Premier Explosives Limited (PREMEXPLN) Q4 FY23 Earnings Concall Transcript

Premier Explosives Limited (NSE: PREMEXPLN) Q4 FY23 earnings concall dated May. 17, 2023

Corporate Participants:

T.V. Chowdary — Managing Director

Srihari Pakalapati — Chief Financial Officer

Analysts:

Vishal Mehta — Stellar Investor Relations — Analyst

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Vijay Goel — ICICI Securities — Analyst

Karan Gupta — Varanium Capital — Analyst

Niraj Mansingka — White Pine Investment Management — Analyst

Aman Vij — Astute Investment Management — Analyst

Rupen Masalia — RN Associates — Analyst

Chirag Shah — White Pine Investment — Analyst

Anant Jain — Individual Investor — Analyst

Manoj Saha — LAC Co Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Premier Explosives Limited Q4 and FY 23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you Mr. Mehta.

Vishal Mehta — Stellar Investor Relations — Analyst

Thank you. Good afternoon, everyone. I, on behalf of Stellar Investor Relations welcome you all to the Premier Explosives Limited Q4 and FY23 Earnings Conference Call. We shall be sharing key operating and financial highlights for the quarter and full-year ended March 31st 2023. We have with us today the senior management team of Premier Explosives Limited, Mr. T.V. Chowdary, Managing Director; and Mr. Srihari Pakalapati, Chief Financial Officer.

Before we begin, I would like to state that some of the statements made in today’s discussion may be forward-looking in nature and may involve risk and uncertainties. Documents relating to the company’s financial performance have already been emailed to you.

Now, I will invite Mr. Chowdary to share his initial remarks on the company’s performance for the quarter and full-year.

T.V. Chowdary — Managing Director

Thank you, Vishal, and good afternoon everybody. Thank you for joining the call and we will begin the call with company’s operational performance during the quarter and followed by the key industry updates. In our last conference call, we have already informed about the new development on DRDO technologies, which has been already transferred to us and we are fully working on those technologies. As we completed design and development of the products for foreign companies, that is for export purpose, supply orders started coming and we have manufactured and delivered the first batch of supply order in the month of February and the last quarter of financial year 2023. Execution of these production orders will be done and that is complete execution will be done in financial year 2023- ’24.

During the year, we have generated healthy cash profit of INR16.5 crores with our execution run-rate stable and given the nature of our cost structure. The operating leverage of our business will help us to generate better cash flows, which will be utilized towards strengthening of our balance sheet. We had started the year with the order book of INR389 crores and we have received order inflow of almost INR340 crores during the year and we have reported the current outstanding order book as on 31st March 2023 stood at approximately INR521 crores, which translates into 2.48 times of our financial year ’23 revenues.

We have despite the first export shipment of rocket motors for the overseas entity in February 2023. Premier Explosives is the only qualified Indian company for countermeasures and the only Indian company which is into export fully assembled rocket motors. In addition to the rocket motors and warheads, production of mines against new orders is going on at Katepally plant. This is expected to give good boost to revenue in the coming quarters and financial year ’24-’25.

And in addition to the production facility for medium-caliber ammunition is ready and this facility also is expected to start generating revenue in the financial year ’24. The defense avenues were affected during the the financial year ending ’23, due to the delays in clearance for deliveries from departments, that is export licenses and also the hardware issues. The first delivery which should have been done in the 3rd-quarter has come to 4th-quarter and come further deliveries will be regularized in the current year. Export billing also was deferred due to the delays in this and we are expecting this to be made up in the current year.

Now coming on the present industry status, about the defense industry as previously-stated and as you may be aware, India’s defense sector has a robust industrial ecosystem and the Atmanirbhar Bharat Strategy has been working well with the Indian defense industry. And the Indian government’s Make in India policy has also been promoting various industries, including the defense industry at large. Supported by governments continuous efforts of policy and the excellent support of the country’s defense sector, India accomplished an extraordinary milestone in defense exports in fiscal year ’20 23. Exports reached an all-time high of about INR16,000 crore, up by INR3,000 crores from the previous financial year. It has grown by ten-fold since 2016 and ’17.

India intends to spend INR2.7 lakh crores on defense equity in fiscal year 2024. Almost all the defense equipment will repurchase from Indian manufacturers to the dismay of the United States and Russia. India’s defense imports are dropping year-on year as the Indian defense sector strengthens. India’s defense imports fell by 11% between 2013 and ’17. And 2018 to ’22, owing mostly to a cumbersome procurement procedure, efforts to diversify arms suppliers and efforts to replace imports with home-grown products.

Coming to aerospace industry. With ISROs success in establishing SSLV, that is a small satellite launch vehicle and Government of India’s encouragement to private sector to take up satellite launching on commercial basis, opportunities are opening in space field and these are expected to fructify in the coming three to four years.

And the mining industry where the coal is the major mining sector. According to the Ministry of Coal, despite the hard environment encountered by Coal India, CCL and other commercial mines in the country, total domestic coal production output has risen to more than 892 million tons in financial year ’22- 23 up by 14.68% from 78.21 million tons in ’21- ’22, and it marks a historic moment for the coal industry in India. The coal sector contribution to economic growth has contributed to India’s rise under the current government and will continue to make the country’s growing energy needs. India has substantial coal reserves and intends to begin exporting that dry fuel by ’24-’25. India is moving from a net importer of coal to a net exporter of non-cooking coal.

As the government prepares to gradually reduce thermal coal imports by ’24-’25, India’s coal output is expected to climb to 1 billion tons in the next fiscal year, up from 900 million tons this fiscal year. The Coal Ministry has revealed that the government has already set a target of 1.3 billion tons of coal output for fiscal ’24-’25 and a goal of 1.5 billion tons by fiscal year ’29-’30. Keeping all this industrial sectors in mind, we expect a healthy growth for your company in the coming years. Thank you.

