Netweb Technologies India (NSE:NETWEB) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Netweb Technologies Q2 FY 'twenty seven Earnings Conference Call hosted by ICIC Securities. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to miss Seema Naik from ICICI Securities. Thank you, and over to you, miss Naik. Thank you. Good afternoon, everyone. On behalf of ICICI Securities, I welcome Netweb Technologies q two FY twenty seven earnings call.

0:46 We have a number of team senior management team of Netweb Technologies led by PMD, mister Sanjay Loda full time director, mister Navin Loda CFO, mister Ankit Kumar Singhar chief sales and marketing officer, mister Hidai Vikram chief strategy officer, mister Mukul Karya and head of Reuters adviser to IR adviser to Netweb Technologies, mister Sandeep Sanskyathy. So without further ado, I'd like to hand over the floor to Mr. Sanjay. Over to you, sir. Thank you, Seema. Good afternoon to all the participants. Before I hand over the call to Mr. Sanjay Lodha for their opening remarks, I would like to draw your attention to the safe harbor statement in the earnings presentation. I request each one of you to go through the disclaimer in that presentation before the meeting starts, so that you are aware of the same.

1:39 Thank you, and over to you, Mr. Lodha. Thank you, Seema and Sanjee. Good afternoon and a warm welcome to all of you to Netweb Technologies Q2 financial year twenty twenty seven earnings call. We are pleased to report that Q2 financial year twenty seven has been another record breaking quarter for Netweb Technologies. It's our highest ever quarterly revenue from operations and profit after tax. Both revenue and profit grew four times year on year. H1 financial year twenty seven PAT reached INR222 crores surpassing our full year financial year '26 PAT of INR206 crores in just six months. In Q2 financial year twenty seven revenue from operations grew at a rate of INR $3.35 point 7% year on year to INR $13.23 crore. Operating EBITDA increased by INR $3.34 percent year on year to INR 197 crores with a margin of 14.9%, whereas that rose from 348.8% year on year to INR 137 crores translating into a margin of 10.2%.

2:49 Our ability to sustain margins while scaling rapidly reflects strong execution and operational discipline amid rising demand for high performance computing and AI infrastructure. AI systems remained our primary growth driver contributing INR $7.73 crores or 58.4% of revenue from operations, registering a growth of 68.1% year on year. HPC and private cloud also delivered robust performance, contributing INR $2.48 crore and INR $2.45 crore, respectively. Highlighting the strength of our diversified growth portfolio, As on 09/30/2026, our order book stood at 2,629 crore with an additional L1 position of INR $6.53 crore, providing strong revenue visibility for the coming quarters.

3:46 The quarter also marked a significant milestone in our journey, where we successfully raised INR 1,200 crores through our first capital raise since listing in July 2023. We are grateful to our investors for their overwhelming response and continued confidence in our business, growth strategy and long term potential. Moving to the industry landscape, we continue to witness an unprecedented surge in global demand for AI compute, which India emerging has a significant growth market. The India AI mission represents a major structural tailwind for the domestic AI ecosystem with the potential to accelerate development of indigenous AI capabilities, expand access to advanced computing infrastructure and strengthen India's AI sovereign AI capabilities.

4:37 Government bodies, public institutions and large enterprises increasingly view computing infrastructure as strategic infrastructure, prioritizing secure high performance systems that enable critical data and workloads to remain within the country while optimizing the AI token economics. Achieving cost effective token generation requires more than access to advance compute. It also demands strong engineering, system design and solutioning capabilities. Netweb has invested in developing these capabilities over the years, positioning us to address the evolving requirement of this market. Global service providers, CSPs, global cloud service providers, CSPs, data center operators, enterprises are expanding their GPU intensive infrastructure to meet the growing computational demand for AI training, inference and other AI driven applications.

5:33 India is emerging as an important destination for these expansion plans, creating an additional opportunities across high end computing ecosystem. These developments together with growing need for indigenous computing capabilities and end to end technology stacks are reinforcing the importance of sovereign compute infrastructure with our integrated design and engineering capabilities, in house manufacturing and end to end solution deployment expertise, Netweb is well positioned to address these requirements. Our strategies across supercomputing and private cloud have also delivered excellent results, further validating our capabilities and market positioning. Furthermore, as National Supercomputing Mission two point zero places greater emphasis on designing and building compute infrastructure in India and HPC adoption across enterprise indigenous design and manufacturing along with bespoke solutioning are becoming increasingly important differentiators in the high end computing landscape.

6:34 We believe these structural drivers will support a sustained growth cycle and high end computing space. Our active pipeline of approximately INR 11,152 crores represent the total value of business opportunity currently under pursuit and serve as an indicator of demand visibility. It is important to distinguish this pipeline from our total addressable market that is a TAM, which is significantly larger and represents broader market opportunity available to Netweb. Together these forces reinforces our confidence in growth opportunities ahead. Beyond our core business, we continue to explore emerging opportunities in physical AI and quantum computing, leveraging our technological expertise and established capabilities.

