the INR 240 billion, INR 250 billion range, then the order backlog growth will peter out because your inflows and revenue would be of similar magnitude. So, in FY '26 with a stable order backlog and possibly your revenues if you grow from that point would cross your order inflow number. So, your order backlog growth in FY '26 by implication would be a negative number. So, do you think that your FY '26 revenue with a flattish order backlog can grow 10%, 15% again in FY '26? Or would that be a stretch?
Let us see. It's difficult to project at this point of time. That's what we initiate because position also will improve. We are also working on various products, various technologies. So, these are all conservative figures what we have told you in next 2 years. But once we reach closer to that, we'll revise those guidelines.
So, let me rephrase my question. If your order backlog is flat year-on-year in FY '25 or is growing in low single-digits, is the execution timeline because you said QRSAM, which is a large inflow contract, will see limited order revenue booking in the first 18 months. I'm just putting logically, doesn't it imply that there should be deceleration in revenue growth?
No. Around 15% we will be able to...
To answer your question. Current year now we are at INR 76,000 crore of order booked there and year-end we will be having little more orders inflow coming in February-March and we'll be ending up with INR 70,000-plus crore order book as on 1st April of '24. And then even if you take the 15% growth, if we end up at INR 20,000 crores, we'll have to see how it happens. INR 20,000 crores and then INR 23,000 crores in the next year still it is INR 47,000 crores plus the order intake of next year if it happens to be in INR 20,000 crores also minimum front it will still be ending again at INR 65,000 crores to INR 70,000 crores in the next year. That is March '25.
Yes. What I'm saying is on INR 65,000 crores to INR 70,000 crores, would you again do INR 260 billion of revenue or would you do INR 230 billion which will be stable?
QRSAM order comes in '25-'26. Naturally, the total order flow will be much more than the revenue in that year. Okay. If QRSAM order will come totally execution will only happen in 3 to 4 years. So, in '24-'25, '25-'26 we should receive INR 30,000-plus crore order minimum. In case we get the QRSAM order, INR 55,000 crore. So that year the execution will be only INR 26,000 crore. Say 15%, another growth if you take it will be around INR 25,000 crores. So that will add to the order. So it will be running, so at any point of time as I was telling it will be minimum more than 2 years of revenue will be there in the order books at any point of time what we receive in the next 3, 4 years, foreseeable future.
The next question is from the line of Harshit Kapadia from Elara Capital.
Congrats team for a very good set of inflows for FY '24. I just wanted to check some things. First similar to defense pipeline which you have mentioned for INR 50,000 crores, can you also share something on non-defense pipeline which you have regarding smart infra, [ civil ] and some other projects that would be helpful.
These projects are very competitive. Many players are there. So, it all depends upon how market goes and how opportunities are there. So, our projection has been 15%, 20% of civil business will be there. So, all these things. None of the civil businesses I think denominated basis, mostly are all competitive...
And they don't come in that range as even when it comes it comes in INR 100 crores, INR 200 crores, INR 500 crores range, whereas the defense order can come even in INR 4,000 crores, INR 5,000 crores range, single order. So that also matter.
Just on the question on revenue. So, Q4 is going to be a steep task of INR 8,000 crores. Just to get the more comfort, sir, which are the large projects which you're expected to execute in Q4 which can really help you achieve this INR 8,000 crore number?
LRSAM will continue to be executed. We have got an order backlog of more than INR 6,500 crores. Then we expect 1 IEWR System is there. [indiscernible] There are many other.
We have 24 strategic big business units doing many, many projects. So, there is [ Akashdeep ], some WLR will go, some tank upgrades will go, shipyard, that sonar communication system, ship data network. All these things are in pipeline. Fire control systems on ship base. Then the SDR-Tac will go to Navy. So, 24 SBUs, they are working on different projects. So, it's not spread across. So, if you see you are telling INR 8,000 crore divide by 24, you just give how much it will come.
And is there a risk that even LRSAM which you have seen a spillover from in Q2 as well and now in Q3, could there be a spillover in Q4 as well if you're not able to get things from Israel on time?
We have got an order book of INR 76,000 crores. So, we are aiming at a growth of 15%, reaching at INR 20,000 crore. So, we expect that the LRSAM should be executed in time and items should come from Israel. Even otherwise as we tell that we always have one Plan A and Plan B push and we'll ensure that we reach INR 20,000 crores, 15% growth.
