Kaynes Technology India Ltd (NSE: KAYNES) Q4 2025 Earnings Call dated May. 16, 2025
Corporate Participants:
Ramesh Kunhikannan — Managing Director
Jairam Sampath — Chief Financial Officer
Analysts:
Chirag Jain — Analyst
Vipraw Srivastava — Analyst
Praveen Sahay — Analyst
Deepak Krishnan — Analyst
Siddhartha Bera — Analyst
Nitin Arora — Analyst
Aditya Bhartia — Analyst
Keyur Pandya — Analyst
Unidentified Participant
Sumant Kumar — Analyst
Girish Achhipalia — Analyst
Meet Jain — Analyst
Indrajit Agarwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Gaines Technology India Limited hosted by Emkay Global Financial Services Limited. 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 Mr Chirag Jain from Emkay Global Financial Services Limited. Thank you, and over to you, sir.
Chirag Jain — Analyst
Thank you,. Good morning, everyone. On behalf of Emkay Global, I would like to welcome you all to the Q4 and FY ’25 earnings conference call of Technology India Limited. We have the management today been represented by Ms Savita Rmesh, Chairperson of the Board; Mr Amish Kandan, Managing Director; Mr Jayram P., Whole-Time Director and Chief Financial Officer; Mr Rajesh Sharma, Chief Executive Officer. At this point, I will hand over the floor to the management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Ramesh Kunhikannan — Managing Director
Thank you. Good morning. I am Nimesh, Managing Director, Technology India Limited. Thank you Good morning, everyone once again. On behalf of Gains Technology team, I would like to welcome everyone to the earnings call for quarter-four FY ’25. I have along with me, Mrs Ramesh, our Chairperson; Board; Mr, our Whole-Time Director and CFO; Mr Rajesh Sharma, our CEO; and Mr Sumit Varma, our Investment Relations. And Capital, our Investor Relations partners. I am pleased to inform you that we have been able to achieve a consolidated revenue of 27,218 million for FY ’25, which represents a strong growth of 51% year-on-year. The consolidated EBITDA of 4,107 million for FY ’25 and EBITDA margin. Including — excluding other income for the year FY ’25 was at 15.1% and PAT margin was at 10.8%, which were higher by 101 basis-points and 62 basis-points respectively on year-on basis. Coming to our performance for the quarter-end Q4 FY ’25, our total revenue was 9,845 million, which signifies a growth of 54% year-on-year basis. Our Q4 FY ’25 operational EBITDA was INR1,679 million at 76% year-on-year corresponding quarter of the last year. Similarly, the PAT was INR1,162 million at 43% year-on-year basis.
We are projecting a significant acceleration in revenue growth in the coming years as mentioned in our previous quarter earnings call, positioning us to be a leader in the industry growth. The same can be reaffirmed from our consistent order book growth from INR41,152 million in-quarter four FY ’24 to INR65,969 million in-quarter four FY ’25. We expect to sustain this profitable growth and continue to work towards improving efficiencies. As we move forward, we expect an all-ground growth in all business verticals, especially with newer clients in EV and aerospace verticals. This reflects our commitment to a business portfolio with robust growth, profitability and diversification our construction for OSAT plant in Salam, Gujarat has already started along with construction for HDI PCB plant in Chennai.
Both the plant construction is in-full swing and we are in-line with meeting the deadlines of completing the construction by year end. Our majority stake in Sensonic, a global AI-based rail network safety solution company positioned us to capitalize on the electronics and technology upgrade in the railway sector. Development program is on-schedule with POC completion expected by mid-year. With our recent acquisition of August Electronics in Canada, we have strengthened our North American footprint, added manufacturing capability in Canada and large high-margin customers.
Following this acquisition, we are well-positioned to present a compelling opportunity to these customers more comprehensively, positioning the Canada India Airlines as a strategic alternate to China-based sourcing. We are continuously looking to add new capability and geographies through a mix of organic and inorganic strategies. With this, I would like to sincerely thank each and every one of our excellent investors for their encouragement so-far in our journey and expect continuing support in the future too. Thank you all once again and we look-forward to exciting times ahead. I will now hand over the call to Mr to take — through — take you through our financial performance. Thank you once again. Over to you.
Jairam Sampath — Chief Financial Officer
Yeah. Thank you, Ramesh. This is, Whole-Time Director and CFO of Technologies. So thank you all for joining today’s call as we start a new quarter. I’m quite excited to share Technologies financial results for the period ending FY ’25 and share with you the highlights of the same. For the quarter ended March ’25, our consolidated total revenues from operations were INR9,845 million, representing a 54% year-on-year growth. For the 12 months ended March 2025, consolidated total revenues from operations were 27,218 million, representing a 51% year-on-year growth.
The consolidated EBITDA at the end of Q4 FY ’25 was INR1,679 billion, showing a 76% year-on-year increase, while for the full-year FY ’25, it was INR4,107 million, which was up 62%. EBITDA margin for Q4 ’25 quarter and FY ’25 stood at 17.1% and 15.1% respectively. This trajectory of expansion in margins is expected to continue during the coming years too. Our consolidated profit-after-tax for the quarter was INR1,162 million, up by 43% year-on-year and the PAT margin at the end-of-the quarter stood at 11.8%. Our consolidated ROE, consequently, our ROE and ROCE adjusted for unutilized portions of proceeds of Q4 FY ’25 is at 19.4% and 19.2% respectively.
