BHARAT ELECTRONICS LTD (BEL) Q1 FY23 Earnings Concall Transcript

BHARAT ELECTRONICS LTD (NSE: BEL) Q1 FY23 Earnings Concall dated Jul. 21, 2022

Corporate Participants:

Renu Baid — Vice President, Institutional Equities IIFL Securities

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Analysts:

Ankur Sharma — HDFC Life — Analyst

Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst

Lavina Quadros — Jefferies — Analyst

Vishal Biraia — Max Life Insurance — Analyst

Amit Mahawar — Edelweiss — Analyst

Amit Pindi — Morgan Stanley — Analyst

Nitin Arora — Axis Mutual Funds — Analyst

Harshit Patel — Equirus Securities — Analyst

Abhijit Mitra — ICICI Securities — Analyst

Harshit Kapadia — Elara Capital — Analyst

Venkatesh Subramanian — LogicTree — Analyst

Bharat Parekh — CLSA — Analyst

Presentation:

Operator

Ladies and gentlemen, good morning and welcome to the Q1 FY ’23 Earnings Conference Call of Bharat Electronics Limited, hosted by IIFL Securities Limited. [Operator Instructions]

I now hand the conference over to Miss Renu Baid from IIFL Securities Limited. Thank you and over to you ma’am.

Renu Baid — Vice President, Institutional Equities IIFL Securities

Thank you very good morning ladies and gentlemen. Today we have with us the management of Bharat Electronics to discuss the 1Q FY ’23 results and the outlook going ahead. The management today is represented by Mrs. Anandi Ramalingam, Chairman and Managing Director in-Charge and Director Marketing, Mr. Dinesh Batra, Director Finance; Mr. Damodar Bhattad, GM Finance; and Mr. Srinivas, Company Secretary.

Without taking much time, I would now like to hand over the call to Mrs. Anandi Ramalingam for her opening remarks. Thereafter we can start the session with Q&A. Thank you and all to you ma’am.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Good morning and thank you Mrs. Renu. As you all know, we have done very well in the Q1 of this year. The results have already been declared and you must have gone — seen that. So maybe to save time on the discussion. I would just request our Director of Finance, to give a few of the salient features of the Q1 performance and then we go into the Q&A, because we need to close it at around sharp 11 o’clock.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Yeah, good morning to all of you. I am Dinesh Batra Director Finance, Bharat Electronics Limited. I am very pleased to share about our Q1 performance. In the Q1, we have clocked turnover of INR3064 crore, which is a growth of 95% YoY. Our profit before tax is at INR578 crores, and profit after tax at INR431 crores. And with these figures, we are maintaining our guidance of 15% growth on the annual basis, FY ’23 and our EBITDA which we told from 21% to 23% and we are quite hopeful of maintaining it around 23%. Our material consumption in the Q1 has come down to 61.95%, from the 64.95% from the corresponding quarter of previous year, which is 3% down and which indicates what we told that, our attention is on the material consumption and we are quite hopeful to bring it 200 basis [Phonetic] points from the previous year, which was at around 60% for the complete year, and this year we are quite hopeful to bring it down to 58 around.

Our employee benefit expenses also have come down from the quarter of the previous year, and we are having a higher other income and this year we have received INR78 crores from the our associate company and special dividend from GEBE. And our order book position is standing — at the end of — on the 1st July INR55,300 crore. And just to give you a glimpse of what major orders we have executed during Q1, we have done LRSAM, Akash Missile System, IACCS, AFNET and CSS Phase II. So these are the major highlights of the Q1 financial, and again I am reiterating, with this figures of Q1, we are confident of achieving 15% growth on the complete year.

And with this I hand over it back to CMD Madam.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yes, Mrs. Renu, we can continue further with the Q&A.

Renu Baid — Vice President, Institutional Equities IIFL Securities

Thank you very much. Can we start the Q&A?

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Ankur Sharma from HDFC Life. Please go ahead.

Ankur Sharma — HDFC Life — Analyst

Oh yeah hi, good morning ma’am. Thanks for your time. Three questions from my side. One, clearly, we’ve seen this very strong execution come through in Q1, post the Q4 and I remember you said there were trip shortages, which had affected sales in Q4, and I’m clearly seeing some of that, you know, kind of going away. So if you could just update us, you know, how are we placed on that front? You know, have supplies improved? Do you believe you know as we go into the forthcoming quarters, that should become less of a concern? And we are also hearing from some of the chip manufacturers also that, supplies have obviously gotten much better, so some comments from your side?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yes Mr. Ankur, supplies have started — the resumption has started. For the last quarter, I mean in the last — Q4 of last year, we had told that around INR2,600 crores of our sales had got impacted due to the chip shortage issues, and we are really happy to say that, out of that about INR821 crores we could liquidate in the first quarter. So INR821 crores [Technical Issues] got liquidated and the good part is that, most of the chip manufacturers have now started giving us a commitment. So with those commitments, we are quite confident that it will be looking tight, but we will be able to meet our guidance of 15% growth.

