Data Patterns (India) Ltd

NSE:DATAPATTNS

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Data Patterns India Limited Q1 FY '26 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded.

I now hand over the conference to Ms. Monari Jain from Go India Advisors. Thank you, and over to you, ma'am.

[Unknown Analyst]

Thanks, Par. Good morning, everyone, and welcome to Data Patterns India Limited earnings call to discuss the Q1 FY '26 earnings. We have the senior management of the company on call, Mr. S. Rangarajan, Chairman and Managing Director; and Mr. Venkata Venkatachalam, Chief Financial Officer.

We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that company faces.

May I now request Mr. Rangarajan to take us through the company's business outlook and financial highlights, subsequent to which we can open the floor for Q&A. Thank you, and over to you, sir.

[Srinivasagopalan Rangarajan, executive]

Good morning, ladies and gentlemen. I'm pleased to welcome you all to our Q1 FY '26 earnings call. I hope you had the opportunity to review our earnings presentation, which is available on the stock exchanges and on our website.

Before Venkata takes you through the financial performance, let me start by sharing some key updates and strategic commentary from my end. We have delivered a reasonable start to the year despite some delays in customer approvals that impacted the pace of revenue recognition. Nevertheless, the quarter has met our expectations. Our order book now stands at a strong INR 1,079 crores with more than INR 320 crores of orders received since the start of the financial year, including some orders from BrahMos and MOD. Our export order book remains healthy at about INR 100 crores, and we're seeing increasing traction from international markets. Post the operations [indiscernible], we are witnessing heightened urgency from the government to procure and deploy indigenous defense equipment, some of which aligns well with our capabilities. However, to participate meaningfully in such opportunities, it is critical that companies have fully developed products and complete internal trials before submission. This underscores our strategy. We must build first to be eligible to win.

At Data Patterns, we have consistently invested ahead of the curve to expand our addressable market, especially in areas where there are no existing domestic products. Our goal is to identify these opportunities, leverage our core competencies and develop differentiated capabilities that give us a sustainable edge. We remain deeply committed to R&D and product development. We already deployed over INR 120 crores in the new product development activities with the focus on building indigenous capabilities across radar systems, electronic warfare, communicate systems and air bond systems.

Our continued efforts in the product development have resulted in products of international quality. We are optimistic that these products will soon be tested and potentially lead to bigger contracts. These initiatives align with our long-term strategy to scale our total addressable market, and we're doing that with discipline and foresight. At the same time, we remain unwavering in our focus on profitability and value creation to our stakeholders.

To conclude, the environment shaping up positively, both domestically and globally. Our pipeline is strong and the content of achieving full year growth guidance of 20% to 25%, revenue growth while maintaining healthy EBITDA margins to the 35% to 40% range.

With that, I'll now hand it over to Venkata to walk you through the financials in more detail.

[Venkata Venkatachalam, executive]

Thank you, sir, and good morning, everyone. Let me take you through the financial highlights for the first quarter of FY '26.

Q1 FY '26 revenue stood at INR 99 crores, down by about 4.6 percentage year-on-year due to customer approval-related delays that deferred dispatches and revenue recognition. Cost of goods sold declined by 30% year-on-year due to favorable product metrics. EBITDA came in at around INR 32 crores with margin at 32.3 percentage, showcasing operational efficiency even on a lower top line. Net profit stood at INR 25.5 crores with PAT margin at 25.7 percentage, highlighting our continued focus on profitability. We expect pickup in the execution and revenue growth from Q2 onwards backed by a strong order book and visibility. As mentioned earlier, we remain firmly on track to meet our stated guidance of 10 to 25 percentage revenue growth.

With that, I now open the floor for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Dipen Vakil from PhillipCapital.

[Dipen Vakil, analyst]

Sir, my first question is on the lines of -- so this quarter, out of INR 183 crores of order wins, majorly, we have on orders on the AMC side or services side of contract. So can you tell us more about this contract in terms of their execution period and the cyclicity? Or when we can -- how is the ordering pattern for the -- whether they are awarded earlier? So can you give us some -- shed some more light on these orders?

[Srinivasagopalan Rangarajan, executive]

Main AMC contract we received is from BrahMos. This is for our 5-year AMC, but it is period at AMC from -- starting from last January. I think January or March. February. So this is -- normally we do the AMC 3 years to 5 years for promotion. This is a 5-year AMC contract, which is billable yearly.

[Dipen Vakil, analyst]

Okay. So we can expect similar contracts to come in every 5 years or every year?

[Srinivasagopalan Rangarajan, executive]

See what happens is this 5-year contract is orders executed. And post warranty, these contracts have come for what we exited earlier. We also have orders for additional BrahMos deliverables this year. We're also expecting additional demo orders because more orders are now coming from BrahMos from airports and Navy. So those back-to-back orders we expect also from Data Patterns. We also expect seeker orders. So it's a question of older orders, we get AMC. As and when the new orders come and their warranty period is lower, we again get an AMC. It's a comprehensive AMC we get from BrahMos. It's been going on for now.

[Venkata Venkatachalam, executive]

And there are some few products where warranty is still continuing. So once that priority is completed, we will get AMC contracts on those systems also.

[Dipen Vakil, analyst]

Got it, sir. Sir, and talking about the order pipeline that you also mentioned that there's a strong order pipeline right now. And also recently, government has granted an for a fire control system for BrahMos. Sir, possible for you to give us that out of INR 2,000 crores to INR 3,000 crores of order inflows that you're expecting in 18 to 24 months, how much of -- can we achieve more than INR 1,200 crores in this year, which will help us to sustain like the decent execution visibility going ahead? So can you give us some more clarity on that?

