Data Patterns (India) Ltd (NSE: DATAPATTNS) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
S. Rangarajan — Chairman and Managing Director
Venkata Subramanian — Chief Financial Officer
Analysts:
Monali Jain — Moderator
Dipen Vakil — Analyst
Jyoti Gupta — Analyst
Lavina Quadros — Analyst
Renu Baid Pugalia — Analyst
Arafat Saiyed — Analyst
Abhishek Singhal — Analyst
Garvit Goyal — Analyst
Alisha Mahawla — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Data Patterns India Limited Q3 FY ’25 Earnings Conference Call hosted by Go India Advisors. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms Monali Jain from Go India Advisors. Thank you, and over to you, ma’am.
Monali Jain — Moderator
Thanks,. Good morning, everyone, and welcome to Data Patterns India Limited Earnings call to discuss the Q3 and nine months FY ’25 earnings. We have the senior management of the company on-call are Mr S. Rangarajan, Chairman and Managing Director; and Mr, Chief Financial Officer. We must remind you that the discussion on today’s call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that company faces. May I now request Mr Rangar Rajan to take us through the company’s business outlook and financial highlights, subsequent to which we’ll open the floor for Q&A. Thank you, and over to you, sir.
S. Rangarajan — Chairman and Managing Director
Thank you thank you, Monali. Good morning, ladies and gentlemen. It is my pleasure to welcome you all to our Q3 FY ’25 earnings call. I hope you’ve had the opportunity to review our earnings presentation, which is available on both the stock exchanges and on our website. Before we encourt presents the financial results, I would like to share some key updates and highlights for this quarter. While we face certain delivery deferments from customers, our overall execution momentum remains strong. On the profitability front, we achieved better EBITDA margin standing at 40% for the Nine-Month period.
In Q3, as highlighted in our earnings release, we maintain an order book of INR1184 crores, including orders worth INR89 crores negotiated till-date. This is driven by 2.5 times growth in order inflows, which stood at INR240 crores for the quarter, bringing the quarter — total of the first-nine months-to INR324 crores. We remain optimistic about delivering strong growth and are firmly on-track to achieve our full-year revenue growth guidance. We anticipate a major ramp-up in the quarter-four and remain confident of achieving 20% 25% revenue growth by FY ’25, while maintaining strong EBITDA margins at 35% to 40%.
In the 3rd-quarter, a substantial portion of our revenue and order inflow was driven by exports market. From the outset, we are focused on developing and designing our products in India and we are now intensifying efforts to introduce and expand the presence of our indigenous products in international markets. This shift towards export marks an exciting and positive development for the company. We remain dedicated to securing additional export orders and our current international order book is a testament to steady growth and successful diversification within our overall order pipeline. Our internal order book stands at INR106 crores as on 31st December 2024.
With a robust bidding pipeline, we target INR20 billion to INR30 billion in new orders over the next 18 months. Our dedication to research and development has led to the creation of several new products, which we plan to showcase at the Defense Expo in February 2025 in Bengaluru. These innovations will enable us to participate in larger opportunities in the medium and long-term. We are strategically deploying funds to accelerate product development with a substantial portion allocated to expanding our R&D capabilities. This investment is driving the creation of next-generation products aligned with emerging industry needs and technological trends.
We have progressed in the value chain by developing integrated systems with three building blocks, drawing in our crore strengths. This has helped us expand into important government markets like Europe and East Asia, where we are now effectively competing with major OEMs. As we move forward, our focus is on growing our addressable market, where we would now shift our focus towards complete systems. Our aim is to establish ourselves as a system supplier, addressing not only the needs of India but also those of other countries. With a trained workforce and improving delivery capabilities, we are well-positioned to meet the diverse of international markets. As of December 31, our order book stands at INR1,095 crores with growth observed across all verticals where development production contributes 47% each. In Q3, we secured a production order for EW worth INR80 crores, a production order for radar worth INR53 crores, a production order for Avionics export worth INR53 crores.
We recently saw Indian government allocated INR6.8 lakh crores for the defense budget in FY ’25-’26, marking a 9.5 increase from the previous year. A substantial INR1.8 lakh crores has been earmarked for upgrading military capabilities with 70% of the modernization budget dedicated to indigenous weapons and equipment. These create opportunities for defense sector as a whole. Overall, we are committed to sustaining growth rate of 20% 25% while maintaining EBITDA margins between 35% to 40%. With that, I’ll now hand over the floor to for his remarks.
Venkata Subramanian — Chief Financial Officer
Thank you, sir. Good morning, ladies and gentlemen. We are pleased to share the highlights of our financial performance for quarter three and first-nine months of financial year ’24-’25. Let’s take a close look at the results. During the quarter three, revenue came at INR117 crore, up by 29 percentage quarter-on-quarter. Development contracts contributed to 37 percentage production contracts to 59 percentage and service contracts, approximately 4 percentage of Q3 revenue. Radar and ATE were highest contributors to the revenue at 62% and 18 percentage respectively.
