Zen Technologies Ltd (NSE: ZENTEC) Q3 2025 Earnings Call dated Feb. 17, 2025
Corporate Participants:
Ashok Atluri — Chairman and Managing Director
Unidentified Speaker
Afzal Malkani — Chief Financial Officer
Analysts:
Abhishek Mehra — Analyst
Teena Virmani — Analyst
Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and a warm welcome to Zen Technologies Limited Q3 FY 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Abhishek Mehra, TIL Advisors Private Limited. Over to you.
Abhishek Mehra — Analyst
Thank you, Swapnil. Welcome, everyone, and thank you for joining this Q3 FY ’25 Earnings Conference Call of Zen Technologies Limited. The results and investor updates have been e-mailed to you and are also available on the stock exchanges. In case anyone does not have a copy of the same, please do write to us, and we’ll be happy to send it over to you.
Today, we’ll start the call with a brief overview of the performance, which will be followed by the Q&A session. As a disclaimer, I would like to remind you that everything said on this call, reflecting any outlook for the future, which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that the company faces.
These risks and uncertainties are included, but not limited to what we’ve mentioned in our annual reports. With that said, I’ll now hand over the call to Teena Virmani from Motilal Oswal.
Teena Virmani — Analyst
Yes. Thanks, Abhishek. We welcome the management team of Zen Technologies for Q3 FY ’25 results con call. We have with us Mr. Ashok Atluri, Chairman and Managing Director; Mr. Afzal Malkani, CFO; Ms. Shilpa, Director of Finance. So over to you, sir, for your opening remarks, and then we will open the floor for question and answers.
Ashok Atluri — Chairman and Managing Director
Good afternoon, everyone, and thank you for joining both existing shareholders, past and potential shareholders. Well, very briefly, I would like to reiterate that the earnings for the year on track. We don’t see any change in our target of INR900 crores for the year. I think we still feel very confident that we’ll achieve that.
On the downside, we expected orders that would have started trickling down from December onwards. And we said the end of first — the third quarter and the fourth quarter, we’ll start getting the orders that have not materialized as expected. And we think that they will start — the orders will start coming during this quarter, and they will most likely spill into the first quarter and probably a little later into the second quarter.
So all domestic orders worth almost INR800 crores are in this pipeline. And we think that by — before this second, we should be having it on our order book, and this excludes the export order, which will be separately accounted for. So I think we have some visibility on these orders. And we are ramping up our execution capabilities so that most of the orders that we are executed within the same year the same financial year. So that was on the news that wasn’t that encouraging. But the good news is that our estimate of the size of the market Afzal can address has grown tremendously over the past few months.
That means the prediction that we have made for the average growth of 50% CAGR over the next 3 years seems achievable. And when I mean achievable in the sense that even if we were to fall short in the FY ’26, the ’27, ’28 figures look very, very encouraging, and we expect to more than cover any deficiency which may arise in FY ’26. And our expectation, of course, is that government will accelerate the procurement process and place orders on the industry sooner than later.
And as we are very extremely transparent, we’ll update you on the orders as soon as we receive it. On the other news President Trump’s ascension is great news for India. We should use this opportunity. Again, we — my stance has been very clear we should use this opportunity to ask for technologies that will help us win the war. And they should be willing to sell it rather than outdated white elephants like F-35, a lot of people are talking about F-35. I’m quite surprised that there are some people who are actually recommending buying it.
And the smartest person in Mr. Trump team, Elon Musk has said a lot about F-35. One of the few remarks that he had made is F-35 fighter jets are obsolete in an era dominated by drones. They have design flows. What he actually said was broken at the requirements level and are an expensive and complex jack off all trades and master of none and have the worst military value for money in the street. So with all this — so we should be very, very careful what we use our money taxpayers money in buying, and there should be only technologies that will help us win the war.
And as you will look, what have we got into, what are the technologies we have, we have in the new acquisitions, what are we doing, you’ll be very happy to know that we are going in that direction. So having said that, again, we think that the government should insist on having private tie-ups with private sector companies, which can absorb the future technologies and they can actually help us co-develop for the next generation of technologies. We should not aim to be just manufacturing or a value chain partner kind of thing, which is typically a lot of people say, but we should be actually co-creating great products with them for the world market.
So that should be our agenda, and I hope the message is taken by the Indian government. So now I’m switching to the acquisitions that we have done. Our philosophy even by looking to acquire any companies is this. If we buy something, if we invest in this company, can they create some absolutely world-class products or not? If the answer comes now, that even by investing and they’re waiting for time, they cannot create world-class product that globally leader, they cannot retain global dealership, we let go of that investment.
So in this thing, I think we have been able to really identify some great companies. And I’m very, very happy that the acquisitions went through. Again, I’m very, very conscious of the fact that 10% to 25% only work almost 75% to 90% of the acquisitions fail — mergers and acquisitions fail. I’m very aware of that. So I’m hoping that I’m an exception, but I’ll be very, very open to the questions that you will ask in this regard.
About our largest acquisition to date is ARI, that is — ARI is very frankly, co-founder, Mr. Shravan Rewari, he is a very good friend of me, I had a long relationship with him. And in fact, I have been — we have been talking on and off about it for the past 2 years that we would like to acquire them. But finally, Shravan was agreed to do it. And again, I very much respect the work and achievement Shravan and his extremely key of talented professionals have done and what they have created is very, very complementary.
I would say that in is in the Army simulation market. ARI is the leader in naval simulation in the marine simulation market. The majority of their income comes from Marine. Now very quickly, the difference between marine and naval simulators are this. The fields are marine is typically commercial, naval is typically armed forces.
So — but 1 thing which is very significant is the majority of the revenues for ARI have been coming from marine simulation and naval simulation has been a little less. So I think that they took a conscious decision that they’ll force on the commercial sector rather than the government sector because of various issues that they have had.
So I think ARI is a great company and the DNA required to be number 1 company in the world in naval simulation and marine simulation is there in that. And fortunately, Shravan has able to — was able to professionalize to such an extent that the team were led by Partha Sanyal and his extremely talented team are almost run the operation independently and very competently.
So I think we fortunately, Shravan will continue to be on board and will give us strategic inputs, including opportunities for further acquisition as Partha will continue to lead the team. I will talk about vector techniques. And the last company I’ll not talk about. I’m a little concerned that the whole of the time should not be taken in the presentation, but we should give time to interact with the shareholders.
So I’ll keep my presentations not so long, but try to keep it brief, so that I can answer your questions. The third company, Bhairav Robotics, I’ll probably take up in the next one. But Vector Techniques, again, this was a company that came to our mind that came to us on a radar a few years back, but then that, for some reasons, it did not happen.
But recently, when — I don’t know whether you have heard about the story about the Jakarta about the Brahmin who’s taking the goat on his shoulders and some thiefs decide — there are many versions of this brand telling one of the version. The 3 thieves decide to take the take the steal the goat from him. And the first guy says, Pandit ji, you are having where they go to the guy who is carrying the goat, pandit ji’s goat on his shoulder and say pandit ji where you are carrying your dog on your shoulder.
And he says, are you mad? It’s not a dog. This is a goat. Thief says are you sure? Beucase it looks like a — it should look like a dog to me, he says, you’re definitely mad. And he’s very confident — a little confidence chicken, but a few steps later, the second guy again repeat, the second thief Achieve 1com pan, and what are you doing? You’re carrying a talk on and says Pandit ji, dog on your thing. So this guy actually start suspecting is this dog and by the — he says, are you sure, no, this not a dog, this is definitely a goat end confidence chicken.