[Srinivasagopalan Rangarajan, executive]

The number of contracts which we're executing, which we expect, there is rollover of this mini contract. This is still not we got the order. The ago an order. Back-to-back discussions are on, we expect the contract maybe in the next 3 to 5, 6 months' time. That also should come this year. There are a number of contracts, which are for airborne radars, which we've done development. These also are expected to fructify in the next 5, 6 months' time. Similarly, we have a list of this kind of what we call auto pipeline and where we are a single vendor. So the contracts are supposed to happen. We believe in the next 6, 7, 8 months probably before end of the year or early next year, we should get some INR 1,000-plus crores orders.

We are also on -- the other thing, we've also done development -- product development using the funds taken from the market. These are all mature, getting to maturity. We expect there will be some development contracts for these orders for flight testing. So we have a list of such contracts. I don't know whether I can tell you exactly which line item of notional value it's going to be. But the order pipeline of this INR 1,000, INR 2,000 crores, you're talking about are INR 2 billion to INR 3 billion. It's all based on those kind of contracts.

[Operator]

The next question is from the line of Hardik Rawat from IIFL Capital.

[Hardik Rawat, analyst]

My first question would be with regards to the delays that you mentioned. So sir, could you please tell us exactly which orders have faced these delays in customer testing? And what will be the quantum of slippers in revenue recognition that we've seen in the quarter?

[Srinivasagopalan Rangarajan, executive]

I don't want to name customer and value. Value, I can tell you around maybe INR 27 crores. But they just started testing now. Last 10 days, the work has started. Customer acceptance has started. So if this goes on properly, we should be able to build it in the coming quarters. But this is what is planned at least every quarter. We plan to bill it this quarter because of inspections getting delayed substantially, we are not able to do this for the last 1 year. But it inflation has started now. So hopefully, that will get billed probably this quarter.

[Hardik Rawat, analyst]

Got it, sir. another question was with regards to your commentary on the order inflows. Now your comment is quite encouraging. And it would be a fair assumption that roughly [ INR 15 billion ] plus worth of order for the full fiscal is something that we should be looking at, [ INR 15 billion to INR 20 billion ] on an overall basis?

[Srinivasagopalan Rangarajan, executive]

There are contracts likely to happen. But unfortunately, we are not able to cover the exact time of the contract now because there are some delays happening which is beyond our control. But yes, [ INR 15 billion ] can happen, maybe slightly less or slightly more, but it depends on how government really goes these kind of products.

And more than -- other than what we've already done, there are other products which are going to MOD FET. This is what called part of the tender is going through a field evaluation trials on EW. There are a few products involved in EW. We successfully crossed on EW product. So we expect that end bit to be open. Hopefully, we will get the order. And some more are in pipeline next month, this coming month and next month, more or -- these are all products which is 100% designed in-house vis-a-vis other companies which we import and integrate has been designed in-house. We expect some traction in EW programs on [indiscernible] and ground systems. So there are requirements like this.

Similarly, requirements of single tethering for a warning receivers, which is going to be airborne for [ Super 30 ] and other platforms. Those are also expected. So timing may vary now and then. But other than the pipeline, which we've talked about, the new requirements of MOD come up because of this operation Sendur, and we're also participating in those kind of contracts now. We probably started about 2 years back developing these products, truck-mounted systems. So the specifications are meeting, and we are continuously improving specifications to see that we meet the international specs and meet the customer requirements.

So we expect some more contracts in those areas also. Plus the -- our seeker for BrahMos has successfully right tested. We expect some contracts to happen in the next coming months. And after that, once that is delivered, we're talking about some 100 systems, et cetera. Most of the seekers now -- all the seekers now are imported seekers for BrahMos. The idea is to make this indigenous. If this happens now, I expect a substantial increase in order as we go around in the coming year.

[Hardik Rawat, analyst]

Got it, sir. Sir, speaking of as BrahMos, what would be sort of a value of orders that we could see, say, for example, [ 100 ] of these systems get -- assuming that we receive that order, what could be the potential order size?

[Srinivasagopalan Rangarajan, executive]

It's a bit premature. Let me get closer to it. First, we'll get the development order executed. And then towards nearing the date, we'll be able to tell you the size of order because I don't want to predict the value business before inquiry comes from BrahMos. That will not be correct. So I can only tell you it would be substantial. And these are all the things which will give me yearly -- see, what we're trying to do is you can't have a 1-year contract order book for that -- that does not augur well for different agencies, especially on capital goods. We need to have at least 3, 4 years of order book. And then only we can invest in scale. We are doing the Ulta here in India because you need to have products and to address the market, we are actually putting our money and developing hundreds of crores or putting money and developing and getting the products online, then going through evaluation trials and things like that.

It's a very hard way of growing. But the only way accessible to us. Otherwise, it just only collaboration. So we have taken the hard root and going through what we think we are competent and where there are no such product available in India, so we're trying to be unique in that and building products and putting our money and effort on this. So it's a different strategy with what we're doing. And I think it will pan out in the next 5, 6 months. You'll see that some traction is happening in all these areas.

[Hardik Rawat, analyst]

I appreciate it, sir. Sir, one last question before I get back to the queue. Our employee cost has seen a 27% Y-o-Y escalation. Just wanted to understand what has driven this? Is this headcount-driven or simply weight inflation?