Last question, just on 4th of January there was a news that Bharat Electronics has become an L1 bidder in the Unmanned Fighter Aircraft System or futuristic Unmanned Fighter Aircraft. And so this will be completely developed this product by you or is it with DRDO? Can you share some highlights? What kind of system is this?
Unmanned Fighter Aircraft L1. I am not aware. Let me...
This order was in the range of what? INR 200 crores you are measuring?
Yes. INR 230 crores? Yes, sir.
INR 230 crores and it was with Godrej or somebody I think.
Yes, absolutely, sir.
I mean what is your question on that?
Can you share some understanding on this particular product?
I understood because it's a test setup. It's for aircraft test setup which is to be established. This is called [indiscernible]. It's not that fighter aircraft which we are developing. It's a test set of futuristic test setup for fighter aircraft.
What is the development timeline or any size that you can share, sir, opportunity here?
This order was INR 200 crores. INR 230 crores.
That was a developmental size, but any opportunity size.
It's not a product. It's a test setup.
It's a test setup which is being supplied by us. It is more infra type of a thing for the customer.
Next question is from the line of Shirom Kapur from Prabhudas Lilladher.
I just want to ask you about the drones once more. So just to understand, does Bharat Electronics make the entire drone itself or is it just a supplier of the various equipment such as avionics and EW?
Our main focus is on payload for the drone and anti-drone systems. Normally for manufacturer of drones, we tie up with partners.
And just on the INR 30,000 crores to INR 35,000 crores expected order intake you expect over the next 2 years. Of course, the INR 20,000 crores for QRSAM. But in the INR 30,000 crores to INR 35,000 crores, could you quantify any of the major orders that you're expecting?
See these are all spread across. If you see there will be EW System, Shatrughat and Samaghat, EW System for land based. That is in pipeline. Then there are some radars orders. There is a requirement for Ashwini radars. Of course it is multi-vendor. Then mission system for airborne applications. Then IFSS for Air Force, Air Shakti. So, it's all, hundreds of line items which are under process.
And just to clarify, I missed the export number that you mentioned. Was it INR 400 crores?
INR 400 crores.
So for 9 months?
[Technical Difficulty] to December was INR 400 crores.
Or in the quarter. And the total exposure that you had mentioned to Israel in the order book?
Around INR 4,000 cores, INR 4,500 crores.
And this you don't foresee too many issues. This can still go ahead as planned. Of course there were issues earlier, but...
See things are moving. It's not like things have stopped. It's only some spillover because of that geopolitical situation, flights not getting finalized. If it is a ship -- shipment by ship it has to take a longer route now than it was coming at a shorter route. So, it is taking some more time. So, these are type of challenges are there. Otherwise as such manufacturing testing are going on. Sometimes in our partner they face some problem in some basic components, electronic components. So, these are challenges are there. But in business these will always be there somewhere or other. So, we are there to address those challenges.
Next question is from the line of Dipen Vakil from InCred Equities.
Sir, my question is on the lines of, we are seeing increased participation from private sector especially in say batteries, arms and ammunition and laser electronics. So, how do you see opportunity in this space going ahead, especially for BEL?
Which one? Batteries?
Batteries, laser electronics and arms and ammunition.
People are there. See these are -- our also if you see that lasers we are making for anti-drone systems. There are private sector also they are also making. So, we are competing with them. Similarly, arms and ammunition also, if you see our exposure is not very high order books. So, this is area where we are trying to enter into that. So, competition will be there. We will face the competition. Private sector will be there in these areas.
But the opportunity in arms and ammunition is completely an import substitution play or previously it was something which was made in India to quite some extent?
It will be import substitute, sir. So, we are trying to tie up with OEMs also and some indigenous developers also in this.
Next question is from the line of Amit Anwani from PL Capital.
My question is with respect to the non-defense side where we have been highlighting many opportunities with respect to homeland securities and sometime EVM and then related to DMRC systems. Just wanted to understand incrementally can non-defense, you did highlighted the defense pipeline, can actually ramp-up or any opportunity which you are seeing in next 6 to 12 months from any of this business segments, subsegment or verticals in non-defense which can significantly contribute to your intake?