By the time the third guy says, why are you carrying a dog? This guy actually throws the goat and runs away and the thieves take it. So why am I explaining the story is, for a long time, Zen was being said that they’re a drone company, drone company, drone company. But we said we have been saying that, no, we are not a drone company. We’re an anti-drone company.
But now the reality is that we are becoming a drone company, and Vector Techniques is the Vector Techniques that we are a company that we are investing is our first step towards becoming a drone company, thanks to all the investors saying that are you equating us with drone company. So — and the reason why we — recently, we started talking to a few drone companies in which we wanted to invest.
Again, our criteria has been very, very simple that we don’t want companies that do get Chinese parts and we recently saw some news articles also in which Chinese parts are found. And the danger of having Chinese parts is that when you — when the war happens, your drones can be completely disabled by the Chinese. So we have to be very, very cautious about are getting any parts. So government acting very harshly in people who have Chinese parts in the drone, I think is very, very justified.
And so we see that DJI don’t fly in the border areas because they’re denied the flight because again, we have also seen that when Israel war happened, Israel was able to actually use the Pager technology to kill so many of the Hamas targets. So are we — so — and up strangely, India still continues to import these electric cars from China. And these electric cars can become absolute weapons when the time of war comes because the software is given by them, the software can be updated to be very, very restrictive on Indian traffic and Indian roads.
But anyway, so that the whole point is that we should be very cautious of a neighbor who has time and again backstab us. So coming back to the thing, we — when we started approaching the drone companies, almost everybody said, listen, we are indigenizing and we — the technology that we are using to indigenize is from a company called Vector Techniques. And in a strange coincidence around that time, Vector Techniques approach us for investment.
And we immediately lapped up and almost — it was a completely cordial tie-up and happen very, very fast. That’s one of the things that we will do, we’ll definitely do. If you like you, it will not be a 1-year due diligence and all that by which time, typically, the people who need the funds actually die. So we’ll act very fast. In fact, this is also an open invitation to any of the shareholders who directly or indirectly know some companies that are looking for investments in the related segment that then is exploring.
But having said that, I’m just inviting Pruthvi and kind of both are here, I’m inviting Pruthvi to come and briefly explain about our products and what they have done about this. So after he explains, there will be around here if you want some additional questions, they’ll say. So what is so really so cutting edge, it blew my mind away?
It blew the mind of very, very technical people we know, but Prithvi, please come and you can explain that you.
Unidentified Speaker
Good afternoon, everyone, and thank you for the opportunity. So we are very thankful for Zen. We’ve been in the space since past 5 years, putting our brains together for research and development. And we have been struggling to find the right investor. Let me put it that way.
So when we approached Zen, a couple of years back, we had just 1 product, and we were not market ready at that given point of time. Given the last 2 years, we had a very good success in capturing the right markets, both domestically as well as internationally. So what we — at our core, we are a motion controlled company.
So we did our research into motion control that is into 2 different segments. One is the brushless DC motor technology for UAVs and robotics. The second one is IC engine-based propulsion for drones. So I’ll show you some of our products. This is our motor, which can be repurposed either as a commercial drone motor or a defense drone motor or even a man carrying drone motor, and it can be used as a robotic motor as well.
Similarly, we are part of the core electronics of a drone. This is simple — if I need to do it in a simple terms, this is almost similar to a motherboard of a PC. So it powers up with the batteries, and it also gives distribution to the other sensors, payloads as well as propulsion. So this is also a key part of our drones.
I’ll show very briefly our second revision. It’s a 4-cylinder UAV aircraft engine for UAVs. This is extending the range of the drones, which are currently operating. It can be used as a regular commercial aircraft as well as his high altitude. So we had designed very strategically that it can be modular. Our painted technology can make the same engine as a 2-stroke whole cylinder engine, 2-cylinder engine and 6-cylinder engine. I’ll just show you quickly how 2-cylinder smaller engine looks like.
So if you see our vertical integration of the technology, it’s the same motors that we develop, which we repurpose as generators. So on board, it can generate power and you don’t need big batteries to carry or you don’t need very, very big batteries to go for extra long range. The engine on board an aircraft can deliver the power, it can be a redundant power supply for all the electronics as well.
Having said that, there is 1 more final trick capacity, which is our counter rotating motor. So these are our counter-rotating motors. What it does is we have a patented license technology with 13 patents globally. It increases the efficiency by 30% and it can change the game of UAVs within a long span. So our small technology can propel a drone 30% longer, faster and can be a beautiful alternator for a regular standard motor and increase the flight times up to 30%.
So this we are currently exporting, and we are very soon launching in India as well. So having said that, with the opportunities that we had from Zen. So far, we have about 5 different product lines. We are going to scale up all of those product lines into about 23 different product lines.
We’ll be targeting markets both domestically as well as internationally. We have our distribution channels across Japan, U.S. and U.K. We are expanding into Middle East and Europe this year, and we are looking for bright talent to expand and thanks to Zen for investing and trusting in us. for such a big expansion that we never dreamt of that will happen so quickly. Thank you, sir.
Ashok Atluri — Chairman and Managing Director
The rule is that whenever somebody speaks so smoothly, you should be very, very careful. So the actual — actually technical guy is not actual technical guys Karna. So he is not very articulated. So that’s the plus point that we have here. So overall, I think we are very, very excited with the acquisitions that we have done. And one thing, even in recent Aero India, we launched a product called Kavach in the sky.
Now this is the most — one of the most advanced anti-drone system in the world now. It has 4 layers of protection. The first player starts with just the jamming soft skill. And then the second level is typically, the Kamikaze drones, the third is the missile attacks. And then finally, the fourth is gatling or regular that can be used to destroy small drones. So this has been developed specifically for small drones, and we are evolving our products at a furious pace to keep with the requirements of the.
So I think overall, most of the points have been covered by me. And I will hand it over to Mr. Afzal Malkani, our CFO, for a presentation on the figure, so that he gives a good perspective on the figures. After that, we’ll open for Q&A., so that we can have a proper interaction with you.
Afzal Malkani — Chief Financial Officer
Thank you, sir. So good evening, everyone, and welcome to the audio conference call for Q3 and 9 months ended 31 December 2024. As you just heard from our CMD, Mr. Ashok Atluri, we would like to report that we have delivered reasonably a good performance for Q3 FY ’25 and 9 months FY ’25. Additionally, we are well positioned to continue our growth momentum.
Let’s begin with a quick update on the stand-alone performance for the Q3 FY ’25. Our revenue from operations was INR141.52 crores compared to INR98.08 crores in Q3 FY ’24. The growth in percentage terms is 44%. Our EBITDA for Q3 FY ’25 increased to INR58.68 crores compared to INR48.40 crores in Q3 FY ’24. In percentage terms, EBITDA is 35.90% of the revenue, the growth in percentage comes to 21%. Our profit after tax has increased to INR38.62 crores compared to INR31.66 crores in the same period last year.
Profit after tax in percentage terms is 27% compared to 32% in Q3 FY ’24. The growth in percentage terms is 22%. So now coming on to the out of our total revenue of INR141.52 crores. INR130.82 crores were contributed by the sale of equipment, while INR10.70 crores came from our AMC business.
Coming on to the 9-month performance for 31st December ’24, our revenue from operation was INR637.17 crores compared to INR295.56 crores in 9 month FY ’24. The growth in percentage terms is 116%. Our EBITDA for the 9-month FY ’25 increased to INR252.77 crores compared to INR143.76 crores in 9 month FY ’24. In percentage terms, EBITDA is 37.69% of the revenue compared to 46.95% in 9 months FY ’24.