Now I request our CFO Mr. Srihari to give our financial performance.

Srihari Pakalapati — Chief Financial Officer

Thank you, sir. Good afternoon, everyone. The results presentation for the quarter has been uploaded in the Stock Exchanges and on the company’s website. I believe you all may have gone through the same. Now I would present the financial results for the 4th-quarter and full-year ended 31st March 2023.

The revenue from operations for Q4 stands at INR52 crores as compared to INR60 crores in the corresponding period last year, which is a de-growth of 13% year-on year. Our operating profit for Q4 stands at INR8 crores as compared to INR5 crores, it’s a growth of 64%. The operating margin for the quarter stands at 15%. In Q4, we reported a net profit of INR2.3 crores compared to INR1.2 crores in Q4 with a growth of 98% as compared to the corresponding period last year.

The revenue from operations for the financial ’23 stands at INR202 crores as compared to INR199 crores in the corresponding period last year, translating a marginal year-on year growth. Operating profit for FY23 stands INR26 crores as compared to INR22 crores with a growth of 16% as compared to last year. The operating margin of 13% in FY23. The net profit in FY23 stood at INR6.7 crores compared to profit of INR5.6 crores in last year, which records a growth of 19%. Company has declared a dividend of INR1.7 per share for the financial year ended Petrobras 31st March 2023.

Now coming to the order book. The company’s current total order book stands at INR521 crores, out of which explosive business comprises around INR90 crores. The higher-margin defense segment is at INR304 crores, which is 58% of our total order book and the service segment that is operation and maintenance is around INR127 crores. The order book represents a strong growth over the previous years. We are confident that with our continued execution run-rate, our forthcoming quarters will continue the growth trajectory.

With this, we now open the floor for questions-and-answers. Thank you very much.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited. Please go-ahead.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Yeah, thanks for the opportunity and congratulations on a good performance. Sir, my first question is regarding order book. So if you can mention the execution timeline we are expecting for explosive and defense sector?

T.V. Chowdary — Managing Director

Yeah, the explosive and defense sector execution timeline is one year — 12 months. Out of which because of the delays happened in the last financial year. Its most of the orders, they’re all of one year execution period.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

You expect that this INR304 crores of defense order book we have, that will be mostly executed entirely in FY24.

T.V. Chowdary — Managing Director

That is the plan. But what happens is these execution — if the production is in our hand, but deliveries they have to be affected only after the inspection and clearance and in case of exports, after getting the export license from government, which sometimes they are delaying the process of deliveries. So otherwise they are all supposed to be executed in the current year.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, so let’s say as per the agreements they are supposed to be executed this year. And considering some delays also we can execute it in 15 to 18 months.

T.V. Chowdary — Managing Director

Yes.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. And in the current year our revenue from defense and services was INR98 crore. Can you just mention how much was the defense and how much was the services?

Srihari Pakalapati — Chief Financial Officer

INR82 crores from defense, INR16 cores from services.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. Now this year our order wins were quite good, INR340 crores order win we have. If you can just guide us through, let’s say, what kind of order win we are expecting next year FY24 and which are the major orders we are expecting or any highlights you can mention, let’s say, where we have participated in the tenders or any major trend opening up this year?

T.V. Chowdary — Managing Director

In the rockets and propellant segment, the existing orders itself will keep coming — repeat other cell keep coming towards that because we are producing these and providing to assembly to BDL. The others are expected to continue for the existing missiles, that is MRSAM and ASTRA in the coming two to three years. And also the export orders also, now only the partial quantity only is converted into order and we are expecting this further to increase in the next financial year and a year later. So these are the things which will continue for the coming two-three years. In addition to that, the new areas that is mines, what we are making for different kinds of mines and also ammunition which is going to be added in the next financial year and the next.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

So, can we expect the similar INR300 crore, INR400 crore order win per annum will continue?

T.V. Chowdary — Managing Director

Yeah, that’s what we are expecting.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Or it can be even, I mean it can be even higher on more or less in that range you can continue?

T.V. Chowdary — Managing Director

See, we are also expecting some big orders in emergency procurement from MOD in the areas like where we are present existing Indian supplier, that is the countermeasures. Once that is finalized and that should add a big boost to our base.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, you mentioned that repeat order can come for MRSAM, ASTRAMRSA. I think recently BDL has signed the MOU for INR8,000 crore order for Akash also. So can we expect some order from that also this year? Yes. Okay. And typically, is my understanding right that 3% to 4% is the kind of opportunity that we cater?

T.V. Chowdary — Managing Director

Hello. Hello. Yeah, please.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

So is my understanding right that for any missile Akash or Astra, te value of that missile, 3% to 4% is typically our opportunity.

T.V. Chowdary — Managing Director

Yeah, very difficult to say because it changes from missile to missile.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

I mean, historically whatever we have executed if you can just give a broader, that will also be helpful.

T.V. Chowdary — Managing Director

In case of Akash, that is propellants and analgetic materials, the component is higher than that 4% or 5%. Whereas in case of other missiles, where the seekers and electronic systems and onboard computers, they are the costliest complaints. In that case, this will come down in terms of percentage.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, so this propellant plus energy would be what, 7%, 8%?

T.V. Chowdary — Managing Director

That is in case of Akash we can take, but in case of this other Astra and MRSAM, it be around I think below 5%.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, okay. So what I understand that in Akash we give only the propellant or energy product. But when we export, we give the full rocket motor system, right?

T.V. Chowdary — Managing Director

Yes, you’re right.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

So in terms of export, this 7%, 8% will become much higher.