7:19 As communicated earlier, we are advancing initiatives in both these areas. In physical AI, we are developing capabilities across technology stack, leveraging our AI systems, digital twins, in house software support, training, simulation requirements. In quantum computing, we have commenced R and D on quantum simulators and emulators and are engaging with institutions, hubs and startups across ecosystem. Further strengthening our focus on technology development, our Board has also approved the establishment of a wholly owned subsidiary of Netweb in Taiwan for advancing our R and D efforts. This is an important step towards deepening R and D in IT hardware and strengthening our technological capabilities as India's leading technology OEM.

8:05 We believe this initiative will further support our pursuit in innovation and our ambition to design and manufacture advanced computing solutions in India. As a leading Indian OEM in the high end computing solutions, we continue to invest steadily in innovation and chip agnostic design philosophy for alignment with Make in India vision, a stronger balance sheet with our recent capital raise and a robust order book position us well to capture growing demand for high end computing, deliver sustainable long term growth and create lasting value for our stakeholders. I will now request Ankit to take you through the financial performance in great detail. Thank you. Thank you, Mr. Lugar.

8:52 Good afternoon, ladies and gentlemen, and thank you for joining our earnings call. Before we open the floor for Q and A session, I would like to provide a brief overview of our financial performance for the quarter and the first half of FY 'twenty seven. I trust you have had the opportunity to review our earnings presentation and press release. Let me begin with our quarterly performance. Revenue from operations for Q2 FY 'twenty seven stood at INR $13.23 crore, registering a year on year growth of INR 3 and thirty five point 7% and a quarter on quarter growth of 61.4%. Operating EBITDA for the quarter stood at INR 197 crore, increasing INR 3 34% year on year and 63.7% quarter on quarter.

9:46 The operating EBITDA margin stood at 14.9%, reflecting our ability to sustain profitability. Profit after tax for Q2 FY 'twenty seven stood at INR 137 crore, growing 334.8% year on year and 60.2% quarter on quarter. The PAT margin for the quarter stood at 10.2%. Moving to our first half performance. Revenue from operation for H1 FY 'twenty seven reached INR 2,143 crore, representing year on year growth of 254.2%. Operating EBITDA stood at INR $3.23 crore, growing 257.7 year on year with a margin of 15.1%.

10:42 PAT increased 258.5% year on year to $2.22 crore with a margin of 10.3%. Our first half performance reflects strong business momentum supported by robust demand across our core segments and disciplined execution. Notably, our H1 FY 'twenty seven pad has already surpassed our full year FY 'twenty six pad, underscoring the scale of our growth. Turning to our balance sheet. We achieved a zero net debt position during the quarter with net cash position of INR 14 crore as of September 2026. In addition, the company had approximately INR $40.03 crore unutilized from the QIP proceeds.

11:32 This improved financial position supported by our recent capital raise provide us with greater financial flexibility to fund our growth plan. Our cash conversion cycle stood at ninety four days with receivable days improving to sixty two days, while inventory days stood at one hundred and seventeen days. The relatively higher inventory levels are intentional and reflect our preparation for executing the order book of approximately INR 2,629 crore as of September 26. Given the strong global demand for high performance computing and the strategic performance, importance of these deployments, proactive supply chain planning and variety of critical component are essential to ensure timely execution of customer orders.

12:25 Our return on equity and return on capital employed stood at 31.438.6% respectively. These ratios reflect the impact of QID proceeds on our capital base. Coming to the utilization of QID proceeds, we had utilized INR $7.67 crore of the proceeds as of September 2026. We remain grateful to our investors for their overwhelming response to the QIP and their continued confidence in the Netweb's growth strategy and long term potential. To conclude, our growth priorities remain firmly on track, supported by a healthy order book, a strong pipeline of business opportunities and sustained demand for high end computing solution.

13:15 We remain focused on scaling our business, executing customer order efficiently and maintaining operating discipline and profitability. With that, I would like to conclude my remarks and invite the moderator to open the floor for Q and A. With this, I now hand over the call to Seema. We will now open the floor for questions. Thank you. We will now begin the question and answer session. The The first question comes from the line of Mohit Bansal with Eternal Access Capital. Please go ahead.

14:14 Mister, please go ahead. Mister, please unmute yourself and go ahead. Since there is no reply from the line of mister, we'll we'll move to the next. That is. That is from. Please go ahead. Hi. I just wanted to ask basic... The question about how fast is overall Netweb growing outside its top five customers? So we see a lot of growth in the top five, but not very clear about how you're seeing the growth outside of the top five customers? I'll let Ankit answer it because I think think Prajitesh mentioned that very clearly. So if you see, we had been adding our new customers.

