Cyient DLM Limited (NSE: CYIENTDLM) Q2 2025 Earnings Call dated Oct. 21, 2024
Corporate Participants:
Krishna Bodanapu — Executive Vice Chairman & Managing Director
Anthony Montalbano — Chief Executive Officer
Shrinivas Kulkarni — Chief Financial Officer
Analysts:
Dipak Saha — Analyst
Vipraw Srivastava — Analyst
Rahul Deshmukh — Analyst
Deepak Krishnan — Analyst
Praveen Sahay — Analyst
Mihir Manohar — Analyst
Swanand Samant — Analyst
Rajit Aggarwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Cyient DLM Limited, Q2 FY25 Results Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Krishna Bodanapu, Non-Executive Chairman – Cyient DLM Limited. Thank you and over to you, sir.
Krishna Bodanapu — Executive Vice Chairman & Managing Director
Thank you and good evening, ladies and gentlemen. I am delighted to welcome you to Cyient DLM Limited Earnings Call for Quarter Two FY25. Present with me on this call are our CEO, Anthony Montalbano; and CFO, Shrinivas Kulkarni. Before we begin, I would like to mention that some of the statements made in today’s call may be forward-looking in nature, and may involve risks and uncertainties. A detailed presentation in this regard is available in our investor update, which would be posted on our website.
In our Q1 investor call, we had specified that some of the deliverables were getting shifted from Q1 to Q2. I’m pleased to share that our Q2 revenue performance is in-line with our expectations, and Shrini will present more details in a few minutes. This is in-line with the expectation that we had that some of the revenue was getting shifted from Q1 to Q2, and that has come to bear. The conflict in the Middle-East is causing some impact to our business — to our supply-chain especially. And this has been the case for a few quarters now. But I also want to reiterate that our suppliers and customers are extending their support to keep the impact on the business minimum, and we continue to see very little impact, though that is something that we are having to manage very closely.
Our pipeline continues to be healthy with key deals getting closer to finalization. We continue to add new logos in Q2, and I want to emphasize that we have developed the right number of resources to grow our engagements with key clients at a faster pace. I’m also excited to share an important update on inorganic growth. As we announced earlier this month, we acquired an EMS company, Altek Electronics based out of Connecticut in the US. Through Altek, we now offer the right blend of competencies, geographic presence and capabilities that supports our growth strategy. This move is completely aligned with the voice of the customer, i.e. the customers asking us for capability and capacity in the US, and I am confident that the synergy benefits from this acquisition will make a significant impact on our performance in due course.
With focus on an exciting journey ahead, I now hand over the call to Anthony and Shrini to provide more updates on the business and financial performance.
Anthony Montalbano — Chief Executive Officer
Hi, thank you, Krishna. So I’ll start with the acquisition of Altek Electronics. This was clearly a key high point of the quarter. As previously announced Altek is based in Connecticut, they have a very long history since the early 70s of providing high-value electronics manufacturing services. And they focus primarily in medical, industrial segments, and also are well-suited to continue their support in the defense area as well. We find this very complementary to our offering and also helps provide a little bit of segment — further segment diversity into our overall portfolio. 80,000 square feet of manufacturing, over 200 employees and also [indecipherable] to expand and very healthy financial metrics for that business.
As we looked at various, and continue to look at various companies that could potentially become part of Cyient DLM, for us, the value proposition needs to include having a similar type of DNA in the business where our clients who do business with us today in India, we feel very confident having their type of business being supported in a similar type of operation in other geographies. And Altek Electronics is definitely a representative of this, and we see this as an important part of our strategy going forward as we build up on that business and leverage those opportunities.
As we’ve highlighted the geographic presence with clients is a unique part of this where, many of our clients today have parts of their portfolio that they would need a North American solution on. And so, these clients now have an opportunity to provide these services through Cyient DLM and allows us to expand that offering and continue their — continue to grow that business in India as well as into North-America. In addition, Cyient that — Altek does bring to Cyient overall some very key logos that are very much industry-leading, and that will play a key part into the expansion of that business.
And then also, we see an opportunity where part of the work that we do in Aero & Defense can also now — also have channels within the North American market from a delivery manufacturing perspective.
So all this kind of align to really the capabilities that continue to get broadened now, including ITAR work that can be supported out of this location. And as we see our business expanding into build-to-spec type opportunities, this plays very well into working with our clients closer on the — really going from design through manufacturing of their products, regardless if that’s going to be done overseas or in North American markets.
Getting a little bit more specific onto the type of capabilities, Altek is very much a high-value EMS provider, really everything from PCBA through engineering support for complex assemblies, they do NPI, they are really in the high mix, low volume, low-to-mid volume sector, very similar type of profile to what you’ll find in Cyient DLM’s core business. So, a lot of the business metrics, way of managing clients, way of managing complex programs, very high-quality requirements, all these aspects that our current client base expects from us are very much similar to how Altek’s business has really been running for decades now. And again, the very — very high-level of manufacturing capabilities that come into that site will be leveraged going forward.