T.V. Chowdary — Managing Director

Yeah.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, how much can you mention?

T.V. Chowdary — Managing Director

In terms of exports. We do not know. They are in customers hand no, what kind of seeker system and electronic we are going to add. Since we do know the final sale price, we cannot comment on our percentage.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. And in terms of export what I understood is, let’s say, over last one, ne and a half year whatever orders we have executed those are mostly for the testing thing and once they tested and the product is proper and matches the quality, then a real order or a big order we can expect. So can we expect some big orders this year or it is still in the testing phasing, maybe big orders will come in FY25?.

T.V. Chowdary — Managing Director

We have already received production order, which now we already started production. Like you have mentioned in my — the first consignment was dispatched in February. So now every month we have to keep on delivering one type of rocket 100 numbers per month and another type 50 numbers per month. So already production process has started for four different types of rockets and also warheads.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, just a couple of things and then I’ll join back-in the queue. In this BDL or in Akash, we are the sole supplier, right?

T.V. Chowdary — Managing Director

No. There are other suppliers also, but we are the largest supplier. Maximum quantity we have supplied in past, even now we are supplying. But otherwise there has others also who took technology from DRDO for producing Akash propellant.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

For that, it’s like BDL decide the quantity or its the tender system?

T.V. Chowdary — Managing Director

Its a tender system, L1 process.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. And last thing on this INR304 crores of order book in the defense, how much would be exports?

Srihari Pakalapati — Chief Financial Officer

It was about INR104 crores.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

INR104 crores. Okay, okay. Thank you. That’s it from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vijay Goel from ICICI Securities. Please go-ahead. Mr. Goel, I have unmuted your line, kindly proceed with your question.

Vijay Goel — ICICI Securities — Analyst

Hello. Yeah, hi sir, good afternoon. Sir, my question was on the explosives segment. So basically we have done 42% growth in exposure to INR103 crores of revenues. So just wanted to know how much explosive volumes we have done for this year and last year FY22 and FY23? So basically I just wanted to understand how much of this 42% growth was driven by volumes and how much was driven by realizations?

T.V. Chowdary — Managing Director

Yeah, Mr. Goel, if I understand correctly, you are asking for the volumes, that is tonnage that we have.

Vijay Goel — ICICI Securities — Analyst

Yeah, yes in tons.

T.V. Chowdary — Managing Director

Further bulk explosive use we have done about 7,500 tons in one location and about 500 tons in another location. About 8,000 tons we have done last year. Growth has come mainly because of the pricing rather than the volumes. So the bulk export has gone up almost double. I think — there was a growth of 100% last year.

Vijay Goel — ICICI Securities — Analyst

No, sir. I mean 8,000 tons of volumes you have done in FY23. And what was in FY22?

Srihari Pakalapati — Chief Financial Officer

FY22 was almost about 4,000 tons only.

Vijay Goel — ICICI Securities — Analyst

4,000 tons. Okay sir, thank you.

Operator

Thank you. We have the next question from the line of Karan Gupta from Varanium Capital, please go-ahead. Mr. Gupta, please proceed.

Karan Gupta — Varanium Capital — Analyst

Yeah, hi. My questions regarding the total volume…

Operator

I’m sorry to interrupt Mr. Gupta, there is a disturbance from your background. May I request you to go to the quiter place and speak please.

Karan Gupta — Varanium Capital — Analyst

Yeah, hello. Is it better now?

Operator

Yes sir, please proceed.

Karan Gupta — Varanium Capital — Analyst

So, my question is related to the total total CapEx we are planning for the next two to three-year and this segment how much CapEx we are planning and the segment-wise breakup of CapEx.

Srihari Pakalapati — Chief Financial Officer

We have the plan to, incorrectly it’s about INR25 to INR28 crores CapEx in ’23-’24. So, which is mainly almost all the CapEx is required for the defense only, not for anything more [Indecipherable] nominal amounts.

Karan Gupta — Varanium Capital — Analyst

INR25 to INR28 crores. And full goes to defense sector?

T.V. Chowdary — Managing Director

Sorry, I didn’t get you. Major quantity will go to defense sector.

Srihari Pakalapati — Chief Financial Officer

Yeah, major amount is for defense sector.

Karan Gupta — Varanium Capital — Analyst

Okay. And anything for capacity expansion in terms volume.

T.V. Chowdary — Managing Director

No, actually this CapEx is required to strengthen our existing facilities and adding some production lines and storage facilities. Exactly this amount is not required. I mean is not further, it is a iIncrease in the capacity.

Karan Gupta — Varanium Capital — Analyst

No-no, this I understood about this CapEx. But in future two to three years any plan to increasing the capacity of bulk explosive or packaged explosive?

T.V. Chowdary — Managing Director

Bulk explosive, we have no plan of increasing the capacity because we have adequate capacity and the licensed capacity also. We are only planning to increase the storage capacity because nowadays the bulk are explosives are more dependent on the imported ammonia nitrate. So there the storage gives do additional strength. A small part of it goes for the increasing the storage capacity. This defense sector, we have already established the facilities for production, but like our CFO said, most of this goes for adding some balancing equipment because when the product changes, it is suppose — I’ll give an example.

We produce propellants and rocket motors, but all are not same. Different dockets have different motors, different size, different propellants. So specific product is produced, you have to depending on the requirement you may have to add additional facilities and capacities added. That really we cannot say it is for increasing the capacity, but utilization of the present capacity only.

Karan Gupta — Varanium Capital — Analyst

Okay, fair enough. And this ammonium nitrate part of — the prices have come down, right?, from around INR65,000 to INR60, per ton.

T.V. Chowdary — Managing Director

Yes.

