Premier Explosives Limited (526247) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '24 Premier Explosives Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you, sir.

Thank you, Lisan. Good afternoon, everyone. I, on behalf of Stellar Investor Relations, welcome you all to Premier Explosives Limited Q2 and H1 FY '24 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the second quarter and half year ended September 30, 2023. We have with us today the senior management team of Premier Explosives Limited, Mr. T.V. Chowdary, Managing Director; and Mr. Srihari Pakalapati, Chief Financial Officer. Before we begin, I would like to state that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you. Now I invite Mr. Chowdary to share his initial remarks on the company's performance for the quarter and half year.

Thank you, Vishal. Good afternoon, everyone, and thank you for joining the call. We'll begin the call with company's operational performance during the quarter and followed by the key industry update. The recent highlights for the company has been strong order inflow. We started the current fiscal year 2024 with an order book of almost INR 521 crores and added to it new orders of almost INR 615 crores in the year till date. Our current outstanding order book stands at approximately INR 1,054 crores, a strong growth of 75% year-on-year and translates into 5.21x of our financial year '23 revenues. Execution of these orders will help us to bid for bigger and better orders from Indian defense industry as well as from the foreign defense entities. Now let me take you through the current orders at hand. Ministry of Defence IAF supply of chaff for INR 292 crores and supply of flares for INR 260 crores, each to be executed in 12 months. And Ministry of Defence Air headquarters supply of 50 mm MTV flares, INR 76.78 crores to be executed in 12 months. Bharat Dynamics Limited supply of Akash booster grains, INR 9.73 crores, to be executed in 12 months. And Bharat Dynamics supply of P1 and P2 motors for MRSAM, INR 43.26 crores, to be executed in 24 months. In addition to that, we have different orders totaling INR 250 crores from Larsen & Toubro Limited and export commitments of defense products alone INR 115 crores. We'd like to reiterate that we have completed the design and development of various products for foreign entities and developed exclusive production lines for these developed products. The company has been constantly receiving production orders in this segment and started supplying to these foreign entities. During the quarter, the company has further executed export orders and shipped out 160 mm rocket motors. The company has done the first export shipment of HMX during this quarter. With all these, the company has clocked the record export revenue of INR 29.4 crores during this quarter. During Q2 financial year '24, Premier Explosives reported excellent performance on an overall level. Our revenue for the quarter increased by 29% year-on-year and 27% quarter-on-quarter to INR 78.4 crores. Again, Premier has clocked highest revenue post the COVID-19 pandemic. Premier Explosives has achieved highest ever EBITDA margins of 28% in quarter -- second quarter of financial year '24, which is a significant improvement, mainly on the back of higher execution or contribution from defense order, along with the significant contribution from commercial explosives, our industry explosives segment. Consequently, the PAT margin of 15% was also the highest ever. Now the future outlook. Premier Explosives is the only qualified Indian company for countermeasures and the only Indian company which is in the export of fully assembled rocket motors. Additional to the rocket motors and warheads and now Premier has entered into manufacturing of mines and also ammunition. The mines -- the production of Nipun mines has started and the deliveries will be from November 2023 onwards. And Premier has successfully completed the development of 40 mm HEAP and HEDP ammunition for UBGL and HBGL with the -- under DcPP program of DRDO. So now we hope that we'll be entering the production and supplies in the current financial year itself. And the HMX and RDX plants, which were earlier producing for self-consumption and also for the domestic market, has now started exporting. We have executed one order of RDX, and another order is going to be executed in the -- before the end of November. And further orders are being booked for RDX and HMX [indiscernible]. Premier has also completed the bulk [ chaff ] production plant, which has come into production, and we are expecting a good contribution from this plant from the current financial year itself. In terms of cash flows, we have generated healthy cash profit of INR 14.4 crores in Q2 FY '24 and INR 25.3 crores in half year of FY '24. With our execution run rate stable and given the nature of our cost structure, the operating leverage of our business will help us to generate better cash flows, which will be utilized towards strengthening of our balance sheet. Coming on the defense industry. Now coming -- the Indian defense sector is experiencing a significant transformation propelled by the pursuit of Aatmanirbhar. The Indian defense export has reached a record high of nearly INR 16,000 crores in '22-'23, saw a 23-fold increase in export. Now India has independently designed and developed capabilities reaching over 84 countries. The Indian indigenous defense industry has achieved the success in expanding exports with sale of major defense systems, including the BrahMos, Supersonic Cruise missile, Akash air defense systems and artillery gun to friendly nations. As per the industry data, the Indian defense industry is now competing with global firms for exporting their military hardware and have been in competition in multiple countries, including Southeast Asia and Africa. In order to reduce dependence on imports of defense equipment, the government has introduced a number of measures to promote private investments in the sector. As per the industry sources, various sector firms are likely to get defense contracts worth INR 60,000 crores in the financial year '24-'25, which will be around 22% of the overall size of the industry. Private sector defense production is expected to expand at a compound annual growth rate of approximately 20% over the next 3 years, reaching INR 34,000 crores by financial year 2026. Coming on the aerospace industry. First of all, I would like to congratulate Indian Space Research Organization for the successful landing of Chandrayaan-3 on the south pole of the moon, first ever landing by any country. With this landing, India has now joined the elite club of becoming the fourth nation to touch the lunar surface after the USA, Russia and China. ISRO has now launched another mission, Aditya-L1, for dedicated mission to study the sun's photosphere, chromosphere and corona. Premier Explosives had a pivotal role in establishing SSLV, that is Small Satellite Launch Vehicle. And Government of India's encouragement to private sector to take up satellite launching on commercial vehicles. Opportunities are opening in space field, and these are expected to fructify in the coming 3 to 4 years. As per the recent announcement made by the Government of India, that India aims to grow its space economy from the current $8 billion to $40 billion by 2040, stated Union Science and Technology Minister. Now we'll share key highlights on the mining industry. The mining industry where the coal is the major mining sector as per the data available with the Ministry of Coal, domestic coal production rose by 9.2% year-on-year in July 2023. Further, September 2023 witnessed a raise in India's total coal output of 15.81%, reaching 67.21 million tonnes, over the 58.034 metric tonnes produced in the same month of the previous year. Moreover, September 2023 saw a considerable increase in coal shipment, which reached 70.33 metric tonnes. This represented an impressive improvement over September 2022, 61.1 metric tonne, with a growth rate of 15.12%. As per the Coal Ministry, the industry experienced an unparalleled surge as output. Dispatch and stock levels have reached emerging height and this phenomenal growth is largely attributed to the ongoing commitment of coal PSU. This demonstrates how well the coal supply chain works and ensures a seamless flow of coal across the country. According to the Indian Bureau of Mines, the amount of minerals mined increased by 12.3% [ in orders ] compared to the same month previous year, while the mining industry as a whole grew by an overall 8.3% from April to August of financial year '24. Thank you. Now I request our CFO to share the financial performance.

