Centum Electronics Limited (517544) Earnings Call Transcript
August 6, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Centum Electronics Q1 FY '26 Earnings Conference Call hosted by ICICI Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Mohit Lohia. ] Thank you, and over to you, sir.
Yes. Hi. Thanks, and good afternoon, everyone. Thank you for joining us today for the Quarter 1 FY '26 Call of Centum Electronics Limited. First of all, I would like to thank management for providing us the opportunity to hold the call. From the management side, we have Mr. Nikhil, Joint Managing Director; Mr. K.S. Desikan, Chief Financial Officer; Mr. Sundararajan Parthasarathy, Chief Financial Officer Designate. So without further delay, I would now hand over the call to management for the opening remarks. Thank you, and over to you, sir.
Thank you, Mr. Mohit, and good afternoon, everyone. Welcome to our earnings call to discuss the performance of first quarter of financial year 2026. Let me first mention a special thanks to our host of today's call, ICICI Securities. I'm joined today with our CFO, Mr. Desikan; and our CFO Designate, Mr. Sundararajan Parthasarathy as well. Let me first start by briefing you on the key performance highlights for the quarter and review. After which our CFO Designate, Mr. Sundararajan, will take you through the financial highlights. And for the Q&A, I'll take the questions along with our CFO, Mr. Desikan as well.
Sorry to interrupt, Mr. Nikhil, can you speak a little louder?
Sure. Yes. In the first quarter under review, we delivered a strong performance on both revenue and EBITDA margins with consolidated revenue from operations growing by 11.4% year-on-year. This was driven by strong growth at the stand-alone level of 35% year-on-year, primarily driven by the high-margin build-to-specification business, higher deliveries for domestic defense and space customers. There was, however degrowth.
Ladies and gentlemen, the line for the management has got disconnected. Please stay connected. Meanwhile, I will connect them back. [Technical Difficulty]
Great. Thank you. So apologies for that. I think we got disconnected. We start again with my comments for the first quarter. So in the first quarter under review, we delivered a strong performance on both revenue and EBITDA margins with consolidated revenue from operations growing by 11.4% year-on-year. This was driven by strong growth at the stand-alone level of 35% year-on-year growth, primarily driven by the high-margin build-to-spec business. And these deliveries are for our domestic defense and space customers. There was, however, degrowth in our international subsidiaries. The demand there is yet to pick up in the ER&D business because of delays in customer decisions on new projects due to uncertain macro factors in Europe. Despite these headwinds, the pipeline of opportunities with key European defense and aerospace customers is improving, and we expect a better performance in the second half of this financial year, of course, contingent on the conversion of these identified opportunities. In addition, we are making progress on our evaluation of strategic actions to [ arrest ] losses and reposition the business, especially with regard to our Canadian subsidiary. On the order book front, our order book position grew to INR 1,769 crores as of 30th June 2025. driven by new EMS customers entering into the serial production phase after successful NPI qualification. Along with this, we have also received new development orders from DRDO for critical programs like the Virupaksha Radar, which we expect will unlock significant long-term pipeline linked to various airborne platform programs. Now we would request Mr. Sundararajan to give you more details on the financial performance.
Thank you, Nikhil, and a very warm welcome to all of you. Let me brief you on the financial highlights for the first quarter of financial year ending 2026. At a stand-alone level, the revenue from operations was about INR 180 crores. This increased by 35% year-on-year. The EBITDA for the quarter was around INR 27 crores, which also grew by more than 100% year-on-year, with EBITDA margins reported at 14.92%. The net profit for the quarter was around INR 16.5 crores, which surged by more than [indiscernible] year-on-year. At a consolidated level, revenue from operations for the quarter was reported at INR 273 crores, which grew by 11% year-on-year. The EBITDA for the quarter was about INR 23 crores, a growth of 47% year-on-year and the EBITDA margin reported at 3.38%. The net profit for the quarter was around [indiscernible] with PAT margins reported at 1.65%. With that, we can open the floor for our Q&A sessions. Thank you so much.
[Operator Instructions] The first question is from the line of Harsh from Perpetual Capital Advisors.
Hello. Am I audible?
Yes, sir.
So my first question was on the ER&D business. The ER&D revenues were under pressure. So can you elaborate on the pathway to recovery for this business? And what is the expected timeline for this recovery? And also with Europe actively increasing defense spending, do you see meaningful update in this ER&D opportunity? And are you seeing this translate into inquiries or order wins also?