15:12 We added 49 new customers in this H1. And if you put three point five year as a period, we have added close to like 500 new customers to the order book. And this is a very important metric that we always report in our presentation because it accounts for like 8% to 9% new customer being added to our revenue book. So having said that, the company has been consistently working on and growing on the customers beyond top 10 and top five. And even these top 10 and top five customers is not these are not the static customer. There is a pool of 25, 30 customer, which keeps on changing. So having said that, you will see that we are consciously working on the customers' entire preservation. Just to add on to what Ankit said.

16:07 So while you are seeing one particular static top five, top 10, but in every quarter, every year, those change. So it is not that the business in the medium term is concentrated to these five, 10 customers. There are new customers who come into those top five. So that churn which happens. So 25 to 30 customers probably have churned over the last two, three years to take the top five top 10 place. Hence, while in statistics, it looks like a very heavy concentration, actually it is not. Mister, are you done with the questions?

16:53 Yes. Thank you. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Jatin from Bank of America. Please go ahead. Hi. Congratulations, team. Great set of numbers. The two questions that I have is, the first one is around if you can detail a little bit more about your plans in the Taiwan subsidiary. What do you intend to do there? Are you planning some sort of a partnership with some local company over there? Some additional color would be really helpful. And then the second one that I had is, what is the progress on the next set of servers that is Verra Rubin? Does our order book already have Verra Rubin in it? Or does it form part of the next orders that we'll start receiving?

17:45 Thank you. Thanks for your question actually. So on the Taiwan subsidiary, I'd like to state that, that basically, Netweb has decided to set up its 100% fully owned subsidiary. There is no partnership or there is no basically with somebody actually. This is primarily completely owned by Netweb only and this is primarily only for R and D purposes actually. Because basically, we have basically since we are a company is growing at a faster rate and new products are always there in pipeline and with Engility and basically all other solution providers introducing products at a very fast rate. So basically we need design engineers and all that. So getting resources sometimes in India becomes a challenge actually on the hardware side of it. So that's the reason their primary purpose is to have more to hire more manpower so that basically they can be available locally in Taiwan. And since those kind of people are easily available in Taiwan, so basically to so that those resources can be used for R and D facilities.

18:45 This will only enable and help us so as to speed up our R and D capabilities. This is the only purpose of that subsidiary in Taiwan. Next question, I will ask Hildad to answer. So thanks for the question for what is our plan for veraupin. So just to share with you that our plan is very much in time that we'll be launching and platforms in India. And in fact, the process of designing, writing schematics and creating these veraupas and all, that all has already started. And as a result of very soon, we'll be having first Vera Rubin system set up in the country very soon at our facility. So the plans are very much intact. And as you have seen that in the past also, we have always kept our product launches matching with worldwide time line. So same is the process that we are following in case of veraupin as well. So this will be, I mean, commercially for so we will be planning to basically start offering this product to be sold to the customers by January.

19:48 So we'll see if we can pull in the time lines. Perfect. This is really helpful. And the tie one hiring bid that you plan to do is definitely encouraging, much appreciated. If I can slip one more. The inventory that you have currently, the INR 1,900 crores bit, fair to assume that we'll execute that within Q3, Q4? Yes, yes. So this inventory actually is to support the order book only. And yes, they will be churning from this inventory definitely. Next question comes from the line of Vinay Menon with Monarch Capital. Please go ahead.

20:38 Hi, sir, and congratulations on great set of numbers. Couple of questions from my side. Gross margins have declined, And I agree that there are component prices are up and that is adding pressure. But what base can we look for the next few quarters? And where could we see a steady state in terms of gross margins? So I think gross margin is very difficult to monitor on a quarter on quarter basis. I think we would it will be good for us to look at a full year basis, and I think we will do we guide on EBITDA, so we are still well in line on EBITDA. So Vinay, I would also like to add here. So it is important to see the EBITDA framework, which is being followed.

21:23 So when we enter into a very large scale deal, so the profile is inherently different with the small deals. So gross margin becomes a game of different deal mix, which cannot be judged on quarter on quarter basis. But the EBITDA framework is well maintained when there is a large deals coming in with whatever gross margin, there is obviously the overhead cost structure do not go grow in that proportion. So there is obviously a leverage which comes in when we do large deals, and that's why the company has showcased operating EBITDA margins to remain around 14%. Okay. Okay. And one more question, we've seen neo clouds like Yota, E2E announcing CapEx FY 2027 and even beyond. And we also saw an RFP from CDAC for some about 10,000 GPUs.