Karan Gupta — Varanium Capital — Analyst

So, from where we are purchasing or the best of the industries players are purchasing and mainly we are importing this thing, right?

T.V. Chowdary — Managing Director

Yeah.

Karan Gupta — Varanium Capital — Analyst

Any reason can you share this thing, its not the confidential thing.

T.V. Chowdary — Managing Director

Simple thing is imported price is lower than the domestic local price available.

Karan Gupta — Varanium Capital — Analyst

Okay. So domestically Like some chemical companies also manufacturing some parts so we are not [Indecipherable] so that’s why we are importing, so could it be major exporter of ammonium nitrate in the overseas market.

T.V. Chowdary — Managing Director

Beg your pardon. Please repeat the last sentence.

Karan Gupta — Varanium Capital — Analyst

Major export of this ammonium nitrate in the overseas market, who is the country or player?

T.V. Chowdary — Managing Director

Mostly it comes from the Eastern block.

Karan Gupta — Varanium Capital — Analyst

Okay, so eastern block. Any region or any major player who are exporting majorly to cater all the worldwide?

T.V. Chowdary — Managing Director

That is not our area.

Karan Gupta — Varanium Capital — Analyst

Okay, that is confidential.

T.V. Chowdary — Managing Director

Nothing confidential. But it’s not our area that we have ready information to share.

Karan Gupta — Varanium Capital — Analyst

Okay, okay. No problem.

Operator

The next question is from the line of Niraj Mansingka from White Pine Investment Management. Please go-ahead.

Niraj Mansingka — White Pine Investment Management — Analyst

Sir, thank you. Just wanted to know about the — you are one of the sole suppliers for lot of products in the propellants, in the missiles. Can you share us when you see the scale-up of this happening or is there a possibility that despite being a sole approved supplier, this perhaps may not be brought by the government in longer-term also. Just wanted so know some thoughts of yours.

T.V. Chowdary — Managing Director

See, for the order book you will understand that at least the coming two years that indicates the current status to you. And we have several things which are lined-up. Like I have shared in my speech that we have already absorbed some of the technologies from DRDO, which are going to meet the requirements and the government also is going to list them in the negative list for imports that is nowadays t is called positive list for local production. So we expect a good continuance of the growth. And like so many products which I mentioned, apart from the rockets and missiles, we have countermeasures, we have mines, we have warheads, which are now all of them are taking off. These are the new additions to our kitty.

Niraj Mansingka — White Pine Investment Management — Analyst

I think we have been discussing that on the calls also that these have been taking off, but the order book is — actually if you see the order book of yours, actually its coming down. Over the last four quarters, the defense order book went book went on from INR360 crores to INR300 crores range. So just wanted to know a color on that are you still seeing that traction there or you see some more delays with the government in coming up with orders — further orders. Yes, because if you see the order book that you were carrying a year back, it was INR346 crores, now its down to INR302 crores in defense side. So you’re actually gone down on the order book despite the government’s intention and entire media releases of lot of buying from the domestic side. So is this just you see a temporary store on or do you see larger delays in executing or getting more orders in the future?

Srihari Pakalapati — Chief Financial Officer

For the current order is an ongoing process. While we are executing the orders on-hand, we are also participating in the RFPs which are in the process. And you know that, you yourself commented we are the — one of the very few players in this line. So we are quite confident and that it will continue. Okay and the other question is, how much supply to MRSAM and LRSAM will scale up in the production for in the near-future?

T.V. Chowdary — Managing Director

See, as on date MRSAM offtake will be in the range of 20 to 25 only per month. This will continue like this in the coming four-five years.

Niraj Mansingka — White Pine Investment Management — Analyst

Okay. Okay, got it. Any other product that you think we should look at in terms of a larger growth in revenues or order book for you?

T.V. Chowdary — Managing Director

There are others which are in pipeline, like QRSAM, NGRA and Astra. All these now are yet to be productionized. We have already participated in the development and succeeded and we are marked as a qualified vendor. Now they have to get converted into bulk volumes.

Niraj Mansingka — White Pine Investment Management — Analyst

Okay, and few quarters — one or two quarters back you had said that Astra is taped down and your looking at — I’m sorry, Akash is tapered down and you are looking at Akash prime [Technical Issues] whenever it takes over.

T.V. Chowdary — Managing Director

We are looking of more towards Astra and MRSAM, that’s what I told. Not only that, you can add to that exports.

Niraj Mansingka — White Pine Investment Management — Analyst

Exports are mostly on the rocket motor, right?

T.V. Chowdary — Managing Director

Yes.

Niraj Mansingka — White Pine Investment Management — Analyst

Okay, okay. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aman Vij from Astute Investment Management. Please go-ahead.

Aman Vij — Astute Investment Management — Analyst

Good afternoon, sir. My first question is on the the rocket motors. So we have I think the capacity of 200 per month. If you can talk about what is the current run-rate that we are doing and at peak, what is the peak sales we can do, as well as if you can talk about the margins they get in this business?

Srihari Pakalapati — Chief Financial Officer

Sorry, can you repeat please?

Aman Vij — Astute Investment Management — Analyst

So rocket motors, we have a capacity of around 200 per month. Is that right?

T.V. Chowdary — Managing Director

No. I don’t know this statement of 200 per month.

Srihari Pakalapati — Chief Financial Officer

Where did you get this statement.

Aman Vij — Astute Investment Management — Analyst

On the previous call you had said we can maybe expand it to 200 per month if the need be.

T.V. Chowdary — Managing Director

We have a large license capacity. We have a license capacity for 100,000 numbers of propellant rocket motors per annum. That is our realization capacity and we also have a huge capacity. Only thing is to add more we may be requiring some more additionally equipment, tooling and some bolts like that, which we keep on as the orders come we keep on doing. So 200 is not our limitation.

