Data Patterns (India) Limited (DATAPATTNS) Earnings Call Transcript

Good day, and welcome to Data Patterns India Limited Q2 FY '27 earnings conference call hosted by Go India Advisors LLP. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Prayasi Patel from Go India Advisors. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone, and welcome to Data Patterns India Limited earnings call to discuss Q2 FY '27 financial performance. Before we begin, I would like to wish everyone a very happy Diwali. May this festival bring happiness, prosperity and success to all. We have the senior management of the company on the call, Mr. S. Rangarajan, Chairman and Managing Director; and Mr. Venkata Subramanian, Chief Financial Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company may face. May I now request Mr. Rangarajan, sir, to take us through the company business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Prayasi. Good morning, ladies and gentlemen. A very warm welcome to the Q2 FY '27 earnings call of Data Patterns India Limited. I join Prayasi and take this opportunity to wish everyone a very happy Diwali and hope that the festive occasion brings happiness, prosperity, and success to all of you and your families. We sincerely appreciate your continued trust, support, and participation. I hope all of you have had the opportunity to review our earnings presentation and financial results, which have been rolled on the stock exchanges and our company website. As we reflect on the first half of FY '27, we are encouraged by the significant progress made by the company, particularly in the order inflow front and the substantive investments being made in the development of complete products and sensors to address the growing scale of opportunities, fueling our increasing participation in larger and more complex defense programs. At Data Patterns, we have consistently invested in developing indigenous technologies, strengthening our engineering capabilities, and expanding our manufacturing infrastructure. These investments are now creating a strong foundation for the next phase of our growth. We're increasingly seeing customers engage with us for complete systems and integrated solutions rather than individual parts and subsystems, which provides us with opportunities to participate in larger programs and enhance our value creation proposition. Our order inflows during H1 FY '27 have been particularly encouraging. We secured fresh orders worth INR 1,046 crores during the first half, INR 929 crores in Q2 FY '27, compared with INR 167 crores in the corresponding quarter last year. This reflects the growing confidence of customers in our technological capabilities, execution strength, and ability to deliver complex defense electronic solutions. Our order book has also strengthened considerably. As of April 1, 2026, our order book stood at INR 927 crores. As of date, orders on hand are at INR 1,742 crores. In addition, we have successfully concluded negotiations for orders worth INR 956 crores, which are awaiting formal receipt. Including these negotiated orders, our overall order book visibility stands approximately at INR 2,698 crores. Our international order book stood at INR 32 crores as of September 30, 2026, which we believe will grow during this financial year. We continue to engage with international customers and explore opportunities to expand our presence in global markets, leveraging our indigenous technologies and established product capabilities. Looking ahead, we see significant opportunities across key business areas, including radar, electronic warfare, avionics, and other defense electronics programs. We're also witnessing increasing opportunities for larger complete system contracts, which we believe can play an important role in driving our growth substantially over the coming years. On the technology front and product development front, we continue to invest in developing new products and expanding our existing portfolio. During the period, we made progress in the development of drone defense systems, including different kinds of radars, passive RF detection and jamming, maritime and airborne radars for small and large UAVs and helicopters, long-range radars with advanced beamforming, and completing the development of jammer pods, development of next generation COMINT and ELINT and radar warning receivers, among others. We have a large engineering team consisting of more than 1,100 engineers and continuing active recruitment of fresh engineering talent. We've also initiated design and development of advanced optronics for varied applications as well as agile defense microsatellites. These initiatives are aimed at strengthening our technological differentiation, addressing emerging customer requirements, and positioning the company to participate in a wider range of defense programs. We believe that continuous investment in indigenous product development will remain an important driver for our long-term growth. Another important strategic development during the quarter was the acquisition of 100% stake in ST Advanced Composites Private Limited, which became a wholly-owned subsidiary effective September 17, 2026. This acquisition strengthens our advanced composite design manufacturing capabilities, enhances our ability to offer integrated solutions and create opportunities across radars and other defense programs. Coming to financial performance, revenue from operations stood at INR 133.3 crores in Q2 FY '27, registering a sequential growth of 14.8% over INR 116 crores in Q1 FY '27. For H1 FY '27, revenue from operations stood at INR 249.3 crores. Revenue from operations for Q2 FY '27 was lower on a year-on-year basis, primarily following the exceptionally strong execution achieved in Q2 FY '26, which had resulted in a significantly higher revenue base. During the current quarter, several program milestones are progressing, with deliveries expected to pick up in the second half of FY '27. Accordingly, we expect H2 FY '27 to be stronger than H1 FY '27, supported by a healthy order book and execution momentum. Looking ahead, we remain confident about our growth trajectory and maintaining our FY '27 guidance of 20% to 25% revenue growth and EBITDA margins in the range of 35% to 40%. Our confidence is supported by strong order inflows during the first half, substantial orders in hand, negotiated orders awaiting formal receipt, and growing opportunity across our key business segments. As we move to H2 FY '27, we remain focused on accelerating execution, driving innovation, and leveraging our technology capabilities to expand our product portfolio to capitalize on the growing opportunities in Indian defense, global defense aerospace sectors, while creating sustainable long-term value for all our stakeholders. With that, I would like to now hand over the floor to our CFO, Mr. Venkata Subramanian, to take you through the financial performance in greater detail.

