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00:00Joining us today is a very special guest, Mr. B. Srinivas Reddy, MD of MTAR Technologies.
00:06Mr. Reddy, thank you very much for taking the time out to talk to us and tell us about what's
00:11happening at business and the outlook for MTAR going ahead. Mr. Reddy, I want to start with the
00:17news point that was about a few weeks ago where there was a little bit of a stock reaction on
00:23back of the company revising its revenue guidance downward to 30 to 35 percent for F525 versus the
00:3045 to 50 percent range. Can you tell us what led to the downward revision? It's technically not
00:38about downward revision. We were expecting our clean energy segment to move forward.
00:44Still, so that's something which we wanted to wait and see how it goes.
00:49And obviously, we need to evaluate it and see the progress being done with the new
00:55models that we have manufactured and dispatched to the customers. So, we have gone with the guidance
01:03which is more realistic to begin with at the beginning of the year and we will see how it
01:07goes during the course of the year. So, we want to be a little bit more cautious in what
01:11kind of guidance we're giving for the current year, keeping what exactly happened in the last
01:15year when shipments were deferred. Right. So, while I completely take your point that there
01:20has been a delay in closures in the clean energy space, when is it going to be or when is it fair
01:28internally? What is the expectation that you have? When do you expect this backlog to start
01:32catching up and the deal pipeline to start witnessing those closures? I mean, it will
01:38happen during the course of the year, second half of the year mainly. That's where we can really
01:42catch up and take things forward. And it's not only about clean energy, we have done a lot of
01:49work in other verticals as well. If you look at the aerospace division, if you look at – we're
01:55getting into new verticals as well. We have done a lot of first articles, a lot of good work has
01:59been done in the last year to actually fuel the growth for the future. So, that's not reflected
02:05in the numbers, but technically, we have done a lot of work in our R&D and developmental programs
02:10for the future of this company. In fact, I think that is a very good point,
02:14sir, because that will be the next trigger, I'm assuming, for MTAR technology defence,
02:19aerospace and the nuclear space that you're working with. It is one of the most important
02:24talking points when you talk about India and the defence story. What is the contribution
02:30of aerospace or what is the potential that you anticipate aerospace defence to contribute to
02:37your top line, not just in FI25, but say two years out, FI26?
02:42We see a substantial progress in the aerospace division in a big way. In fact, we are setting
02:48up an exclusive aerospace plant in Hyderabad, which should be more or less commissioned by
02:56September, October of this year. And we have done a lot of first articles for many MNCs,
03:01we're working on them as such right now, and we're slowly moving into volume production.
03:05So the growth in these areas, which we have done a lot of work over the last couple of years in
03:11terms of first articles, manufacturing, proving our products, certifications, etc., we have done
03:18all that good work, which doesn't really reflect in the numbers of the balance sheet as such, but
03:24this has already been done, we continue to do that. So we see a substantial growth happening
03:30in this particular sector that we're focusing on right now.
03:33And when do you expect that to reflect in the numbers, all the good work that you've done a
03:37few quarters out? Just give me a sense of what expectations are.
03:41Yeah, if you look at this last year in aerospace, we have done first articles reflecting about
03:45hardly 7-8 crores of business, but this year, we are moving up to close to about 60-70 crores of
03:51business. But the year after that would be even doubling that kind of number. So that's the kind
03:57of growth we are looking at. So all this is going to reflect year-on-year basis in a much bigger way
04:03is where we are today in terms of developing these verticals, which are very good for the
04:09company's growth in the long-term basis. You're right. In fact, even a 6 crores to
04:1360 crores is a 10x right there. So I guess the street and investors will be very pleased to hear
04:19that. Give me a sense of what margins in this business are. Are they better than say the other
04:25verticals? Is there any particular reason you believe that this could be the key driver for
04:30MTAR in the next 3-5 years? Yeah, see basically, we're going to have better operating leverage
04:37in terms of the kind of volumes we are going to do in this manufacturing and SMDs that we're going
04:42to do in aerospace. So margins are going to be reasonably good. We're looking at about 24%
04:49in aerospace business as such, but it will take time for us to catch up in terms of ramping up
04:55in terms of volumes, which we'll do in the current year and probably in the next year.