Our order book surged from 41,152 million at the end of Q4 of FY ’24 to 65,969 million at the end of Q4 FY ’25. On a sequential basis, the order book grew from INR60,471 million in Q3 FY ’25 to INR65,969 rupees million in Q4 FY ’25. The average monthly order inflow has grown handsomely from INR4,285 million per month-in Q3 FY ’25 to 5,114 million per month-in Q4 FY ’25. The net working capital days for year 2025 were at 87 days, while the inventory days improved from 97 to 91 days.
We are committed to improve the net working capital this year with a long-term plan to work with our suppliers to have lower inventory days. We are working with different long-term strategies like supplier manage inventories, resource, recodes the factoring and better production planning and scheduling and we hope to improve the working capital day significantly during FY ’26. The construction of our projects in Sanan Gujarat and our HBITC project in Chennai is in-full screen and we are projecting for the construction to get completed by the end of 2025 calendar year, so that this year we will have some revenues coming in from both the new investments. We are also signing-up plants for significant capacity utilizations in both of these subsidiary entities. Also, our acquisition of companies like Sensonic and our new subsidiary, SpaceTech are few steps by our company to lead the sector into newer technologies from electronic space.
We will continue to identify opportunities which can keep games evolve, we can help evolve as a global player in electronics sector. Our key strategies include growth in new geographies through inorganic acquisition, strengthening our ODM capabilities and deepening our technology footprint in manufacturing. During the year FY ’25, we have taken significant steps to further our strategy implementation.
We once again place on record our deep appreciation for the support of our customers, shareholders, analysts and governmental agencies for providing us with a good growth platform. We’d like to thank MK for hosting this earnings call and like to thank all the participants for committing their valuable time for attending this call. Now I hand over to Mike to compare, so that we can ask questions. Thank you.
Questions and Answers:
Operator
Thank you, sir. Ladies and gentlemen, we will now begin with 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 star and 2. Participants are requested to use handsets while asking a question. Participants are also requested to restrict themselves to one question. If you have any more questions, kindly rejoin the queue. Thank you. The first question comes from the line of Viprash from PhillipCapital. Please go-ahead.
Vipraw Srivastava
Hi, sir, I’m audible, right?
Operator
Yes.
Jairam Sampath
Yes.
Vipraw Srivastava
Sir, firstly, on the cash-flow from operations side, the one-line item, which is other non-current assets has gone up and that’s why CFO has become negative. What’s that line-item dealing with specifically and how do you plan to tackle it in next year?
Jairam Sampath
Yeah. So if you noticed our working capital, net working capital also has gone up from, I mean, it has not come down as much as we expected despite resulting in inventory. So this is a business that we acquired in our subsidiary in the industrial area and they had orders with pre-agreed contract conditions, which we have to honor. So this — this total quantum of this is not very significant Future orders in that subsidiary are all going on a full payment basis. This particular thing has been delayed payments. So the way we — we have found a way for funding this through annuity funding through some of the banks, which will implement in the coming quarter. So going-forward, the effect of this will slowly reduce and over-time, maybe by the end-of-the year, this will not be any significant number. Yeah. Why are the current assets? Because the payment term itself is deferred for this particular order. So over-time, when we start getting newer orders, which will have a clear payment term, which are within, let’s say 90 days and 120 days. So in which case this quantum will keep reducing as a percentage of total.
Vipraw Srivastava
Right, sir. And sir, a follow-up on this. So this payment we have made were made to the discoms or to whom we have made these payments?
Jairam Sampath
No, no, these are all AMIC payments only. The terms are different. Once it took over this company, we have now — yeah, we don’t anymore work at VMISP, but as a device manufacturer. So this transition has taken a little bit of time and we have to honor all the orders that are already there. So I think from that perspective, stopping.
Vipraw Srivastava
Right, sir. And secondly, sir, sir,
Operator
I’m sorry to, that was your question. If you have any more, please rejoin the queue. Thank you. The next question comes from the line of Praveen Sahai from PL Capital. Please go-ahead.
Praveen Sahay
Yeah. Thank you for opportunity and many congratulations on good set of numbers. My question is related to the order book. So order book has increased to around INR66 billion. If you can give some indication from which segment the order flow intake were on the higher side? And secondly, that’s the sustainability of the high-margin which you reported this year or this quarter, how that will be with the new order flow?
Jairam Sampath
No, absolutely. So this INR6,500 crore odd of orders, which is — which is staying in the order book, the increment has come in aerospace, industrial and automotive. And these are margin-accretive orders. I’m unable to give you exact details, but suffice it to say that the order book today contains orders which are higher-margin than what we are delivering right now. Only thing to note is that this order book will get executed over one and a half year time-frame. So not all of the orders will get executed in the coming FY ’26. So the order inflow, to tell you honestly is very, very healthy and most of the orders that come in are at a margin-accretive kind of situation.