Our order book remained strong at INR1,184 crores as on-date, including the orders negotiated, driven by growth in both development and production contracts. We achieved an improvement in gross margin to 80 percentage, up by 1,260 bps, driven by a favorable product mix. For nine months, revenue stood at INR312 crore, down by 7.5% year-on-year, but with a strong gross margin at 76 percentage and EBITDA margin at 40 percentage. Our net debt-free balance sheet reflects our prudential financial management. As of December end, we hold over INR575 crore in cash-and-cash equivalents, underscoring our financial strength and liquidity. As mentioned by our CMD, we are on-track to meet our stated guidance of ’24 ’25 with the 20% to 25 percentage growth in the revenue. With this, I open the floor for Q&A. Thank you.
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 one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles the first question comes from the line of Dipin from PhillipCapital. Please go-ahead.
Dipen Vakil
Thank you for this opportunity and congratulations on great margin sir. Sir, my first question is on — so over the years, we have moved from a revenue guidance of close to around 30% to now to 20% to 25%. I want to know what are the challenges that we are currently facing, so that — because of which we are not able to target high-growth and what kind of triggers are expected or what kind of triggers are we looking for in such a way that we can expect a growth of close to around 30% going ahead market, the market order book doesn’t happen on a year-on-year.
S. Rangarajan
Market, the market order book doesn’t happen on a year-on-year effort goes many years behind because the order happens, takes sometimes three years, five years or eight years, depending on what we did some years back, the contract starts happening now. Of course, the conversion rate to contract can be much quicker in the coming days. But having been where we are as industry in India, that is how the actual contract happens over a period of time. Today, what is increasing it. So whatever we did many years back, the contracts are coming as repeat contracts now and some new orders and development contracts are happening, which is what we have driven today in the revenue growth you’ve seen today.
Now going ahead to say what triggers the necessary to increase the scaling or increase in revenue growth faster, we need to have an addressable market which is larger and build product that further address the market and see that those initial entry orders received which are tested based on which repeat orders, production orders start happening. That could be the figure point. So what we’ve done actually is raise money to build products so we increase the addressable market to INR1,000 crore to INR20,000 crores. Once we increase the addressable market, develop the products, position it, go through the process of acceptance and then the contract should happen, which will scale growth substantially. There are two things which has to happen. One, the growth is to grow faster. Second, we need to have an order book for few years, not one and a half, two years order book, we need to have order for three to five years on-hand. We expect to do this over a period of time and that is the reason we are doing very internal R&D, the tremendous product development we’re doing. So this company can be to higher-growth and also have a stable order book, which is at least four, five years, three, four years at least so that we can have predictable growth patterns in the coming years.
Dipen Vakil
Got it, sir. Sir, my next question is that — so recently, so Defense Secretary as well as has mentioned that there are some heavy orderings expected in next couple of months. So — and this quarter somehow I was not able to see the order inflow guidance for full-year. So what is the order inflow guidance that you’re expecting for FY ’25? And while I understand that you have guided for INR20 billion to INR30 billion in next 18 months, so can you highlight two to three major orders which are expected or which are there in that 20 million to $30 million guidance.
S. Rangarajan
I wouldn’t want to give into very specific programs because see bidding happens in these programs. It will be not correct to open forum to discuss which order and expect in which contracts. So I would rather not get into — that is why we’re giving overall guidance. But I’ll tell you this, we have only a couple of months-to year-end. There have been a shift in the order intake and the shift in certain amount of products decision-making has taken some time, but we have not lost those contracts. The contracts are still firmly in our hand in the sense that the bidding will happen and we should get those contracts. So given the next one year time-frame, I think we should be able to build the orders keep — keeping in-line with our next year guidance, which we will talk about in the next session. After a year and closing, we’ll talk about it. We’ll have far more greater numbers in our hand in the next three to four months’ time and we will give you some guidance to take this forward. I can give you overall general is that in a major programs we’ve participated, our products have been accepted and those bids are about to happen in the process of happening. Some have already quoted. So the decisions have to happen. I’m not in control of when the decision happened, but I think in the next few months, those decisions will happen, the order will come. We projected some of those orders even for next year deliverables and take an advanced action on that. That is an internal decision we’ve taken. But at the point in time, I don’t want to give you exact details of the order book in our performance. Maybe another three, four months from now, we’ll give you better guidance on that.
Dipen Vakil
Okay. Got it, sir. Sir, and last one, sir, on execution side of it, sir, we have seen a degrowth of 16% this year, largely attributable to the delay in deliveries because of the clients request. Sir, so that has impacted us for the second or 3rd-quarter in a row. Sir, when do you expect this to turn-around in terms of delivery starting to happen or maybe offset this by execution of some other projects because now that is leading to de-growth in our overall — overall numbers now, sir.