Great. Thank you, Harsh, for the question. So yes, with regards to the ER&D business, we've clearly seen demand softness over the past 18 months or so with less effectively by the -- firstly, the automotive sector, partially also on the aerospace sector. But we are seeing an improvement in the pipeline of opportunities, driven largely by the defense customers, and to a certain extent also, with certain aerospace programs. So we expect to -- we expect to have some of these pipeline conversions happened over the next few months. And with that, we are targeting to have an improved performance in the ER&D part at least in the second half of this financial year. So that's, I would say, the overall summary with regard to the ER&D business. Yes, we're certainly seeing signs of the increased spending in Europe in the form of a better pipeline of opportunities on the defense side. And we hope that this will sustain and convert in the time to come.
Right. And sir, the domestic BTS order book has remained flat Q-o-Q. Could you share why is this? And are there any expected conversions or current inquiry pipeline and expected conversions in the near term?
Yes. I mean the -- while the order book has been relatively flat, you must remember that there has been a significant growth of revenue in deliveries over the last quarter, which is what we just highlighted. So from an order booking standpoint, it continues to remain healthy. And we continue to see a healthy pipeline of opportunities that we expect to book over the remainder of this year. So the domestic BTS business continues to be a growth area for us.
And sir, what is the typical execution timeline of the current BTS order book?
Yes. Typically, the BTS orders are in the range of between 2 to 2.5-year execution period.
And sir, on the development orders, which often carry lower or negative margin initially. What is the conversion timeline into production orders? Like are we starting to see some of these translate into higher margin opportunities?
Yes, certainly. So I mean, I would say, broadly, you can categorize the type of orders we have into 2 parts. One is large development programs itself, which are the kind of things that we do for the state for space programs, for example, where these are largely project-based, project type of business, which involves a design phase and delivery or manufacturing phase for these things. But these are not huge numbers because satellites are still relatively small in quantities, but high in value. On the other side, you have defense programs where there are several different types of subsystems and all of that, where we have a development contract in the beginning or even in certain cases, we take on the development of products to indigenize imported systems, which itself last maybe about 18 months, 18 to 24 months of design and qualification cycle. And subsequently, we will receive production orders for that over a longer period of time. So these are the 2 types of contracts that we typically have. But as I mentioned, the design and qualification period itself is somewhere in the range of around 18 months, 18 to 24 months.
Sir, on the EMS side...
Sorry to interrupt, Mr. Harsh. Mr. Harsh, sorry to interrupt, but I request you to rejoin the queue for the follow-up question. The next question is from the line of [ Raman Kerti ] from Sequent Investments.
Congratulations on a good set of numbers. Sir, I just wanted to understand, one, can you give any update with respect to the Canadian subsidiary? Has there been any deal that has been finalized?
Yes. Thanks, [ Raman. ] This, of course, is a key priority, as we've been mentioning. We've made some good progress on that. We believe we should have a decision for this in the coming months, and we hope to basically have a decision for that by the end of the current quarter. And then there will be some time associated, short period following that to close and basically complete the transaction of that. So yes, we are still working towards that timeline.
Sir, and can you give a ballpark figure of what would be the cash inflow once you sell out this business?
Yes, I'm not able to disclose anything of that sort at the moment. And also, you should remember this is a loss-making business. So the expectation of any significant cash in is not high.
Okay. And sir, my second question is with respect to the order book. Can you give the order book split?
I think the earnings presentation that we have highlighted this, but give me 1 minute. So yes, at a high level, we see that about INR 710 crores is the order book for EMS, INR 886 crores is BTS and ER&D service is INR 171 crores.
Sir, and my final question is with respect to the gross margin. During this quarter, there has been -- I mean, although the EBITDA margin has increased by 200 -- almost 200 basis points on year-on-year, but the gross margin has declined by 100 bps. Is it -- is there any one-off or the steady state gross margin is -- the current gross margin is the steady state gross margin?
Okay, I will look at -- yes.
So you say EBITDA margin improvement but gross margin, what do you mean by gross margin because if we...
I'm talking about only...
I'm sorry to interrupt, but can you speak a little louder?
Can you hear me?
Yes, I can hear you. I'm talking to the management.
So what do you mean by gross margin declining? Can you please explain? Because EBITDA, we understand.