Thank you, sir. Good morning, ladies and gentlemen, and thank you all for joining us today. Let me take you through the financial highlights for the second quarter and first half of FY '27. Revenue from operations for Q2 FY '27 stood at INR 133 crores, compared to INR 116 crores in Q1 FY '27. For H1 FY '27, the revenue stood at INR 249 crores. Profit before tax for Q2 FY '27 stood at INR 30 crores, while profit after tax stood at INR 22 crores. For H1 FY '27, PBT stood at INR 59 crores and PAT stood at INR 44 crores. On a year-on-year basis, the revenue and profitability were lower compared to Q2 FY '26, primarily reflecting the higher execution base in the corresponding quarter last year. However, our overall performance remained broadly in line with the preceding quarter. The company continues to maintain a strong balance sheet with cash and bank balances and investments of more than INR 500 crores as on September 30, 2026, providing us with the financial flexibility to support our growth initiatives and strategic investments. Our closing order book as of September 30, 2026, stood at INR 2,698 crores, including orders negotiated, providing a healthy visibility for execution over the coming period. Our international order book stood at INR 32 crores, and we expect it to grow in the current financial year. We remain focused on disciplined execution, maintaining operational efficiencies, and ensuring that our investments in technology and engineering capabilities support sustainable growth and profitability. With this, I would like to open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Abhijeet Singh from Systematix.

Sir, first question is on the orders that we have negotiated and we are awaiting final close for that. So what is the outlook on that? It seems to be that those are getting delayed to an extent, because even the last quarter, we were talking about those orders. Now in this quarter, we have about INR 1,000 crores under negotiation. So what is the reason for the delay? And when can we expect those INR 1,000 crores of orders to flow in the order book?

Whatever we told you last call, number of orders that have already been realized, and that is added to the orders on hand situation. As of April 1, you see it's INR 900-odd crores. It's about INR 1,700-odd crores now. So the number of orders have been received. Some more orders have been negotiated, and that is what we're talking about, nearly INR 1,000 crores of orders to be completed. I believe that in the next maybe a month or 2, the contract should happen from what my sales team is telling me. These are things which is beyond our control. The processing of the order takes some time. Maybe it has to go to some reference and then come back. But the orders have been negotiated and these are approved programs. So we expect probably another month or 2, most of the orders should get certified.

Sir, is there a risk of these orders getting canceled as well, some part of it or no?

No. There is no risk of orders getting canceled. These are Central Government orders. Tenders. And tenders have been opened, negotiated and funded programs, so there won't be any cancellation of the tenders.

The delay is on account of internal processes. Because it has to go through some different approval processes, and that's the reason for the delay.

Right, sir. So then, in 1H, our revenue growth run rate has been slower than what we have guided for of 20% to 25% on an annual basis. I think we have -- revenue has fallen about 20% on a Y-o-Y basis. So in H2, of course, our revenue execution run rate has shot up substantially. So are we in a position to maintain our guidance for the full year? Or there's a risk of execution delaying beyond the H2 into the next year maybe?

Yes. We've never given revenue growth quarter-to-quarter. We've never done it ever since we went public. This is a normal business. It tends to become a Q4 heavy. This is how it has always been. And we've been a bit successful in navigating some of the contracts to be executed because we had the orders in hand, and one didn't get executed. We could execute the others in maintaining a different kind of a profile to see that quarter-to-quarter profitability is maintained. But this is a yearly business. It's a program-based, project-based business. So -- and it's not a monthly revenue growth. This is what we are aiming for in terms of interactive contracts we get. And we had a 5-year contract, then we can do quarter-to-quarter sales. But that is what we're aiming for in terms of building products for long-term contracts visibility. But as it is our existing business is going to be Q4 heavy. Last year it happened because we executed a very large contract as a program. So it's 2 years back, we got the order 3 years back. We executed it in second quarter. So the bump was there, the quarter 2. But I see this is a normal way our business will happen. It is not a quarter-to-quarter kind of a sale process. That's the first question you asked. Second is, we've already mentioned that we have orders in hand. Though the execution didn't take place in Q1 and Q2, we've already started producing these products for Q3 and Q4. So we expect that in the next 5 months we will accelerate the production and see that the programs are delivered. As of now, I don't see any change in our guidance, what we've given last time and also this time.