Thank you, sir. Good afternoon, everyone. The results presentation for the quarter has been uploaded on the stock exchanges and on the company's website. I believe you all may have gone through the same. Now I would present the financial results for the second quarter and half year ended 30 September 2023. The revenue from operations for Q2 financial year 2023-'24 stands at INR 78.4 crores as compared to INR 60.6 crores in the corresponding previous last year, which saw a growth of 29% year-on-year and 27% quarter-on-quarter. Our operating profit for Q2 FY '24 stands at INR 21.9 crores as compared to INR 7.2 crores with a growth of 204% year-on-year. The operating margin for the quarter stands at 28%, clocked highest ever EBITDA margin in industry of Premier Explosives -- in the history of the Premier Explosives, which is already shared by Mr. Chowdary in his initial remarks. In Q2 FY '24, we reported a net profit of INR 11.6 crores compared to INR 2.5 crores in Q2 FY '23 with a growth of 362% as compared to the corresponding period last year. And even on the net profit margin, Premier Explosives have achieved the highest ever PAT margin in the history of the Premier Explosives. Let me take you to the H1 FY '24 performance. The revenue from operations for H1 FY '24 stands at INR 140.4 crores as compared to INR 112.4 crores in the corresponding period last year, translating into 25% growth year-on-year. Operating profit in H1 FY '24 stands at INR 38.5 crores as compared to INR 13 crores in the corresponding period last year, which shows a robust growth of 196% year-on-year. The operating margin stood at 27% in H1 FY '24. The net profit in H1 FY '24 stood at INR 19.8 crores compared to profit of INR 3.8 crores in H1 FY '23, which showed a tremendous growth of 425% year-on-year. Now coming to the order book. The company's current order book stands at INR 1,054.38 crores, out of which the higher-margin defense segment forms the majority of INR 884 crores, which is almost equal to 84% of our total order book. Explosive segment stands at INR 51 crores. And service segments that is operational maintenance is at INR 119 crores. During the quarter, domestic order book is at 89%, and export order book is at 11% of the total order book. The order book represents a solid and strong growth over the previous year. With this, we now open the floor for questions and answers. Thank you very much.

