DCX Systems Ltd

Ladies and gentlemen, good day and welcome to DCX Systems Limited Q1 FY25 Earnings Conference Call.

This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions and expectations of the Company as on date of this call. The statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, all the participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should we need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Dr. Raghavendra Rao – Chairman, DCX Systems. Thank you and over to you, Mr. Rao.

Thank you and good afternoon everyone. Namaste and welcome to all of you for Q1 FY25 Earning Conference Call.

With me, I have our CFO - Mr. Diwakaraiah; and Mr. Shiva Kumar - VP (Operation) and Mr. Niraj - DGM (Corporate Affairs).

Presently, our order book as of 30th June is about Rs. 1937 crore. With healthy, we have a very healthy pipeline of orders, the confidence with growing our order book. We are excited about this development, or confidence to grow our Company. At this point, I would like to invite our

Page 3 of 17 CFO, Mr. Diwakaraiah, who will provide an overview of the Company’s Financial Performance.

Diwakaraiah, you can take over now. Thank you.

Thank you, Dr. Rao. Good afternoon. We appreciate your joining us today as we present a detailed overview of our “Financial and Operational Performance” for the Quarter Ended June 30th, 2024.

First, I will present you with the standalone results followed by the consolidated results for the period ending 30th June 2024.

In Q1 FY25 we achieved a revenue of 138.08 crore, comparable to 170.10 crores achieved during the same period last year. Our EBIT for the quarter reached Rs.11.77 crores down from 18.71 crores in Q1, FY24. The EBIT margin was 8.52% compared to 11% in the corresponding quarter of the previous fiscal year. Our PAT for the quarter stood at 4.51 crores, comparable to Rs.9.85 crores reported in the same quarter for the previous year. EPS for this quarter stood at 0.40.

When it comes to consolidated results, I will present you with the details now:

The total sales on consolidated revenue achieved during Q1 FY25 is recorded at 138.08 crores on a consolidated basis, compared to Rs.170.10 crores recorded during the same quarter last year. Our EBIT for the quarter reached Rs.10.70 crores, down from 18.51 crores, which was recorded in Q1 FY24. The EBIT margin was 7.75% compared to 10.88% in the corresponding quarter of the previous fiscal year. The PAT for the quarter stood at 2.95 crores, compared to 9.60 crores reported in the same quarter of the previous fiscal year.

Thank you, we now invite you to share any questions, feedback or insights as we open the floor for discussion. Over to you back.

Thank you very much. We will now begin the question-and-answer session. The first question will be from the line of Deepak Saha from DR Choksey Finserv Private Limited. Please go ahead.

Sir my first question is, on the NIART part, you have reported in the financial somewhere around 475 crore assets from NIART. So, just trying to understand, have we completely concluded the TOT process, and if you can give a breakup of this particular number of 475 crore assets, and what is the visibility on the NIART, in terms of getting the tender from government, this is my first question.

Mr. Deepak, I am not able to hear you properly. Literally, it is breaking, except NIART, I didn't understand anything on this question. Your voice was breaking completely.

Page 4 of 17 So, I am saying, in the financials you have mentioned NIART Systems Limited, the total assets for NIART System Limited is around 475 crore. So, just trying to understand, if you can share some color, have we concluded the TOT process from ELTA, and what is the breakup of this asset on the NIART for this 475 crore. Secondly, on the visibility in terms of revenue side or the tender side from NIART, have we started getting any update as far as the tenders or even visibility has started coming in for the tenders?

Okay, what I understand, I don't know. Okay, see in the QIP, we raised totally of 500 crores and leaving the expenditure of this thing about 480 crores, I believe, you are talking of the QIP utilization?

No, sir I am not talking QIP allocation, in your financials this year Q1 FY25 for financials that you have shared, there are provisional numbers for the subsidiaries, both in terms of revenue and assets. So, on the assets of NIART System Limited you have mentioned 475 crore worth of asset in NIART as of June 30th, 2024, so we are just trying to understand the breakup of that particular number, and have we concluded the technology transfer process from ELTA?

So, what I understood the question is, you want the breakup of the asset of NIART Systems Limited. So, in NIART Systems Limited, there is a non-current assets of Rs.2603.45 million.