Praveen Sahay
Okay. So margin, whatever you delivered is going to continue or improve from here the type of order decision.
Jairam Sampath
Yeah, we’ve already made our operating plan for the coming year and we hopefully will grow better than last year in terms of growth rate and we also computed the kind of margins that are likely to be there. So we want to have also margin expansion.
Operator
Okay. Thank you, sir. I have more question. I’ll come in the queue. Thank you. Sure. Thank you. Thank you. The next question comes from the line of Deepak Krishnan from Kotak Institutional Equities. Please go-ahead.
Deepak Krishnan
Hi, sir. Hope I’m audible. Just wanted to check two things. On the PCB front, we are doing for the expansion on our own. Will we also participate in the component PLA for this? And the second thing, if you could sort of highlight the financials of this electronics what you’ve acquired as well as your venture into space, what is the thought process being getting into payloads and all of those aspects.
Jairam Sampath
Yeah, yeah, sure. So as far as the PCB is concerned, we have applied into the 2.0 as it were and we are likely to get the PLI there, but we depend more on the capital subsidy. And as far as PC board business is concerned, our profitability does not depend on the PLI, but on the kind of quality of customers that we have and we already have at least five customers who are in serious stocks and one of them has given RSV which we are responding to and a significant portion of our capacity once it is formed will be already booked by the time the plants come on free.
So as far as August Electronics is concerned, without giving you an actual breakdown, the margins are better than in terms of EBITDA or better than our consolidating margin and we have a business which is a quite large say about 57 million or so is the Canadian dollar is the kind of business and they likely to grow also very well. We are one of the premier vendors in Canada and Canada itself has got a huge potential to grow this particular business.
So we expect that the growth will be margin-accretive and also significant and it will strengthen our presence in the North American geography. As you know, a lot of, let’s say, encouragement is given by government — local governments there in North-America to do production in North-America. And also this is adding to our ability to get orders with us to going to China up with because of these kind of connections and these set of customers that we will be serving are completely new and there are no common customers at this point in time.
Deepak Krishnan
So just on the space venture better. Just on the space.
Jairam Sampath
Yeah, space — this is — see, we’ve been a strategic partner for ISRO for more than a decade and we have participated in most of your prestigious missions and all that. So there are two-parts to this. One is our ambition to really be part of the technology evolution that ISR is bringing. And as you know, even in recent defense technologies and other things, ISR is at the forefront. So we wanted to strengthen the partnership. Secondly, space by itself offers huge opportunities in terms of satellites, which can be micro mini or regular satellites and even launched vehicles and so on. And components thereof. We’ve also set-up a significant capacity in a subsidiary called Mechatronics. So our objective is to make sure that the space tech will become a premier vendor for supply of all the parts and also we probably can also attempt to launch satellites into the space. But we restrict ourselves to high-tech manufacturing, which is our area of interest. And we think that this will also grow at a high-rate and these are of course a reasonably good margin compared to the current consolidated EBITDA.
Deepak Krishnan
Sure, sir. No sir my questions. Thank you.
Operator
Thank you. The next question comes from the line of Siddharth Behra from Nomura. Please go-ahead.
Siddhartha Bera
Yeah. Hi, sir. Thanks for the opportunity and congrats on a good set of numbers. Sir, first question is on the — given the very strong traction in the order book, would it be possible to highlight, given this traction, what is the sort of numbers you’re targeting now for the next two years for the EMS business as of now? And what segment will be the key driver? Will it be again smart meters? And what will be the contribution if you can share?
Jairam Sampath
Yeah, yeah. Saji, thank you for your question. So in terms of growth numbers for our consolidated numbers this year, we can safely say that minimum 60% growth will be there in operating revenues. And we also expect about 50 basis-points expansion in our EBITDA numbers too. Now the basic reason for this is that the orders that are coming in are in areas such as industrial, which is of course, smart meter, then aerospace and then also areas like automotive, especially we now have orders from some of the top key Tier-1 companies and a significant amount of export is also likely to happen.
So over the next two years, you will see quality of our portfolio increasing and the bulk of the order book that today has an EBITDA profile likely to beat our consolidated EBITDA what we have done this year. So hopefully, the trend will continue. As you know, over the last quarter to this quarter, there has been a significant improvement in the monthly run-rate of orders being booked. So we think this trend will continue as well. There are many orders which are — which are there in the pipeline. So answering your question, I think we can expect strong growth in business over the next several years.
Siddhartha Bera
Got it, sir. And second, sir, on the capex side, we are doing close to INR950 crore last year. So what is the capex you’re looking at for this year? And within this, what will be for the EMS business and what will be for the OSAD and PCB segments, if you can just break it down?
Jairam Sampath
Sure. So for EMS business, I think we will do whatever maintenance capex that’s required and there are a few lines which have to be completed, etc. We already have all the capacities. It’s just a matter of making them work more efficiently and so that we can have better asset turns and we are aiming to do that. As far as the bulk of the capex is concerned is going into new projects, which is our semicon and. And so without putting a specific number, I think we will try and finish the first phase-in both the areas. It will be a significant amount of capex. We will probably share that separately. And so this year’s planned capex, we’ll make sure that we start doing business in PC — HBI, PC Board in the last quarter as well as the Semicon in the last quarter of this year. So that’s how we are thinking. And then of course, FY ’27, we will do — we’ll complete all the capex for semicon and PC Board.
