Aequs (NSE:AEQUS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty seven Earnings Call for Aequs Limited. As a reminder, all participants' lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. I now hand over the conference to Mr. Manav Paul from Thank you, and over to you, sir. Thank you, Barry. Good evening to all the participants on the call, and thank you for joining in. We welcome you to the Q1 FY 'twenty seven earnings call of Aequs Limited. Before we proceed, let me remind you that the discussion may contain certain forward looking statements that may involve known or unknown uncertainties and other factors.

0:53 These statements should be viewed together with our business risks, which may lead to actual results and performance, deferring materially from what is expressed or implied. To take us through the results and answer your questions today, we have the management of Aequs Limited represented by Mr. Armen Maligiri, Executive Chairman and CEO Mr. Rajiv Kaul, Co Founder and Managing Director Mr. Harish Bang, Vice President, Finance. We will start the call with a brief overview of the previous quarter and then conduct the Q and A session. With that said, I'll now hand the call over to Arvind sir. Thank you, Mano. Good evening, everyone, and thank you for joining us. Q1 FY 'twenty seven marks a strong start to the year we described in our Investor Day, a year about translating our expanded capacity into the financial returns.

1:44 This quarter demonstrated exactly the beginning of that translation. Consolidated revenue grew 55% year on year to 3,955 million up 8% sequentially on what was already a strongest quarter in our history. Growth was broad based. Aerospace grew 40% year on year and our consumer segment nearly tripled, reflecting the consumer electronics ramp at Hoopali. Consumer contributed 19% of revenue this quarter, up from 10% a year ago. I want to address the profitability picture directly because the headline and the substance point in the different directions this quarter. Reported EBITDA at $2,500,000 is lower than the Q4, but that moment is mainly due to other income foreign exchange, which was unusually high in the Q4. On the operational basis, excluding the other income, EBITDA improved from $42,000,000 in Q4 to 148,000,000 a more than threefour sequential improvement, driven by narrowing consumer loss.

2:41 That operational trajectory, not the currency line, is the measure of execution, and it's moving exactly as we committed. Our Consumer segment EBITDA loss narrowed by $112,000,000 sequentially, the path to consumer EBITDA breakeven by Q4 'twenty seven now has its first quarterly proof point. Let me share the highlights from Farm Bureau. Which just came back from there last week, from which our strongest airshow yet. We signed a long term agreement with two new Aerostructure Tier one customers, expanding our global base. And we signed our first contract to fully integrated Airbus A320 wheels with Safran Landing Systems. Aequs will deliver completely assembled wheels built from India sourced aerospace qualified aluminum, forging, machining, surface treatment and assembly all within the Belgae Aerospace ecosystem.

3:31 That is 100% making India for a flight critical product. Notably, these wins come after a quarter and order book of over $1,000,000,000 You should see these as wins reflect new wins reflect in the next quarter order book. Given the scale and the delivery of requirements of these new wins, we're evaluating acceleration of aerospace CapEx plan to ensure that required capacity is available in line with our customer time lines. Our FY 'twenty seven priorities are unchanged from what we set out in May. First, grow aerospace revenue profitably 25% to 30% with the segment EBITDA margins above 20%. Q1 delivered 40% growth at a 23% segment margin. Second, drive consumer utilization to unlock the cooperating leverage embedded in our existing asset base.

4:20 Third, move our consumer EBITDA breakeven by Q4 FY 'twenty seven, which will be a major inflection point in our consolidated profitability. At a consolidated level, we continue to expect approximately 45% to 50% top line revenue growth for the full year with the doubling of our operational EBITDA, a target that is weighted against to the second half of consumer utilization base through the year. Since our listing, we have seen exceptional broadening of our shareholder base and a rapid deepening of our investor engagement with a long term manufacturing story. In a remarkable short period, we have achieved a breadth of shareholder participation in the manufacturing companies typically takes several years to build, an acknowledgment of our strength and our differentiated platform and the magnitude of the opportunity before us.

5:09 On the CFO transition, as communicated in May, Dinesh has stepped down at the end of June, and our search for CFO, a full time CFO is progressing well. In the interim, Harish Bank is leading our finance function, and he will take you through the financials shortly. With that, I'll hand over to Raju Gaul, Co Founder and Managing Director, to take you through the operating performance. Thank you, Arvind, and good evening, everyone. I'll begin with our Aerospace performance. Aerospace revenue increased by 40% year on year and 6% sequentially to 3,222 million dollars The growth was supported by higher customer base and the proposition of additional parts into production. During the quarter, we added 86 new parts, further expanding one of India's most extensive aerospace manufacturing portfolio to 5,740 parts. The defining achievement of the quarter was our aerospace order book crossing USD 1,000,000,000 mark, following a 13% sequential increase from US$889,000,000.