S. Rangarajan
Yeah, we are working in both strategies, as you said. We are engaging with the customer. We expect that we would be able to get some kind of clearance to go-ahead in the next few weeks’ time. Products are ready. So once that is, it will be ship it hopefully this quarter, Q4, we expect to ship those products. But like you’re saying, eventuality that is not happening. We are also working on some products we have planned for Q1 of ’25-’26. We’ve also planned that and expect to keep the delivery higher of schedule. So working on both strategies so that our guidance remains, we’re able to continue to deliver on our guidance. Got it, sir. Sir, and exports, sir, on the export, so this time you have seen a huge growth in our export revenue. So can you tell us from which area have we got this export orders and what kind of execution are we looking at going ahead in exports? And I think these are all very preliminary export contracts we’ve got. So it’s a welcome thing for us.
The only thing which what I would like to say here is, see, we’ve been a product development company. It is very nice to know that our products are going to European markets, very advanced Western countries and where our IP is being accepted. So we started quoting a few places. We are successful and last year we got these orders 14 months back. We developed the entire product arena the contract, of course, modified existing, but it’s a completely new design, which has been delivered and customers accepted it. So going ahead, we want to see that more products we develop in India, we want to see that this is showcased abroad. So we are planning to set-up a proper marketing organization in the coming year to see that we will start looking at export. It’s going to take time to graduate large orders in export and get a substantive business there because we need to have a field product quote most of the costs of quoting, maybe the quoting to cointing orders in the faster in the Western countries than it is in India today because of a process which is more cumbersome here, but we have to go through the processes.
So we are in the process of building a long-range structure to address this. But before we do that, we need your products which can be marketed. See, till now what happens is in India, we’ve been only subsystem supplier. We need to graduate the system supplier, then those products are exportable. So we are working internally to build the products which are export worthy, then take it back to export. So this is going to be a slightly medium and long-term kind of an approach. But yes, we are starting on it. To come back to your answer, what areas here we worked in one area which has given us is in radars. Initial orders have been in radars. But over a period of last seven, seven, eight years, we’ve been developing some avionics for our European customer and that we continue to deliver on a month-on-month — earlier quarter-to-quarter basis over a month-on-month basis. Their orders have gone up. Consequently, their subcontracting our orders sources come up. And here we have designed the product. It is not a built-to-print production contracts with no margin, that is not the way we have done it. It’s all our IP. There were products have gone ahead and accepted customers happy. So increase the volume of business here. Now we are producing multiple systems per year, month and they are very happy with our performance.
Even during COVID, there was not one month delay in our product. We’re very happy with this. Considering other programs for this, there have been a lot of visits from foreign large OEMs to our factory and we and we are quite impressed with what has been achieved here. So in the months ahead, I think we need to engage with them to carry-through this process to see that we start getting initial trial orders with them, new customers. But these will be perpetual orders if we get the first orders and successfully implemented, then they’re not really depending one customer here, but their own marketing capabilities and their order book, part of it will come to us, maybe a small part, but it will give you sustained revenue. So we got to start building the capability in-going ahead and we think this errrow India also is going to expose us to a number of foreign OEMs who visited us are going to come there and we’ve had some time slots appointments made there. So this is a process. But I think they are — they like what we’re doing, they like the engineering. So I believe that we are the right path to see that we increase our revenue in exports.
Two, the second thing also we’re doing is not only building the products, but also building a lot of people with capability. You can’t take an order and not deliver. And Annet, we want to kind of surprise them as delivery ahead of schedule, faster than what they would imagine, for which we need to create infrastructure in India is that the development, delivery and manufacturing is in pace, the expectations are very fast, delivery which we can do. So we now crossed more than 1,000 odd engineers in the workforce in 1,500 people we have and recruiting more engineers. They are getting trained in our existing development. What are we doing for DRD and others, they’re doing, they’re getting trained. So a lot of train manpower is also getting done and use this as a foundation and then start exporting is what we’re thinking because it has to be grow global as we go apart. Yes, the large market is India. This is the only time when India has opened down to Indians and defense aerospace, the excitement is very much here. We have to address this market. But this is capital market, it is market, there is 011 market. So we need to also butress it with export orders with IP from India, so that the bottom-line also is also taken care of, build that and then take export, in which case, we have steady revenue month-on-month, quarter-to-quarter revenue also will come in there. So this kind of balances the kind of capital equivalent market, tender market which you addressing in India. So we need to have a mix of both and we’re building an organization to do that. We want to invest in infrastructure, you know, equipment and development to see that we are gearing ourselves to see that delivery models can happen along with the marketing infrastructure, we’re going to set it up. So on
Dipen Vakil
Got it, sir. That’s really very encouraging. Sir, thank you so much for answering my question. Just one suggestion on your PPT, sir. Some of the — some of the — so disclosures have been reduced, especially on the new order wins, maybe on the client side of it, request you not to decrease the disclosures because that really helps us to see the trajectory of the company.
S. Rangarajan
Yeah, purpose is a key because I don’t know when see when it is going to open-market. I’m very — as you ask your question, I give you a direct answer. I don’t know the impact of all these answers in the open-market. So that’s the reason we are trying to not to give specifics on every order who gives the order kind of thing. We will internally discuss with our management and Board to find out what line to draw there and then come back to you.