04:59So on the long-term basis, yes, it's going to be a good margin business for us.
05:03And we are creating such facilities in terms of ensuring that we ramp up very quickly and
05:10orders is not an issue for MTAR. Obviously, we are putting everything in place and a couple of
05:16years from today, we'll be very strong in this division as such. Across the board, sir, what does
05:21your order book stand at and what is the sort of guidance you have for FY25 in terms of order book
05:28growth? See, we closed at about 900 crores plus order book what we have as of March 31st, FY24.
05:37And when it comes to FY25, we said we are expecting a lot of orders coming in on the
05:41nuclear side, space and aerospace side, which would close around close to about 1400 to 1500
05:48crores of order book. It can be even more, but we have to see how it goes. So that's where we are.
05:56Right. I also want to get a sense from you on the other verticals and we can talk about Bloom
06:01as well a little bit more. But with the significant presence with business, of course, in terms of the
06:07U.S., is business slow there given the fact that U.S. elections are around the corner as well?
06:13Are you seeing a slowdown in decision making and hence a catch up in order pick up maybe two,
06:18three quarters out post U.S. elections? Yeah, that's what I think is a known fact that the
06:25elections are in November. A lot of big corporates are waiting and watching to see what the new
06:30policies would be. But overall, it's just a stall in terms of decision making right now.
06:37A matter of months, once that is done, the elections are done, probably a lot of corporates
06:42would take a very positive decision, especially in terms of clean energy as such. So we have to
06:48wait and watch and see how it goes. But overall, if you look at it, whatever the results are,
06:54it's going to be on the positive side of the story is what we strongly believe.
06:58How much of your order book, sir, is coming in from clean energy at this point,
07:02and where does you see that in FY25, at the end of FY25?
07:07Actually, I think it's close to about 45 to 50 percent, but we are expecting huge orders
07:12still coming from nuclear this year. If you remember, we said that CAIGA 5 and 6,
07:18which is going to be given to much larger corporates to handle the entire nuclear
07:24project, where entire is going to be a partner in terms of the supplies to the core area of the
07:30nuclear reactors. So those tenders are going to be finalized in this month itself in terms of who's
07:36the L1 bidder for that. And subsequently, the orders would go in to MTR property in the Q3
07:42of this year. So that's what we're expecting, close to about 500 to 600 crores of orders coming in.
07:49That's exciting. And just coming back again to the defense and the nuclear space,
07:55because I know, like we've discussed, that's a big driver. Is a lot of the demand localized,
08:02or is there an international audience as well that you are seeing increased conversations and
08:07conversions to? Yeah, basically, if you look at our aerospace, part of it can also be defense,
08:12right? We're also into exports of those things for various assemblies that we're doing.
08:17We're also going to enter into some of the Make in India joint venture with companies
08:23where we have the Make in India concept, where the Indian country has to be more than 60 percent
08:28or not. So we're trying to look at those opportunities as well, since we have the
08:31defense license. So if you look at it from now over the next five years, this is going to be
08:37a continuous, progressive way of doing things, mostly in terms of collaborations to get a jump
08:43start on the technologies that they have and then take it forward, especially in the area of defense.
08:48Right. In terms of expansion, any expansion plans that you'd like to share with our viewers
08:56that you've planned for F525? We are actually looking at, as I said, aerospace. We're really
09:01expanding a lot in those lines. We already have enough capacities for clean energy, what we are
09:06looking on. We're also looking at oil field sector moving forward, which is really picking up.
09:12So we're looking at that as well. So probably we'll do a lot of first articles for oil field
09:16this year and probably it will really grow and ramp up in a big way from next financial year
09:21onwards. So we're looking at these areas. And we're also looking at various other products
09:27that we are trying to develop to get them certified by Government of India for indigenization program
09:34in India. So we're doing a lot of those things in our R&D division purely based on a clear roadmap
09:40what we have for the next five years and a lot of such work we are doing. I would say seeing is
09:46believing in MTAR and a lot of people have visited MTAR. They've really seen the kind of work we have
09:51done. And sometimes the numbers year on year basis for a company like MTAR can be a, we might have
09:59stalled a little bit last year, but we are very confident that we'll grow steadily over the next
10:04five years without any issues.