Avalon Technologies Ltd (NSE: AVALON) Q1 2026 Earnings Call dated Aug. 06, 2025
Corporate Participants:
Unidentified Speaker
T.P Imbichammed — Chairman and Managing Director
Suresh Veerappan — Chief Financial Officer
Analysts:
Unidentified Participant
Bhoomika Nair — Analyst
Deepak Krishnan — Analyst
Praveen Sahay — Analyst
Jalaj — Analyst
Indrajit Agarwal — Analyst
Chirag — Analyst
Bala Subramanian — Analyst
Sumant Kumar — Analyst
Vipraw Srivastava — Analyst
Presentation:
operator
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operator
Ladies and gentlemen, good day and welcome to Avalon Technologies Limited Q1FY26 earnings conference call hosted by Dam Capital Advisors. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on a touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Pomika Nair from Dam Capital Advisors. Thank you. And over to you ma’.
operator
Am.
Bhoomika Nair — Analyst
Thanks, Yusuf. Good afternoon everyone and a warm welcome to the Q1 FY26 earnings call of Avalon Technologies. We have with us from the management today Mr. Kunman Bicha, Chairman and Managing Director, Mr. Bhaskar Srinivas, President. Mr. Suresh Vyaz, Chief Financial Officer Mr. Shriram Vijay Raghavan, Chief Operating Officer and Mr. Venki Venkatesh, Chief Sales Officer. Mr. Mitchell will give an overview of the business performance and will be followed up by Mr. Suresh’s remarks on the financial performance post which we’ll open up the floor for Q and A as we move forward. It is important to bear in mind that any forward looking statements made during this call are subject to potential risks and uncertainties both known and unknown.
Now without any further delay, I’ll now hand over the floor to Mr. Bicha for his initial remarks. The CMD. Thank you. And over to you sir.
T.P Imbichammed — Chairman and Managing Director
Thank you, Bhumika. Ladies and gentlemen, on behalf of Avalon Technologies we extend a very warm welcome to our Q1 FY26 earnings call. I would like to begin by expressing our sincere gratitude to all our investors for their continued trust and confidence in Avalon. Over the past two and a half decades, India has steadily emerged as a strong manufacturing base catering to its own growing domestic electronics demand and to the evolving needs of global markets. India is reducing its dependence on imports and it is positioning itself as a trusted partner in the diversified global supply chain.
This shift, backed by structural reforms and government led initiatives provide the solid foundation for sustained growth in the ems. Industrial and portions have gone well into the future. While global trade dynamics continue to evolve, India’s structural strengths, growth drivers and policy support remain intact and continue to support long term industry momentum. Building on this momentum, we are pleased to announce a significant milestone on Avalon’s growth journey. We have entered the semiconductor equipment manufacturing space. We are partnering with the leading global semiconductor equipment company to provide highly complex industry 4.0 compliant box mills. This partnership allows us to leverage our core expertise in box bill solutions which currently accounts for 56% of our revenue.
This also reflects our engineering depth, manufacturing maturity and strong track record in delivering complex assemblies for critical applications. This prototype phase is underway and production is expected to ramp up over the next four to five quarters. We view this as a major technological step forward and a strategic entry into a high potential and advanced segment. Over the medium term, we believe this vertical could become a meaningful growth driver and further strengthen the foundation of the catering growth we are targeting. Considering a strong start to our FY25 26 and encouraging revenue momentum, we are upward revising our full year revenue growth guidance to 23 to 25% from the earlier guidance of 18 to 20%.
This reflects confidence in our business outlook. Let me now take you through our Q1FY26 performance. In Q1FY26 we delivered a 62.1% year on year revenue growth driven by broad based demand across industry verticals and geographies. Notably, both our India and US businesses recorded a 62% year over year growth reflecting consistent performance across geographies. Our gross margins for the quarter stood at 35.5% exceeding the upper end of our guided range of 33 to 35%. This is a 230 basis point improvement over Q1 FY25. Our EBITDA margin came in at 3.2% and profit after tax was 14 crores.
Return on capital employed stood at 17.5% and asset terms were at 8 times highlighting efficient utilization and productivity. As of June 30, 2025 order books stood at 1,790 crores with an average execution period of 14 months reflecting a 22.5% year on year increase. In addition, our long term contracts with Execution timelines of 15 to 36 months grew by 17.4% year on year to 1,157 crores. This order book growth has been well balanced and diversified across industry verticals and geographies. We remain encouraged by the continued momentum across our three growth engines. Existing Businesses this is driven by long product life cycles and deep customer relationships delivering steady recurring revenues.
2. New business this is a result of sustained efforts over the past two years translating into fresh orders across multiple verticals and ramping into production.
T.P Imbichammed — Chairman and Managing Director
3.
T.P Imbichammed — Chairman and Managing Director
Pipeline opportunities this is a growing and diverse set of opportunities that are progressing towards finalization with increasing potential in terms of size and scope. With all three engines operating at different stages, we are front loading investments in capabilities, manpower and inventory to stay ahead of the expected growth. While this has led to some sequential moderation EBITDA margin, we remain confident that operating leverage will begin to take effect in the second half of the year. On the working capital front, net working capital dates improved from 163 days in June 2024 to 142 days in June 2025.