So just to remind you, the total capex for semicon is like INR2,400 crores and total capex for CC board is about INR1,400 crores. So between this year and next year and maybe some little spillover will be there and we will complete this capex. And then so that by FY ’28, we can have significant capacity utilizations in newer businesses. As far as VMX is concerned, I think it’s almost now on a self-sufficient mode. And whatever we generate from the operations that is sufficient, this year we will of course ease out more sales out-of-the assets already established.
And for the coming year, we will probably in the second-half add some little listing. And then of course, there are subsidiaries have been added and so on. On. So I think in terms of capacities, I think we are somewhat ahead of the demand so that we will not have trouble in execution.
Siddhartha Bera
Got it, sir. Thanks, sir. I’ll come back-in the queue.
Operator
Thank you. And the next question comes from the line of Nitin Arora from Axis Mutual Funds. Please go-ahead.
Nitin Arora
Hi, sir. Sir, just one question on the recent acquisition what you did. Can you throw some light how scalable this business is? What are you thinking about the potential of revenue and profitability from this business? And also if you can talk about any further acquisitions what you are articulating in this space? Thank you.
Jairam Sampath
Thank you for your question. So as far as the August Electronics acquisition is concerned, this is one of the premier vendors and quite healthy what go on. EBITDA numbers are always around which is better than our consolidated as of now. And we have seen their plans for the next five years and they are likely to grow at about, 15% 20% on their own. And with us taking over and putting our bike into it, we might get a silver business from Chinese business transfer to India because most of the customers who do business with Electronics, they have significant pursues from China too.
And already some of the customers have looked at our facility and so on and they are quite convinced that we we can be a good supplier for that. So broadly upward of 20% 25% of growth, you can expect 20% growth at least you can expect the geography there itself and another 5%, 10% of spillover effect to our business in India. And these are all customers qualitatively pretty good margin and large customers, global players. They belong to areas like petrochemical, energy, medical instrumentation in those areas where we don’t have huge customers — customer-base. So they are going to be both in terms of quality of business, revenue accretive as well as the margin-accretive in their approach. So this is what we expect what was the second question is
Nitin Arora
Any further acquisitions you are looking at it? Given this acquisition you think you’ll be able to fund internally and for the further acquisitions, how you’re thinking about it? And one comment on the OSAT, if you can also talk about what are the developments there?
Jairam Sampath
Sure, sir. So as far as first acquisitions are concerned that we are — it’s our stated position that we have a three-pronged strategy. One is geography expansion with local basis of production and then of course, we take whatever collateral benefits into India wherever those customers have some manufacturing going-in China too. So we feel like China plus US will become India plus US kind of strategy and we will certainly acquire. For financing, we don’t have any tension right now. We also announced our approval from our shareholders for the QIP. Some of those proceeds can be also used.
So we are looking at what we can, let’s say, synergize and sue and digest. So that’s important part of our business. So whichever gets straight-away added synergies to our business is what we are taking. So some of these acquisitions will be short gestation period and they’ll start yielding revenue and profits immediately. As far as the OSAC business is concerned, we — I think we’re building this construction is going on. We’ve got signed all the agreements with our collaborators, etc. And very shortly the agreement with the government also get signed and of course, approvals have been always in-place.
And so we will have probably the first chip coming out sometime if I’m not mistaken in the second-quarter or at least early 3rd-quarter. 3rd-quarter, I think you can fairly expect the first production to happen. And then 4th-quarter we will have some reasonable production happening. We have a couple of customers who have committed capacities too. So when we exit this year, we will have significant amount of capacity committed and by some reasonably good customers.
Nitin Arora
Great, sir. Thank you very much and all the best, sir. Thanks.
Operator
Thank you. The next question comes from the line of Aditya Bharthia from Investec India. Please go-ahead.
Aditya Bhartia
Hi, good morning, sir. Sir, my first question is on capex, wherein we have spent almost INR8 billion in the standalone entity itself, which compares to roughly INR1.3 billion last year. So just wanted to understand what was the nature of this investment, where exactly was it spent and how much incrementally would have gotten spent on OSAT and BayPCB given that out-of-the QIP proceeds, it appears that quite a bit is remaining unutilized.
Jairam Sampath
Yeah, it’s correct. So fundamentally for and PCD, we basically bought the land and then some initial building work was done, land development, etc. So that’s the extent of money that went into that. Of course, we have committed some more money in terms of ordering, etc of these things. As far as the existing business is concerned, we have completed our facility, which is a fairly global facility wherein we have got a couple of exclusive zones for some large customers.
So they had made some specifications because they are looking at us for $1 billion-plus kind of businesses over the next five, 10 years time-frame. So we have completed that. So bulk of it has gone into basically developing customer exclusive EMS facilities, so they are fungible facilities, but they will be higher-grade because most of these customers deal with aerospace and some other high-tech sensor electronics and so on and so forth. And we also probably this year will further augment by adding one more very large global client which have — which we have acquired — which we are in the process of acquiring as a result of our acquisition in Canada too. So yeah, so these are all going-in PMS business, EMS business with high-value, high-tech, high-margin products.