[Srinivasagopalan Rangarajan, executive]

No. It is headcount-driven. There is wage revision plus headcount-driven. Suppose we won from the [ INR 700 crores ] to be a pioneer company in the next, let's say, 4 years, 5 years. we need to do not just the products. We are building upfront products going to a flight test, ending qualified, so the orders can come in the next 2 to 3 years' time. Once you do that, you also need to have people to see that we produce the kind of -- we cannot scale like this. These are all complex products. And though we do automotive test equipment to produce them in numbers as we go along, the types which you do is so large, it is not the same type of product, which is done in 100,000 pieces. It becomes very simple. The types are so large and so many and all are complex. It is necessary to have quality people, train people to do this. So they start recruiting people, training them for their requirement as we go along.

The second thing -- third thing we are doing also is in trading infrastructure, production and anticipating these contracts to happen. So we will be spending now, so that we will be able to deliver in 3 years from now or 2 years from now, the contract happens and deliver. You can't deliver. Suddenly it takes [ 700, 1,500, 2,500 ]. It's not practical. We can't do it. They need to put in the infrastructure see the delivery model happens. So these are all consciously done and we are going ahead and investing in people and training. And that is how the cost is going up.

[Operator]

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

[Unknown Analyst]

A couple of questions, sir. The first one is on the -- if I look at the order inflow texture, so FY '24, '25 orders have largely been -- order inflow had largely beyond production side, but Q1 FY '26 has been skewed on services side. So just wanted to understand that whether this is the kind of pattern that we will see going ahead, also that services would be a major portion? Or it is just that certain orders have been delayed and we expect the normal order profile to be back to 70%, 75% of production? And whatever services we get, it will be, of course, plus or over and above that.

[Srinivasagopalan Rangarajan, executive]

See, it cannot be a service-oriented witness what we have because we don't have too many contracts actually delivered to customers. Order delivered today, mostly in the last 10, 15, 20 years has been to BDO. And that doesn't mature into a services contract or AMC contact later. Only when it goes to the actual users, several this contract starts happening. So this has just started or like was just started with the users. Direct deliveries to MOD, army, efforts is happening now. That will then mature into service contracts. So what you see in BrahMos in the long term -- in 2006, we've been delivering promote branches. So the service contracts happening with more and more BrahMos promote deliveries, more reverse content happening from that. It's one of the few contracts which is happening like this. Many more should happen, only once you put -- populate more hardware orders on the -- with the users. This will happen in the next few years.

So our main order book will be on actual delivery contracts as well as development contracts. But this year, I think from this year onwards, the development contracts have become lesser and we think the delivery production contracts will become more. They had a lot of development contracts earlier. This is all hopefully in the next year or so mature into production contract as we go along. And now that we are doing our own in-house development for MOD requirements, we expect direct delivery contracts to happen -- or production contracts to happen with the MOD.

[Unknown Analyst]

Got it. The second one is on the recent AON that was recorded for INR 67,000 crores. Now if we look at it, there are several items that actually fall within your purview. So any broad idea of TAM you would like to provide from that INR 67,000 crores? And also on the execution side, we saw that Q1 FY '26 was skewed towards -- so is it the kind of revenue profile that we will see during the year or to just in this particular quarter?

[Srinivasagopalan Rangarajan, executive]

I can't comment on the AON because what is real is will order those contracts, when you bulk it together, I won't be able to comment on it. We only look at contracts, which is accessible to us. So not just -- AON is published, we don't really look at it very seriously. So I can't comment on that.

On the second area, which you're talking about, it all depends on the kind of contract, whether it's the EL or HAL or ECL or MOD and depending on the timeliness of when they want the delivery to happen. So that depends on that. Not necessarily it will only be oriented or any other army is oriented. It depends on the mix of contracts that we get.

Ours is not a quarterly revenue business. That is why we are saying that towards the end of the year, a lot of contracts will get delivered towards the end of the year, maintaining our order we have position you've taken, a [ 20% ] growth. Actually, what I expect is the top line growth is further. My more on worry is on the bottom line. We wanted me there is a 20%, 25% bottom line growth is what we plan to do, that is where our focus is and also increase the scale of the business.

[Operator]

The next question is from the line of Jyoti Gupta from Nirmal Bang.

[Jyoti Gupta, analyst]

My question was on a similar line in terms of Bell. Two things that I wanted to understand was, one, is there -- while you have different platforms where you're actually delivering, is there a case where the margins I had anticipated slightly higher, is that -- are we getting lesser margins from Bell compared to other platforms? Or is it like this quarter has been a little bit of a washer?

Second is, you will be delivering the radars of the EW and that is it looks like high. But if the numbers for LCM increase for FY '26, which is likely to happen given the engines will be delivered on time. higher than what we expected, like we were expecting 5 LCAs, but I think we should look at something like a 7 to 8 LCAs this year. Will that not also help you improve your revenue as well as your profitability? Just your thoughts on that.

[Srinivasagopalan Rangarajan, executive]

Okay. On the first question which you had, you said our margins have come down. Actually, our margins have gone up. Gross margins have gone up to 80%. I thought we have done very well on the gross margin. Your profit talking about EBITDA. EBITDA is a different story because the top line comes down, expenses remain the same. So EBITDA comes down. But our gross margins have increased. So the profitability has actually increased, not come down. And this -- as and when the revenue goes up, EBITDA also will go up because that is a fixed cost to the company, which will go up. So I don't think we are worried about our profitability at the present moment. Whatever we're delivering over test doesn't matter which the organization is. The IP-driven products, our profitability has only gone up.

The point is the revenue has come down because of nondelivery in certain items because of customer acceptance delays. So that is what was explained earlier also. So that is actually the reason why we could not deliver what we want to deliver. But that is getting compensated next quarter. And some of the orders which we have taken a long lead time for manufacturing, design, development and manufacturing. So it doesn't fall in the quarter-to-quarter category. So this will happen during the course of this year. Larger orders, 1 order we've already executed last year. On large orders, [ INR 180 crores ]. We expect to exclude this quarter and next quarter.