So moving forward, looking at some other key highlights for the business, we have added two more new logos in this quarter, a defense contract in India and also a global oilfield services company. So this gives us access through many [indecipherable] companies do the acquisition of Altek and adding these two new logos is key as part of this. We also did receive some business award acknowledged by ITC for the work that we’ve done in the industry.
Looking at our growth strategy, especially as now we completed our first inorganic play as part of Cyient DLM. It really comes down to — our growth is still going to be on our core business and that really comes down to what we do in working with some of our larger contracts with key clients. We do have a focus on Indian defense that we’re getting a lot of traction and increasing pipeline in as well. And then also the build-to-specification type of offering, this is something that is really starting to drive a bit of a shift in terms of — it’ll start to have an impact, especially in the coming fiscal year on the types of programs we deliver.
Our inorganic expansion, again, we just announced Altek and this very much aligns to the initiatives that we’ve highlighted before, what we look for in terms of capability in geo and client. And as we look at further acquisitions in these regions or other regions, it will continue along the addition of similar priorities, proximity client, additional capabilities that align with the growth that we’re seeing in the business. I think, yeah, we can go to the next slide. That really highlights the business — summarizes the business overview. And again, it was a significant quarter for us in that regard.
Let me turn it over to our CFO, Shrinivas, in terms of addressing some of the finance updates for the business this quarter.
Shrinivas Kulkarni — Chief Financial Officer
Thank you, Anthony. I’ll first talk about the acquisition impact, the financials of the acquisition that we did recently, and some of these have been reported in the past, but just for the sake of refreshing. We did an upfront payment of about $23.4 million, and there is an earnout that’s also payable which is capped at $5.85 million. So the total payout for this asset will be at the maximum earnout is $29.2 million[Phonetic]. This is an asset, as we saw in the earlier slide, a double-digit EBITDA company, right, and provides us a ROCE of more than 15%. And the acquisition will also be EPS accretive from FY26. In FY25, we will have one-time transaction cost which will report at the end of Q3 when we have the financials available with us.
In terms of their revenue by service type, they do a fair bit of PCBA and box builds which is highlighted in the pie chart below. And the industry mix, right, and this is where I think it diversifies our overall portfolio. Now, well, more than 95% of their business currently is industrial and medical, and these are the two areas where we have seen lesser growth compared to our growth in aerospace and defense. So this acquisition is also critical in that aspect of diversifying the better performance[Phonetic].
Coming to the organic performance of the business for the quarter, we did a revenue of INR3,894 million, which is a growth of 33.4% year-on-year. Our EBITDA stood at INR316 million, which is also a growth of 34.4% year-on-year. And EBITDA margin stood at 8.1%, so mildly up by or flattish compared to year-on-year.
What we have is the PAT at INR15.5 crore or INR155 million, which is a year-on-year growth of 5.5%. The gap between EBITDA and PAT is largely because of the higher finance costs we have incurred, following the fact that our free cash flow has been negative in the first half of the year, we’ll had to borrow funds which we plan to sort of liquidate in the second half of the year as the cash flow turns positive. So the finance cost is a bit higher than what we had anticipated in the first half of the year.
Order backlog is at INR1,979 crores. This is lower quarter-on-quarter by INR147.7 crores. Now we have explained this in the past, there is lumpiness in the business, one large order which we are consuming very fast, and that partially the reason why the order backlog on a sequential basis shows a decline, but as we move along and consume that order, from that point onwards we start seeing the recovery in this order backlog. PAT margin was 4%, which is lower year-on-year due to the finance costs which I explained.
The next chart sort of gives a trend, I want to call out one thing, as you see in both revenue and EBITDA, usually, we have a bit of a seasonality between H1 and H2. So I think we have to look at it from that perspective. So our H1 typically is a bit lower than H2. So that is the same trajectory we are seeing for the current year. And EBITDA percentage is a bit lower in H1. But on a full year basis, our EBITDA is likely to be flat year-on-year. And we already spoke about the fact, that will also show an improved trajectory in H2 as [indecipherable].
Looking at some of the working capital metrics and the key trends on other aspects of the business, we see the DIO has sharply declined quarter-on-quarter from 184 days to 122 days. As you all know, the 184 days was also because of the lower revenue we had in Q1, right. And as the revenue has picked up, that number has come back in control. Of course, this is still not at the ideal inventory days that we wish to operate at. Our goal internally is to get to about 90 to 100 days of DIO. We have our action plan, and we are working through the steps to get to that level on a sustainable basis.