Ankur Sharma — HDFC Life — Analyst

Okay, perfect. Okay, that’s good to know. Ma’am second question would be on the order inflows. Clearly Q1 obviously has always been a weakest quarter. The first half normally is a weakest quarter for us, and then it’s always been more of a second-half — when we see a substantial pickup in ordering. So if you could just highlight you know the mix of orders, you know which you expect to book this year, both the larger size and you know the regular radars and the smaller size you know, the optronics and the communication devices etc. So just some color there, you know which are some of the larger projects, and some medium sized projects, which you think could come our way to kind of help us get to that INR18,000 crore, INR19,000 crore number which we are targeting for this year?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yes, yes we are still retaining the guidance of INR18,000 crore, INR19,000 crore. In fact, we are hoping that we will be able to touch INR20,000 crores of order acquisition this year. As of now, I think around INR850 crores have been acquired by us, and the major projects which we are likely to acquire in the months or in the coming months are Akash Prime, which will again be an order from BDL for about INR4,000 crores. We have the Himshakti order of electronic warfare system, land based electronic warfare system, which we were expecting to get it in the month of March itself, will now come through. That is around INR3,200 crores. Then there is a radar — Arudhra radar for the Air Force, which we are targeting at around INR3,000 crores.

Then we have the midlife [Phonetic], our helicopter EW system, for MI-17 helicopters which is around INR1,500 crores. We have recently — DAC has given approval for the WLR of another 20 — 12 numbers, which is about INR1,000 crores. Then we have a lot of ship based programs, NGMB NGO, OPD and MPV, CPS, all these ship based programs, we had already tendered out and shipbuilders have come — one or the other shipbuilder has become L1, and there are umpteen buyer nominated equipments in this.

So each one of them is roughly on an average about INR2500 crores from [Indecipherable]. And then we have other than this, for the naval fire, we have another project called the Lynx U2 which is a fire control system, for which we have received an RFP separately, and the bid has also been submitted. So this is also a high value project of over INR2,500 crores. Then we have BMP — AMPs are there, and of course BMP upgrade program, which again we were thinking, that this will happen last year, is likely to come through in this year, that will be around INR2,000 crores.

And these are regular orders of AMC, spares and then small, small — different types of communication equipment and others will continue. So we are quite hopeful of touching that reasonable figure of INR20,000 crores this year. Some single site also, some INR500 crores will be there, a minimum of INR500 crores. So it will still be maintained over and above the base, whatever is the major orders I have just listed now.

Ankur Sharma — HDFC Life — Analyst

All right. Got it. Great. Good to know that. And just a last question, you know, we’ve seen this big jump in other income, so just trying to understand what’s driving that jump? Is it more because of higher cash balances and therefore if you could also help us on the debtor, and the — the receivable position as well on the balance sheet? Yeah, that’s all from my side. Thanks.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Yeah you are very right. We have a higher cash balances. So the interest income has gone up, and now as interest rates are also firming up, so we are getting good returns. Also, as in my opening remark I told, this year in Q1 we have received the INR78 crores of a special dividend from our associate company GEB. So these two are the reasons for the higher other income.

Ankur Sharma — HDFC Life — Analyst

And on the debtor position, sir, if you could help us?

Operator

Mr. Sharma, I would request you to rejoin the queue please. There are many other participants waiting for their turn.

Ankur Sharma — HDFC Life — Analyst

Okay. Thanks.

Operator

Ladies and gentlemen, in order to ensure that the management will be able to answer questions from all the participants in the conference, please limit your questions to two per participant. Should you have a follow up question, please rejoin the queue. Thank you.

The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund. Please go ahead.

Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst

Yeah hi sir. Hi ma’am. Congrats on good set of numbers. Like you had mentioned last time, around INR2,700 crores of supplies impacted due to chip shortage. So is that complete INR2,700 crore done, and you feel that there is yet more in that?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah. Out of that INR2,600 crore, we could liquidate INR821 crores exactly in the first quarter, and the remaining will get liquidated in — INR500 crores in Q2 and the remaining in Q3, Q4. So it depends on the chip manufacturer, so we are confident of liquidating the whole INR2,600 crores by Q4 of this year.

Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst

Okay, so this additional amount will continue to happen in next couple of quarters also, till this normalizes, is that the understanding?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yes. Yes.

Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst

Okay. And ma’am, we had talked about the Smart City investment, INR1500 crore. So what is the status over there?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

As I had told you last time also, we have given a final proposal to the UP [Phonetic] government as well as the Ministry of Housing and Urban Affairs. They are now trying to take approval for that. So maybe another month or so they said that they will be able to get the final administrative approval. Post which, they will call us for a discussion on how to implement that project. But we are sure that it will start somewhere before in September, October and a large portion of it, we may have to do it in the current financial year itself.

Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst

Okay. Okay ma’am, I will join for further question. Thanks.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Sure. Thank you so much.

Operator

Thank you. The next question is from the line of Lavina Quadros from Jefferies. Please go ahead.

Lavina Quadros — Jefferies — Analyst

Yeah hi ma’am, just wanted to check something because of chip shortages, you have easy and you’ve actually seen revenue growth being very strong in 1Q. So you have a backlog which is getting — which should have been executed last year, which has been executed in the course of this year. You think you can actually beat the 15% revenue growth number of this year, or is it that this impacted revenue of last year is factored in your guidance? Just to understand.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, it I mean the see all the other projects also, the commitments from the semiconductor manufacturers are not in line with what we had anticipated. There has been a delay. So cumulative delay will always be there, and the remaining projects also are part of it is getting affected. We will try, but 15% we are very confident. Over and above that we will have to really see how it all pans out, maybe in the next six months.