22:16 Are these part, like, of our current pipeline? Or or do we see any additional pipeline and order book coming from these kind of dealings where we could play a major role? So thank you for pointing it out. But basically, all the names which you mentioned, all our customers, and they are very much in the order book in the funnel everywhere. But basically, we don't specifically state the numbers of the orders or the quantities of particular customers because basically, I hope you'll understand the reason for that. But still, you can see the order book is still after execution of such a robust revenue this quarter. Still the order book has also increased. It was INR 2,500 crores last quarter, it is INR 2,600 crores. If you add the basically the L1, it would be around INR 3,100 crores, 3,200 crores approximately, which is substantially large order book.

23:05 Okay. And one last small question sir, in terms of NSM 2.0, when can we start expecting some orders from it, maybe early twenty twenty seven? Yes, you are right. Next question comes from the line of Zaif Sheikh with Hathithipidla. Hi. Thank you. Thank you for the opportunity, and congratulations on that, sir. So we'd like to ask about the Taiwanese subsidiary that you're setting up. Will this kind of enable us to kind of put our company on the same set as of the Taiwanese audience? Will you be able to launch out new products at the same price as it of our Vibena or Pacatron, etcetera?

23:59 Second question, I'd like to follow-up on the working capital cycle, but first, if you can answer this question. I didn't get your second question. What is your second question? The working capital net working capital. So how is the net working capital expected to shape up in the forthcoming year? Net working capital. So basically, first, I will answer the first question. I hope you'll appreciate that, that basically has been very clearly a make in India company, and we want to focus on manufacturing in India itself because the company is a twenty five year old company. And from very beginning, since inception, the idea has been to design, develop and manufacture in India. So that was the idea actually. We and plus basically, there are two major differences between the ODMs and Netweb is primarily one is that, that we are India focused. The second is that we are not box to sell. Most of the ODMs, which you mentioned, they primarily manufacture boxes and they just sell the boxes actually. So basically, we don't intend to become an ODM kind of basically the names which you mentioned because they are a different kind of companies, we are a different kind of company. The primarily the Taiwan subsidiary will be only used for R and D services R and D purposes.

25:10 That is only to speed up the R and D efforts from our side. And you know that most of these technology providers, they also have their basically the main R and D centers in Taiwan. So being nearer to them also helps actually. So these are the reasons why we have this. But primarily, the idea is only R and D at this point of time. Thank you. The second part, I'll In regards to the networking cycle is for the September was INR 94 crores. And what we anticipate that our cash conversion cycle will operate between INR 90 to INR 110 considering how the quarter growth goes in. So 90 to 110 is the range where our working capital cycle will operate.

26:05 Got it. Sir, I think last year, we we kind of operated it some fourteen days networking capital. So is that a one off thing? And every year, it is expected to operate in the same seventy to eighty or ninety days range? So yes, if we talk about last year, it was eighty four days, the cash conversion cycle, it has gone up because in this year, we had been doing the efforts on the inventory days, considering the large order book we have in hand. So even going forward, we will operate in this range only. Got it, sir. Thank you.

26:53 Thank you. Next question comes from the line of Sandeep Psha with Equities Securities. Please go ahead. Yeah. Thanks. Thanks for the opportunity, and congratulations for a strong quarter. Just the gaining traction from the Chinese memory chipmaker like CXMT or YMTC. If this scales up, are we ready in terms of making a schematic changes in our design of the server to incorporate this kind of a new partnership? So Sandeep, to answer your question, So currently, the architectural changes are not very swiftly moving towards the technology that you're referring to. So that is going to take some time.

27:39 And definitely, this is also important to share with you that in case if there is some market exchange, which happens very shortly or very fast, then we will also be able to adapt to it, and there will be other comparable or competing players who will also be able to offer the platform. So I think for now, we are having a good road map available, which will serve at least for two to three years in terms of introducing the new product lines and even catering to the current ones. So that means we are confident of the product line that we are carrying. Okay. Okay. And just a related question today to optimize the token cost world over some of the Fortune 500 clients are preferring multi model architecture where they are using frontier models, small language model, open source model.

28:29 So does that also changes our server design in terms of incorporating various model options? And does those kind of a server demand is increasing in... Even in India? So one thing which is very important, which you must have also noticed by now, which we have already been highlighting that we have always been focusing on all the layers of our solution. And when we design the solution, we focus on providing compute, interconnect storage and the layer above that, which includes our cloud stack also. And by virtue of that, only we have been able to achieve better token economics for our end customers. So it is not basically demanding the architectural change in the server architecture, Rather, it is demanding a better design solution, which includes optimized design and going by the reference architecture of NVIDIA chips. So that's how we achieve better token economics, and we have been helping our customers basis on that only.