DSO has decreased quarter-on-quarter from 92 to 82 days. We have further scope for improvement even in DSO, which we will talk about in the coming quarter as we stay with it. Customer advances are 20 days. And this is sort of the mix — change in mix in the business. I think the sort of orders we are getting now, the customer advances are going to be lower, that will sort of reflect from an inventory perspective as well. But for now, the newer orders that they’re getting are not where the customers are willing to give in advance, right? And so, we see a decline in that number as well.
So net-net, I think from a net working capital perspective, we’ve seen a fair bit of improvement this quarter, but it’s a job half done. We are very cognizant of that. What we will do in the coming quarters continue to improve on this metric.
A quick look at the mix. The industry mix is largely the same. We have had impressive growth in aerospace and defense, right, and therefore that’s a large piece of the pie right now. Of course, the point we made earlier on the Altek acquisition is that sort of balances the portfolio well. So this is only the view of the organic part of the business.
In terms of product category, there has not been any considerable shift from the earlier quarters. The export domestic shift is very stark in favor of domestic this time, largely because of the one defense order that we are executing at a faster pace. This is not the norm. We will come back to about 70% export and 30% domestic as we stabilize. This is an unusual quarter where the domestic mix was very, very high.
This is just the same financial which I presented, I’ll just highlight on the H1 performance since we saw the Q2 performance already. So if you look at a half year to half year basis, we had a growth of 27.2% on revenue, our EBITDA has grown by 18.6%, and profit after tax has grown by 31% year-on-year on a half yearly basis. So that sort of the performance summary for Q2 as well as for the first half of this financial year.
Last slide is on the usage of the IPO proceeds. We have utilized the further 39 million on working capital this quarter. What you will see here is that the inorganic [Technical Issue] through acquisitions as well as the general corporate purposes are still shown as unutilized, that’s because this report is as of 30th September. Next quarter, you will see that fully utilized, right? So one of the big objectives of doing the IPO was to have inorganic growth in our business, and we are very happy to know that we successfully sort of concluded that aspect.
This is the sort of the financial summary. I’ll pause here, and then we will turn it back to you for any question and answer.
Questions and Answers:
Operator
[Operator Instructions] We have the first question from the line of Dipak Saha from KRChoksey Shares & Securities Private Limited. Please go ahead.
Dipak Saha
Hi. Am I audible?
Operator
You are audible, sir.
Dipak Saha
Thanks for the opportunity. Sir, my first question is, we are seeing the debt levels risen in the first half, and you mentioned largely for the working capital requirements since the cash flows are expected to turn better in the second half. So my question is, since this acquisition is there and we had mentioned earlier that we might need to finance it partly with debt and debt with cash. So do we see any further — I mean from here, the debt level, do we see any further probability of debt levels going up for rest of the year? You can share some color. For full year, what kind of debt levels we should look at?
Shrinivas Kulkarni
Yeah. So, Dipak, I think the debt level will certainly go down as we generate positive cash in the business. The debt we took for the M&A was for very specific reason. And there, I think we should look at it from the perspective of the performance of the inorganic business on that — that part of the P&L, right? So we will take — we have taken that debt, it’s a long-term debt to fund the M&A, and the returns will surpass the sort of the debt funding or the cost that is required to service that debt. The comment on the debt level going down is more from the organic business perspective. There, we will see a reduction in the debt as we generate positive cash for the rest of the year.
Dipak Saha
Okay. And sir, pardon me if I heard it wrong, but I believe you said somewhere EBITDA margins probably remain flat. Is that what you alluded in your opening remarks?
Shrinivas Kulkarni
Yeah. I said year-on-year, we can expect the EBITDA to be flat, right? So we’ve had only 8.5% in the first half, whereas last year, we did about 9.2% on a full year basis. So what we expected on a year-on-year basis, we will have better EBITDA in H2, which means for the full year, we will be very comparable with what we did in FY25 pre-report[Phonetic].
Dipak Saha
Okay. Sir, one of the earlier comments in your previous con calls were that probably we were looking for double-digit EBITDA margin for the full year FY25. So that is certainly delayed to FY26. Is it a right understanding?
Shrinivas Kulkarni
No. I mean, we are very close to that number, Dipak, so it’s very hard — I mean, we’re not giving you guidance here, right? So what will happen is, we will be somewhere closer to the double-digit number. We will definitely end the year at double-digit, and it all depends on how much we are able to sort of further optimize on some of the cost, et cetera in H2, we might even hit double-digit. So we are not giving that number. What we are saying is at a minimum, we will remain flat year-on-year.
Dipak Saha
Okay, okay. That’s good. And sir, on the Middle East side, I mean, if you can share some little bit of depth in terms of what is the extent of impact, is it the raw material prices or just the timely — time concerns which are impacting the business? If you can just share certain understanding how this is impacting and are we largely fine with it or it’s still there?
Shrinivas Kulkarni
I was not clear with your question, Dipak. Can you please say that again?
Dipak Saha
I’m asking, in the opening remarks, something mentioned that from Middle East, especially Israel side, there were certain concerns on the operation, but you’ve managed it pretty well. And so just trying to understand what is that depth of that impact. And are we over it, or do we see that continuing for rest of the year?