The growth in percentage terms is 75.82%. Our profit after tax has increased to INR178.03 crores compared to INR96.20 crores in the same period last year. Profit after tax in percentage terms is 27.94% compared to 32.61% in 9 months FY ’24. The growth in percentage terms is 85%. Now coming on to the balance sheet part, and Zen remains focused on maintaining strong liquidity and leveraging its asset-light business model to ensure sustained growth and value creation for our stakeholders.
With that, we conclude our opening remarks, and we would like — you would like to open the floor for the question and answers. Thank you.
Questions and Answers:
Operator
[Operator Instructions] Now we will take our first question from Mr. Lokesh Sabrawal.
Analyst
Yes. Can you hear me?
Operator
Yes, we can hear you. Please go ahead.
Analyst
Mr. Ashok Atluri, I have been a big fan of yours, invested in your company for over 2 years now. I have basically 2 questions. So what is the current order pipeline? And by when do you expect it to start coming on papers? Because as of now, we can see it’s around INR116 crores. So — and you have projected around INR1,200 crores for next financial year. So how would you be able to achieve that?
And second is the profit margin has been very good in your company in the recent years. And after the acquisition, what do you think that the profit margin would be when the revenue of the existing companies start coming in?
Ashok Atluri
Okay. Thanks, Lokesh. Thanks for asking, and thanks being a co-owner with me on for Zen Technologies. Really appreciate that. The first question is on the order pipeline, again, we had indicated that we’ll get about INR1,200 crores during the year. But we have about INR800 crores in the pipeline at this point in time. And we expect that the — most of the results should come out by Q1. If not Q1 then Q2, definitely. So that’s the — we are not factoring the exports. That’s a little iffy thing, but there is a large order coming in. If it happens, there are large orders there.
And with respect to the profit margin post acquisition, acquisition margins are not as big as we have, but we expect them to improve what — again, very typically, I want to say that when these — when ARI has the marine simulators, and Zen is saying that we’ll move to naval simulators. What does it mean? Basically, marine simulators that are, for example, the bridge simulator, the engine simulator, all those simulators are similar in both the cases.
There are some simulators that are mutually exclusive, but most of the — it’s almost a super set of naval simulators are super set of marine simulators, most of the case, again, there are exceptions. So here, what happens is, why is the naval simulators are different kind of different these 2 handles, 1 thing missing is the weapon simulator that are required to make them actually naval simulators. So with the marine simulation leadership that ARI has under the leadership of what they have developed with Shravanji, and the simulator that we have, the naval the weapon simulator, if you combine them, they make perfect naval simulators. So this is the absolute synergy creating opportunity. So we are very, very excited about this. And I think the margin profile once we integrate both the companies will continue to remain the same and maybe better in some cases.
Operator
We will have our next question from Mr. Dipen Vakil.
Analyst
Congratulations on your decent quarter and congratulations on acquisitions. Sir, my first question is on the lines of, sir, we have earlier on guided that we’re on track to do a revenue of close to INR900 crores. So are we still on track with the same guidance? Or is there any material change because we already passed on with even the first half of fourth quarter. So would you like to state the same guidance for this year?
Ashok Atluri
Yes. Dipen, yes, we are confident that we’ll be able to achieve INR900 crores. And again, thanks for saying that’s a decent quarter, not everybody is saying that. But the — actually, in Q1, I said, please don’t go on quarter-on-quarter because somebody said, you are very heavy, you will do INR1,000 crores. I said no, don’t go on quarter-on-quarter. But just we’re INR900 crores, we are very confident whatever is the gap, we will be able to fill that gap to hit the INR900 crore target in this quarter.
Analyst
Sir, now next on, sir, you even — you mentioned that the pipeline is of close to around INR800 crores, which will get fulfilled by likely by, say, first half of next year. But sir, can you give us a little bit more about the ordering environment that is there currently because your equipment orders are now at current at 0.4x the sales. So how do you think that the ordering will happen in, say, next 15 days? Are there any advanced talks that are happening when it comes to orders?
Ashok Atluri
Again, even after very frankly, Dipen, what has happened is all the — after 30 years of experience, I projected a very, very conservative figure and said that actually, my — the team had said that we’ll start getting orders much, much earlier, but we took a very conservative approach and said we’ll start getting from December. But even that proved to be very optimistic and still the orders are yet to come.
But to be very fair with you, some orders are at a very advanced stage, and they may happen in this quarter itself. But again, I don’t want to give any figures on that Dipen, and I hope you understand that. But on the advanced stage, yes.
Analyst
Got it, sir. Sir, we are very positive on it. So all the best for fourth quarter and FY ’26.
Ashok Atluri
Thank you, Dipen. FY ’27 ’28. Yes. Thank you.
Operator
Our next question will be from Sandip Agarwal from Kohinoor Investment.
Analyst
Are you able to hear me, sir?
Operator
Yes, we can hear you.
Analyst
We have taken over this company, ARI, where the revenues are around INR92 crores. Can we get to know what is the EBITDA margin in that company?
Ashok Atluri
Afzal, would you be able to show?
Afzal Malkani
Am I audibe?
Ashok Atluri
Yes.
Analyst
Yes, sir.
Afzal Malkani
So currently, in the current year, ARI will achieve a revenue of more than INR100 crores and EBITDA will be around in the range of 18% to 19% and PAT would be around 13% to 14% in the current financial year.
Analyst
Okay. And like we are attending to a lot of exhibitions and fares. So we don’t get any clients giving us orders on the same quarter because we have been waiting for 3 quarters and no orders have come in. So we don’t get orders when we are exhibiting in fairs.
Ashok Atluri
Not really, Sandeep. I think it’s a little complex process. Even for — the Indian government has its own long process, but even foreign delegation that visit, these are all visits to actually explore what are the technologies available for acquisition in India. So when they come here, they look at it and then they take — they tell us that these are the technologies that we are interested in. In some cases, where they’re already in touch with us, they come and say, listen, these are the things that we will be placing order in the coming couple of quarters. So yes, but we typically don’t get any orders because they are government orders, they are extremely process-driven. The orders come after they come, go back, floated tender, etc.
Analyst
Okay. And like what Donald Trump is coming out with a lot of news like we might have to do different deals. The Indian government might have to do with different deals with the U.S. government. So we’re buying more of defense equipment from U.S. will that affect our performance in any way?
Ashok Atluri
Yes. So in the sense that we do anti-drone systems. And I think we are — we do very better than most of the companies, including American companies. So Indian government will be very, very cautious. I think they will be using technologies that are not available in India, they will not buy something they’re already available in India. It doesn’t make sense at all. And even when they buy it, they will be only to build ourselves into a winning award, not for — just to oblige President Trump.
I think we are in a very good spot. And definitely, there are technologies that America has that can help us become a stronger nation. So it doesn’t see any threat at all from this. In fact, we think that our opening of office in U.S. was very opportune and with all the setup, we had recently taken permission to invest in U.S. We are going there. As we speak, we are identifying the place with the new Trump administration in place, we are identifying where we will be setting our factory.
And I think U.S. will contribute significantly from FY ’27 onwards. I’m very sure about that. So I think that’s a good news for our people who are setting up business manufacturing facility in U.S. that they’ll be able to take advantage of President Trump’s bargaining tactics.
Analyst
Congratulations for the future.
Ashok Atluri
Thank you, Sandeep. Thank you so much.
Operator
Our next question is coming in from Ms. Smita from Credit Infoedge.
