Cyient DLM Limited (NSE: CYIENTDLM) Q3 2025 Earnings Call dated Jan. 21, 2025
Corporate Participants:
Krishna Bodanapu — Non-Executive Chairman
Anthony Montalbano — Chief Executive Officer
Shrinivas Kulkarni — Chief Financial Officer
Analysts:
Deepak Krishnan — Analyst
Vipraw Srivastava — Analyst
Arafat Saiyed — Analyst
Deval Shah — Analyst
Jinesh Shah — Analyst
Mihir Manohar — Analyst
Deepak Lalwani — Analyst
Praveen Sahay — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Scient DLM Limited Q3 FY ’25 Results Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Krishna Bodhanapu, Non-Executive Chairman of Scient DLM Limited.
Krishna Bodanapu — Non-Executive Chairman
Thank you, and over to you, sir. Thank you very much and good evening, ladies and gentlemen. I’m Krishna, Non-Executive Chairman of BLM. Welcome to Scient BLM’s earnings call for the quarter three of FY ’25. Present with me on this call are our Chief Executive Officer, Anthony Montalbano; and our Chief Financial Officer.
Before I 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 statement in this regard is available in our investor update, which has been posted on our website.
In the last quarter, we announced the acquisition of Altec Electronics, a leading EMS company based in in the US the strategy behind this deal was clearly on leveraging synergy benefits. I’m excited to share an update that the process of integrating — integration is going exceptionally well and to plan. We are pleased to report our Q3 performance, including Altec Electronics. With the addition of the client base, the synergy conversations are increasing significantly and I had the opportunity to have three synergy conversations last week when I was in the US.
It is very encouraging to be a part of these discussions and expansion plans and I’m confident that we will see the synergy revenue coming in the next quarters. The political developments in the US are also going to be a significant opportunity since they create localization requirements and Altech will benefit from these requirements. For those of you who heard his speech last night, President Trump was very aggressive in setting his intent of increasing manufacturing in the US. His industrial policies will be aimed at strengthening domestic manufacturing and it is perceived as an opportunity by many OEMs and Tier-1s in the US to manufacture locally and they’re already reaching out proactively to us to manage this growth to manufacture components locally.
This will — the outcome will be several opportunities for. And I’m very happy and I’m very glad that the leadership team was able to proactively identify an opportunity to create significant manufacturing capability in the US and that is going to benefit us as President Trump’s industrialization policies start to take shape and all indications are that made in US will be a big part of that. That. On the other hand, our revenue mix is slowly changing and this is having an impact on the medium-term.
We are looking at it positively to both on our profitability and cash-flow. Having said that, some of the large contracts that we signed during last year are starting to see traction and we see this further increasing in the coming quarters. We’re also gearing up to make sure that we’re able to meet these requirements. With the industrial and medical science showing recovery and clients of looking at our manufacturing facilities in India for India requirements, I can assure you that the road looks quite — or the future looks quite positive for us. And I am confident that we’re headed in the right direction and getting ready for the next phase of flow.
Now I will hand it over to Anthony and Srini to provide more updates on the business and finance in more detail. Anthony, over to you.
Anthony Montalbano — Chief Executive Officer
Okay. Thank you, Krishna. So as Krishna highlighted, Altac has been part of the business now for 1/4. And I thought it would be important just to kind of highlight some of the key aspects of the business as well as the integration highlights in that regard. So has been providing services in the EMS industry based in Connecticut for about 50 years. Primary sectors for the business include industrial, medical and defense and this aligned with our current portfolio allows us to expand and potentially take-up ITAR programs into the US defense sector market.
It also provides some overall business diversity in terms of business sector that we operate in and in giving us an additional industrial and medical sector opportunity. The client process, a lot of our clients within science DLM are western based clients and there are many opportunities that are now available to us by having US manufacturing available that were not part of the discussion earlier this geographic footprint aspect of the business will create growth opportunities for us and also complement the additional client access that we can get as part of portfolio.
The capabilities of the site are also very complementary and the DNA of the business focusing on very-high value, you know, low-volume, high mix, mission-critical type of electronics are very complementary to the business that we’ve been operating under for many years and allows our clients to have a similar experience, whether they are working with us in India or in the US as we now are providing mobile offerings.
On the integration progress, there has been considerable focus on the go-to-market aspects of that include integration of working with top key clients across both of our businesses, working with the go-to-market leaders that focus on these clients with both of our businesses, they’re now integrated as we look at opportunities, we now collectively plan and execute on how to make that make those opportunities transform into the business. The operations integration and HR integration aspects are also underway and in the first-quarter that we will be providing a consolidated view as well as it’s a reflection of that.
As supply-chain synergies are also being mapped right now and this brings certain aspects in terms of — in terms of what we can do with certain key aspects in the supply-chain part of the business that can include key components, distribution and overall spend we bring in certain aspects to help provide greater value that we can bring to our clients in that regard. And then also the financials have been integrated and we’ll keep stepping some of those here going-forward.
Some key wins for this quarter, we secured one leading global technology company focused on the energy services solutions space, which is sub under our industrial sector in terms of unique multinational OEM that we look to be a key growth and overall revenue plan for us in the future. This is in addition to at least six new logos of similar scale that we’ve announced in earlier quarters. From a pipeline perspective, our pipeline is considerable with over 1 billion in of opportunities that we continue to try and convert.