So it's been 1.5 years kind of development time frames. Those take a lot of time to build. It's a very, very complex system, so to speak on time. So that is the first question. I think we missed our numbers.

On the second on LCA, we don't actually do much in LCA. We are doing the cockpit displays, and that is the one thing which we have on an order. They want more for the additional 97 and the inquiry has come. We've not quoted because what we already developed the deliveries have not happened. Also, our tracer picks up the delivery and paces then we will make quotes for other things. But we do have orders for the LCA [indiscernible]. We do the glass cockpit, which is called the large area display, [indiscernible] order. It's a very modern system, thinner system in the world like an F-35 that we'll be delivering in the next 3, 4 months' time. We do the mission systems for it. We held the order to do that. We expect that we should operate the [indiscernible] a lot more of our products, including the EW. LCA also, we had the EW, which is flying very well. But unfortunately, government decided to import it from data, radar. And Uttam Radar is not being considered presently under the change in things. So accordingly, because it comes to the package, we didn't get the hardware, though it is flying very well. But we will be considered for MACH 2. And we are also being considered for up for that.

So there are a number of such programs, which we're working on. But LCA MACH 1 we're not very sure really what is the level of contribution unless they take our new radars and port it to LC [indiscernible]. This is all on a discussion stage. I can't comment on it at present. But we're very, very bullish on the future. There may be 1 or 2 programs we are not in. But on an overall level, if you take, since you have done a lot of product development, we are very bullish about scaling the company and a contract beyond INR 5,000 or INR 10,000 crores in the next few years' time. That is where we are trying to reach our business.

[Jyoti Gupta, analyst]

Okay. Sir, I would like to understand one more thing on Jana port that you have worked on, where all is it being -- who have been -- I mean, which platforms are there being used? And what's the kind of order that we received on that.

[Srinivasagopalan Rangarajan, executive]

See, we can't receive an order. The government has no provision to place an order on private sector at the present moment, unless we go through an RFP and a proposal of RFI/RFP and open tender. However, important or needed the whole contract is for them. They cannot do this. But it is proceeding very well. We have developed the part which is going through air trials now, air trials meaning aerodynamic trials and the liquid coolant trials are all going on. It will be finished in the next 1 month. Our own methodology of jamming technologies, techniques is being tested. The hardware has been fully realized. That is being tested. Hopefully, in the next 1, 1.5 months, we could finish it.

We've also made an offer to Air Force to fit it into a [ S3 ]. They have taken it very positively because of the -- this is a self-production jammer, which is fitted to all the aircraft. It goes in the wingtips of both the -- both the wingtips and this degree jamming coverage. So since we have done this and they've seen it, they've taken a very positive view of order. Internally, they are discussing how to give us a bulk to do no cost or no commitment tiers. We believe the economic we should get clearance to accommodate [ Super 30 ] for us, that we do by flight trials. And once the flight trials are over, then the inquiries will start for flight tested equipment, we believe that there is no other company in India. Of course, BID is, they are already having a part, and that is also going to go to flight test.

So we'll have an alternative, and we believe we have done very good very modern, low weight, better aerodynamic part with more jamming efficacy, more power. So we believe we started to a very good chance in this. But we have to go through the results of flight testing. It will take us a year, 1.5 years to do this. Post that, the requirements are large. In January of this year, government has MOD escalate that for some [ 700 crores ] for the jammer, for the EW suite. We have the RWR. We have all the antenna. Everything on the jammer port plus the jammer port has been designed in-house. So we become automatically have player to be considered as long as we do the flight testing, and Air Force has promised us that they'll give us a [indiscernible] flight test.

So government is very positive on industry participation, industry-driven R&D. And after very being validation of the 5 systems in down, they're willing to even spend on flight testing on their own, which is a welcome difference in the last 10 years. So we believe we are very well positioned there. But for all this to happen, because this contract value is about INR 10,000 crores, requirements are there. So we believe that we are well positioned in it. But all this will take time for it to -- this is all the TAM I'm talking about, this upper money you're taking to develop. But it's -- we have done our end of the job. We believe that it will continue to do well. Probably another year from now, we'll be able to answer your question more clearly.

[Operator]

The next question is from the line of Krishna Doshi from Ashika Stock Services.

[Unknown Analyst]

While most of my questions have already been answered, I have a question that like right now, we just mentioned that the development contracts are going to go down while we are going to see an increase in the production contracts. So just trying to understand further how is it going to impact our margins?

[Srinivasagopalan Rangarajan, executive]

It doesn't matter what contract we take of development or production because our company normally funds the development of sets. So the price is given for the production value, only the prices given to customers even during development contract. So actually, we don't charge a nonrecurring development fee in most of the contracts we take up. So I don't think there is any difference between production and development in terms of gross margins.

And the second is, during production contract, there is also -- government compensates us for the U.S. dollar exchange rate and reputation. All this is also taken care of by them when a production contract happens. So typically, we don't think we have a problem between margins and contracts.

[Unknown Analyst]

Okay, sir. And is it possible to quantify like what sort of orders are we expecting when it comes to the emergency procurement? Like what will be the quantum of the orders that you are expecting?

[Srinivasagopalan Rangarajan, executive]

Very difficult to predict, ma'am, because emerging procurement has a bunch of requirements, and out of which some of them we can address, but these have to be demonstrated field development trials have to happen. And then you pass the field development trials, then you are -- the lowest court gets a contract. It's a lot of competitive bids. Most of the procurement contracts goes towards the PSUs or indirect imports to an Indian agent or made in India, some kind of a company.