Analyst
Yes. Am I audible, sir?
Operator
Yes, we can hear you.
Analyst
Okay. So 2 questions. You sound very optimistic about the business moving forward. Still, I wanted to ask 2 questions. One was how — as a D&A you have changed from being anti-drone to drone and you sound very optimistic about this joint venture, whatever you are doing. But looking at the financials, which the order book is showing us and the last 2 quarters, growth that we are seeing that has gone for a toss and making us think that actually, would it will ’25, ’26 will be a bit muted and ’27-’28 will be forthcoming? And how do you like that this drone system addition that you are doing to your wallet as a product mix, will it benefit you more or the company that is coming more, which will be taking your market also for your for the product sale of them?
Ashok Atluri
So Smita, thanks for the question. So — so your first question was the movement from anti-drone to drone. So the anti-drone is very frankly, I think we are in a very, very good seasonality anti-drone system. I think once we are supplying are extraordinary and absolutely class. To your second question, why are we getting into drone systems? This is a very, very cold blooded decision that we took. We were — in fact, we avoided getting into drone space for a very long time because we were thinking we will get world-class technologies at some point in time.
And but what we have seen is even now the products being supplied to the Indian armed forces still have Chinese parts. They haven’t — they’re really not cutting edge. Again, I don’t know why this has happened, but the actual drones that are being developed are really, really lacking in world-class position. So we deliberate — again, anti-drone is one part of the total equation. If you don’t have cutting-edge drones, you just can’t win a war.
So we think that we can really, really — again, we are not trying to reinvent the ground up. What we are trying to get is the smartest and the best and the deepest player, deep tech players in this segment and getting them together to develop the world’s most advanced drone systems. It is, again, as we always do, we are not focused only on Indian armed forces because we don’t want to give something Indian armed forces to just to satisfy the RFQ requirement, but we want to give them absolutely world-class product that is actually leading in the world.
So this is what I have in mind. And this is the reason we’re getting into drone systems, because without drone, absolutely cutting-edge drone, we cannot win a war. And what we have seen until now is pathetic and we are very, very unhappy with what the drone ecosystem has delivered. So we are hoping that we will fulfill the gap that is there to ensure that we are not found wanting when the happens in the — in the future, between India and neighbor country. Smita, you’re on mute.
Analyst
So basically, sir, I wanted to know that are we benefiting with an increase in this? Or is the company which is coming new which will benefit because currently, we don’t know if we have — will we be having that drone orders from the government?
Ashok Atluri
So actually, I’m a little amused by the question. The thing is when 2 people get together, there is a synergy produce. It’s not that 1 guy is benefiting the other guy is losing. It’s not a fixed pie. It actually, the pie is growing extraordinarily big. It’s multiplying. And I think both of us will benefit significantly from this. And most importantly, the customer will get absolutely cutting-edge technology from this collaboration. So I don’t think there is anybody who is taking advantage or getting something while the other guy is losing. I don’t think in that way at all. I hope Smita you’re getting my point.
Analyst
Yes, sir. Just wanted to end my query with one last question. That is I’ve seen your shareholding going down. So with so much of optimism in the company why is the promoter shareholding going down?
Ashok Atluri
Smita, we — very frankly, we have never always, we have had the same shareholding for a very, very long time. And only in recent times you have sold 1% of the holding, not much by me and my co-founder and my brother, they sold 1% each to take some money or various reasons. Again, we have been very, very conservative. And so very little have been taken off the table and majority of the holding continues to be in the family’s name, and there is no sale other than 1 sale that has happened. And we don’t even intend to dilute any further. So that was actually announced at that point in time. We don’t intend to dilute any further in the near future or even the late future.
Operator
We’ll have our next question from Ashish Sony, Family Office.
Analyst
Yes. So from this acquisition, how much revenue you are seeing in next 2 to 3 years, scaling up and what margins, because drone seems to be commoditized business to me, at least. You said, I think what I heard here is an IP and all, but will we get the good margins in drone business also?
Ashok Atluri
Again, if the competition was like everybody was getting parts from China. And when you get everybody gets parts from China. I mean, again, there are some players who are really, really who do Indian production or don’t include any Chinese part. But typically, when everybody is getting from the same source and just assembling and selling, then the war becomes very, very difficult to win. But in this case, what we are doing, we are bringing on new level of technology. It’s a different technology, different level of indigenization that is happening.
So I think with these kind of indigenization and the different technologies counter-rotary technology and the engines being completely indigenized, specifically for the drone companies, we think we are not only going to supply to India, but this will become an absolute manufacturing hub for the world. So we will be exporting a lot from here to other foreign countries. And I’m not talking about Africa or Middle East I’m talking about North America and Europe. So that’s where the lot of export will happen. And I think my personal belief is that the margin profile will improve after this collaboration starts happening in turn out.
So with respect to the turnover, I don’t have — I will just defer it. We have some figures which are very, very conservative, which are like INR50 crores, INR100 crores kind of thing. But I think in the long term, this will be significantly, I would say wait until FY ’28 or something, I think it’s going to be really, really mind-blowing. The figure that we’ll get will kind of compete with what we are doing in anti-drone and the simulator space.
Analyst
And you seem to be more optimistic on the U.S. business, and you were there in air show also. So I just want to understand qualitatively how much revenue or are you having like firm discussion in terms of orders with the customers? Like what is your optimism coming from at least for the U.S. business when you set up a manufacturing plant because last quarter, you were optimist, right now, you’re also optimist give qualitative color, what is happening and how much revenue scale up, at least from U.S. business, you can do manufacturing from U.S. in FY ’27?
Ashok Atluri
So FY ’27, what is happening at this point in time, there are many foreign companies, foreign countries that are actually asking us for these products and they would prefer that we do the manufacturing in the U.S. and made in U.S. branch. And especially with the new administration in place, they are saying that we are under pressure to buy from the current administration.
So they would love to buy these — the products that we have rather some — mostly from U.S. at this point in time. And these markets, typically, they’re easy to service from U.S., that would include the South America and North America market. And typically, some customers are there who will not buy from India and they prefer to buy from their own allies for example, the NATO forces. So Nato allies or some other market that we are looking at from U.S.
So given these are the kind of things. So again, I will not put a figure on this because, again, this will be too premature. And at this point in time, it’s actually not very, very clear. The numbers are very large, but I think as we go into FY next year and mid next year, we should be able to give a good color to the FY ’27 figures.
Analyst
And lastly, any guidance on FY ’26 because you said your order book is getting shifted and — but you’re still hopeful. But guidance-wise, do you think you’ll meet the 50% CAGR expectation for FY ’26?
Ashok Atluri
Yes. So FY ’26, if there is any shortage, we — given the current situation, we think there will be some shortage. We are very sure that that will be filled up in FY ’27.
Analyst
So you are saying it will just movement to FY ’27, but your overall guidance will remain the same.
Ashok Atluri
Absolutely. And again, probably I used this figure, it’s going to be average CAGR of 50%. I’d be still stick by that, stand by that estimate.
Operator
Our next question is coming in from Neil Mehta from ICICI Securities.
Analyst
Am I audible?
Operator
Yes.
Analyst
Very hearty congratulations on a good quarter. Just wanted to ask you a few questions. So our revenue guidance was INR1,400 crores. With these acquisitions, is it still staying at INR1,400 crores? Or are we revising it upwards? I understand that the order book has come as delayed. So it might be a spillover effect of ’26, ’27. But for ’26, are we still on INR1,400 crores?