And also we are currently working on the specific large opportunities that are in advanced stages and hope to provide more updates on an important. Some other aspects of the business from a recognition perspective, our largest customers this year, Bell has recognized us as a valued partner. This is another testament to the services we provide and quality in these types of applications. Also some other aspects from on the business highlights focusing on our environmental and initiatives we did announce a strategic partnership with for a basically a solar power plant that we’ve applied to our facility and this will be the key aspect to help our ongoing commitment to renewable energy. We’ve also received some award specific awardness from the state of for overall export and business growth in that sector.
So those are some of the key highlights for this quarter — excuse me. I’ll turn it over to, Srinibas for some of the finance company.
Shrinivas Kulkarni — Chief Financial Officer
Thank you. Thank you, Anthony. Thank you, ladies and gentlemen, for joining the call today. I’ll walk you through the Q3 financials.
This will be a consolidated financials for us, including, and I’ll also call-out some of the key aspects of this particular quarter, which are the one-off expenses we have incurred for the — concluding the M&A, right? And we’ve sort of shown an adjusted EBITDA and a PAT number so that the sustainable performance becomes clear to you. And we’ve also showed what the reported numbers are in the comments. So to start with, we did a revenue of INR44.2 crores, which is a 38.4% growth year-on-year. Now this of course includes the number as well and the standalone revenue for the period was INR357.3 crores, which is a growth of 11.3% year-on-year.
From an EBITDA perspective, INR359 million is the adjusted EBITDA, which translates to a margin of 8.1%. Now this is lower year-on-year by 109 basis-points due to a few reasons and we’ll talk about that in detail. But the reported number is about INR8 crores lower than this because of the one-off expenses we have incurred in terms of the bankruptcies and the loyalties, etc that were used to conclude the M&A. Similarly, the Q3 reported PAT after adjusting for these expenses is about INR108 million, but the correct number to look at, which is the adjusted number is INR106 million, which translates to strong and also a little de-growth year-on-year from — of about 10%.
The order backlog now includes the numbers. So this stands at INR2,142.9 crores of and the number from Altec that is included in this is 291.5 crores. So the standalone order backlog is the difference between the two. So looking at some of the key KPI trends and this again the Q3, the latest numbers in this chart are all the consolidated numbers, which includes number and we’ve just gives a trend for you in terms of how we have performed on the important metrics of revenue, EBITDA and PAT over a period of time over last several quarters.
The non-P&L metrics, we will take a look at the — how we have done on the net working capital, right, in terms of DSO, we are at 76 days. This is a drop quarter-on-quarter as well as from a — from a year-on-year as well, right? And there is improvement that we’ve seen in the DSO metrics. In DIO, we are at 129 days. Again, this is a little bit higher than last quarter, but we have a roadmap to get to about between 90 and 100 days and we are still at a level which is slightly elevated more than we would like to be. Our DPO has improved to about 69 days and customer advances as the nature of the business has dropped to about 16 days in this quarter as we consume some of the revenue from the customers who have given advances, this number continues — will continue to drop.
We are not expecting any new advances in the near-future. So this is something that we will see as a trend. And so all-in all, the net working capital is about 120 days, which is an improvement from our previous quarter as well as-is almost in-line with where we were last year and in the same quarter. And I’m also happy to report that the — at the consolidated company-level, we’ve had free-cash flow, which is positive for the quarter. Now this slide gives a trend of the industry mix, the product categories and the mix between the rest of the world and India revenue.
Now you will find this interesting in terms of the industry mix. This is significantly different from how we have shown in the past, right, in terms of being very heavy on aerospace and defense. Now you see a big chunk coming from industrial and medtech as well. And because one of the reasons why we did the acquisition, we diversified our industry base very nicely and this has led to a growth of 47% year-o-Y on industrial and about 156 on medical, right? So this chart looks more balanced now and with the acquisition of. Now the mix of the PCBA, box build and cable has not changed significantly, but we have — we continue to see a large portion of our business coming from PCBA and the box build growth now stands at 16% year-on-year.
Similarly, on the mix from — between geography, now the business is all accounted in the rest of the world, which is at 61% and the India business is at 39% and we will continue to watch this trend going-forward as well. The chart just gives a tabular view of the financials we just reviewed. It has more granular details in terms of the various cost elements. I think you can go through it in detail as you know, the financial footprint of US company is different from in Indian EMS companies. The ratio of material and employee cost is different there and therefore, you see some changes as we go-forward, right.
The employee cost will be higher, material cost will be a little bit lower as we consolidate. The other thing you will see in the financials here is also the depreciation and amortization. As you know, when you make an acquisition, there is a purchase price allocation and the intangibles start getting amortized over a period of time that is — that is discussed with the auditor. Now this number is not really a cash expenditure, it’s a — it is just allocation of the intangibles and write-off of the same. And so with all of that, I think you will see a profit which is and reported here for the quarter.
And just to give further clarity on how the one-off expenses are treated between EBITDA and PAT, this slide give you more color in terms of how we treated the as a onetime transaction-related. This will not repeat going-forward. So that’s why it’s called out as an excessful item. So slide on the IPO proceeds utilization, as we had stated in the objects of the issue, had earmarked 10% of the entire issue proceeds towards inorganic. So we’ve used that as a part of the general corporate proceeds to make the current acquisition. We have repaid all the external borrowings and the trend on the working capital and capex is lower than what we had expected.