6:07 This milestone is a powerful validation of the trust placed in AEQUS by leading global OEMs. The scale and depth of our program portfolio and the enduring strength of our aerospace business. Our aerospace focus remains on scaling production in line with customer bill rates, moving awarded parts into serial production and increasing value addition across our integrated manufacturing ecosystem. We are selectively expanding into higher value adjacencies, entering aero engine and landing gear system components. Our integrated ecosystem remains a key differentiator, bringing multiple processes together at Bilgami to reduce complexity, strengthen control of quality and delivery, support and contestly at a breadth of parts that is difficult to replicate for others.

6:53 Beyond the continued growth of our existing aerospace operation, the proposed Hosur ecosystem represents the next phase of our expansion. It will extend Aequs' integrated manufacturing model into new areas of opportunity and strengthen our ability to participate in larger, more complex programs over time. And we expect revenues kick off from FY 2029. Moving to consumer, revenues increased by 190% year on year to $734,000,000 as production volumes increased across the portfolio. The consumer segment achieved 16 quarter on quarter revenue growth, while operating at the similar capacity utilization level as Q4. This reflects enhanced throughput, better product mix and improved execution, enabling the business to drive higher revenue from the existing manufacturing footprint.

7:40 We expect utilization to improve through the course of the year as this ramp progresses and remain confident in the trajectory towards our profitability goals. Our priorities in consumer remain clear. In the near term, focus is on steadily scaling the existing product portfolio, improving utilization across our operations. As the business matures, we intend to deepen our customer relationships by broadening the component portfolio and progressing towards integrated kit supply. From FY two thousand and thirty, thirty one onwards, our ambition is to engage earlier in customer new product development cycles and evolve from a component supplier into preferred manufacturing and co development partner. We have a clearly defined road map ahead and remain focused on executing each phase with discipline.

8:27 To conclude, Q1 saw continued aerospace growth, a larger order book, further expansion of the parts portfolio and measurable sequential improvement in consumer performance. The operational priorities for the remainder of FY twenty twenty seven remain disciplined program execution, consumer scale up, utilization improvement and careful deployment of capital against customer backed opportunities. I will now hand over to Harish Ba, Vice President, Finance, to take you through the financial performance in greater detail. Thank you, Rajiv, and good morning, everyone. I will take you through the key financial performance highlights for Q1 FY 'twenty seven. Revenue from operations increased by 55% year on year and 8% sequentially to INR 3,955 million for Q1 FY 'twenty seven, supported by continued aerospace growth and scale up of consumer.

9:21 Reported EBITDA, which includes other income, stood at INR $215,000,000 with a margin of 5% for the quarter. EBITDA for Q1 FY 'twenty six was INR $399,000,000. The year on year comparison reflects the recognition of consumer electronics operating costs in the current quarter, whereas these costs were capitalized in Q1 FY 'twenty six. EBITDA for Q4 FY 'twenty six was INR $321,000,000. The sequential comparison was affected by the movement in other income, which reduced from INR $279,000,000 in Q4 FY 'twenty six to INR 67,000,000 in Q1 FY 'twenty seven. Excluding other income, operational EBITDA increased from INR 42,000,000 in Q4 FY 'twenty six to INR 148,000,000 in Q1 FY 'twenty seven, an improvement of approximately 3.5x with the margin increasing from 1% to 4%.

10:16 Revenue, including proportionate share from joint ventures, increased by 53% year on year and 8% sequentially to INR 4,301 million. EBITDA stood at INR $3.00 7,000,000 with a margin of 7%. In aerospace, revenue increased by 40% year on year and 6% sequentially to INR 3,222 million. Segment EBITDA stood at INR $731,000,000, representing growth of 35% year on year, although it moderated sequentially from Q4 FY 'twenty six due to significant other income in Q4 FY 'twenty six, which mainly included foreign exchange gain. The aerospace business continues to grow strongly supported by higher customer bill rates, the progression of additional parts into production USD 1,004 million order book.

11:08 Consumer revenue increased by 190% year on year and 16% sequentially to INR $734,000,000. The segment's EBITDA stood at a loss of INR $361,000,000 compared with a loss of INR 74,000,000 in Q1 FY 'twenty six and narrowed from a loss of INR $473,000,000 in Q4 FY 'twenty six. The year on year comparison reflects the commencement of consumer electronics commercial operations and the resulting recognition of operating costs in Q1 FY 'twenty seven, whereas these costs were capitalized in Q1 FY 'twenty six. Sequentially, the consumer EBITDA loss narrowed by INR 110,000,000 or approximately 24%, supported by increasing production volumes and improving operating performance.

