BHARAT ELECTRONICS LTD (BEL) Q2 FY23 Earnings Concall Transcript

BHARAT ELECTRONICS LTD (NSE: BEL) Q2 FY23 Earnings Concall dated Oct. 31, 2022

Corporate Participants:

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Bhanu Prakash Srivastava — Director, Other Units

Sreenivas S — Company Secretary

Analysts:

Umesh Raut — PhillipCapital India Limited — Analyst

Ankur Sharma — HDFC Life — Analyst

Nitin Arora — Axis Mutual Funds — Analyst

Bharti Sawant — Mirae Asset — Analyst

Unidentified Speaker —

Deepesh Agarwal — UTI AMC — Analyst

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Atul Tiwari — Citigroup — Analyst

Sumit Kishore — Axis Capital — Analyst

Kevyn Kadakia — Sundaram Asset Management — Analyst

Renu Baid — IIFL Institutional Equities — Analyst

Kirti Jain — Canara HSBC — Analyst

Dhruvesh Shah — JM Mutual Fund — Analyst

Harshit Patel — Equirus — Analyst

Sandeep Tulsiyan — JM Financial Institutional Securities — Analyst

Harshit Kapadia — Elara Capital — Analyst

Presentation:

Operator

Ladies And gentlemen, good day and welcome to the Q2 FY23 Earnings Conference Call of Bharat Electronics Limited, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Umesh Raut from PhillipCapital India Private Limited. Thank you. And, over to you, sir.

Umesh Raut — PhillipCapital India Limited — Analyst

Thank you, Stephen. Good afternoon, ladies and gentlemen. On the behalf of PhillipCapital, a warm welcome to all of you. Today we have with us senior management of Bharat Electronics to discuss the 2Q FY ’23 results and business outlook. Management is being represented by Mr. Dinesh Kumar Batra, Chairman & Managing Director in-charge, Director of Finance; Mr. Damodar Bhattad, General Manager, Finance; and Mr. Sreenivas, Company Secretary.

Without taking much of time. I would like to hand over the call to the management for their opening remarks. Thereafter, we can start the Q&A session. Thank you and over to you, sir.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Good afternoon. We — our second-half — basically, first half, the second-quarter completed on 30th September 2022 and, I’m very pleased to share with you that we have clocked INR6,960 crore in the H1 of ’22-’23, which, over the previous H1, is a growth of 34.18% in the turnover. Our EBITDA has grown at the rate of 48.97%, at INR1,369 crore, whereas in H1 ’21-’22, it was INR919 crore. EBITDA as a percentage has increased to 19.67% in H1, compared with 17.72% in ’21-’22. Our profit before-tax has increased by 66.43% at INR1,403 crore, whereas in the last H1, it was INR843 crore. Similarly, PAT at INR1,043 crore has increased by 67.14%. Our earnings per share, this is at the enhanced capital of INR731 crore, is at INR1.43, which was INR0.85, if we adjust to the increased capital. There is also a growth of 68.24%. Our order book remains on 1st of October, INR52,795 crore.

And if we see quarter-on-quarter, so in Q2, we have grown at the rate of 27.19% over Q1 of ’22-’23. EBITDA has increased to INR856 crore in Q2, whereas in Q1, it was INR513 crore. There is a growth of 66.86%. PBT has increased at the rate of 42.73% over Q1 at INR825 crore, whereas it was, in Q1, INR578 crore. Similarly PAT is INR611 crore in Q2, whereas in Q1, it was INR431 crore. There is a growth of 41.76%. Earning per share in the Q2 is INR0.84 over the INR1 share, whereas in Q1, it was INR0.59, so there is a growth of 42.37%.

So this shows we are on the path to achieve what guidance we have given, that 15%, which I’m sure as our major turnover comes in the Q3 and Q4 so, we’ll able to achieve the 15% growth, what we have shared with you all previously.

Still we have already booked around INR2,000 crores worth of order in H1. We continue to share with you that around INR20,000 crores orders will be booked in this complete financial year.

So, these are the major highlights of H1 of ’22-’23. Now, open to your questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Ankur from HDFC Life. Please go ahead.

Ankur Sharma — HDFC Life — Analyst

Yeah. Hi, sir, good afternoon. Thanks for your time. So sir on our order inflow, we’ve got this very large battery pack order from Triton, about INR80-some-hundred [Phonetic] odd crores. So if you could just help us understand timelines of delivery, what kind of margins you make, what kind of any — if any investment — new capacities that need to be put up and, more importantly, beyond this, are there any repeat order, are you looking at other customers? How do you see this deal kind of shaping up over the next couple of years?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes. First of all. I would like to say, this is not an order. This is letter of intent which Triton has signed with us in the Defexpo. We — they have acquired this plant, this AMW which is located Bhuj and they are going to make the electric trucks there. We have developed battery packs for their electric truck which — they have given us this much requirement and letter of intent they have placed on us over the 2-years. But first, we have to give them battery completely evaluated by ARAI [Phonetic] and other designated agencies. And once this battery is proven, this much orders will be — is the potential order out there. So at the moment, it’s a letter of intent. So talking of the price, etc., is all to be further negotiated. They have already placed one order for one battery, which is around 37 lakh [Phonetic], one battery. Rest of the things, once completely things are proven and the final order will start coming. That time these margins, etc., will be discussed. So at the moment, I can’t comment on the margins.