[Operator Instructions] The first question is from the line of Pankaj Gupta from Ratnabali Investments.

Congratulations for the excellent set of numbers you have shown. And sir, thanks for the detailed breakup of the order -- individual order which you have given. Sir, I just wanted to understand that in your Slide 21, you have mentioned a lot of India's prestigious missile programs, and some of them are also in the production phase. So I just wanted to understand that in some of them, we are the sole, say, 100% requirements of solid propellants are being met by us. So whether in this order book, any order from these programs have been mentioned? And how does the orders for these programs comes? It's a step-by-step? Or it's a quarterly requirement? Or how the orders flows?

See, I have already mentioned about MRSAM. MRSAM is the missile which has come to productionization and being produced by BDL. And there is another missile Astra, which is again the order -- the BDL is the production agency for the entire missile, and we are already having those orders in hand and expecting bigger orders in future. In addition to this, there are others which are in DRDO labs, which are progressing. And I think very soon, they will be productionized, and we'll be continuing to provide the propellants as sole provider.

Sir, but one thing, I think this LRSAM, MRSAM, Astra, this would be going orders which would be for a number of years. But when we report the order book from this, it is only for an immediate requirement? Or it craters to the medium-term requirement also?

See, we report only the order which is received by us, firm order received by us and that, too, as per the statutory.

Yes. No, normally, we declare the significant large orders. It's not that we declare each and every penny order. We keep on getting the orders on a regular basis. But it depends on the importance and the value of the order and nature of the order we declare to the stock exchanges, and we follow as per the regulations of the listing agreement.

Okay. And sir, my second question is regarding, sir, we already started supplying, say, rocket motors to our customers based in Israel. So if you could help us understand any impact of the ongoing conflict in Israel, which is happening, whether it would help us in accelerating or decelerating the shipments. And I think these rocket motors, et cetera, should be in huge requirements post this conflict. So if you could help us understand our position in this.

As on date, we have no impact of any conflict. These are all the orders we are executing, and we are continuing to do that. And about future impact, I don't know. This is premature to say anything on that. But today, we are -- whatever orders in hand from them, we are executing them, and they are going smoothly.

Sir, I'm talking from the positive impact on this one because I think the requirement of this rocket motor should increase. Are we getting some initial feedback from our customers that the requirement of this would be increased or enhanced?

Mr. Pankaj, I don't want to make a speculative statement on this. We are in the business, yes, if it helps, we still may grow. But let us be happy with what we have in our hand. We have good orders in our hand, and then we can execute them and all of them. Okay, if this helps and we get our better orders and all those, we'll be definitely sharing with you.

The next question is from the line of Dipen Vakil from InCred Equities.

Congratulations on a good quarter, sir. My question is on the order book, sir. Sir, can you help us with the execution time line for your order book and mainly on the order book breakup for services, explosive and defense? Is everything executable in, say, around 12 to 15 months?

Can you please repeat question? You are not audible much.