11:55 The continued progress in utilization and cost absorption will support the next phase of improvement as we advance towards consumer EBITDA breakeven by Q4 FY 'twenty seven. Depreciation and amortization stood at INR $453,000,000 compared with INR $246,000,000 in Q1 FY 'twenty six, reflecting the expanded consumer electronics asset base. Sequentially, depreciation remained broadly stable compared with INR $455,000,000 in Q4 FY 'twenty six. Finance cost reduced from INR $358,000,000 in Q4 FY 'twenty six to INR 189,000,000 in Q1 FY 'twenty seven following debt reduction undertaken during the previous quarter, including loan repayments of approximately INR 2,527 million and a net reduction of INR $789,000,000 in a short term and working capital borrowings.

12:47 PAT stood at a loss of INR $532,000,000 for Q1 FY twenty twenty seven. The reported Q4 FY twenty twenty six PAT loss was with INR $541,000,000, included an exceptional gain of INR 90,000,000, which included a corporate provision reversal. Excluding this gain, the adjusted Q4 PAT loss was INR $631,000,000. On a comparable basis, the PAT loss, therefore, improved sequentially for from INR $631,000,000 to INR $532,000,000. Turning to the balance sheet. Total equity stood at INR 14,332 million. Cash and cash equivalents were INR 2,340 million, the further INR $537,000,000 in other bank balances for Q1 FY 'twenty seven.

13:33 Cash flow from operations was negative INR $414,000,000, primarily reflecting the additional working capital required to support the higher operating cycle. Capital expenditure during the quarter was INR $830,000,000 and closing cash stood at INR 2,340 million. We saw an improvement in the working capital efficiency with net working capital days reducing from one hundred twenty seven days at the end of FY 'twenty six to one hundred twenty five days in Q1 FY 'twenty seven, which is calculated quarterly annualized basis. This reflects better conversion of the higher operating scale into cash, supported by improved receivables and payables management. Even as inventory was maintained to support the ongoing production ramp up. Our financial priorities remain focused on advancing consumer towards EBITDA breakeven, sustaining aerospace momentum, improving utilization and cost absorption, managing working capital and maintaining discipline in the execution of our investment program.

14:32 To conclude, we have had a strong revenue growth across the board, while reported EBITDA was affected by low other income, the underlying operating trajectory improved meaningfully. Operational EBITDA increased approximately 3.5 times sequentially and the consumer EBITDA loss narrowed by 24%. These developments provide a stronger foundation for continued improvement through the remainder of FY 2027. With that, over to the moderator to open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. You may press star and two. Participants are requested to use handsets while asking a question.

15:20 Ladies and gentlemen, in order to ensure that the management is able to address questions from the participants in this conference, please restrict your question to two per participants. Should you have a follow-up question, please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue is up. The first question is from the line of Gaurav from Aevendespar. Please proceed. Thank you for the opportunity and congrats on the good set of numbers on the aerospace side. The first question pertains to if you can share the details on this contract that they have won for this A320 deals with power sending system.

16:10 So the question is that how big is this order, number one. Number two, is it fair to assume that the profitability in this work would be higher than the Aerospace segment average, which you have today, which is about 20%, 23% kind of EBITDA margin that you do in this segment? I mean, if you really look at it, Varou, it's I mean, first time in India, we have a complete make in India. We use all the way from aluminum source to the finished parts. That's the first achievement and one of the longest agreement we have signed in our history of Aequs, I would say, fifteen year agreement we have signed with the right adjustments and everything. So that basically gives us a very good foothold. The beauty about this is that leveraging every capability we have in the ecosystem. I mean, obviously, if you look at across the margin, it's much larger margin to us.

17:08 But these businesses will deliver the right level of returns, put it that way. If ROCs are used, level and delivering that piece. So I think I cannot comment on the specific margins, but it's a great asset and it's a globally very attractive offer for the customer. And the first time ever customer has done this outside of their own facilities. This used to happen in house. That's another feller in the cap for Aequs to be able to take something out, I mean, the capacity, which they instead of investing, they're working with us to make sure that leverage our ecosystem. That's what I would say at this point in time. And I'm presuming that it's a single source order for you for this.

17:56 Second question on the consumer electronics segment. And if you can just help me understand the utilization in more detail. That last quarter, the utilization was about 23% as per the presentation. And this quarter, despite seeing a sequential growth in revenue, we have seen a utilization coming down to 22%. So have we increased the capacity? And as a result, we are seeing this utilization on a lower side? Second, on in terms of I'm not sure if you want to share, but what is the ease that you are really getting in this segment as we speak? And are we on track of reaching the breakeven EBITDA level by Q4?

18:47 See, the consumer segment achieved 16% quarter on quarter revenue growth, first is that, okay? That is a much better this one to see our utilization of the performance. While operating in a similar capacity utilization rate Q4, so that demonstrates how we are utilizing our capacity for our business. This reflects basically through the announced throughput, better product mix and improved execution. So are one of the major business drivers to drive the higher revenue from the existing manufacturing footprint. Okay? And it has remained capacity while demonstrated at a similar level and our revenues are right mix to see how we are getting there. Utilization. It's ultimately a combination of utilization and the yield to get a higher revenue item and we can derive from that.