Shrinivas Kulkarni
So the impact is more on supply constraints. I think there will be shipment delays both inward and outward, right, the parts availability, et cetera. Those are the sort of challenges we have faced. So far, we have managed it well. We have not had a significant impact, but it’s hard to say whether we are over it, because we do not know how the situation changes tomorrow, right?
So if the situation — I mean, while we’ve got the operation from the vendors and suppliers and then customers both to be managing the situation, it’s sort of managed, right? And that’s an important point, so we don’t know how it will pan out, but hopefully, it will de-escalate and not escalate for us. But one can only sort of manage it as it comes, we can’t predict, right?
Dipak Saha
Sir, I understand it. But what I was trying to understand, since the situation has evolved post Q2 as well, and we have seen certain things developing. So in your talks with your suppliers, do you see any risk of cost here on going up or any of that sort of risk for the raw materials that you are sourcing from there?
Shrinivas Kulkarni
No, I think cost is not a big factor, Dipak. I think the cost still pretty much honor the pure terms, whatever is there. It is actually the delay and those kinds of things that are of impact. Certain parts where the order has not been placed because of supply constraint, the cost could go up if you’re looking at an alternate supply. But that — we are not seeing a lot of that. We are seeing more and more on the delay and scheduling rather than the cost.
Dipak Saha
Okay. And sir, last question before I fall back on the queue, you mentioned in your PPT that in terms of expansion, the strategies that you are resorting to also includes expansion to EV. So if you can share some color on this, what exactly are we moving into automobile and which particular geography, is it US or India as well? So some bit of detail would be really helpful. Thank you.
Anthony Montalbano
So the question in terms of the sectors in which regions we’re going to be expanding into. Is that how I understood the question?
Dipak Saha
Yes, you’re right on this.
Anthony Montalbano
Yeah. So there is a focus on different geos and different sectors that we are looking to expand into. That includes that we have provided some additional bandwidth from a go-to-market perspective in the India market directly. And there has been — the EV space definitely is an area of interest in that regard. So as we get some more details as we update the pipeline in that regard, we can share more info on that. But that is an area of focus right now that adds on to the four segments that we are already in.
Dipak Saha
Thank you.
Operator
[Operator Instructions] The next question comes from the line of Vipraw Srivastava from PhillipCapital. Please go ahead.
Vipraw Srivastava
Hi. I’m audible, right?
Operator
Yes, you’re audible, sir.
Vipraw Srivastava
Right. So just one question on debt. So the management has taken debt for this acquisitions, right? But currently in the balance sheet, we are seeing an increase of short-term debt. So the management thinks in further quarters, long-term debt will also go up, so interest costs can actually increase.
Shrinivas Kulkarni
Yeah. So the part of the long-term debt will also be used to clear the short-term debt. The short-term debt is a temporary arrangement to fund the M&A, right, because the M&A debt itself will take a little bit of time.
Vipraw Srivastava
Okay. Secondly, sir, on the question on the resolution of head of sales. I mean, is there something structural, or is it just a normal designation or something? I mean, do you have a separate team? I mean, who replaces and anything on that?
Shrinivas Kulkarni
Sorry, you’re not clear. [Technical Issue]
Vipraw Srivastava
The designation of Joseph Crowley, Head of Sales, right? There was an exchange filing for that.
Anthony Montalbano
Yes. So, the head of sales position, that is really due to a medical situation with that leader. And so due to the time frames involved for that, this is why we’ve had to unfortunately vacate that position for this one time.
Vipraw Srivastava
Okay, fair enough. Sir, last question. So, I mean, obviously, this quarter has been good, but going ahead, sir, I mean, do you see any margin expansion happening in FY26? I mean because all of your employee costs would have been observed and obviously you’re also looking for B2S.So that also has relatively higher margin. So any thoughts on that?
Shrinivas Kulkarni
Yes, certainly. I think there are two aspects to that question, right? I think there is definitely an absorption aspect as the growth kicks in. And there is no — I mean, we are not going to add P&L linearly to the growth going forward. But more importantly, I think the mix of business is going to change quite a bit next year, right, because of the one large order which had a lower margin, that sort of concluding. So the rest of the business has very healthy margins, so we should see appreciable improvement in the margins next year.
Vipraw Srivastava
Right. And Sir, last question on order book. So where do you see it by the end of this year? I mean, what’s the traction there? Do you see an improvement? Can we see an improvement in H2 or should we — for FY26, any thoughts on that?
Anthony Montalbano
Yeah. So we — we are at the point now within H2 where we are expecting to see some traction and improvement in that regard. So we will update as the quarters continue. But we are already starting to see some positive trends in that regard and that’s kind of how we have anticipated it and guidance that we’ve given before or comments we’ve given on it before.