29:25 So I think we have been able to justify whatever token maps we have to give to our end customers. We have been able to justify that. Based on that only, adoption of our platforms are happening across multiple customer segments. Okay. Okay. And just last question. In the AI led order intake, is it the traction that is also coming from the private organization within India? Or is it largely skewed towards government? And what is the typical average size of AI led server demand or order? So basically, that's a question is very varied actually. It can lie from somewhere between INR 5 crore to basically maybe INR 1,000 crore actually.

30:14 So as regards the size of the order is concerned. So then basically, to answer the first part of your question, there is a major thrust from the private bodies on the demand. So basically, government demand as well as private demand, both are really in buoyancy. And basically, it's no more primarily AI is a government play. There could be... The private demand is also enterprise demand is also very heavy. Okay. Thanks. All the best. Thank you. Next question comes from the line of Prateek Singh with IIFL Capital. Please go ahead. Hi. Thanks for the opportunity, and congrats for a good set of numbers. My first question is about.

31:02 Given that the bulk of the strategy quarter of 52,000,000,000 is now now behind us, question maybe INR 3,000,000,000, 2,000,000,000 is less. I understand that we should not be looking at the business from a credit perspective, but just to... Yes, your voice is not clear. We are not to understand. Can you speak clearly? Can you speak louder? Speak a little louder. We cannot hear you. Is it... Yeah. Is it better now? Yes. Yes. Please go ahead. Yeah. So I was asking how do we look at two edge now that the bulk of the strategic order of around 22,000,000,000 is behind us, I understand that we should not be looking at it from a quarter to quarter perspective, but just so we can get a sense, 2 h revenue would likely be higher than one h as it has been in the past, Or we can see a change of pricing?

31:51 So basically, the thing is that I will keep my basically, I can only tell you, if you see the order book, that will itself give you an indication how the 2x will look actually. So basically, I'll leave that calculation on your end, but I can only assure you one thing that we are targeting to achieve INR 4,000 crores of revenue this particular financial year. Understood. And can we get the same test to which segments are driving the order book? So in case, is it largely AI or it's broad based across all segments? I think you are not audible. Okay. Sorry. I'll join in the queue. Next question comes from the line of C. A. Garvit Goel with Sereng Alpha. Please go ahead.

32:40 Am I audible? Yes. Good evening, and congrats for the good set of numbers. I wanted to understand on the growth perspective in FY 'twenty eight and onwards. I understand that your pipeline is 11,000 plus. But in order to grow at the higher base, the kind of execution people have delivered in '27, it's a free mind going, right? So on that base, to continue a growth of 30%, 35% in 'twenty eight and onwards, we need to close a significant portion of the pipeline into confirmed order book by FY 'twenty seven. So can you put your view on that, like where we are in the terms of closing this pipeline into confirmed orders? If you can put some probable number, what kind of order book it will look like at the end of financial year 2027?

33:37 So, Garveer, I think you are following the company for last five years, I think so. You might have seen basically whatever we have committed, we have delivered. Okay. If you see the base, which was basically INR 400 crores while we did the IPO, okay. And basically, today, what I am suggesting that we'll be doing around INR 4,000 crores. So basically, that's 10 times actually. And we have always constantly kept our growth numbers around 30% to 40% CAGR kind of growth, which I promised year on year and seeing the current AI demand and the kind of technology innovation, which we are trying to do, the kind of unique position, which Netweb brings on the table for the Indian AI ecosystem. Definitely, we are very confident to maintaining that growth for at least three to next two to three years actually.

34:24 And you see the pipeline has been also very robust. It has been clearly growing at a constant pace. And but basically, if you tell me that in a minute, it will change something or basically the conversion ratio will change, these things doesn't happen this way. It basically, it happens only gradually. We have a conversion ratio of around 60% of the pipeline, which basically and the pipeline keeps on adding every day. So that gives us the confidence that basically we'll keep on growing at the same rate of 30% to 40%. Just to just add let me Sanjeev, let me add in. So if you look at last quarter's order book after was about INR $20,042,500 and after billing about INR 1,300 plus crores, we are actually above the last quarter's orders.

35:12 And the second thing is that we cannot have a confirmed order for the whole of next year right away, right? The conversion happens gradually, but the strike rate is 50%, and we are sitting on the pipeline of more than INR 10,000 crores. I think it's mathematically, you can yourself kind of do a model for yourself. Understood, sir. And secondly, I wanted to know your view of you might have addressed it in the opening remarks to an extent. But I wanted to understand from the perspective of AI CapEx that is happening in the global market. If I look at the rising cost of capital, the capital that was available to these players maybe six months or ten months ago, the cost of that capital has increased significantly now. So are you people hearing any kind of hindrances or any kind of reduction in in the the CapEx by these hyperscalers globally due to rising cost of capital, sir?