19:34 And we expect those utilization to improve over the course of the year as the ramp progress. No, my question was that the utilization of debt Q o Q from Q4 to Q1 and net revenues are up. So have we taken any capacity expansion as a result, numerically we are seeing No, we are not done any capacity expansion. It is not because of the capacity expansion. Better utilization of the assets, put it that way. And obviously, that also includes yield. Okay. Okay. I think we are committed on the Q4 breakeven EBITDA for consumer. That's we are on the path. We feel confident as of today. All right. All right. Okay. I have more questions. I'll get back in queue. Bye bye.

20:23 Thank you. Thank you. The next question is from the line of from Ashika. Please proceed. Good evening, sir. I have two questions. One is, why is the depreciation so high in the first quarter? Second, if I consider that INR 400 crores is effectively is your revenue, then you would achieve full year should be close to something like INR 1,600 crores, while the guidance is somewhere close to INR 1,800 crores. Third point, I want to understand that other incomes which you're saying is basically revaluation of results, maybe the foreign exchange part, which is actually lower, which is why your overall revenue has come down.

21:11 But then, what is the guidance on this other income going forward? If I have to look at your revenues other than the other income, then what exactly how should we look at this? And fourth is, I'm... While the numbers have sequentially improved, there is still the ramp up of consumer electronics completely the way we are looking at from 23% to coming to 46% doesn't seem or could be achieved by quarter four FY 'twenty seven? Just give me an just want to understand that. Rajiv, Harish here. I will take a couple of questions from here. So first one was depreciation.

21:58 So if you see our Q4 depreciation was also close to same number, I mean, about INR $453,000,000 or INR $455,000,000. Our Q1 depreciation is also in the same range. So Q4 is what we got all the Q3, end of the Q3 entire capitalization was stopped and commercial operations for consumer electronics was started. And Q4 was a full quarter of getting that depreciation with a low utilization. So it will remain similar level, I mean, as it was in Q4. That So was the first that for the next all 0.75, you'll see such high depreciation numbers? I mean, there will be similar depreciation, which is there. Of course, unless we add more CapEx, the depreciation will increase. So that's something you have given.

22:47 Your second question was on the full year projections. So yes, Q1, we did about approximately INR 400 crores, right? As we said that our utilization in consumer is improving. And Q4, we will see utilization of 40% to 50%. That means our revenues in Q4 would be higher, which would take us to a full year growth of 45% to 50% at overall level. On the other income, just to clarify, there are no realization reserves as such. So it's typically driven by two things. One is the interest income and all those things. And second is foreign exchange fluctuation. So typically, foreign exchange fluctuation is what we don't project for future period. Our interest income will remain in the similar line as what it was in Q1.

23:36 Going back to your fourth question, maybe I will have Arvind or Raju talk about it ramp up from 20% to 40%. We'll go from We have currently the way what we have projected is Q4 to be EBITDA positive is based on this assumption. At this point, we are fairly confident to get to 40% to 50 of capacity utilization. Okay. I'll come back in the queue. I have more questions, but I'll come back in the queue. Thank you. The next question is from the line of from Asset Manager. Please proceed. Hi. This is only a question. My first question was around, like, you have announced a significant investment over the last few quarters.

24:24 Could you also help me understand that what are the expected effect on over the new investments? And how do you look over the ROIC profiles once these investments stabilize? Sorry, the first question was expected CapEx, Mundira. Sorry, I missed that or it was what was it? Can you repeat? Yes, new CapEx What is the expected? It was around what is the expected returns over this new investment, and how do you see the ROIC profile over this investment once they stabilize?

25:12 Sure. So I think as we mentioned in the last quarter as well, our consumer asset turns overall would be about 1.5x and that remains stable. I mean, ROIC profile also on a steady state basis would be in the similar range 18% to 20% as aerospace. Okay. And my second question was the what business involving global trade policies and tariff changes. Have customer accelerated the localization or diversified their sourcing towards India? And have they, like, already started in... Have you already started incremental business from this shift? Particular from this shift. This shift, I mean, you're talking tariff?

26:02 Yes, sir. Tariff changes and policy. I mean, we are not seeing any specific current to this tariff, if changes are happening. Our customers have taken strategic view of where they want to be as a supply chain, global supply chain to be. And based on that, they're committing the supplier allocations and everything, and we are working with them on those activities. So yes, I mean, we feel their strategy has not changed as far as we know. A real estate, nothing has changed on consumer side. We are very clear that whatever is there, nothing has changed. Very stable as far as we are concerned. Okay. Just one last question. The consumer manufacturing, which is like strategic goals area right now, are you seeing a structural improvement in the customer demand? Or is it the current recovery is largely driven by inventory restocking for this current quarter and for this FY '27, sir?