Majority are predominantly, it consists of 2,512.85 is for intangible, and other is for non- intangible and other financial assets. And one more question you asked, total assets is 475.21 crore, that's what the question I heard, out of that 260.34 crore belongs to non-current assets, and 214.87 crore belongs to current assets, which is involving bank balance, cash and cash equivalent, other financial assets and other current assets. So, total put together it's a 475.21 crore assets which belongs to NIART Systems Limited.

Okay. So, on the non-current asset size, on the asset side, is there any fixed assets that we have, or it's completely intangible?

No, we have fixed assets of around Rs.8.83 crores.

Okay, largely it’s intangible. Sir on these tender side that you were saying in last quarter that, since we are ready for mass production, is there any update that you are getting for the particular product, and as far as possible commercial angle is concerned? Sir, I am asking is there any update on the NIART business side for the proximate tenders that you were talking.

No, actually let me tell you, this is as you know this is a global technology what we have, it is not only for India. Couple of things, as you know we got 5 number of Proto order, and it has been fully tested and working fine for different countries and different weather conditions, including Indian weather condition, everything. And now still, we are waiting for the big tender now it is in the very positive may be expected very shortly. And there are a lot of process to be

Page 5 of 17 done in the qualification everything. Now, everything is be done and there is a one, there are some final modification tuning is required for the, which is required for their weather condition which we are working so maybe it will be completed by this month end, the final version. After that there are some reserve order not in India, somewhere else. And reserve orders is given to view some of the portion of order. Then we are also expecting to get a tender from Indian railway also, very shortly, that's what we are working towards, to know what is the status and other thing.

And more or less, we are good to go for a bulk orders. To get the tenders from dates and everything is not yet confirmed, but we are fully focused to get the things move as quick as possible now because the product is ready to go.

Okay. Sir coming to the operational side, if I see for this particular quarter, Raneal Advanced Systems did a revenue of around 42 crore odd. Now, I assume this is largely for internal consumption, but if I see your gross margin despite having the own utilization from Raneal, that has fallen quite substantially for this particular quarter, if you can share some color, why exactly profit margins are looking especially gross margin is looking so tepid for this quarter?

Yes, definitely. Raneal, of course whatever we have done for a 42 crore revenue, it is a completely internal consumption. And there is increase in the material value. There are two reasons, one is DCX give a PO and we get a PO from customer to DCX, foreign customer or domestic customer. Then we buy the PCB, printed circuit board from the Raneal. Whatever price has been discussed and agreed both parties has been given. Now when Raneal try to buy the material, of course it's a very old program. This will be about a three years program, we used to buy the some of the board from the outside. Now, from last two quarter, we are majority board we are doing in in-house. There are bill of material, as I mentioned, in the long time also. There are contract between DCX and the foreign OEMs or domestic OEM there is a BoM guarantee.

That means any price variation the OEMs has to compensate the money because of the long time program, three years, four years program, once we have a PO this will keep on supply up to two to three years. The variation the electronic price we cannot say, because of the price increase let us say today I quoted $100 the price become around $110 we cannot go back to customer for immediately to get the amended PO there is a process. Now DCX has to give a PO to Raneal, Raneal buys the material with a higher price, which we are approved internally we got approved from the OEMs. So, they have to buy, once we bought for Rs.100 material, they spent Rs.110, naturally that material consumption goes because I need to account it in the market. So, that Rs.10, whatever it is additional, it has to get from DCX, in turn DCX has to get from the customer. So, that is a process, how this process works. Once we have a project completion of the program end, we need to go with the complete details. Boss, this is the price you have given earlier, now this is the price got increased, which you approved by email. Now, I need this price to be amended and give the amended PO, then I need to raise a bill. This has happened in the last quarter also, in fact in the March also, little bit price. We need to go, any way one program it is closing very shortly in the month. Then we need to consolidate everything, then we need to go back to customer this is the price, the hike price has been done, then you approved it, as per

Page 6 of 17 the contract you need to reimburse the money. So, this is called a BoM guarantee material, but Raneal, I cannot it is my own sister concern, I cannot tell you supply as it is no, that has to follow certain process which they are following. Now Raneal whatever spend money, it has to be reimbursed by the foreign OEM or domestic OEM. So, that's the reason Raneal made a more consumption in the raw material consumption has been more. Then this has to be go, maybe we are getting closed in a month time we need to go consolidate report and take this amendment PO and drive another bill for the reimbursement of the money.