Vipraw Srivastava
Right. So we see order booking, right? Because INR1,900 crore is the current order book, which I mean, will be sustainable for such the growth of the company. So we see that improving, right?
Anthony Montalbano
The order book would definitely need to be improving. That is correct. That’s what’s necessary to drive the growth.
Vipraw Srivastava
Okay, thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Rahul Deshmukh from LKP Securities. Please go ahead.
Rahul Deshmukh
Hello, sir. Thanks for the opportunity. Am I audible to you?
Operator
You are audible, sir. You may proceed.
Rahul Deshmukh
Yes. So my first question was, in quarter one, you told that we were facing some constraint in catching volumes. So effect of this, we were not able to observe the fixed cost, so, which was affecting our EBITDA margins. So how is the situation right now regarding the volumes?
Shrinivas Kulkarni
Yeah. So as you can see, right now, our volumes have improved in Q2 and therefore there is better absorption. But what has happened in Q2 is also the mix of business is different. While at EBITDA level, the SG&A absorption has helped, we also lost a little bit on gross margin, which is sort of offset. So from quarter-on-quarter, the improvement is not as appreciable as you would have hoped to see. That is the reason. But from an SG&A absorption perspective, we are definitely whatever we said in Q1 has happened in Q2.
Rahul Deshmukh
So should we expect any improvement in volumes in upcoming quarters?
Shrinivas Kulkarni
Compared to what year — from a year-on-year perspective?
Rahul Deshmukh
On year-on-year basis.
Shrinivas Kulkarni
I don’t know if you heard that. On the year-on-year perspective, yes we [Sppech Overlap].
Rahul Deshmukh
Yeah. On year-on-year basis.
Shrinivas Kulkarni
We will see an improvement.
Rahul Deshmukh
Yeah. And my second question was that in quarter one, you mentioned that we are facing some constant in procuring raw materials from the Israel region. So now things are getting worsen. So at this point of time also, are we targeting networking capital of 100 days? And what is the contribution of Israel in our supply chain?
Shrinivas Kulkarni
So, I mean, from the Israel, contribution will be about 20 days in that overall networking capital number. It’s definitely our percent — it’s a percent of getting to 90 days to 100 days. That is our aim, from a networking capital perspective. It might take more than one quarter to get there, but we are on the job in terms of identifying specific actions to get that at a sustainable basis.
Rahul Deshmukh
Okay, sir. Thank you, sir. Yeah.
Operator
Thank you. The next question is from the line of Deepak Krishnan from Kotak Institutional Equities. Please go ahead.
Deepak Krishnan
Hi, sir. Am I audible?
Operator
Sir, you are audible. You may proceed.
Deepak Krishnan
Yeah. Just wanted to check what is the goodwill created with this acquisition and what would be the amortization impact for the next couple of years.
Shrinivas Kulkarni
So we are yet to do the purchase price allocation. We are in the process of doing so. I think what will happen is, in this business, there is a considerable amount of assets that also come along with the acquisition. So you will have lesser intangibles in the business compared to, let’s say, a services company. And therefore, the amortization also will be quite minimal.
I mean, taking all of that into account, the comment that we made on us being EPS accretive is that, it is at a PAT level, we will see better profit company, if we had competitively have not done the acquisition for example, right? So, yeah, I mean, we’ll come back with the commentary on goodwill and the amortization impact at the end of Q3, once we have completed the purchase price allocation.
Deepak Krishnan
Sir, maybe just wanted to check on the order book level like, while we are at 19.8 billion at the end, the peak we were at closer to 24 billion, 25 billion. So when we say improving trajectory, by when should we sort of reach that levels? Because if we sort of don’t reach 24 billion, 25 billion, then our implied guidance of about 30% CAGR, if you remove the inorganic element, then the ability to achieve that over three years seems to be slightly difficult, because it’s been nine quarters, we are seeing continuous decline in order inflow.
Anthony Montalbano
Yeah. So, as previously addressed, that is one item that we do hope to see some traction on in H2. And that is correct, that would need to improve as well to continue the growth that we’ve been targeting. So, yeah, that’s previously covered. That’s correct.
Deepak Krishnan
Yeah. And on the India defense side of the India story, because we’re saying that it will go back to 70-30 exports and 30% local. That means the chances of defense — repeat defense ordering from those — from that large old PSU as well as the new missile PSU that you’ve signed. The opportunity may not be that big as what we originally had. Is that understanding correct?
Anthony Montalbano
No, I’ve answered that differently. Because I think we — that comment of 70%, 30% is taking into account inorganic mix also that will come into the business which will all be counted as exports, right? And second part is that particular order or the repeat of the defense business will have a little bit of a gap. When it concludes, I don’t think immediately it will come to the next order, it has some time gap.