If you see the total our order book and orders in pipeline non-defense will remain minority portion, minor portion. So 15%, 10%, 15%. So value will not be that significant. But yes we are in technology field and we would like to contribute in non-defense field also that will spread our portfolio. So we are working on that. But significant contribution will be from defense cycle.
So, wanted to understand on CapEx for the 9 months and guidance for FY '24 CapEx and FY '25 CapEx.
CapEx for the 9 months has been around INR 400 crores and we expect it to be around INR 700 crores by the year-end, March '24 and next year also we expect it to be in the same range.
And on capacity expand which side we are expanding capacities?
Capacities, we are building up some infrastructures and some plant and nursery. Some buildings are coming up. On the CapEx trend as we are told there are some infrastructures coming up at Palasamudram. It's coming up in Hyderabad, it's coming up in Masulipatnam and of course related to projects also there are some machineries which you have to buy, some test setups which you have to buy. So, these are the major CapEx which are happening.
My question again sir on the INR 50,000 crores cumulative I think I might have missed, you might have indicated INR 50,000 crore defense pipeline.
INR 50,000 crore total order, we are expecting to get in the next 2 years is what we told. We didn't tell defense. We told '24-'25 and '25-'26 put together, the total order intake should be in the range of INR 50,000 crores. All put together.
Including FY '24 and FY '25, is it?
Yeah. April '24 to March '26.
So sir, just wanted to understand we were guiding INR 20,000 crores for this year and we are going to achieve almost INR 30,000 crores. And whatever you have been indicating, is it the case that your baseline guidance can go up to INR 23,000 crores, INR 25,000 crores? So you did highlighted INR 50,000 crores. Is it the baseline order intake which you are expecting, or...?
No, it's just a realistic estimate of what we see today. It's not a baseline, it's not a high side or low side. It's just an realistic estimate of what we expect to receive in '24-'25 and '25-'26 based on our assessment at this point of time, based on the projects in pipeline.
[Operator Instructions] Next question is from the line of Abhishek Poddar from HDFC Mutual Fund.
Sir, regarding the positive and digitalization list, could you give some understanding that this year's order inflows of INR 28,000 crore, does it have any components and items from those 400 items that was put in? And if you can give some road map also that what are your expectations for '25, '26, '27 based upon that list?
It's very difficult to exactly match those lists. But whatever list, positive indigenous list is there by Government of India, we are in our area of business we are there. So if positive indigenous list some items are there, definitely we are one of the key supplier for those items. But it's very difficult to exactly map and tell that this much order has come from positive indigenous.
So for example, when Defense Minister has announced this, I think there were media articles which indicated that the amount would be -- which would be ordered because of that list would be in excess of INR 5 lash crores or so. Any numbering for you that what could be your share in those list, not for next 1 year but let's say next 3, 4 years. Any exercise that has been done?
No, we have not done that exercise.
But you do expect that in next 2, 3 years you start seeing some more positive?
Definitely, definitely.
All right. And so second on the Akash missile, if you could give some understanding that what order expectations there from either directly from MOD or from the other PSU who have won the Akash orders to you.
Akash, we got the order from BDL. BDL got the order for 2 regiments, from MOD that in turn that our [Technical Difficulty] for ground equipment around [ INR 2,750 ] crores order we got. Then BDL also got some export order for that. So ground equipments and radars and all are from our side. So that order also got. For Akash, we are trying to get the export order. So that is also an opportunity for Akash weapon system.
So possible that even you get the export order directly for Akash rather than BDL getting it?
Possible. Either BDL gets or we get. We share because our work share is almost decided. What is the work share of BDL and what is the share of BEL. So it doesn't make a difference who gets the order. Ultimately, our portion of business will come to us. BDL gets. If I get, BDL share of work will go to BDL.
So in that INR 50,000 crores for next 2 years expectation anything on a Akash being built in or that is beyond '26?
Some projections are there but not very, very aggressive. But definitely we have put in the INR 50,000 crores some orders from Akash side also.
[Operator Instructions] Next question is from the line of Lavina Quadros from Jeffries.
So one final question for me. Your working capital because your order book growth is much faster than your revenue growth, would it be fair to say that because of contracting advances your working capital will reduce by significant.
