00:00 time that we talked to Zen Technologies and now a couple of things have happened. They've received
00:04 a small yet presumably a significant order from the overseas market. The questions of course would
00:10 be around whether this sets the ball rolling for some more to happen of that nature. So that is a
00:15 development that happened recently and something that just happened a couple of days ago is that
00:21 the company signed an MOU if I'm not wrong with the government of Goa for an R&D and a manufacturing
00:28 facility. To talk about this Mr Ashok Atluri Johnson. Mr Atluri, thanks for taking the time
00:32 out. Hope all is well. Yeah, thank you so much. Let me start off with this agreement that you
00:39 signed. The last time that we spoke sir, you spoke about how you are in good stead for the contract
00:47 manufacturers that you already have up till a revenue of 2000 crores and you won't need
00:51 additional manufacturing. Now you've gone ahead and tied up for an R&D and a manufacturing facility
00:58 something that you don't do per se. What's happened here? So one thing is that we are looking at
01:06 increasing the scope of the products. That is the first thing that we may be adding some other
01:10 scope of the products and the second thing is that one of the customer was insisting on some
01:15 kind of a de-risking of the geographical risk. So everything is at one place. So they were
01:21 asking for a giga and this could potentially turn out to be very large order and we saw that most
01:27 of the large players were asking for this that we need some kind of a
01:33 geographical de-risking and having a second. Again, in terms of we're not doing
01:40 any aggressive investment except that the building facility and building up
01:47 the ecosystem around us which can help us in executing the orders. So our facility is not
01:53 the investment is not much per se but the ecosystem of the supply chain
02:00 is also in a lot of people who are working with us. They are also keen to having a second facility
02:05 there. So this is mostly for the geographical de-risking and some new products that we have in
02:09 mind. So effectively instead of doing it at one geography in India, you're now wanting a base for
02:15 a second geography as well. That's right. This has the potential to become a larger facility than
02:20 what you will start off with eventually? Yeah, it will be quite significant facility. I think
02:26 it will be at least as large as what we have in Hyderabad. In terms of R&D or in terms of
02:32 manufacturing because I thought manufacturing you don't have an in-house facility yourself.
02:36 So it is basically this will be an integration facility like we have in Hyderabad.
02:42 We do 85-90% of the manufacturing outside. So we will be having ancillary industries around us.
02:48 There are a lot of already people are there who can do it and there are additional spaces where
02:53 we are talking to our supply chain who wouldn't mind moving in there in addition to Hyderabad
02:59 and Bangalore and Pune. So this will be mostly integration facility for us. The manufacturing
03:05 will still be done by the supply chain that we have. I get your point and I heard you say that
03:09 you're not making a very large investment but in the same breath I hear you say that this has the
03:13 potential to be significantly large. How is that happening? Significantly large in terms of
03:18 turnover the way we are doing in Hyderabad. So yeah, that's what I mean by significantly large
03:24 contribution turnover. Got it. Mr. Atul, the other point that with related to this particular thing,
03:33 I heard you saying one of your answers then one large customer and some other customers have also
03:39 spoken about having a newer geography moving away from Hyderabad predominantly and I heard you say
03:45 that this has the potential, this large customer there is potential because of what you've just
03:50 done in Goa for that order or new set of orders from that customer to be significantly larger.
03:56 I'm not asking for a number but some color on how does something like this move? So this is
04:03 an overseas customer and they were insisting on this and so if it happens it's almost going to be
04:12 a continuous kind of order. The orders will keep coming, they'll last for a couple of years.
04:17 So we understood their requirement and the Goa government has also been very aggressive in saying
04:24 that if you are showing the facility and they were saying they really laid out the red carpet,
04:30 they're very pro-industry. So we expect overall the customer's requirement and our geographical
04:36 de-risking strategy met with the Goa's welcoming attitude. Got it and by very large, I mean,
04:43 are you in a position to guesstimate the numbers or you would want to leave that? No, I would not.
04:47 It will be premature and I mean, again, there is always a possibility that it may not happen. So
04:54 it's premature to say anything more than that. Got it. The last time that we spoke the other
04:58 aspect and I'm referring now to the order that you won from overseas. I hear you say that this
05:04 is also an overseas customer who is kind of urging you to do a facility in Goa and you had mentioned
05:09 the last conversation that there are a lot of overseas conversations happening for order wins.
05:15 Now tell us a bit about it simply because defence is in the thick of things today after Prime
05:20 Minister Modi's sortie as well. So tell us what about the overseas aspect of the business and
05:26 what about the domestic aspect both? So overseas, there are unfortunate developments, whether it's
05:35 Ukraine or Middle East or Armenia, Azerbaijan. So earlier there was a thing that it is war or peace.
