Category
🗞
NewsTranscript
00:00 And Amit Mahajan, Director of Technical and R&D,
00:02 Powers, Defense and Space Technologies,
00:04 joins us on the show.
00:05 Amit, good having you.
00:06 Thanks for joining in.
00:08 Good afternoon.
00:09 And while it's been a year which has been--
00:14 well, from the promise that you give,
00:16 maybe a bit flattish, 10-odd percent growth,
00:19 it's quarter four which is intriguing,
00:21 because you've shown, let's say, growth
00:25 to an extent on the top line, not that great but there.
00:30 But the margin squeeze has been very, very sharp.
00:33 Now, what's led to this, Amit?
00:36 Firstly, good afternoon.
00:37 And thank you for--
00:40 your analysis is absolutely correct.
00:43 All the reasons for this, I would
00:45 like to mention it very startlingly,
00:47 is all positive reasons.
00:49 Why?
00:50 One is the defense engineering, if you see,
00:54 has outperformed themselves.
00:55 There are two verticals, optics and optronic systems
00:58 and defense engineering.
00:59 So defense engineering has taken 73% on our revenues,
01:03 wherein optics and optronic systems have gone down to 23%.
01:06 The primary reason for this is one particular product, which
01:10 is a very high-value product, which
01:11 is supposed to go in Q4, will now go in Q1 of this year.
01:16 Now, this shift has hampered the revenue, the total revenue,
01:21 also the revenue percentages, and also profitability,
01:24 because that is--
01:25 optics and optronic systems contribute largely to my problem.
01:28 So this is the reason why I say it's positive,
01:30 because if you ask me defense engineering team,
01:32 they are rejoicing because they have outperformed.
01:34 They've done much better than the last.
01:36 The second reason for slightly lower profitability
01:39 is because there are two.
01:42 One is we have augmented our employees.
01:46 The employee cost would have gone 30% higher.
01:48 And that you can see in the balance sheet.
01:51 The second is the Antitron Systems subsidiary of ours.
01:56 We've invested heavily in the R&D part.
01:58 They're coming out with some wonderful products.
02:01 All of the revenues we'll be able to see
02:03 in the coming year onwards.
02:05 But till last year, all that we've invested just
02:08 is like a loss.
02:09 And those loss gets carried forward to the parent company.
02:14 And hence, in console, you will see a lot of loss effect
02:17 of the subsidies, where the expense is happening on the R&D,
02:20 but the revenues aren't being done.
02:22 So I consider all of this as positive effect.
02:26 You will be able to see the positive effect
02:29 and the positive results in the coming days.
02:33 Amit, OK, and thanks for the clarification.
02:37 Just some questions out there.
02:39 This is Neeraj here, of course, with me, my colleague, Harsh.
02:42 But when I look at what you've done, not just in quarter four,
02:47 so first question, are you saying
02:49 that because this didn't get executed in quarter four,
02:51 but will get executed in quarter one,
02:54 operational metrics or margins could
02:55 revert to much higher numbers than the 20% for the quarter?
02:59 Part two of my question is that when
03:02 I look at the last two or three years,
03:04 your operational margins have dipped from circa 30-odd
03:10 to circa 20-odd.
03:11 Do you envisage margins going back to those levels?
03:15 Or that may not be the case?
03:20 OK, so the dip has only been in the last year.
03:23 If you see the last couple of years,
03:24 we've kind of sustained our margins.
03:28 And I would also want to mention that the sustenance of margin
03:31 also, if you ask me, is on the conservative side.
03:34 Leave aside the dip.
03:35 The dip is not envisaged at all.
03:37 But the events, like I told you, they affect the margins.
03:41 When I'm saying this, in the coming year,
03:43 I will not only sustain the old margins,
03:46 but I might slightly do better.
03:49 You mean 30-odd percent level ballpark?
03:53 Between 28% to 30%.
03:54 Between 28% to 30%.
03:55 OK, and you believe that for the year at large,
03:57 you could be between 28% to 30%?
04:00 Starting from quarter one?
04:02 Do not look at us as quarter company.
04:04 Got it.
04:04 Yeah, of course.
04:05 But I'm just trying to understand.
04:06 Quarter one looks very, very good.
04:09 But I don't know how the remaining three quarters are.
04:11 OK.
04:12 But on an average, you say between 28% to 30%.
04:15 OK.
04:16 All right.
04:18 OK, so Amit, could you just give us
04:20 a perspective on optics versus defense?
04:23 What are the margins like for each of those?
04:25 Defense trades at a margin of 20%, 15%, 20%.
04:33 And optics trades at a margin of 30-plus percent.
04:38 So--
04:39 Understood.
04:39 And with this new vertical of--
04:43 possibly it's part of defense itself, drone,
04:46 what kind of margins and what kind of contribution
04:49 will it have to revenue going forward?