And sir last question on the hawk radar that, we were mentioning last quarter that there was a software integration that you were evaluating. The hardware part you completed for MiG and Sukhoi. So what is the update on that? Is there a decision taken on the software integration as to where you need to procure it from or still you're evaluating the choices that you have?

There is still some delays in that of trying to integrate software into our hawk, whatever we did, the development of the hardware. The hardware is ready. It's still not processed the progressed on the software. The other point is, the second area is what we talked about is the pod, the Sukhoi-30 pods, self-protection jammer. That is going well. There are no dependencies on any other organization there. The complete software and hardware and mechanicals are done, designed in-house. So that is going well. Air Force is quite happy with the progress. And I think that we should be able to fly it in the next few months to see that operational readiness is also shown. So that is happening. Similarly, we intend to develop on communications. That's also going on very well. Since we have platform for all army, navy, air force. That's also going well. We expect to integrate with the other platform radios in the next coming months to see that compatibility is established. So a lot of work has happened, but that is going a bit slow than what we expected. The rest are happening the way we planned.

Right. Sir, this communication product, what is that? Sorry, I didn't get it. That you will integrate on...

It's called software-defined radios. These are radios or communication equipment handled by the army in the ground, and the airborne systems in helicopters and aircraft. So there is a naval systems also, ship and airborne systems. So we've been designing our radios.

[indiscernible]

No. This will be directly to MoD. See, so what we're trying to do now is, till now we've been trying to build parts and subsystems with DRDO and then do technology transfer to Bharat Electronics or any other organization, and then we give subcontractors then. That continues to happen. But to scale the organization, we decided a few years back that we'll do complete systems. And these are initiatives taken by the company to build those complete systems. So directly we'll address MoD requirements. Recently, MoD requirements are largely delivered by DPSUs. And now large companies, multinationals are quoting here and tying up with the Indian companies to quote against the large requirements of MoD. We are doing an alternative thing. And we're trying to develop these in-house in India with indigenous technology and compete with all of them. So that is where the large resources are being spent, in terms of money and manpower, building those technologies and products to address the large opportunities. So that is what I think will scale the company to the next level. The large kind of scaling can happen in the next couple of few years to build complete products. And that's what the company is aiming to do.

Great. And do we have...

Sorry to interrupt you, Mr. Singh. Can you please rejoin for our follow-up question? There's a long queue.

Sure.

The next question is from the line of Amit Dixit from Goldman Sachs.

My first question is essentially on a couple of areas that we were actually consciously, I think, not concentrating on earlier, such as space, which has gathered momentum in the industry. So just wanted to get your thoughts, whether we are reconsidering the space segment and the counter-drone segment. So that is the first question.

I think in the opening remarks itself I stated that we've invested substantially on the counter-drone segment. We built various kinds of radars for active detection of drones. Very, very small drones for 0.001 square meter RCS, as well as larger drones. So we're successfully building it. I think the next 1 to 2 months the product should be ready for demonstration and participation in tenders or with other OEMs. Second is the passive detection of RF detectors. Since we have a complete range of products for EW, signal COMINT. We are really addressing -- we are remapping these products for counter-drone applications. And then the third is active jamming. So all of them, we're in various stages of completion and demonstration. This we're already doing. We also suggested that the last few years we didn't go ahead for building the complete satellite, so we've a competency map. We have designed a satellite, and the satellite is going to be in there 4 years in space. Fully designed in-house. And with the normal correction, all of them from the ground. And including down station, everything has been designed by us. We refrained from going into it because there are a lot of startups who are actually building satellites, a number of contracts are going to almost no value. We didn't want to take it up at that point in time, because it will have a very clear dip in our revenue and bottom line. But today we've taken a decision to go ahead and start building our own satellites, systems and satellites for various applications. Accordingly, we have started staffing ourselves, from ex-ISRO scientists, senior scientists to join us, to build both the satellites and all the payloads in-house. Complete design will be done by us, and we are actually looking at building the satellite and launching it, then go to market. So that decision has been taken internally. The details are being worked out. Initial staffing is happening. Initial development will happen. And once it happens, maybe 6 to 8 months from now, maybe we'll be able to talk more about it. Today, a decision internally is taken to go ahead with the development. At the present moment, I can only comment on that. Let's see how the next 6 to 8 months goes, and then we can be able to give you more clear directives on those areas, what we've done.