Inventory levels are elevated for supporting upcoming production and growth. We remain focused on further improving efficiency and bringing networking capital down to 120 to 130 day range. Revenue share from a US manufacturing plant now accounts for 20% of our revenue in Q1 FY26. Meanwhile, manufacturing at India plants which serve both our domestic and Global customers represent 80% of our business in Q1 FY26 remains highly profitable with an EBITDA margin of 13.2% and a PAT margin of 8.8%. As tariff related discussions between US and India continue, we are closely monitoring developments. In such an environment, it is important to remain agile and take a measured approach before making any strategic adjustments.
Avalon’s dual presence in US and India offers a unique advantage. Our US Facility enables customers to localize production and manage tariff exposure while our India operations provide a cost effective and scalable manufacturing base. This geographic flexibility places Avalon in a strong position to support customer needs across both regions and respond effectively to evolving trade dynamics. Tariff related considerations continue to be managed through our user commercial process. As has been the case in the.
T.P Imbichammed — Chairman and Managing Director
Past.
T.P Imbichammed — Chairman and Managing Director
We are making steady progress on several new programs that are advancing from design and prototyping stages into production. These include products for global auto components, home electrification systems and a range of solutions across verticals such as rail, industrial and clean energy. Some of the projects currently in development include backup power systems, power transmission systems, aerospace cabin subsystems, locomotive engine subsystems, energy storage systems and power electronics. Many of these are expected to ramp up during the current financial year and contribute meaningfully to our growth. We are also progressing on the Railway Kavat Systems which is currently under prototyping and final stages of approval.
This is expected to enter commercial production next year. These developments support our continued efforts to deepen customer engagement and expand our presence across critical and high potential end markets. To support the series of new product introductions and anticipated growth, we are scaling our operations ahead of the project plan. On the infrastructure front, our export focus plant in Chennai as common production are now ramping up to meet rising domestic demand, we are planning to complete phase two of our brownfield expansion in Chennai by the end of Q3 FY26. To summarize, Avalon has started FY26. On a strong note, with a broad based revenue growth, LP order book expansion and improved operational metrics, our dual manufacturing presence both in India and US continue to offer strategic flexibility helping us to serve a diverse customer base and navigate evolving global trade dynamics.
We are steadily ramping up new project across multiple industry segments supported by proactive capacity investments and deepening of our customer engagement. Our entry into the semiconductor equipment stakes marked a significant step forward in expanding to high potential high advanced segments. With an improved growth outlook and a robust execution framework, we believe Avalon is well positioned to sustain its momentum and remain committed to building a business focused on long term profitable growth rather than short term gains. With this, I will now handle over to our CFO Suresh Veerappan for a detailed overview of our financial performance.
Suresh Veerappan — Chief Financial Officer
Suresh Good afternoon everyone and thank you for joining the call. Q1 FY26 marks a steady start to the year reflecting our disciplined execution and continued customer confidence. We are expanding strategic partnership, strengthening capabilities and investing in talent, capacity and inventory to support upcoming growth. These steps position us well for a stronger second half and reinforce the foundation for long term growth. Coming to our Q1FY26 performance, we reported revenue of rupees 323 crores a year over year growth of 62.1% compared to rupees 199 crores in Q1FY25. Our geographical revenue split for the quarter was 4860 with India contributing Rs 130 crores and the US contributing Rs 193 crores.
Gross margin for the quarter stood at Rs. 115 crores, a 73.3% increase from rupees 66 crores in Q1FY25 reflecting a gross margin of 35.5%. We continue to deliver industry leading margins driven by our product mix and execution efficiency. EBITDA stood at Rs. 30 crores up from rupees 4 crores in Q1FY25 with margin expanding to 9.2%, a 705 basis point improvement prospect asset tax stood at rupees 14 crores compared to a loss of Rs. 212 in Q1FY25 resulting in a pack margin of 4.4%. As volumes ramp up in the second half, we expect the benefits of operating leverage to become more evident towards the end of FY26 with this momentum likely to carry into FY27 on the balance sheet.
Front net working capital days improved to 142 days in June 2025 from 153 days in June 2024, an improvement of 21 days. Inventory days reduced to 104 from 130 while trade receivable days increased slightly to 87 from 78. Trade payable days improved to 49 from 45. On a sequential basis, networking capital days increased from 124 to in March 25 to 142 in June 25, primarily due to inventory raising from 86 to 104 days. In absolute terms, receivables and payables were broadly in line with March level while inventory increased by Rs. 43 crores. This inventory build is intentional and aligned with our growth plans, ensuring readiness to meet customer demand in the coming quarters.
As of June 30, our total outstanding debt stood at Rs. 134 crores with cash equivalents and investments at rupees 100 crores, resulting in a net debt of rupees 34 crores. Capex for Q1FY26 was rupees 9.6 crores. With our asset light approach, we continue to maintain strong asset terms of eight times. To conclude, as we progress through the year, our focus remains on disciplined execution. Thank you. Over to you, Bhumika.
Questions and Answers:
operator
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question is from the line of Deepak Krishnan from Kotak Institutional Equities. Please go ahead.
Deepak Krishnan
Hi sir. Am I audible?
operator
Yes, please go ahead.
Deepak Krishnan
Yeah, so I just wanted to check. You know we moved US manufacturing to 20% versus 13% last year and as a result we’ve seen a jump in somewhat jump in employee expense as well. Like what is our overall strategy for the year? Like how much percentage of production do we think happens in US or at least if not for the year near term, does this shift kind of continue and would that have some bit of minor impact in terms of margins? While you’ve guided to some leverage coming through, just your perspective in terms of US versus India manufacturing as things stand today.