Working capital, as we have been telling that we are maintaining the ratio of current assets to current liabilities remains at around 1.5 and the liquidity is good. We have a cash on this one as on 31 December of INR 8,000 crores, trade receivables are around INR 7,700 crores. So working capital ratio is good. Now it's in the range of 1.5 and it continues to be in the same range.
Next question is from the line of Gagan Thareja from ASK Investment Managers.
My question is that of the total order book of INR 76,000 crore directly or indirectly for your components how dependent are you on the Russia-Israel geography?
See, we had dependency on Russia for some of our equipments related with tank electronics. But we have gone very, very aggressively on indigenization of those items. So, tank electronics from next year onwards, our dependency on Russia will not be there. Coming to dependency on Israel, yes, for LRSAM, IW, electro-optics there will be dependency on Israel. But then that Israel also is working aggressively and they are ensuring that pipelines are maintained. They are also working, factories are working despite this war. So, some delay may happen here and there. But I don't think that any materialistic impacts will happen because of our dependency on Israel.Third thing is that yes, since infrastructure or ecosystem of basic electronic components is not there in country, so being in electronic industry, whatever semiconductor issues and supply chain issues will there, we will do get impacted by that. For that we do various strategies and plan how to address those and meet the expectations.
Is the shipping-related problem around Red Sea something which can materially impact you in terms of the time to get your supplies?
Not significant because you might have heard in the news also that Indian Navy are there. They are patrolling, other foreign countries that Americans and all are there in those areas and they are making sure that the shipping lines are kept open. Some of the cases it takes more time because it changes the route. So question is of gap of round if it is by ship another 20, 25 days more time. If by air also instead of directly coming to India, it takes alternate routes and then some trans shipment something happens. So that is the only impact that what we see as of now.
Final one, sir. Upgrades, AMCs, software upgrades, air and so on. What part of your order intake annually could come from something of a repetitive or maintenance-oriented nature?
See, if you take services we have done around 11%, 10% to 11% from service. And then another, you can say that 5%, 10% will be from air supply. Upgrades, it comes as significant for existing platforms and go for refit and upgrades. So in refit and upgrades for them there is upgrade. But in many platforms when they go for upgrade, they change the equipment. So, for us it becomes a supply of new equipment.
So 10% to 15% of sales, you're saying, or you are saying of order intake?
Sales.
And in the low earth orbit satellite business, that's a business which a lot of the private sector companies seem to talk about as one where there could be scale later on. Is it something which interests you or which you see?
Yes, we have one strategic business unit which is working on this, the business opportunities and what we can do.
Anything more you can elaborate on that?
Not at this point of time. Maybe once we make progress, then we'll elaborate.
Next question is from the line of Vipulkumar Shah from Sumangal Investments.
Most of my questions have been answered. Just we had MoU for battery management system sometime back. Any progress on that sir?
I have to check it up.
Are you mentioning about the Titan MoU?
Yes, sir.
No, not much progress.
Not much progress on that and that is not factored also in this INR 50,000 crore order.
Next question is from the line of Manish Goyal from Thinqwise Wealth Managers LLP.
Just on a continuation on the services and AMC. So, will the revenue share continue at 10%, 11% or we probably see an increase in revenue share because in recent past we have received a few orders in this segment? And what would be the share in the order book of services and AMC?
Services and AMC, maybe around 10% 12% will be there. And it all depends upon how services go. Their philosophy for maintenance. If you use for complex equipments, they are going for AMC, but for standalone equipment they have got their own repair depots. Base repair deposit for Army is there, naval dockyards are there. They are doing so, yes, something they will do. But as of now it is around 10%.
90-10 ratio which has been there and which is there for the December and also April to December. Order book is also in around 90%, 10% only. So it may remain in the same range in the coming year.
Correct, sir. And ideally the margins should be definitely much better than the company average margin.
[indiscernible] why are they telling.
No, we are talking of overall margins and we are told that current year we are expecting a gross margin of 42% and EBITDA of 23%.
Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to management for closing comments.
Yeah. Thank you all for questions and we tried our best to give that our response to all the questions. I can only say that we have a very positive outlook. Major 3 guidance what we have given, profitability, order inflow and revenue. Profitability and order inflow, we exceeded our guidance. Revenue we are bit short, but we are very confident the way we have done in Q4 for order inflow last year, this year we will do it for revenue guidance also. Thank you.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us and you may now disconnect your lines.