Aditya Bhartia
So does that mean that the initial capacity that we had planned at, for which we had raised around INR1.5 billion at the time of the IPO, the current shape is much, much larger than what was initially envisaged. And does that also mean that incrementally our asset turns are going to be lower given that if we look historically, we used to have a fairly small gross fixed asset-base and asset turns used to be extremely high.
Jairam Sampath
Yeah, yeah. So as far as the original IPO money was concerned, that part of it went into and clearing debt and so on and so forth, not all of it added to the gross block actually. So answering your question, yeah, earlier, we were very efficient using because we lagged the capacity, let’s say, capital to actually deal with large clients. So the way in the large client business works is that you discuss with them and then make the facility work and then they come and audit the facility and then they satisfy themselves that they can build all their global purchases, they can build it here.
And that’s what we have done and all of those are all targeted investments. And since now that we do have a slightly easier access to funds right now. So that’s why we are able to cater to larger clients, larger clients with more high-tech, more long-standing businesses and better margins too. So in the interim, maybe a couple of years, the asset turns will appear to be lower, but then that’s cost of business, right? As you see the order book is increasing.
So this order book increase is primarily due to the fact that we are now get — getting recognized by lot of large guys who give us long-term business. In fact, the order book that we have published is only five years order book and we do have significant amount of orders beyond five years, but we don’t normally publish beyond five years. So beyond five years also, we have confirmed orders from customers. So obviously, when customers start taking a long-term view of your view as a supplier, then we also need to reciprocate by building capacities and then the specific things that they require. Suffice it to say that in EMS, most of the infrastructure 90% is fungible, but they still need to see it available for them because when they shift significant capacities from places like China, et-cetera, these are all, let’s say, hundreds of millions and billions of dollars of contracts. So obviously, they would like to be sure that we do have that not only the intent and not only the ability, but actually the competence and the capacity on-ground. So that’s when they will shift them.
Aditya Bhartia
Understood, sir. That’s helpful. Just one last question, if I may. When we had acquired the Smart Nutrient business, you had indicated that should be contributing roughly 10% of revenues. And from that context, the increase in other current assets that we have seen appears to be fairly large. So how is the accounting being done? Is it in respect of some of the revenues that have been recorded in the past as well that we have assets that are — that are recognized on the books?
Jairam Sampath
Yeah. So basically the other current assets are those receivables, which are — which are termed to be received later. They are not overdues, which we have agreed for a later. So when we acquired this subsidiary company, we had two-parts of business. One was the metering business as a device business and then there was something like AMI business wherein the installation, etc. And also one more part of the business which we’ve not talked about yet, but then that is going to add margins to us to software because we see these companies, this company has significant amount of software solution in both meter data management as well as head software, therein there is no-cost associated.
So we made a reckoning simply that yes, there is — when we acquire our orders, they already — we have to service those orders and those orders had certain clauses of money is being collected over-extended periods. But future orders, we are making sure that we become more device and our orders will be like 90 days to 120 days kind of collection period. So we don’t think that this will volume up significantly. And for whatever amount for the current traction that we are talking about, we are also trying to fund annuity funding. So looking at if we can do it without it by factoring it on the customer because our contracts are clear and clean.
So we will let you know, maybe second-quarter or so see we are working with a few banks and NBFC. So let’s see when we will get there. So this is not going to cause any distress, but this is necessarily part of the activity.
Aditya Bhartia
Understood, sir. That’s helpful. Thank you so much.
Operator
Thank you. The next question comes from the line of Keyur Pandia from ICICI Prudential Life Insurance. Please go-ahead.
Keyur Pandya
Thank you. Sir, two questions. First on their PCB and the OSAT business, you talked about OSAT cost gains at Q3. Or when should we see for both of this business, say a more commercial kind of revenue flowing through, if not say full utilization, but say, 25%, 30% kind of utilization, when should we see that? And so what are the timelines? Just want to understand for both of these business. And second question on the core business, FY ’25 gross block — ballpark would be around INR650 crore. Now in that backdrop this around INR700 crore-plus kind of capex in the standalone entity. So is it at a more higher-cost or it is going to increase your capacity by just want to understand basically in the core business, what would be our gross block by end of or mid of FY ’26 and what kind of revenue it can generate, any change in asset turn, et-cetera?
Jairam Sampath
Yeah. So as far as FY ’26 is concerned, even if we did not add any further like any further
Ramesh Kunhikannan
Yeah the first question I will take, the second question you take. Yeah. Yeah. The first question, let me answer. So what I’m — what we are planning to do is get all the validation that the near building start from next financial year, right? Because for validation itself, it will take around three to four months. Our plan is to do the trials in the pilot lot builty by July, August. From there, one after the other one semiconductor at the time we wanted to do. And then this year, we are planning to take around six models. Towards the end-of-the year, there is a likely chance of some building happened, but otherwise the next year will be a full-year for when it comes to PCB same problem, these goals after doing our trials and everything, this factory should be ready somewhere in November, December for full production and then we need to do all the trials so it will take two to three months. So basically the large portion of the building we can get only next year. So considering all the timing required for validation, we have scheduled it like that. Thank you.
