MTAR Technologies Ltd
NSE:MTARTECH
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MTAR Technologies Ltd
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Ladies and gentlemen, good day, and welcome to MTAR Technologies Limited Q4 and FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Irfan Raeen from Orient Capital. Thank you, and over to you, Mr. Raeen.
Thank you, Nirav. Good afternoon, everyone. On behalf of MTAR Technologies Limited, I extend a very warm welcome to all participants on Q4 and FY '23 financial discussion call -- today on the call, we have Mr. Srinivas Reddy, Managing Director and Promoter; Mr. Gunneswara, Chief Financial Officer; and Ms. Srilekha Jasthi, Manager, Strategy and Operations. Hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on exchanges and our company's website.
I would like to give a short disclaimer before we start the call. This call will contain some of the forward-looking statements, which are completely based upon our belief opinions and expectations as of today. These statements are not guarantees of our future performance and involve unforeseen risks and uncertainties.
With this, I hand over the call to MD, sir. Over to you, sir. Thank you.
Thank you, Irfan. Good afternoon to everyone. I would like to thank all of you to stay in a valuable time to participate in Q4 2023 earnings call of MTAR. I have with me Mr. Gunneswara, CFO; and Srilekha, Senior Manager Strategy and Operations; and Irfan from Orient Capital. We have uploaded the investor presentation in stock exchanges, and I hope all of you [indiscernible] the same.
At this point of time, I would like to mention a little bit more on the market guidance given by us in terms of revenues and margins, what they have said earlier. In terms of revenue, initially, we had given guidance of 55% to 60%. And during the Q3 earnings call, we have revised our guidance to certify to 80%. We have achieved revenues of INR 573.8 crores in FY '23 as against [ INR 322 crores ] in FY '22, which is 78.2% increase, and we have delivered the guidance revenue number as mentioned. For FY '24, we continue to confirm the annual revenue guidance of 45% to 50% increase in revenues on a year-on-year basis.
When it comes to EBITDA margin, we had initially given a guidance of 30% plus minus 100 basis points and revised the EBITDA margins during the earnings call of Q3 2023 to 29% plus minus 50 basis points. We have ended the year with EBITDA margin of close to 27% instead of the guidance given at 28.5%, which is on the lower side by 1.5%. I owe the shareholders clear explanation regarding the lower EBITDA margins, compared to the guidance given.
One is the gross margins in Q4 has come down to 48.6% due to sales mix as -- or you can say the product mix as [indiscernible] reported much higher growth compared to the other segment, as you all know, [indiscernible] gross margins are lower than the other segments. But this cannot be the reason because the operating leverage should maintain [indiscernible] in Q4 which did not happen. And initially, the annual guidance margin was down by [ 150 ] basis points as Q4 recorded 25% EBITDA margins.
The impact was purely because of employee benefit expenses, which have increased by [ tenfold ] growth quarter-on-quarter basis because we had to implement market corrections and salaries for -- across the board for high steel workers and our core engineering team, and our management team during the quarter, and the same was [indiscernible]. This had impact of about 5% in EBITDA margins in Q4, if not the margins would be 30% in Q4 and eventually, we would have realized the 28.5% EBITDA margins for the year.
Consent of MTAR is in high-steel employees on the shop floor, the core engineering team and the management team, and this has been done keeping in mind the high-growth prospects of the company moving forward, which we are really excited about. I strongly believe that this onetime benefit will lead to a strong foundation, for a growth company like MTAR [indiscernible].
Sir, sorry to interrupt. We are losing your audio.
So in spite of the above, the overall employee and other expenses dropped in percentage terms from last year to this year by 540 basis points and [ 410 ] basis points, respectively, which now stands at 15.8% and 7.7% respectively.
Moving forward, over the next 2 years, the employee benefit expenses will fall below a single-digit percentage in comparison to sales. The above move did impact PAT, which should have been at INR 110 crores, which is now close to INR 104 crores. Finally, I would like to inform all the shareholders that this decision would lead to much better performance moving forward. And the team has the passion, but it was high time to pass on this benefit to support the passionate team, which was done without the team asking for it.
We would like to confirm that our annual EBITDA margins for FY '24 will be around 28% -- around 28% I would say, with a few basis points here and there. Due to steps already taken towards -- the steps which are very critical at this juncture with reduction in costs in terms of supply chain activities, obviously, the employee benefit expenses would drop and also the reduction in other expenses that we are looking at and a substantial increase that we are envisaging in the current year in terms of product sales, which will be more than INR 120 crores, which is a massive jump compared to the previous year.
When we look at our order book, we have given a revised guidance in Q3 earnings call for INR 1200 crores of order -- closing order book and we have ended with INR 1,173 crores, which is very close to the year end order book guidance given earlier. Based on the orders expected and execution of existing and new orders during the financial year, we are expecting the order book to be at INR 1,500 crores by end of this current financial year FY '24. We're not only expecting those orders from clean energy segment in fuel cells, Hydel and waste-to-energy, wind sector as well as we have done enough first articles during the past 1 year.
And also in the aerospace sector, we have already started working with reputed MNCs, especially we're also living Director of [indiscernible] GKN aerospace sector for close to $10 million. The expected order inflows should be around INR 1,200 crores in all segments put together in the current financial year, which is very encouraging for us. And a lot of effort has been put in not only in terms of achieving the revenue guidance, but also in creating a great platform for the future years during the last financial year.
Specific to nuclear energy, I do understand there has been a slight pushback in terms of orders being received from NPCIL, but they have taken a decision to first experiment on [ Kaiga 5 and 6 ] reactors to be given to major companies like L&T, Tata's, et cetera, and the tenders have been floated for them to build the reactors in exactly 4 years' time. But the fleet reactor tenders will continue to flow in. But these 2 reactors, they wanted to ensure that they are done in exactly 4 years and are there to stick into 10 years.