We have used up only INR135 crores so-far, but we’ll roughly use of about INR190 crores by the end-of-the year and we’ll have another INR100 crores left for the next financial year in terms of the working capital requirements. But on capex, the way we have — I mean we have excess capacity right now. So there is no need for a substantial expansion of capex at the moment, right? And so we have enough capacity to even run next year. There will be incremental capex additions during the year and we will call that out as we use the funds towards CapEx. There are some more in the presentation.
I will not go to that right now. These will give a better color on the difference between the standalone and the consolidated numbers. We also have a slide on the nine-month performance. Please go through those and if you have any questions, we can address them.
But with that, I conclude the financial presentation and we can go to Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first 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’re audible. You may proceed.
Deepak Krishnan
Yeah. So just wanted to check. So essentially, if I look at the order book number, adjusting for the EUR2915 million, which is the, we’ve again sort of seen an order book decline constant number of 8, 5 and 4 odd to that. So essentially in terms of new order wins or we’ve indicated we are at final stages of negotiation. But when do we start seeing large orders coming in? And plus obviously, whatever comes from, maybe just an outlook in terms of what is the US growth that you’re expecting for the next maybe two years, essentially because of all the potential impacts due to the localization of manufacturing there.
Shrinivas Kulkarni
Yeah, I think on the order backlog, right, I think we we’ve — we’ve seen from organic business, yes, we have seen a degrowth this quarter as well. The pace at which the large order from one of the key customers is being consumed is higher than where we are seeing the growth, right? Look, I mean, it’s a little hard to call what the outlook will be. We are definitely working on several large opportunities. As Anthony also highlighted, the pipeline is large, right? And there are several deals and actually three large deals where there is active conversation at an advanced-stage. So as those convert, I think we will once see the order book growing up from where we are today. Has a shorter sales cycle compared to DLM.
So we will fill a lot of orders even during the year, so we start with, let’s say, 90% visibility, they start with 50%, 60% visibility. Just to give some perspective of how that business runs, right? And definitely we see a growth in North-America. I think for two reasons. One, one with the acquisition, I think it gives us a footprint of having manufacturing presence in North-America, which you know — and a lot of clients have been demanding the sort of probability to their centers. Another is what Krishna mentioned, they are just the sort of political changes that have happened in the US and the outlook that is there in terms of keeping America first and manufacturing in the US, I think we will definitely see much higher-growth in North-America compared to what we’ve seen in the past last.
Deepak Krishnan
Sure. Maybe just a second question, if I just look at the difference between the standalone and the consol and adjust for the EUR80 million sort of one-off expense. I think Altec this quarter reported an EBITDA margin of close 7.6% versus standalone about 8.3% prior to other income. So is Altech EBITDA margins more in the 7% to 8% range or do we also see that this segment can potentially help us get to 10% EBITDA margin that we see? We’ve indicated that that’s at our stated goal that we were to reach-out to.
Shrinivas Kulkarni
Yeah. So first of all, the EBITDA margins are similar to ours in this particular quarter, right? And — but they have a roadmap of getting to over 10% least. And then even when the acquisition was made and we have seen the historical performance, I think they have operated at around 10%. We have a — we have a few expenses which are sort of just immediately after the acquisition that have taken place this quarter, we have a clear line-of-sight to get to 10% on a sustainable business in.
Deepak Krishnan
Maybe just wanted to understand sort of do we still stand-by the 30% CAGR guideline for a three-year time-frame and any particular revenue guidance that you want to give for this particular year given that organic growth this quarter has slowed down to about 11%. So just wanted to sort of understand these two points.
Anthony Montalbano
Regarding the 30% of figure that we’ve discussed, that’s just been more of a guidance as more of a CAGR year-on-year. I think I think you’re going to find some variability. I think the first year we delivered over 40% and then you find what I think we delivered in the 20s. And so that’s going to vary. I think that is a — still a healthy number to consider on just the mid to-long-term of our business. But as we look at certain programs transferring out and as we ramp other businesses up, there definitely could be some lag on your in that number. So it’s not meant to be a firm 30% year-on-year guidance.
Deepak Krishnan
Sure, sir. We just wanted to understand the strong free-cash flow generation that we had this quarter, given that there was only a slight decrease in net working capital days, anything else that sort of aided this EUR478 million of free-cash generation because it’s only about a 7-day decline Q-o-Q in WC. So can you please yeah, just wanted to understand the EUR478 million of free-cash that we’ve generated this quarter because working capital has not really changed that much. It’s gone from 127 to 120 days. So any other factor that led to such a strong free-cash generation?
Shrinivas Kulkarni
No. I mean the release of working capital in like 7 days. I think that big number, right? So you will see the I mean, INR47 crores is not a also includes some of the cash generation that is coming from Alpek. But yes, I mean the calendar means in the big numbers and that translates to talk to the numbers.
Deepak Krishnan
Yes. Maybe just a con, I wanted to understand, last quarter, we had an FX loss. This quarter, we had an FX gain, but you acted the other income has not really jumped. So any other factors that’s sort of causing the other income to be lower this particular for that?