Ashok Atluri
No. We will be revising that, Neil, as we speak. We — as the orders come in during the Q4 and Q1, we will get a very clear picture. And I think by end of Q1, we’ll be able to do it. But again, if there is any shortfall, we are reasonably sure that FY ’27 and ’28 will more than make up the shortfall, and we still stand by the average CAGR of 50% over the next 3 years.
Analyst
And sir, the new acquisition that we have had in the new simulation area, sir how many patents do they have already?
Ashok Atluri
So they don’t have any — they have applied for the patents. I think they applied for a few patents. The patents are yet to be granted. So that’s the profile. Again, we expect — again, they have generated extraordinary amount of IP, but they have not been very aggressive in asserting that IP. But as we speak, they have started the process. And I think at least 10 patents will definitely be coming out, if not more than that.
Analyst
Okay. And sir, the new acquisitions that you’ve had, what would their book tendering number come up to?
Ashok Atluri
So I would say, I think for the — the new 2 companies, they are just starting — they have just developed a deep tech, but they haven’t sold much. But in the case of ARI, I think at least INR100 crores will be the addition that we will have without the naval simulators coming into place. Once naval simulators start coming into place, that will really, really, I think, double, triple or something like it. Again, I personally feel that, again, one of the thing is that in India, we are so obsessed with the 2 borders.
On the east side, we have a friendly neighbor, on the west side, we have a large friendly neighbor. So we are just obsessed on those 2 borders. Just imagine, turn the map upside down. You see the whole Indian notion completely open and India standing there is a small triangle there. So this is what is opening up for Indian Ocean is going to be the future of all our issues and conflicts and dominance that are required.
If we are able to establish ourself in Indian ocean, then we are through to the world power. And how — for that, we require tremendous amount of training on the latest technologies. And this is exactly what ARI’s collaboration is bringing. And our collaboration is getting the weapons onto the ships and bringing the absolutely latest naval training systems. So I think the INR100 crores that they are adding is not the thing, but the few hundreds of crores in the collaboration will get will be the key in getting to the next year.
Analyst
Okay. And if I may just scope in the last one. If we are going under acquisitions, I understand it will take time to ramp them up. For at least the next 1 quarter or the next 2 quarters, a hypothetical guestimate on EBITDA margins, somewhere between 40 to 50 we were standing at? Where would these acquisitions take us to?
Ashok Atluri
Acquisition, at the EBITDA margin, I think if — we should be able to maintain at 35%. That’s our target. So 35% EBITDA and 25% PAT is something that we feel that we should maintain. If we are an extreme IP value-add company. So if we fall below that, I mean that I think we are doing something wrong. So we will — we are very conscious about that. And PAT again, 25%,EBITDA, 35% is our target.
Operator
We’ll have a next question coming in from Abhishek Shah from AMBIT.
Analyst
So just 1 thing. For the last year or the last few quarters, tank simulators was also a pretty significant part, both tank and battle field training simulation was a pretty significant part of our revenue. And we’ve not spoken much about that also the first 3 quarters of the year, order flow has been also quite weak as we discussed on the call. So anything from the Indian government in terms of this segment? Like is it saturated? What are we thinking about that part of our business going forward?
Ashok Atluri
Okay, first 3 orders — again, Abhishek, we were — in fact, we have been telling that the orders typically come towards the fourth quarter and some — and we have been guiding that it will start towards the end of the third quarter and come in the fourth quarter. And we were conscious that this — the order flow may not happen in the first few quarters. So that is about. Even though our team was saying that orders may come through, but we are conscious about that.
And with respect to tank simulators and simulators, there is a lot of demand at this point in time, and we are — some of the orders that we are talking in the order book position include the tank simulator. Now battlefield simulator would, I don’t know what that means. But we have combat training centers, that’s the complete training by on the battles. So those simulators have a very huge demand, and they are a complex combination of all the simulators.
So that is actually very few companies in the world can do that. In fact, I don’t think of any company that can do in the world, kind of all the equipment simulators put together working in to trying to simulate the war is something that then can do very well, and I don’t know of any other company that can do it. So yes, these are the 2 very big opportunities, and we expect this to come. Again, one of these will actually blow our minds away and they would be an absolute Blackstone first event. So we hope it may happen in FY ’27, if not in FY ’26. That would be a very, very large order when and if it happens.
Analyst
Sir, any impact of the elections in terms of the order flow that has — do you think that has had any impact?
Ashok Atluri
I think that has had an impact, Abhishek. Even though I would like to say that there was earned an impact, but we saw that order flow slowdown because of the — government was working at a little slower pace than they would have worked. But I think those issues are getting resolved as we speak. They are catching up even though we would love to then do it at a faster pace because remember that government placing a few orders can really rejuvenate the whole capital market for defense. And this is the cheapest kind of fund the U.S. or Indian government can get for the defense market. So I wish they get the message and they really, really start giving the orders and rejuvenate the different sector very soon.
Operator
The next question is coming in from Asutosh Garud from Ambit Wealth.
Analyst
Am I audible?
Operator
Yes, we can hear you.
Analyst
So just wanted to understand as far as that’s why this is — the revenue was concerned. So we start.
Operator
Mr. Garud, sorry to interrupt. We are not able to hear you clearly.
Analyst
Am I audible now?
Ashok Atluri
There is an echo.
Analyst
Is it better?
Operator
Yes.
Analyst
What I was asking that at the start of FY ’25, we had an order of around INR1,400 crores, and we are now about to deliver the INR900 crores of. Now entering at end of FY ’25, start of FY ’26 having lesser order. So would it fair to say that the growth as far as FY ’26 is concerned, this market could very well be established and the 15% growth rate that you would be fairly back ended as far as?
Ashok Atluri
I think till we get the again, I think we feel that there should be growth. It may not be flattish, but again, what I have been saying from the beginning that whatever is the deficit in FY ’25 — FY ’26, we will make it in FY ’27, ’28 to more than make it. And we still stand by the statement by the statement that we made that a CAGR average CAGR of 50% will be achieved. And I understand your concern that our order book is less than the order book, which was in end of FY ’24. So we need to — we are concerned about that. But the fact is that the orders have been a little slow in coming.
But again, we see that government is moving very fast and order position will become a little better by end of Q1. And we will keep you updated about it. But overall, we have been never more optimistic about the Indian defense industry defense, placing orders on new defense industry. They are acting very fast. There creating their budgets which are required for them, and they want to buy from Indian players, notwithstanding the fear that President Trump is pushing Prime Minister Modi. Prime Minister Modi is not a guide to be pushed around. We will definitely do — he may act with all the decency and diplomacy that’s required, but he will completely act in the interest of the country. I don’t know if any other leader would do that. But — so we think that the orders will come to Indian companies and in large numbers as we speak.
Operator
We’ll have our next question from Mr. Mann for BMS.
Analyst
Can you hear me?
Operator
Yes, we can hear you.
Analyst
Okay, great. Sir, my first question is on, can you please update us on the Goa facility? Last quarter, you said that we were at the blueprint stage now where are we?
Ashok Atluri
So we were — we are waiting from the permission from the Government of Goa. And we were supposed to start the construction as we speak by February 15th, but I think there is some delay in giving the permissions. But the moment the permission comes, we have the blueprint, everything ready, we’ll start the construction. We hope to operationalize it probably by the — by — before the end of this year — this calendar year.
Analyst
Okay, got it. the next question would be that last call, you had said that we would — we might have around INR1,100 crores to INR1,300 crores kind of an order, but you are now saying that the pipeline is of INR800 crores.
Ashok Atluri
That’s only for domestic orders, yes.