But so far the battery packs is concerned, we have already put up a state-of-the-art automatic plant at our Pune factory. Also, I would like to share with you that there was, in Defexpo, one — this fuel-cell based motorcycle was displayed in which also our battery had gone and this battery had the first indigenously-manufactured Lithium-ion cell. So this battery pack was made — indigenously designed and manufactured cell. So this plant also we have put up in our Pune factory. Depending on the business shaping up, we are open for further capex in both, for making Lithium-ion cells as well as battery packs.

Ankur Sharma — HDFC Life — Analyst

Okay, I understand. And sir, because I read somewhere that you would be starting deliveries early next calendar year, is that right? So effectively, this order should get booked this year itself. Is that the right understanding?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes, in fact, everything is going in a quite fast mode as this company has acquired a completely built plant, I think which had gone sick and they have acquired it. So now the one battery which they have given us the, firm order, this will be a first off model and this will go through all the tests, etc. So, once that is proven, then only the more number of orders and then how many will be coming in the first year because we also have to start building up the trucks in that plant. It’s not only our batteries, but their trucks and then their trucks should find good market and they start pulling up. So it will be lot of inter-dependent but they have given — shown us that much potential by giving us the letter of intent that in two years’ time, this INR8,000 crores worth of order need to be there.

Ankur Sharma — HDFC Life — Analyst

And, just to clarify, I think, this year we also have developed the indigenous battery cell as well, right, for which you may look at depending on future orders, a type [Phonetic] of factory. So this has been developed by BEL itself and, therefore, unlike most other players who import the battery cell, we can potentially put up our own plant and therefore make the battery pack as well. Is that right?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah. I would just like to give further explanation on this. This technology has been developed by our DRDO lab. From there, we have acquired this technology and we have put up — already put up a plant in our Pune factory, but that’s a small plant with INR40 crores of investment for the 350 MW around capacity. Once these cells become proven on these battery packs, which we’ll be manufacturing for the selected truck, then that technology will also be proven, our process will also be proven, then we can just scale it up and, then of course, this will be based on the indigenously-manufactured Lithium-ion cell and the very first battery, which went into the electric motorcycle there which was displayed. It has already gone and it was working. Of course, not on the road, this motorcycle has come. So it has to go through all the tests, but it was demonstrated, it was working.

Ankur Sharma — HDFC Life — Analyst

Okay, okay. And, sir, just one more question before I get back. On your FY ’24 order inflows, because we’ve been in that range of INR18,000 crores, INR20,000 crores for a year or two now. We’ve been hearing some delays on QRSAM during the test done by the defense services. So if you could just update us in terms of how these [Indecipherable], one is of course, QRSAM but on some of the other large missile programs, when do you expect that to come through in terms of orders and the kind of aggregate over the next two years, maybe ’24 and ’25?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes. We have already shared with you that minimum INR20,000 crores of orders will be coming in both the year and that too for next three to four years. And now you know already that our fourth positive indigenization list towards the — very recently was promulgated, then BEL is having around 39 items with INR30,000 crores of potential from that list as well. Now QRSAM, maybe one or two tests they might be doing it again and all, but I don’t think there will be any impact on the orders coming in the ’24 onwards.

Ankur Sharma — HDFC Life — Analyst

Okay.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

And when we say INR20,000 crores, these are the minimum. In fact, we are following up with much large numbers. And now with this e-mobility and our civil segment also looking up in our metro segment, in fact, just two days back, we have also signed an MOU with Chennai Metro now for putting this platform screening doors. So after Delhi Metro now this was another feather for BEL. So the combined things, across many sectors, will not have any impact of one or two projects slightly getting delayed.

Ankur Sharma — HDFC Life — Analyst

I understand. Great. Okay, sir, thanks so much and all the best. Very helpful.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah, thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.

Nitin Arora — Axis Mutual Funds — Analyst

Hi sir, thanks for taking my question. Sir, just one clarification, what Ankur asked, and specifically on this — the truck order. So this — the fuel-cell the Lithium, the whole battery, the Lithium-ion battery, once, let’s say, the order comes to you, the MOU you already signed and the production schedules will be given to you, will you be importing the cell and just doing the BMS work at your plant, which normally every company is doing here? Or we’ll be manufacturing our cell itself here? Because — just that clarification I want.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Correct, correct. As I already informed, we are making cell also here and the very first cell we launched during Defexpo and also the battery pack was there in the motorcycle. So now fuel-cell and this Lithium-ion battery pack, these are two different things. Of course, we have also signed an MOU to make fuel-cell also. Now coming to it, of course, we intend to put up our own plant of gigawatt hour capacity, but in that Interregnum period, if there is a supply gap and large volumes picks up we may import in the Interregnum period, but ultimately we are going to make our own cells as we have already put up a small plant where we are stabilizing our process. And in fact, recently many journalists, etc., they had visited our factory in Pune and they saw the cells getting manufactured at our plant.