Okay. Thanks for the detailed answer, sir. Just one thing, last quarter since we also faced a similar situation. So, did we get the final number for the last quarter, we had around 740 crore odd revenue, so we also have similar increase in raw material case. So, did we have any number now, how much would be recoverable from the vendors, from the customers, especially?

Not vendors, I cannot tell the exact number, but we have a quite a good amount of reimbursement we need to get. Presently, we prepared a note and send everything until customer approves. Yes, whatever the sheet has been spent, there is a process and also there is a backend maybe another balance about 500, 600 modules to be completed. I don't know any price further going up, we are still purchasing it. Once we freeze, all the material has come then I can decide. Exactly, I can tell you, maybe in the next couple of weeks, what is our amount presently, is a quite a good amount we need to get it. I don't have a figure exactly now. You are supposed to get last quarter money also, this quarter money also, we need to claim back from the customers.

Okay. And that should help us in targeting our objective of getting towards double digit EBITDA margin sir?

I am not sure. I cannot comment on that right now, because customer has to say yes, then only I can tell you, this is going to affect maybe in the next quarter, these figures.

Okay. And then, sir, on the employee benefit expenses side. If we look at the run rate, this particular quarter we had a little bit higher number earlier that number used to be around 33, 35 million odd every quarter, that has gone up to 49 million this particular quarter. So, have we increased the team size for any particular subsidiaries or anything, if you can share some color how exactly this number has gone up?

Yes, there is a manpower increase. Also, I given a hike to the current employees. There is a manpower got increased, in the manpower technical side and commercial side. Also existing employees, we need to make yearly hike for March, which we have done, definitely goes up for little bit. That is about 30 lakh, 40 lakh right, Prasanna?

Page 7 of 17 It is a consolidated basis, so we have added a manpower in Raneal and NIART, and we have a hike in DCX, which contributes the hike in employee cost in this quarter as compared to last year, same quarter.

Okay, sir. Sir one last thing before I fall back on the queue. I know we are quite tight lipped about any kind of guidance, but even as a percentage of the mix, do we expect Raneal to start its commercial production other than DCX and if we can get, say 5%, 6% of the contribution to the overall revenue from Raneal outside DCX, if you can share some color, how the mix should be this year, are we still going to be 85%, 90% on system integration, or we are getting some 4%, 5% additional from Raneal for external customers, that's all from my end, so I will fall back on with queue. Thank you.

Yes, there is a good opportunity for Raneal to get a direct orders, and we are working on it that will be of course, a better margin and with the new customer, and that will be, we are working with many things with the Raneal directly, and we have a good chance to win big bulk of PO, and we are almost confident to get in very shortly that is we are working and secondly, on the existing DCX mix is of course majority is our strength is system integration, and also the cable also is growing now because of the recent order what we received for a 32.5. We expect some of the cable business also in quite a good amount. For the cable business also getting increased, which we are waiting for the lot of pipeline POs to come and looks mix of and also the kitting will be a second biggest opportunity. And maybe this year we have a, of course majority is from the system integration may be about 60%, 70% and rest will be divided, earlier was 98% now we are able to increase other domain. I am not reducing system integration, I am increasing the other domain like cable, PCBA and kitting. So, we are very focused, and opportunities are there in those areas also, we are working on it. Thank you.

Thank you very much. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.

See what you know our business very well, and this what we received PO, it is a long term PO and heavy duty PO. All POs comes in the big numbers and big quantity. This will go nearly two to three years in the line. So, what is the contract between the OEMs and DCX. Any bill of material variation, price variation in the component they have to reimburse the money when the

Okay. So, basically, the positive effect of this claim that should happen next quarter? Hopefully, yes.

Sure. Sir on the pipeline, if you can provide some color you mentioned about the Raneal, there are some outside orders which are there, other in NIART you are expecting, some orders on the tender side and cable also. If you can throw some color as to, how are you seeing the pipeline and when should one expect the materialization of this pipeline to happen?