04:52 With the drone and the anti-drone,
04:53 these are two subsidies of the company.
04:55 And they independently operate.
04:58 The drone market, yes, is having a good set of margins
05:02 somewhere between the optics and the electronics vertical.
05:07 The anti-drone system, when it starts kicking up,
05:10 it will come closer to the optics margins
05:13 because they are highly valuated, quite complex products,
05:17 but very good margins.
05:22 OK, OK.
05:22 And what's the visibility like going forward
05:29 in terms of opportunities and order wins
05:31 and the book that you currently have, just in terms of size?
05:36 So if you look at--
05:37 Paras has been blessed with a solid order book.
05:40 And the smiles on my face--
05:43 and I want people to draw positivity out of this--
05:46 is the company has strong order book,
05:49 has a funnel which is in excess of 2,000 crores.
05:54 And when I'm saying strong order book,
05:56 it is in excess of 600 crores already.
05:58 I'm not even counting the orders which are L1.
06:01 And they are in the pipeline.
06:02 They are yet to come.
06:03 I'm not even talking about that.
06:05 So the business front is very, very strong.
06:10 Yes, we are going from component business
06:12 to a product business.
06:14 This leads to a higher value added value per product.
06:18 And if that product, for some reason,
06:20 which is not within the control of us or our customers,
06:23 some third party reasons, this can just--
06:27 they don't know what a quarter means, right?
06:29 So this can go from Q4 to Q1.
06:32 And that can have this effect.
06:34 We need to wait till it settles down.
06:37 But the coming year looks good.
06:39 Understood.
06:40 So let's look at it annually.
06:41 What's the kind of compounded growth you are looking at?
06:45 Because you've got such good visibility
06:47 in terms of the order book.
06:49 What's the growth like in terms of compounded growth
06:52 over the next one to two years that one can expect?
06:55 I am going to be very, very conservative,
06:58 because I have not done what I should have been doing
07:01 for the last two years.
07:02 So I will still maintain 20% to 30% as growth.
07:06 Even if I say 30%, it's still going to be conservative.
07:09 So 20% to 30% is the growth that I want to give a guidance of.
07:14 But [INAUDIBLE]
07:18 Understood.
07:18 And optics versus defense, what's
07:20 the mix like in terms of order book mix?
07:22 If you can quickly--
07:23 Order book is 50-50.
07:24 Order book is 50-50.
07:25 Understood.
07:26 Understood.
07:27 Yes.
07:28 Orders are yet to come in, which we
07:29 expect to come any time in this financial year.
07:32 So the order book shall go slightly inclined
07:35 towards optics as the year progresses.
07:38 OK.
07:38 So, Amit, one final question from my end.
07:42 What else is happening?
07:43 Because you've spoken about anti-drone and drone
07:46 systems for the last 12, 18 months.
07:48 They have now come to fruition.
07:50 What else is in the offing, something
07:52 that you can disclose which could be a big part of what
07:54 Paras will do over the next 18 to 24 months?
07:58 I wouldn't say 18 to 24 months.
08:00 Yes, we've brewed the coffee long enough for it to now--
08:04 it's the time for us to sip.
08:05 But if you take me beyond, say, 36 months,
08:09 if you look at the Quantico Technologies,
08:12 a subsidiary, 100% of our own subsidiary of Paras,
08:14 which we have formed recently, if you look at that,
08:18 then quantum communication is one area
08:20 that Paras will be entering to in the near future.
08:22 That is going to take Paras defense over and beyond that
08:26 we have ever thought ourselves to be.
08:28 So this is going to be the game changer for the company.
08:31 Along with that, the JV that we have with Contro,
08:34 which is the world's number one UIR company,
08:38 this will start making good inroads
08:41 into the Indian business.
08:42 In the coming future, you will be
08:44 able to notice that this particular JV will back
08:48 some real nice good orders.
08:50 And obviously, a large sum of that business
08:53 will be brought back to Paras defense
08:55 because Paras defense will contribute
08:57 to the indigenous content of whatever Contro Paras does.
09:00 So it's a good amount of mix that we are looking at.
09:06 And this will propel the company into a solid UIR company, one.
09:11 And second, it will also propel us
09:14 into quantum communication domain
09:16 where you won't find many people around the globe.
09:19 Well, we wish you all the best for that, all the process,
09:23 per se, and maybe in a couple of years' time,
09:26 we'll be able to maybe talk about numbers, too.
09:28 Who knows?
09:29 You said 36 months.
09:30 Let's hope it's sooner.
09:31 Thanks a lot, Amit, for joining in today
09:33 and giving us the perspective.
09:34 [MUSIC PLAYING]
09:37 (electronic music)