So — and again, answering your earlier question, that’s a sort of lumpiness which will sort of create sudden jump in the order book, right? If you see our order book today if you remove that particular business and then see the rest of it, I think there is growth in our order book, but it’s definitely not at the level that you want it to be. The big [indecipherable] is an impact of that order going through and not coming back immediately, but as and when the repeat order from that customer comes, I think we will be the front runner to sort of leave that.
Deepak Krishnan
Yeah, sure. Maybe just one last question. Given Cyient’s focus into — the parent’s focus into the semiconductor business, while we see sort of — we don’t see any business because of Cyient’s venture into semiconductors sort of coming to the EMS arm. Is that understanding correct, at this stage, there is no overlap between the two?
Krishna Bodanapu
Let me answer that. I think it’s — there is a synergy because the continuum is really, first you build it — first you design, then you build the chip, and then you build the board and the box and everything around it. So in that sense, there is a continuum, I would say, and therefore there is a synergy. But I think we won’t expect anything to play out from that synergy at least for a few years, because we will first have to start designing the chips and then looking at how those chips can be consumed in Cyient DLM. So while there is a continuum and there is a logical flow for it to play out, I would say will at least be a few years from now. So I wouldn’t count that at least in the immediate future.
Deepak Krishnan
Okay. Thanks for those answers. Those are my questions.
Operator
Thank you. The next question is from the line of Praveen Sahay from PL Capital. Please go ahead.
Praveen Sahay
Yeah. Thank you for the opportunity. So the first on there is some clarification, sir, because here, you are given some 30% of a growth indications. So is that acquisitions like of Altek also considered? Or also, you had mentioned about the looking for acquisition in the North America and EMEA as well. So you are considering all those, and then after you had given a 30% of CAGR numbers?
Anthony Montalbano
Yeah. So the 30% outlook was really what we see as a multi-year CAGR. And that is — that still is what we are targeting and running the business towards. With the — and that is organic, by the way. That does not include any inorganic piece of that. So — and with the addition of Altek, we look to still maintain that overall combined business level of growth from a top and bottom line. This acquisition is not diluted in any way in terms of top and bottom line. So that’s where another aspect of the business is important, especially when you look at other markets which might not be at the same level of growth and profitability as the Indian-based EMS market.
Praveen Sahay
Okay. And the next question is related to the Altek Electronics. So can you give some color on the how is the geographical operation area and how is the opportunity growth for the business in the year to come? And is there any seasonality like our existing business, like of H2 is more as important of H1? How is that?
Anthony Montalbano
Yeah. So, as far as the geographic aspects of it, I will highlight that their location in Connecticut is an attractive area considering the types of clients that they have, work that’s done in that nearby — in that region, in the industries they operate in, including medical and others. So they provide the high value services from that location. And there is also expansion opportunity to grow on that site specifically.
And then regarding the question as far as the specifics on that business and the outlook, starting next quarter, we’ll start to integrate that into our overall updates, and then that’ll help bring this whole picture together in that regard.
Praveen Sahay
Okay. And lastly, sir, if you can give some order book, mixed domestic versus export of your existing order book.
Anthony Montalbano
So right now, it’s about — it’s about a 60%, 40% mix where it’s 40% domestic, 60% exports. And then, going forward, that mix might be a little bit more, more export or — more outside of India’s focus, but that that will probably shift again once maybe some of the Indian business starts in some of these new areas that we’re focused on what will grow. So that kind of gives the view where it is today and the trajectory it’s on.
Praveen Sahay
Okay. Thank you. And I have no more questions.
Operator
Thank you. We have a follow-up question from the line of Dipak Saha from KRChoksey Shares & Securities Private Limited. Please go ahead.
Dipak Saha
Sir, just one question. Lately, we have seen certain announcements of — on the surface to air missile size by BEL. So do we have any sort of capabilities there and can we capitalize on those kind of opportunities?
Shrinivas Kulkarni
Your line was not very clear. Can you please say that again?
Dipak Saha
Yeah. Is it better now?
Shrinivas Kulkarni
Yeah.
Dipak Saha
Sir, I’m talking there has been certain announcement from BEL on QRSAM size, so — especially on the quick response surface to air missile. So do we have any capabilities on those grounds to capitalize on?
Krishna Bodanapu
I think some of these are still quite out there, I mean with — what happens is from the time some of the programs get announced to the actual execution, the timelines are quite long. So we still don’t have the details on it. We just have to wait to understand what exactly the timelines are, what the program will maintain[Phonetic] and how much will be bought. See, the other thing we have to also look at is how much will be bought out versus indigenously developed. So it’s going to take a little bit of time on[Phonetic] this.
Dipak Saha
Okay, sir. Thank you. Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Mihir Manohar
Yeah. Hi. Thanks for giving the opportunity. I wanted to understand on the borrowing side. I mean, short-term borrowings have gone up from INR58 crore to INR225 crores. On the other hand, when we see there is, I mean, this amount of cash which is sitting on the asset side, close to INR500 crores. So I mean, why is this mismatch there, and why not use the cash itself? I just wanted to get an understanding around that. And also you mentioned that we have raised certain capital — certain sudden debt for this acquisition. If you can quantify that, that will be helpful as to what is the amount sitting over there.