Nitin Arora — Axis Mutual Funds — Analyst

So, sir, what was the reason…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Now this plant, not only is indigenous, this technology also is indigenous, which is being developed by NSTL which is the DRDO lab in Vishakapatnam. So, it’s everything, complete supply chain is indigenous. Of course, the material may come from outside.

Nitin Arora — Axis Mutual Funds — Analyst

Yeah. Sir the question here is that if we were so confident of getting this, our technology inbuilt indigenized, but in the specialty material which gets imported, why we have not bid for the PLI in the battery?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Actually, we are yet — this is indigenously-developed technology which we are stabilizing first time and this was for basically underwater applications, so we are upgrading the technology for this electric vehicle applications where the temperature range from minus 10 to plus 50, etc., it has to do the scan. So other technology, we have not been — we have not resorted to the route of importing the technology itself. So at the moment, we are not participating in the PLI.

Nitin Arora — Axis Mutual Funds — Analyst

Sir, just lastly from my side, if you can update us on two, three programs which were — as we spoke on the last call, you were saying that the orders like land-based electronic warfare system, Akash order as well as the ship-based program, which is a very big number you shared, the NGMV, and where we stand, do you see some delay happening there or that should fall in, in next two quarters? That’s my last question, thank you.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Definitely, the very clear visibility of INR20,000 crores flowing in as now Akash Prime is very close to happening. Himshakti is very close to happening and EW Suite for SU-30 and EW Suite for MLH and Arudhra radar, final negotiations underway. In fact, it would have happened, but there is a change of guard in the Ministry so it’s slightly slipped but definitely these all programs are going to happen in the rest of two quarters.

Operator

Thank you. The next question is from the line of Bharti Sawant from Mirae Asset. Please go ahead. Bharti Sawant, your line is in talk mode. Kindly go ahead with your question please.

Bharti Sawant — Mirae Asset — Analyst

Hello, am I audible?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes.

Bharti Sawant — Mirae Asset — Analyst

Yeah. So just few clarifications, the INR20,000 crore order inflow that we expect for the current year and even for the forthcoming years, the INR20,000 crore kind of visibility that we have, is it purely from defense or does it include some bit of civil side?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah, this will include some things from the civil side also. As told, in the defense side, there is a EW Suites for MLH and SU-30. There’s WLR, there’s ADF, ADCNRS, and AMC is coming from — for Akash and IACCS and Akash Prime is there, Himshakti, any day it may happen, then medium-power radar Arudhra is there, BMP-2 upgrade, so all these orders. And on the civil side, orders will be flowing in for the metro segment like Chennai Metro just two, three days back, we have signed for platform screening doors and this civil side ATMS, our — the present trial is going on.

Bharti Sawant — Mirae Asset — Analyst

What is ATMS?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Pardon? ATMS is Air Traffic Management System, it’s in the civil side, the rail or metro is, then batteries, of course, mobility — e-mobility segment is already looking very bright and recently we received a letter of intent, around INR8,000 crores. So this will — some portion will start flowing in once these batteries on the trucks are proven. Then of course $60 million worth of export also we are going to do and further orders are in pipeline on the export front. So this will be some — I would say some 15% around will also be flowing in from civilian segment.

Bharti Sawant — Mirae Asset — Analyst

So within the INR20,000 crores, INR15,000 crores we are estimating to come from civil and balance…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No, no. What I said…

Bharti Sawant — Mirae Asset — Analyst

Yeah, 15%.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

There’s some homeland security, etc. So INR20,000 is very sure estimate, it may become more than this.

Bharti Sawant — Mirae Asset — Analyst

Okay, so — but this INR20,000 crore, we give guidance before receiving any MOU or LOI from Triton. Do we expect this — as in, do we expect to surpass this INR20,000 crore number?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, number one, of course yes, more than INR20,000 crores order may flow in, but however, as Triton is concerned, the very first task is to prove this battery on the truck. The first time any Indian company is going to introduce the electric truck, which is a very heavy battery it’s going to have. So this year much orders will flow, I’m not sure, but definitely from next year, because once this battery is put, a month or two will take for getting all the certifications from the different government bodies, which are being set in after there’s lot of incidents of fire took place and ARAI is to approve it. So remaining six months. not much may come. Of course, few numbers may come. So this will go for the next two years, where this complete INR8,000 crores of potential will become reality.

Bharti Sawant — Mirae Asset — Analyst

Understood. Sir, initially as in over — in the last quarter, we mentioned that we are expecting about 15% growth despite of some slippages happening in FY ’22 because of the semiconductor chip shortages. So if you can just brief us or give us an update as to what’s — can we expect an improvement in the revenue guidance or do we still stand by 15% number?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

I will keep 15% guidance and though I am very, now, 100% sure seeing our H1 performance where we have grown at the rate of 34.18%, and all factors of profitability or EBITDA margin or PAT etc., they all have grown, handsomely they have grown 66.43%, PBT 67.14% and even our capital is enhanced to three-fold and still our EPS could grow rate of 68% over the previous one. So I will like to retain the guidance of 15% and EBITDA margin of around 22% to 23%.