T.P Imbichammed
Thank you, Deepak. So just to put in perspective, last quarter was lower in the US. We’ve always said we’re targeting an 8020 mix with 80% big in India and 20. So this 20%, what you’re seeing happening is that more customers and existing customers increasing their revenue in the US and, and the way we think about it is if the tariff situation changes, the new customers may want to start production in the US till it settles down, then move to India as it goes. So we are the only one who has both the options to keep going.
But our focus is always make in India and we are also focusing on other geographies apart from the US going forward. And one thing to note is that around three years back we were only 20% India production. Today, sorry, 20% India customers and today we are getting close to being 50% India and more business is coming from India segment. Did I answer your question?
Deepak Krishnan
Yeah, I think sort of got a sense at least sort of this rate is the understanding I have. Maybe just wanted to sort of also understand the semiconductor opportunity that you mentioned in the press release and you said that it’s going to be a big driver, maybe you know, a year out or two years out. How big is this in terms of, you know, percentage of revenue two years out? Do you think this could be something like a 1520 revenue contribution or this is more like a, you know, 5, 7% revenue contribution. And are you anchoring on adding additional customers once we have sort of this customer in base?
T.P Imbichammed
Yes. This is one of the leading semiconductor equipment manufacturers and we’ve been working with them for a year now, so we’ve just not talked about it. And now the next quarter we’ll probably start the pilot production and ramp up. It’s substantial. I don’t want to put a number to it yet, but we believe this is the start of our journey in the semiconductor equipment. And as you know, multiple companies are there. Once we have one of the biggest companies working with us, it’s easier for them to follow.
Deepak Krishnan
Sure, maybe. Just one final question. So far, at least in 1q and 2q there haven’t been any major trade disruptions and that has been manageable in the understanding. Correct. And second is big Beautiful Bill hasn’t impacted our clean energy revenues in any meaningful way or our order book. Are those two understandings correct? Just want to sort of finish that off.
T.P Imbichammed
Yeah, you can see our, you know, like we said, we had, you know, interestingly, 62% both growth in India and in the US so most of our products are long term in nature. It is not something you can change quickly over time. They are lifetimes of 5 to 15 years. So as you know, last quarter a lot of it was passed through There was no issue. We didn’t see anything based on that. But it’s changing every day. So we anticipate not to see issues. But if things change every day, we’re waiting for things to settle down.
As of now, we don’t see any ramifications.
Deepak Krishnan
Sure. And same as the big beautiful bill on clean energy, the impact is minimal. Is that understanding correct?
T.P Imbichammed
Yeah. What we need to understand is that we are into energy storage systems. No rooftop solar and all that. It’s mostly storage, which is growing 70% year over year. 60 to 70% I would say, in the US and we are playing in that segment.
Deepak Krishnan
Sure. Sir, thanks for your questions and I’ll get back on. Thank you.
T.P Imbichammed
Thank you.
operator
Thank you. Next question is from the line of Ms. Bhumika Nair from Dam Capital. Please go ahead.
Bhoomika Nair
Yeah, good afternoon sir. Congratulations on a good set of numbers. So my first question is related to the employee cost that we saw during the quarter which kind of jumped up, you know, should we see that as a normalized run rate now per se as we move forward, given that we are seeing decent traction in terms of revenues.
Bhoomika Nair
Suresh, one answer?
Suresh Veerappan
Yeah, so because like what we had mentioned in earlier calls, many of the projects which we won over the last four, five quarters, it is getting into a ramp up stage. Some of it in Q2, some of it in Q3. But like you already said before, the project ramps up. We have to build a team upfront, which is what is happening right now. But it will kind of give you a guided range for the whole year. There may be slight increase from here, but then it can give a ballpark.
Suresh Veerappan
Range around this and there’s an inflationary increase also year over year.
Bhoomika Nair
Okay, okay. So this, I mean what I’m trying to get at is it’s not got anything to do with the increased manufacturing quarter over quarter that we’ve seen in US and it’s more normalization of cost with the increased revenues per se. Is that understanding correct?
T.P Imbichammed
Okay, so the later part is right. Okay. So for example, with the new financial year there will be appraisals and that also has a number of impacts. That is number one and number two, even in the last quarter what we had highlighted is between US manufacturing, India manufacturing, the revenue split to be 20 and 80. That is what has come over here. The ramp ups are happening predominantly in India manufacturing facility and the that is all that is the key reason I would say and not the increase in US manufacturing.
Bhoomika Nair
Got it, got it. So the other thing was in terms of the, if I Look at the revenue breakup between different segments. Clearly you know industrials and mobility has grown at a very sharp pace in this current quarter which has contributed to the overall growth. If you can give some color in terms of, you know, how is clean energy performing relatively it has seen a little muted growth. Is that got to do with the fact that, you know there is this tariff related situation and the ongoing issues around renewable energy in US which is kind of slowed down relatively the growth rate or should one read it like a little differently per se? Not to mention that you know when we’re talking about 25% growth for the full year roughly 23 25% as you highlighted which means that the balance nine months we’re looking at about a 15 odd percent kind of a growth.
Whereas I thought second half we’ve seen some larger scale up. So how should we look into this? If you could just talk about that.
T.P Imbichammed
Thanks for the question Gomita. You always ask the difficult question. So we’re seeing a broad based growth. If you look at year over year growth, don’t take this shot and we don’t take that because quarter to quarter things may change year over year. Clean energy grew 26%. Communication grew 102%. Rail and aerospace grew more than 100%. Mobility put all the three sectors together grew 92%. Industrial at 86. So we’re seeing this across the board. So it’s not just specific and clean energy for us if you look at last year was 20, this quarter is 18.