Analyst
Okay. So the earlier when you had mentioned INR1,200 crores to INR1,300 crore, that was including international?
Ashok Atluri
Yes, I’m assuming that I meant the total order book would be about inflow would be over INR1,200 crores. So yes, I had assumed that there will be — it included exports also, yes.
Analyst
Okay, got it. Got it. Then sir, 2 more questions. One would be, can you please also give us the margin profile for Vector? I know it’s a very small as of now, but still some margin? Or are we like a loss in that company?
Ashok Atluri
No, no, no, no. So the thing is, listen, this is at R&D position now. I think we will start the sales starting next year. I think in 6 months or so, we should start getting the sales. The margin profile in no case can be less than 25% PAT. I think the amount of value they will be bringing the amount of uniqueness that they are bringing to the products and the amount of power their per rupee that they will be giving to the customer will be extraordinary that if they were to buy even at current market prices, the same thing, the margin profile will be very, very good.
Again, all companies that bring — add IP, they’re not just as a buying and selling that create deep IP, they can demand and they do get margins the way then is getting. So I think that will be a good margin profile. If they definitely not dilute our margin profile, if they fail to improve the margin profile, I would be very surprised.
Analyst
Okay, got it. Sir, I asked because in the press release, I can read that it did around INR1 crore something of turnover in ’24, which is why I just asked.
Ashok Atluri
I mean this is best experimental product that they sold to somebody. So it’s not — it’s actually it could have been given away something like that. To the actual commercialization of the products will happen in the next year.
Analyst
Okay, got it.
Ashok Atluri
It will be very large. I think the orders will increase by FY ’27 and ’28, they’re going to be a very, very large business for us, yes.
Analyst
Got it. So just a follow-up question. Sir, even as you said that we don’t look for anything which is below 25%. But one of the participants asked about ARI. And Afzal sir said that they are doing PAT of 13%, 14%. Then how do we look at that?
Ashok Atluri
Okay. First of all, what I’m — we don’t acquire companies based on PAT profile. We invest in companies based on their uniqueness and the value they bring to the customer. That means that they should be unique within the potential to become a global leader. So one uniqueness and deep technology is available, the margin profile automatically has to be very good because it’s not a commodity product. It is a deeply — deep IP research product, that means the profile will be good.
So what — that is right, but the 25% will come automatically, if these things are fulfilled. So at present, the profile is at 13% or so, but we — when we mix our simulator — our weapon simulator with the commercial simulator, marine simulator, what I said was that the profile will improve to at least 25%. So when we start going to naval simulators, I think the profile will be much, much better than what is there in the commercial marine segment.
Analyst
Okay. Understood. And sir, very last question would be that. Sir, even as we are now going into drones that you said. So would you — who would be your competitors in the listed space, like Optimus could be one or something because they are also doing. So what do you think and how would you compare yourself with someone who’s listed?
Ashok Atluri
I will not compare myself with anybody who’s listed. We want to create a market in which we want to absolutely help Indian government become unbeatable, the Indian Armed Forces become unbeatable. So for example, that the counter-rotary technology that is there, it is 30% more efficient. It’s very responsive. So what it can deliver is something unfathomable. Can we create some drones underground, underwater, can we create robots, so all the multiple applications as we speak.
And again, we will help — we — this is the truth. One is the drones that we may create ourselves, which will not be done by this company. This company, the dedicated ecosystem supporter, ecosystem supplier, the engines, the counter-rotary technology, etc. So they will be doing that, and they will be absolutely — I think they will be number 1 in the world without exception. So we will be trying to look at some companies that can use these technologies and other technologies to create the drone. So we are not in a drone. What I’m saying is we are on the way to become probably on the way to become a drone company sometime in the future.
Operator
We will now take the last question for today from Mr. Abhay Jain from Hem Securities.
Analyst
Yes. Am I audible?
Operator
Yes, we can hear you.
Analyst
Ashok ji, we have been really optimistic about Zen, and that is partly because your optimism about the market. So considering that there have been really bigger statements by Honorable Mr. Rajnath Singh about calling 2025 as a year of reforms. And we have been hearing good things about defense acquisition council as well DSE as well. But that is not getting realized into orders or maybe — and this is not about Zen, this is what all other companies as well. There has been a slowdown. So is the opportunity real or how big is it for Zen for the next 3- to 5-year horizon, even if it is getting shifted maybe from 1 quarter to the other, it’s okay, we understand that it might be due to elections and all, but is the opportunity really that big? And how much are we trying to achieve out of the total addressable market present for anti-drone simulators, both of these businesses combined as on today?
And sorry, just 1 last line that when he talks about a year of defense, I mean like a year of reform for defense, he is also indicating about technologically advanced combat ready force. So they are focusing a lot of technology. So I’m pretty sure we are — we must be one of the front runners in getting a pie out of that. Is our understanding correct? And what are your comments on that?
Ashok Atluri
So I think you are very much on track, Abhaya. The fact is the market is really, really big. And I really don’t want to tell because that will sound obscene in this forum. But what we have seen is in the last few months, the market size has been increasing both for simulators and for anti-drone systems only for India. And so when we say that we will grow at a CAGR of 50%, it’s actually — we are saying that in a very, very conservative manner. So the — to your question, why is the order slowed? I think their orders have slowed in when you — I think there are some bad players in the industry in the sense that if you supply products that don’t work in the border like Chinese things or there is some kind of reservation.
There is some disappointment by the armed forces that we have let them down. I think that’s the overall feeling, but companies like Zen, there are some very great like Solar. These are the companies that are really, really doing something, which is very, very unique, and we think that we will overcome the negative impression be created by these assemblers and importers.
And we think that when he says the year of reform, this exactly means that we need to read out the bad players so that the good players can flourish and the good players, especially those not the manufacturing — say, we are part of the value chain of some big company, not those guys. We are really talking about the innovators and the IP creators and people who do deep R&D.
That’s what Mr. Rajnath Singh was referring to when he said that this is a year of reform for getting high-tech technology into the armed forces. I think your intuition is absolutely right on that point. Thanks, Abhay. And Swapnil, if you don’t mind, can we extend it by if there is somebody there, it’s 5:37. Let us do to 5:45, if you don’t mind.
Operator
Sure, Ashok sir. [Operator Instructions] We have the next question coming in from Jatin Jadav from Capital.
Analyst
Am I audible?
Operator
Yes, we can hear you.
Analyst
So sir, 2 questions. First on the anti-drone system, which — the, which you were talking about, which has 4 layers. Sir, based on my research, I’ve heard a lot of companies making claims that they have the best, they have the best, x, y, z, you for sure, must have been hearing them as well. So sir, in detail and in a very crisp manner, could you explain what are these 4 layers and how are we so different? Because as far as my resource goes, one of the most effective ways of countering any drone or a so more drone is basically E&P directional weapon. So that’s the first question.
Sir, and second, I want to understand how — since you’ve acquired ARI, I do believe it’s a very good strategy of acquiring someone in the naval simulations here. When will we see some good traction going there? So can we easily manufacture or destroyers simulator an aircraft carrier simulator or the subsystems of an aircraft or a destroyer? Are we targeting those or a whole simulator system for those?
Ashok Atluri
So with respect to the Kavach, again, very frankly, we have been hearing these claims about companies that have been very active in the space of anti-drone systems. And when I meet investors, they keep saying, Ashok, these companies there, they have done to develop this. Again, ’23 about more than a year back, there were 2 tenders floated by the Indian armed forces. Now there were only 2 or 3 companies that came to the trials.