Yes. So when I'm comparing it on a year-on-year basis, your gross margin is around 50% to 51%, which is basically exclude margin with respect to the material consumed and currently, it's around 49%, 50%.
Yes. Yes. I mean I think the part of materials consumed, we have to be -- just to clarify, there's a big contribution of the mix of the revenues that plays into this. So fundamentally, the -- each of these businesses have different levels of gross margins that we have. The build-to-spec business, considering the fact that the design is done by us and so on, we have a higher level of gross margin in that business compared to the EMS where we are more manufacturing customers design. And if you look finally even at the Engineering Services part of the business, there, it is only people cost because we have no material cost as such in Engineering Services by itself. So the level of gross margin will be highly dependent on the mix of the 3 types of business that we have.
The next question is from the line of [ Harshal Setia ] from Singularity AMC.
Sir, how much loss does the Canadian subsidiary do as of today, as of FY '25?
This is last year. We have lost about EUR 2.4 million. And in the 2 years prior to that also, we have been losing about 2 million each year. And that is the reason that we are trying to take that hard decision of stopping the bleeding by one way or another.
So cumulatively, in Q1, it's about EUR 600,000 to EUR 700,000 basically.
Sir, 600,000, 700,000 is the EBITDA loss that you're talking about?
No, it is [ EBITDA ] level, EUR 600,000 for the quarter, euros.
Yes. And sir, how many employees are still left in the Canadian subsidiary? I guess we are already downsized in the last 2 years?
Yes, they are currently around 30 employees that we have there.
Okay. And this is basically the Alstom business, right?
They are the biggest -- they are the largest customer contributing to this business. That's right.
So then are you saying you're trying to reposition this Canadian subsidiary? Are you in -- so basically negotiating with Alstom or trying to sell the division out?
Yes. So we are exploring different options. We've -- our first objective is to stop the loss fundamentally. So -- and like I said, at this stage, I'm not able to divulge much because we are under NDA and we need to complete the discussions ongoing. But we are discussing both options to be clear.
And how much does the Canadian subsidiary contribute to revenues in FY '25?
The current quarter, let me say, because it has been coming down and current quarter, the subsidiary overall is about INR 95 crores, of which the Canadian entity is about INR 7 crores to INR 8 crores.
And how much would it be last year, some INR 50 crores, INR 60 crores or higher than that?
It would have been about INR 70 crores, INR 70 crores to INR 75 crores.
Okay. And sir, lastly, what is the current build pipeline in terms of order book as of today? And you know, what is our expectation in terms of order inflow growth for FY '26?
You're talking about the overall group, right?
On a consolidated basis.
Yes. I mean, we don't really, again, express exactly what the bid pipeline is looking like. But I can just say that we do have a healthy pipeline and a plan to book the business to be able to continue a healthy level of growth that we've been targeting. As we mentioned in the past, our medium-term growth objectives is to be in the range of 18% to 20% at a consolidated level. And at a stand-alone level, it will be higher than that. So we feel we have appropriate pipeline to be able to continue that level of growth going forward.
Okay. And sir, lastly, on the CapEx front. I guess you had earlier mentioned that we'll do a INR 40 crores CapEx in FY '26. So -- and that would take our gross block up to around INR 390 crores, INR 400 crores. So sir, what kind of asset turns do you see in the business? What is our utilization levels at each and every facility, if you can tell?
Currently, we are -- now I talk about stand-alone mostly because there is no CapEx in the subsidiaries. Currently, we are running around 6x to 7x. And that may not significantly increase in the current year, but considering the growth from 6x to 7x, we expect this to move about 8 to 9 turns in the next year or 2 because significant CapEx will get added to this.
So the INR 40 crores CapEx that you had announced on the last call will be done purely for the Indian business?
Yes.
Okay. And we are not pumping in any money for our subsidiaries, right?
No.
Okay. And sir, in this gross log of around INR 380 crores, INR 390 crores, which will happen by the end of the year. How much would be from the Indian business and how much would be from overseas subsidiaries?
You mean gross block?
Yes, sir.
No, gross block is mostly Indian only because there is no fixed asset base. [indiscernible]
People business, it's a people business because the engineering services, there is no major CapEx and fixed assets in the subsidiaries.
Okay. And sir, lastly, what I want to understand is in the Canada business, was it ER&D and BTS both? Or was it just any single segment?