Shrinivas Kulkarni
Yeah. No, I think there are two aspects. I think that also has an aspect of the sort of the interest yield on the deposits that we have, right? I think even that number may have come down in the current quarter. I don’t have a specific number in front of me, but yes, there is a — that also has a bearing. We don’t see other income going up and because of the interest yield on the — as we consume the cash from the IPO, I think that number is going to sort of shrink, right? Unless we have surplus cash and start generating interest income, that number will go down. So an exchange fluctuation impact will be there. There will be realized and unrealized be in both coming up in the other income. So and that’s something we can’t really predict.
Deepak Krishnan
Sure, sir. Those are my questions and best of luck for future quarters. Thank you.
Operator
Thank you. Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict your questions to three per participant. For follow-up questions, you may rejoin the queue. We have the next question from the line of Viprav Srivastawa from PhillipCapital. Please go-ahead.
Vipraw Srivastava
Hi, sir, I’m audible, right?
Operator
Yes. You are audible, sir. Please go-ahead.
Vipraw Srivastava
Yeah. Firstly, on the standalone margin, while other expense as a percentage of sales relatively higher because revenue has degrown Q-o-Q, but other expense has gone up. So any thoughts on that?
Shrinivas Kulkarni
Yeah. So other expense this time includes the other expenses of, right? And like I said, I think the financial footprint, while at EBITDA level, the businesses are comparable, I think the mix between the two businesses are different.
Vipraw Srivastava
Mostly on the standalone level, I’m talking, sir. They don’t have, right?
Shrinivas Kulkarni
Yeah, on standalone level, there are a few operational expenses that have gone up this time, namely to the sort of the bad debt provisions and some of the other provisions that we have taken in the business. That’s more on a — we may now take the provisions on an expected credit-loss, which is basically on the aging of receivables. Some of our receivables have moved to the right, which as per policy we have to take it. This is recoverable next quarter as we collect amounts. But for the quarter we have taken a conservative view and provided as per the volume.
Vipraw Srivastava
So what would be the on the receivable number if you can give INR8 crores? That’s the number?
Shrinivas Kulkarni
What is it? Sorry what is the number you wanted?
Vipraw Srivastava
What’s the quantum of that external credit-loss you have taken in receivables?
Shrinivas Kulkarni
No, I’ll not qualify — quantify that separately.
Vipraw Srivastava
Okay. Sure, sir, sure. So I mean, on a gross margin level, you have maintained a gross margin that’s commendable. But going-forward, how do you see your EBITDA shaping up? I mean, this quarter, we were expecting EBITDA to ramp-up, but again, because of this other expense, it has again come down. So how do you see EBITDA progressing in coming quarters?
Shrinivas Kulkarni
Yeah. So the mix of the business has a big bearing. We’ve discussed this in the past as well. As we get into Q4, I think the — there is one large deal, which is a slightly drag on the margins is going to ramp-down significantly, right? And therefore, I think our margins will improve in Q4 and beyond. So you will see substantial improvement in the margin for the Q4 quarter.
Vipraw Srivastava
Right, fair enough, sir. And sir, on a standalone level, we have only grown at 11%. So I mean this order book you were mentioning, this few large deals you are in discussions with, what will be the quantum of these orders? I mean will they be big enough to move the needle on a consol level? I mean, anything on that? Any quantum you can give rough quantum, anything on that.
Anthony Montalbano
These programs do have impact on our next two fiscal years and so definitely some on FY ’26. And they really are dependent on the — a couple of these are transfer programs and a couple of other things programs. So there are some variability there as to how fast they come in. But again, we do see the impact on these deals starting into next fiscal year.
Vipraw Srivastava
So you are seeing by FY ’26, do you see these converting into full-time orders, right?
Anthony Montalbano
Yes, we will definitely start to recognize them as part of our backlog as soon as we get those closed and then — and then as far as impacting the revenue and all the other aspects of it, that would come in the quarter’s following.
Vipraw Srivastava
Right. And a question for Srini. Sir, I mean, obviously, you mentioned about the ECL express credit-loss on receivables, which resulted in higher other expense. But I mean, going-forward, do we see such a surprise because is it a onetime thing or is there further receivables which can have ECL in future? What are your thoughts on that?
Shrinivas Kulkarni
No, this is a one-off things. I think we’ve had some — some of the receivables not getting collected during the December owing to holidays and a few other factors like that, definitely one of things will substantial improvement going-forward. And also, no, look, I mean, the provision that we have created is more on a sort of this quarter on a conservative basis as we just don’t want to deviate, right? But as we collect, we are kind of collecting those, right? We will. And the prices are increasingly the accounting standard is you show efficiency in your collections and the provision automatically goes down, right? So it’s a — it’s right, sir. So we will — we will obviously as we target our DSO to be between 60 and 70 days, currently at 85 days, I think we will start seeing that will do.
Vipraw Srivastava
That’s right. And sir, last question, this ECL is from a foreign client or domestic client.
Shrinivas Kulkarni
It’s from the domestic client.
Vipraw Srivastava
Okay, sir. Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Sayed from InCred Research. Please go-ahead.
Arafat Saiyed
Yeah. Hi, sir. Thanks for taking my question. Sir, my first question is on your order book. So let’s say, despite adding all take on your order book, we take towards more about the data and aerospace, around 66% 68%. So in the future, you expect this should go more towards the actual medical industry this as it is on this.