Sir, my question is on the order book. So in our order book, can you help us with the execution time line of our order book, say, for services, explosives and defense?

I have mentioned in my starting comments the execution time of each important order.

So with regard to the OM, operational maintenance, the order book of balance INR 119 crores, which spreads over 7 years, next 7 years. Okay. So with regard to the commercial explosives, I think all -- total order book has to be executed in the next 12 to 15 months. With regard to defense, it varies, and it has to be executed between 9 to 18 months. Some of them 24 months also, the average.

Sir, my next question is in the line of some of our DPSUs as well as clients from Israel. So DPSUs were facing some supply chain issues. So did that create any stress on your receivables or any slowdown in orders from DPSUs?

Which defense PSUs? You were saying about the raw material availability?

Yes.

So on date, we are not facing any problem.

And the orders from defense PSUs are on track as it used to be? Or any slowdown on that?

Yes, yes, they are on track.

The next question is from the line of Abhishek Poddar from HDFC Mutual Fund.

Congratulations on strong order book and good results for the quarter. Sir, could you give us some understanding, this large order that you received for chaff and flares? What is the time line for the requirement by MoD? Should we expect such orders in what period for the replenishment, some understanding there? And is it like a large order for building up the inventory? Or how have they ordered such a large number, sir?

Yes. This is a large number coming under the emergency procurement to build up the inventory and all those. But this has to be executed in 12 months period from the date of receiving order. But this is not the only thing, but in the future for replenishing the quantities and all those, it will continue. It may not be of this large volume in 12 months, but yes, it will continue.

Okay. So sir, this -- what quantity we are supplying, any, sir, understanding that how much time it gets consumed by the defense forces?

That we cannot say.

Okay. And sir, is it that this was earlier getting imported and now it's getting substituted by us? Where were they buying...

You're right. Earlier, they are being imported. Now it has come in the positive list where imports are abandoned and then only to procure from India. So under that, we are the source for business items.

Understood. And sir, the product pipeline that we are supplying now has increased with the mines and ammunitions. Any understanding that next 1 to 2 years, what kind of order inflows are we expecting or at least some understanding how you're seeing the markets?

Orders are expected. This is the beginning only. These products earlier, which are being imported, now even mines or ammunition also they are all being imported. Now they are all going to be sourced internally, indigenous sources. So definitely, there will be increase in the orders and the quantities. Now quantifying it in terms of so many crores is difficult. But yes, we are targeting a INR 500 crore turnover in the coming 2 months -- 2 years period.

INR 500 crores a year, you're targeting, sir?

Yes.

Understood. And sir, if you look at the margins for this quarter, 27.9, if you could give us some understanding that how are the defense margins and how are the explosive margins? And should we assume that the current order book has the similar margins for next 2 years?

Giving margins separately, I don't think that we can do that. But yes, the overall margins will remain like that.

Okay. So this 27, 28 is where your entire order book is currently based at?

Yes.

The next question is from the line of Darshil Pandya from Finterest Capital.

The questions are already answered.

The next question is from the line of Aman Vij from Astute Investment Management.

My first question is on the mine production, which you talked about, you started recently. If you can talk about how big is this opportunity and what kind of revenue we can achieve in this division over the next 2, 3 years? As well as does this also include some kind of underwater mines or this is only out key surface mines only?

We are working on multiple types of mines where some are under development and some have already got into productionalization. So present order what we have received, I think we have...

About INR 40 crores. That is indicated. So again, it is not possible to predict because we think, okay, now this order next year may not be requiring so much having placed order, but it will -- yes, either this or that or something will take over when you have a bouquet of multiple products. So that's why I said that we can say that we have targeted INR 500 crores. But if you ask which product and all those, we cannot express in that way, yes.

Sure, sir. I understand that point, but I was trying to understand in terms of import or the opportunity. How big is the opportunity in mind? Whether we get it or not is -- we can't predict that, but currently...

[ Now, the present INR 50 crore. ] In future, we cannot predict that, how and all because this -- see, these are all war machinery and used in that. So whatever is used in the practice and war way stage only will be replenished. So those quantities, we'll have to understand.