Yes. Today, it's largely the BTS business. With the history, the background over here is that this was -- this used to be actually a part of Alstom in the past. It was carved out and given to the subsidiary or to the company even before actually we acquired the French company. This is, to be clear, the Canada subsidiary, the subsidiary of the French business, and it came along with the acquisition of the French business. So this was originally carved out and given an engineering services contract for the people. And over time, it was a declining contract, which was to be converted into BTS or product supplies agreements with multiple different contracts and so on. So where we are today is essentially that the level of product deliveries and the sale is not enough to -- or the margins associated with that is not enough to justify the cost that we have in Canada. And so that's part of the reason we're recurring the loss. And on the other side, one of the things that we have done is also created a team in India. So we are now about 30 engineers, 30 to 40 engineers in India able to design and develop the same sort of solutions, and we are already delivering this for Delhi and Chennai Metro in India. We won a first order even for the Vande Bharat program in the past quarter. And so we are able to continue this capability from India without reliance on Canada.
Okay. And lastly...
Sorry to interrupt, [ Mr. Harshil, ] but I request you to rejoin the queue for the follow-up question. The next question is from the line of [ Vikram Sharma ] from [indiscernible].
Congratulations for the good numbers. So sir, my question, what is the size of this development order received from ER&D? And also, if you can explain about the overall opportunity size in the next 3 to 4 years?
Yes. Yes, the size of the development order is relatively small. I mean this is the range of maybe around INR 10 crores or so. But these are major platforms that can -- that will come subsequently. Obviously, as I mentioned, just the time to design and qualify this at the platform level. I mean for us to design and deliver this is an 18- to 24-month project. And then for it to be qualified at the platform level integrated on the plane has a lead time associated with that. So in the period of 3 to 4 years, it may not directly yield huge orders. But subsequent to that, I mean, this is one. This is for a major platform, which is [ Sukhoi 30. ] And the size opportunity there can be to the tune of maybe INR 1,000 crores or so. And the other important thing is also while we are developing this for the specific programs, the technology are sort of like building blocks. So we can use these technologies to also try to open up and create opportunities in other programs, which we will also be pursuing. So that -- it is a significant development because this is a cutting-edge technology that we will be developing for radars. And we are confident that this should open up some sizable opportunities for us going forward.
Okay. And could you talk more on the airborne platform program you briefly mentioned in the presentation? So what are the products we are targeting?
Yes. So staying on this point of the radar itself, I mean this does represent an important opportunity. The one talked about in the presentation, which is for the Virupaksha program is intended for the [ Su-30 ] platform. But like I was mentioning, similar type of technology, there are requirements and needs for other type of platforms, including on the -- on various types of UAVs, helicopters and other future next-generation fighters also. So those are one. And then, of course, in addition to this, we are also working on certain other subsystems and technology in the radar and electronic warfare.
Okay. And sir, the last question on the EMS and BTS business breakup. So we have seen like a 15% margin at standard level. This is comparatively higher which we guide. So was there any onetime BTS business revenue contribution in this quarter or the split is normal we can expect in the remaining year also?
So one thing I would say is please look at the company on the yearly basis because it's difficult to say, pull up on the whole, the BTS and the EMS business, we maintain the characteristics. But during the quarter, see, one may be higher and even product mix may be shared, et cetera. So the point to notice overall, we should be able to maintain the same percentages that we have been giving.
Okay. And sir, if you can add the earnings growth, just on the EMS...
Sorry to interrupt, Mr. Sharma, but I request you to rejoin the queue for the follow-up questions as there are many participants left in the queue. The next question is from the line of [ Ankit Gupta ] from Bamboo Capital.
Congratulations for a great set of numbers and getting the development orders for the Virupaksha Radar. So Nikhil, we have been talking about 3 or 4 segment that we have been concentrating on the BTS side. One is the defense satellite, one is the radar, then we have [ EWS ] as well as the tank electronics. So for all major segment that we have been talking about, can you give us some flavor on how are things going on in the order intake side? And when are we expected to get some development as well as commercial orders from these segments?