We have our own designs that IP belongs us. In EW, we have done a lot of work. Similarly, some of the systems in avionics, their procurement is happening now, and we are participating in these kind of replacing imported systems with Indian capabilities. But what we will turn out in terms of contract book, I cannot tell you. And we are confident that EW some of things will be able to convert because we have done all the development in-house, so we should be costers is what we are thinking. But only when the commercial bids are open, we will be able to know. So I can't really detail out extent of value of contracts. This has to come quarter-to-quarter as and when we win the contract.

[Unknown Analyst]

Okay, sir. And just a last question. So it was regarding on the export side, now that we are seeing the NATO rearmament plan and as we already know, we are doing a substantial export to the U.K. market. So just trying to understand how are we going to scale up there? And is it that now we are seeing better opportunities in export also? Like earlier, I remember you saying that our focus is the domestic demand. Like are we now shifting our focus towards export?

[Srinivasagopalan Rangarajan, executive]

Yes, our focus still remains domestic because there's a huge untapped market. We import 80% of our defense requirements, various forms, though it is finally called Indian-made. A lot of systems, subsystems and that is imported. So the focus is to try where we have competencies in technologies and IP capabilities. We can differentiate on the rest of Indian companies. We would like to focus on that because there is immediate need and it's a long-term need to see that we can address those needs. So we will do that. But however, we don't want to -- not to look at export, we would like to look at export. But the NATO country, whatever you're talking about, those requirements is to scale up defense equipment, et cetera, they have a local supply chain. It's very difficult to break that supply chain to build available systems. And new technologies normally they try to do within their own country.

None other countries like to import defense equipment, different technologies. Nobody likes to import. Countries don't import defense technology of outside us. So what really comes down to company countries in India is manufacturing contracts to reduce their cost. That is really what happens though we do manufacturing also, our focus is not pure and [indiscernible] EMS line. We are an IP doing organization. So we try to build that value and then build and then sell. So where that is possible, we are trying to do that. Yes, in U.K., we've been doing some work. We expect that to increase. We're also trying to do some more work with the same U.K. company. They're transferring certain technologies in manufacturing. But these are value-driven products, not manufacturing for manufacturing per se.

Similarly, we are trying to also look at collaborations in certain disciplines where we can not only look at contracts abroad. But more importantly, these can get indigenized and mainly Indian company for Indian markets, we can produce them. So we'll get some opportunities. We have to expand our scale you go along, we had to put the marketing organization for , but this is a slightly longer-term goal, take us 3 years to put the marketing infrastructure and then average U.S. and European markets. But what we can do is once the products are done in India, full products are done by us. We can also sell to Far East Asian countries, other than Western countries, we can also sell the contracts in systems to. So there is automatically a byproduct of what we do in India and get exported because a lot of products are technically advanced and second to none. So we should be able to address the market, but that's going to take a bit more longer. First, we improved in India, then we can export it.

[Operator]

[Operator Instructions] The next question is from the line of Jay Jahan from [indiscernible] Asset Managers.

[Unknown Analyst]

Am I audible?

[Venkata Venkatachalam, executive]

Yes.

[Unknown Analyst]

So I just have one question. Like with companies like Astra Microwave working in RF microwave and radar domains, what are your key differentiators when competing for tenders? And how does it work exactly, sir?

[Srinivasagopalan Rangarajan, executive]

We also do RF microwave. We don't do only RF and microwave. we already also -- like them, we started like a subsystem and some part of the system. We're graduating ourselves to a complete systems company now. We have more than 100 mechanical engineers doing mechanical design on thermal structure. So we are putting people to design full systems on radar, signal casting, everywhere, similarly IP for EW, IP and radar, IP communication. So I think these are the differentiators. We are not on RF microwave alone. We do RF microwave also. That's not the only end to what we do. We want to build complete systems.

[Unknown Analyst]

Right, sir. Understood. But if you look at -- if I look at the competitor, like, for example, [indiscernible], take an example, they're also doing complete subsystems like in radar domains. And I just wanted to understand like how does this work in the tender system when you apply for the key competency that you have in the specific product? And like how do you win tenders for the same? Is it divided between the companies? And how does it work exactly?

[Srinivasagopalan Rangarajan, executive]

There are 2 kinds of business. One is it goes to end user, end user buys complete equipment, not part of the equipment. The second is you design it and send it to the development agency, which is BDO kind of organizations, where they design the system and ask the subsystems to be tendered out or components to be tendered out. All of us compete for the component subsystems. So whatever you are talking about will be applicable to the second part where you sell to or go to tender with DRDO and the component goes where the kind of business grows. Some of them goes because you have competency other people don't have, so they do similar the cases. Some of them open tender, limited tender and competition happens. So it depends on the end use, really.

We are trying to -- we worked with DRDO the last 25 years, I learned a lot from them and through contracts from them. Today, I think the time has come, not only to look at only DRDO markets. We also have to look at the MOD market, the MOD market now it's opened up to India. Just not 15 years back, not open to Indians, but they only want full systems. So our focus today is to build full -- if you want to build scale, you want to be a [ 10,000 ] crore company, it's going to be very difficult to do this by making components and subsystems. And it's going to take a lot of time. And everywhere, there is one more competitor who will come at a slightly lower cost, and you will still lose the business. And it also takes development, production takes a lot of time. So we decided that we will build a competency metrics and a product capability, build the product for the end user. This is the game changer, which is what we are putting a lot of money and development effort to.