Bharti Sawant — Mirae Asset — Analyst

Understood. Sir, one more question, given over a five year period, we were expecting the civil segment to become more like 25%, that’s the intent. With cash, how do you see the margin profile changing?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, continuously I have maintained this, when you enter in different new segments, you have to have your innovative pricing strategy because price is never cost plus, it is how competition is behaving. So there are many variable factors, how the competition will emerge in these segments. However, as BEL is a sort of conglomerate of 24 companies, all focused on different product segments, overall, EBITDA you’d see hovering around 23%, 24%.

Bharti Sawant — Mirae Asset — Analyst

Understood. And just one last question on the capex front. If you can guide us to what will be the overall capex for the company over the next two years?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes, in fact, at the moment we have INR3,000 crores capex — approved capex, in some — which we have already done…

Unidentified Speaker —

INR216 crores till September.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No, no, not this year, out of INR3,000 crores…

Unidentified Speaker —

INR1,500 crores.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

INR1,500 crores already done and this year it is picking up now, the labor market and commodity prices also becoming stabilized. So our plant at Nimmaluru and Ibrahimpatnam, etc., they are shaping well. Nimmaluru is almost nearing completion where we will be putting up our plant and machinery and testing equipment. Ibrahimpatnam has started coming up. Nagpur also we have started. So this year I’m quite hopeful that around INR1,000 crores we will be able to do. But this is an ongoing process, this INR3,000 crores is getting executed, the new projects are getting added up. As you know, very recently we have also signed an MOU with NHPC for putting up solar ingots, wafers and cell and module level. So as this will start taking shape, the capex will increase. We are also exploring to go for semiconductor fab to put up. So those all proposals are underway. So this is what I can say that around INR1,000 crores, we’ll be doing this year. Next year also I see around INR1,500 crores. And also in — R&D will remain also in the tune of around INR1,000 crores, INR1,100 crores.

Bharti Sawant — Mirae Asset — Analyst

So this…

Operator

Ms. Sawant, sorry to interrupt, but for any follow-up questions, may we request you to rejoin the queue please. [Operator Instructions] The next question is from the line of Deepesh Agarwal from UTI AMC. Please go ahead.

Deepesh Agarwal — UTI AMC — Analyst

Yeah. Good afternoon sir. Sir, my first question is, you are guiding for INR20,000 crores kind of inflow. Hello, am I audible?

Operator

Sir, your voice is bit muffled. If you can take the call [Technical Issues].

Deepesh Agarwal — UTI AMC — Analyst

Yeah, one minute. Sir, my first question is, so you’re guiding for INR20,000 crores of inflows next year. But I believe even if you get one regiment of QRSAM next year, that could be itself INR12,000 crores to INR13,000 crores. So what is that keeping you conservative on guidance, even I believe you would be factoring in this e-mobility inflows next year?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yes, in fact, it’s not — the requirements are there but as we have seen in the past, the budgets become constrained and government has to put more budget towards the revenue expenditures rather than capital. So keeping those things, I don’t want to give the highly optimistic estimates as INR20,000 crores I see definitely happening. So at the moment, we are keeping it around there. But simultaneously, I keep on telling that it can — it will be much more than this. But at the moment I’m keeping at this level and this kind of order inclusion give me the turnover growth which I say is 15% to 20% the next year. This year I’d say 15%, so I have sufficient order book. At the moment the order like is from INR52,000 crores.

Deepesh Agarwal — UTI AMC — Analyst

Okay. And sir, secondly, so the Triton order, is it contingent on any conditions of them winning any order from a third-party or is it for the end-market?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

That’s what. As you’ve very rightly said, there are a lot of things to happen. First, this is a very big battery pack, it has — the truck has to come out of their plant and battery has to go on the truck, then all the road ability test and other — the safeguards which — the standards government has come out with, it has to meet everything. So first, trials, etc. will take some time. Only those are the conditions. If everything is in place, the orders will flow in. And mind it, they also have to sell their truck. They will not be building up the inventory of batteries and we are capable of making but they have also to sell trucks and the charging infrastructure is coming on the roads. Of course, many chargers have started coming on highway. But all those will be the limiting factors and enabling factors, you can say.

Deepesh Agarwal — UTI AMC — Analyst

And this is for Indian market.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, I can’t comment on Triton. It’s a U.S. company which they have put up in India by acquiring this AMW Asia motor works, but they will be doing — at the moment, I’m not much privy to it, it’s a very — it’s at nascent stage and seeing our capabilities, they have given us this letter of intent so that we can put our money. And if we need to expand the plants, etc., then we should not shy, so that’s why they have shared this MOU with us.