But you know next quarter or the following quarter it will come back to where it stands. So we are seeing good order momentum in that also.
T.P Imbichammed
Okay, did I answer your question?
Bhoomika Nair
Yes sir, I’ll come back in the question queue but this helps for now. Yeah, thanks.
T.P Imbichammed
You’re welcome.
operator
Thank you. Next question is from the line of Somil from Lucky Investments. Please go ahead.
Unidentified Participant
Hello.
operator
Yes, please go ahead.
Unidentified Participant
Great. Sort of Navarai sir, congratulations on that. My first question is on the revenue growth and the upward division in the guidance last quarter you guided for about 20 odd percent growth for the full year of FY26 with some back ended which is indicated to be back ended with some power products sort of taking off in the second half. And this quarter we have seen about 100% year on year growth in industrials. So has that already started to take shape or are we yet to see this products that we were talking about take off in the second half of this year?
T.P Imbichammed
Let’s see, we’ve got multiple product kick ins through the Year, some of them have kicked in. We are starting to see revenues both in Q1 and in Q2. But some, there’s some more projects which will kick in in Q3, Q4 and it’s just not industrial. It’s across the board to be honest. We are very confident that this growth is there and we are confident that multiple projects are there. That as you well know we are conservative with the world situation, the macro situation.
Unidentified Participant
Right, okay. And secondly on the margins, first gross margin level there’s about 230 bits of expansion. Can you talk about that? Has that got to be the mix changing towards industrials or is it something else? Can you just elaborate on that?
T.P Imbichammed
So it’s interesting though there were tariffs last quarter, we’ve been able to increase our margins. So there’s a good pass through going and the margin wage it will fluctuate. We commit to 33 to 35 certain quarters you may see it higher. The last few quarters you’ve been seeing it higher. But that will continue. We internally target 30 to 35 and if 36 happens we are all happy.
Unidentified Participant
Okay. Okay. And you also mentioned that there was an impact of front loading of investments towards future growth on there was an impact on EBITDA margin relating to that. Would it be possible to quantify that?
T.P Imbichammed
A lot of it is. You know, see when we, because our products are fairly complex, it’s not step and repeat like the consumer type. So we need to start training people for production, starting let’s say this quarter. We need to start training people at least a quarter or two months earlier. So some of that happened because some substantial increases are in the pipeline. So we started doing that last quarter and of course planning on infrastructure and putting things together for this plant increase.
Unidentified Participant
Okay, okay. Any quantifications possible? What would be the impact.
T.P Imbichammed
We commit to what we committed for the year.
Unidentified Participant
All right. All right.
T.P Imbichammed
So there’s no traction.
Unidentified Participant
And finally on the semiconductor equipment new partnership. Is that with the Japanese oem?
T.P Imbichammed
No, it’s. It’s a global oem. So with the semiconductor guide supply, I don’t want to name the customer but top four or five companies in the world.
Unidentified Participant
All right sir, thank you so much. I’ll call back in the team. Thank you and all the best.
T.P Imbichammed
Thank you.
operator
Thank you. Next question is from the line of Praveen Sahai from Prabhu Dasli Ladhar. Please go ahead.
Praveen Sahay
Thank you for opportunity and congratulations on good set of numbers. My first question is related to the growth which you had upward revised to 25% of for this year. So like you had already given a 60% growth. You have already order book a strong order book of 1790 crore. What you know what restricting you to give you know the higher growth guidance. Looking at order book and the performance in the first quarter nine month if I you know calculate on your numbers it’s around 17% only what you are guiding for. So will you please clarify on this?
T.P Imbichammed
So it’s an interesting situation we are in because the last time we gave growth guidance it was the day after operation syndrome. We are confused how the world is going to play out now we’ve got this tariff uncertainty which we don’t see an issue. But let’s put it this way. We are a conservative company and we just want to maintain what we, you know what we said and if the improvement is there we are very happy about it. But we want to be very considerate in what we say.
Unidentified Participant
Okay next question.
T.P Imbichammed
And we have always committed to double by FY27. We maintain that maybe certain slow quarters, certain high quarters but we maintain to double by 527 in three years.
Unidentified Participant
All right sir next question related to order book. Is it possible to give any clarification of like how much is from the box build or some other segment in this order book?
T.P Imbichammed
Sunday 19th we’ve been consistently because we’ve got the highest box bill percentage and we have always been maintaining 50 to 56%. We are 56% now. Our whole goal is to keep increasing this box build mix and that is what is playing out now. And we’ll continue to do that as of Today it’s around 56% and we believe that can as years go by that can improve too.
T.P Imbichammed
The order book mix will be slightly resembling the revenue mix to an extent.
Unidentified Participant
Okay, last question. On the you know capex which you had guided 45 crore for this year is there any increase in that for guidance?
T.P Imbichammed
Pretty close to that and we would say 45 to 55 crores just to be on the safer side. We continue our goals of having a certain age in 10 times and we believe that is achievable. We have a low capex model to achieve a lot of.
Unidentified Participant
Thank you sir and all the best.
T.P Imbichammed
Thank you.
operator
Thank you. Next question is from the line of Jalaj Manoucha from Swan Investments. Please go ahead.
Jalaj
Hello.
T.P Imbichammed
Yes, please proceed.