Dipen Vakil
Thank you, sir.
Operator
The next question comes from the line of Joti Gupta from Nirmal Bang. Please go-ahead.
Jyoti Gupta
Good morning, sir. Good set of numbers. I anticipated — I mean our numbers are in-line. Two questions I have. One, you know, while moving to exports is actually fared well for the company because the kind of products that you’re making. My first question would be, will the margins be better than what — because last year, the entire story was about indigenization because of better margins and not looking at exports. But now everybody is moving to exports, is it because the margins look better compared to what we had anticipated or anticipated going-forward. Our second thing is, while I understand that two things that there have been delays, but the two numbers, which is inventory days, which has increased from 187 from 155 and you know your cash conversion cycle, do you anticipate in FY ’25 this to be elevated or is this going to come down from 187 in FY ’25 and cash conversion to actually improve it by the exit of FY ’25.
S. Rangarajan
Okay, I’ll take your question two first and one later. Details will make-up and give you. I’ll just immediately react all your inventory days. See, what’s happened is I’ve been informing this what is our we went ahead with two large contracts for radars and where we said margins were not really high, but just to build a capability to build complete systems and it’s a very large space radar kind of thing. So we have in the last one and a half years design the radars, a whole lot of material is blocked in manufacturing is a large areas, very, very large areas. So a lot of material is blocked in terms of manufacturing and it’s a long gestation on terms of development and manufacturing gestation and test gestation. So a lot of our money on inventory is actually more than 50%, 60% of the inventory is actually only on these two projects. We expect to deliver one project by end of this March and probably Q1, Q2 next year, we expect to deliver the rest of the product. So once you do this, inventory will come down substantially because this is driven by two main orders, which is going to go out and delivery is happening.
So that is on one-hand. And paying as a trailer to this, we expect inventory days to come down and going ahead, whatever next year because this kind of inventory oriented contracts we are not normally we don’t take. But because the complexity of the product is so, so high, we said it is necessary that this kind of complexity we need to design from scratch and build a competency which is unmatched in India. So we took up this contract at very low margins, but we have taken that because it is a pause — we need to do two things. Capability building has to happen and there has to be a demonstrated capability. It is not that ICI capability. The capability comes in-product demonstrations. That has to happen to build confidence to larger customers to look at us going along to how to build scale a few thousand crore company, we need to have big, big contracts.
So for that, we said this will be baseline. So we took these contracts and based on which we have learnt a lot on these contracts. So there is addition and capability. So that has happened. But normally, our product mix is very different and it’s all-IP driven and not material driven. And that is what you witnessed in the last nine months also on EBITDA margins and last one saying it’s all-IP driven. We — as against other companies, we buy and integrate, we also design everything in-house. Of course, it takes enormous amount of effort and pre-development and a whole lot of revenue expansion things happens in the previous years, but we tend to write-off all those things on the year of realization of product. We don’t capitalize it except in the large products where we’ve taken money from the market. We’re building capital. Otherwise on the normal products, we do market where we get an order, we build development, we do not capitalize this revenue, we write it off. So that’s what’s happening.
So my second question is, yes, it is going to come down. The reason for this is only two contracts. Coming to your first question, why are we going global? Why do you — why some emphasis on export? Is it because we get higher margins there? No, that’s definitely not the reason. We do a system in India, we would expect to get a higher-margin in India. There we are doing part of a system because when you export some rate systems is a different problem. Again, we are getting it into — and all the OEMs on the subcontract development and testing and equipment here because you also look at a cost multiple which is lower here in India than in US or Europe. So they’re looking at it as slightly lower-price. So really we do not go for export just for the margin. Margin, I think we should drive it out of Indian business. If foreigners compete in Indian business, their margins on a system-level, I think we are comparatively, we have a lot of advantage in doing in India, especially IP in India. Without sacrificing large margins, we still be able to compete effectively with the foreigners. And since everything is foreign in India today, I think it gives a ground plan of claim fleet to see that ready to build those products and compete with the foreigners in India. So that is the business we are in.
And we continue to put a lot of effort in this. Fallout is once we build the product, there are a lot of other areas, countries like India who are used to buying some products, we will start exporting to those countries first. That is the product mix which we’re doing. The other portion of exports we’re doing subsystems on development delivery for the foreign OEMs is they get — they get a number of years of business ahead, a plan ahead. And so it allows us to give you quarterly revenue, monthly revenue, stabilized revenue process, which can mix both capex tender business and a revenue business grows month-on-month. So it is a good mix to have and this has been discussed internally. We said we need to — since we have a capability to build world-class products, we should expand our shores, get more marketing because we have been very engineer driven inward-looking company all along. Now we want to say that now we are publishing the company, we should not prevent ourselves only to look inwards. We should go out, start looking exports seriously. So we just started doing this. It’s only beginnings in our life. I think next three to five years, we said they should really go into it because we need to have both clinics, not only India, we also have to get export and be well-rounded company. So that’s the reason why we’re doing it.