Deepesh Agarwal — UTI AMC — Analyst

And sir, lastly, can you comment on the cash flows? Because if I see the cash flow in first half, your cash flow from operation was negative. So how is the working capital situation right now?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Working capital, as we are able to — we have booked cash, we are having with us, and at the moment, we — when the year got closed, we had INR4,200 [Phonetic] odd crores of cash with us and as the large — to meet the large turnover in the next two quarters, the inventory, etc., we are purchasing. So money has gone there and it feels…

Deepesh Agarwal — UTI AMC — Analyst

There is no delay in the payments from the government side, that’s…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No, there’s no delay. Only thing, wherever the milestones, etc., not being achieved, and in fact government is having lot of money on the capital side. But because of these milestones not coming up, which will take shape by the end of third quarter. But we are also approaching government as they have lot of budgets in capital, so relax some of the milestones so that — and they have shown very positive on that. I’m sure in next two to three months, lot of what’s under that will be realized.

Deepesh Agarwal — UTI AMC — Analyst

So fair to assume this year’s closing working capital would be in line with the last year?

Unidentified Speaker —

Yeah, it should be around that. Only — it was 1.5 times around last year. Current assets to current liabilities. So we expect it to be in the same range.

Deepesh Agarwal — UTI AMC — Analyst

Okay, okay. Thank you.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Thank you.

Operator

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

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Yeah. Hi, sir. Sir, just on that Triton, again just wanted to understand what will be the total investment we have to do from our end to build that capability for Lithium-ion batteries and related manufacturing set-up.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, so far making battery packs are concerned, we have already invested around INR12 crores, putting up automatic battery pack manufacturing plant. So far making the Lithium-ion cells are concerned, that — there’s lot of investment we will have to make once the cells become successful and we decide to ramp it up. Otherwise, it’s always open to — like others are doing, we can keep importing cells and have our own supply chain. In fact, Triton is open to supply the cells by procuring outside and supply to us. So there, of course, substantial capex will be required and it will be in different tranche over the next three, four years.

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Okay. And sir, last meeting, you had also mentioned regarding capex for some Hyderabad Smart City which we were planning to do. So what is the current status? Have you put any investment in that?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Number one, we never spoke about Hyderabad Smart City. Probably you are referring to UP 100 Smart City.

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Yeah UP 100. Sorry, yeah, sorry.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Those talks are going on. Nothing much has happened. There capex is required as they want to do in the duo model. But not much headway yet, I should say. Meanwhile we are winning other smart cities, Sundargarh Phase II we have got and the Port Blair we have won.

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Okay, okay. So in terms of capex this year will be how much and next year?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

It’ll be be around INR1,000 crores — INR750 crores to INR1,000 crores.

Renjith Sivaram — Mahindra Mutual Fund — Analyst

This year, and next year?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

It’ll be in the same tune. Actually INR3,000 crores of capex is already approved by our Board, ongoing projects. So this year if it comes around INR1,000 crores, next year — INR1,200 crores, INR1,300 crores we have already completed out of that INR3,000 crores, but then new proposals keep coming. I’m quite — the same tune, around INR1,000 crores, INR1,200 crores will also be next year. Still this big ticket comps, putting in the Lithium-ion or the fuel cell or the semiconductor or the solar, the capex will remain around this. Once the big ticket capex materialize, then it will be different story altogether.

Renjith Sivaram — Mahindra Mutual Fund — Analyst

Okay. Okay, sir, thanks and all the best.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Thank you very much.

Operator

Thank you. The next question is from the line of Atul Tiwari from Citi. Please go ahead.

Atul Tiwari — Citigroup — Analyst

Yes. Sir, again, just one question on the second half order inflow. So about INR18,000 crore is needed, so which will be like two, three big orders which could kind of make up for it?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah Akash Prime is there, which is around INR4,000 crores. Himshakti is there, which is around INR3,000 crores. Then medium-power radar Arudhra is there again INR2,500 crores, then BMP upgrade is there, INR1,950 crores. EW Suite is there. EW MLH is there, WLR, ADCNRS, which is INR1,700 crores. AMC of Akash and [Indecipherable] at INR650 crores. So many big tickets are quite nearing the completion.

Atul Tiwari — Citigroup — Analyst

Okay, sir, okay. And sir, just, though, this is slightly futuristic but you yourself I think kind of alluded to it. So obviously, government’s intent is very clear regarding promoting indigenous manufacturing of various defense equipment and Bharat Electronics is playing a crucial role in that. So, that, all of us understand. But obviously, fiscal deficits are high this year and we are headed into kind of an election season over next 18 or 24 months. And so do you see a situation where the focus could kind of shift to revenue expenditure and we could see a period where the spending is slightly slower for next, say, three, four quarter, which could impact your revenue growth or could lead to some buildup in receivables of the company, even though, obviously, over the medium-term we know that things are going to be fine even from that perspective, but over next three, four quarters?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No. I don’t think such possibility. Our payments are flowing in and depending on the milestones, etc., we are completing, we’ll be able to have the same kind of performance the last year we had.

Atul Tiwari — Citigroup — Analyst

Okay, sir. Great. Thank you, thanks a lot.

Operator

Thank you. The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.