So the company is changing from a component and subsystem vedor to a system vendor. So this is what's happening. So that is a change which you'll see in the next 2 to 3 years, how Data Patterns will be taking a complete shift in the way the business is done by us in the last 20 years to what we're going to do in the next 10 years.

[Operator]

The next question is from the line of [indiscernible] from Invest Analytics Advisory.

[Unknown Analyst]

Am I audible?

[Srinivasagopalan Rangarajan, executive]

Yes.

[Unknown Analyst]

First question is on the delay that happened in this quarter due to some customer approvals, you mentioned some trials that are going on. So my question is like we are saying that testing is that happening now. And at the same time, we are saying in Q2, we will start ramping up. So what is giving you this confidence that even if the testing doesn't result in execution in Q2, then we will be able to grow in Q2? That's my first question.

[Srinivasagopalan Rangarajan, executive]

No, I don't really understood what you've been talking about at all. Because what we talked about is orders, the delay -- delivers a single contract for the last 1 year, we've been postponing quarter-to-quarter because customer acceptance has got delayed. That is what we talked about. Now in our office and the acceptance is happening, products will obviously meet the requirement. It's a production order. It is not a development order. There's no development in this. Repeat production, which got to deliver first in 2005 is what we're talking in 2025. So only thing they have to come for acceptance. Without acceptance, I can't ship it. And that is why the delay has happened. They have been here now. As long as they continue to be here and acceptance goes on, till September, we should be able to dispatch what I said. It's got nothing to do with Q3 or Q4.

[Unknown Analyst]

No, actually, my question was a little different, but you understood. I'm just trying to understand, like you mentioned on Q2 onwards, ramp-up is going to happen, like we will be able to see decent execution, right? I'm just trying to understand like this quarter was affected by the customer delays and the delay is still continuing, so what is giving you the confidence that in Q2 onwards, we will be able to execute in a decent manner? Like is it any other projects that we are working on or any other contract that we will be delivering is what I'm trying to understand.

[Srinivasagopalan Rangarajan, executive]

Any contract, this can happen. This is the government of India. Any contract will happen. I have no control over government of India. So I can only answer the question as I see it today. Tomorrow, if the guys don't come for inspection, again, the delay may happen. I have no control. We believe it will not happen because there is an urgent need for them to develop. Already we are 2 years we have schedule in the early delivery, and customer is shouting, end customer. So hopefully, they will not put any spokes to deliveries from our side is what we hope because there's an urgency to pull from the customer, end customer. But whatever I say, finally, is government PSUs, they decide when they pick up a product, when they don't pick up a product. I can't be sure that this will happen. But at the present moment, whatever indications we have, I don't think they're going to have a problem in the next quarter 2, quarter 3. They enrolled our problem because they need their products urgently.

[Unknown Analyst]

Got it. And secondly, on the margin front, on a Y-on-Y basis, there is a slight dip in the margin. So I want to understand like what is the key reason for the same? And because we are still sticking to our annual guidance. So I just want to understand what is the key reason why, on a Y-on-Y basis, our margins are low?

[Srinivasagopalan Rangarajan, executive]

See, margins are governed by product mix. Sometimes we take contracts with very low margins or not on margins because we believe it's a long-term -- this product will have value to the company. I can create some IP, I can create an order book, which is going to scale multiple times and scale the company.

So based on some strategic decision-making, it takes some contracts with low margin. Ideally, we don't take most of the contract. We don't take with low margins because it is going to be L1 business. We are mostly not there in most of the businesses. We can also compete, but our focus is try to build more products with more IP-driven products, which is differentiated from rest of competition. And that is how we are trying to take contracts. So that is the first part.

On the second part, what you are talking about, year-on-year, it's come down. What has happened is the -- because of that 1 or 2 contracts, which is taken with lesser margins, say last year over last to last year, the PAT percentage or EBITDA percentage might have come down. But what has not happened if you look at is my overall PAT has gone up 20%, 21% as commented by you. So the PAT has gone up. The margins is a question of the mix of contracts which you have taken consciously to see where it adds value to the company. And if you look at this quarter, our gross margin is higher. But since the revenue is lower, the EBITDA margin is lower. That is what I explained in the first question to Philips. So that is where it is.

[Unknown Analyst]

And lastly, on the product side. In your annual report, this time, you have highlighted many new products. So I just want to understand, in the PPT also, you mentioned about some new products that are in the testing phase for which we will be able to get some orders. So I just want to understand on the product part, like these products is the data that on only 1 which has this kind of portfolio for these products in India?

[Srinivasagopalan Rangarajan, executive]

D As I understand it, yes.

[Unknown Analyst]

And's who are the customers for like -- can you give us the names of the areas we are taking to via these products?

[Srinivasagopalan Rangarajan, executive]

This is -- one is, let's say, fire count of radars, airborne. We are looking at upgrade opportunity in S53 and MiG-29 for Air Force and Navy. This can also go to LCA MACH 2, if they choose to buy it. But this is the decision, we can't decide for them. what we are pitching for this as and when the capability of the product is established, we'll pitch for it.

Similarly EW, again, for the upgrade contracts as well as the new aircraft, which is being designed in India, we can pitch for most of them. Why we pitch for the upgrade contracts and built products have been issue is that there is no single company in India who have a complete product, which can look at the upgrade. Point number two, the upgrade opportunities is a volume business, and that will be finalized in the next 2 years' time, 3 years' time, which is a substantive business, which is more than INR 10,000 crore to INR 15,000 crores. So when there is open market and the competency doesn't exist and the product doesn't exist in India in the private sector, we said we can do this. The other companies is to come in with international for foreigners. But foreigners will not work with the Russian companies, Western companies. So the market is then only to India. So the idea is also doing their own products in these areas because the Air Force has given them money, maybe has given the money to build the products to them. So they are in parallel doing this.