Yes. So if you look at the last year, last financial year, we had a good increase in terms of our overall order book, and that was driven essentially by a few key programs, one being the radar program itself, where we have designed with DRDO in the early stage some of the critical TR module planks for a naval radar that came in the form of production orders for us in the last year. We will be executing that. And the same product we hope will have further demand as our customer gets newer orders for these type of platforms and so on. So that's one in terms of products that we have already designed and we have started to get the first production orders for. In addition to that, as I mentioned, in terms of new technology development, again, in this sector, we had -- we talked about the Virupaksha order. And so we are now going to be developing a significant part of the radar at [indiscernible]. So that is on the radar front. The space side has been another area that we had some sizable orders last year. We are also anticipating some good orders coming this year from a few different programs. So we are working hard to win -- to capture those. And then on the EW side as well, we have responded to certain large opportunities from the customers on, again, airborne platforms, different things. But these are -- some of them are competitive bids. So we will have to wait for the results of some of these opportunities, but these are large opportunities that we have. And finally, on the land systems side, here again, -- we've been investing over the past few years in terms of developing equivalent solutions to imported systems and subsystems. We've seen some of those orders come in even including in the current quarter. And there are a few other key products that we are also in advanced stages of development and qualification. And we hope to have the qualification completed in this financial year and maybe the first orders for those also coming in at the end of this year or the beginning of next year, next financial year. So all in all, I think the progress is good, both in terms of our development pipeline road map as well as order intake coming in from key customers.
Sure. So we have been trying to work directly as a system supplier to the [ tri-services. ] And we were hoping that we were developing some products for them, where the order size can be of the magnitude of around INR 200 crore, INR 300 crore or even INR 500 crores a single order size. So how close are we to getting those contracts? Where are they in terms of development stage? Do you think in the coming financial year, FY '26 or FY '27, we should be able to back some of these large contracts and this can add to our order book substantially?
We continue to work on some of those opportunities. I think we've submitted various proposals and are awaiting -- the government obviously has process associated with those. So they are still in the, I would say, various approval stages within the government itself. So it's -- we don't see in the very short term, some of these major opportunities coming through. But I mean -- but we continue to work on them and monitor them very closely. And as and when the processes -- approval processes come through and they come out in the form of [ RFQs ] and all of that, we are well positioned to be able to bid on those. But having said that, again, I come back to the point about our own organic business where we have already done a lot of work and effort in terms of development and customer engagements. And we are quite confident that orders coming from this should be healthy and will support the growth of this part of the business for us in the coming few years.
On the other part, so if I were to summarize, I would say for the large opportunities, the potential is still there and the pipeline visibility is improving, yet, the actual order, when we will get depends on the government processes, which seems to be improving, but still, we are not into clearly say it will happen this year. So as we progress and as we get more visibility, we should be able to inform you.
So can we expect that with the current programs that we have on a stand-alone basis, our BTS revenues can grow by 20%, 25% or even higher by 30% over the next 2 or 3 years? And if we get some of these large [ tri-services ] orders, our BTS revenue can grow [ magnifold ] depending on if we get some of those large orders or not? And can we expect some of those wins in FY '27, '28, if not this year, '26?
Your guess is as good as mine. But yes, all I can say is to your first point, the growth that we can see on the stand-alone business, driven by the order book that we have I think is -- we are reasonably confident that we can continue to go down that path. And yes, as and when these big ticket opportunities click, it can be a step improvement also for the overall business.
[Operator Instructions] The next question is from the line of [ Hrushikesh Shah ] from Alchemy Capital.
Hello?
Yes.
So regarding the margins...
Mr. Shah, can you speak a little louder?
Yes. My question was regarding the margins this quarter.
Mr. Shah, we can't hear you properly.
Hello?
Yes, please continue.
Yes. My question was regarding the margins this quarter. See, our BTS segment revenue share as compared to last quarter has improved by 600 basis points, but still, our margins are lower this time, and BTS segment being the highest margin segment for us. What is the reason for lower margins?
Mr. Shah, can you please keep the device closer to you? We can't hear you properly.
Am I audible now?
No. Can you please speak a little louder?
One second, I'll join the queue again.
Okay, sure. The next question is from the line of [ Anand Shenoy ] from AS Capital.
In the INR 57 crores standalone BTS business, can you give a rough split between the space and the defense? And I'm reading that there is a significant -- and the government is fast-tracking the space-based surveillance. So can you talk about the opportunity for us there?