36:19 I just wanted your view on that. The problem is different that basically, as if the demand increases, definitely, basically, the pricing and the cost of capital, the cost of the memory prices have gone up by 200 or maybe even more than that. But do you think that has impacted the demand? That has not impacted the demand. And plus, please keep in mind, my complete business is not dependent upon the overseas kind of a demand, which is coming to India. Basically, we have a very, very balanced kind of a demand we have from various areas. But personal my personal view is that the definitely cost of capital and all those things basically can really will go up because the demand will go up, but that will not deter the demand. Got it. Thank you, sir. And all the best for the future. Thanks.

37:09 Thank you. Next question comes from the line of Nishita with Barclays. Please go ahead. Yeah. Am I audible? Yes. Yeah. Hi. So, like, we have a very good order pipeline of around 10,000. Conversion ratio is also of around 60%. So you're saying that we can achieve a 30%, 40% CAGR. Is that conservative? Because from where I see and from how much we can convert our pipeline, we can easily achieve, like, around 50%, 60% growth. So are you being conservative? Hear you anymore. Hello? Hello?

37:59 Hello? Have you completed your question? Yeah. Am I audible? Yes, mister. You're audible. Yeah. So I just wanted to understand if we are being conservative when we will grow 30, 40%. I cannot give a guidance on a guidance. My guidance stands where it is. Okay. Okay. And my next question is I just wanted to understand the execution time line of our current order book. Basically, depends. It is ten to sixteen weeks. I'm sorry, ten to sixteen weeks. Yes. Okay. Understood. Yes. That is standard time line which we have, not on the current order book. That's the standard with any order that's basically the usual time line we have.

38:49 Okay. Okay. Got it. Yeah. Thank you. Thank you. Next question comes from the line of. ICSI Securities. Go ahead. Congratulations on our report quarter. My question is on the order side. Right? If you could feel that there's a breakup of the pipeline between India AI, software AI, and organic, That would be helpful. And what is your outlook two years down the line? Ma'am, thank you for your question actually, but unfortunately, we don't share the breakup of the order book actually. But basically, I can tell you, it's a very healthy mix. The enterprise is also very, very active these days. And basically, the demand is from the government and enterprise, both are mixed together. And definitely, if you ask me in today's order pipeline, I can only tell you that maybe enterprise will be more than the government at this point of time. But basically, this keeps on changing quarter on quarter actually. And it's so that I will not be able to mention to you. But other thing basically as regards to growth is concerned, I already indicated you the number which we are targeting this year. And we are also we have plan to grow by 30%, 40% CAGR continuously for next few years now.

40:09 So we are very confident about that. And what percentage of DSM 2.0 outlay are you targeting? Actually, NSM 2.04 is basically since we are definitely targeting a good percentage, actually more than half of it we should be targeting actually. But it will not come in one go because basically that's a five year program. So that will come as slowly as it comes, but we will be very well positioned because a lot of Indianization and local manufacturing and all these things have been given weighted under that program. So as soon it rolls over, I think that will be that we will reap all benefits of that. Got it. Thanks for taking my question.

40:55 Thank you. Thank you. Next question comes from the line of Divesh Mehta with Invesco India Mutual Fund. Please go So thanks for taking my question. What I wanted to understand is actually two things. What is... In my understanding, I think beyond the working capital of hundred and ten days, ninety to ninety to hundred and ten days, which we need, a lot of orders will also require us to block a certain amount of cash in in terms of fulfilling that order. Right? So any color as to how how how that would have impacted our cash flows in the recent times. I think that's the first first question that...

41:41 That's the first question. And the second part is, take for an example, hypothetically, if feedback issues are tender for around creating a GPU cluster of around 10,000 GPUs via some vendor. So in your understanding, such large orders, how fast do they get executed? Do they get executed 10,000 GPUs in one single slot, or do they go to a single vendor and then that vendor buys from you? In your understanding, it's typically... If there's an open tender of of of something of similar from CDAS, how would the timeline slow down? Any color on that? Those are the two questions. Okay. So as far as the first question is concerned regarding the blockage of any cash flows, we haven't seen any substitution because if you see there is a significant improvement in the receivable days in this quarter.

42:39 So our debtors that comes that is being reported are all very healthy and top notch, and there is no such case of any bad debt or being elongated beyond one to ten day cycle. So there is no as such on these cash flows, whereas inventory is concerned, it is a bit intentional that we are preparing for the upcoming orders. The order book is significantly large. If you see, it's of INR 2,600 crore. So the investment is going basis, the supply chain demand and the kind of lead time, which has gone up. So in order to secure the execution of these orders, we have done so. So there is no any pressure on that, I'm trying to say, in terms of... Thanks.