Lavina Quadros — Jefferies — Analyst

Okay, thank you. And ma’am lastly, with the war in Russia-Ukraine, are you seeing any additional commentary from the ministry to accelerate indigenization, or any commentary, any reforms you think that could come up further from the ministry, in order to…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, the policy, the ministry has already indicated to us, that we should not — we should no longer be dependent on Russian and Ukraine suppliers, so we they have asked us to find alternatives and preferably indigenous ones. So they have been singled out and then lot of indigenous actions have been initiated. So most of them we have found — we have at least given them a roadmap on how, when and how we will be able to indigenize it. And in addition to that, they are now asking us whether we can take up the maintenance of Russian platforms. All these platforms have lot of electronics in it. So ministry has asked us, and we are examining it and looks like we will be able to do it.

But I mean just operations of these systems may not be a big problem, but then if we have to support them with a lot of spares and other things, that we are trying to examine and see how long — how much time it would take, and whether it is better to use our own system in place of the system which is already there. So that detailed discussion is going on with the ministry, but this is a very good opportunity for us. We are also trying to encash on it. But maybe we will get some more details in another two to three months.

Lavina Quadros — Jefferies — Analyst

Thank you.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you.

Operator

Thank you. The next question is from the line of Vishal Biraia from Max Life Insurance. Please go ahead.

Vishal Biraia — Max Life Insurance — Analyst

Hello, thank you. Good morning. The indigenization being — was somewhere around 45% of the BUM, which used to be about 50% earlier. So in the next few years, what would be our internal target as to where would we want this indigenization to be?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See indigenization, I don’t know whether — I mean whether you have got it right. See what we were telling you, in this transfer [Phonetic] of about INR15,000 crores if you see, 80% to 82% is from indigenous technologies, that is either BEL developed or DRDO developed. And in that, we — see most of them also have a foreign content in it, because we do not have — you know everything is not made within the country, so our material cost is also there. So material cost, that is why we were telling, that what is this standing at 64%, we will try to reduce it by doing a lot of indigenous development work. So it is at the subsystem or the component level. But at the main system level, already lot of work has happened, and as I told you 82% of the turnover is coming from indigenous technologies. Out of that, 50% — out of the 82%, maybe around 40% to 42% is from DRD and remaining 40% is from BEL’s own developed products and systems. Is it clear? Is that what you wanted?

Vishal Biraia — Max Life Insurance — Analyst

Yes, yes yeah, absolutely. So I was just trying to understand, this 42%, 43% that BEL indigenously does, can this — I mean to what extent will this increase over the next few years? I mean, are there any internal targets that you would like to share?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, yeah. See our internal target is to be — to have a full 100% BEL developed, we also — because DRDO also — of course we are the most preferential partners for DRDO. But then DRDO also you all know that they have got a policy, they have also started opening up. So it’s not that all technology comes to us. The only major programs or programs which are very complex or very critical in nature, they prefer from companies like BEL, who has got a lot of experience. The smaller ones, we are not pretty sure. So it will surely go up.

In fact long back if you see about five to six years back, most of our indigenous production systems were either from DRDO or some other academic institutions. Now it is not so. So we have slowly crossed 40%. And as you rightly said we have a target, we have a target of reaching up to 75%, and a lot of development work is happening on the civilian business side, especially for Airport Authority of India, whatever requirement they have, we are trying to customize whatever solutions we have to meet their requirements and we are doing a lot of work for rail and metro business, for railways.

So all these are purely indigenous. I mean we are not taking technology or are we not collaborating with any other institution for this. So once this comes through, surely the indigenous or whatever is the turnover from our own developed products and systems, will surely grow.

Vishal Biraia — Max Life Insurance — Analyst

So just one last thing, we were we were developing the TCAS system for the railways so — and the approval was pending. So where are we currently based on that?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, development is going on, but the development is going on at a very, what to say, it is quite a lot very normal, and in fact it is much more than what we had expected, good development work has happened. But for submission to — for taking up the certification, it may take a little more time, because we are trying out this [Indecipherable] domain which is new to us. So whatever domain knowledge we had for the services, we are now trying to customize. So lot of other issues keep coming up now and then, but the development is on the right track and hopefully another six months we should get the certification.

For metro anyway, we have already completed the trial order, which the MRT has given us. And they are quite happy with that, and now they are planning — they have already issued a circular amount to all the other metros, that this particular solution is to — has to be indigenous. They cannot import it. So it has already been put under the banned list.

Vishal Biraia — Max Life Insurance — Analyst

Okay, and just to understand…

Operator

I am sorry to interrupt, Mr. Biraia, you’ll have to rejoin the queue.

Vishal Biraia — Max Life Insurance — Analyst

I’ll do that. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Amit Mahawar from Edelweiss. Please go ahead.