27:05 It's a there is no this is all driven by the customer demand, basically. Whatever we are producing, we are shipping. There is no issue of the demand. Okay. Sir. Got it. Thank you so much. I'll come back in the queue for the next question. Thank you. Participants who wish to ask a question, please press star and one at this time. The next question is from the line of Aqash from Amirapali Capital. Please proceed. Yeah. Hi, sir. Thank you for the.

27:51 Sir, actually, I have a couple of questions. Sir, sir, currently company on the on the consumer consumer side, company is doing approximately 23% of your. So as of now, I wanted to know how much capacity utilization is in the current quarter and the company is targeting for the upcoming for 2029. How much utilization rate will be there and which segment like the the other couple of things that we will be in the two seventy electronic payment and to to clear and size. So which which which quarter has a major product of the company? Second question, I I have to know. And there's no company has budget for the 80 to 22% kind of for the for the coming next two two to three years. So also also wanted to know how much the company estimated for the top margin kind of thing. Is is any estimated estimation for the coming two to three years as as as a earlier call call, the management has guided to in next two to three years, we are going to start positive. So how much company's side margin will be there?

29:06 See, Prakis, let me add on the capacity utilization. So current quarter we did around 22% and we still hold by Q4 to touch 40% to 50%. I cannot give you any more view than next quarter and all those things at this point in for consumer. Yes. On the EBITDA margin, yes, we are guiding towards 18% to 22 and that's what we have laid down in our Investor Day as well. On PAT, again, we have few milestones what we have laid in front of us. One is, of course, PAT breakeven by H1 of FY twenty twenty eight, consumer bad breakeven by FY 2020 and we'll have a decent ROC, which will decent fact in FY 2021, which will translate to about 20% steady state ROC in FY 2021.

29:56 Okay. So on the TAD margin side, let's suppose if I'm forecasting the for FY '30, so what percentage I can review? So right now, I think we stick to the milestone what we have given. We are not disclosing anything beyond this. Okay. Okay, sir. Thank you, sir. I will join the queue back. Thank you. The next question is from the line of Deep Shah from New Venom Capital. Please proceed. Thank you for the opportunity. My question is on the Hosur plant. If you could just give us some details, is it gonna be...

30:43 Firstly, how much is the investment going to be and how... When do we see first phase one getting operational? And also on like the Belgae plant, which is end to end vertically integrated, when do we see that happen in the Hosul facility? That's my only question. Yes. The Hussor facility is integrated focus on engine and landing gear components. And it is going to be end to end, just like what we are doing in Baghdadi for the aerostructure focus predominantly. The full will start first facility will come second half between September to March timeframe of next year of twenty seven to '28.

31:33 And that's why Raji was reflecting that '29 will then we'll start seeing some revenue coming out of that facility. And that's going to be our first machining facility, then we'll have a forging and various other vertical integration to happen in that location. So our all investment predominantly on vertical integration side will be done by 2030 timeframe. Machining will continue to happen over a period of time. So that's the road map we are giving. We committed about INR 1,900 crores in total investment in that, including our JV partners investment in the JVs, what we have. So our JVs will get extended from what we have in Tel Ghazi focused on those capabilities into that zone.

32:24 So could you please repeat the investment including JVs and how much? From Kodak Institutional Equities. Please proceed. Yeah. Hi, sir. I just wanted to first understand the loss rate to win consumer between toys and ATP, and I just wanted to check-in terms of the potential ramp up of the new customer in toys during the second half of the year. So Deepak, Harish here. We look at the consumer as a overall level. We do not provide split between the two sub verticals as we mentioned in the previous call as well.

33:20 And maybe the maximum On of metal do the toy side, metal is scaling up well. Continue to see that as a strategic customer to us, just to give you a clarity on that side of it. Okay? Sure. And maybe just overall CapEx for the next two years. Specifically, this year, how much incrementally do we invest in consumer and aero and maybe just this year and next year also, if you could sort of highlight that? Yes. So this year, what we laid down, right, our total CapEx overall, including aero and consumer would be about INR $6.60 crores for FY 'twenty seven, and we stick to this number. In terms of future CapEx, again, we have laid down a plan of from this year to FY '31 for the next five years, investing about $350,000,000 to $400,000,000 of overall CapEx. Yes.

34:13 But any split that you want to share for this year, between the INR $6.60 crores? So INR $6.60 crores, I mean, we had given a split of about INR 500 crores for consumer and INR 160 crores for aerospace. We may see some acceleration in aerospace CapEx and maybe that may be compensated by some reduction of saving in consumer. So optimization in consumer. So overall, it will remain same. Sure. And we are already at 70% utilization. What is the maximum we can do in aero before we would require? Or it's just machining out of this land and anyway we have all the facilities? Yes. I mean, look, the we are continuously adding already since last December, our continuous machine addition are happening. Literally, we're adding a machine peak right now at this stage.