That's quite helpful. The second question is essentially on the overall ordering in the defense ecosystem. What we have seen that you have received, of course, some good orders in Q2. But a lot of other players, the ordering has kind of dried up. Just wanted to understand from your perspective -- again, I'm not talking from quarter-to-quarter, but we have seen that the first half has been quite, I would say, low in terms of the pace of ordering. Some of the orders are delayed, et cetera. So just wanted to get your thought on how you see the overall ecosystem. Where are the constraints, if any?

I don't see ecosystem constraints. I think the budget allocations are becoming bigger. The Acceptance of Necessity, AoNs are getting released every 2 months, which is going to be much higher than what was the previous year's numbers. The opportunities are growing. I won't be able to comment on the ordering portion per se because that depends from tender to tender and contract to contract, depending on the need of the customer and what it has to go through. But the overall order book visibility is much higher, and that is what exciting us to build larger, to get the products developed to address the market, to increase our TAM, to substantially scale the company's revenue. That's what we are trying to do. But one difference is that we are not relying on foreign technology for doing this. We're also trying to differentiate the products as a company integrated systems with respect to competition, how they address the market. We want to see that differentiated product offerings gives you a slightly more value-added approach to give you a better revenue and a bottom-line business. This is what we're doing, and we're trying to develop this much in advance so that we are ready when the tender comes up. So that is what we're doing. I don't see any reduction in the opportunities or this ordering. Of course, we have had delays in our orders, but that is very specific to our contracts. I don't think there is a general kind of anything that says that it is going to be a delay for everybody. I don't think so. Probably from whatever little I know, I don't think that's a right statement. Maybe I don't know all the things which other people are talking to you.

Got it, sir. The third question is essentially on the exports. So after PAR, are we -- what are some of the programs or systems that we are targeting for the export markets? I mean, to the extent you can disclose, if possibly you can broadly highlight the programs or whether it's EW system, radar we are engaged in as far as the export market is concerned.

We are experiencing some more contracts in the PAR acquisition for radar. We have quoted for some more, I think some more business to happen. We also have some orders for radar front ends from Europe. We'll start executing probably by December to March, we'll execute some of those contracts. We're expecting some different kind of radar -- modern radar components and subsystems, large subsystems from Europe. Enquiries are coming. We expect that we should be able to address in the next 1 year. Deliver it, which can become the basis for our volume business thereafter. These are initially approved prototypes and qualification units. Based on numbers should happen in the coming years. That is one. We are also co-investing in some radars with a British company. We see that we can look at worldwide markets. We're also trying to make offers for civil aviation avionics and sensors. If that happens, I think there can be a large revenue post-qualification. We're trying to grow a bit to see what is it we can do. And we're trying to also put in an active export marketing team to take what we have. In the present geopolitical environment, we believe that our offers on time lines which we can deliver contracts, and as well as the world-class technology we're building, can give us a competitive edge over others. And especially there's a need in the existing political scenario, geopolitical system. I think there's a need for people like us to give some very serious products offerings for other countries' defense needs. I can't talk about more of what we do exactly now. 30 to 55, we could probably talk about later, but the initiative is on. We're going to put a lot of initiatives in the coming years to see that we get large export revenue. That also is on.

The next question is from the line of Dipen Vakil from PhillipCapital.

Congratulations on great order inflow during the quarter. Also wish you a very happy Diwali to you and your team. So my first question is to you, basically this quarter when we see at your order inflow break up, you have received some very strong production orders. So can you help us understand what are the difference between like the execution schedule between production orders and developmental orders? So that would be my first question.

