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00:00 And Amit Mahajan, Director of Technical and R&D,

00:02 Powers, Defense and Space Technologies,

00:04 joins us on the show.

00:05 Amit, good having you.

00:06 Thanks for joining in.

00:08 Good afternoon.

00:09 And while it's been a year which has been--

00:14 well, from the promise that you give,

00:16 maybe a bit flattish, 10-odd percent growth,

00:19 it's quarter four which is intriguing,

00:21 because you've shown, let's say, growth

00:25 to an extent on the top line, not that great but there.

00:30 But the margin squeeze has been very, very sharp.

00:33 Now, what's led to this, Amit?

00:36 Firstly, good afternoon.

00:37 And thank you for--

00:40 your analysis is absolutely correct.

00:43 All the reasons for this, I would

00:45 like to mention it very startlingly,

00:47 is all positive reasons.

00:49 Why?

00:50 One is the defense engineering, if you see,

00:54 has outperformed themselves.

00:55 There are two verticals, optics and optronic systems

00:58 and defense engineering.

00:59 So defense engineering has taken 73% on our revenues,

01:03 wherein optics and optronic systems have gone down to 23%.

01:06 The primary reason for this is one particular product, which

01:10 is a very high-value product, which

01:11 is supposed to go in Q4, will now go in Q1 of this year.

01:16 Now, this shift has hampered the revenue, the total revenue,

01:21 also the revenue percentages, and also profitability,

01:24 because that is--

01:25 optics and optronic systems contribute largely to my problem.

01:28 So this is the reason why I say it's positive,

01:30 because if you ask me defense engineering team,

01:32 they are rejoicing because they have outperformed.

01:34 They've done much better than the last.

01:36 The second reason for slightly lower profitability

01:39 is because there are two.

01:42 One is we have augmented our employees.

01:46 The employee cost would have gone 30% higher.

01:48 And that you can see in the balance sheet.

01:51 The second is the Antitron Systems subsidiary of ours.

01:56 We've invested heavily in the R&D part.

01:58 They're coming out with some wonderful products.

02:01 All of the revenues we'll be able to see

02:03 in the coming year onwards.

02:05 But till last year, all that we've invested just

02:08 is like a loss.

02:09 And those loss gets carried forward to the parent company.

02:14 And hence, in console, you will see a lot of loss effect

02:17 of the subsidies, where the expense is happening on the R&D,

02:20 but the revenues aren't being done.

02:22 So I consider all of this as positive effect.

02:26 You will be able to see the positive effect

02:29 and the positive results in the coming days.

02:33 Amit, OK, and thanks for the clarification.

02:37 Just some questions out there.

02:39 This is Neeraj here, of course, with me, my colleague, Harsh.

02:42 But when I look at what you've done, not just in quarter four,

02:47 so first question, are you saying

02:49 that because this didn't get executed in quarter four,

02:51 but will get executed in quarter one,

02:54 operational metrics or margins could

02:55 revert to much higher numbers than the 20% for the quarter?

02:59 Part two of my question is that when

03:02 I look at the last two or three years,

03:04 your operational margins have dipped from circa 30-odd

03:10 to circa 20-odd.

03:11 Do you envisage margins going back to those levels?

03:15 Or that may not be the case?

03:20 OK, so the dip has only been in the last year.

03:23 If you see the last couple of years,

03:24 we've kind of sustained our margins.

03:28 And I would also want to mention that the sustenance of margin

03:31 also, if you ask me, is on the conservative side.

03:34 Leave aside the dip.

03:35 The dip is not envisaged at all.

03:37 But the events, like I told you, they affect the margins.

03:41 When I'm saying this, in the coming year,

03:43 I will not only sustain the old margins,

03:46 but I might slightly do better.

03:49 You mean 30-odd percent level ballpark?

03:53 Between 28% to 30%.

03:54 Between 28% to 30%.

03:55 OK, and you believe that for the year at large,

03:57 you could be between 28% to 30%?

04:00 Starting from quarter one?

04:02 Do not look at us as quarter company.

04:04 Got it.

04:04 Yeah, of course.

04:05 But I'm just trying to understand.

04:06 Quarter one looks very, very good.

04:09 But I don't know how the remaining three quarters are.

04:11 OK.

04:12 But on an average, you say between 28% to 30%.

04:15 OK.

04:16 All right.

04:18 OK, so Amit, could you just give us

04:20 a perspective on optics versus defense?

04:23 What are the margins like for each of those?

04:25 Defense trades at a margin of 20%, 15%, 20%.

04:33 And optics trades at a margin of 30-plus percent.

04:38 So--

04:39 Understood.

04:39 And with this new vertical of--

04:43 possibly it's part of defense itself, drone,

04:46 what kind of margins and what kind of contribution

04:49 will it have to revenue going forward?