Amit Mahawar — Edelweiss — Analyst

I just have two questions. First, is on the large — some of the large platforms, what are the timelines, especially on QRSAM, MRSAM, the LRSAM Phase II seems to be delayed and then CIWS. So these three four large projects, can you share the timelines? And you can also include IACCS 2 or CHAWC [Phonetic]. That’s my first question ma’am.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, as far as — see the LRSAM Phase II is concerned, we have also not been — I mean we really do not know when it will happen we have — of course, there is a rethinking in navy, whether they should go ahead with the current solution or the one which is developed by DRDO. But the one which is developed by DRDO is also — we are working with them for both the radar as well as the weapon control system. So either way it will be good for us. But then we are not able to really commit on the timelines, as far as LRSAM Phase II is concerned.

But for QRSAM we have already given our budgetary quote and army is taking us — going to take up the AON, that is acceptance of necessity for this particular case, maybe another couple of months, and post which they may order about — QRSAM for about two regiments. This is what — the total requirement is for four regiments, but what we heard is, that they will initially go for two regiments, and then follow it up with another two, maybe after a couple of years.

As far as MRSAM is concerned, MRSAM Air Force also, now we have the firing unit which was delivered by IAI for the contract which they got directly from DRDO, and that has already been completed. The firing trials have happened. Post which Air Force has asked us to give a budgetary quote for taking up necessary approvals. So we are in the — the finalization of budgetary quote is in progress at BEL, and maybe we will be able to submit it another fortnight, post which they will take up for the approval. So I think QRSAM, as well as MRSAM may happen in the next year, ’23, ’24, yes; because after they take the AON, then the RFP will be issued, then we will respond to the RFP, then negotiation will happen, then CFA approval. So most likely it will be ’23-’24.

Amit Mahawar — Edelweiss — Analyst

Okay, fair point. Second question…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

As far as EW Systems are concerned, I mean we are still to receive any formal response from HAL on this, on both LCH and ALS. But of course the ministry has already told, that it will be a BEL solution. But when exactly this will happen, we are also not very clear. Because the existing order of ALH is still being executed by HAL. So post which, the second lot of ALH, which — order which they get only, they will be — trying to fit our EW suite.

Amit Mahawar — Edelweiss — Analyst

You got it ma’am. And second question is on your imports. Of all the total imports that BEL has, what is the share of imports from, particularly Russia and separately from Ukraine, if you can spell out, and you know this far, have we got any impact, in terms of you know overall disruption that we have. So broadly you can share the [Indecipherable] import share of — specifically Russia and Ukraine separately? Thank you.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

The import share of Russia and Ukraine will not be very high, it will be less than 5%. See mainly from Russia, we buy about — we buy a lot of components which are used in all the tanks, T90, T72 tanks. So maybe around INR300 crores, very less. And Ukraine also, our vendor base in Ukraine is also not very high, it is only some five, six suppliers. That is what [Speech Overlap] from the supply, these issues post Russia-Ukraine crisis.

Amit Mahawar — Edelweiss — Analyst

Fair point. Got it ma’am. Thank you and best of luck.

Operator

Thank you. The next question is from the line of Amit Pindi [Phonetic] from Morgan Stanley. Please go ahead.

Amit Pindi — Morgan Stanley — Analyst

I just had a question on the top line, your guidance of 15%, how much of semiconductor supplies can come through, which could raise the revenue growth guidance by [Phonetic]? Because if I look at last year’s numbers, you said that INR2600 crore was the miss on account of semiconductor shortage. So effectively we would reach about INR17,900 crores, INR18,000 crores of top line, which is exactly equal to the semiconductor shortage that we had last year. So are we suggesting that you know the — there’s no big real growth this year, on account of semi issues?

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

It’s not true. In fact, like last year, whatever you know we can shortfall on account of semiconductor, we tried to, you know, fulfill through some other projects. So it’s not that, that total growth is coming from the — whatever we are completing the last year shortage. It’s not so. This is a real growth, and to grow at the rate of 15%, it’s I feel — even that is a struggle. So last year, it’s not that that we could have done. Some of the shortfall on the account of semiconductor, we try to fulfill from the other projects.

Amit Pindi — Morgan Stanley — Analyst

Let me sir ask you differently, if I look at the 15% growth, it implies only 6% growth for the balance nine months of the three quarters of the year remaining. So is that number suggesting some issue on the backlog, some slow moving orders there?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no it is not that. See as I told you, for the remaining projects also, there is not — a clear commitment we have not got, as far as the semiconductors are concerned. So wherever the semiconductor commitments have been received by us, based on that, we are giving a guidance of 15%. So in that 15%…

Amit Pindi — Morgan Stanley — Analyst

Yeah, so that’s what I was asking. That if you received the commitment ma’am, what could be the you know run rate? Could it be 20%? Could it be 25%, if you get all the commitments that you are right now not having?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, yeah. It will be difficult for us to tell. See but finally, even if we get the commitment, we need to see whether we have the capacity, we have the SUs which will be able to handle them. So all this issues will be discussed as and when it comes through so. But there is a possibility that it can go up. And so for every, you know if all these issues are resolved. But then right now it is, I mean we also don’t want to give a commitment or something which we are not very sure of.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

And in fact if you see, the FY ’22 Q1 we were around…

Amit Pindi — Morgan Stanley — Analyst

[Indecipherable]

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Pardon?