Anthony Montalbano
So if I understood the question correctly, I think you’re asking regarding which business sectors, the order book is aligned towards. We do see — if I got that correct, we do — we do continue to see strong and defense as part of that order book. That being said, we also have — that still is more dominant, but we still do have some new opportunities in this regard that will impact our medical and industrial as well.
Arafat Saiyed
And sir, the second question is on yours. Recently own order from Honeywell and that is for 15 years.
Operator
You do sound a little muffled on your line. We request you to please check the mode that you’re using on your handset.
Arafat Saiyed
Yeah, hi. And now I’m audible now.
Operator
Yes, it’s slightly better, sir. Please go-ahead.
Arafat Saiyed
Yeah. Yeah. So my question is on your order book, which you recently got from Honeywell order inflow of around $50 million that for 15 years. So what is the status of that, sir? Have you executed anything on that or this will remain, let’s say, in the long-term only?
Anthony Montalbano
Yeah, we — so yeah, regardless of that deal that’s a very strategic opportunity that we’ve commented on and are planning to continue to support that. Regarding getting into more specifics of that would compromise client information in that regard.
Arafat Saiyed
Thank you. Okay, fine, sir. That’s it from my side. Thank you.
Shrinivas Kulkarni
Great. Thank you.
Operator
Thank you. The next question is from the line of Deval Shah from RBSA Investment Managers. Please go-ahead.
Deval Shah
Hello. Good afternoon. Am I audible?
Operator
You are audible, sir. You may proceed.
Deval Shah
Yeah. So it’s more of a clarification first is, sir, what I understood is that the margin profile of Alitec is very much similar to ALM and as well as we both are aspiring to and to go for 10% margin. So is my understanding correct?
Shrinivas Kulkarni
No, is already at around 10%. This is a one-off quarter, right? I think we should also look at these businesses on a full-year basis, not on 1/4. Quarters have some seasonalities in the cost, et-cetera. On an annual basis, I can assure you that is more like a 10% business.
Deval Shah
Okay. So that’s what my understanding. So I was also asking for the full-year basis only, not on the quarter basis. So the margin profile of is very much similar to what ALM is aspiring. So we are also aspiring for the 10% margin, right?
Shrinivas Kulkarni
Yes, see we are — we will also end with the higher-margin on a full-year basis this year as well. And yeah, 10% is just the starting. If it’s one milestone, it’s not something that stops at 10%, right? I think our aspiration is bigger than that. But I think the first milestone for us to is to consistently deliver 10% and then grow from that point onwards.
Deval Shah
Okay, fair enough. And my next question is to Krishna. So while he alluded about the US opportunity for Altech, which — which is a good deal for us, just wanted to understand how the Altech business in the EMS is different from sand ELMs are doing it right now. So how the written profile are different? So if I want to break it down the ROE, so how is it different? So what is the ROE looks and sand ALMs?
Shrinivas Kulkarni
So I think the — from a ROE perspective, both businesses will end-up being quite similar. If you look at the advantage that Altech brings, two things, right. One is Altech works in some very sophisticated sectors like industrial, safety, critical, industrial or safety, critical, medical, which is a complement to what Scient BLM does because our — of course, we do some work-in those sectors, but a significant portion of our work is also concentrated in aerospace and defense. So the first element of what brings to the table is some very sophisticated work-in the safety, critical, industrial and medical sectors. The second thing is the defense angle that Altec brings to the table.
Now by-law, US anything manufactured for US defense has to be made in the US, which means that so-far, while we’ve had some big customers and as you know, in the wider science ecosystem, aerospace and defense is a critical industry and we work with pretty much all the large aerospace OEMs who also happen to be defense OEMs. We’re now seeing manufacturing opportunities from our — from these customers because they also need equipment to be made in the US. We already do a lot of design-in the US, as you know in science, but now we can also make in the US.
So in that sense, the Altec business is a great complement to the science BLM business. And it’s again, I’d say complement not supplement in the sense that it is — it is — it’s very unique, it’s very adjacent and therefore, we believe that there’s a good growth opportunity. Again, from a metrics perspective over a period of time, we believe that both from a margin perspective, ROCE perspective and cash generation perspective. By the nature of the business is both will be very similar.
Deval Shah
Okay. Thank you. All the best.
Operator
Thank you. The next question is from the line of Jinesh Shah from RSP and Ventures. Please go-ahead.
Jinesh Shah
Yeah. Hello. Am I audible?
Operator
Yes, you’re audible, sir.
Jinesh Shah
Yeah. Okay. So my first question was I think the previous participant already asked. So I just wanted to understand that we have a couple of one-off expenses like ECL provision for debt debts and M&A expenses in this quarter. So it will be helpful for me if you will be able to quantify accumulatively that amount.
Shrinivas Kulkarni
No, look, it will not be fair to call-out specific amounts like that. What I’ll tell is these are one-offs and we will not repeat, right? I think on the M&D, we’ve already quantified that this is an INR8 crore expenditure, right, because very straightforward, it was a few line-item. But whatever — I mean — and then some of the other operating expenses have gone up this quarter, they will not repeat in Q4 and the other operating expense have not been called out as one-off. So what you will see is the operating performance itself showing a better number next quarter. But from an perspective or the M&A integration perspective, there is a one-off cost that was incurred and that has been followed.