35:06 So CapEx is happening in aerospace, continuous basis because you see that order book, right? Order book growth means it only comes because we can get up to 75% comfortably. And as we are also increasing the order book, we'll learn how to put a CapEx in there to support it. Sure, sir. And maybe I just missed this in your opening remarks, but the... What is the contract value potential size of this Wheels contract that we've received? If you could sort of... We're not disclosing that contract It should show up in order book next quarter when we because none of the Farm Bureau, whatever we have done is not reflecting right now in our order book. It is reflecting the... Sure. So we should see more upside in the order book and the sequential acceleration should continue. Okay. Sure, sir. Those are my questions.

35:55 I'll get back on the queue. Thank you. Thank you. The next question is from the line of Abhishek from Nevakar Ventures Private Limited. Please proceed. Hi, sir. Thank you for the opportunity. Sir, I just wanted to understand because this industry is precision manufacturing and like you are dealing with a lot of processes in your work. How how have you been thinking about the, you know, talent management for the next five to ten years? Like, let's let's say, if you see a lot of growth in the sector and, like, you need a lot of talent. So how have you been thinking about building the talent?

36:47 Well, I mean, look, if you're never... If you visited Baghdadi, you can... You know, you you should come down and see Baghdadi. I mean, we are in tier three. We have chosen to be in tier three. We have been able to build this vertically integrated ecosystem from scratch, you know, using the talent mostly regional. Okay? And it's pretty much fresh out of school because when we started, the country did not have aerospace capability, so we had to build from scratch. So we have inherent ability to train the people, deploy the people. That has never been a constraint to us. And we welcome the overall growth in the industry, and we feel very strong about our process of inducting people and developing the people and retaining the people.

37:32 And also at the same time, our joint ventures have helped us build capability and further expand our ability to retain people. So this is the fundamental DNA of the organization to develop people from scratch, from fresh out of school. That's what we have done, and we continue to do that. Thank you, sir. Thank you. Thank you. The next question is from the line of Gaurav from Amindus Park. Please proceed. Thank you for the opportunity again. Sir, just one question on the consumer electronics segment that the CapEx that you have committed of about INR 400 crores, 500 crores in this segment. Is it subjected to your utilization ramp up?

38:18 Meaning, in case the utilization ramp up is slower for the three year, you would not commit this CapEx? And second, this CapEx is for the capacity augmentation or you are doing more backward and the forward integration for the similar process? This is for the capacity augmentation, first of all, and also new programs as we are getting into new programs with the customer. All right. So irrespective of the utilization ramp up, will commit this CapEx? Utilization is not going to happen, then we'll not have to spend some portion of the CapEx will not happen. Some portion will not happen. Right. My more question is please.

39:04 Okay. Got it. And one more question, if I may ask that. In the Aerospace segment, let's say, because you're targeting more landing gear and engine, are there any capabilities that you would like to build over next few years so that you can get more and more engine component orders? I mean, the whole whole Hossary is going to be new capability, a whole lot of new capabilities. So we have a road map of that. Obviously, it's internal. So our goal is to be the largest manufacturer of aero engine components. So that's the goal what we have established, and we are working on that path vertically integrated products. The next question is from the line of from.

39:59 Please proceed. Hi. Good evening, sir. Thanks for the opportunity. I just have one question. To appreciate the the numbers that are reported in the consumer segment, while we are not splitting it out into its two parts, could we at least get a directional sense as to the consumer electronics has grown and and the toys segment has regrown or vice versa? So just wanted to understand if there's a significant volume ramp up that we have seen in consumer electronics and the guidance that we have for four q to breakeven on EBITDA is basis consumer electronics. So if you could just clarify for the quarter and the directional sense for F 'twenty seven, that would be very helpful. I mean, if you really look at it, the consumer overall was utilization was low, you know, even before consumer electronics was started. So overall, our utilization has to improve both of them together in a tandem to get to where we need to get to, you know. So we can't just have one not used and other one used is not going to get us there.

41:09 It's a good part is we have key customer on each of these verticals, each of these sub verticals and both are committed over the growth is execution. That's what we are working through right now. So the utilization and is basically cuts across both the businesses. And that's where we see right now. Right, sir. But just on a quarter on quarter basis, I mean, we have some growth in in the consumer piece. So that's where I was kind of trying to pry upon to understand whether this will be led from the electronic side or the toy side just to appreciate that number a bit better. That was my limited question. It's a it's a it's a tandem growth.

41:54 That's what I'm I'm trying to tell you because both are underutilized capacities. Right? So Right. I mean, that's why we are... That's the reason I'm saying. It's about... Utilization was about same, you know, when we when we did in the past. Oh, got it. We are also communicating that our our... Yeah. Even our price utilization was low. We communicated that when when when the consumer electronics was not there yet. Right? So it's that we're increasing both the utilizations. Understood. We're not breaking up the... Both of them, bottom line, because that's... Because that just gets into, you know, situation of where... Because certain assets are also... Could be used here for the common way. Got it. And did I also hear this right? We are entrenching into a few more programs on the consumer electronics side.