Amit Pindi — Morgan Stanley — Analyst

Sorry sir. I was just asking what could be the civil revenue growth for the year, civil part of the business?

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Out of, as you said, INR17,900 crore around, that we will be able to clock. Some 15% will be coming from the civil segments.

Amit Pindi — Morgan Stanley — Analyst

15% of revenue would be civil. So it would be a growth of 20%? Possible…

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

You know that, what is the growth of the civil? Our civil is yet to happen in a real way, as CMD was telling, that lot of projects are underdevelopment from the rail, metro and Civil Aviation, where in fact they were not giving orders in the indigenous market, Indian market till now. So now when that will happen, and that will start happening from ’23-’24 for the next five years. So real growth we will talk in the civil segment then. Today, what I’m saying our — out of INR18,000 crores around, the 15% will be coming in this year from the civil segment.

Amit Pindi — Morgan Stanley — Analyst

Okay, thank you so much, sir.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See what one more point, which I would like to tell you is, last year as DF was also telling, we compensated for that INR2600 crores to some extent by pulling up for some of the smaller projects which we had planned for execution in this current year. So that portion is already gone. So that comfort is not there. See, we always keep some small projects which can be taught, for which we can realize the revenue quickly. We keep such projects. But those projects have all been exhausted.

Amit Pindi — Morgan Stanley — Analyst

Yeah ma’am, that reconciles it. Thank you so much.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, yeah, yeah.

Operator

Thank you. The next question is from the line of Nitin Arora from Axis Mutual Funds. Please go ahead.

Nitin Arora — Axis Mutual Funds — Analyst

Hi ma’am, morning. Can you update us on this Himshakti order, the electronic warfare system? You know it’s been taking quite long. Can you tell us exactly where it is stuck, this upgradation part of the Samyukta One, that’s my first question.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See, actually there’s — I mean it has not got stuck. What happened was at the time of, when the final CFA approval was to be taken, Army thought that they can take the latest one because, the more technology upgradation, they were looking at, whether that can happen within the same project. So that discussion happened. We also examined and we said a portion of it, we will be able to handle, but not the complete one. So what we are now proposing is, that they will take it up in two different contracts. One will be the earlier one, as it is, and one the upgraded one, which will have whatever extra — I mean the latest technologies, which army is asking for. So that decision took little time.

So the equation we also finally told them to have process it as two separate orders. So the statement of case for the second order has just been made, but the first order is in the pipeline. I think it has gone to the NSC, National Secretariat Council, it has gone there, and most probably once it comes back, then it will go to CCS directly. Once PCS approval is obtained, we should be getting the order.

Nitin Arora — Axis Mutual Funds — Analyst

And ma’am in this INR3,200 crore which you mentioned, has there been a revision in the contract price and is that yours and ECIL will also be a part of it, just one clarification I wanted on this?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no, there is no revision in the price, it is the same only, and ECIL is our vendor in this. A portion of it we are buying from ECIL. That’s it.

Nitin Arora — Axis Mutual Funds — Analyst

Right. And any update on the Arudhra radar on the development side, that’s my last question?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah. Arudhra radar, already CNC is on, it is likely to be concluded shortly, and then it’s a very clean case, I mean it is under the approval of Raksha Mantri only. So another two, three months I think we should be getting that order.

Nitin Arora — Axis Mutual Funds — Analyst

So it will come this year or FY ’24 is once you look…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

This year.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Both will come this year.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Both will come. Yes, yes, yes.

Nitin Arora — Axis Mutual Funds — Analyst

Got it. Thank you so much ma’am. All the best.

Operator

Thank you. The next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.

Harshit Patel — Equirus Securities — Analyst

Hi sir, thank you very much for the opportunity. My first question would be on our capex plans ma’am, so could you give us an update on the capex that we were doing at multiple locations, like Palasamudram, Nimmaluru, Nagpur, what is the status? When they will be commercialized? And what would be our overall capex outlook for the next two years?

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

These are all — what all projects you told, these all were part of our around INR3000 crores of capex which we had planned. And out of which, some INR2000 crores has already happened. And Nimmaluru is very nearing completion, and this year I’m very hopeful it will get completed. Nagpur land has been acquired, and now the perimeter wall etc construction is on. Palasamudram, there was an issue of certain, you know limitations being put up by the authorities, as they had brought it into the red zone and certain clarifications, etc were required, and so those things — discussions are going on, and I’m quite hopeful that now our building plans etc will be finalized after getting the clarification from the Andhra Pradesh industrial authorities.

And all other projects are underway, whatever capex we had planned. This year, we are hopeful of achieving around INR1000 crores of capex, and most of our capex plan are on the way. It means underway and as we had scheduled. Except this Anantapur, that is Palasamudram is called, where these some land issues from the authorities were cropped up after our acquiring of land.