We are also in the industry, it's industry-funded -- our funded product development program, which we think that we'll probably build the product ahead and meeting the requirement and exceeding the specifications. So this is a kind of gambit we've taken and building products. So those are all kind of products which you see is unique to an Indian industry context, but not unique to government of India. India government is also doing what they're doing. But we are trying to orchestrate our systems against -- to see whether this can match their requirements, and we can get an order book which is substantial.

[Operator]

[Operator Instructions] The next question is from the line of Rupesh Data from Shriram Manager.

[Unknown Analyst]

I had 2 questions, 1 on BrahMos and 1 on MPA, Maritime Patrol radar. So on BrahMos, I heard you say that you have won some seeker order. The clarification I am looking for is, is this for BrahMos or is it for BrahMos engine?

[Srinivasagopalan Rangarajan, executive]

Okay. I'm not -- I think you missed my statement. I've not received the BrahMos seeker order. We had a seeker corder, which is tested now and proven successful. We expect -- we have some inquiries now. We expect the contract to happen in the next month or so. If once that this contract is done as a predevelopment contract or a production contract, we expect that production orders should also falling, which is sizable value. So we are focused on making it a success.

We already started development of those activities so that we can do an outstanding product for BrahMos seeker. And hopefully, we'll get a...

[Unknown Analyst]

But this is BrahMos or next-generation BrahMos ENGIE.

[Srinivasagopalan Rangarajan, executive]

BrahMos ENGIE is not part of Indian context at the person moment. We've not even signed any memorandum of understanding with the Russian government NG. So it is still not in the play, as I understand. Yes, [indiscernible] around, but I don't think we have it with us.

[Unknown Analyst]

But there is some -- I mean I read some news articles that in a couple of days, there is some manufacturing facility tender.

[Srinivasagopalan Rangarajan, executive]

I also read a lot of news articles. I don't know, 90% of these articles, I'm unable to believe. Although I'm in the same subject area, 90%, 95%, I'm able to believe. Every week, every 2 days, some articles are coming up. And I really don't know where the pickup the rate are real.

[Unknown Analyst]

Okay. So this is BrahMos gimbal ARH you're talking about? And any time lines you can give around these orders?

[Srinivasagopalan Rangarajan, executive]

Some initial order is supposed to happen in the next 1 month or 2 months' time, we are supposed to call us negotiations. And once we deliver this and qualify the system, then they said that they will place orders for production, may be a letter of when term to production also get placed along with this. We have to wait to watch what happens. Maybe 6, 9 months from now, we should be in a production order is what I'm thinking. Again, this is my guesstimate. It is finally BrahMos to decide, and it will happen. And when the approvals happen for the first lot, which we deliver.

But I think in that time frame, we should be able to do this is what I'm thinking. in the business we have is on the maritime patrol data. We have done our end of the work and given it to DRU. DRE is flight testing it. Flight testing is still not completed. Since flight testing is not completed, at the present moment, maybe is planning to import the radars from Metra. So that negotiations are on from HAL to Alta, negotiations are on now. We may miss the bus for the petrol radar because it is up to DRDO do when they will position the radar and the flight test in the Navy. If that is done in time, maybe it can get considered. But if they delay, then it will not get considered.

But what DRDO is saying is other than the Navy, it's also Coast Guard. And that also is likely to happen. But time lines is something which I'm not in a position to comment on.

[Unknown Analyst]

But sir, this MPA, this is in the context of which program. This is borne [ 228 ] upgrade you're talking about or LHI because that part is not clear to me.

[Srinivasagopalan Rangarajan, executive]

Dornier 228.

[Unknown Analyst]

So what you're saying is Dornier 228, we might have missed the bus.

[Srinivasagopalan Rangarajan, executive]

We don't know that. As of now, the contracts have not been placed. But until DRDO approves the product because we have only done the hardware there, they are putting the software and playing it. So unless DRDO approves it to maybe that all the flight tests are over and completed, it will not get considered. So we are all hoping that the flight test is improved.

[Unknown Analyst]

Okay. And then with these [ 30 ] of orders, which will -- that will be which platform subsequent some of that first got...

[Srinivasagopalan Rangarajan, executive]

[indiscernible]

[Unknown Analyst]

Okay. So first lot might have radar, the second lot onwards, there might be [indiscernible] radar.

[Srinivasagopalan Rangarajan, executive]

No, no, there is no first lot, second lot. One is for Navy. The second one is Coast Guard. So we don't know. Coast Guard, it's not an organization. So they don't have to take inputs from what maybe is done.

[Unknown Analyst]

Okay. And then my final question is on Metra, maybe Mark 1, Mark 2, all 3 programs, if you can give some idea about where these programs are, what is our contribution and when can we see some orders?

[Srinivasagopalan Rangarajan, executive]

Again, this is DRDO's decision who they pitched the contract to. We have flight proven ESM and that is EW. ESM and RWR already flight 4 and Metra. So for Metra 1 and Metra 2, if they consider it, that will become a contract for us. The rest of the subsystems is all on tender, radar and second radar all in tender, it all happens. So it will be L1 basis. So we will -- we don't pitch -- we will pitch for it, but we are not predicting any of those things because any contract which is L1, we do not know whether we'll get it or not. So we don't add it to the pipeline.

[Unknown Analyst]

What are the time lines? I mean, number of aircraft you can -- because I think -- I'm hoping after operations in your hopefully, there is more requirement.