Sumit Kishore — Axis Capital — Analyst

Good afternoon, sir. First question is that you had mentioned after the Q1 call that there was INR26 billion lower revenue booking in Q4 due to chip shortage issues. How much has been recouped so far in 2Q and first half and how are they going for H2?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

These answers I will not like to give but you can see our H1 performance. They are almost — the first time when whatever we planned and 100% we have achieved an impressive growth over the H1 of previous year. So I don’t think the semiconductors shortage, etc., as our people have tackled it by different measures, we are going to book our — the 15% growth which in absolute terms from some INR17,500 crores to INR18,000 crores worth of turnover we are going to achieve. Semiconductor shortage is there or not, it’s not going to affect us.

Sumit Kishore — Axis Capital — Analyst

Well noted. My second question is, could you help break up the order backlog as of September into defense, non-defense and services? And also what proportion of the defense order book is competitively bid and what proportion of contracts are on nomination basis?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, nomination remains around 80% to 85% of the order book and major orders, again, which are in pipeline, these are on nomination basis, whether it’s Akash or Himshakti or Arudhra. So good amount of orders are going to come from the nomination basis. And if you — INR52,000 crores order backlog, the non-defense is — like defense is INR43,000 crores and non-defense is INR4,500 crores around. So, it remains 10% of almost the — of defense business.

Sumit Kishore — Axis Capital — Analyst

Okay. And the remaining would be services.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Services is a part of defense or non-defense. So that remains against 10% of our overall business, whether it’s a defense or non-defense. This services is included in this.

Sumit Kishore — Axis Capital — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Kevyn Kadakia from Sundaram Asset Management. Please go ahead.

Kevyn Kadakia — Sundaram Asset Management — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, first, I just wanted to check on the capex…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Your voice is very low.

Operator

Mr. Kadakia?

Kevyn Kadakia — Sundaram Asset Management — Analyst

Hello. Is this better?

Operator

Yes, sir. Please proceed.

Kevyn Kadakia — Sundaram Asset Management — Analyst

Is it better now?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah.

Kevyn Kadakia — Sundaram Asset Management — Analyst

Yes, sir. Sir, just wanted to check, you mentioned you’ve got INR30 billion, INR3,000 crores of capex, which has been approved by the Board for ongoing projects, but for some of the big ticket that you mentioned like for solar modules, semi fab or fuel cells, like what will be the additional kind of capex that would be required, the quantum for each of these?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, number one, probably I have — could not hear you correctly. But on my side, I would like to say, it’s INR3,000 crores total approved capex, out of which INR1,300 crores, INR1,400 crores are already taken place and INR1,000 crores we are expecting happening this year. And now this big ticket, these are still being discussed, evaluated at different levels. So when — we’ll see when it comes and we are quite capable of raising funds from our internal accruals as well as being zero-debt company, have quite big leveraging power.

Kevyn Kadakia — Sundaram Asset Management — Analyst

But is it possible to just give some quantum on what will be the approx size for some of these that you mentioned?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Will you say it again, I’m sorry?

Kevyn Kadakia — Sundaram Asset Management — Analyst

No, I’m saying, is it possible to just give the quantum of capex that could come for some of these…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

I can tell you the projects, but exactly what amount — this — see LRSAM we are doing, there is some — around INR350 crores is happening there, but quite a chunk has already happened. Then this advanced night vision factory which is in Andhra Pradesh, Nimmaluru, that is nearing completion. Then Nagpur, we are setting up an ammunition complex, that is underway. Then in Telangana, Ibrahimpatnam, where we are — land-based systems factory we are putting up, quite a good chunk is going there. And then capital infrastructure [Technical Issues] EV pack, which major deliveries will be starting next year, of course some amount of INR400 crores, INR500 crores supplies will be going out this year also. So these are the major projects on which it is going. Of course, the D29, that order is already there. So we have put up investment — FSPU, that is the fiber optic gyro-based system we are making, there also a good chunk is going. These are the major areas out of INR3,000 crores where ongoing investment capex is taking place. There’s super component type facility we are setting up at Hyderabad [Technical Issues] investment of some INR104 crores, that’s also under [Technical Issues]

Kevyn Kadakia — Sundaram Asset Management — Analyst

Thanks for elaborating and clarifying. And specifically, sir, for these — for the solar modules or the semiconductor fab, is it possible to share right now?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

It’s difficult. Still approval has not come from Ministry. If it comes, then there is a — to the extent of INR2,500 crores to INR3,000 crores we need to invest. But I don’t know how this will be taking shape and so far the Ministry has not accorded to us.

Operator

Thank you. [Operator Instructions] The next question is from the line of Renu Baid from IIFL. Please go ahead.

Renu Baid — IIFL Institutional Equities — Analyst

Yeah, good afternoon and thanks for the opportunity sir. Just at the onset, would like to congratulate before your term at Bharat Electronics, today being your last and superannuation day. Many congratulations for all the good work that you’ve done.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Thank you.