Jalaj
So congrats on a decent set of numbers. Sir, I had a first question was regarding the US facility. Could you help me understand the unit economics of fixed cost there and the gross margins because even though Our revenue has increased from the facilities ioi but then the data numbers don’t show up any profitability increasing. So could you in the absolute terms, could you help me understand those numbers once?
T.P Imbichammed
So US manufacturing today is around 20% of our overall revenue. And like what KB mentioned in the opening remarks, the ebitda there is minus 6.9% and a PAT of minus 9 crores in this quarter.
Jalaj
So thanks for that. I wanted to understand what sort of fixed cost are we seeing in the US facility and what sort of numbers of top line would eventually make it a break even.
T.P Imbichammed
So what do we like what we had mentioned in the earlier calls. I think one year before our US manufacturing had a losses of close to minus 14 crores. Now it is at minus 9 crores and one of the key customers over there has started to pick up. This started later part of the first later part of the Q1. I think over the next few quarters we do not want to put a number yet but over the next few quarters we believe with the ramp up of that particular key customer we believe we’ll be getting closer to decent numbers on the profitable side.
On the break even or profitable side.
Jalaj
Understood, got it. And second question was around the CapEx. So we did due to CapEx number of 4050 crores for this year. But my sense, I just wanted to add one sense. The utilization in the US facility would be on the lower side still we are doing asset terms of 8x so there is a possibility on a full capacity run up this number two or the asset turn number to go even higher or what.
T.P Imbichammed
Our goal is always, you know,
Suresh Veerappan
internal goal is 10 we say 8 to 10. Absolutely. What you say is right. There’s enough capacity both in India and in the US in the US a little bit more than India. So we’re very measured in what we take in there. So what you say is absolutely right.
Jalaj
And one last question was could you talk a little about. You have partially alluded to the impact of tariffs but what sorts of discussions are we having with clients? Because the clients would start to look at a second best option which would be cheaper to them. I’m sure a client will be working with more than one vendor and would not be only 100% dependent on us. So what sort of discussions are we having with the clients right now? Who takes in the tariff in case this comes in or kicks in or how would the supply chain be managed?
Suresh Veerappan
Like I said earlier, the clients also things are changing so fast so they don’t know how to strategically maneuver that’s one piece. The second feat for us is if you look at the other alternatives they are close to what we have or worse, right? Whether you take the other geographies which can do this manufacturing so choosing which one and most of them have us plus one and because China is completely out as you as you know, because the tariff rates are much higher so it’s between everybody else and India still is okay comparatively. I’m not saying the 25% tariff is right or wrong but what I’m trying to say compared it to the other geographies we are pretty close and with our none of the other apart from Vietnam would have lower cost of labor than India.
And most of our customers are here for the long, long term nature whether to enter the Indian market because most of our Indian customers you see are all multinationals from across whether it is Japan, whether it is Europe, they have come and entered, they’re coming for the India market. So it’s just not the cost alone, it’s the entry into a market like India. And also if you look at the comparison between different countries, we may be a little bit higher compared to UK or something which they cannot manufacture there or EU It’s a challenge. Also these are only two countries which are lower apart from the other countries.
Did I answer that?
operator
Sorry to interrupt Mr. Manocha maybe please request you to rejoin the queue several parties. Thank you sir, thank you so much. Next question is from the line of Vineet from Investec. Please go ahead.
Unidentified Speaker
Hi. Hi. Good afternoon sir. Thank you for the opportunity. Just couple of questions from my end. First is wanted to understand given we’ve had a robust growth in terms of US customers in Q1 was there any element of you know, pre buying ahead of you know, anticipated higher tariffs which were to be which were getting applicable. So was there any sort of element if at all the continuation to that is how has been the customer response at least in the first initial week and are you getting any sense from the customer around potential sourcing strategies for them in case 25% tariffs are too sustained for some time so any broad color there would help.
And lastly the third question is on margins. Now last year we had a very tough Q1 as far as the profitability was concerned this time we are positioned way better. While I acknowledge the investments which are required for the business has taken margins lower but would it be still okay to assume that we’ll better the margins which we had delivered for the whole of last year purely given Q1 last year was extremely weak and we’ve done pretty okay in Q1 this time around.
T.P Imbichammed
Okay, so I’ll try to answer. You had too many questions. If I missed something, just remind me. So what you can look at is the last, you’re looking at just one quarter. Right. So if you start from Q2 of last year, Q2, Q3, Q4, Q1 of this year, you’ve consistently shown growth in margin improvement. So we intend to maintain that and we intend to grow. On the tariff question what we need to understand is, you know close to getting close to 50% of our business is in India now and around three years back that was 20%.
Today we are very happy to diversify in this way and then 20% of our business is us. So what we are talking here is around 30, 35% of production going into Expo and that too a lot of that is FOB India where the customer is directly responsible on doing it. And the last point is even customers don’t know which product has got duty and which product got tabulous and which does not have tabby at different varying levels. So things will settle down. But if you take a longer term picture I think it’ll all equate out because it’s not that somebody else can make it cheaper.
I know I missed one question or three. Maybe the first.
Unidentified Participant
Any element of pre buying?
Unidentified Participant
Any element of pre buying?
T.P Imbichammed
No, no, no. So that is see lot of our planning starts six months eight months ahead. So it’s not easy to even pre buy. So we don’t see any element of pre buying. So that’s why I said if you look at the last three or four quarters we’re constantly showing growth. So this quarter because last year this quarter a little bit neutral, it’s a little bit higher. But we are confident that there’s no element of pre buying. Actually we could have customers wanted more in the sense of new customer patterns which are taking.
operator
So in. Sorry to interrupt Mr. Please request you to rejoin the show sir.