43:30 Thanks, sir. But when I look at our presentation, we give a specific disclosure called free cash in the balance sheet in the presentation. And when I look at the same number, which is in our actual BSC filing balance sheet, both numbers are different. No. So I was just trying to triangulate because I think one of that number stays around $3.50 crores. Other number is slightly higher. So my understanding was a certain amount is probably sitting as a guarantee or a year to pull some So sort of there is a calculation behind this thing, which might not be apparently appearing on the balance sheet phase. So there are two components. One is the free cash that we have. So there are some bank deposits, which do not primarily appear in the free cash, but they sit in every bank deposits, which are of slightly longer days. So it appears in a classification of bank balance and other than cash and cash equivalents. Classification? Yes, this is just a classification.

44:33 And a large part of the difference is because of the money which was raised in the QIP, and it is sitting in the that is also there in the cash also. So that is INR 400 crores and the rest is on certain bank guarantees and deposits. So it's a mix of both. But large part of it is because of the money which was raised in the QIP and not yet utilized. So that cannot be considered free cash. Yes, sir. Thanks a lot. And that's the last the CDAC question, ma'am. That's it. The second question, just to answer your question that what CDAC has rolled out is an opportunity, which is for request for empowerment. And under this RFP, they are going to empower CSPs who are going to ultimately offer them the amount of GPUs that they are targeting to have.

45:19 When this is definitely not going to stop at INR 10,000, they are going demand more because this is the kind of requirement that because this is on behalf of India AI, by the way. This is not basically on CDAC's own behalf. That is one. So yes, this is an opportunity which will give us the space to basically create more opportunities for ourselves also because we are already in touch with those ESPs, and many of them are already served by us. So in fact, there are certain new players, which who will also be participating, and we are in touch with them. So that way, we that way, we are pretty much on top of it, and this is definitely going to result into, you know, more pipeline addition for us. Okay. Just a clarification on this part. So in your understanding, is it the case that the existing capacity for India AI mission which was sitting with those CSPs is largely now utilized?

46:10 And do you think that CDAC will roll out 10,000 clusters in a single slot and then increase, or 10,000 also is going to be staggered? You're a bit confused actually. Basically, basically, there are two parts to it. One is that the earlier India AI RFP, which was there. So actually, CDAC is doing the RFP in behalf of India okay? This is not CDAC personal requirement. This is India AI requirement. And the earlier RFP which they had done when people had offered GPUs actually, those were utilized. But currently, what is happening is that the rates, the international rates of the GPUs per hour has gone up. Hence, basically, the India is not able to get the GPUs at the older rates. So hence, they are trying to go come out with a fresh RFP, which they have just rolled out, which people will be bidding and definitely it will be prevailing as per the market rate. So definitely as as soon as it is they offer the GPUs, are getting allocated. So various CSPs will definitely have installations and they can place orders. They have an option of placing orders on us. And as the orders are placed, we will be delivering.

47:14 So this is how this will work actually. This is not CDAC trying to deploy these many clusters. Okay. Thanks a lot. Thank you. Thank you. Next question comes from the line of Manjimar Singh Sethi with Sethi Capital. Please go ahead. Am I audible? Yes. Okay. So in the presentation, I have noticed that SBA and IDFC First Bank are listed for the first time as customers. I just wanted to know that since you mentioned in the opening remarks that the data sovereignty and data localization, especially in the Indian banking system and financial service is key. So could be the banking and the BFSI segment emerge as a significant growth driver for Netweb over the coming years?

48:02 Very good observation, sir. Thank you so much. Hello? Very good observation, sir. Your observation is absolutely correct. Okay. Thank you, sir. So my second question with respect to that is, recently, you know, NVIDIA has launched supercomputers in a computer. In the sense, they are replacing the traditional PCs and laptops. So I just wanted to know how does NETWEB view this emerging opportunity, and are you evaluating or planning to expand into this segment? So basically, Netweb is a very, very, very focused company into the data center enterprise workspace. We we normally don't get into client devices and selling boxes. So I don't think the area which you are mentioning is not very clear to me what exactly you're mentioning, But basically, we don't intend to get into laptop space and the client space at all.

48:57 Okay. That's all and all the very best to you and the team, sir. Thank you. You. You. Next question comes from the line of Abhinay Menon with Monarch Capital. Please go ahead. Hi, sir. Thank you for the opportunity. One follow-up. Employee costs have come up on a Q on Q basis. And if I look at last five, six quarters, this number is increasing. Is it because we are adding talent? Or is it maybe if you can do a breakup of ESOP costs also in that, that would be helpful. So Vinay, there are two, three factors behind this increase in the employee benefit expenses. First is this quarter is basically quarter where the increment has been coming in as a cost of arrears.