Harshit Patel — Equirus Securities — Analyst

Sure, sure understood. Sir, thank you. Thank you very much for the update. My second question would be on our content in LCA Tejas Mark 1A. I believe we are already supplying DFCC, that is Digital Flight Control Computer and also ADC. So apart from that, what are the other products that are going into LCA Mark 1A? So out of INR36,000 crore odd order that HAL has got, so out of that what is passed on to us? Now on top of that, whenever the Uttam radar will come into picture, I think right now we are buying it from one of the Israeli companies. But when Uttam AESA radar will be going into it, does that improve our content in that particular project? What part we will be playing in that particular radar project?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, see the other than the DSCC, air data computer, we are supplying lot of weapon systems packages, like that pylon interface box and other boxes. So altogether it is — our share is about INR3300 crores, about 10%. Currently, we have already got the order from HAL and as you rightly said, once the Uttam radar is approved, then for the production agency of Uttam Radar is BEL only. BEL only manufactured the prototype also and that is now subjected to trial. So this should increase our content. May be each radar may be about INR50 crores to INR60 crores.

Harshit Patel — Equirus Securities — Analyst

Okay, sure. So these will be…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

[Speech Overlap] numbers I can take right now. They may go in for some 50% of imported or 50% of indigenous, this thing is not yet finalized. The proportion is not yet finalized. The ratio is not finalized. So post which we will be able to give you a firm indication of our contribution to LCA Mark 1A.

Harshit Patel — Equirus Securities — Analyst

Understood, ma’am. Ma’am just a follow up to that, as you rightly mentioned, our content is right now 10% to 12% of the overall order. So around INR3,000 crore, so where this 10% to 12% number can go up in the future projects like LCA Mark 2, AMCA. Can we have something like 20%, 25% kind of content, or would that be too much?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no, no. We are also targeting about 20% to 25%. See the main [Indecipherable] we are now developing the EW suite, which also they were procuring earlier from a company called Saab of Europe. So EW suite as well as the radar and the mission computer also if it gets delivered from BEL, then that content will obviously go up much more than 25%.

Harshit Patel — Equirus Securities — Analyst

Understood, understood ma’am. Ma’am thank you very much for answering my questions.

Operator

Thank you. The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yeah, thanks for taking my question. Question is more on the possible order that you see from the rotary wing platforms of HAL over the next couple of years. What can the potential order intake be? And just to understand the radar warning receiver and the MAWS. In Tejas Mark 1, will that come to BEL or will it come to some — or will it come to India as a competitive tender, or what’s your view on that?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See, as I was mentioning earlier, right now it is well imported through us, which HAL is getting for the EW — as far as EW suite is concerned. But parallelly we are developing late, and then we have also been told by HAL, and also been told that they should stop importing henceforth. So that that will surely happen, not only the radar warning receiver, MAWS, but also we are targeting the DIRCUM, Directed Infrared Countermeasure System. So if that also comes through, it will surely go up much further. And of course [Speech Overlap]

Abhijit Mitra — ICICI Securities — Analyst

Just to sort of — just to add a follow up here, because you have got interestingly the RWR and the MAWS — C295, right? So those are also for the back ended production in India or?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, pardon?

Abhijit Mitra — ICICI Securities — Analyst

So those deliveries would be for the — second batch would be produced in India?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Oh, completely it will be produced in India. No you are telling about the aircraft or the…

Abhijit Mitra — ICICI Securities — Analyst

C295. Yeah aircrafts yes, yes, yes. Because from there will be a — first batch would be flown in, and the second batch would be produced here. So this order is for the second batch?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Pardon?

Abhijit Mitra — ICICI Securities — Analyst

So this order of C295 is for the second batch right, that will be produced in India?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no, no, no. That is for the complete — it is for the complete. See, as you rightly said, some ultras [Phonetic] were getting delivered directly by Airbus, remaining will be done along with the Tatas in India. But this — the order which you have got is for the complete lot.

Abhijit Mitra — ICICI Securities — Analyst

Okay. And so then — so then why is this dichotomy between, say, Tejas Mark 1A and I mean can’t those — they will be cross marketed or…?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See, the LCA Mark 1A or Tejas is a fighter aircraft, whereas the C295 is a transport aircraft. So the requirement is different.

Abhijit Mitra — ICICI Securities — Analyst

Yeah, yeah that’s true. Yeah, yeah, absolutely. But I’m saying can’t these capabilities be cross marketed or?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no, no, it can be, but that is why I said that that that development is happening. So in a helicopter you will have to — the form fit also is very, very important. It has to be as light as possible, because the space there is very less so. All this customization and some — the technological development is happening now, and we are quite confident that maybe after some few numbers, they should be able to take our solution.

Abhijit Mitra — ICICI Securities — Analyst

Okay, sure, sure. And just one couple of lines on the Rotary aircraft, possible order flow that you see over the next couple of years, and that would be it…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See, for all the other rotary — like ANH, NCH, we are already supplying the compass, that is that Electro Optic payload which is manufactured at our Chennai plant, that is being supplied. Then we are also supplying the –HUD, Head Up Display also, we are supplying from our Panchkula unit. And slowly we will — we are trying to see, whether we will be able to pitch in our EW system, along with the DIRCUM.

Abhijit Mitra — ICICI Securities — Analyst

Okay, okay. Got it, got it. That’s all from my side.

Operator

Thank you. The next question is from the line of Vishal Biraia from Max Life Insurance. Please go ahead.