Unidentified Participant
Thank you sir. Sure.
operator
Okay, next question is from the line of Neil Mecca from Equator Securities. Please go ahead.
Unidentified Participant
Yeah. Hi sir, thank you for the opportunity and congratulations for the good set of numbers. So sir, my question was particularly related to the communication segment that has led to you know, sharp jump almost more than 100% growth on a Y basis. So it is driven by certain products or it’s driven by any particular customers. Would you please highlight that because I mean like since last two quarters we are showing it sales segment is a pretty good. So can you just help me? I mean how shaping Up.
T.P Imbichammed
So on a broader sense most of the customers and the and the entries you have done in India are in power infrastructure and communications on the communications segment. So we’re not in the low end of stuff on the communications segment. Our focus is on 5G and 5G radios making it for some of our larger clients in India with the next, you know, few years of growth is you went to that around three quarters back and we will see some uptick on that in the coming quarters also. I hope I answered your question.
Unidentified Participant
Pretty much sir. And this just last question that you know, since we are pouring into the semiconductor equipment side, just wanted to understand that the you know, our partner which we have done the partnership is also into the equipment side or they are into the fabulous side like in founder side. Just wanted to understanding which value chain of the semiconductor we are in. So just wanted to understand that.
T.P Imbichammed
Absolutely in the equipment side it’s the highest end of box build you can do. And we’ve been working to get to that level of complexity and technology and we achieved that. That’s why we are confident. It’s been a journey of you know, three or four quarters to get here. It’s completely on the equipment side and because we do so much of box build, it kind of takes us to the next level of box.
Unidentified Participant
Okay sir, that is from my. Sir. Thank you sir.
T.P Imbichammed
You’re welcome.
operator
Thank you. Next question is from the line of Indrajit Agarwal from clsa. Please go ahead.
Indrajit Agarwal
Hi sir. Thank you for the opportunity. I have a couple of questions. First on the tariff and also on the cost structure. How do we actually identify what we sell off that what is actually under tariff and what is exempt and how long does the exemption exist and wherever we have a tariff or we are subject to pay a tariff, which other countries are more economical after adjusting for tariffs than us.
T.P Imbichammed
So let’s say customer doesn’t know. We don’t know. I don’t know if anybody knows what this product has got. What tariffs now because it’s all fluid. Okay. So the way we look at it is a tariff as of today is a complete pass through to the customer. I’m not saying that will not change but as of today it’s a complete pass through. And your second part of the question where you said which is which country and what. Right. So there are countries between 25 to 15. Most of the countries are there. China has an outlier, you call it 40 or 50 in certain areas.
So it’s not just a specific country. This thing can move to or so it’s a long term vision. Customers have mixed. Most of our customers are not completely cost based because they have invested a lot of time, effort, money to get us going. So they’re looking at the longer term of you know, five to 15 years. So there’s no kind of immediate pressure because wherever they change to they’re going to have some sort of tariff because if there’s no country not with a tariff unless it’s in UK or one of these small islands, wherever they have a 10% but with India’s strength in labor costs as well as technology, I think it’s a long term journey for India.
I’m just not talking Babylon. And since we do complex products it’s not easy to shift.
Indrajit Agarwal
Sure. Secondly, on your semicon equipment can you just throw some more light as to what kind of capex we can end up incurring and what kind of margin this category has in the sense that how scalable this business is for us.
T.P Imbichammed
It is very scalable and there’s a number of products and it’s part of systems what we are building, not complete systems, part of systems we are building. And space is more of a constraint, not a capacity which we are catered to now.
Indrajit Agarwal
And we will get government incentives on this.
T.P Imbichammed
This is after we get moving on this and get into production. We are going to look at government incentives on this.
Indrajit Agarwal
Sure. Thank you.
Indrajit Agarwal
That’s all from my side.
operator
Thank you. Next question is from the line of Chirag from Keynote Capital. Please go ahead.
Chirag
Yes, thank you for the opportunity. So I just wanted to understand one thing. The pace of order book growth seems to be flat enough. Just wanted to have your look. Are we facing any challenges because of this tariff? Only due to which order book growth is not at the same pace it was earlier.
T.P Imbichammed
So we see, as you know, we do complex product and we look for profitable growth rather than growth at all cost. The order book is 7090 for the next 12 to 14 months plus 1157 crores apart from that and you don’t count the orders which you have more than three years. Okay, so there’s another element of that. So this itself will get you around 2,900 crores give or take a certain number. So if you look at it that way on a three year period you have the orders. So we just break it down to show you the immediate what we can execute.
And lot of the 12 to 14 months will start flowing into. Sorry, a lot of the 14 to 30, 36 months will start flowing into the 12 to 14 months.
Chirag
Yeah, I do get that. But still trying to understand on an annual. On an annual basis or a monthly basis, what is the run rate now? And so if our current run rate last year was X and this year it’s X plus Y. Just wanted to understand from that perspective, are we expecting on a monthly basis our order book to increase at a faster pace going forward?
T.P Imbichammed
A couple of points there. One. First, our order book has grown by 23% right now Q1 to Q1 year on year. Okay. Second is like what we had mentioned earlier. Many of the new projects are either in proto stakeholders stage or one step before the commercial production commences. So the larger orders for each of those projects which we won over the last few quarters is expected to come through over the next one two quarters. So that is also one of the reason why we are comfortable in communicating that we will be able. We will try and double our revenues from FF24 to FF27.