Jinesh Shah
Okay. Fair enough. So like as you mentioned in last call that overall margin for the entire year should be flat as compared to the previous year. So if I take — take consideration the hit of this quarter, then for this quarter at least we’ll be able — we’ll be doing a little bit less — we’ll be earning a little bit less margin than 9% to 9.5%, right, then we’ll be able to try to achieve milestone of 10% probably in the next year. That’s what the outlook is from your end?
Shrinivas Kulkarni
Yeah. I mean as I mentioned, I think the margin has several factors, right, which we take into account. The business mix is one of the largest factors that business is from us. Now when you look at our current business mix, it has a certain mix of low-margin business, which is going to drop-in Q4 and further substantially drop-in Q1, right? So both these lead to better margins in-quarter four, leading to a full-year margin being worse. More closely — it’s closer to being flat year-on-year in margin terms.
But the exit quarter for — for the current year margin terms will be good, right, which will argue well for the next year, that is the next financial year as we go into it. Of course, there is another factor to consider here that the first-half of next financial year may not be a high on growth, right? It will be a soft-ish first-half given where we are in terms of our overall order book and the large order coming down. So there might be some absorption impact, etc., that we will see in the first-half of next year. But having said that, overall from a perspective, the margin is likely to improve from where we are today and the first demonstration of that will be in Q4.
Jinesh Shah
Okay, okay. Understood. Got it. And my last question would be, if you can talk about the macroeconomic environment, like do you anticipate any headwinds across like based on the talks with the customers or the opportunities that you see in the market. If you can talk a little bit more about that in couple of one or two years, you can see.
Anthony Montalbano
Yeah, an important question. This is something that we talked about our top-lines about on kind of what we’re seeing and what they’re seeing. So on one aspect, if you look at our top — if you take the — if you take the one large contract that will be — that we’ll be completing next quarter. If you kind of take that one out-of-the equation and you look at really our top three, four clients, we’ve seen pretty strong favorable outlook in that regard. Those tend to be a little bit more aero and defense focused.
And but then as you go down from there and start getting into the following clients that follow those, it’s a little bit more of a mixed feedback. We’re seeing some softness in certain areas there from some clients, specifically in the industrial and medical segment. Segment and then and so it does get a little bit more mix there. Not that they’re guiding down, but I think it’s just client-by-client outside of Aero and defense. So this is something we do have or have are some on the and outside of air own defense to get a little bit more mixed.
Jinesh Shah
Okay, okay, got you. That’s it from my side. Thanks a lot.
Operator
Thank you. We have the next question from the line of Mihir Manohar from Asset Management. Please go-ahead.
Mihir Manohar
Yeah. Hi, thanks for giving the opportunity. I wanted to understand this difference between consol and standalone. Is that difference completely attributable to or is there any other subsidiary where the numbers will also go?
Shrinivas Kulkarni
No, no, it’s completely attributable to media. So the standalone means the traditional science business, which we have been reporting till last quarter, the consolidated — consolidated number just includes that.
Mihir Manohar
Okay, sure. Understood. Second question was on this order book. Now this is like almost seven, eight quarters, we have seen order book remaining largely flat or going down. I wanted to understand, I mean what is the reason that the discussions are not fructifying into order booking because the pipeline has remained over that number, $1 billion kind of a number. But why is it not converting into order book? Some color around that will be helpful.
Anthony Montalbano
Yeah, I think one key aspect is that we — we have been consuming, we have been consuming the backlog. And so as orders come in, you have to kind of have to try and offset that. But these programs as well are you are larger longer-term programs. The award on them can shift in terms of timing of — they can even shift a quarter or maybe even more time. But we also have a — we also have announced some large contracts as well in prior quarters. So I think it’s more of a timing issue as those orders come in as it’s the nature of those types of programs and especially on the A&D side, I think you’ll find a little bit more consistency when you start to look at medical and industrial similar to the profile that was highlighted earlier where that business with — you have the kind of a quicker churn of the yield business compared to the other sectors.
Mihir Manohar
I understand that this is a lumpy business. It becomes difficult to guess it from a quarter-to-quarter perspective. But I mean, is it the case that the client has decided to defer this program or is he evaluating an alternate vendor or is the rate negotiation going on or are the supply-chain issues there which are resulting into these problems? So what exactly is it leading to because these are lumpy orders to understand, but there should be some specific reason around it.
Anthony Montalbano
I don’t — I don’t think there’s really a specific reason. I think it really comes down to there are several deals that we are working and we’re not going to win all of them, but we — we have announced the ones that we have closed and we do plan to close more. There are going to be various considerations as to why one may or may not come our way, but I would not, you know, I would not try and categorize any specific trend or anything in that regard. We are our clients really align to us on these types of programs based on our capability and strong track-record we have and these factors being financed.
Mihir Manohar
Sure, sure. This number of towards INR42 crores, does it include the aircraft touring technology? I mean contract which is there, which you declared on 5th of November, 5th or 6th of November. Does this number include that or it doesn’t include?
Anthony Montalbano
I don’t think it includes this.