Jyoti Gupta
Okay. So one last question on the avionics part. Now when I — when we heard the bell saying that they’ll be delivering a lot of EWs for the LCM Mark 1, while the LCM Mark 1 platform itself is delayed should that should avionics so and your either you have one of the products which is your integrated jet trainers. Is there any way you are not — is the delivery for LCA for you also happening or is it somewhat a bit staggered because how come the bell is making deliveries for LC Mark 1 and is it the same case for you or is it not?
S. Rangarajan
Every problem is the industry problem. So we are not alone and nobody is alone. They’re all together and this is a big program gets delayed and there is an impact to all of us. Every impact for will be more because they are larger suppliers and dominated basis, they get a lot more orders. We get smaller orders, so the impact will be less. But on a balance sheet — on a P&L of hours, that impact matters. So what we need to do is to not allow this impact, we must-have an order book, three to four-year order book, mix of contracts, mix of programs so that we can mix-and-match and deliver and take care of our shareholder interest and revenue positions you make do that. This is what actively the company is doing in terms of strategy, or development and marketing. We need to scale-up all of them to see that these small things should not affect the company performance. One or two things should not affect. It is affecting today, which is not good. So we will strengthen areas where it will not have an impact on us. We working on a strategy to see how to do this.
Operator
Okay. Thank you. May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference. Please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question comes from the line of Lavina from Jefferies. Please go-ahead. Yeah. Hi, sir. Sir, I just wanted to understand a flavor from you on — there are a lot of concerns that whether in India, defense indigenization is going to get slowed down, defense spend is going to get slowed down, ordering activity will slow-down. I wanted to understand from you, are you seeing any changes on-the-ground, particularly? So this budget commentary has clearly not been for capex anymore, but just wanted a sense, but defense spend has been good. So wanted a sense from you on what is the kind of movement you’re actually seeing in terms of ordering activity tendering, if you could just give your thoughts. Thanks.
S. Rangarajan
Actually, our interaction with MOD senior IS officers and MOD people by personal interaction has been very positive. You know, they are looking at modernizing processes, are looking at and process delaying procurement activities, also providing a level-playing field to industry DPSU alone. They are looking at all of these things. And I think MOD is concerned that there are delays and the delays are not acceptable. So they’re looking at process to see how we can quickly do things. The activity is on. We is promising to see that major changes in processes will happen to allow more industry participants and faster ordering. It’s going to happen.
Matter of fact, I think Defense Secretary has recently went online to say that you’re going to see that industry is going to give a lot of orders. So I think they are serious and they are — they do know that these kind of issues should not slow-down this process. Second, we live in — you are looking at the international context now. It is necessary that India has to defend itself very strongly and we need to — and our PM and the government is very clear that the engineering in defense is a mandatory requirement to make it a strong country. No country with zero defense or limited defense capabilities can be strong. All of us understand that and more so our Prime Minister. So he is very clear that indigenous. The PMO is very clear. So there is not going to be any let-up in my mind. I think if at all, you see with the international outlook what is happening in the international world, we should rededicate ourselves to do much more in India and faster in India and believe in ourselves, ourselves give opportunities to see that we can go through the opportunities, maybe fail a bit, but we’ll get up-and-down. But that opportunity has to come from government because they are the users. We would strive and we will also emphasize that they should do more — to do more in India and enhance capabilities in India and develop delivery in India and also go global from India. I don’t think any one of us are thinking second or thinking that this is not happening. We are very, very bullish about India and the process. There are changes, delays, but we are bringing up notes to ministries to say that we need to look at it, we need to look at it slightly differently. We have done this five, 60 years one-way. But yes, we have built-up capabilities and that is not adequate in Indian context. We need to do more. So all of us are starting to do more and I’m sure the government is behind us and we’re going to us to do more. I have two second thoughts on this.
Lavina Quadros
All right. And sir, lastly, one more just aspect. I know everyone has asked about exports already, but let’s say between a lot of commentary on government-to-government discussions on exports of products, be it to Southeast Asia, like, for example, orders were expected for HAL, Bell, there have clearly been quite a few delays. Now just generally again, are you seeing scope on pickup on that side or any commentary that, let’s say, the larger companies start getting orders sooner because eventually it will slow-down to you all apart from your own individual efforts in those countries. Any thoughts over there? Thanks.
S. Rangarajan
Okay, see, I’m not too prudent nor we are not part of that kind of nominated export contracts which get because the government is owned contracts unless you know some part of the small part gets from us. Clearly, we are not looking at this and planning ahead based on this and I don’t want any more government delays or product delays to affect us. So we need to go outside the system. We want to be on our own. Go contact the End-User, the OEM, B2B customers, not B2C, probably some B2C we have done, but through B2B. So the big OEMs, we need to contract — get contracts from them on individual basis, not because of it going through a DPSU that may or may not happen. We are not really focusing on that. It happens, it happens, it happens in-spite of me. I have not done anything for that. So I’m not really going to focus on it.