Yes. First of all, I wouldn't -- there are -- we don't really give the breakup in terms of space and defense and so on because in several cases, we also have programs for defense, which are on a space platform, for example, right? So the way we see it is more just generally build-to-spec business for our domestic customers in space and defense as a whole. Having said that, I mean, we do quite a bit of critical work in programs for the space side of the business. So we do have an important contribution coming from both parts of it in the overall revenue. To your question about the [ SBS-3 ] program, this is the budgets have just been sanctioned and a big part of it will be going to [ ISRO ] after which this will come out in the form of various RFQs for private industry and so on. So these are all at different stages of maturity, but we have been working with [ ISRO ] for a long time. And we continue to look and participate in several different areas of engagement here. So we've read the whole thing about the government asking to fast track it, but that is -- for us right now, it's still at the early stages of the program, and we are waiting to see how these pan out in the form of different types of RFQs and opportunities for private sector industry.
Sure. So these orders will be, like when we said, these orders, they will get executed this year? Or do you think it will happen next year? And can you break it down, what is the size that we are looking for in this particular project?
The timelines get spread over multiple years. At least 2 years, there will be -- if there are multiple different opportunities and orders that will come through. So yes, there are -- so that's the first point to your question. The second one, in terms of the [ pie ] size, this is something I'm not able to share right now. We have a view of all the different opportunities that are there, some of them where we have unique positioning because of proprietary IP or technology that we have on our side and some of which are competitive bids where we have to compete against others. So the [ pie ] itself is substantial. We will need to see how much of that we'll be booking ourselves.
Sure. My second question is about yesterday, in the AGM. You mentioned the 3-year outlook about 18% to 20% EBITDA margins that we'll do in 3 years. Can you tell about the road map? How can we -- like on the current margins, how can we go to 18% to 20%?
Yes. No, just to be clear, what we talked about is 18% to 20% growth rate at a consolidated level. We're not referring to -- this is revenue growth, not EBITDA margin. EBITDA margin, our objective is to be at -- in the range of 13% to 15% at a consolidated level, which today is at 8.5% or so level. So the road map that we see there, first of all, as you see, the stand-alone part of the business is already at a roughly 14% level. So we expect and are working to maintain, maybe slightly improve that. But given the growth rate that we will experience in both the EMS and the build-to-spec business, the stand-alone EBITDA levels will be more or less in a similar sort of range. The opportunity for improvement will come largely from the subsidiary, which today is at almost like if you look at the last year, it was at roughly 1.5% kind of EBITDA level, which is dragging down the overall consolidated number. And so the path to fixing that are fundamentally 2 things. One is the Canadian subsidiary, which I talked about a little bit earlier, which is a major contributor for some of the losses that we are seeing there. We are taking some actions, strategic steps with -- in discussion with our key customer there to be able to stop those losses in the coming quarter. And the second aspect of it, which is more on the France subsidiary, where essentially the sale has reduced and that has resulted in the impact on the margins. There, we are working in terms of focusing our sales efforts on the key customers on -- in defense and aerospace, where we've seen the pipeline improved over the past quarter or 2. And we are working in a focused way to try to convert those into opportunities and improve the sales, which will help improve the margin also at the France subsidiary level. So with all of this, we are working on a road map that would help us improve this subsidiary margin from this 1% to try to get to a 10%, 11% kind of level in a roughly 2-year time period. And so that's the overall plan for margin improvement, I would say.
The next question is from the line of Harsh from Perpetual Capital Advisors.
Yes. Sir, can you hear me?
Yes, please.
Sir, you had mentioned some [ NPI ] qualifications previously. I wanted to understand if these are tied to [indiscernible] semiconductors or some other sectors? And what is the anticipated revenue contribution from these opportunities?
Yes. These are basically with new customers. Just to clarify, first of all, when we see [ NPI ] qualification, typically, when we have awarded new business, either from existing or from a new customer, we go through a qualification phase where we build prototypes and then go through a rigorous testing and so on. And so once those are approved, then we get into mass production. So what I was referring to here was basically on 2, 3 key customer segments, one was semiconductor segment, another is around biometric security solutions, and the third is, again, back to defense and aerospace for the export customers. So with all of this, I think for the current financial year itself, our objective in some of these NPIs itself will add about USD 15 million or so in terms of revenue, U.S. dollars revenue.
$16 million?
$15 million, yes, roughly about $15 million.
Okay. And what is the total opportunity over the next 4, 5 years, how much?
I mean these are all pretty much recurring products. So these revenues go up or down based on specific years, demand from the customer. But what -- the way we see the EMS business is more dependent on the customer relationship than on the specific product itself. And so with these customers, the -- while we are -- we have done through these NPI qualifications and so on for a certain set of products. We continue to have a pipeline of new products also, which we are quoting and winning and will help to increase our engagement with these customers as we go forward into the coming years.