Jairam Sampath
Yeah, thank you. And regarding gross block, I think this year we will improve our asset turns because most of the facilities like the Chamraj Nagar one will all start working at much higher capacity. So even if we did not add any more capacity, this year’s numbers we can very do FY ’26 numbers. And by actioning this, we will have some spare capacity. As you know, earlier also we have said that the moment we reach a 70% kind of capacity utilization, we need time to go for newer capacities because global players would like to see free capacity for any business that they transfer from other places. So this is good news only. A little bit of lower asset turn is good news in this business because that means that we have committed customers who are likely to give us business and that’s when we keep it. Earlier we run a choco block almost six or seven chance of pricess we should do. So maybe three, four-year timeframe, we will get to that number, a little higher number, let’s say, five or six times. Till that time, we’ll do some minor capacity additions every year. So in this business, about 7% of turnover of EMF typically can give us the kind of number to grow at about 50%. Maybe so FY ’27 onwards 7% of turnover, so whatever that number is, let’s say, 4Q or whatever. So about INR300 croress crores of investments we do within FY ’26 second-half and first-half of FY ’27. So that will grow at about 50% the EMS business and so on.
Keyur Pandya
Okay. Just one question if I can.
Operator
Sorry to interrupt. Those were two questions. I would request you to join the queue. Thank you. The next question comes from the line of Akshay from Ask Investment. Please go-ahead. Hello. Please go-ahead, Akshay with your question.
Unidentified Participant
Yeah. Sir, what led to the shortfall of — some shortfall of our previously-stated revised guidance of INR2,800 crores? And are we confident of achieving 3,500 in the current fiscal year? And also — and also our other expenses in this quarter stood sub sharply from INR100 crores — sorry, INR31 crore to INR101 crore and it was INR52 crore in the previous quarter. So what led to the sharp jump-in other expenses?
Jairam Sampath
Yeah. So I’ll answer your first question first. So for the fundamentally, I think in our Q3 call also we had explained that there was a delay in execution of our smart meter business because we had large number of orders and this is a new facility in Hyderabad. So now we have overcome that and we are quite confident. What we are saying is 60% minimum. So 60% minimum growth will take us to about or so. And if everything goes well, we’ll certainly exceed that number with a much expanded at least 50 basis-point expansion in our EBITDA numbers.
That’s the kind of planning that we have for FY ’26. Now what was the second question that you asked? You asked about other expenses if not. Yeah. So some of the other expenses could be due to reclassification of certain consumables and so on and so forth. So maybe over the next last four quarters some declassification of consumables which normally should be part of of material was not like where it was shown separately and so on and so forth. More detailed one, I can probably ask somebody from finance to share with you because more could we do with reclassification than to increase in our cost sir. Yeah, of course, supply costs have tried higher because we — like we said, we are currently buffering up the capacity, preparing for some two or three global engagements in the FY ’26. So in terms of other costs, there are no major cost increases, it’s just some reclassification.
Unidentified Participant
Sure, sir. And sir, recently government ordered some fast step deployment of new satellites after the India-Pakistan conflict. So does it provide some opportunity for us because the timeline was three to four years, but now they have a — they have reduced to just one year.
Jairam Sampath
Yes, sir. So we have of course, formed us venture and we’ll keenly look at in what way we can contribute towards nation security and abilities in that space. And we have got some very good scientists who worked earlier in government IFRO, et-cetera to steerhead this thing. So keep yourself keen to our announcements. I think we are working very hard to make sure that we participate in the next-generation of technology development for the country.
Unidentified Participant
Okay. Sure, sir. Thank you so much and all the best for the upcoming week. Please go-ahead. Thank you.
Operator
Thank you. A reminder to all participants, please restrict yourselves to one question. If you have any more questions, kindly rejoin the queue. The next question comes from the line of Deepak from Sundaram Mutual Funds. Please go-ahead.
Unidentified Participant
Yeah, am I audible?
Jairam Sampath
Yes.
Unidentified Participant
Sir, my question is regarding your margins. So what would be our core EMS margin, let’s say, for Q4 FY ’25 and for the whole year FY ’25 because if my understanding is correct, there would be some employee expense and other expenses, which will be related to OSAT and Bayer PCB business, right, as we are expanding that too. So just wanted to understand what is our core EBITDA margin for FY ’25 and Q4 for base PCBA business.
Jairam Sampath
Our core margins are reflected in our consol only. See, the expenses which have incurred in development of the projects, etc., pre-op expenses, they get capitalized actually, okay. So a major amount of course, they have corporate-level expenses, supposing we do have some people joining at the corporate-level. So that increase is there. And like I said, I think in answer to some of the questions earlier, we do build capacities in ahead of time.