The tender has been issued but MTAR has exclusive capability in [ such packages ], which is mentioned clearly in a [indiscernible] company. And for these packages, we are expecting close to about -- at least about INR 600 crores of orders flowing-in in the current financial year. And we have estimated on a [indiscernible] basis of INR 500 crores, finally that would come in during this year and probably the rest would come in the next financial year, specific to [ Kaiga 5 & 6 ] I'm talking about I'm talking about. And obviously, the orders from the other segments which we are very comfortable with in terms of aerospace, clean energy, et cetera, space and defense. So as said, these 2 reactors have to be commissioned exactly in 4 years, as mentioned by the CMD of NPCIL, on a one-to-one meeting with them as well. So as I mentioned earlier, the rest of these reactors will follow in the normal mode of operations as the case may be in the past.
The next important point, which I would like to mention is on the NWC. We have guided for working capital days to be at 220 days, and we are able to achieve 230 days, down from 290 days in the last quarter. And we are making every effort to bring it down. And this number would come down further this year, and we are targeting 180 days by end of the year, between 180 to 200 days by end of this year. And here, again, we were forced to airlift a lot of [indiscernible] sheets last year. So we had a staggered shipment plan by sea, close to about INR 70 crores of inventory, which is in transit, but staggered over a period of time.
But we also do have credit terms with the [indiscernible] supplier. This we had to do in order to avoid the air freight charges, which were nominal. So obviously, this inventory, which we are talking about, INR 70 crores to INR 80 crores will get consumed over the quarters, which should not be an issue for the company. And that's how we'll further bring down inventory levels quarter-on-quarter basis to improve our working capital days moving forward as well.
The ROCE stands at 20% in FY '23 as against 14% in FY '22. And the ROE in FY '23 stands at 18% as against 12% in FY '22. And these percentages are expected to even improve further by end of FY '24 as well.
So quickly in a brief synopsis, the future outlook for FY '22, see, apart from the guidance numbers, which I have given, we are in advanced stage to enter into agreement with Fluence energy for the energy storage systems, which again comes under clean energy for both domestic and export markets. So over the next 3 years, as we ramp up gradually starting from FY '24 onwards, we are looking at revenues touching at a level of about INR 400 crores by end of the third year starting from FY '25. And also, we are entering into various agreements or received orders from companies like Voith, GE Renewable, Andtriz. Enercon is another company which is really looking at us in terms of wind energy requirements.
So this -- our fabrication unit, which will be fully commissioned by June '23, we'll be able to cater to all these requirements. And, but for Fluence energy, we have to establish a separate facility for them, which we have the existing facility can be used for the domestic, but we would like to -- we're looking at a huge revenue base. So we would like to look at a separate kind of facility to cater to the Fluence energy at this point of time.
So the most exciting issue is that the Bloom Energy electrolysers have been installed recently as probably all of you must have heard, it was done very successfully. And this -- the project, what they have undertaken was completed in actually 2 months, is delivering an equivalent of over 2.4 metric tons per day of hydrogen output, which is a great stride in terms of production of hydrogen. So what it means to MTAR is we have been manufacturing the electrolysers for them. And I [indiscernible] systems are established and approval in the market with high efficiencies, which they have proven.
We are looking at this vertical to ramp up very quickly, hopefully, by end of this year, calendar year. And then this vertical would be as strong as near the vertical that we have to. So we have a very clear -- the bigger picture, which I would like to mention for the first time is that was very clear roadmap for MTAR over the next 5 years, by FY '28 we could be a [ INR 3,000 crores ] company, only throughout -- within its own innovations and manufacturing abilities...
Sir, sorry to interrupt you once again, but we are losing your audio. Ladies and gentlemen, please stay connected while we rejoin Mr. Reddy back to the call.
Ladies and gentlemen, thank you for your patience and your line for Mr. Reddy reconnected. Sir, you may go ahead.
Thank you. So finally, I would say that based on -- we have a clear roadmap for MTAR to be a INR 300 crore plus revenue-based company over the next 5 years by FY '28, sustaining its margins through innovation and efficiencies entirely in a organic manner without considering any kind of JVs or inorganic growth as far as the road map is concerned.
And we continue to work towards improving our margins and also trying to expand our customer base, which we have been doing, which is very evident and which I've mentioned about various customers that we are working with. And this will continue to be our endeavor to have a wide spread of customers over the next 5 years and in order to ensure that the exposure within each customer is within certain limitations.
Thank you so much. And I would like now to hand over the call to CFO, Mr. Gunneswara, who will take you through in detail about the financials in more detail than what I've said right. Thank you.
Thank you, Mr. Srinivas Reddy. Good afternoon, everyone, and a warm welcome to our earnings call. And first and foremost, I would like to express my gratitude for your continued trust and support. I will take you through the financial highlights post which we will open the floor for questions and answers.
We successfully achieved our revenue guidance with a significant increase in revenues in FY '23, our revenue reached to INR 573.8 crores, representing a growth of 78.2% compared to INR 322 crores in FY 2022. So our EBITDA also showed a substantial improvement in absolute terms reaching INR 150 crores -- INR 154 crores in FY '23 and 63.1% increase from INR 94.4 crores in FY '22 with a margin of approximately [ 27% ]. So though the margins have come down as Mr. MD, Srinivas has explained, reasons for the margin decline.
In absolute terms, we maintain a margin of INR 150 crores as far as the initial guidance is concerned, like FY 2022 INR 322 crores revenue, it's a 60% initial guidance at a 30% EBITDA will give us INR 150 crores of EBITDA. So same EBITDA, we maintained it even after the reduction of the margin percentage, but absolute terms, we maintained INR 150 crores -- INR 154 crores as promised initially.