The next question is from the line of [ Raman Kerti ] from Sequent Investments.
Sir, I just wanted to understand on the CapEx front, you are doing INR 40 crores of CapEx in FY '26 with respect to the stand-alone entity. How much incremental revenue will this aid in? Historically, you have been able to work with respect to -- I'm just talking about the stand-alone entity. On a gross block of INR 230 crores, you were able to do INR 750 crores. Can we expect the same asset turn?
Yes. And it will be slightly better also. That is...
That will be around [ 4 to 5? ]
5 minimum on the gross block. At the next block level is what actually I was talking about. It's going to be around 6x to 7x, yes. And this customer wins is the revenue growth that Nikhil has been indicated -- indicating.
Sir, but that's like my follow-up. Like historically, our stand-alone entity has been growing at 25% -- has been growing about 25% every year for the past at least -- from what I can say, for the past 3, 2, 3 years. So once this block commences operation, can we expect that in FY '27, there will be an additional leg of growth?
So just to explain the actual CapEx itself, if you look at the stand-alone entity in the BTS business, basically, we have different setup capabilities, right? So we are doing, right, from [ analog, ] digital power or so on and so forth. So when I say, we are augmenting that capabilities, we also augment the capacities in the respective capabilities. So with whatever we had, the capabilities, that is how we have been growing. And going forward, we are increasing the capabilities and also increasing the capacities in the existing assets as well as the each of the capabilities. So [indiscernible]. That is the reason why I said we should be able to maintain or slightly improve.
The next question is from the line of [ Abhi Mirawala from White Capital. ]
Hello? Am I audible? Hello?
Yes, yes, we can hear you.
I have only one question related to your U.K. subsidiary, Centum U.K. Electronics Limited. I want to know basically, in the last 2 years, we have invested around [indiscernible] in FY '24 and [ 45 ] [indiscernible] in FY '25. So what kind of opportunity do you see there?
U.K. is actually a pass-through. It is a special purpose vehicle. So the investment was in the French subsidiary. So if you see that from the Centum Electronics parent company, we invest in the [indiscernible] Centum U.K. and Centum U.K. is investing in the French company. So U.K. is not an operating entity at all.
Okay. So basically, we're investing more in France?
That is correct. Yes.
Sir, another point. In the latest quarter, around [indiscernible] loss we incurred from this subsidiary. So how much loss did we incur from Canada?
So it's roughly 50-50, 50% in Canada and 50% in France of the INR 12 crores. But the revenue from Canada is very, very small, but the loss is quite high. So that's the reason we are trying to stop that.
So basically, it's loss from employee?
Employee cost, yes.
[Operator Instructions] The next question is from the line of [ Ajay ] from [indiscernible]
Am I audible?
Yes.
Congratulations on good set of numbers. I wanted to understand like how is the distribution of business under the EMS segment more on the sector, sector-wise, which sector are being focused over there? And also, is it more diversified across customers? Do we have repeat orders from a few customers? If you could highlight more on the EMS part of the business?
Yes, sure. Yes, the EMS business is certainly quite well diversified. We address customers in defense and aerospace. For exports, we address industrial and energy, some medical customers and as well as the automotive or mobility kind of customers. So these are all the sectors that we're in. And now, as I mentioned, some of the newer customers we've added and we're ramping up in the semiconductor space, semiconductor equipment and biometric and security. So these are all different sectors that we are catering to. And all I would say, pretty much all of the business is recurring in nature. These are products that have long life cycles and can last 10 years or more in many cases. And so we have a fairly high level of recurring revenue in this part of the business for us. Even from a geography standpoint, it's quite well diversified. I mean here, again, I would say a big part of it is for export. We have some part which is domestic. But we are exporting into Europe. We are exporting to the U.S., to other countries in Asia, including Israel and even now to countries like Malaysia, Singapore and so on. So there's a fairly good level of diversification in this part of the business.
Understood. And one last question. I wanted to understand more on the BTS side of things. You have been highlighting the amount of opportunity that we have available from this segment considering the vast domestic volume of aerospace and defense sector as a whole. So any growth guidance you would be comfortable giving like how this segment can grow maybe 2, 3 years down the line?
No, we don't give any specific guidance on specific parts of the business. I think we've maintained that at consolidated level, we're moving at 18% to 20%, with obviously a higher growth rate coming from the stand-alone business. And that is combination of both the build-to-spec and the EMS business growing at a healthy growth rate of 25-plus percent that we are targeting. So that's, I would say, at the high level for the time to come.