04:52 With the drone and the anti-drone,

04:53 these are two subsidies of the company.

04:55 And they independently operate.

04:58 The drone market, yes, is having a good set of margins

05:02 somewhere between the optics and the electronics vertical.

05:07 The anti-drone system, when it starts kicking up,

05:10 it will come closer to the optics margins

05:13 because they are highly valuated, quite complex products,

05:17 but very good margins.

05:22 OK, OK.

05:22 And what's the visibility like going forward

05:29 in terms of opportunities and order wins

05:31 and the book that you currently have, just in terms of size?

05:36 So if you look at--

05:37 Paras has been blessed with a solid order book.

05:40 And the smiles on my face--

05:43 and I want people to draw positivity out of this--

05:46 is the company has strong order book,

05:49 has a funnel which is in excess of 2,000 crores.

05:54 And when I'm saying strong order book,

05:56 it is in excess of 600 crores already.

05:58 I'm not even counting the orders which are L1.

06:01 And they are in the pipeline.

06:02 They are yet to come.

06:03 I'm not even talking about that.

06:05 So the business front is very, very strong.

06:10 Yes, we are going from component business

06:12 to a product business.

06:14 This leads to a higher value added value per product.

06:18 And if that product, for some reason,

06:20 which is not within the control of us or our customers,

06:23 some third party reasons, this can just--

06:27 they don't know what a quarter means, right?

06:29 So this can go from Q4 to Q1.

06:32 And that can have this effect.

06:34 We need to wait till it settles down.

06:37 But the coming year looks good.

06:39 Understood.

06:40 So let's look at it annually.

06:41 What's the kind of compounded growth you are looking at?

06:45 Because you've got such good visibility

06:47 in terms of the order book.

06:49 What's the growth like in terms of compounded growth

06:52 over the next one to two years that one can expect?

06:55 I am going to be very, very conservative,

06:58 because I have not done what I should have been doing

07:01 for the last two years.

07:02 So I will still maintain 20% to 30% as growth.

07:06 Even if I say 30%, it's still going to be conservative.

07:09 So 20% to 30% is the growth that I want to give a guidance of.

07:14 But [INAUDIBLE]

07:18 Understood.

07:18 And optics versus defense, what's

07:20 the mix like in terms of order book mix?

07:22 If you can quickly--

07:23 Order book is 50-50.

07:24 Order book is 50-50.

07:25 Understood.

07:26 Understood.

07:27 Yes.

07:28 Orders are yet to come in, which we

07:29 expect to come any time in this financial year.

07:32 So the order book shall go slightly inclined

07:35 towards optics as the year progresses.

07:38 OK.

07:38 So, Amit, one final question from my end.

07:42 What else is happening?

07:43 Because you've spoken about anti-drone and drone

07:46 systems for the last 12, 18 months.

07:48 They have now come to fruition.

07:50 What else is in the offing, something

07:52 that you can disclose which could be a big part of what

07:54 Paras will do over the next 18 to 24 months?

07:58 I wouldn't say 18 to 24 months.

08:00 Yes, we've brewed the coffee long enough for it to now--

08:04 it's the time for us to sip.

08:05 But if you take me beyond, say, 36 months,

08:09 if you look at the Quantico Technologies,

08:12 a subsidiary, 100% of our own subsidiary of Paras,

08:14 which we have formed recently, if you look at that,

08:18 then quantum communication is one area

08:20 that Paras will be entering to in the near future.

08:22 That is going to take Paras defense over and beyond that

08:26 we have ever thought ourselves to be.

08:28 So this is going to be the game changer for the company.

08:31 Along with that, the JV that we have with Contro,

08:34 which is the world's number one UIR company,

08:38 this will start making good inroads

08:41 into the Indian business.

08:42 In the coming future, you will be

08:44 able to notice that this particular JV will back

08:48 some real nice good orders.

08:50 And obviously, a large sum of that business

08:53 will be brought back to Paras defense

08:55 because Paras defense will contribute

08:57 to the indigenous content of whatever Contro Paras does.

09:00 So it's a good amount of mix that we are looking at.

09:06 And this will propel the company into a solid UIR company, one.

09:11 And second, it will also propel us

09:14 into quantum communication domain

09:16 where you won't find many people around the globe.

09:19 Well, we wish you all the best for that, all the process,

09:23 per se, and maybe in a couple of years' time,

09:26 we'll be able to maybe talk about numbers, too.

09:28 Who knows?

09:29 You said 36 months.

09:30 Let's hope it's sooner.

09:31 Thanks a lot, Amit, for joining in today

09:33 and giving us the perspective.

09:34 [MUSIC PLAYING]

09:37 (electronic music)

Paras Defence: Order Inflow Outlook | NDTV Profit

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