42:50 So beyond the scope that was already assigned to us, is that a fair reading or the understanding that I got from Rajiv earlier? Yes. Okay. Perfect. Thanks. Thank you, sir. That helps, and have a good day. Thank you. Thank you. The next question is from the line of Jody from Ashika. Please proceed. Sir, I would like to understand why do we have other expenses so high? Why is it doubling on a... I mean, why did it come down on a sequential basis? But on a y o y basis, it is doubling. What components would actually be affecting it throughout the year and other expenses part? So Jyoti, as I mentioned earlier, Q1 of FY 'twenty six did add the consumer electronics piece in the P and L. The expenses are getting capitalized, right? And from Q4, all the expenses came into the P and L and that's the broader reason why we see increase in the other expenses and even some are employee benefit, all the expenses in fact.

43:56 But would this be at similar levels or is it going to go high in the subsequent quarters? That's because we have consumer electronics added? See, it has a bit of variable as well as fixed component. So variable will kind of slightly grow as the revenue grows. Fixed will remain pretty much same at least in the next near term. So the fixed part would be 30% of these other expenses? Or is it fifty-fifty fixed and variable? I think that would be too much of disclosure at this moment, Jyoti. Ladies and gentlemen, if you wish to ask a question, please press star and 1 at this time.

44:57 To ask a question, please press star and 1 now. The next question is from the line of from GrowthX Capital. Please proceed. Hi, sir. Good evening. Am I audible? Yes. Yes, you're audible. Hi, sir. Thank you for the opportunity. I have just two questions. One is regarding the capacity. So as I see the capacity, sir, number in terms of million hour from base of FY 'twenty six has increased from 3,620,000 to currently 4.78. So I just want to understand where do you see the total capacity number in the next two, three years?

45:47 If possible, it also provide the split between aerospace and aerospace? We cannot we don't really project that basis because it depends on the components type we sign up and type of machines we sign up. And the combination of that will get there. Again, aerospace could be different and consumer is going to be different. So I think the and we weren't really that's not it's just a tracker to see how the growth is happening from the overall capacity perspective, but not something we model the business on. We model business more on the where we think revenues are going to come from and type of components we do, that's what happens.

46:47 The next question is from the line of Panj Modi from Swan Investments. Please proceed. Hi. Am I audible? Hello? Yes. You're audible. So thank you for this opportunity. I just want to ask that around the 1,700 to 1,800 guidance for top line for this year, what is the segment mix that we're targeting between consumer and aerospace? So as we guided earlier, our aerospace growth will be about 25% to 30% over FY 'twenty six. And consumer will see about 125% to 150% over FY 'twenty six. Okay. Got it. Thank you.

47:34 Thank you. The next question is from the line of Mahesh from LIC Mutual Fund. Please proceed. Hi, sir. Thank you so much for the opportunity. Sir, given the growth, I mean, we are going to witness for next three years, I mean, what kind of investments we required if I had to take a longer term view, like three years in terms of putting both in working capital as well as the fixed capital? So we have laid down a five year plan starting FY twenty seven to FY thirty one, wherein we have laid down a capital expenditure requirement of about $350,000,000 to $400,000,000 over the period of next five years. And working capital, about one hundred twenty five days in net working capital? Net working capital.

48:20 What we are doing right now. So total will be like $500,000,000 right? Yeah. I mean, whatever that translates to. Okay. Okay. Okay. And, I mean, how much that can come through internal accruals? Or is it that we have to raise money from the market? Yes, we do we did communicate that most probably about $150,000,000 kind of raise we'll have to do. We don't we are not right now, this year, we are not planning to do anything unless there is an advanced pull in CapEx or inorganic piece. The next question is from the line of Deep from New Verand Capital.

49:14 Thank you for the opportunity again. My only question is again on the lease order that you mentioned about. Could you just explain it in much more detail as what the actual product is? What are the components that we will be manufacturing? That's my only question. We will be manufacturing the aircraft wheel for Airbus A320. And we just without the tires, We don't put tires. The whole wheel completely finished wheels is going to be manufactured including the assemblies. Is actually wheel is an aircraft is a two half wheels joined together becomes a full wheel and there are some leads there. So whole thing is going to be done out of Balsami, all the way from raw materials sourced within India and we have approved source now with a qualified source. We are already doing the forging of the wheels and some machining of the view, but now we are going to be completely finishing the surface finishing and the assemblies, all that element also going to be coming in.