We’re going to do our own work, our own effort, our own products, our own marketing reach, outreach and then give very competitive high-value products to our customers. So this is what our effort should be and the direction should be. We have to work on that. I don’t think we should work on these areas because the market is so big and opportunities are there. If we are able to gear ourselves up, build products and give reasonable pricing and quality products, I think you should get this, but it’s going to take time. It is — so because nobody trusts an Indian developed product overnight in the Western world, they are not used to it. So it’s going to take time to break the barrier, get the first initial contracts through that it’s working, get the buy-in and say that they are happy, then they find the advantages because there are a lot of advantages when people like us get to give products to OEMs because they are also played with the same problems for 20 years support 25 years support of services, electronics and the larger OEMs in the US, European market, they keep on doing new products based on new components coming in the market. They keep growing and they start accelerating their older products. But these older products are still in-line — in-life with the products delivered to-end customers. So they have a lot of problems how to maintain those. Company like us will go extra mile, maintain products for 20 years, stock components for 20 years, maintain their — because we need it, we are hungry, we are hard-working. So we will ensure that our customers traffic.
We will not let go of customer. So it’s a good thing for both organizations to work like this together because we have a need to do such things. So I’m thinking that we should expand the marketing organization and also the infrastructure to deliver quality products much ahead of time. That’s what we want to do in the next three years.
Lavina Quadros
Thank you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question comes from the line of Renu from IIFL. Please go-ahead.
Renu Baid Pugalia
Yeah. Yeah, hi, sir. Sorry if I missed this in the start of the call. If I look at the YTD inflows, it’s been quite weak and we have reiterated INR7 billion to INR8 billion of annual guidance. So if you can help us with where are we placed with respect to L1 orders and orders where we expect closure in the next three to four months, that would be helpful. Also for next year, what set of large orders do we have certainty, which are a part of the INR20 billion to INR30 billion order inflow guidance that we are giving?
S. Rangarajan
Hydro hotel loan contracts done only trend is open, we can do this. Yes, we last — yesterday we were L1 in some contract to INR13 crores. But we’re not — we are going to bid more of those contracts, but where IT belongs to us and so we become L1. So we’re going to do that. We are going to participate number of MOD contract therapy. So we are in the process of doing it. But we can’t give you a projection on all of them because only when the tender bit is open, we know whether L1 or not. But on the guidance itself, while, yes, there is a lot of slippage in the programs, which you actually planned for this year and next year, the contracts have not happened because of some events delaying the closure of these contracts, but we have not lost the contract.
Contracts are still live. We expect that this is activity is happening in the customer end to see that we quickly release tenders that close those contracts. I think in the next five, six to eight months’ time, those contracts should start coming in. That is why we say the EUR2 billion to $3 billion you’re talking will be there. There are major programs. Again, based on disclosure, what we want to do, we don’t want to specify the programs because I don’t know-how this is right in the open-market. That’s why we’re keeping quite earlier, I was telling everything and ask, I can tell everything. Today slowly, you have the excuse me to say I’ll be a bit more circumscript in what I said and give you general guidance, there are big programs offering. They have got delayed because of monetary reasons, clearances in the government. So that is all if it’s happening, we’ll do. And in lot of new programs, DRDO has got a number of new programs sanctioned and that levels of sanction, money sanction has happened. So they’re all-in the developer stage now. And I think we have very advantaged positioned in those programs having developed the EW capabilities where all of them are required and the complete system capability we have achieved in this, we believe we are very well-positioned to take a portion of those contracts. But again, I don’t want to name the contracts, but yes, we have done that. We are also done — a lot of products is already-approved. We’re hoping that those products will be approved by the users if we approve those products, back-to-back contracts will be few 100 crores in each of them. So we are working — both DRDU and us are working together to see that the approvals are acceptable to the users and users backers rather than importing the products from abroad. So we are working actively have also made representation to MOD to do this. So I hope all this will pan-out, but the path direction is right. What we’re doing is we have convince the direction is right. There has been delays, but I think we will get compensated in the next few months. I will be more specific,, after about three, four months, once more clarity comes in the product, when exactly quotations happen. The timelines are very clearly visible, but I will tell you whose contract which contract they got
Operator
Thank you. The next question comes from the line of Rafat Saeer from InCred Research. Please go-ahead.
Arafat Saiyed
Yeah, hi, sir. I hope I’m audible.
Operator
Yes, yes. Please go-ahead. Yeah. Sir, my first question is on your deferment of contract. So can you quantify the number in this quarter, which got deferred for the next quarter or how is that things will pan-out?