05:44 Now the realization has come, it's going to be war and peace at the same time. So how do you keep
05:50 prepared, fighting the wars on one side and keep preparing during this time for thing. So the
05:56 training aspect has become very, very, very, very important. And export, we in the overseas market,
06:01 you can see almost a sense of fear, which is there, you know, what's going to happen next.
06:05 So yeah, and domestically, of course, the you know, the chief of the army staff, actually,
06:09 in one of the remarks he started when he then there was a conclave, defence conclave, he remarked
06:15 that, you know, we have some when somebody asked about simulator, he said, the simulator is becoming
06:20 major focus area, and they have just started, and it's going to be implemented across all domains.
06:25 So Indian Army is going to be big in simulator, and of course, counter drone are the
06:29 real, real requirement. I mean, that's the most frictionless product in our history. So people
06:33 are really coming and it's completely indigenous technology. The Indian armed forces are really,
06:38 really seeing very deeply, just seeing through the code, seeing the hardware, whether it's
06:44 really Indian or not. And only then they're playing, which is good news for companies that
06:48 are actually not, you know, reselling the product, but actually developing Indian IP. So you know,
06:53 we stand in a good stead at this point in time. I'm guessing it's music to ears when you hear
06:58 the words IP, because that's what you specialize in per se. Yeah, I mean, you know, I actually,
07:04 again, the thing is, it's strange that it took us so long to focus on the IP, because again, IP,
07:12 you know, this, when we talk about iPhone, it's $245 out of the bill of material $5 in Foxconn,
07:17 which is $750 is the value captured by the IP, you have not been talking about it, you've been
07:22 talking about making manufacturing in the island. So I'm very, very happy when they talk about IDDM
07:27 and IP because that is where the soul that is where the Microsoft and Google's are created. So
07:32 you know, I think we are on the way, the thing is started, I think it's just the beginning of
07:37 the inflection point. Got it. I have one final question. And we'll talk about you know, how you
07:42 think about multiple years, maybe, maybe when we talk in the April to June quarter, because by then
07:48 your year would have ended. But I would still just urge you to tell me Mr. Kloody in brief,
07:52 as things stand as Zen technology sits right now, from where it has been, to where you envisage it
07:59 to go, you've given me numbers, then you've told me last time that you'll be doing injustice to
08:04 yourself if you don't touch numbers of maybe 10x your FY 24 revenues in the next few years. So the
08:10 numbers I know, I'm just trying to think of the internals, the return ratios, you know, return
08:17 on capital, ROE, etc. The value of the IP that you create or the value that you create with Zen
08:21 technologies itself. How do you think about those aspects when you think of a five, six year
08:27 picture of where Zen would be? So you know, one thing is that we do expect some, you know,
08:35 inorganic acquisitions will happen in the next couple of years. We also think that the IP there
08:41 will be more research being done. And the research of the past years will start showing results as
08:47 we go into the couple of years, it's a continuous process. And this will also because of the focus
08:53 on IDTM, this will also give us a huge, huge, you know, push not only in India, but overseas also,
09:00 I think both domestically and internationally, we will be a dominant player definitely in 9.4,
09:04 we are already, we expect to go into the antitrust system in a big way, but probably a couple of
09:12 other verticals also as we go ahead in the years to come. Are you in a liberty to talk about them
09:19 right now? Or would you do it once you? No, no, no, it's a bit early. But you know, I think
09:22 in a few months time, definitely we'll be hearing on this from us. Okay. Last question is 42 crore
09:28 order. Sorry, I kind of sidestep it completely. I went into a macro question when I was talking
09:32 about that. But explain to us the significance of this 42 crore order. It's not very large in
09:36 terms of numbers now that you have an order book, which is very high, but is it significant still?
09:40 It is very significant in the sense that this is, you know, I mean, apart from the fact that,
09:45 you know, the country which is buying is buying world class product, this has been this has a
09:50 huge active support from the Indian government. So, we can see that many such push in various
09:58 countries, similar countries is being done by government of India. And we think this, you know,
10:02 trickle will probably turn into a flood in the next couple of years. If our guess is right.
10:09 Well, we wish you all the best for the flood to be a tsunami. Mr. Atuluri, thank you so much for
10:14 taking the time out and speaking to us. Thank you so much. Thanks for tuning in.
10:27 Transcribed by https://otter.ai
10:29 [BLANK_AUDIO]
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