Pipeline is very big; I can say you that much. We cannot tell you the numbers, we don't have practice of mention until we receive the PO. Pipeline is a quite a good deal and now presently, 1937 crores, what we have a PO that, the DCX trial, every day will not get PO every month. We will get only the big POs in the three, four times. And we are expect a very, very healthy pipeline maybe, I don't know exactly very shortly we can expect and good to go. Anyway, you came to know, I will immediately announce that we have PO on the Raneal, or DCX, but is a very healthy and strong pipeline is ready to come.

Sure. And we are expecting Raneal outside DCX is also showing good inquiries right?

And also, like to inform you we are just, I want to like to tell you, we are already getting direct PO, one PO is already received from the foreign customer to Raneal directly. So, first article has been done they are very happy, we expected a big repeated order from there, one of the foreign new customer.

Okay, sure understood. Sir, lastly was on the double-digit margins, and we are looking at the backward integration via Raneal plus also entering into products with railways and defense, civil also, looking something so when should we then expect double digit margins to fructify for us at the Company level?

Page 9 of 17 That is a target for DCX, that's the reason. See how do we improve margin, what is the action plan for Company of course, I want to increase double digit margin very shortly. There are three things we have taken action, one is for the NIART JV, which is a very good margin in this thing, it has to come. Secondly, immediately we started Raneal Advanced System to improve our margin, and also supply chain consideration, also cash flow to manage easily and start doing it.

Thank you. The next question is from the line of Akshada, from Vivog Commercial Limited. Please go ahead.

Yes, I had a clarification, there is a Lockheed project that was again mentioned in this quarter presentation. Is the old project or is it the new contract that the Company got?

Old only, this has been Lockheed Martin it is old what we received 2 million PO which we executed in the March, and is updated in the presentation customer list, that's all. We have not received any PO yet.

Okay, that's just the clarification. L&T order that we have received the 1250 crore agreement, can you tell us how long will this PO last for approximately?

Page 10 of 17 Okay. Sir we have around 1900 crores of order book, and we are expecting some new POs as well as developments on NIART side. So, why are we not yet optimistic on double digit margin.

We will be able to achieve the double digit margin?

Until we have a PO on the NIART side and the new customer, how can I say today, but I mentioned, to improve our double digit margin we created a Raneal, Raneal is doing well. And also there is a direct order, is a better margin, and also cable is a better margin, which we are already proven and team our BD team has been done fantastic. There are a couple of PO on the line, and that is our motto to immediately to gear up our thing. But I cannot tell you what is the percentage until we get a PO work with the suppliers. There is a process and of course, Company is well, well focused to improve bottom line definitely.

Okay. And sir your 1900 odd crore order book that we have, that is also roughly a two year target period for completion and deliverables of all the other orders? Yes, you are right. ok, Thank you so much.

Thank you. The next question will be from the line of Vidhit Shah from Spark Private Wealth Management. Please go ahead.

Sir my first question was on just a clarification on the BoM guarantee pricing that we are likely to do once the contract ends or the program ends. So, how many of these programs are we going to pass on prices or let say how many programs will be work at one point of time where we have to then pass on price increases?

Each and every program this clause will be there. This is a standard clause for all the single contract, and it will be applicable for all the programs not only one. Let us have five programs going parallely, all the program at this clause and one program completed, we need to go with the record and take the reimbursement, after the program complete we keep on going and taking it.

So, out of all the program that we are running, only one program reimbursement is likely to come up in the next quarter. The others, we will still have to wait for the end of the program to get the reimbursement, would that be right?

No, I have not told only one program. There are a couple of program is getting ended, and it has to be claimed back parallely and next program what we are doing it for this thing, and this will continue. This is not, I cannot say today whether even though price goes up or it will going to reduce today, I have a PO from customer today, whether how much material goes up, we don't

Okay. So, when do we expect us to realize all the money that we are due to receive?

I told you, already I told we are working and one program is getting close in the couple of weeks, we are working the way, that is a major money we supposed to get to 1 or 2 program which we are working and same, I repeatedly telling you this will take two to three months to get the money, we need to present it and ship this thing made a calculation, and many things. Even though freight cost may be vary, insurance we paid more, and the component variation. There are big data to be provided. It is not a small $1 or $2 this has to be gone to their approval capacity.