S. Rangarajan
Okay, no, no, no problem is about — totally — contracts is about INR70 crores. One was actual product available should have gone last quarter and previous quarters got deferred again. So that is about INR20 odd crores. And the other product is mainly ready to the experience contract will happen. So the contract happened very last-minute. And what happened is the inspection process has initiated product is ready for dispatched. But based on the customer need, we got the product up, but there was an MOD requirement. The contract got delayed with three months. Received the contract the company inspection to deal or two. There are other program products which orders are expected where some of the development has happened and the order has got deferred. So there are a mix of these kind of things.
Arafat Saiyed
Got it. And second, sir, can you just please guide on the order pipeline for the next couple of years? If you can share some quantum how much amount you’re looking to bid over the next couple of years?
S. Rangarajan
Yeah, I’ll give you this a few months the cost, we have now — some of the programs which we thought will happen last year has got postponed. So I don’t want to talk out of turn and take ownership for something which I cannot take ownership. So let me wait for — I think the clarity will come in the next two, three months that these contracts will start moving again and I’ll be able to tell you properly. So that is one. Second point is, we have done a lot of development in the last 15 months. We’ve done some world-class products, the complete products have been designed. We want to showcase them in Aero India. This is the next — next week, we expect that the users — very senior users, senior people will visit us and have one-on-one dialog with them that how do we use these products and which is urgent required by the services. So we expect that some kind of a positive reaction has to happen. We worked very hard last 15 months-to make this possible. And it’s a really truly world-class products we’ve done. We all required INR2,000 crores of each is required by the users. So we hope some breakthrough happens and they take seriously. They take you seriously, we need to work the next few months-to convert them into initial contracts and after product testing other things, we get into larger contracts. So that is a path. We are well from our side, we’ve done whatever we can in terms of capability demonstration and product demonstration. Now we need to wait for users to do the policy and see what to do and take interest in it. So I’m just saying early for a few months, we will have some more clarity how it turns out and then I’ll be able to tell you the core to the investors that this is the direction we have.
Operator
Thank you. The next question comes from the line of Abhishek Singhal from Naredi Investments. Please go-ahead.
Abhishek Singhal
Good morning, sir, and thank you for taking my question. Sir, my question is relating to we had raised INR500 crores for product development. When will that development be completed and when will the revenue start coming from this development? And how much revenue will come from this INR500 crore QIP? And second question, what kind of order book are you expecting end of this financial year? Thank you, sir.
S. Rangarajan
Yeah, financial year is not very clear because today is available to financial year. Maybe some contracts will happen. We are working towards some content maybe INR150 crores, something like that. We are working on-contract conversion, but it may happen this way or that way. It may take a bit longer. We do not know. But the larger contracts which we are quoting for is going to be all a few 100 crores. So this will happen over the next year or year or so. A number of those requirements for the products for the contract will happen. A lot of happen ahead of time. So we will be in a position to deliver much ahead of time, much higher requirement compared to normal organizations which start to scratch. So that is how we are developing products. Coming to your first question on our QIP implementation. We’ve nearly spent about INR100 crores already for INR80-odd crores on product development and mainly in 56 categories. I think that is also, I think announced, not announced exactly what done. Okay. So we have done that INR84 crores, so something we have capitalized on this. This is basically on radars. One is on radars; second new EW suite. Third is in software developing radius. Fourth is some make-to programs we are participating in and five and six and few smaller items which you are participating in putting products together.
The important thing about all these product development is building block so that even in the existing new contracts, which we are going to bid with GRDO or wherever, the building blocks you have developed for specific products can be reuse in these programs and all of them require what is called as a no-cost, no commitment trial. You need to trial — give a devastation to the customer before they shot selected to commission opening. So to allow that to happen, people import and then integrate or represent somebody into. They are saying we built the building blocks, they reuse the building blocks and go for participation in the trials. So which allows us to also look at a bigger portion of the addressable market with our products. So that is how we have done. So there are two point attack in how we’re building products. So it’s all come now.
Some of the products which I talked about development, a portion of the development which we’ve done and products have been finished or almost finished, we’re going to showcase the neuro India. So that is what we’ve done. We put a large in this development of satellite, we have slightly deferred the satellite development initiatives because I’m not very confident how the business model works or initially we were thinking that it will be a large business model. But with all the startups and a whole lot of IDEX and things like that and pricing and a small companies start-ups being preferred for certain things. I do not want to take a step on investing INR200 crore crores and product development, which will actually take two years of development to launch and third year to start getting a contract or so and how the government changes their mindset, I’m not very clear. So we’re not — though we have a full confidence in the building satellites, we launched the satellites all working for 24 hour — 24 months now every part of it design and knows and also the sensors itself is designed in-house now. But before lack of clarity will not put that extra with more clarity coming from Ministry of, maybe we will also attend doing that as going ahead next year or so. Today, ourselves to areas where we see low-line opportunities, low-hanging crudes where we can be first come kind of a opportunity advantage. So we’re trying to put that in this area. We spent about INR85, INR88 crores now and we have money in the to spend more. So we are being — we are cautious about spending the money. We have cash-on-hand, but we are very cautious about spending the money because we’ve been very clear return investment is going to happen. So we are — that’s where we are today.