Renu Baid — IIFL Institutional Equities — Analyst

Yeah, two small questions from my side. One, at the Defense Expo, one thing was very clear, apart from large programs, there was a lot of thrust on consumable items, arms and fuses. So if you can just share some update in terms of where are these with respect to our projects? Maybe we’re doing investments and what kind of revenue can we expect from the investment that we’re doing for fuses and arms — ammunitions? And second, for more of a bookkeeping question here, for the first half, can we have the revenue split between defense and non-defense revenues, and also for exports and services, revenue split?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Okay. So first, arms and ammunition, as regarding our investment going on, so as I told, we are building up a ammunition complex at a 200 acres facility, the land which we have acquired. So this is going on, some — around more than INR150 crores which — already land we have paid around INR110 crores and already we have few manufacturing facilities at our Pune factory. We have already won INR100-odd crores of orders this year for fuses through the revenue route and our — the participation which was for 50 lakh fuses to be supplied over 10 years and, I’m happy to share that we have crossed. This has taken four to five years. Now we have completed all the trials and we have been declared successful in the trials and very shortly this price bidding should be open and, I can’t say, because there’s another company also, ECIL, who is in fray. Finally, we two remain in fray and there were other private companies, they have fallen on the — during the various trials, digital trials, etc., But I’m quite hopeful that we are in good position to win this order and, if it comes it will be very big, to the tune of INR4,000-odd crores.

And not only that, we are already manufacturing long range guided bomb and many other Make II programs we are participating. Very recently we had signed an MOU for this Hammer [Phonetic] which is Rafale France. This is a range extension kit for the bombs. And also we have signed an MUU pursuing this case of 30 mm and 40 mm ammunition. So there are many programs going on, on the arms and ammunition and we’re acquiring our own ammunition complex. Till now, we were outsourcing those magazine, etc. So I’m quite hopeful this segment will be a good revenue earner for us for the long time to come.

Renu Baid — IIFL Institutional Equities — Analyst

But any targets we have like for FY ’25 or in the next five years, what kind of revenue this segment or category can generate for us?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, LRGB itself is some INR240 crores and next year it will be delivered. So far, fuses is concerned, this must be giving INR100 crores, INR150 crores every year. And other programs, when they become reality, then it’ll be much more than that.

Unidentified Speaker —

Now regarding the sales breakup, what you’re asking, the defense was around INR5,700 crores, non-defense is around INR400 crores, services is around INR700 crores and ARO [Phonetic] INR800 crores. Export is around INR50 crores to INR60 crores — INR57 [Phonetic] crores.

Operator

Thank you. The next question is from the line of Kirti Jain from Canara HSBC. Please go ahead.

Kirti Jain — Canara HSBC — Analyst

Sir, with regard to order book, sir, when we say we will achieve INR20,000 crores order book, despite that, our order book will be flat on a Y-o-Y basis [Technical Issues]. When do you expect the order book to grow from INR57,000 crores levels to INR65,000 crores, INR70,000 crores level, sir?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

But point is, if our order book remains the 3 times of the turnover we are doing, the excess orders to keep in order book and then those are not delivered [Technical Issues] affect much. And so far, what you have asked, as I’m saying, at the flow in of INR20,000 crores, it’s remaining flat and growing slightly. Like, this year, I expect to close at around INR60,000 crores on 31st March. But when it is more than INR20,000 crores, which is my pessimistic estimate, then this will grow further. If the QRSAM takes place, it will grow further. But this much confidence I’m giving that we are having enough to grow at the rate of 15%.

Operator

Thank you. The next question is from the line of Dhruvesh from JM Mutual Fund. Please go ahead.

Dhruvesh Shah — JM Mutual Fund — Analyst

Hi, sir. Of last four, five years and after considering the seasonality, I observed that our operating cash flow was negative for first half. If you can help us understand what led to a weak operating cash flow before taxation? Thank you.

Unidentified Speaker —

No, the current year, as we address, we were just telling you sometime before, the operating cash flow because, we have put more on the inventories, which are required for the second half production. So that is how it is.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

And even, just I would like to add on, to overcome this semiconductor shortage, so we have gone for — to ensure that we should not fall short, we have built up the inventory for those.

Dhruvesh Shah — JM Mutual Fund — Analyst

Understood. So it’s primarily a conservative inventory buildup and no delay of advances or any sort from the government during first half?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No, no, no. In fact, if you see our cash and cash equivalents at the end of the period, all three cash flows from investing and financing and operating activities, this has gone up. We are INR1,078 crores, whereas, ended previous half, H1, it was INR772 crores.

Operator

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

Harshit Patel — Equirus — Analyst

Hi, sir. Thank you very much for the opportunity. Sir, my first question is on the MRSAM program of Indian Air Force. So could you explain what would be our scope of work, in the sense that what could be the total size of orders across here and what will be our work share in that, which will be the other player in the defense ecosystem who will also be participating? So if you can throw light on this whole MRSAM project, it will be very helpful.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

I won’t be able to throw at the moment.

Harshit Patel — Equirus — Analyst

Okay, sure, sir, no problem. Sir, coming to my second question on the LRSAM program, so you have earlier shared that there will be a Phase II of this program. So what could be the potential order value for the next phase? Which are the naval platforms on which it will be integrated? And given that we have already achieved very high localization level by executing Phase I, what could be the localization level when we will execute it the next time?

Operator

[Technical Issues] We request all the participants to please stay connected while we reconnect the management. Ladies and gentlemen, the line for the management is reconnected. Thank you and over to you, sir.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah on the same question and I’m asking my colleague Director to answer it.