This, we are working toward that and I cannot tell you the timeline today, but once program we are getting it done very closely. That is a major amount we are supposed to get for this particular one or two program, this will going to complete this month, maybe next month, we are submitting the document. And this is a process, this has to be continued like this. See, today you should be happy that in some other program you not get BoM guarantee whatever you take the price today and close. So, for our contract to safeguard our margin, we are insisted this clause to put it. So, money comes today or tomorrow for me, I will not lose anything in my pocket. That is the whole focus on these programs.

Understood, sir. And if you could just also help me understand the L&T order, what is the nature of services that we are providing to L&T, is it system integration or is it PCBAs?

Whatever, I am allowed to disclose I mentioned in my announcement. More than that, I cannot able to tell you anything, which program, what process that I am not allowed to discuss. What we have mentioned, manufacturing and supply of electronic module. That much only I can tell you.

Okay, understood. And can you shed some light on the MRO program with IAI India, how big this opportunity is and when do we start benefiting from this, when does this start flowing through our financials?

This MRO of course the big opportunity you just imagine, foreign Company has come in.

Gurgaon started a big way MRO facility in the many engineers, about 30, 40, engineers they have set and about 40-50,000 square feet place they had taken and bought all the equipment everything, of course is a big business. So, we will get, I don't know the value, still I not received the PO, because I am the partner for this complete electronic system to be repaired and sent which we are working. I don't have any numbers in my mind, but looking at as a partner, looking at their investment and interest on this thing. So, definitely is a big opportunity.

Page 12 of 17 So, will we be the sole partner for electronic system or there will be more?

I am the only partner for this Company for an electronic space and module level supplier, PCB assembly, repair, spares, what all I mentioned will tell you supply and repair, services, spare parts and electronic component and board level repair. I am the only partner today MOU signed by presently, I am the only partner.

Okay. So, the MOU has been signed between us and IAI, and we have this?

ASI not IAI, there is a Indian Company is owned by IAI, Israel Aerospace India Service Private Limited.

Thank you. The next question will be from the line of Rajesh Jain from RK Capital. Please go ahead.

Just wanted to know, is your quarter one always weak, and even if it is so, this year the quarter one is weaker than even by your usual standards. So, what are the reasons for that?

I don't know, quarter one see, as I mentioned for many conference calls, in the road show, on my media interview, and DCX you cannot calculate our revenue Rs.100 divided by 4. So, you can see that my major revenue it is coming in this, let us take example of last 1424 crores revenue for FY23-24 in the nine months, I have done 723, crores. In the first one quarter, it is done by 746 crores, this is not after the IPO. This is seven years history always first, second quarter was, we are not able to dispatch, we need to get material, qualification, licenses, internal testing, stress test, OJT. There are many process, so this will be completed in the first and second quarter. And exactly it will go little bit, medium size in the third quarter and fourth quarter it will go whatever commitment we have a internally commitment of the revenue. It will go that, it is not today this has been history of DCX from last six, seven years. So, this will be like that only and maybe this is going to improve once we have a Raneal, NIART and what we are talking about the technology transfer, it will get all this thing. But presently, for this year also I am looking like this only first, second and third, first and second quarter will be dull only. This has to be very nominal way it will go. And because of the licenses, security clearance, many things on the takes time and the testability and internal process, OJT, training many things are there. Hence, this is a standard practice and of course, it is not new to the market, you also know first and second quarter.

Coming back to next last year you have done 170 crore, last quarter is done 170, this 135, this all depends on the availability material where I push maximum 741 crore. Last time I didn't have whatever left out in the March month we done it in the first quarter in the last year. Now, we are maximum we planned and pushed 741 and whatever real production happened for this quarter, we will declare in the 138 crores, that's all the reason.

Page 13 of 17 Okay. Sir, also I wanted to know your 1900 plus crore order book, which you clarified, which will be executed over a two year period. What could be our operating margins on that broad range can you share?