Profit before tax at INR 140 crores in FY '23, reflecting a growth of 70.6% from INR 82.2 crores in FY 2022. Similarly, profit after tax increased by 69.9%, reaching INR 103.4 crores in FY '23 compared to INR 60.9 crores in FY 2022. In terms of earnings per share, our diluted EPS for FY '23 stood at [ INR 33.62 ], an improvement from 19.79 in FY 2022. We have reduced our net working capital days to 230 days in line with our target of 220 days by end of the FY '23. Out of these 223 days -- 230 days, 92 days, are related to work in process -- so we aim to further decrease our net working capital to less than 200 days by end of the FY '24 through increase in turnover, inventory reduction, shorter shipment days and change in our product mix.
Our return on capital employed improved by -- improved to 20% in FY '23 compared to 14% in FY 2022, while return on equity increased to 18% in FY '23 from 12% in FY 2022. We anticipate further enhancement in our returns and ratios through an increase in wallet share with existing customers, operating leverage in our product portfolio and revenue ramp up. We understand the importance of reasonable business practices and sustainable development. Our commitment to corporate social responsibility remains unwavering as we shift to positive impact the communities in which we operate.
I also would like to mentioned that we have strengthened our management team by welcoming Mr. Raj Bollampally as our new COO. Under his guidance, we expect to optimize our operational efficiencies to cater to the accelerated growth.
With that, I open the floor for discussion and welcome any questions you may have.
[Operator Instructions] The first question is from the line of Deepak Krishnan from Macquarie.
My first question is largely on your order inflow guidance. You're indicating INR 1200 crore order-in for this quarter and up about INR 500 crores coming from nuclear. So how much would be Bloom's order inflow in the coming year? And because last year, we did close to over INR 800 crores and what is the outlook in terms of hot boxes, say for FY '24 and then FY '25? Any comments on that, that you could share?
Sorry, Deepak, I was on mute actually, and apologies for that. So Deepak, I heard your question. The order inflow for this year, which I said is about INR 1,200 crores is primarily during the entire financial year. That's how we end up [ INR 300 crores ] as our estimate is. It's primarily, which I said for Kaiga 5 & 6, we're expecting at least about INR 500 crores of orders coming in for sure this year, and which had a detailed discussion with the CMD of NPCIL as well on the strategy that what they're adopting right now and also from the other fleet reactors that we're expecting.
And I do understand there was a little bit pushback on the order inflow, but now time has come that's very -- the attitude is very clear right now in terms of getting these orders through. And obviously, the inflows from clean energy segment are not only from Bloom, but we're going to get substantial inflows from various companies where we have done first articles with Voith, Andtriz, GE renewable and companies like new companies have joined us in terms of [ Siemens ], [indiscernible] and Enercon, et cetera.
And also this strengthening our aerospace vertical, we already received a letter of intent of $10 million from GKN Aerospace. So which we are expecting that to be converted to orders during this quarter or beginning of next quarter. So overall, it's a very nice mix of spread of orders coming in. I've mentioned a conservative number at this point of time, but we'd expect a lot more orders flowing in. But this would be the bare minimum that we are expecting, and we should stick to this.
Any it is coming from the Bloom hot boxes shipments for this and next year or Bloom overall targeting [indiscernible]?
As of now. So basically, we continue to do the Yuma boxes at the rate what we have done. We have done the highest number of boxes in the last financial year, I think close to about 4,500 or 4,600 boxes. And we will continue to do that, but they are looking at increasing that number, but we have not yet received the confirmation as of now, but we will hear from them by end of this quarter. And as far as [indiscernible] concerned, there are some major design changes which are happening, which -- that order is still on -- which we have to execute. We still have to hear from them officially in terms of what they're going to do in terms of design changes. So that's about 1,600 units we are looking at.
But that's something which we need to get -- Bloom has to get back to us because they're looking at much higher power generation and change of design or what they want to do with their [indiscernible] of this quarter. So that would be the same number what we have given in the last call as well. And what we are really excited about is the electrolysers, which now since they have installed it and proven the hydrogen output with very good efficiency, and we have supplied all the electrolysers to them. So whatever we are going to do this year, we have an order of the 142 numbers, but that's only batch production, but we can see some kind of volume production kicking in probably 2 quarters down the line. So that's where we stand right now.
Sure. Maybe just a question on gross margin [indiscernible] mix was one of the factors, but anything that sort of really stood out that is sort of more one-off in that goes out for any cost that is building for future revenue? Anything that can take the gross margin back to say 50%, 60%? Or would we think that for a full year basis, we are in this 48% range next year out?
Not really, Deepak. If you look at the absolute numbers, what guidance we have given or see -- the guidance what I've given is I have not even taken -- revenue guidance has not even taken keeylocko into picture right now because there are some design changes going on there. So if you look at that kind of revenue guidance I have given, basically, the absolute numbers of other segments are substantially going up in the current financial year. So the gross margins would kick in back to about 50% to 60% moving forward as well. So that should not be an issue at all.
Sir, maybe just one last question from my end, more on how are you looking at inventory days where you've done a substantial about 20 days improvement in receivables, largely inventory days and payable days have sort of gone up. So any -- like what measures are we taking to get the inventory days at back to closer to the 190-odd days which were there in FY '22?
Yes. Probably [ GR ] will be able to explain that in more detail, but we have put a specific task to reduce the inventory levels. Obviously, I've explained about the Inconel sheets, what we have done and that's something which is stock in transit and also it is not due as of now. So it will get consumed over the period of a couple of quarters. But overall, we are looking at very seriously about getting our inventory levels down as much as possible because we are working on various product mixes to begin with, with new products being introduced. So over next 2, 3 quarters, we would obviously try to bring them down more and more. And GR, you would like to say something?