Chirag
Right. That’s fair. Secondly, I just wanted to understand, as you have mentioned EBITDA margins and PAT margins for India business, India plant business specifically, which is 13 percentage and 8.8 percentage roughly. Will it be possible for you to give us the gross margins in India India plants?
T.P Imbichammed
We generally do not provide that kind of a breakup. But what I would like to highlight is for us, we have been able to steadily maintain our gross margins over the last four, five years now. Okay. 33 to 35% is the guided range. We’ve been happy to maintain at the top or upper end of the range over the last few quarters now.
Chirag
Fair enough. And what kind of cash flows are.
operator
Sorry to interrupt. Mr. Chirag. May we please request you to rejoin the queue, sir.
operator
Thank you. Sir. Next question is from the line of Bala Subramaniam from Aran Capital Markets. Please go ahead.
Bala Subramanian
Good evening, sir. Thank you. Opportunity also I just want to understand this partnership for.
operator
Your voice is breaking sir.
Bala Subramanian
Right now. Sorry sir.
operator
Yes, please proceed in between.
Bala Subramanian
It’s breaking so that ZCO partnership special EB drone components.
Bala Subramanian
It.
Bala Subramanian
And.
operator
So you’re not audible. Are you using microphone or something? Please use your handset, sir.
Bala Subramanian
So right now?
operator
Yes, please go ahead.
Bala Subramanian
Yeah. Sir, partnership especially focused on EC components and what kind of synergy we can able to create through this partnership. And what percentage of future revenue could come from design lead manufacturing versus a traditional ems. And secondly, this local PCP procurement is increasing due to pli. What percentage of inputs are still imported and we are like what kind of like dependent dependencies in terms of sourcing. Is there multiple Sources we have or still we are dependent on Chinese components.
T.P Imbichammed
Okay, just to answer your first part of question. So the two partnership, one is drones. Now I can specifically say it is for the power electronics and drone motors which is today 95% of the motors come from outside the country. So we believe that we’re driving that change we can happen in India with zepco. Apart from that, the design led. So most of our customers in the power domain, which is a good piece of our business, both in industrial and clean energy, are slowly starting to use Zebco to design and redo manufacturing. Did I answer that? Manasubermi?
operator
Mr. Subramaniam, does that answer your question? No response from the current question, sir. We’ll move on to the next question from the line of Naman Jain from Kotak Institutional equities, please go ahead.
Unidentified Participant
Hello, Am I audible?
operator
Yes, please go ahead.
Unidentified Participant
Okay. Yeah. So if you can just expand a bit on power electronics. Are you also entering into BEF given, you know, a lot of regulations are coming into increase indigenization of VSS in India.
Unidentified Participant
Can you just expand BE ITSF for.
Unidentified Participant
Me as battery, battery energy storage system which we do have.
T.P Imbichammed
So as of now the focus is outside India and today we have the capabilities and the knowledge to do that. So let’s get stability going where the margins are and then we’ll come back and address that if required.
Unidentified Participant
Okay.
Unidentified Participant
All right.
Unidentified Participant
And second question, I know you have answered a lot on tariff already but you know, just another question. What’s your view, let’s say if the situation doesn’t improve from here on, do you believe you will start facing some pressure as to from your customers to share a bit of the tariff loads? I know you said FOB for some of them, but you know, what’s your estimate if the situation continues to remain as is?
T.P Imbichammed
So the two elements we look at, you know, whatever we did, you know, by luck of a choice, diversification into India, you know, because we had 80% exports if you look at it three years back, right. So we are getting close to 50% and most of our growth will also come from India. And if the US side of it, if there is going, my firm belief is that as of now we have no answers and no solution on both sides. And these are technically, you know, it’s not something people can change overnight. There may be give or take.
And like I said, you know, 45 to 50% is India, 20% is US and 30% is what we’re talking about. You know, where the tariff kind of comes and most of that is FOB and a few of that is only gdp. So it’s as we, you know, as of now, you know there’s talk but there’s no. So the effect is going to be not like the whole business or so it’s going to be less than 10 to 15, I mean 15 to 20% max of the business which, which is affected. And if you look at what is going to be tariff and what is not going to be tariff, when that clarity comes, life will be a lot easier.
Unidentified Participant
Okay, thank you.
operator
Thank you. Next question is from the line of Sumanth Kumar from Motilal Oswald. Please go ahead.
Sumant Kumar
So.
Sumant Kumar
We have entered into semiconductor equipment manufacturing. So can you elaborate more about that what kind of product we are going to manufacture?
T.P Imbichammed
So a lot of it is the power related boxes. Okay. And I would not like to go much more deeper into this. And as we, as we what is it? Expand, continue to grow in this segment we give you a lot more clarity on where we are heading. But these are complex systems
Sumant Kumar
testing tool kind of.
T.P Imbichammed
No, it’s not on the testing tools.
T.P Imbichammed
No.
Sumant Kumar
Okay.
Sumant Kumar
It’s part of the equipment itself.
Sumant Kumar
Okay. And talking about the. So can you talk about in a EBITDA marketing guidance for FY26.
T.P Imbichammed
We generally do not provide a guidance per se on the EBITDA or the PAC levels on a fully basis. But having said that at a Gross margin level 33 to 35% is the guided range. And second like indicated earlier, we expect with the ramp up revenue expected in the second half of the year it should be operating leverage to be more evident as we in the second half.