As you know, I am not allowed to, because I will tell you. Today, let us take example I have $100 PO my margin assume about Rs.10 ok Rs.10 margin maybe goes up, maybe comes down, based on the operations, based on the process, maybe I negotiate with a better price, with supplier. Our process can be improved now we have our own EMS inside so we have a better visibility but as on today, now we have started procurement of material. We calculated some freight cost, which we had taken from customer, insurance this all depends on how much it will going to happen, until you have a material, build it properly. Till then, we cannot able to figure it out what is exactly for your margins. I hope you understand my difficulty, I cannot tell you the numbers, because practically once you buy the material, convert it, bill it, then only finance can tell boss you have done this thing, this thing, this thing. Today you are asking me, yes, I have a figure what I quoted, quotation prepared and sent, which I cannot disclose now. Maybe this is not relevant, maybe it will go up in my view it should go up. This is the situation now, and this will go into because now based on the experience, based on the supply chain, Make in India, many product to be bought in India, many things are advantage for this orders now. Ok sir, ok Thank you so much.

Thank you very much. The next follow up question will be from a line of Deepak Saha from DR Choksey Finserv Private Limited. Please go ahead.

So, I have one follow up, in the QIP money in one of the previous calls also you alluded to the fact we were in the advance talks with some other companies or OEM, or DPSUs for forming JV, what is the development on that side, if you can give some color?

See, regarding QIP money, we are already sent about 10 million first installment to NIART JV, rest another goes 5 million, maybe this month, another 10 million to be sent in next four months, as per the schedule goes. Balance money what we raise about 200 crore for the technology transfer and defense JV and, I may give good news shortly.

Okay, so that’s fine. One last thing, on the overall size, for the revenue we ended up, FY23 somewhere in 1200 crore, FY24 1400 crore, FY25 I understand it is subject to lot of POs also that flew in what kind of numbers we are targeting for the year, FY25 internally, I don't want the concrete number, any range, if you can also give that is going to be helpful sir. Thank you.

As you know, I don't have a practice to give a guidance number. And you know the DCX, you are all my respect to my all my shareholders, you know where every day we started with cable, then system integration. So, after the IPO, we are geared up with EMS, NIART, and now maybe

Okay, sir one last thing. If I can, on the NIART side, you said you are targeting global market that's fine, if you can share some color with the Indian Railway authorities, if we have interacted and what kind of response we are getting for the obstacle detection equipment that we are planning to come up with. So, on the domestic side, what kind of feedback sir you are getting?

I don't know, still I not able to understand the audio is very bad.

I will repeat my question. Sir, I am saying on the NIART side for the obstacle detection equipment that we are building, we have definitely interacted a lot, and is lot of market on the global side, but on the domestic side, with Indian Railway authorities, what is the response from the domestic side for the particular obstacle detection equipment that we are coming up with.

How is the response you are getting from the domestic market. Thank you, that's my last question.

Very happy about the product, and more than expected we are delivering and we are, that's what we spend a lot of money, time, and we expect very big business. But till on the tender comes, we don't know when bulk tender comes, and the performance wise, they are very, very happy. ok, Thank you sir, Thank you Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.

Sir, wanted to understand on the receivable side as of March 24, we had 670 crores of receivables. This was because bulk of our execution had happened in the month of March. So, what is the receivables position now, is there a realization which has happened from receivables?

Can you please repeat the question again.

Page 15 of 17 So, our receivables as on March ‘24, stood at 670 crores and this was because bulk of the execution happened in the last month, and then you get billing, and then the money was yet to come. So, if you can just get a clarity what is the receivables which are pending now, that will be helpful.

Sir, both quarter receivables, whatever the pending we have already received. The receivables would be for the present quarter only, the pending receivables which is going to collect in a monthly basis as per the schedule, 30 days, 15 days like that only, there is no huge outstanding receivables in our books.

Okay, sure. So, again, this has fallen up now. Just wanted to understand this L&T order. When should one expect the L&T execution to start? Sorry?

L&T order which is there the 1250 crores of order from L&T. So, when the execution of this order will start?

We are yet to get the dates from the component suppliers. Just we got a month back PO, month back PO, there are process we need to get advance money, we need to release PO there is a big process, but we are plan to start as quick as possible. But I cannot tell you the exact date, but we are in the focus, because this is not a regular product where you can bring material from market, start tomorrow and go. There are a lot of support, licenses, component lead time, special process, many things but, we have experience, and once we have the proper dates from the supplier, mainly on component, so then we can think of the dates, as on day when I am going to start this, really I don't know, but we want to start as quick as possible in my I need to review with a complete, even though we are not even placed the PO for component, some of the component, so we are still working and maybe we have a clarity by next month when we are going to start the production.