Okay, sir. My second question is on this grenade ammunition part, the 40 mm, which you talked about a little bit in that starting speech. So last call, you had talked about we had submitted 2 phases of our clearance and we were expecting clearance. So any update on that?

Yes, that's what I told. We are cleared, and now we are ready for production. We have built the production facility also. Product is qualified. User agencies have visited us. So we are hoping that in the current year, some RFP will come, and then we'll be participating in it.

Okay. And you expect this in Q3 or Q4?

Q4, I think. Q3 probably, it may -- order may materialize. But we cannot predict all this, these timings and all those. They don't work in months, rather they work in years.

Sure, sir. And you talked about that some paramilitary forces orders might come, but the bigger opportunity is the Army orders. So any further update on that? Is Army also looking at -- are they coming for the inspection?

So Army RFPs are -- the old RFPs were there, but they are not yet finalized. These are the RFPs from paramilitary forces, what I'm talking that we can probably productionize in this year. So those are only visible right now.

Okay, sir. Just last part on this. What is the maximum revenue we can do in this in terms of our production capacity? Do we have the production capacity to make like INR 100 crores also? Or is it a smaller size we can produce in the new production facility you talked about?

Yes. We have the production capacity and pent up capacity to do INR 100 crores of business in this line.

The next question is from the line of Vivek Gautam from GS Investments.

Yes. Am I audible?

Yes.

Sir, seeing this nowadays, the warfare going on in Ukraine and then Israel, since everything is through missiles and aeroplane, bombs, so we are placed, I believe, in a sort of a situation for us is better in terms of opportunity size. And as such, any new orders we have got from Israel and any new orders from the missile program? And that is the one question. And secondly, similar sort of opportunity size exists for space SSLV also, I think so. And how is the future looking like?

As far as the defense orders, you've named about the present countries which are involved in the conflict. So whatever orders we have in hand from Israel, we are executing. There are no new orders. And about the space sector, yes, new -- SSLV is the new thing, which government wants to privatize the satellite launching. And having participated in the production of SSLV at Sriharikota facility, we are very much favored to be the partner for this. So not -- with this expression of interest and other things that are going on, in which we are -- yes, we are participating along with other players.

And sir, what is -- so this is really -- the Aatmanirbhar scheme has really sort of been helping the indigenous defense companies like us. And -- but the earlier sort of regime was totally favoring imports. And now for a change, we are doing it. But now the elections are coming. And any preparation at our end for a sort of adverse development and in terms of regime change? And how prepared are we for that sort of theoretical situation, sir? And in the future, looking like that current policy will continue or sort of basically any preparation at our level for policy and regime change, sir?

I think the encouragement to Make in India and then -- has started almost 15 or more years back. It is only getting better and improve more and more with the consecutive governments. So I don't think any adverse effect will come based on the political situation. It will only -- because today, we have already transformed from an importing country to manufacturing country and then exporting country. So I don't think that is going to affect us.

Yes, that's a really good development and good for us, good for country.

Yes.

The next question is from the line of Nikhil Jain from Galaxy International.

Yes. I just wanted to check whether we have started supplying the new order that we received for countermeasures and flares. So have you already started supplying that?

No, the supplies will start from, I think, the February month onwards.

But you said that since the time of receiving, we have to supply that order in 1 year, like so 12 months emergency procurement, so...

12 months. Each order has to be executed in 12 months.

So we received the order sometime in August. So from there, we have to supply till next July, August 2024. Is that the correct understanding?

Right. Yes.

So if you will start supplying from February, so would we be able to manage the entire order by, let's say, the August of 2024?

Yes. We are working with those schedules only because any order -- big order execution, it needs build up time. You have to procure the raw materials. You have to build the component. You have to build your vendors. You need that large quantity and all those. So that's why 6 months' time is needed for those things. Now we have already completed those. Now the process is going on, outside process. Once that process has to shift inside our plant, then we'll be doing. In the meantime, we are also building up the multiple production lines. So we are quite confident that we can meet that.