Sumant Kumar
So can you talk that way or whatever the historical EBITDA margin we have can we reach in the coming year or this year?
T.P Imbichammed
Rather than putting out a number over there, how I would like to highlight this right now in the first half we are upfronting our cost and investments whether it is the people plant or on the capabilities. But the results of all of these efforts which is happening in the first half I think will start becoming more evident as we get to the later part of this fiscal year and it will continue to flow into FY27. We’ve always been focused on not growth at all cost but profitable growth. That is something that we will be very cognizant of in all of these.
Sumant Kumar
Thank you.
T.P Imbichammed
Thank you Suman.
operator
Thank you. Next question is from the line of Bharat Gulati from Dalalan brochure. Please go ahead.
Unidentified Participant
Yeah, thank you for the question.
Unidentified Participant
So just I Want to understand if you can throw some light on when will revenue start coming in for the semiconductor business?
T.P Imbichammed
Yes. So we’ll start. It’s going to be a gradual step up. So you would probably start seeing some of it next quarter then gradually growing over the next three to five quarters.
Unidentified Participant
Okay. And just want to understand that if the tariff situation persists, can we see US Manufacturing contribute more as a percentage of revenue?
T.P Imbichammed
So we are very selective in what we do there. So because the whole business is growing. Okay. So though we say 20%, the absolute number may be higher. Okay. So but we are ready if customers are willing to pay the higher amount, they are ready to do that. And just again, you know a lot of new customers wanted to be stop for a short time before they come to India. So if they come there, this is something like a, you know like a beach head, like what, what we call it. So it’s they start there then move to India.
The intention is to move to India.
Unidentified Participant
Right. Right.
Unidentified Participant
Okay. That’s it. Thank you sir.
operator
Thank you. Next question is from the line of Vipro Shivasto from Philip Capital. Please go ahead.
Vipraw Srivastava
Hi sir. Thanks for allowing me to ask a question so quickly. Just a bit on the math. So in the Q4 presentation it was highlighted that the Indian business has an ebitda margin of 14.2%. In the Q1 presentation it’s highlighted that Indian business has an ebitda margin of 13.2%. So that’s 100 grits decline. But overall margin has declined by more than that. So is it fair to assume that US business aborted margin has declined significantly more?
T.P Imbichammed
So overall consolidated level our ebitda margins in Q1 is 9.2% vis a vis 2.2% in Q1FY25 and 12.1% in Q4FY25. The main reason being we expect a ramp up on all the new business coming through in Q2 and Q3. So second half is going to be there. So we are upfronting some of our costs cost over there. So that is why at a consolidated level itself there has been a EBITDA margins are at 9.2%. The effect of that is what we are reflect we are seeing in both the India manufacturing as well as the US manufacturing.
US manufacturing the PAT is around -9 crores for this Q1 at again -14 crores same time last year.
Vipraw Srivastava
Right sir. And so last question from my end. Obviously tariffs has been there and there is no clarity on what will happen in the coming months. But has the Company got any, you know, assurance from a US client that they can manufacture in India or if the client asks you to ship to us, do you have any, you have any pricing power over the client? Can you tell them that we only manufacture in India? So what’s the dynamic there?
T.P Imbichammed
So end of the day, a couple of points there. See manufacturing in the US even with tariffs is not going to work because the costs are significantly higher. So unless the customer needs to build it there, it’s still going to be us because China is not there. It’s a lot easier for India now. But other geographies, again the tariffs are within five points of what India is. So the concern is there. But we are fairly confident because the US is used to tariffs because China travels at 30 or 35, it changes often, has been there for a couple, three, four years.
So the US companies are used to paying tariffs with China. So now it’s everyone. So that’s the issue now. And it’s still significantly lower than what China tariffs are. So they’re very used to tariffs. It’s new to us but customers are used to tariffs out of China.
Vipraw Srivastava
Right. And the last question if I’m allowed to ask on the one big beautiful bell, battery energy has been battery energy IRA incentives will be removed from 2027. So post that. How do you see your clean energy segment progressing?
T.P Imbichammed
We are very happy with that happens because a lot of the production will move to India but the demand is there whether it’s made in India or made in US that’s the segment. That’s why we are excited about.
Vipraw Srivastava
That’s a structural positive, right? If I’m standing correct. Because then you make more profit.
T.P Imbichammed
Absolutely.
T.P Imbichammed
Yes.
Vipraw Srivastava
Thank you.
T.P Imbichammed
You’re welcome.
operator
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to Ms. Bunika Nair for the closing comments.
Bhoomika Nair
Yes, thank you to all the participants for being on the call and asking the questions and thank you very much to the management for giving us an opportunity to host the call. Thank you very much sir and wish you all the very best. Any closing remarks from your end?
T.P Imbichammed
Yes, thank you. Vumika FY26 has started strong travel on with robust revenue growth, solid execution and continued customer traction across key markets. The upward revision in our revenue growth guidance reflects our confidence in our business outlook. We remain focused on scaling new programs, enhancing capabilities and investing ahead of the growth. Our entry into semiconductor equipment space marks a key step as we expand into more advanced high potential segments with a healthy order book, expanding customer engagement and a flexible global manufacturing model. We are well positioned to sustain momentum through the year and deliver profitable growth.
We thank our investors for the continued support and look forward to updating you in the coming quarters. Thank you.
operator
Thank you, sir. On behalf of DAM Capital Advisors, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.