49:47 Secondly, there is always a variable pay, which comes in line with the growth that we do for the quarter. So it's a bit variable because there is a provisioning of incentives and all which goes in. And third, lastly, yes, there is increase in the headcount. If you see, we have grown by 120 plus employee strength as compared to last year's quarter headcount. So yes, there is these are three factors, whereas as far as ESOP cost is concerned, for this quarter and sequentially, the as well quarter, there was not significant ESOP cost because the tranche which we had given at the time of before the IPO, they got vested fully last year itself. So there is no much ESOP cost. Whenever the new ESOP schemes are being distributed, then it will have an impact in this.

50:46 Okay. Okay. Thank you. Thank you and all the best. Thank you so much. Thank you. Next question comes from the line of Pradeep Nagori, an individual investor. First, congratulations, Sanjay ji and the entire team for super numbers. Most of my questions are answered, but, you know, I would still like to ask one particular question, which is from a future perspective. On your presentation, you mentioned that the the new opportunity that we are trying to tap is physical AI and quantum. Could you give me some more details in terms of what exactly we are doing in this space and how large this opportunity can be for Netweb in next couple of years?

51:32 So these are the new areas that you know. These are the areas which are developing very well, and we we are spending into r and d. Actually, at this point of time, we are not willing to disclose more about exactly what we are trying to do because as you can very well understand, still we have our own reasons actually, wherein we are not really talking much about it. But some brief information, which was which I have already shared on my opening remarks as well, that basically is covered under that. But how I mean, from a time line perspective, how do we see in terms of that opportunity getting monetized, meaning like what next one year, two year, three year? How far your estimate is in terms of monetizing that opportunity? So I think this is just presently in the initial development stage. And I believe as and when we believe that we are ready to be ready to envision the exact numbers, we'll get back to it.

52:29 I don't think we want to speculate on how much we can do at this point in time. Okay. So just last question. Very short period of time, like if you look at Y o Y numbers for both H1 and the quarter numbers, H1 numbers are growing by about 2.5x and Q on Q I mean, Y o Y quarter numbers are growing by about 3.3x. But there is it seems that there is no operating leverage that is kicking in because the fact numbers or the operating margin numbers more or less remain in percentage terms exactly the same. So I mean, I would assume that when such growth is coming in short span of time, there would be some operating leverage that would be coming in.

53:15 So you will appreciate that with the scale of growth which we have seen, obviously, the size of the business has also increased, the whole structure of the customer profile expense change. So for us, to be able to maintain EBITDA is something which we are really focusing on. I think we've already always we have always very clearly mentioned that we will maintain our EBITDA in PAT, and I think we continue to do that. Ankit, do like to add something? So if you see the revenue and PAT both have grown four times if we compare with the Y o Y numbers. So having said that with this scale, maintaining the EBITDA margins, what we have said that 13%, 14%, we have slightly crossed that in this H1.

54:08 But not to be quoted for the entire year, but yes, the EBITDA framework while maintaining this large scale is what we have been appreciated of. And also you appreciate that we are a technology heavy company, and we have to keep reinvesting in R and D. And we monetize all the R and D costs. So for us to be able to keep developing new products coming out in the market to continue to remain relevant, I think this is a very speed stop and none of our competitors are even close to what we are. So I think we are happy to be with this as long as we keep getting the lion shares of the business. Great. Thank you so much. If I could just push one more question. I mean, would you see any other competition for us in India in the space that you are? That is a we have no idea about that.

55:00 Okay. Thank you so much. Thank you. Next question comes from the line of Basant Pansal with NBG Investment. Please go ahead. Yes. Afternoon, sir. From the results, from your opening remarks and from the question answer, it looks that everything is good. So what are the concerns and challenges that makes you worried more particularly given the fact that the AI sector itself is this has lot of concern? So basically, as regards there are tools to basically, as you can see, the glass is half full or half empty actually.

55:48 To us, it looks basically, in my view, AI sector doesn't have much challenges. Definitely, any sector which grows at such a fast rate, definitely more eyebrows are there, people will think about it. I personally feel AI have got the three areas we work into. One is the supercomputing. Supercomputing is an area which we are working for twenty five plus years and basically cloud, SCI we are working for ten plus years. AI, we are working for fifteen plus years. So we have seen the entire basically entire journey of the complete technology development. So we are very robust and we completely feel that the industry seems to be robust to us. And we feel that this will keep on growing. And these small concerns will keep on coming and up and down. They are more of an investor related concerns. I personally don't feel there are any fundamental issues with the AI demand or something.

56:39 The way the AI adoption is happening, the use cases are increasing day by day, it's entering into normal person's life actually. So I personally feel that this is only a booster. I don't feel that there is anything negative about AI. This has just started, I mean, as of now. This is not basically the even segment of the story. This has just started. So the way token consumption is going up, so you will see that there is a lot of headroom for AI as a technology to grow in coming years. So I think there's nothing that, first of all, concerns have started coming up or situation started coming up, nothing of that sort. Thank you, sir. This is very helpful. Thank you.

57:28 On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.