Vishal Biraia — Max Life Insurance — Analyst

Yeah, so just — just coming back to the railway TCAS order, what would be the potential size? Because it seems that it could be INR7 crores per kilometer as the opportunity. So how big is the percent that you are targeting? Thank you.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Maybe around INR12,000 crores. I mean, of course this is a rough estimate, it is not a very detailed one. But it will be around INR10,000 crores to INR12,000 crores.

Vishal Biraia — Max Life Insurance — Analyst

And of this, what would be imported?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Pardon?

Vishal Biraia — Max Life Insurance — Analyst

Of this INR10,000 crores to INR12,000 crores, what would be imported currently, all of it?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

All of it is getting imported.

Vishal Biraia — Max Life Insurance — Analyst

And when you mentioned — sorry, when you mentioned that DMRC has written to the other metros that this should not be imported anymore. And this INR10,000 crores to INR12,000 crores?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Not the TCAS, it is the APS, that Automatic Train Supervisory system.

Vishal Biraia — Max Life Insurance — Analyst

Okay. And the INR10,000 crores to INR12,000 crores is — we are referring to TCAS.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, yeah, yeah. Exactly, exactly.

Vishal Biraia — Max Life Insurance — Analyst

Okay. And we have received approval from for the metro side, the railways is still in trials?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Railways are still on trials. Yes, yes.

Vishal Biraia — Max Life Insurance — Analyst

Okay. Fair enough, madam. Thank you.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you.

Operator

Thank you, the next question is from the line of Harshit Kapadia from Elara Capital. Please go ahead.

Harshit Kapadia — Elara Capital — Analyst

Thank you for the opportunity and congrats for good set of numbers. A couple of questions from my side. Can you also help us with the EBITDA margin guidance for FY ’23, given that your material cost consumption is going to come down by 200 bps, can we expect a sharp rise in the EBITDA margin for FY ’23?

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

I’m maintaining the margin around 21% to 23% when I give the range, but I am very hopeful of coming around 23% and that is after taking into account of, you know some 200 bps reduction in the material consumption, but that is the whole year we have to, you know, control it, as the prices are increasing. inflation is going up etc, interest rates are firming. So that will be a big challenge to maintain it around 23%, but we are very hopeful — because we are not to take into account only the material consumption, but there are other expenses also. So we are keeping close watch on those. So we will maintain around — you know 21% to 23%.

Harshit Kapadia — Elara Capital — Analyst

Fair enough. Sir, a couple of questions on the non-defense side. So can we expect the execution of the EVM and VVPAT order to be done in this FY ’23…

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, yeah, partially in FY ’23, maybe about 40%, because this also got affected because of the semiconductor chip shortage. So now just last week, we got a commitment from the supplier. So a part of it is will get delivered by March, that is Q4 of this year, and the remaining will be Q1 of next year. So maybe in the ratio of 40% to 60%.

Harshit Kapadia — Elara Capital — Analyst

Understood, and the order size for this was close to INR4,000 crores, is that correct, ma’am?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, no INR1,500 crores.

Harshit Kapadia — Elara Capital — Analyst

INR1,500 crores. And could you help us, you know to get more clarity on the space electronics, I know we had lost out on the first tender. Are you seeing more tenders coming out from the PSLV side on the rocket, can highlight it?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No other tender has come through, but we are in discussion with ISRO. We are just seeing if there is any other that will come through. Meanwhile L&T has asked us whether we will be interested in manufacturing some of that orders which they are getting for the PSLV rocket launches. So we are we are in discussion with them. We’ll have to see if it is viable and if it makes sense for us, we will start back.

Harshit Kapadia — Elara Capital — Analyst

Okay. Thanks and all the best.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you.

Operator

Thank you. The next question is from the line of Venkatesh from LogicTree. Please go ahead.

Venkatesh Subramanian — LogicTree — Analyst

Yes ma’am. Good morning. My question is in terms of the order book, out of the total order book of INR55,000 crores, if you are able to execute INR18,000 odd crores this year, the remaining would get executed, would it be fair to say over the next two years, this is FY ’24 and ’25? And if it is the case, what kind of replenishment of orders do you expect over the next two years, to keep going on from FY ’25 onwards?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

See after maybe as I told you, next year we will be getting both QRSAM and LRSAM. See QRSAM is in the range of INR20,000 crores and MRSAM also will be in the range of INR15,000 crores to INR20,000 crores. So once those orders come up, the order book will really shoot up. What we are now telling, is the normal order which we have been getting for the last two, three years. It is just like how we got Akash Seven Squadron order, and LRSAM order, that really made us to jump for go beyond the INR50,000 crore order book. So similar thing will happen in the next year or so.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

In fact, I would like to add on this, see order book is a dynamic thing. It’s not that today it’s INR55,300 crores and it will be executed in the next two years. They are with the staggered deliveries, depending on the platforms available. So — and it keeps on building up, you know if we are saying INR20,000 crores order inflow this year and some INR18,000 crores get executed, so it will be standing around at 60,000 next year. And that will get again executed next two to three four years. So it’s a dynamic thing. It’s very difficult to say that the whole thing will get executed.