So constantly, we’ll have a quarter worth of additional capacity before the work starts, start because global players don’t want to risk bring orders to a company who does not have ready capacities because for them, 100 million, 2003 million kind of dollar kind of businesses, they don’t want to take any risk with the new suppliers. So to that extent, this year, FY ’26 May, we are saying that core business will yield another 50 basis-points, about 15.6% EBITDA. So maybe the seat number is somewhere there, there maybe another 40, 50 basis-points over-time.
But I’m afraid that we’ll keep building capacities and incurring slightly higher expenditure for the future growth of business. So you can take around 15.5 to 16 as the kind of number in the core business. And of course, the subsidiaries, etc., which we acquire, they may add we are making sure that we take a augmentative kind of addition and not any business which is lower than our existing EBITDA. So they may also pull the vector upwards in three, four years time-frame and the quantum of business is significant.
Unidentified Participant
Okay. So 15% to 16%
Operator
Deepak, that was your question. I would request you to rejoin the queue. Thank you. The next question comes from the line of Sumant Kumar from Motinal Oswal Financial Services Limited. Please go-ahead.
Sumant Kumar
Yeah, hi, sir. So current — assuming current scenario, global scenario, can you talk on export opportunities? How is the inquiries currently
Jairam Sampath
Yeah. So our — if you — I think we have talked about this in earlier calls too. So fundamentally, the aerospace business and some of the automotive, etc., now we’ve got global clients. So they do not only take requirements for Indian requirements, but also requirements for production outside of that. So we think that — so let’s say we have now three businesses fired up, one is EMS, the other one is post fat and PCB. So-far in is significant amount of business will be in export. Maybe from FY ’27, we’ll start seeing its impact. FY ’26 may primarily these three sectors like automotive, aerospace and some portion of industrial would see some increase in export. So maybe out-of-the total of, let’s say, 400, 3, 5, zero, maybe you can expect at least 15% roughly if I hazard a guess at this point in time of exports.
And the other thing is we must remember that we are also doing a geography strategy. So they are not considered export, but has a business done within that country. So for this, the Canadian entity will be shipping in Canada itself. So we can take that as an export in which case over-time, four, five years time-frame, 20% 25% minimum of our business will come from outside, let’s say, clients, you know. So some will be exported, some will be done there itself in the geographies where we have. So we have the on-strategy of acquisition and so on. So Sumanthi, basically export orientation will increase. Some of it will look like exports, others will look like a subsidiary business.
Sumant Kumar
Yeah. So current scenario, the tariff for we are getting some inquiries and more engagement with the client. I’m asking.
Jairam Sampath
Yes, sir. No, no. So actually what we are getting is a lot of big OEMs are seriously considering alternative to China. In the sense, they may not replace the entire thing. Obviously, that’s a little difficult. But the — all the new products, etc., they will bring to places like India because I think US is very much cautious in providing new technology to Chinese vendors. So they know that gets compromised. So I think we can look-forward. The tariff war will also kind of cool-off at some point in time and India has played that middle in the path very well. So — and also we are also having geography strategy we are going to have places in North-America producing. So from that perspective, I think tariff will benefit our company.
Sumant Kumar
Yeah. Thank you. Thank you, sir.
Operator
Thank you. The next question comes from the line of Girish Chipalia from Morgan Stanley. Please go-ahead.
Girish Achhipalia
Sir, just wanted to understand the rationale of the Canadian acquisition more or better. And you know, is it also having some ODM capability or is it more just a geographical and business diversification? And you know, just in terms of working capital intensity of that business and profit margins, if at all, if you can just help us with that. Thanks.
Jairam Sampath
Sure, sure. So like an answer to the previous question, I had mentioned that it’s margin-accretive with the EBITDA numbers are higher than what we have at consol level at this point in time. The rationale for acquisition was that they have global customers which we don’t have access to right now. They do somewhat larger electronics in the area of instrumentation in the area of energy, energy in this petroleum sector and then of course, medical then IT, etc.
Telecom also is one of those areas. So these are all high-value addition areas, which are generally the province of companies sitting right in the North American geography to serve their customers. For whatever reason, maybe it’s a reason of proximity, it’s a reason of strategy. So we will benefit and we have looked at their business plans. So 20% growth organically is feasible. And this Canadian industry has got expertise in refurbishment and other areas and they also are ready to expand into let’s say other geographies like other countries like US, etc., as you know, Texas and other areas are having huge amount of business in oil, etc.
Of course, they have some interest in Europe too. So with sales health, we would probably do the collateral benefit of helping this company expand and maybe increase their business a little beyond this 20% that they are currently planning. Plus they also — their clients have significant purchases from China. In addition to what they purchased from August Electronics, they purchased things from China too. So it is that portion of the business too and then a couple of clients have already visited us and they are happy to help us with new RFQs so that India is safer haven, especially for newer products and B, which is also newer than China is for their general acquisition and so on.
So we will have collateral benefits and change that here for local business. We will have some at least seeding of growth in North American geography and possibly an additional facility in the US in addition to already we have busycom. So we can combine all of these and then a critical mass will be there and so that by FY ’28 when the company does $1 billion, we want a significant number to come from these areas too. So that is the — so the rationale to put it plainly new customers, new geography and new businesses
Girish Achhipalia
Is this a clarification this 60% growth is including the Canadian part, right, or is it only the core business.