Okay. And just a follow-up on that, sir. So you said that we are targeting INR 500 crores, let's say, by FY '25, FY '26, 2 years' time. But if you will supply, let's say, a INR 500 crore order in 6 months from February '24 till August of '24, so the turnover should actually exceed more than INR 500 crores given that there are other products also which are there, right?

Yes, you're right. But the part of it will come in this financial year. Part of it will go in next financial year.

Right, yes. That is there, yes. And sir, the second question was related to the grenade and other things. So you said that we have submitted it, and we expect the order finalization is to happen by quarter 4. Is that understanding correct, sir?

Yes. Submitted in the sense it's not any tender submission or anything. It is -- yes, we have developed the product. Product has been submitted for testing by the user and then the quality agencies, and it has met the requirement.

The next question is from the line of Ankur Kumar from Alpha Capital.

Sir, my first question is on the balance sheet side, there is a big jump in other current labilities, which I believe is advanced from customers. So can you comment on...

Yes. We have received some advance in the last week of September 2023 from the MoD as against a new order.

So generally, what percentage of our revenue generally comes in advances for...

Normally, MoD is not giving any advance, but since this is an emergency, they have given some advance to the extent of 15% against the bank guarantee. This is an exceptional case. Not that we get advance in every case.

Got it, sir. And sir, on margins, you said this current 27% is sustainable. But isn't there an operating leverage in the business? Because I generally believe gross would be working on a similar gross margins, and when revenue improve, our margins should inch up from here.

So normally, if you remember our previous calls, we were talking about 20% on overall average EBITDA for the whole year, but luckily first 2 quarters, we almost reached about 27%. So we are trying hard to get -- I mean to maintain the similar margin. There may be some plus or minus, but we are trying to manage...

The changes with the deliveries made and the inspections and all those, sometimes it may happen that the last day of the quarter, we could not deliver and it may go into the next -- first or second day of the next quarter. So that consistency is a little bit, but yes, we expect a good...

Got it, sir. And sir, on the last question on the flare side, you said you will start from February. So can you comment on how should be our -- we assuming the delivery in the second half of the year, how much revenue or delivery schedule should we be expecting in Q3 and Q4 for this year?

No, sir, we cannot comment on the revenue. This is very premature because it depends. Our dispatches depends on a lot of the PDA inspections and all, which are not in our hand. But the new order execution as our -- Mr. Chowdary was telling earlier, some portion, maybe a little portion may start going from the February. So a little portion may come in this year, and major portion will come into the next year.

Sure, sir. And sir, in terms of new order wins, how much are we applying? And how -- what is our chances to get more such orders?

See, you are quite aware of the fact that we are -- limited persons are there involved in this -- listed companies are involved in this business. So with our present niche position, yes, we expect that orders will keep on coming.

[Operator Instructions] The next question is from the line of Jayesh Shah from Ohm Portfolio Equi Research.

Hello? Am I audible?

A little louder. Please speak a little louder.

Yes, yes, yes. Sir, congratulations for a great set of results. I just wanted to clear the understanding, what is the order inflow in the second quarter? Because I thought the first quarter order inflow was already around INR 1,000 crores.

Second quarter order inflow was -- I mean, it was nominal because I think it was listed about INR 50 crores, nominal petty orders. We have not received any significant order in Q.

Okay. Okay. And what -- how is the pipeline looking at it for the next 2 quarters?

Yes, we are participating in many RFPs and tenders, so how many of them will be completed this year, come to order placement stage and all those prediction is a little difficult because MoD doesn't work on that basis. So yes, we are working, and we are participating. All of them may not materialize. Some of them may materialize. So that's why we are targeting this financial year. And next financial year, probably we will inch and go closer to INR 500 crores.

Okay. Because sir, I think on the last call, my understanding was that we should -- we were targeting INR 500 crores for this financial year depending on the execution cycle that we expected for the emergency order. So that has got delayed a bit, right?

I think if I remember correctly, that was -- somebody asked about that, sir, can you achieve? We said that yes, the way the orders are in hand, we can achieve. But our target was INR 300 crores.