Actually, the inventory of the INR 240 crores, INR 72 crores is a stock in plants, which we may receive after 60 days to 75 days sometimes. So that is the reason there will be inventory and also payables both are there. So that is one of the reasons. And as MD said, these inventories, we will use because last time we have airlifted so much of material and the cost is very high. So we are taking a calculated risk and keeping our inventory carrying costs into consideration.
We are taking slowly, I think we are trying to reduce, by end of this financial year, we will try and maintain INR 200 crores less than -- 200 days of inventory -- days of working capital. And also this inventory having some of the long lead items for which there is -- we are working with a nuclear project, we got SMBC [indiscernible] systems, some inventory -- around 25% of inventories related to that and around 25 percentage is in stock in transit, remaining in the export-related inventory, which we will consume in 4 months or 3 months' time. And now that we got some clarity where slowly the supply chain issues are relaxing, the clarity we are getting.
So normally, when we plan the inventory, we have to see that what is a transit time and all. So accordingly, we will plan our inventory days, suppose sometimes what happen, you may receive in 15 days, 20 days before because of the availability of shifting lines and other things. So these are all the various factors are there. So we have to balance all those things. But definitely, having said that, we are actually working on it. Now we are continuously monitoring on receivables, increasing credit period with [indiscernible]. So lot of actions we are taking, and we'll try and reduce as much as possible by end of this financial year.
The WIP days have been closer to 90 days for a loss of time. Do you think it's largely coming from there? Or will it come from other than WIP, would that number go up?
No, no. WIP is [ surplus ] number and which is around 92 days inventory is there. And the maximum in that, 80% is the domestic where long-lead projects inventory, so which is actually good for the company because it is going to crystalize the revenue in the coming year -- this financial year FY '24.
[Operator Instructions] The next question is from the line of Sandeep Tulsiyan from JM Financial.
Yes. Congratulations on achieving the guidance...
[Operator Instructions] The line for the participant dropped. The next question is from the line of Renu Baid from IIFL Securities.
Many thanks for first accommodating in the change in time, in the interest of all the investors and analysts.
Sir, my first question to you is when I -- you did mention that many materials, especially the inconel sheet required for exports and other business have to be airlifted, which also impacted gross margin. Sir, can you throw some input in terms of why the urgency of airlifting or was there issues in terms of your normal conventional shipments, which was coming through? Through the year, you are maintaining relatively elevated inventory levels. So why the last minute emergency to airlifting and take a hit on the cost as well?
There are a couple of issues there. Some were really unforeseen. One is that we import Inconel sheets from Germany as well from VDM, they had a cyber attack and there was an issue with them. So they -- we had issues with them in terms of dispatches. And from the U.S. company, UPM, the initial lot of materials, there are different sizes of Inconel sheets. So there was some kind of an imbalance. So in the terms of imbalance, they were delaying because their input raw material got delayed in the United States and which was not anticipated. So we had to airlift to balance -- to make sure our production lines are not down. These are the factors.
So subsequent to that, it got eased out and they had enough material on hand. We didn't want a situation where we would airlift and especially Inconel sheet, the airfreight is very expensive. So we absorbed that cost last year. And now we are in a pretty comfortable position in terms of the supply chain in terms of these Inconel sheets, which GR has explained about having it in transit and staggered, which will come in useful for the next 2 quarters without airlift in any material. So we had to spend enough money on that last year to absorb that cost.
So can you help us quantify in terms of last -- the fourth quarter gross profit, what was the impact on raw material to sales because of this thing? And also, will the cost escalation because of the global vendor will be passed on to Bloom or we will have to bear the cost for this increase?
No, no, we don't have to bear any cost if there is any increase in the raw material cost. Every quarter, it is reviewed and it is addressed accordingly. So we don't have to do that at all. In fact, there are a lot of some design changes happening in Yuma as well. For example, we are using 3 other [ borrowers ] of parts for Yuma, which is about $750 which we import. Now they bought it down to 2 with some design changes, which we work along with them. And similarly, any cost escalation is obviously addressed at the end of each quarter and it appears amended accordingly. So we are not affected because of the increase in cost of research.
[Operator Instructions] The next question is from the line of Amar Mourya from AlfAccurate Advisors.
Just to again continue with the gross margin. Like, sir, was that hike of inventory impacted the fourth quarter margin? That is number one. If yes, what was the quantum of that high-cost inventory, which was baked into the fourth quarter margin?
I think GR can explain this, but I would like to brief this. GR, if you can explain this?
See, the gross margin drop alone, we should not see here just because the gross margin is good, it doesn't mean that the EBITDA will suppose say today, we are at [ 46% ]. So if it is [ 54.8% ], EBITDA will not increase. So there are some products like exports, for example, where the inventory is 60%, we have a gross margin at 40%, whereas the value addition requirement is very low. In case of domestic projects, gross margin is higher when value addition is higher.
So in our companies since we are in various segments, the gross margin alone is not required to be same. The EBITDA decrease is not as our MD said, it is not just because of the domestic sale and because of export. It is not that. There is a one-time correction we have done in line with the market benchmarking to our employees. So where our cost is impacted. So the fixed cost is impacted. That is the reason for the like lower EBITDA margin, not because of the gross margin lower and -- if the gross margin is lower and valuation will be higher in the domestic products and vice versa for the export products.
Sir, I'm confused. Basically what I'm trying to understand. Gross margin has gone down by [ 400 basis]. When your EBITDA has gone down by 300 basis points in [ sequentially ]. I'm talking about sequential, Q3 to Q4. So basically, what I'm trying to understand is 48% gross margin, which we have posted, reported in this quarter. Is it -- there is some onetime RM impact into this? And are you saying that from Q1, again, the gross margin will bounce back to the 52%? That is what I try to understand.