Aman Vij — Astute Investment Management — Analyst

Okay, okay, sorry. And as of now what is the run-rate that we are doing?

T.V. Chowdary — Managing Director

Yeah, with current orders on-hand around 200 numbers per month we are doing, including export and domestic.

Aman Vij — Astute Investment Management — Analyst

Okay. So that was the confusion And in terms of — so we are doing around 2,400 motors per year, so what is the sales that we are getting because of that?

Srihari Pakalapati — Chief Financial Officer

So basically the major portion of the defense revenue is coming from there only. For the ’22-’23 rocket motors and propellants only.

Aman Vij — Astute Investment Management — Analyst

Okay, sir. I thought this is more for the propellants for the missiles versus rocket motors. So has the shift happened that now rocket motors is contributing much more than the propellants for the missiles?

T.V. Chowdary — Managing Director

Propellants for the missile is only propellants. This is including rocket, but it is not the contribution part, it is the volumes. The rockets where we are exporting, the volumes are large. The per annum we are we are talking about almost 2,000 numbers and the balance 400, 500 numbers only come from the domestic market.

Aman Vij — Astute Investment Management — Analyst

No. I was talking in terms of sales breakup. So for FY23, the defense sales that we did, what was the breakup of motor versus rocket, sorry the propellants for missile?

T.V. Chowdary — Managing Director

Just the exports of rockets has just started. Like we said that the first consignment has gone in the month of February. So this year I think we’ll be able to monitor that and then see that.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. And in terms of…

Srihari Pakalapati — Chief Financial Officer

From ’23, ‘ 24 onwards, ’22-’23, we have just started and we have done some first batch of small quantity.

Aman Vij — Astute Investment Management — Analyst

Okay, okay, sir. So in terms of the current order book of around INR300 crores, what is the split of the rocket motors and…

T.V. Chowdary — Managing Director

About 100 croresr. I think we can have some figures and some discussions on this after the first-quarter of the current year.

Aman Vij — Astute Investment Management — Analyst

Sure, sure. My second set of question is, so last con-call you had updated us on ammunition grenades that we were doing, some development cum production orders. So if you can update us what is the status of that and what kind of sales are we expecting from this ammunition grenades in this year?

T.V. Chowdary — Managing Director

Ammunition grenades, the transfer of technology part that is development, it is DCPP program with DRDO is completed and our production facility also is completed. And right now this is against the development or that we have done and we have participated in different RFPs. So we have to see for the maturation of those RFPs and getting orders. So as on-date, except development order we don’t have any order on hand for this product.

Aman Vij — Astute Investment Management — Analyst

But you had talked about there is like 1 lakh orders demand.

T.V. Chowdary — Managing Director

Yeah. We participated in RFPs. So we have to wait for them to be finalized.

Aman Vij — Astute Investment Management — Analyst

Okay, so is it impacted the result of those RFPs coming in FY24 or it will take a longer time.

T.V. Chowdary — Managing Director

These are being procured by MOD, as well as paramilitary forces and CRPF and all those. The paramilitary forces and CRPF, there the quantities will be less, but they are expected to come earlier, maybe in the current year itself. But MOD order, the processing and all takes longer time.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. So 1 lakh was combined or 1 lakh was only MOD you had talked about?

T.V. Chowdary — Managing Director

This is MOD.

Aman Vij — Astute Investment Management — Analyst

So for paramilitary forces and CRPF what would be the size?

T.V. Chowdary — Managing Director

Maybe we are expecting that can be another 30,00, 40,000 per annum.

Aman Vij — Astute Investment Management — Analyst

Okay, and we should expect some orders in first-half or second-half of the year in this paramilitary front.

T.V. Chowdary — Managing Director

Not in the first-half. Because now we have completed the development work, Now user has to come in and see them, user trials, that part will be there.

Aman Vij — Astute Investment Management — Analyst

Okay, so I thought the trials were also done, trials are remaining as of now.

T.V. Chowdary — Managing Director

Trials with DRDO and the self, those are completed. Now we are offering to — we have already offered to user. Now they have to come back.

Aman Vij — Astute Investment Management — Analyst

So that will happen in first-half and then finally orders in second half. Is my understanding correct?

T.V. Chowdary — Managing Director

Yes.

Aman Vij — Astute Investment Management — Analyst

Okay. Okay, sir. My next question is, so you have you talked about future growth drivers include QRSAM, NGRAM and Astra. Do you think any of these will get into commercial production in FY24 or if you can talk about some timelines, according to your estimates and when can we see this contributing to revenue.

T.V. Chowdary — Managing Director

There is QRSAM, we can expect in the next financial year, that is ’24-’25. Presently it is there. Already we — BDL is the integrator for Astra. Astra is expected — we are expecting Astra by the end of this year. It will fructify into a bulk order. Right now it is small, small quantity is only going on, 20 numbers, 25 numbers, like that. And QRSAM development is completed, but we are expecting this in ’24-’25 probably it will come.

Aman Vij — Astute Investment Management — Analyst

And NGRAM?

T.V. Chowdary — Managing Director

NGRAM in — it is — the rocket motor development that is our part is completed. But the entire missile assembly that part is still going up. So the commercial production will start only probably in the year ’25-’26, that’s what I’m thinking.

Aman Vij — Astute Investment Management — Analyst

Sure, sure, sir. And we are hearing a lot of news regarding this new platforms like the Prithvi and others also LRSAM. So any part we might take in those also?

T.V. Chowdary — Managing Director

LRSAM and MRSAM is same. We are doing both. The name only is different. LRSAM is Naval version and MRSAM is Army. So both are okay, we are doing. And Prithvi, no, we are not in Prithvi.