Mihir Manohar
Okay, sure. And what would be the value of this deal because it’s like a 16-year deal, at least the president mentions that. So is it a large contract or it is not a large contract?
Anthony Montalbano
I — which program are you referring to? Just to clarify?
Mihir Manohar
Yeah, this is the aircraft tooling technology. I mean, a press release you have given on 6th of November.
Shrinivas Kulkarni
It’s a large OEM.
Mihir Manohar
Now sorry, it’s a large OEM it’s a large OEM from very true. But for you, is it a large contract or it is not a large contract?
Shrinivas Kulkarni
No, it’s a large award, right? So we don’t have the — so from a total contract value perspective, that value is high. We have not received specific purchase orders, which are large yet. As you know, I think the cycles are very long in this industry, you have to get through the MDI and then get to the main production. But once you are there, you will get that order. But right now, we are not counting any significant view from that program into our order book. As they come in, we will keep contract. But the award letter is there and that quantifies the total contract potential for that?
Mihir Manohar
Okay, understood. Sure. Second question was just on the depreciation side. I mean we are paying roughly $30 million for this acquisition. So what would be attributable to attributable to goodwill customer purchase and how to read the incremental depreciation? I believe the incremental depreciation is INR crore INR4 crores INR5 crores, right? So should we take this as a ballpark number for the coming quarters as well?
Shrinivas Kulkarni
Yeah, look, I think we will report the balance sheet next quarter, that is the balance sheet we put in-period and we have — we are still going through the purchase price allocation process, but approximately we will have $1 million every year coming in from the additional amortization and the remaining will be goodwill. As you know, in manufacturing companies, the sort of inventory and other assets that come along with an acquisition mind, the goodwill tends to be low, right, and that’s — we are in-line with the rest of the acquisitions that happened in this industry, right?
So we will have a goodwill, which is substantially lower than the purchase price we have paid. So which also means the amortization might be a little bit higher. So if you net out the amortization, even with that amortization accretivity on a full-year basis, right? So therefore, from the financial perspective, it’s a good acquisition. But if you frankly net out the amortization is extremely good at this good deal, right. And so and it’s not a cash expenditure, it’s just reporting and so we are okay with whatever the purchase price allocation lend is.
Mihir Manohar
Okay, sure. And just one last question on the order book side. I mean, let’s assume if our order book goes up in first-quarter, does it translate to higher revenue in second-quarter itself or will that take time?
Shrinivas Kulkarni
Again specific to the industry there, I think it’s very hard to sort of quantify and say you know what you know which order converts how fast, right? I think in certain industries and with certain clients, it’s a very quick turnaround. I think there are sort of the orders where the conversion is less than three months also. But most of the A&P in your contracts, these tend to be longer. I think the order comes in and by the time you see a meaningful revenue, it’s at least nine to 12 months. So it’s hard to generalize and-answer that question. So it’s very client-specific.
Mihir Manohar
Sure. That’s it from my side. Thank you very much. Thank you.
Operator
Thank you. The next question is from the line of Deepak Lalwani from Unifi Capital. Please go-ahead.
Deepak Lalwani
Hello, sir. Thank you for the opportunity. Sir, in the standalone business, we’ve only grown by 11%. So what is the reason for this execution being low despite H2 being the seasonally stronger quarter. So any reason for this? And how are we looking at Q4, that is this Jan to March quarter in terms of execution?
Anthony Montalbano
Yeah. One key element is we did have one top key client did have inventory that had built and that caused a reduction in-demand. So that did provide some of this. And then it comes down as well to just when you look at the overall mix of the program, you know, again, as we have a very large percentage of our growth coming from a key program that we’ve been executing over the last several quarters, you know, providing the new business to offset that those programs ramp at different rates but again one big part was a reduction in that one top program.
Deepak Lalwani
Sure so has the issue of inventory been sold and how are we looking at Q4 sir?
Anthony Montalbano
No, we do — that is being worked through. And again, we do expect demand there to return in the coming quarters. And again that’s specific to-end market of that client. And again, it’s very much in-line as well with kind of the industry sector outlook I gave earlier and kind of where we’re seeing and we have some strength and where we’re seeing the mix.
Deepak Lalwani
Okay. Okay. And so if you look at the standalone order book, it stands at about INR1,850 crores. So what is the execution timeline for this? And if you can tell us what should one work with for the next year’s revenue?
Shrinivas Kulkarni
No, the execution timeline is between 18 and 24 months depending on client-specific needs and scheduling. So we are still undergoing the budgeting process for next year. So we have no commentary on next year’s number. So I think we will revisit this question at the end of next quarter.
Deepak Lalwani
Sure. Got it. And sir, this delay in order book, I understand the client — I understand the capability and will come. So — but is there any specific reason for this with regards to the End-User industry having some issues or any macro headwinds you mentioned in the previous comments also. If you can give more granular sense on it, that would be helpful.
Shrinivas Kulkarni
Thank you, I think it would be — I think it would be difficult to start to start to give much bigger trends when you look at if you’re looking at a large part of your business coming from you know, 10, 12 clients is kind of hard to start to draw trends in that regard. So I think the level of response I gave earlier is probably the best guidance that we can give. Otherwise, it starts to become really speculation on just probably not enough data point.