There were 20 companies that came to the pre-bidding meeting, and they are a fixed company that put in the bid, but who came to the trial. The question is we will not discuss what is — what I have, what you have. The final proof of the pudding is, are you actually getting your equipment for trial or not? And then who got qualified? There’s 2 tenders floated by the armed forces in both the tenders, Zen was the resultant single vendor situation. So that is what.
So if there are any other company that were there in ’23 with better technology, they did a fantastic job of hiding the technology from the Indian armed forces, but so we will wait. We will — so I’m not saying that we will — they will definitely — there is no better technology, but the proof is when the tenders are floated, please get your equipment there and show to the Indian Armed Forces. And again, the Indian armed forces are saying they’re IDDM, that they are going to go through your software code, they’re going to see the software.
They’re going to see your over file for the electronic PCBs that you have done. They see how you have designed the thing. Then they’re going to see your solid works, exploded view of the product, the CAD profile, everything. They’re going to deep search. If you’re just going to come and ping for somebody, resell somebody’s product, they’re not going to accept it. And even then, our confidence says even if you’re reselling, you don’t have a better product than us. So this is based on our experience at the ground level.
So that is — having said that, again, in the case of this multiple layer thing, we are aware of the E&P technology. But as we think that when you actually how do we do create an anti-drone system that can effectively destroy only the enemies drones. Now what we are doing is when we’re talking to the 4 layer, the first layer is our software soft skill, where we send the soft skill signals to disable the ground communication and do everything to deny the GPS signal, etc. And only the drones that are able to as that stage come to the next one in which we actually send Kamikaze drones, to go and destroy that.
Now if I had an E&P active at that point in time, it will destroy both my drones and other the competitors’ drones. But I can be smart enough to use the anti-drone technology, the software technology in such a way that my drones have not impacted, but the other drones get completely impacted. So the third stage is, of course, we use missiles. Again, these missiles are something that we’ll buy it from third-party and integrated into it. The fourth are the actual weapons that we are currently — we are in the process of manufacturing, licensing, etc, which can be integrated at the final trade. But in the final stage, we can also integrate existing weapons like L70, therefore, the air defense that we have done already. you can use any existing government that is there. But in case they want something very, very versatile weapon like 12.77 mm can or 20-mm gun or a Gatling gun we can incorporate, we are planning to offer that in, give it as a standard offering choice to the customer.
Analyst
Sir, regarding that, doesn’t it make more sense to add an EMP directional weapon in the second? Because I’m saying because there’s a company in United States who have deployed Leonidas, which essentially is the directed energy weapon, which is I think, sir, deployed in Afghanistan also. They — according to them, their logic is skillets squadron of 6, 7 kilometers of entire air space where no drone — any drone of whatever size might come through. And then the air-in space where we see our drones are also flying or, let’s say, an enemy drones might also there, we can have a more hard kill, let’s say, Gatling guns or came drones. So that’s my — that’s where the question rows up.
Ashok Atluri
The technical person, Karan. Karan, can you just very quickly reply to the technical question yes.
Unidentified Speaker
So very good question, and you have done your homework well. So the first thing is direct energy weapons are very fun to hear and they’re — they need very good tracking. They need good visibility, that is weather conditions, and they can be obscured with smoke and other systems that are deployed in that area to dissipate its direct energy is basically light microwave and such stuff, which can be dissipated very easily. So there are research in progress. Zen is also doing some direct energy experiments in-house along with CHESS. It’s our DRDO’s very own direct energy unit. So yes, as these things become viable, there are very good news clippings that are coming out for their companies. But rail gun is one, direct Energy is one, EMP is one. They are on the horizon, but not yet completely proven. So a mix of all is what Zen is doing. And let’s hope that works out.
Ashok Atluri
I hope you noticed both of them are. So unless they are board, you’re not acquiring those companies. So I think we’ll go with the question and answer. Let us go to 6. Are there still people waiting Swapnil in the queue?
Operator
Yes, Ashok sir. Our next question is coming in from Mr. Arman Nahar from Blue Sky Capital.
Analyst
Yes. Am I audible?
Operator
Yes, we can hear you.
Analyst
Yes. First of all, sir, thanks a lot for again extending. And second thing, with your words because most of the companies, like the way we hear you, that gives us a conviction that you are not just working for the company, but you are working for our country. The way you passionately don’t tell about that we want to give a quality product for Indian armed forces that brings in not just goosebumps, but yes, a few good factors that we are associated with you. And third thing, practically to be around like order book, as we have said that it might get into Q1 or Q2. The company we acquired, is that, that INR800 crore pipeline you are talking about those companies acquired order book is also included in that? And what’s their pipeline?
Ashok Atluri
No. So they are not included in this, Arman. Arman, thank you so much. I really appreciate. We love to have people who love the country as shareholders. So — but we want to make money also for you. But coming back to this, we think there is a order book for them, but it’s very large, it’s probably around INR100 crores or so. So it’s not very large. But again, when we actually add more products, when we add more mix our technology, I think the order book — we will be exposing ourselves to — again, I mean the more — more I dig into it, the whole world is moving towards this blue ocean security, they want more security there.
They are thinking various ways, and we see that in Philippines and all the nasty behavior that’s going on, I think this is really, really becoming a big opportunity, and it was very opportunity that we were able to get this a great company that Shravan had built toward the past 2.5 decades. Yes. I think — but again, the order book is not so significant. It’s only INR100 crores, but we expect to collaborate with them and improve it significantly.
Operator
Our next question is coming in from Mr. Rudresh Kalyani from Colony Private business.
Analyst
Am I audible?
Operator
Yes, we can hear you.
Analyst
Yes. On the one hand, you told that we have increased the manpower. But when we see the panel statement, sequentially, the manpower cost has come down by somewhere around 7.5%. So what’s the reason?
Ashok Atluri
So Rudresh, so you’re right that in the last quarter, it was INR14 crores. And in this quarter, it is around INR12.10 crores. But if you see — in the current quarter, there is a reduction in turnover by almost 70% to 80% compared to Q2. In Q2, our turnover was around INR241 crores. And in this quarter, it is INR141 crore. So against this 70% to 80% reduction in turnover, there are some reduction in the contractual employees to the extent of INR2 crores. Otherwise, our employee cost remains the same only.
Analyst
Okay. And one more thing is our other income has increased by exponentially. So what the reason?
Ashok Atluri
So other income — if you see, we raised INR1,000 crores in the month of August on 22nd August 2024. So there is an interest income at the rate of 7.5% on a quarterly basis. So if you see in Q3, our EBITDA was around 58.68%. This was around — it is around 35%. If we reduce this other income in other income is at INR22 crores, out of which INR19 crores is the interest income. If we deduct this INR19 crore, then also our EBITDA is coming around INR39 crore. So there is a reduction of around 8% in EBITDA. But this 8%, as I explained to you that there is a reduction in the — that there is an increase in expense actually in compared to Q2. If you see our manufacturing cost, employee benefit cost and administrative and other cost was 23% in the last quarter — 15% in last quarter, Q2 and in this quarter, Q3, it is 23%.
So that is a delta of 8%. So that’s why this total EBITDA has come down to 8%. So it is 27%. But again, if we are the other income, it is coming at 35%. So this is — in absolute numbers, overheads are remain the same. But if you calculate the percentage of expense on turnover of INR240 crores, then it is coming 15%. And in Q3, if we consider the same overhead on the basis of percentage of INR141 crores, it is coming at around 23%.