Operator
Thank you. Our next question comes from the line of Garvit Goyal from Envest Analytics Advisory LLP. Please go-ahead.
Garvit Goyal
Hi, am I audible, sir?
Operator
Yes, sir, please go-ahead.
Garvit Goyal
Good morning, sir. All of my questions are answered. Just one question. Like you mentioned to some previous participant, like you expect getting clearance from customers in upcoming weeks. But let’s say, we don’t get that. So then also, do you still believe like we will be able to do INR320, 350 cr kind of top-line in Q4 via a different product mix and delivering to different customers? So that’s my question, sir.
S. Rangarajan
That’s what you’re working on. We are trying to some of the contracts in if case this doesn’t happen. But we are very positively indicating the customer that it will likely take place in the next week, two weeks or so they will come here for inspection and go-ahead, in which case, we can deliver it in March. So we’re hoping that we are continuously engage with the customer. But nevertheless, we’re also taking some alternative action to deepen some of the contract contracts for next quarter. We’re doing both.
Operator
Thank you. The next question comes from the line of Alisha Mahawla from Envision Capital. Please go-ahead.
Alisha Mahawla
Hi, sir, thank you for the opportunity. Just wanted to understand that since we were mentioning that some of the development contracts that we’ve taken, which will be executed over next few quarters with slightly lower-margin, exports also not delivering is not offering margins pleasure than the domestic business. So can we expect the margins to now start gliding lower and probably end at the lower-end of our expected margin band?
S. Rangarajan
What we’re doing is we are trying to build a product mix that some are lower margins, some are higher margins. We’re focusing such a way that our bottom business, whatever we are talking closely to you and to our investors is not margin right. We don’t want to reduce that. So we believe we should keep the lower-margin. Your EBITDA or whatever may come down, but the bottom-line PAT, this revenue will go up because margins are lower, the PAT percentage may go down. But the PAT as a — as a — as the overall PAT compared to last year to this year, we will retain gross margins as predicted to you as committed. So that is what we’re doing. So we’ll have a mix. I don’t think we should get into really a situation where I’m going to give you less margin, lower PAT kind of numbers in the coming quarters. We will try to mix delivery such a way that doesn’t happen is what we’re aiming to do. Number of our own IP products. So we expect that will compensate for the loss of margin in some products.
Operator
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to the management for closing comments.
S. Rangarajan
Thank you. Thank you everyone for joining us on the Q3 investor call. Yes, I understand the various questions and concerns which have been autoed by you. You’re also well aware of that. We are taking action to see how to do this. We are on the right path. We are doing product development, host of IP is being generated and large products required by India where they’re looking towards India to develop, where we’re uniquely positioned. They’re positioning ourselves very well there. Products are coming out actually very well. A couple of European customers have come head of the institutions have come and seen the products and are very happy with the engineering. So all of them have given us good recommendance that we will have to work with you going ahead. This is being done by you. It’s such a large team, we will be very happy to work with you.
So I expect things to happen. I think the path is very clear. We’re also investing ahead to see that once we get a contract, we’re able to execute contracts in time and ahead of time. We’re also putting infrastructure in not only in terms of our test facilities and manufacturing infrastructure, but also putting train manpower and building capability across-the-board. We are also spending money, we’re going to spend money in the coming year. A lot of IT infrastructure in terms of PLM licenses and this and that, which will become a backbone to become a large company. We need to scale to a large company and whatever necessary to scale to a large company, they are doing on capability, on infrastructure, on IT and backbone and also on people, training, scaling of people capabilities, all of them are doing. I think we are doing in the right direction. But enormous amount of money is getting spent in-product development. You will see it coming.
Hopefully, some contracts will happen in the next two quarters to say that, yes, we’ve gone in the right direction and we’ve got orders which will scale. So that also will happen. And the third initiative we are taking now is try to slightly slowly start moving up the export chain. So we are going-in that direction. Again, it is all coming out of capability and product capability driven. From a competency model, they’re trying to build products. A lot of people worried whether they go export, the margins will come down. I don’t think so. What we were trying to do is not, you know is not a skin, not services model. We are doing a product model. In the product model, yes, it has — we have a competitive invested in some countries from their OEMs or subcontractors. But that does not mean less margin in my mind. I think we will do this properly is my belief. More-and-more order we start getting. I will be able to say what is the calibration need to how we want to do this further, we’ll understand from our experiences, but I think we are in the right direction and we are very, very bullish about growth going ahead. The orders have got delayed, but I think we will continue to get the contracts, large contracts and we’re very well-positioned in all those large contracts because the products approval and it is all flying, very reliable and it’s advanced. And we built an organization. There are actually people who come there. They’re very happy to see the engineering capabilities which have built over the last two to three years’ time. So I think the direction is right. So we will continue to press on the direction what we’re doing and look towards how to scale markets. Thank you very much for listening to me. Any other questions you have, kindly mark it to GoIndia and we will see that every question of yours is answered. Thank you very much. Have a good day.
Operator
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lines.