Okay. Can I explain that GR, and you can continue. See, basically, in Q4, our product mix was more towards the exports and domestic where the gross margin is lower in exports, but the operating leverage technically has -- eventually, I explained to you, if not for the employee benefit expenses, we could have maintained our EBITDA margins, right? Now as I said earlier, moving forward, our product mix, where I said that even the domestic is going to be reasonably on the higher side. So we'll bounce back, as I've mentioned to Deepak as well, that we'll go back to 52%, 53%, moving forward based on the product mix that we're going to have over the next few quarters.
The next question is from the line of Mohit Kumar from ICICI Securities.
Congrats on a decent set of number, sir. First question on the [ revenue ] guidance, I missed the number, what is your revenue guidance for FY '24?
Can you repeat that?
On the revenue guidance how much you are expecting in FY '24?
Your voice is coming a little muffled. Is it possible for you to speak through the handset, please?
I'm audible now?
Yes, absolutely.
So my question is on the revenue guidance, how much you are expecting in FY '24?
I've already mentioned that...
I missed out that.
Okay. Sure, no problem. So we're expecting 45% to 50% increase in revenue guidance for FY '24.
Okay. My second question is on the working capital. And you're guiding for improvement in the entire fiscal. Can you expect some improvement in the first half itself by the time you report the number in September?
GR, do you want to answer?
Yes, we are trying to reduce. But as we've said already, there are some inventories, which existing inventories, we will use in the first half of the year. And the third quarter requirement, we try and get as per the need basis. So we'll try and [ read ] this our working capital by first half of the year.
My last question is, can you speak about the new clients you added in FY '23? And how do you expect the ramp-up in revenue and the opportunity in FY '24 and FY '25 from the new clients that being...
See, we have added a number of new clients, which I've said, starting from Voith, GE Renewables, Andtriz, Hitachi, now we've added Thales, GKN Aerospace. So we are improving our customer base with a very wide portfolio right now. So we have more or less completed first articles with some of the customers and some are in progress. And also the new customers that clean energy -- Enervenue and all the customers are almost in the final stage of discussions.
So all this customers in engineering, once we are done with the first article, the volumes will pick up, especially our fabrication is also is getting fully commenced by end of June, including the [ mission assets ] of it. And Enercon is another company which are looking at us to take out their needs for [indiscernible] that are very complicated assembly that they're looking at. So all this over the next 2, 3 years, would become a substantial business for MTAR, as I said, including Fluence and take all these customers into account, including GKN Aerospace in the aerospace sector, we're looking at revenues over -- probably by end of 3 years, we are looking at INR 600 crores to INR 700 crores of revenue kicking in from all the customers or even more.
Next question is from the line of Vinod from Union Mutual Fund.
Sir, I just want to have your comments, has the Indian space Policy, which was approved by the cabinet in the month of April? So I just would like to get your comment on that? And also, can you just help me how MTAR will benefit from this...
can you repeat that once again?
In terms of -- there was a change in Space policy, which was approved by the cabinet for -- which I was talking about, institutionalization of private sector participation in the Space sector. I would like to get your comment on how MTAR will benefit from this?
So you are talking about -- see, this is exactly what I'm saying. See, MTAR is getting involved in design and development of its own launch vehicle in the small satellite launch vehicle. So ultimately, the government is looking at privatization in the space sector in a big way. But for any company to design and develop, that's what I said, it's a 4-year period, which we have already taken it up very seriously, and we have actually completed a lot of design work as we move on, we have already recruited very well-experienced scientists in this area.
So this is something which is going to be a game changer for MTAR 4 years from now. That would be a fully integrated system, and our first development should be ready at end of the fourth year. So this is what the government is looking at. But again, the government has also given the PSLV launched vehicle to private companies like L&T and HAL, in consortium. But there again, since the MTAR is the exclusive supplier of the liquid propulsion engines and various other modules that we supplied for them, which they have been using for all their launch vehicles.
So we are -- these vendors, again, would come to us to deliver engines to them as well. So we benefit in both ways, but we would like to ultimately develop our own product within the company moving forward. So that's pretty encouraging, and it all depends on how we design and develop our own products over the years.
Okay. And just a second clarification. You said that in the clean energy business, the new clients like Voith and GE renewables to contribute INR 600 crores over the next 3 to 4 years. So currently, is there any contribution on the revenue side or order book, order backlog on this new client?
No, we have orders. We already excluded some orders somewhere. See that's what I said. We just started doing first articles. I think we have excluded some -- between INR 15 crores to INR 20 crores of orders or maybe more than that for them. So it's a starting point. So this is -- in engineering, first, we do the first articles and then the customer starts building up and slowly have to ramp up and take care of their requirements, majority.
And Fluence is something which we have yet to start. We are almost in the final stage of discussions right now. And that's something the energy storage systems and the clean energy is going to ramp up in a big year over the next few years on a step-by-step manner. So overall, the vision of the company is to diversify a very strong customer portfolio and also have enough revenues being generated from each of these customers.
So we've been very careful in dealing with that because in engineering, we spent a lot of time in developing these products for them or developing whatever their requirements are. But we also look at the commercial aspects in terms of how much of revenues that we can generate on volume terms moving forward. So we are in line with that target. That's how we are able to -- I clearly said that the vision of MTAR is to be a INR 3,000 crore revenue-based company by FY '28. And a lot of work has been done in the last financial year, which does not reflect in our numbers, obviously. But this is a path forward as a platform we created year-on-year basis to achieve our end goal of sustaining those revenues and the margins what they're looking at.
Next question is from the line of Deepesh Agarwal from UTI Asset Management.
My first question is on order inflow. You are driving for some INR 1,200 crores of inflow next year, of which INR 500 crores is from [indiscernible]. If I do the math, it implies that you are building in a decline in the other segment order inflow last year, clean energy itself was INR 800 crores. So what explains this kind of an estimation?