Sure. Will anything be possible for this financial year?

Yes, that's what our plan. And we will see what is the thing, we are on the Yes, I want to do this year only some of the quantity, at least to start moving around. So, that is a target, but still, we need to get confirmation on the lead time of component. So, hopefully I am going to start, some quantity.

Sure. And just lastly on this claim. So, sorry to harp on this, but this claim side, claims reconciliation and all. Just wanted to understand what is our frequency of reconciliation, does the reconciliation happen on every quarterly basis, or does it happen on any monthly basis or

Page 16 of 17 does it happen only after the project gets completed because we are having large projects of two to three years. So, what is the frequency of reconciliation?

That depends how much is the, it is a small money it will go to the end project. It will be a huge money it will be a supported by cash flow. If it is a project like we bought some jigs, we bought from fixture, we bought some extra jigs, which is away from the program. There is a NRE, there is a compound that will go sit on the end of the program. But is a huge let us take $100 gone for $200 they will support the cash flow with the supporting document. So, variation, see boss this all, 80 million, 90 million, 120 million. To get a PO, it has to go to the number one person in the board approval. So, they cannot have a authority to change any PO by one guy to change the PO it has to go. Because this is the large PO it has to be signed by the top level. They cannot do everything amendment, and they will go on the program wise. Then they had to amend the PO, then we need to raise a bill, then we need to claim back the money. And this is a regular process, this is not new to us, this is happening from last seven, eight years. It is not new to us, because the program what we are running through, the more consumption, now Raneal has to claim back from DCX. DCX has to claim back from the end customer. So, normally three portion one is, it will happen midway, it will happen in the, the last of the program, end of the program, that depends on the cash flow. Ok, Understood Thank you. The next question will be from the line of Praveen Gramle from Ananya Research. Please go ahead.

Thanks for the opportunity, sir, Most of my questions have been answered. I just wanted to understand on the tax parts, so the coming year, what will be the tax rate it will, that’s all from my end thank you.

So, tax part in what angle they are asking, I do not know. In the standalone basis, we are in SEZ, and we have completed first five years. So, as per section 10 AA, we are eligible for the tax benefit of 50% for the program, or for the project which we are doing direct exports, rest of the things, it will be as usual, normal tax rate. When it comes to Raneal it is 15% flat tax rate, plus cess and surcharge applicable. Okay, they have any bulk.

Raneal is irrespective of export, irrespective of domestic, correct Prasanna for 15%?

Yes, for Raneal it is immaterial. So, it's a standard rate. ok, got it sir, Thank you so much.

Page 17 of 17 Thank you very much. The last follow up question will be from the line of Deepak Saha from DR Choksey Finserv Private Limited. Please go ahead.

Sir, please can you give any broad number on the order pipeline, how is the order pipeline is looking?

It is really healthy. I told you I cannot give the numbers. See normally, when I got a PO within 24 hours, you will came to know. I will never even though see, the process I need to check legal had to check if PO is okay. I will not even wait immediately announce. But one thing I can tell you all my dearest investors, pipelines are very, very healthy, very good.

Thank you sir understood and all the best for the rest of the year.

Thank you. Ladies and gentlemen that was the last question for today. I now hand the conference over to Dr. Raghavendra Rao for closing comments.

Thank you all for your continued trust and support and taking the time to join us today on this call. I want to extend my appreciation to the entire DCX team for their dedication and hard work.

I would also like to thank for our prestigious investors, customers, suppliers, bankers and auditor for this continued support. And I want to tell you, in the last DCX is fully focused. Opportunity is very good, and Company is fully focused on the business and pipelines orders are very good.

Visibility is very good and also, we extend our all our arms to wherever possible on the other areas like India and other countries. And please, please have the complete visibility on DCX.

We are fully focused, and we are 100% confidence to get more, more orders and will grow this Company in big way. Thank you so much for all your support. Jai Hind, Jai Karnataka, thank you all.

On behalf of DCX Systems Limited, that concludes the conference. Thank you for joining us and you may now disconnect your line.