50:19 And just on raw material for both consumer electronics and aerospace, do the suppliers help you procure raw materials and do it differently and how easy or difficult it is for raw material like super alloys, etcetera? I mean, just if you could throw some light on that. Both sides actually in the super alloys and all these titanium customer really supports on the both sides to source the materials. Actually, if you really look at it, I mean, we deal with like hundreds of different material, raw material globally sourced. Out of that, only we're able to get maybe one or two alloys right now in India get qualified. We have worked for the last several years to get it done.

51:05 So it's a long process to even aluminum. We produce a lot of aluminum in the country, but not necessarily commercial aerospace qualified by our customers. There are only two grades we have been able to get it done. Only for that also for forgings, not even for otherwise. So it's a very long journey to develop this ecosystem on global national basis. It's a journey, but that's what I call. Hope we can accelerate some of these things, some of the wins what we had kind of wins we had more of those vertical integrated. Got it, sir. Thank you so much and all the best. Thank you. Thank you.

51:50 The next question is from the line of Praveen Gupta from Neon Ventures. Please proceed. Hello? Yes. Eva? Yeah. Thank you for the opportunity. Sir, you stated that this year you're planning for a six sixty core CapEx and next year it is going to be at Hosul factory INR1900 crores. So how are you going to fund this or what is going to be a mix for this internal accrual and debt? So INR 1,900 crores of Ushur CapEx, what Arjun mentioned earlier in the call, is over a period of ten years, not next year.

52:39 Okay. The next question is from the line of Rishikesh from Ampitas, Akshay Sutra Private Limited. Please proceed. Hi, sir. Hi, Madhu. Yeah. Sir, my question is on the consumer side. Can you share the customer name... Customer's name in the consumer side in consumer electronics, toys, consumer durables? Yes. Consumer electronics is one of the largest manufacturer consumer electronic manufacturer brand.

53:33 We cannot share because of confidentiality. And Tramantina is our consumer durable side and metal is our consumer toys. The next question is from the line of Banj Modi from Swan Investments. With INR 1,800 crores of top line and the guidance that you've given for consumer segment analyst base, what is the blended EBITDA margin that you're targeting for this year? So this year, we are targeting to kind of doubling of our operational EBITDA as compared to FY 'twenty six. That's the target for FY 'twenty seven.

54:27 So roughly around INR 180 crores of EBITDA. Is that right? Yeah. Moderate that number transition. Yes. Yes. Also, just one more question, sir. For the next two to three years, how do we see the share of consumer business going up of our overall top line? Because from this year's guidance, it is expected to be roughly around 20%, 23%. And then over the next two to three years, how do you see that transitioning? So if you see Q1, we are at about 19%. And as our utilization increases, the share will start increasing. I mean, a period of five year basis, I think we would be about 40, 60 consumer.

55:14 Okay. 40 to 60%. Alright. And this is expected to generate an EBITDA margin of less than 20% compared to our aerospace business, which is above 20%. Is that right? Is that the right understanding? Aerospace, have guided at 18% to 22% and consumer 18% to 20%. 18% to 20%. Okay. Got it. Thank you. Thank you, sir. Thank you. The next question is from the line of Rajni from Bai... From Bright Politics. Please proceed. Yes. Thank you for this opportunity. Sir, my my question is that that with global original equipment manufacturing increasingly pushing for supply chain derisking and near shoring, how much of your raw material sourcing is currently localized within India versus imported?

56:16 I think our raw material is like 99% is imported. So I don't think there is anything, any possibility of changing that anytime soon because we don't have any qualified sources in India for that to change. Thank you, sir. Thank you. The next question is from the line of Praveen Gupta from Ston Ventures. Please proceed. Sir, we allocate this CapEx, what is the ROC at the management level for each of the CapEx? Either within aerospace or within the consumer electrical space?

57:10 Yes. Our ROCE targets on a steady state basis remain same 18% to 20%. That's how we look at it whenever we allocate the capital. Okay. And going forward, do you feel that Consumer Electronics because of the less capitalization is going to be more in terms of revenues and aerospace? No. I mean, we see aerospace already a large base still continue to grow right now at 30%, 40% level, right, whatever we have, added. And with that kind of growth, we still see consumer going to be next five years at least, still lower than the aerospace and higher growth of Yes.

57:57 But we have already reached the utilization level of 80%. So you said that although aerospace is going to be INR120 crores or so, but then in next year, if we have to grow, we have to make more capital allocation in respect to India. I have done that already, capital allocation plan. May I know how much is that? So we said INR 1,900 crore. Anyone another 2,800 crore we're investing between consumer and aerospace in Karnataka. That also we have guided. Yes. For the next year, how much it would be, sir? We're not finalizing the next year numbers.

58:46 Ladies and gentlemen, that was the last question for today. I now hand over the conference to management for closing comments. Over to you. Thank you, everyone, for joining the call. Look forward to discussing further with you in the coming quarters. Thank you. Thank you. Thank you. Thank you. On behalf of AQUS Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.