And my second question was on the industrial side. I mean, last quarter, the industrial client faced the challenge. This quarter also, one of the industrial clients has faced a challenge, given the fact that industrial revenue is down. And in last quarter, you had mentioned that from 3Q onwards, we should see growth picking up. So how [Technical Issue] segment from 3Q[Phonetic]?
Shrinivas Kulkarni
So let me answer that, Mihir. So the funds that are sitting in the — as cash or fixed deposits are earmarked for certain usages as per the IPO statement that we release in the prospectus, right? So even though there is cash available, it has to be used only for those earmarked purposes. Second, since they are — accept the deposits at certain tenure, actually makes more sense to borrow money even instead of breaking those and losing the sort of penalty and the interest on those issues. So it’s a more of a timing issue. The borrowing we are seeking for the acquisition is about $12 million, or about roughly INR100 crores. And once that comes in, we’ll use a large part of it to also repay the short-term debt. Yeah.
Anthony Montalbano
And then in regards to the reference, I think of the industrial-specific segment of that debt, yes, there was some inventory that had been built up within key finds within that sector. And so, that is still pretty much the same as we advised last time that, that inventory is getting consumed. And then we do expect recovery in that regard. In terms of order book coming back in that sector, that’ll probably take probably one to two more quarters before we start to see that get back through the inventory situation I just highlighted.
Mihir Manohar
Okay, sure. And just last question was on the — is there any one time transaction cost which is sitting in this quarter?
Shrinivas Kulkarni
No, not in Q2, Mihir. We will — we are taking all the costs in Q3, and we’ll call that out separately.
Mihir Manohar
Okay. Yeah. Thank you. That’s it from my side.
Operator
Thank you. The next question is from the line of Swanand Samant from Klay Securities. Please go ahead.
Swanand Samant
Hey. Hi. So my question again was on the order inflows, right? So just to understand the business model a little bit better. So we have been lacking in order inflows for some quarters now, right, eight, nine quarters now. So just to understand that we — our revenue mix is also tilted towards the top 10 customers, which accounts for almost 80%, 85% of our revenue. So just to understand how these customers kind of look at us as a vendor, right? Are we — for the programs we run for these guys, are we the preferred vendor for them? Are we in the top three, top five?
So just to understand a little better why I’m asking this question is that the slowness, is it because that the customers kind of revenues have already slowed down, that’s true, but is it also because of the competition or losing out on some business? And how do we deal with this? Because at any point of time, there will be at least one or two in a back cycle, or in a back cycle, there will be at least one or two customers who would be a little weak on revenues for some of the other reasons, right? So is it kind of how do we reduce this risk in the future? Any qualitative comment on that?
Anthony Montalbano
Yeah, some insight I can give in regards to how our clients view Cyient DLM and the offering. We’re still a very small percentage of their spend. So it’s not really a matter of a small percentage. It’s really more the type of work that we’re doing for them. So quite frankly, the importance of the type of products we’re delivering to our clients, which are often for new programs or critical programs is extremely high. So we may be delivering a $10 million solution, but from working with the clients, it could very much be $100 million type of solution because of the urgency needed from their perspective to have this type of product within their — to support their end clients. So this business is not as price sensitive in that regard, really. So really what causes movement is often more — more along other aspects. It could be geo aspects, it could be strategy, and then of course, if there’s operational execution issues, then that would definitely be the key item. But for us, that’s our core and those are the main reasons that drive the value within the business. And then I think you had another — I didn’t follow the — quite the second part of your question.
Swanand Samant
So the second part was like, this would be the case for us when there would be at least one or two clients who have been struggling for some of the other reason, in the future as well, right, depending on the cycle. So how do we deal this because our top 10 customers, I guess, would account for 80%, 85% of the revenue. And we always have that business model where it would be concentrated at such. So how do we derisk in the future that — what can we do at such, any qualitative comment on that?
Anthony Montalbano
Yeah, good question. And, actually — so one key thing is we did announce a new logo, a new client in an industrial sector last quarter. And this sector actually moves extremely fast with the segment the client is in, so we see that — just the revenue potential from this new logo alone for our next fiscal year to be quite considerable. The fact where it would probably be a top — a top three or four client for us alone in the next fiscal year. And then it could even be a top one or two client for us in the following year.
So expansion of these types of key clients in these sectors is one area. And then also just the other pieces that we are — we just announced the acquisition of Altek, that also brings a little bit of diversity as well for us in terms of sector and helps broaden — helps kind of balance out the portfolio that we have within our clients and the sectors that we play in.