[Srinivasagopalan Rangarajan, executive]

It's already 2 years since the program has been approved. Again, because of money sanctions, it has still gone back to CCS. Once CCS leaves it, it probably might be taken. I can't comment on time lines. It's best you talk to the government officials.

[Operator]

The next question is from the line of Rahul Jain from LionRock Capital.

[Unknown Analyst]

Can you hear me?

[Srinivasagopalan Rangarajan, executive]

Yes.

[Unknown Analyst]

I'm relatively a bit new to the company. You consistently mentioned a pipeline of orders of about INR 20 billion to INR 30 billion over the next 18 to 24 months the last few quarters. Is it possible for you to either kind of give some sense of what are the key programs one should be looking at to get a bit of sense of when those orders could come? Or the other way to look at it would be, obviously, India different budget is going, but is there any specific areas we should be following up on to get a better sense of the opportunity in plant of Data Patterns over the next few years from an ordering perspective?

[Srinivasagopalan Rangarajan, executive]

Okay. Second question first. We do not do pipeline based on the budgets, defense budget. It has got no relevance to us because that is a very big number. And we can't little it down to what really comes where we can address the market. So we don't look at those kind of numbers. The pipeline is made up of contracts, what we believe will be repeat orders based on contracts already delivered and proved, developed and delivered to customers. And we expect the repeat order to happen. So that is all based on what the previous release you've done.

So that pipeline is what we talk about and where the order should only come to us and not to anybody else, it's not competitive bids. But at the present moment, I won't be able to give you line item-wise because we don't have inquiries for them. The inquiries have to come, which will not preempt the customer. It's also sensitive information, and we won't be able to discuss it in public.

[Unknown Analyst]

Okay. But is -- like any -- I understand, obviously, RADAR is a big part of the business.

[Srinivasagopalan Rangarajan, executive]

Radar, EW, a whole lot of other stuff on avionics, what we've already delivered. All this will come into repeat done for naval systems. A lot of things were done with DRDO. And all of them are repeat orders will happen either through HAL or Bharat Electronics. So there will be the overall agency to put the systems together. Finally, it will come to one of those companies. But the timing and the value proposition, I won't be able to tell you. I have some idea, but I can't divulge that in an open discussion.

[Operator]

Ladies and gentlemen, that was the last question for today due to time constraints. I now hand over the conference to management for closing comments.

[Srinivasagopalan Rangarajan, executive]

Thank you, all. Thank you for the patience. Thank you for tuning in and asking questions and listening to our commentary and the interest shown in Data Patterns.

I just need to conclude saying that again, we're very bullish about the future markets. We were doing it. I think we're doing a lot of right things in Data Patterns. We have a differentiated product. We are building competencies, very differentiated from rest of India. We're building products, which is equivalent to what Western countries are offering there in Europe and U.S.

So we believe as a product, what we'd like to develop is second to none. And there's a huge need in India to Make in India. But though we talk about Make in India, the processes to Make in India is also very tough. There has to be an Indian content kind of quality requirement. The design in India content is not specified. So it also allows import to happen from various quarters and add some value add here and sell to India. So there is -- this also allows a lot of imports to happen. And we have taken a hard route of trying to design and develop in India and address the market in Indian IP. If Indian IP is developed, we can also export to the rest of the world. We believe that is a way to go awarded a longer term. And we have taken the longer route and harder route, considering that we've been in business for many years. They built up ground up development thanks to [indiscernible] and DRDO, we done the product development in-house. The competencies are developing as we decided that that's the right way to go.

And since there's a huge untapped market in India, I said we should be able to get a percentage of the market. However, we have products to address the market. That is why we took money from the market of INR 500 crores to the product development activities. Those are spent wisely and we are counting the pennies to spend the money, build the products in EW. It's a very, very modern product for EW suite. We also developed a 5 control radars for [ 30]. We're already doing the rate systems, transferable SDR and a whole lot of other products for the [ M2 ] program for EW ground-based in radars, which we are trying to participate in. I'm sure some of them will be successful. The combined market we are trying to address in all this is more INR 25,000 crores. So even a percentage of the market, I think, is substantial.

Though we're not going to be happy with a percentage, we would like to take the whole market being ahead of others. We are trying to see how to do this. The customers have been positive, maybe and efforts, particularly very positive to what our products are demonstrating and showing to them. They're willing -- they're giving a full support to us, offering the aircraft to us to see the upgrade and flight testing can happen, which they'll probably spend more money than we have spent on product development itself.

So I think everything looks good now. the products are coming out very well. It is going to take some bit of time to convert these large opportunities and make it as an order for our revenue. We are also putting infrastructure, build the capability to manufacture them build people to see that this can be delivered and also support these systems. All of them are happening. We are investing steadily ahead of time, see that the company within the next 3 years' time to scale to a INR 30,000 crore company revenue. This is what our interest is. Having been in this business so long, we want to be leaders in this business going ahead.

We're also going to focus coming down on exports to see we're not only dependent on government business in India, and we can distribute the risk across many other agencies and be part of a larger organization outside India. We will put our efforts going ahead to see that we build an organization which can also be export-friendly. This is the idea. This is the strategy. We're working towards this.

As a personal moment, we believe that we're going in the right direction. And that's all I want to leave you all with. If you have any questions further to this, please send it to Go India. We will be very more than happy to answer the questions. Thank you once again for listening in and the interest in Data Patterns. Thank you all.

[Operator]

Thank you. On behalf of Go India Advisors, this concludes this conference. Thank you for joining us, and you may now disconnect your lines.