The next question is from the line of [ Hrushikesh Shah from Alchemy Capital. ]
Am I audible now?
Yes.
So my question was regarding our EBITDA margins. On a yearly basis, we have done well. But on quarterly basis, even with our BTS segment now contributing around 38% from 32% on a quarterly basis, why are our EBITDA margins down?
That's what I was trying to say earlier also. We cannot compare the yearly percentage to the quarterly percentage. The challenge is, for example, the mix changes during the quarters. So we will be able to maintain the EBITDA margins, which Nikhil was indicating around 14% to 15% on a yearly basis.
Yes. There's a few things that contribute to this due to the EBITDA margins. One is, of course, the mix of the BTS and EMS, but also just the level of sales. So the fundamental point is that some of this business is lumpy in nature. So we have level of sales varying, not just the percentage of the contribution, but the level of the sale also that plays into this. I think I would just go back to what Desikan was saying. And of course, even within each business, even within the BTS business or within the EMS business, there are different product mix, which will contribute to different levels of margin variation, right?
And this 14% is on consolidated basis or on stand-alone basis?
Stand-alone EBITDA is 14.9% for the quarter.
Second question was regarding our revenue growth this quarter. It has been only 11%.
Sorry to interrupt, Mr. Shah, but we are taking only one question per participant. The next question is from the line of [indiscernible], who is an individual investor.
Yes. I have got one question that as I understand a lot of startups are also doing quite well in this period of space, and they are working on a very niche areas. So when we are saying that this space sector is very, very interesting and the opportunity size and the size which [indiscernible] is talking about is around roughly $3 billion to $4 billion. Now are we planning to work with these kind of companies or we will be working with some kind of multinational or foreign companies to take on bigger, huge projects in future?
Yes. Thanks, [indiscernible]. So in a nutshell, we are doing all 3. So we're already working on partnering and working with some of these startups in different ways, either by doing some of the core parts of their satellites or in certain cases, we are also with the end users working on some sort of partnership type of agreement where we will be the prime contractor. And there will be certain work share that is divided between what we do and the core IP technology that the startup brings. So that's one aspect of it. But coming back to your question, there is the opportunity that we are talking about in some of these key and large programs will be driven through [ ISRO ]. And this is where our own internal capabilities and engagements that we have combined with some specific strategic partnerships where we are working with some global companies are both being pursued to be able to position ourselves to capture these opportunities. And then I would -- from a business perspective, our visibility, at least, the bigger share of it will come either driven by our own internal capabilities or in certain very specific cases. through the partnership with global companies.
I would like to add one quick point on that. We are quite open to work with the large private companies and international organizations and also the start-ups. The startups are something that we cannot ignore at this point of time because they bring innovation to the table. But we ensure that we don't lose money with them. We ensure that because for every 10 start-up, maybe 2 start-ups are [indiscernible] exceedingly well. So what we ensure is when we work with start-ups, we ensure that we get our money on the material front at least, definitely.
So we are not going to buy them out or we are not going to enter into some kind of investment here.
The next question is from the line of [ Anand Shenoy ] from AS Capital.
Is there any update on [indiscernible] that we are signing?
No further update on that program. It's still basically solid, and we have no further update from the government on this program.
The next question is from the line of [indiscernible] from [ Capstocks. ]
My question is a follow-up question regarding the margins that someone had previously asked. You mentioned that the margins will vary across quarters due to different mix. So my question is about revenue recognition for build-to-spec is very heavily focused on quarter 4. So can we expect a more even distribution across quarters this year? Or would it be -- would it fall similar pattern?
So your observation is, by and large, right. If you look at in the past 2, 3 years also, the margin expansion happened in Q4. But we are a little fortunate this year, I would say. If you look at even Q1, I think margin was better compared to last year Q1. So this year around, maybe it will be distributed, if not on an equal basis, maybe still -- I know the higher margin probably would be dropped in the last quarter. But this year, it is slightly better than the previous year where most of it happened only in the Q4.
We will take that as the last question for today. I now hand the conference over to the management for closing comments.
Thank you all for participating in this earnings conference call, and I hope we were able to answer your questions satisfactorily, and at the same time, offer insights into our business. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Managers at Valorem Advisors. Thank you, and stay safe.
On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
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