Swanand Samant
Okay, got it. So a follow-up on that. So when we say that as a vendor, we kind of support our client or customer with a very niche offering, right? But still, if we look at our margins in the past or what we expect in the future as well, those are kind of volatile and in the single-digit or early double-digits, right? So being in the niche of offerings which we offer still, we don’t command that kind of pricing power if you compare it to some of the other competitors. So, any comment on that? Why would our EBITDA margins be lagging at high single digits or low double digits as such?
Anthony Montalbano
Yeah. So I think if you look at — you look across the industry within the Indian EMS providers and you look across the industry globally, I think you’ll find that EBITDA margins, 9%, 10%, is relatively healthy in the Indian EMS sector. And then it’s definitely extremely healthy on the global sector as well, where EBITDA margins are anywhere from 3%, 4%, 5%, sometimes 6%. And so from that perspective, I think that does reflect the value of the business.
And again, it’s not that it’s just a niche business. It’s really more the aspect that it’s low volume, high mix, but mission and safety-critical. So that is why there’s more focus on the quality, on the systems in place to make sure that that continuity is there, as opposed to a business that might be more higher volume or consumer-based, which that type of business moves around from supplier to supplier much easier. And it also is probably operating about a third of the margins that the business we’re running today is in.
Swanand Samant
Okay. Got it. And on the order book inflows, so in last quarter, we said that we have some 80 billion[Phonetic] of pipeline. Could you quantify how much order inflow you internally target in the next two or three, four quarters, so that it will give us some comforts on what kind of internal target we do have in that?
Anthony Montalbano
Yeah. So I think we’ve laid out really with the overall growth aspirations are for the business, and that’s organic as well. So we’re continuing to look at that as how we run the business. And that’s counting the last fiscal year, the current one we’re in, and then also going forward. So those are the levels we’re continuing to support and invest the business in. And that also includes investments in our current operations and then also at the inorganic side as well, in addition to that.
Swanand Samant
Okay, got it. So —
Operator
So sorry to interrupt. We need to proceed with the question queue, sir. We have participants awaiting their turns. Thank you. The next question is from the line of Rajit Aggarwal from Atharva Investment Managers. Please go ahead.
Rajit Aggarwal
Good evening, sir, and thank you for giving me the opportunity to ask a question. So I have two questions. One is related to the acquisition. So on the business model of the acquired entity, there’s a V, the business model of the Indian entity. Will it be fair to say that the acquired entities caters to lower volume and higher customization compared to the Indian one? And do you see following the same model in the next two to three years? Or are there some thoughts wherein you converge the two models and are able to collaborate on the customers?
Anthony Montalbano
Yes, I think — I think that’s well represented. It is a business that is focused on low volume, high mix business. And again, this is also in these very high-quality type requirement sectors that they support their clients in. So it’s a very, very similar business model. This is why you also see the similar bottom line and top line financial aspects of the business. And they have some of their top clients have been doing business with them for decades just because of the service level that they provide.
Also for a manufacturing company, they also have — they also bring a lot of engineering type support to the products. Oftentimes, a product will come to them. It does require some more work, and they will work with the client to get the additional manufacturing for engineering done to get that product up and going. So this is the type of flexibility that a smaller, low volume, high mix operation can provide much more efficiently than a much larger operation that’s set up for more of a higher volume type setup. So we see very — it’s very complimentary, and this is why we also see a strong synergy case for the business with our current clients, where they can find comfort in extending their business, they do the best into that operation.
Rajit Aggarwal
Right. Thank you, sir. And the second question is on the large contract that is concluding in the near future. So can you help me with when exactly that is concluding and what will be the immediate impact on the next quarter sales because of that contract turning off?
Anthony Montalbano
Yeah. We’re really limited on what we can discuss on specific contracts and clients in that regard. So I think the guidance that we’ve given or commentary we give that about as much as we can really share at this point in time.
Rajit Aggarwal
Okay. Thank you, sir.
Operator
Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments. Over to you, sir.
Krishna Bodanapu
Thank you very much. And thank you everybody for joining us this evening. As you saw, there’s a lot of exciting things that are going on in the business. On the organic side, we’ve had a good quarter with growth coming back in an expected manner, and we’ll continue the growth trajectory for the foreseeable future. Of course, as there was a question and Anthony answered it, order book and order intake is something that we’re quite focused on. But looking at where we stand with a number of large deals, we’re quite confident that we will also start to fill up the order book quite nicely.
On the other side, Altek is a very, very important milestone for us because it globalizes the business and it also globalizes the business in such a manner that it’s not very different from our business model. So it’s something that we understand, it’s something that we’re comfortable with, but most importantly, it’s something that our customers see value in.
So, taking these two pillars of growth, both organic and inorganic, we’re very confident where we stand with the business and we’ll continue to update you as things progress. But for now, thank you very much for your support. And we’ll again speak next quarter after the year-end[Phonetic] results.
Operator
[Operator Closing Remarks]