So there is an increase of 8% in the expense. But against this 8% is compensated by the increase in the other income in the form of interest income, but again, what we say is that if we compare, we generally give the guidance for the full year. If we compare the margin for 9 months, then also in 9 months, our turnover was INR637 crores against this, we have achieved EBITDA of around INR252 crore. This is again, 37.94%. And even if we deduct this interest income for this 9 months is INR29 crores. If we deduct this INR29 crores from INR252 crores, then it comes at INR223.72 crores. And if we apply the percentage, INR223.72 crores divided by INR637, then also EBITDA is coming exactly 35%. This is operational EBITDA.
So on a 9-month basis, everything is on track only — on that — and even so Q3, it is only due to the reason that our turnover is the below-average. Again, in Q4, our turnover will increase, our EBITDA will again increase. So overall, we will be — at the end of the year, we will be more than 35% EBITDA and 25% profit after tax.
Analyst
And my last question is we talked about the CR tech. So can that tech be sold as a module for the other prongs to increase their efficiency?
Ashok Atluri
No, no. So that is the only purpose of that. We will be selling it as a — so Vector will be focusing on selling the subunits to support the drone ecosystem in India. So they are completely focused on that. They will not be doing any drones by itself, they’ll be supporting. So drone is another acquisition that we are negotiating with somebody at this point in time, but that’s a different discussion altogether. But this will be the a drone support 1 ecosystem supporter for India, and there will be a lot of exports to both the — most advanced countries in the world from India to those the target countries.
Analyst
Yes. See, you talked about Bhairav Robotics, but you didn’t tell anything about that. So since we are not into manufacturing, what is the use of this?
Ashok Atluri
What is your question? I didn’t understand.
Analyst
No, no, no. I meant that see, the robots are meant for the automation.
Ashok Atluri
Just to Rudresh, I’m giving more time for Q&A. In fact, Bhairav and didn’t want to go talk about product. Otherwise, we would have exhausted the whole hour discussing that. So Bhairav, I will talk about them in the next call — earnings call, definitely. We’ll go deep into it, show what they are doing, okay?
Operator
We’ll take our next question from Mr. Gopalakrishnan Subramanyam from Investments.
Analyst
I hope you are able to hear me.
Ashok Atluri
Yes, Gopal, we can. Please go ahead.
Analyst
Yes. Fantastic. Now sir, 1 thing I see that there is a performance deterioration in the trading 12-month period when I compare it with the 3-year period. In the 3 years, sales growth has been 100%, whereas profit growth was 257%, whereas in the trailing 12-month period, sales growth is 100%, but profit growth is only 92%. That is a profit growth trailing the sales growth percentage. Any specific reason for that?
That is point number one. Point number two is this promoter holding somebody raised that point. Actually, when I observed when compared to March 2023 till date, the promoter holding has come down from 60% to 49%. There is 11% reduction in promoter holding. When I see there is a cash of INR1,000 crores in the book. I’m not able to understand why promoter holding has to go down when there is so much cash in the books?
Ashok Atluri
I’ll answer the promoter question. The cash is in the company, not with the promoter. So that is one thing. The second thing is, again, between, between March ’23 and now, in addition to sale by the promoters, I think we sold about 40 lakh shares in all. The core promoter me and my brothers hold 1% each, other promoters hold 2%. So there was a 4% drop. But the reason why it has dropped by 11% is there was a QIP done for raising INR1,000 crores. So that caused the dilution in the — the overall share capital increase and that caused the dilution to dilution, and that has resulted in the promoter’s equity coming to 49%. The other question is Mr. Afzal will answer.
Afzal Malkani
So Gopal, you are asking about the growth, right? So growth at the beginning of the year in Q1, we gave a guidance of around INR900 crore against the last year FY ’24 turnover of INR430 crores. So we already gave a guidance for a growth of 110% considering that. So I think that it is, I think, a good growth, 110% considering the current environment. And considering total 9 months, we are on track. So we request you to look at a for the whole year turnover. And as we mentioned earlier also, that currently we have achieved INR637 crores is its 9-month first, in H1, it was INR494 crores. In Q3, it was INR141 crores. There is some deferment of shipment in Q4, but that will be made over and we are on track, and we will achieve our guidance of around INR900 crores we gave at the beginning of the year.
Analyst
No, no, no, no. My question was different. I’m talking about sales growth and profit growth. See the sales growth in the 3-year period, 100%, profit growth, 257%. In the trailing 12-month period, the sales growth 100%, but profit growth is 92%. That is the profit growth is trailing the sales growth. You understand my point, I am not talking about your growth and guidance and all that. No, no. I’m only talking about the variance between say the sales growth, it is 100% profit growth has to be more than that, right?
Ashok Atluri
Yes, Gopal, very briefly, this is a result of the product mix. When we have — when we have simulators, we have very good margins actually. And when — but we — in the case of anti-drone systems, we bid very aggressively because we perceive some competition is there, and that’s the entry strategy that we have done. So whenever we have drones as a turnover factor, we — our profit to grow as much as the sales growth. So that is what the difference is.
Analyst
Okay. Okay. No, I have actually some more questions. What I do sense because there is no time, who I should address those questions. So maybe I’ll send a mail, maybe I can get.
Ashok Atluri
Say to see cfo@zentechnologies.com, we will get to our investors at zentechnologies.com, we’ll respond immediately on that.
Analyst
No, because I don’t want to I know the time is limited and you have already extended the time. I thank you very much for that. I was wondering, I was keeping anxiously waiting for my opportunity.
Operator
We will take that as a last question for today. I will now hand it over back to the management for closing remarks. We’ll take the question from Mr. Deepak Sharma, who is an individual investor.
Analyst
Just my 1 question. Despite having a via very good order book of INR900 plus crore in the Q2, we have executed only the 150-something figure. So what is the reason behind what is the gap?
Ashok Atluri
So the thing is that at of the INR900 crores, we have about almost about 300 are these annual maintenance contracts. So this is the September 30 figure you are giving. I’m very sure about that. So September 30. So we have executed — so out of that, if you take the INR300 crore, we have about INR600 crores that we need to execute. So we think that out of that, it will be INR150 crores. And this — in the Q4, we’ll fill up the gap whatever is there to execute the INR900 crore thing. And whatever is remaining will be executed in Q1 and Q2. The whole thing will be executed, yes.
Analyst
So I’m summing up that within next quarters means Q4, Q1 and the Q2 of next year, you will complete this remaining, I think, INR850-something crore order book, right?
Ashok Atluri
No, no, no. out of — if you remove INR300 crores, maybe a little INR250 crore crores to INR300 crores of AMC, INR600 crores is remaining. Out of that EUR150 crores, we have executed you are saying for INR450 crores will be remaining. So that INR450 crores, we will execute in these 3 quarters in addition to the new orders that we are getting.
Operator
Ashok sir, you can continue for the closing remarks.
Ashok Atluri
Yes. So I think there may be still a lot of — by the way, I love interacting with my co-owners of the company. And I think this is a very, very sacred time. I’m sorry if some of you have not been able to answer your question, again, please address them to investors@zentechnologies.com. All will get answered without exception. Our cfo@zentechnologies. com, they were Afzal will be promptly replying to them. And I look forward — I have never been more optimistic about the defense sector as such. I think the next 3 years will blow our minds away, and let us be — let us support the Indian government in achieving their objectives or become absolutely unbeatable in the world. And we thank you again for the fantastic support that you have given to us. I appreciate it. Thank you so much.
Operator
Thank you. On behalf of Zen Technologies Limited, that concludes today’s conference call. Thank you for joining us. And you may click on the Leave icon to exit the meeting. Thank you for your participation.