I see. I see. Okay. Okay. And based on the current pipeline, what should be the average order inflow for the year that one could see now as a run rate?

Between last year and this year, I think last year, we received about INR 400 crores. And this year, we have already received about INR 700 crores, so...

And with the new products of DRDO coming into productionization, we feel that this will continue.

The next question is from the line of Deepak Poddar from Sapphire Capital.

Yes...

Mr. Poddar, we are unable to hear you.

Am I audible now?

Sir, your voice is breaking up.

Now it's better? Hello?

Sir, slightly better. Please proceed.

Yes. Just a clarification, sir. I mean you mentioned INR 300 crores and INR 500 crores is our execution target for this year and next year, right?

Yes, INR 500 crores, like I said, year '25-'26 is the target. That is -- this year is INR 300 crores is our target. It depends. If we can execute some of them pulling this year, it may exceed that also.

Okay. And INR 500 crores, you are saying about FY '26, not FY '25?

Yes. '25 itself, I think we can reach.

The next question is from the line of Koushik Mohan from Ashika Institutional Equities.

Congratulations for the great set of numbers. Sir, my -- I'm a bit not convinced on this number because we have seen from the last 15, 16 quarters, if I look at our employee cost, day by day, we had a peak of around 35% of our entire total revenue, but now it comes out to be around 18.5%. Can I get some clear clarity or understanding on this? Like why are we reducing -- what is playing out our employee cost is going down? Are we reducing on what basis?

See, our -- earlier, if you go back in the history, we were industrial explosives manufacturing company where most of the operations, the detonators, detonating fuse and all those were manpower intensive. So we had larger manpower, which is permanent employees with larger pay package because of the long experience and service. It's a 40 years old company. Now the employees, workmen and also they have reached retirement stage. As they are retiring, the numbers are reducing. But we are now shifting more and more towards defense products and all those where the manpower requirements are less, we are not recruiting. We are rather using the people effectively and train their experience and all those, rather than recruiting fresh people. Now the recruitment is more towards the educated and the skilled employees rather than the workmen and all those. So that has brought this change.

Okay. Sir, another question is on -- like are we able to maintain these margins going further? Like our operating margin has been around -- currently around 28 percentage in this quarter. Can we see the growth? And can we maintain this overall next till we reach our INR 500 crore mark in a couple of years on the top line?

I think the margins should be good, but it is not that we can commit on 28%. This is good because it depends on the product mix. It depends on the...

Quarter-to-quarter, it varies, depends upon the delivery of the goods. It's not just...

Then what is our normalized margin, sir?

Earlier, we have indicated normally, we will be maintaining around 18% to 20% EBITDA. That is, yes, definitely commitment. But beyond that, yes, depending on the deliveries and fresh orders coming and how we execute, it may go up also.

Got it. Got it. Sir, I have another last one final question. Sir, if we see the full -- our annual report of March 2023, we have paid taxes of INR 1.91 crores. But we reported around INR 4 crores as our tax expense in our P&L. What is this majorly difference is coming? Because I can't find any deferred numbers in the balance sheet. So some light over here on this number, clarity?

Sorry, you are talking about deferred taxes, right?

Yes, sir. Yes.

No, it is related to the calculation, which is there is -- there was -- some MAT liability was there. There was some calculation.

Sorry, VAT liabilities were there?

MAT, yes. MAT. It came in the MAT liability.

Okay. Okay. So that's the reason. MAT liability is the major reason. Okay. Got it. Sir, and how about our order book, sir? We can see that our order book is break up with defense of around 84 percentage. So are we also -- going further in a couple of years down the line or the 4 years, 5 years down the line, is the defense order being in such a dominant position in the order book?

Yes, it should be.

It should be. Okay. Something around 75%, then can I assume it's something around like that?

Yes, more or less. If you see even last year also, you can see 70%, 75% [ within '26 ].

[Operator Instructions] We'll move to the next question that is from the line of Santanu Chatterjee from Mount Infra Finance Private Limited.