Bhanu Prakash Srivastava — Director, Other Units

Yeah, good afternoon. This is Bhanu Srivastava, Director, OU of BEL. These LRSAM projects, we have already given proposal for new generation [Indecipherable] which is around INR8,000 crore. That is in pipeline and in fact, MoD is actively considering that navy is working on that. Apart from that, there may be a requirement on NGMV but not sure whether they will go for indigenous solution or imported one. So as of now, what proposal we have given to is around INR8,000 crores.

Harshit Patel — Equirus — Analyst

What will be the localization levels when we will execute for this INR8,000 crores?

Bhanu Prakash Srivastava — Director, Other Units

It will be around 50% of indigenous.

Harshit Patel — Equirus — Analyst

Okay, sure sir. Thank you very much, sir, for answering.

Sreenivas S — Company Secretary

Sir, we have to receive only two more participants, sir, please.

Operator

Sure. Thank you. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.

Sandeep Tulsiyan — JM Financial Institutional Securities — Analyst

Yeah, very good afternoon. Sir, couple of questions on that Triton EV order that we can get. Sir, for that, company is going to do some capex of close to INR11,000 crores in India. So how well it is funded given it is — I did not have much of a background what we can find on that, so if you can give some details in that part. Secondly, the quantities you mentioned 37 lakhs for battery pack, is it factoring in from 20,000, 22,000 kind of vehicles or is there a different or a higher number that you factored in terms of vehicles that we’ll supply? And thirdly, if margins for this order are in line with the company level margins or there you will — based on whatever assessment we have of our manufacturing right now?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

See, number one, your first part of the question, better Triton can answer it, I cannot answer on their behalf that how many trucks and all they’ll be manufacturing. They have given us a order visibility of INR8,000 crores over the next two years once the first-off model, that’s proven in all the aspects.

Sandeep Tulsiyan — JM Financial Institutional Securities — Analyst

Have they funded to or sustained this order for INR8,000 crores?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No, they are not funding, only thing, like, first battery order when they gave us, they have given complete 100% advance and when we’ll negotiate this further battery orders, there will be certain amount of advance they have to give. Besides that, it’s our own investments, going to be. Regarding your question on margins, I previously also told, it will be negotiated and, of course, we’ll try to build up at least not the company margins of the different business and all but we don’t do any business less than 10%.

Operator

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

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

This will be the last question as Sree [Phonetic] already said.

Harshit Kapadia — Elara Capital — Analyst

Yeah, thanks for the opportunity. Just two questions from my side. Can you give an update on the anti-train collision system, which we’re working and what’s the update there and what is the opportunity size there?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Yeah, opportunity is unlimited. This we had — this is called TCAS, the train collision avoidance system. This — at the moment, we are with the Delhi Metro on this. Once it gets inducted, the sky is going to be the limit, all these metros and then mainline railways, it can be adapted for the main railways as well. Now just to give you like how other metros are coming, first, we were having with Delhi Metro. Now two, three days back, we signed with Chennai Metro supplying the PSD’s, that is platform screening doors. So it will find a very good market. Beyond it, it will be very premature on my part to say it.

Harshit Kapadia — Elara Capital — Analyst

What stage are we in to [Technical Issues], if the trials are over or few more trials are required or has been [Technical Issues] and approval is taking time? Any color on…

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

At the moment, I will not be able to say more than this.

Harshit Kapadia — Elara Capital — Analyst

And lastly, sir, you had mentioned few quarters back, you are looking to raise your service revenue to 25% of the overall revenue. Right now, you are at 10%. So what could be the driver and any project which you are envisaging?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

For the big systems, they are coming for AMCs. Like this year, we are going to see AMC for Akash and IACCS. So — and more and more of our product support centers, which are emerging over the different parts of country, so that is giving us the hope of raising it to 25% over the two, three years.

Harshit Kapadia — Elara Capital — Analyst

And what was the value for Akash and IACCS [Phonetic]?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

AMC, it will be around some INR500 crores, INR600 crores.

Harshit Kapadia — Elara Capital — Analyst

Each?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

No. The total orders of AMC on these two parts will still flow in this year, Akash and IACCS, maybe around INR650 crores-odd.

Harshit Kapadia — Elara Capital — Analyst

Okay. But that would not help you to reach 25% revenue share.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

[Technical Issues] that 15% going to touch INR18,000 crores or INR17,500 crore to INR18,000 crore. And again it will be 10%, 12% only.

Harshit Kapadia — Elara Capital — Analyst

Okay, yeah, thank you, sir.

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Thank you. Thank you, Mr. Umesh.

Operator

Thank you. Sir, any closing comments from your end?

Dinesh Kumar Batra — Chairman & Managing Director, Additional Charge; Director, Finance & Chief Financial Officer

Closing comment, I would like to say that we — whatever guidance we have given, we are on the track and seeing our H1 performance, all whatever we have planned, we are able to achieve. So — and all the guidance what we have given, I’m holding at the end of H1.

Operator

[Operator Closing Remarks]