I actually don't have an exact split of production and development orders. But maybe I can send the data to Prayasi in the coming week, and maybe she can address this. I really don't have it off the cuff on exactly what is the production and this development order differentiation. What I can tell you is -- I can tell you one thing is what are the products we have developed for DRDO, they've been successfully executed. These are all some of the large program requirements were delivered, very large systems. We expect that in the coming 1 to 1.5 years' time, they should become a production order, because the size of business is very large. Hopefully, that will take shape, and then do this. So number of products we have developed have been delivered, and we expect repeat business out of that. So those are the first things. And second is also with the new development programs like the pod and other things we are getting involved in, which is an obligatory development without contracts and self-investment. I think that is also going in a good feasible way, where there is a lot of differentiation between us and competition. So we should be able to see that those orders also get into production mode, in the fight to succeed visibility and production line. So I'm trying to focus on such programs while keeping the company revenue and the bottom-line business we have promised the market. Trying to see that is addressed with smaller orders and some production orders is happening. And the large production orders and large scale value is what will bring us scale and take us to a large corporate. So we are working on such products and programs where there are key differentiator, key openings in the market. And the need is very high. So we're trying to address and build our own products in those areas. It will take time to get a production order, but that will be the main scale of building a larger organization as we go along. So we're trying to address that also.

Got it, sir. So when you receive a production order, what is the usual execution within which you have to deliver the product?

See, that varies again. If it's a program order, for example, if Bharat Electronics gets an order, we have to deliver in 2 years. Then back-to-back, our delivery also becomes back-to-back every quarter. After the first 6 months, we start delivering quarterly or monthly, depending to meet their time lines. So these are project and program orders. Then there are orders which is, let's say, for HAL, we get a contract, and they have a 8-year window of delivery. They will want to have a 6 or 7-year window on year-on-year delivery commitment from us, so they can build onto the aircraft. So that varies on the end application. It's best that we have a combination of both to give us what we want as we go along. But we should have a 3 to 5-year order book in this business, which is tender-based. To see that stability and scalability is possible and sustained scalability is possible with visibility of future. So we're trying to address how to bring in the scale and what kind of products and technology we can have, which can be competitively placed in the market to get us the scale. That's what we're working on. But it depends on your question -- to answer your question, it depends on the....

Kind of contract contracts we get. Got it.

We are addressing -- both the markets we are addressing.

Got it. So the second question is on your order inflow and the negotiated contract. So during previous quarter also, we were discussing about very strong order pipeline, which included some orders from HAL, single vendor contract orders from HAL, as well as BrahMos seeker order. So any update on those orders, whether they have gotten into negotiation stage or whether they're included in the INR 900 crores of negotiated orders? Can you help us understand that?

No. They're not part of the negotiated contracts. That continues to be part of pipeline. We started negotiation with HAL on some of large contracts. The other ones is under trial. So once we finish the trial, maybe the contracts for vehicles should happen. But these are part of the pipeline, which is not mentioned in our negotiated values. That is negotiated is tender published and we are at one, the negotiations being completed. The pipeline which you're talking about, there are further INR 800 to INR 2,000 crores. We expect to get that before end of March, is what we are expecting. So that order book should be there for the subsequent year, is what we're thinking. Those things cannot be accelerated. Part of it can be accelerated depending on when the order comes and the need of the customer, we can ship part of the order. We are getting ourselves prepared for all of this and buying material components, keeping it in stock in case we need a faster turnaround. Once the contract comes, we are in a position to address the market. So we are actually planning ahead of materials and inventories. But the contract is still, we still not got the contracts online. Those are all part of pipeline at the present moment.

Got it, sir. And very encouraging new product portfolio you have showcased. So all the best for development of those and all the best for second half, sir.

The next question is from the line of CA Garvit Goyal from Serene Alpha.

Am I audible?

Yes.

Yes.

Sir, first question is on Tejas Mk2 program, which is getting delayed by 1 year due to technical issues related to undercarriage. So is it going to any way impact our growth in this financial year and as well as the next financial year?

These anti-drone systems were never part of our projections for this financial year. These are all being built for future programs because a drone is an essential part of warfare today, and we need to have products in that category to address the large market opportunities which is coming up. But these are all early stage markets on drone detection. A number of trials are happening across India and across the world, and large businesses have not been still, they are all experimenting in what is the right kind of anti-drone systems. That is what is happening, and that's what's happening in India also. So we are trying to put in together our -- since we have a competency in radars and electronic warfare, we are trying to put our competencies and build a product which suits the customer requirements. I think they're already there. So within next few months, we should start getting some contracts in this. We're also winning bids against open tenders and MoD. We're also looking at how to export these contracts once it is completely tried and tested here. We can also export it to other businesses and markets outside India. But they are not part of our projections, negotiations nor pipelines. These are all future, which can bring in separate revenue outside of what we have actually projected to the market.

No. Sir, actually, I was asking about a particular program of HAL, which that is Tejas Mk2.