See, I have given a conservative estimate, Deepesh. So whatever I said, INR 1,200 crores is what I've said. But obviously, we'll get a lot more orders in clean energy segment as such. But at this point of time, I have given a very conservative estimate as far as the order book is concerned, which is substantial, actually, but we would probably get much more than that. But I would like to always the way I tell things that I would like to maintain a number and try to achieve it much more than what I say. So that's what it is. So obviously, you're right. We'll have a much stronger order book going forward as well.
Understood. Understood. And the second question was on the working capital side. If I look at the working capital, there seems to be a significant increase in payables this quarter. So is there a change in the terms with our vendors?
I quickly answer -- GR, do you want to answer this?
Yes, the payable is because INR 72 crores of raw metal is in stock in transit and the same thing is reflecting in the payable also. That is another reason. And some other thing is we are actually talking to various customers and increasing our credit period. Earlier, we used to pay advances slowly. We are bringing into 30 days, 45 days, some customers -- we have some supplies even 60 days also. So we are trying in the both sides, but there is a stock in transit value is also included in this [indiscernible].
Understood. Related question. So earlier, you had highlighted that in terms of receivables, the transit time to U.S. has increased, which actually meant your receivable from Bloom Energy increased because they pay after they receive the shipment. Now what is the situation that globally the shipment time lines are shrinking?
I think it is stabilized now.
It is stabilized now, that's why actually, last time, it was 154 days, now 132 days now. Last year, it is 154 and now 132 days. And we are closely monitoring and trying to get as much possible. And in case of Bloom, there is no fall of required. It is actually on due date, it will come without any intervention. They have a customer portal, wherein we will know when it is reached when they are paying all the fees.
The next question is from the line of Bala Murali from [ Oman Investment Advisers ].
So earlier 2, 3 years before, now there for 8,000 hot boxes...
Bala, your voice is not coming clear, and there is a slight background noise. Is it possible to come to a different location?
Yes. Now, is it okay?
Yes.
Yes. earlier in maybe 1 or 2 years before, you have guided for 8,000 safety boxes capacity by FY '24. So are you on track, you can deliver if the order is available, the 8000 safety boxes?
So it's as said, 7,200 hot boxes, including all the models put together. So we are on track with that except keeylocko, some design changes that are going on, which is about 1,600 units, which we'll know by end of this quarter. Once that clarification comes from Bloom, then probably we will be on track with that as well, or probably they'll increase the other units as well. So we'll know by end of this quarter.
Yes. And second one is regarding the electrolysers, what could be your capacity for FY '24 and how much we can deliver if an order is available and then realization for this electrolysers.
I said earlier, electrolysers they have already established the project in U.S. where they were able to successfully commission it and display it to the -- all their customers, which is happening as I speak. So based on the initial feedback that has been highly successful in terms of the efficiencies and what they have done. So hopefully, in a couple of quarters, we will see a good ramp-up happening, and we have the capacity to handle.
And the ramp-up, obviously, the volumes really pick up as Yumas and Enclosures, probably then we need to look at -- we proactively look at capacity and then we act accordingly. So we'll address that once we got the bridge is better.
And what is the relation for any ballpark number?
It's around -- as of today, it's around roughly around $23,000.
Understood. And lastly, on I think you have given the 4 to 5 years guidance, I missed that number. I think it's INR 3,000 crores or something else?
Yes, that's right. What I've said is we have a clear road map in terms of how we are creating a platform and building a customer base year-on-year basis. And the kind of revenue growth we're going to consistently have sustaining our margins. Over the next 5 years, we should be at that level of INR 3,000 crores is our roadmap 5 years from today. Purely on organic basis.
Next question is from the [ Sriram Kapoor ] from Prabhudas Lilladher.
I want to ask you about your defense segment and how you see that growing over the next 2 years? And what within defense, what sector do you specifically cater to? Is it directly supplying to the armed forces or do you supply to the [indiscernible] like HAL? So if you could give some color on that.
Absolutely. So as far as defense is concerned, our percentage is very low, but our focus has been primarily on clean energy segment and nuclear is also part of that and space area. But we are doing substantial work for the different labs as of today. And that's what we are doing right now. But in order to cater to the air forces and navy's of the world, -- the issue is we need to have a defense license, which we probably by this quarter, we'll have the defense license with us.
It's a long and tedious process to get such defense licenses. So we are trying to get that, which we don't have it right now. But once we have that, then in terms of technology and supplying the end systems, obviously, we need to collaborate with some of the MNCs, which we have to see how profitable that is to the company, which we are very clear in terms of maintaining our margins because most of the MNCs will try to pull away as much of share from the whole projects what we get in terms of make and buy. So we're evaluating all these things. So if you have a good lucrative opportunities, we'll look at it, but our -- primarily our focus is more on the other areas that we're looking at right now.
Understood. And my next question is on the key products that you have on the development, which is your valves, lubricants and the semi-cryo engine and the import substitute like the Bellows and heaters. What is the outlook for them? What is the addressable market for these products? And when will they begin to contribute significantly to your top line?
See the products, as you say, the electromechanical actuators, we are delivering this year, all the orders, what they have given us, which we have taken it for the first time, were all import substitute products. We are delivering almost INR 7 crores to INR 8 crores of EMAs this year. That's going to be a substantial achievement in terms of delivering the actual products which they're going to use instead of importing it.
Roller Screws, we have already proved to [indiscernible] about our capabilities, which are importing from Rollvis Sweden. So the formalities are pending in terms of getting the official moat through in terms of Government of India to put a import ban. We're hoping that it happened by end of this quarter. So that's going to be a substantial product, which we have taken 1.5, 2 years to develop it. For the last 30 years or 35 years, they have been importing it from Sweden. So that should stop. So with this what we have made here.