Venkatesh Subramanian — LogicTree — Analyst

Fine. Thank you sir, and second question is, in terms of — you talked about the shipbuilding orders. So if you talk about some of these shipping companies, shipyard companies in India, Mazgaon and GRSE. What kind of order execution or order inflows do you think can happen with respect to shipyards this year, FY ’23?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Yeah, that is what we told you, for MGMV. Yeah MVO, OPV, MVME, CTS, MCV, all together around INR12,000 crores. This year since we are targeting. For all these programs, the CMC is already concluded, and we are expecting the order anytime now.

Venkatesh Subramanian — LogicTree — Analyst

Okay, okay ma’am. Thank you very much. No problem. And sorry ma’am I will just sneak in one more. Exports opportunity, because I think the government is focused on defense exports opportunity. If you take a three-year view, what percentage of our top line can be exports?

Operator

Ladies and gentlemen, we have lost the management connection. I’ll connect them quickly. Give me a moment.

Ladies and gentlemen, we have the management connected now. Mr. Venkatesh, you can proceed with your question.

Venkatesh Subramanian — LogicTree — Analyst

Okay, ma’am. My last question was, exports as a target, internally, do you have a number that you think over the next few years you want to reach in terms of top line, or as a percentage of overall sales, whatever [Indecipherable]?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Our target is to reach 10% of our turnover through exports. But currently it is very less. You are asking about exports isn’t it?

Venkatesh Subramanian — LogicTree — Analyst

Yes, yes. But is that not a very massive opportunity ma’am? In terms — because I think we are looking at exporting more out of India, in terms of electronics, defense, everything?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

True, true. But then it has its own challenges, as we have been keeping on telling. Of course earlier, we never used to get the clearances from all these services. But of late we are getting clearances, but conditional clearance that we will have to reduce the, whatever is the features or make it a little different and all that. So a lot of customization work is also required. So what happens is, that many of the tenders which we participate, they ask us whether the equipment is readily available. So that puts a real challenge on us. So we have also little selective. But then, the opportunities are quite huge, and we have been in the equation — order equation front, we have done quite well last year, we could talk about $180 million, and this year we are targeting about $400 million to $450 million of acquisition [Phonetic]. So if not now, hopefully in the next two, three years it should stabilize and we should at least reach a target of about 10% of our turnover coming from exports.

We have set-up a lot of overseas marketing offices, and we have now at least started participating in all these tenders. So that is a good point of it.

Venkatesh Subramanian — LogicTree — Analyst

Okay, ma’am, thank you so much.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you, thank you.

Operator

Thank you. Ladies and gentlemen, due to time constraints, this will be the last question for today, and the question is from the line of Bharat Parekh from CLSA. Please go ahead.

Bharat Parekh — CLSA — Analyst

Yeah, good morning ma’am and congratulations on the improved execution. If I may request for details of the order inflows for the last year, FY ’22, some of the larger orders if you can highlight, apart from the C29 the airborne electronic system and IWR which we know, that will be helpful to get the details of INR18,000 crore. Thank you.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

The major orders you yourself have told, the 29 and the IWR.

Bharat Parekh — CLSA — Analyst

But those are INR4000 odd crores.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Then some orders we got from CSL, as well as GRSE, that shipyard, but the shallow water [Technical Issues].

Bharat Parekh — CLSA — Analyst

How much would be that ma’am?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Then the avionics — – that was around — so totally it was around INR3500 crores something. Then the avionics package from LCA. Then we got the electronic warfare suite for the D29 and of course also the — this thing, the export order for C295. Then we had a commander — for T-90 tanks, which was occurring around INR900 crores. Then — so I’ll tell you the major one, then we had the — then we got some fuse orders also for our Pune plant. Then the naval anti-drone system for all the three services. And some export orders, so all put together, around INR19000 crores, major ones I have told you.

Bharat Parekh — CLSA — Analyst

Yeah, and of this, avionics for LCA and EW sort of D29, if you can help us with the value please?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

D29 was around the — was around INR1,688 crores. And avionics package was INR1,864 crores and — altogether, maybe around INR3200 crores or so.

Bharat Parekh — CLSA — Analyst

Thank you so much and wish you best of luck.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you.

Operator

Thank you. As that was the last question for today, I now hand the conference to Renu Baid from IIFL Securities. Over to you ma’am.

Renu Baid — Vice President, Institutional Equities IIFL Securities

Well, on behalf of IIFL Securities, I would like to thank the management of Bharat Electronics for giving us this opportunity to host the call. Ma’am, sir, would you like to make any closing comments before we close this call? Closing remarks?

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

No, the only remark is — yeah, yeah, yeah. So we maintain the guidance of 15% growth in revenue and about 21% to 23% of EBITDA margin and an order intake of minimum of INR20,000 crores.

Renu Baid — Vice President, Institutional Equities IIFL Securities

Thank you. On behalf of IIFL Securities Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.

Anandi Ramalingam — Chairman and Managing Director in-Charge, Director – Marketing

Thank you.

Dinesh Kumar Batra — Director – Finance & Chief Financial Officer

Thank you.

Renu Baid — Vice President, Institutional Equities IIFL Securities

Thank you.

More BEL analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

{%sfr%}