Deepak Lalwani
Sure. So these three large deals that you’re talking about, what are the milestones that are pending to fluctify these deals into conversions, what are the milestones left? And if you can just indicate broadly what would the quantum of these deals be? Will it be in a INR500 crore range or will it be smaller deals INR200 crore? Just a ballpark number would be helpful.
Anthony Montalbano
Yeah. Yeah. So it’s a typical sales cycle aspects associated with the deal. It could be finalizing, you knowit could be finalized pricing, it could be further negotiations. It could be various aspects of business award. Yeah, so all these types of factors kind of come in. There’s no really one or two clean answers there. And then as far as just the specific value of the deal, the those we really try and limit providing those types of specific numbers, again, just for client data integrity and yes, inappropriate expectations.
Deepak Lalwani
Sure. Okay. Thank you, sir. Those are my questions. Thank you.
Shrinivas Kulkarni
Thank you.
Operator
Thank you. Ladies and gentlemen, we will now take one last question, which will be from the line of Praveen Sahey from Prabhudas Lilladher Capital. Please go-ahead.
Praveen Sahay
Thank you for taking my question. My first question is related to the current order book. Can you give a — to clarify that you had a given one that nine to 12-month execution timeline or 18 to 12, 24 month execution timeline?
Shrinivas Kulkarni
Nine to 12 is the execution timeline of a new PO, a new PO comes on-board. By the time — I would say never new prospects, I would not even say from PO2 revenue, it’s a shorter-cycle. But from when a new client comes on-board and you win an award, by the time it converts to meaningful revenue, it will be nine to 12 months. The execution cycle of order is different. That is more on the current orders. The scheduling between the two years is what is INR18 crores.
Praveen Sahay
Okay. Okay. Got it. The next question is related to the LTEC. And as you had mentioned that the consolidated and the standalone difference is only LTEC. So L-Tech have a very-high gross margin, you know that’s in the range of around 45%, 46% is it or is something different.
Shrinivas Kulkarni
Is not that high. So you may be referring to the contribution margin. Gross — their gross margins are definitely higher more in the 18% 19% range when you take the other direct cost as well. But their SG&A also will be higher. So it’s a different kind of a business, right? That’s what I said, at an EBITDA level, the business was comparable and you saw the optics between the line items between like let’s say material and labor, etc., are different than that. So I think it’s best to look at EBITDA levels because there are also definition issue between companies here how they classify because of.
Praveen Sahay
So okay. And second clarification on the ECL. In the previously also you had accounted such kind of incidences in the business. This — not in the recent past. I’m sure there have been some instances in the long history of the company, but not in the recent past, not at least for the last 24 months where there has been a substantial increase in the ECF so like I said, a one-off even for this quarter, it will correct for itself for next quarter month. So actually I’m trying to understand what is the probability of — as you had also mentioned, it’s in the coming quarters, it’s also get you know added back. So what is the probability of that actually?
Shrinivas Kulkarni
No, no, the probability is extremely high. That’s the reason why I’m confidently telling you that this is one-off. Okay. And last clarification on the segment that A&D, I believe have a very-high margin as compared of the other industrial or a railway. Is it understanding right?
Anthony Montalbano
Not necessarily. The sectors between A&D, medical, and industrial, at least in sectors we at least within our client base, we actually find very similar margins. The more the variability is really more client-specific or program-specific. But as far as you know, if you’re to generalize new business in any one of these three sectors, they actually deliver very similar profit margin for us.
Praveen Sahay
Okay, fine. And last clarification related to your three large deals, which you are in talk. Those are domestic or rest of the world?
Anthony Montalbano
And more rest of the world. Yeah, I think the three you called out are more rest of the world. There are some — there are definitely quite a few domestic opportunities that we are working, but I don’t know if we would necessarily highlight those as a standout large deal, but there’s definitely more of those that we’ll be announcing later, but not necessarily the read that we chose to highlight for this quarter.
Praveen Sahay
Okay. Thank you for answering my question. All the best. Thank you.
Anthony Montalbano
Thank you.
Operator
Thank you. I would now like to hand the conference over to Mr Krishna Bodhanapu for closing comments. Over to you, sir.
Krishna Bodanapu
Thank you very much and thank you everybody for participating in the Q3 conference call. As you see, things are going okay. Things are going well. In many cases. There are areas that we need to improve in others. But overall, I would say we are executing to a plan, which we feel very confident about. I’m very excited for what the business holds and I also want to compliment the signed BLM leadership team on identifying, acquiring and now integrating the Altech opportunity. We are one of the few, if not one of the only one EMS company in the world that has this capability, especially at our scale, which is essentially to do safety-critical, highly reliable, highly complex engineering-centric electronics from India, from the US and we will, of course derisk further derisk for further expand on our manufacturing base to create a truly global EMS.
I think we are — there are two elements to that we’re working on. One is a truly global EMS capability and secondly, a truly integrated design and manufacturing capability. It is hard work, but I think I’m incredibly proud of the team for the work that they’re doing. And I think you will continue to see the results. Obviously, many great things that happened this quarter and things will continue to get much, much better. So I’m very excited for the business. Thank you for the support. And if there’s any further questions, I’m sure will be happy to answer them. Otherwise, we’ll speak next week — or next quarter, sorry. Obviously, as you can tell, I’m very excited to speak next week, but thank you very much. Thank you. On behalf of Scient DLM Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you.