And Bellows is something which we've already started and using it as well, in-house right now. We look at other opportunities where we can also make Bellows for other customers as well, which is that's another big market that we are looking at, but that we have to seriously look at it. Because right now, we are busy, our own in-house consumption for Bellows. Heater is another thing which we are working upon. Ceramics, we let the component what we are using in-house is also something which we are developing right now, so a lot of big products.
And as I said, the ASP is another product which we have got commissioned and got qualified and started dispatching as well. So last year, we did INR 7.5 crores, and this year will do close to about INR 110 crores to INR 120 crores of ASP dispatches happening this year. So our idea is to really increase our product portfolio basket over the next 3, 4 years, to make it a much larger revenue base, which is a high-margin area for us at this point of time.
Okay. Got it. And just last one bookkeeping question on -- If you could provide the revenue split for Q4 FY '22 between Space and Defense because last year in the presentation, they would clubbed together at about INR 15.2 crores. So if you could provide the split between Space and defense?
GR, you want to -- I think defense is a very small percent.
Yes, defense is only 3%, Space, we have not included any defense revenue.
In Q4 FY '22. So that's last year's quarter that INR 15.2 crores purely Space? There's no defense in that?
There is hardly any percentage, difference is less than 3%.
[Operator Instructions] Next question is from the line of Sanjaya Satapathy from Ampersand Capital.
Yes, sir, my first question is you have given this salary hike suddenly in quarter 4. How much of that has gone to top management? Can you please give that clarification?
Most of it has gone towards the highly skilled employees, the shop floor workers who have been working with this for quite some time because these are the workers with a lot of experience and also the core engineering team. So the focus was primarily on that, not on the top management as such.
Understood. And sir, this is something which you could have planned for. So considering that you have given a guidance in February, and you ended up this expense. So just wanted to see whether anything suddenly changed for you? And more importantly, is there some kind of a process related deficiency there in the system that you were incurring many expenses which is coming out of turn?
This is not an out of turn expense. So it has nothing to do with process-related issues. It was a decision taken looking at a very conscious decision taken, looking at the future outlook of the company, which is only going to benefit the company and the shareholders in the long run. Obviously, it has an impact on the P&L, but it is something -- if you're investing in CapEx, you also need to look at -- looking at your own team of people who are working for the company for years.
And we felt that this genuinely, this is unappropriate. And when we look at the road map for the company over the next 5 years, we really felt that this is a great motivation factor moving forward. And that really doesn't really matter in terms of long-term basis. So it was a genuine decision taken, which only benefits the company and the shareholders moving forward.
Sir, my last question is you're getting into quite a few new product areas looks like in financial year '24, including valves and some other fabrication. I assume that they will be far more better in terms of margin. But how difficult will it be for you to scale up in this category?
No, we have enough capacity. It's not that. It's all about the developmental activities, right? So MTAR has got enough capacities across the board. We have enough machines. And as I said, the highly skilled employees of the company. They are the core strength of MTAR. So the capacities are never an issue unless any bottleneck areas or any specific areas where we need to build the capacity separately, which are not part of the existing capacity, then it's a separate issue. Otherwise, it's not a major concern at all.
Next question is from the line of Anika Mittal from Invest Research.
Congratulations -- Sir, my question is on the EBITDA margin. EBITDA margins in financial '21 was 34% of growth and financial year '22 it was 29%. This financial year came down to [ 27% ], so from 34% to 27% in 3 years. What's the reason for this drop? And what will be the sustainable EBITDA margin in next, say 2 or 3 years?
I've already said that, one is sustaining the margins. We have taken various steps and we will sustain these margins moving forward. And the product mix also has changed year-on-year basis. Like when you're looking at the product mix is also very important. So we have considered that even moving forward as well. So we'll be able to maintain such margins moving forward what I've said earlier in my speech as well.
All right. Sir, my next question is on [indiscernible]. [indiscernible] technology has partnered with [indiscernible] with hydrogen fuel use cell manufacturing in India. [indiscernible] or if we have plan to start potato. How do you see this deal as an opportunity going forward, like can we have [indiscernible] as a customer?
No, we can have anybody as a customer. It is not about India or abroad, right? First of all, most of the hydrogen sector electrolyzers are under developmental stage. You have [indiscernible], for example, trying to develop electrolysers...
The next question is from the line of Amar Mourya from AlfAccurate Advisors.
Sir, just one clarification. This low cost inventory, but basically the current inventory of INR 74 crores, is there any inventory of airlift inventory into that?
No, the INR 74 crores, which in transit is by sea only. That's what we have clearly mentioned. There's no airlift factor this.
On airlift inventory -- do we have some airlift inventory left?
We don't have anything -- we have used -- It wouldn't be airlifted, we wouldn't do it, right? So if we have the time then we'd have it move it by sea. We have taken that impact already in the last quarter.
And then, sir, the gross margin recovery will happen in first half or in second half?
No, it will happen as we move on the first half, it will. That's not an issue.
Next question is from the line of Pradyumna Choudhary from JM Financial.
So my question was more regarding the green hydrogen space in India. So we are seeing a lot of development there, a lot of players talking about it. So like what opportunities do you see for your company in this particular stage in terms of the kind of products or components we can be manufacturing? And are we in talks with any major players?
Yes, we are. But see the issue, as I've explained earlier, for Bloom, it took quite a while to actually establish and the approved recently in the last 1 week, what they can actually generate output for hydrogen at very high efficiency. So it's all technology-based. So as I mentioned earlier, depends on all these companies where they can build a proper electrolyzer with a lot of efficiencies to bring on the cost of hydrogen, then it makes sense. So we have to see how it goes. So obviously, MTAR is there and we have the capacities to address such situations. So probably, we have to see over the next 6 to 8 months, how it evolves and how they can develop these electrolysers.
But like what all products and the value chain can we be looking at? One would be a electrolyzers, what else?