Jairam Sampath
Right now we are saying consol because we will have receive the entire year cannot be consolidated. They work on Jan to December. But yeah, broadly we will make sure that we attempt to do this in the existing business itself.
Girish Achhipalia
Okay. Thank you.
Operator
Thanks, Kish. The next question comes from the line of Meet Jain from Motilal Oswal Finance Financial Services Limited. Please go-ahead.
Meet Jain
Hi, sir. Thank you for the opportunity. Sir, my question is regarding this quarter last quarter as well, we have seen an increase in flow of our ODN business and the mix has increased significantly to almost 18%, including the product engineering business and that also resulted in a better margin. So can you throw some light on which kind of products are we manufacturing in that or which segment? Also, we can see the IoT part of the business, IoT consumer has seen a very strong jump. And throw some light on that?
Jairam Sampath
Sure. In terms of ODMR ability in the area of industrial is in the area of railways with coverage program and other things. And so those are the — and of course, IT IoT is another area where we have significant amount of ODM activity. So that is definitely going to go up going into the future. As far as the ITIT is concerned, it’s because of server production taking off. So that’s why so we don’t do commercial laptops, et-cetera, but we do high-performance computing servers. So that’s something that we continue to do. And we have a few more clients in the pipeline. So that business will also increase. So in terms of our, let’s say, trajectory of competition of our business, aerospace is on the up. Obviously, automotive will remain very strong with global clients and so on. And industrial will also be very strong, etc. Medical, we’ve been talking about an overseas client so that is also shaping up there. And of course, the business, once I think government finalizes strategy, we will get a good fair share of business for different production in India. Right now, it represents a very small portion of our business. IT, of course, will keep growing. Aerospace will, I think have become much larger than what it is today in our portfolio.
Meet Jain
So just a follow-up on that. So how much delta in terms of margin can we see is the ODM because ODMs are in the high-margin business. This mix is going up. So what kind of delta can we see on our margins down the line in the core DMS business?
Jairam Sampath
Yeah. So sir, see, margin is a mix of lot of blend of customers and different areas, etc. So this year, we estimate safely that at least 50 basis-point increase in margins will be there on a consol basis. And this is in existing businesses. If there are new businesses acquired, you make sure that it is at least a minimum it gives you this kind of a margin. So short-term at 50 basis-points yeah, maybe 200 basis-points are feasible over-time.
Meet Jain
Yeah. So because high-margin businesses generally carry some kind of working capital with it, so — and we target to reduce that. So can you throw some light to how is it possible?
Operator
Sorry to interrupt Amit, you’re done with your two questions. I would request you to rejoin the queue. Thank you. Ladies and gentlemen, in the interest of time, we’ll take the last question from Indrajit Agarwal from CLSA. Please go-ahead.
Indrajit Agarwal
Hi, sir. Congratulations on a good set of numbers and thank you for the opportunity. I have just one question. Of the capex that you announced or highlighted for OSAT and PCB 3,400 and 1,400, how much will come from the government and what would be the timeline of receipt of that amount? So is it that we pay-out the initial amount totally by ourselves and there is a lag in when we get it from the government.
Jairam Sampath
Yeah. So the policy is anywhere published by government. So in case of PC let’s say, is Indian semicondubmission, which has publish this policy, 50% of eligible capex, which is excluding land in some parts of buildings. So in INR3,400 crores, about INR2,700 crores, we will get 50% from Central government and another 20% 25% from state government, okay, of INR2,700. Remaining, we have to it ourselves. It contains land building plus it contains also some high-tech investment which in government’s opinion does not require subsidy because it’s a high-tech area and wherein there are already plants and so on. As far as the CC Board is concerned, INR1,400 and the federal government money comes furry party. That means when we pay the supplier, at the same time government does its contribution. State government comes with a lag of about six months and the machines come here and then we install. And then what is known as a startup of operations is the kind of thing. So first let’s say few tranches will be six months period after that it will become a regular routine cycle. So that’s as far as the OSAT is concerned. As far as PC Board is concerned, we get a significant amount about 40% plus 25% roughly. So about 65% capital subsidy. These all come after the machines come here and we start-up the operations. And — but within the year, the state government will be 40% roughly the — they will dispense within the year. The — so there’ll be no major lag, there will be we can say an average six months lag. The central government will come again with the same six months lag. So we may use certain bridge loans for this, which are self-exting moment the subsidiaries come, we can pay them off. So out of INR1,400 crores, roughly 65% is something which is capital subsidy remaining we have to put the best.
Indrajit Agarwal
Sure. Thanks a lot. That’s all. That’s all. Thank you.
Operator
Thank you. Ladies and gentlemen, in the interest of time, that was the last question for today. I would now like to hand the conference over to the management for closing remarks. Thank you.
Jairam Sampath
Yes. Thanks. Thank you everyone for joining this call. And now we may meet you all on good guidings and strong business growth. And like we discussed in detail about what our plans are and so on and so forth, look-forward to meeting you next quarter with some more good news. So in the meanwhile have a good time and see you later.
Operator
Thank you, sir. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you. Thank you. Thank you very much.