Aman Vij — Astute Investment Management — Analyst

Okay. And sir, are we present in this — a very different category ATGMs, like Nag and Amogha with PBM like NIAGEN Maga and Helina. So are we present in those also?

T.V. Chowdary — Managing Director

Right now some of them are being done with double base propellants. We are not in double base, but we are in the New generation ATGMS and the small ones, new ones, we are there on it, and we are also DCPP partners and the other productionizing agencies, we have MOUs with them.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. So out of this your are extending the small one. So some ones will be which ones, if you can name some platforms.

T.V. Chowdary — Managing Director

One is [Indecipherable] You must have heard of about it. Many I think platforms and names rather than going into those things. But then we have other agencies also where we are working for this UAVs warheads for UVVs and all those. So those are the areas where we are expanding for future.

Aman Vij — Astute Investment Management — Analyst

Okay, so nothing on this Amogha and Nag side because these are double propellant. Yes. Okay, sir. My final question is in terms of defense order, the contribution, the order inflow. So we have INR300 crore orders. So what kind of execution are we expecting in FY24 as well as what kind of additional orders are we expecting for FY24.

Srihari Pakalapati — Chief Financial Officer

Actually as per the schedule, we are supposed to deliver at least INR240 crores in for ’23-’24, which is again subject to the clearances from the Departments. And depends on the export licenses and logistics issues. But as per schedule, we are supposed to deliver at least INR240 crores in defense.

Aman Vij — Astute Investment Management — Analyst

Okay, and the additional orders we are expecting apart from our current order book.

Srihari Pakalapati — Chief Financial Officer

There are lot of orders in pipeline. We are expecting some large orders in near-future. But at this moment, we cannot comment on that.

Aman Vij — Astute Investment Management — Analyst

Sure sir. Thank you for answering the question.

Operator

Thank you very much. The next question is from the line of Rupen Masalia from RN Associates. Please go-ahead.

Rupen Masalia — RN Associates — Analyst

Yeah, thanks for the opportunity. See, my questions are pertaining to a longer time horizon. So, next three to four years considering the your capabilities in high-energy materials and capacities and of course the tailspin provided by the indigenization drive with the government of India. So where do you see defense and aerospace business scaling up over next three to four years, that’s one part. Second is, like you are trying to climb up the hierarchy of value chain by being currently a component or subsystem supplier to being a system integrator. So in the light of that, over next three-four years where do you see the margin profile climbing up. Currently, I mean whatever margins you are enjoying in defense and aerospace business at EBITDA level or maybe PBT EBIT level. So in next three to four years the questions are scalability than climbing up the value chain hierarchy and of course, margin profile. So if you can elaborate on these aspects. Thank you.

T.V. Chowdary — Managing Director

That growth-wise, like you yourself said the defense sector is growing and all those. And apart from defense, the aerospace we have not discussed up till now. In none of the questions it appeared. Aerospace is one area where the new satellite launch vehicles and all those are going to come in. The private sector is also going to join and other things. So that is one area in the coming three-four years we see a big growth in addition to the existing ones. And you are aware that countermeasures, one of the products which we make. Now it has become totally indigenous, Make in India only, cannot import. So we are expecting to continue this further orders and increase in that area for the coming three-four years, which is also a good contributor and we have enough capacity to produce.

Rupen Masalia — RN Associates — Analyst

Would it be fair to presume that, you know, in next three to four years you can do an annual business of INR700 crores, INR800 crore.kind of revenue from defense and aerospace with around 25%, 30% margins at EBITDA level, would it be fair?

T.V. Chowdary — Managing Director

The turnover target, yes. We also have such figures, but we are little conservative in announcing those. But yes, we have that. And EBITDA level percentage of 30% to 40% expectation is a bit high.

Rupen Masalia — RN Associates — Analyst

No, 25%, 30%. Sir, I’m saying 25% to 30%, not 35%, 40%. 25% to 30%.

T.V. Chowdary — Managing Director

We are targeting 15% to 20%.

Rupen Masalia — RN Associates — Analyst

Okay, EBITDA level.

T.V. Chowdary — Managing Director

Yeah.

Rupen Masalia — RN Associates — Analyst

Right, right, right. Okay, that’s it from my side and all the best for future.

T.V. Chowdary — Managing Director

Yeah, thank you.

Operator

Thank you. The next question is from Chirag Shah from White Pine Investment. Please go-ahead.

Chirag Shah — White Pine Investment — Analyst

Yeah. Thanks for the opportunity. Sir, most of the questions have been answered. One very basic question I had. I was just looking at your past order book and its conversion to revenue. That ratio seems to be very low. It is in the range of 40% to 50%. So now with INR520 crore of order book that we had, what will change that the conversion ratios will improve significantly. That is one. And the second, in the past order book that you share. For example, in F’19 we you had INR388 crores. Has there been any cancellations which have happened during the course of the time afterwards. So these are two question I had.

Srihari Pakalapati — Chief Financial Officer

About your observation of 40%,. I think that happened in case of two orders which we received. That is export orders where because of the ongoing war and on those, the export licenses were not issued. Because of that, we had to withdraw from those others. Other than that, I think we are executing everything.

Chirag Shah — White Pine Investment — Analyst

No, I was just looking at your overall order book that you have given in the presentation. I was looking at subsequently your revenue number.

Srihari Pakalapati — Chief Financial Officer

Overall order book, there is a major component is from O&M, operations and maintenance. We contract further, which is therefore long tenure, which is for 10 years. So, even at this moment we have one INR127 crores which is to be executed in the next seven years. So this is a fixed contract. Every year you get from some INR16 crores to INR18 crores continuously. So this this you cannot average it because these are a major component which comes for the next seven years. Rest of the order book is normally we are making it to 55% to 60%.