No, electrolyzers is the main thing, the MTAR electrolyzers. We have the facilities and the technology to build for them, whether it is [indiscernible], whatever it is. End of the day, it's the MTAR electrolysers, the design part of it which has to work for them. Well is there design, it's not our design.
Next question is from the line of Dhavan Shah from AlfAccurate Advisors.
Sir, my question is again on the gross margin front. So you mentioned that the last quarter, we did some airlifting for the raw mat. So can you share the airlifting cost, which is the extraordinary in nature for the last quarter?
I think it's probably close to about INR 7 crores to INR 8 crores of material that we have to airlift and the cost that we had to airlift, roughly I'm talking. I don't have the exact number to be genuine, but I think to my knowledge, it's about that number.
Around $400,000, $500,000. Yes. That is value what you are saying is inventory value...
Overall, he is asking about the airlift costs.
Okay. Okay. So total is around that INR 7000 crores...
It's about 800,000 something, right?
So total cost is -- that's a yes.
Okay. Okay. And the second one is on the net working capital days. So in the presentation, you mentioned that roughly 158 days is other than WIP, which must be in something is good inventory also. So can you share out of INR 380-odd crore the inventory, which is how much is the finished cost, finished good? And post, you also mentioned that some parts will be supplied for NPCIL in the first half itself. So how do you see WIP days going forward on inventory days because I think these 200 days will fall down to what level for FY '24?
The total INR 380 crores of inventory, INR 144 crores is the WIP and INR 242 crores is a raw material. And out of INR 242 crores, INR 72 crores is the stock in transit which is actually both reflecting in the inventory and payables. So by end of year, we try to make like reduced inventory like what -- like next 2 quarters, with raw material water, we are importing water is imported and water is in transit, which we will use it in the 1 or 2 quarters. And after that release slowly we will trying to reduce as per the requirement at the operations. So that's why -- thereby, we can reduce the inventory days.
Sure. And one thing is the clean energy contribution for this quarter is roughly 73% versus the Q3 contribution was 80-odd percent. So how is the gross margin differentiation? You already mentioned that the export business is doing lower gross margin versus the domestic one. So what is the difference between export and domestic gross margin?
So in the export, there is around 40% gross margins, where in case of domestic around 60% -- 55% to 60% gross margins are there. In some cases, we have various products. Some are having the even 30% also, some are at 55% also. So overall you can say gross margins around 60% in case of domestic turnover.
[Operator Instructions] Next question is from line of Sandeep Tulsiyan from JM Financial.
First question is pertaining to the Bloom Energy guidance. I think the company itself has given guidance of about $1.35 billion for product revenue, which is 50% higher. In that contrast, our guidance for the year where we are ramping up other segments as well, clean energy and the others, used to be a bit on the conservative side. So if you could highlight more on specifically how much you're building in terms of the guidance for clean energy segment and how much for the overall other segments as well for a segment before that it space and [ defense ]?
So Sandeep, basically we have taken 55% or so for clean energy which is very conservative, you're absolutely right. But I would like to stick to this guidance for now, 45% to 50%. The good news is that the other part of the 45% is definitely going to happen. So that absolute number is going to really give a lot of difference in terms of our margins as well. So what the kind of work we have done over the last 1 year or 2 years? So obviously, it's a conservative guidance, but I would like to stick to that. I do understand that Bloom Energy have given a guidance of $1.4 billion compared to $1 billion last year. So let's see how it goes. We'll have more clarity by end of June. Obviously, the new orders will be placed as you know, Sandeep, last year we did that. For the next year as well the last quarter. So we'll see how it goes. June, July, we'll have more clarity on that.
Fair enough, and just one clarification regarding the GKN Aerospace $10 million order, is it already booked and shown in our product segment? Or it is something that came after 31st March?
It came after 31st March. So it is -- they have given a letter of intent to us, so I can't take that into the order book as of now, right? So they've asked us to -- they've given us to go ahead with the raw material sourcing and all that. The order will come in probably in this quarter itself, the official order will come in this quarter itself. And that's something we have done a lot of due diligence before they released their order to us, their LOI to us. So similarly with [indiscernible] as well. So these are all the things, the stepping stones for our future growth. We are trying to diversify the different customers, different segments and things like that where our profitability will be much higher. So that's what we are looking at.
So then a follow-up, what is this order build across product segment? If you can just clarify on that because this is a huge jump that you see on year-on-year basis?
Yes. See, the product -- you're talking about the product portfolio, right?
Product -- yes, product segment...
See, one is we're looking at the electromechanical actuators. The second is the roller screws. The third is the ASPs, which we are going to do more than INR 100 crores this year. We just got qualified in the last quarter of this last financial year, and we dispatched about INR 7.5 crores to INR 8 crores worth of products to them. And then now we are ramping up -- the ramp-up has already started, and we'll be achieving more than INR 100 crores of that revenue.
So I have not taken into consideration, a lot of the other products that we are doing, like roller screws and all that, which will really -- now we're almost there to get qualified there. It will take a little while because of the various issues with how to prove to the idea and all that. But finally, we have achieved that. So all these things will accumulate and will result in revenue increase over the years.
Ladies and gentlemen, due to time constraint, we'll take that as the last question. I now hand the conference over to Mr. Srinivas Reddy for closing comments.
I would like to thank everyone for joining our earnings call for FY '23 Q4 earnings call. And I hope I've explained very clearly about the margins and revenues and the future outlook of the company. And I really appreciate the support from all the shareholders to MTAR. And we are right on track, and we believe in giving a guidance which we would like to adhere to, and we have done that.
And as I also explained very clearly about the slight reduction in the EBITDA margins for Q4. And moving forward, we'll get back to the normal margins what we have -- we have been delivering. And please address this on an annualized basis, whatever we do, we'll definitely achieve the margins, what the guidance we've given moving forward as well. Thank you so much.
Thank you very much. On behalf of MTAR Technologies Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.