Chirag Shah — White Pine Investment — Analyst

Okay. Does it get added to the next year order book or the order book that at the end-of-the year is a fresh order. And not a carry-forward of the past other also.

T.V. Chowdary — Managing Director

The current selling, that is last year’s selling of order book. Yes, that is going on. Execution is going on And like I mentioned, due to delays in the pre-dispatch inspection and other things, that those orders have flown into the current year and the will be executed in current year.

Chirag Shah — White Pine Investment — Analyst

Okay, so last year of INR390 crore order, whatever has not been done and which is not cancelled, gets added to current year INR521 crore order book, right? That’s how one should look at it and that would have been the trend over the year, that’s how you give your order books.

T.V. Chowdary — Managing Director

Yes.

Chirag Shah — White Pine Investment — Analyst

And sir, just a clarification. This O&M order is an ongoing order, right? Every year you must be getting some O&M order.

Srihari Pakalapati — Chief Financial Officer

No, no. It is a long tenure contract for 10 years which we received in 2020, which we have just completed three years and seven years is still left.

Chirag Shah — White Pine Investment — Analyst

Okay, sir, you just keep on reducing that number every year.

T.V. Chowdary — Managing Director

Yes, exactly.

Chirag Shah — White Pine Investment — Analyst

Okay. And the second question, generally are there order cancellations which happens that you may have added to the order book and then suddenly government decides not to procure. Is it a frequent feature because over last five-six years…

Srihari Pakalapati — Chief Financial Officer

This has happened once in about two ears back per [Speech Overlap]

T.V. Chowdary — Managing Director

It is not any cancellation of orders. It is our cancellation because the Government of India did not give the license. That’s what I told you. Two export orders for explosives, that is high explosives which we booked. Finally, we had to inform them that we cannot supply because the Government of India did not give license for exports. So other than this, there is no cancellation of any directly at least of my knowledge.

Chirag Shah — White Pine Investment — Analyst

Okay. And just one thing. So of the INR400 crore of order book or INR395 crore order book ex of O&M, you are saying 60% odd can can be converted subject to the availability of licenses and other parameters that you indicated. Is that a fair way to look at it.

T.V. Chowdary — Managing Director

No, actually I don’t understand this convertibility of — 100% it will be converted. Sometimes it happens like this year because of these reasons it may over flow to next year, then loss of this year becomes gain of next year. So do we call that as only partial execution.

Chirag Shah — White Pine Investment — Analyst

No-no, fair point. Thank you. Thank you very much. I understood. I was just trying to understand that.

T.V. Chowdary — Managing Director

Yeah, because there is no cancellation and we are executing all the others.

Chirag Shah — White Pine Investment — Analyst

Okay. Thank you and all the best.

T.V. Chowdary — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Thank you for the opportunity again. Sir, my question is on the space side. So you talked about we are already solid propellant for SSLV vehicle. So among the other vehicles, like GSLV and PSLV, do we also supply anything for those vehicles?

T.V. Chowdary — Managing Director

No, we are not making for SSLV. I think heard wrongly. We are making for PSLV. PSLV, there are strap on motors, PSOM-XL. Those we are making in our facility. And the SSLV, yes, we have participated in SSLV in our ongoing good service contract at Sriharikota. And new plant of SSLV and all those, the discussions are going on their plant and all those. But as on-date SSLV production is not there, it is only being done at Sriharikota.

Aman Vij — Astute Investment Management — Analyst

Okay, okay, so. So on the PSLV sir, so last two-three years in terms of…

T.V. Chowdary — Managing Director

We are doing the strap-on motors for PSLV and we still orders for three more motors in hand, which we will complete in this current year.

Operator

Thank you. Sir, the participant has left the queue. We move on to the next question which is from the line of Anant Jain, an Individual Investor. Please go-ahead.

Anant Jain — Individual Investor — Analyst

Yeah, thanks for the opportunity, sir. My first question is on the artillery grenade side. I just want to understand in terms of MOD approval, where are we for that item?

T.V. Chowdary — Managing Director

This we are manufacturing under DCPP program. DCPP program is development and production partners with DRDO. So with ARDE hand-holding, we are working on it. And ARDE is interacting with the MOD for clearance and all those. So we have already submitted to MOD that we are ready with the product and all those. So now they have to come and then see the probably — they will decide that this is only from my side that facility inspection and the product trial testing of the product that has to be done still by the user.

Anant Jain — Individual Investor — Analyst

Okay, because what we keep hearing is that there is a lot of shortage in terms of these grenades, artillery grenades, but we still don’t see any fast movement happening on that. That’s what we keep hearing about it. At the same time…

T.V. Chowdary — Managing Director

You are right about the shortage. There is a requirement demand. That’s why DRDO, ARDE laboratory is working on it and they are very closely monitoring and day-to day interaction is going on and samples are tested and trialed and done and all those. There are four variants in it. Out of four variants, two are the main requirement. And those two are already developed and demonstrated to ARDE. Now MOD we have to demonstrated.

Anant Jain — Individual Investor — Analyst

My second question is again on the same thing because MHA we were expecting MHA order somewhere around March-April time-frame. But what are the reasons for the delay there Sir.

T.V. Chowdary — Managing Director

Not know sir. We are not aware, it is from their side because there’s usually it happens whether its MHA or MOD. The emergency procurement itself takes three-four months. So regular procurement it may go to anything six months-to one year before they finalize.

Anant Jain — Individual Investor — Analyst

And for these grenades that we are making, is this also is like no 100% made in India and we don’t have any imported components in these?

T.V. Chowdary — Managing Director

Yeah, right now what we are making are with 100% Indian complement, but we may have to look about some imports in future some of the components.

Anant Jain — Individual Investor — Analyst

What is the reason for that because I think they have to be made in India only as per the government requirement.

T.V. Chowdary — Managing Director

As on-date we are dependent on MIL, that is Munitions India limiters for some energetic components. So depending on the policy of availability, making it available to the other industry our imports will depend. if they cooperate and they can meet our requirements, then we need go for imports or anything, but otherwise we have to look for another alternate sources.

Anant Jain — Individual Investor — Analyst

One other question is, because, I mean, this is mainly because of the concern of fall in the order book. Of course, we all understand that the long-term opportunity is there for us. But this fall in order book from last year to this year on the defense, just wanted to understand in terms of — either in terms of tenders or bids or in terms of RFPs, if you can give us some understanding as to where we were last year and where we are now just to get a flavor of how our order book can shape up going ahead. If you can give some value.

Srihari Pakalapati — Chief Financial Officer

We received a major orders in defense only somewhere around April and May. And there has been significant increase in order book from defense during the year ’22-’23. Out of which there has been some execution. But if you compare with last ’22 March other book, still there is significant increase.

Anant Jain — Individual Investor — Analyst

I understand that. I totally understand that. My only question is…

Operator

Mr. Jain, I would request you to kindly rejoin the queue. There are other participants who are waiting for their turn.

Anant Jain — Individual Investor — Analyst

Sure.

Operator

Thank you sir. The next question is from the line of Aman Vij from Astute Investments Management. Please go-ahead.

Aman Vij — Astute Investment Management — Analyst

Yeah, sorry, sir, the line was cut earlier. So continuing with the previous participants question. In terms of number of bids and number of tenders we are participating for defense, if you can talk about. Mid-size or in terms of number of tenders that has come, is it increasing compared to last year or is it the same levels only. If you can quantify on that.

T.V. Chowdary — Managing Director

It is much more than last year.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. And on an average, so if we have one, say, INR300 crores worth of orders…

T.V. Chowdary — Managing Director

Right now we have participated and still in the process and all those almost to INR600 crores worth tenders are there.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. So this INR600 crore whatever result be will come out and then our order book will increase based on this.

T.V. Chowdary — Managing Director

Yes.

Anant Jain — Individual Investor — Analyst

And out of this normally what is our hit rate in terms of — do we proceed first 600, do you expect 300 core out of it or even higher.

T.V. Chowdary — Managing Director

See, in case of countermeasures and all those, we are the single qualified vendor indigenous. So we are the single vendor so we expect that their quantity to be received by us once they are finalized. In case of other tenders and all those, we are only two vendors, two or three vendors. And where generally L1 and L2 both get based on the 60:40. So everywhere we will be there.

Aman Vij — Astute Investment Management — Analyst

So that is very heartening to know. So roughly countermeasures our of this INR600 crore tenders will be how much.

Srihari Pakalapati — Chief Financial Officer

So I think the major portion is relating to countermeasure only.

Aman Vij — Astute Investment Management — Analyst

Is it like more than 50% discount countermeasures.

T.V. Chowdary — Managing Director

Much more.

Aman Vij — Astute Investment Management — Analyst

Okay, so that means then it’s almost — there is a very good chance we can get that soon. Sure, sure, sir. And the the expected timeline of this tender…

Operator

Sorry sir. I would request you to kindly join the queue. There are the participants waiting.

Aman Vij — Astute Investment Management — Analyst

Sure, sure, sure.

Operator

May we request the participants to limit your questions to two per participant. Should you have a follow-up question please rejoin the queue. Thank you. The next question is from the line of Manoj Saha from LAC Co Investments. Please go-ahead.

Manoj Saha — LAC Co Investments — Analyst

Yeah, thanks for the opportunity. My question is, for any export orders do you need to take export license permission from the government on case-to-case basis or there is a list of friendly countries from where you can export if you get an export order you can execute the order, you don’t need to go for a license.

T.V. Chowdary — Managing Director

Every hazardous product which is listed in the items we have to take license case-to-case, order to order we have to approach and take license. And generally where we are dealing with friendly countries and all those, we don’t get any issue. But recently like I was talking, some big order from Turkey and Ukraine, we had to lose because there was restriction.

Manoj Saha — LAC Co Investments — Analyst

Okay. I’ve got another question like revenue mix has been changing from — earlier you used to have manufacture explosive, now your getting more into defense. The revenues from the defense are increasing day-by day. So your profile is almost 50:50 mix kind of, okay, if I see the last year number or if in FY22 the defense revenue are much higher. So how do you see it shaping up forward, next two-three years is I’m talking about.

T.V. Chowdary — Managing Director

This is an exceptional case. As explained earlier, there are lot of turnover — defense turnover has been deferred to next year due to the explained regions. But the composition may not be the same in future.

Manoj Saha — LAC Co Investments — Analyst

So probably more than 50% revenue will come from defense side going forward. That’s what we can expect?

T.V. Chowdary — Managing Director

Yes, it should be more, in line with the previous year.

Manoj Saha — LAC Co Investments — Analyst

FY23?

T.V. Chowdary — Managing Director

No, ’22.

Manoj Saha — LAC Co Investments — Analyst

’22, okay.

T.V. Chowdary — Managing Director

’23 is an exceptional case as we explained.

Manoj Saha — LAC Co Investments — Analyst

Okay. Thank you very much.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. T.V. Chowdary for closing comments. Over to you, sir. th

T.V. Chowdary — Managing Director

Thank you. Thank you very much. I hope we could answer all the questions which were listed and all those. And I thank all of you for having patience and being with us and supporting us and we look forward further growth and a better future. Thank you very much.

Operator

[Operator Closing Remarks]