Captains Speak

Published: Dec 29, 2021
Updated: Dec 29, 2021

Astra Microwave Products: Going great guns on defence items

"We are taking adequate steps to take advantage of recent government decisions to encourage the domestic defence industry for supply of critical defence equipment for our armed forces."

Admitting that while the sales turnover of Astra Microwave Products (AMP) has spurted from Rs 467 crore in the previous year to Rs 641 crore last year, there has been a fall in earnings from Rs 44.04 crore to Rs 28.85 crore in the corresponding period, S Gurunatha Reddy, Managing Director, elaborates that “during fiscal 2021, we could achieve around 40% growth in the topline despite Covid-19 challenges. However, there is no corresponding growth in the bottomline, as the mix of sales was skewed by exports which carries lower gross margins. But going ahead, we are confident of improving profit margins in the coming years.”

Financials

Giving a broad outline with respect to operating margins, Mr Reddy says, “In FY22, we are expecting a topline of about Rs 700 crore with an improved EBITDA margin of about 10-12% from the existing 7%. Similarly, at the PBT level, we should improve from the existing 5% to about 9%.”

AMP has recorded sales of Rs 119.53 crore in the first quarter of the current fiscal (FY2022) as compared to Rs 96.75 crore in the corresponding quarter of the previous year. However, its profit before tax increased to Rs 12.14 crore vis-à-vis a loss of Rs 1.52 crore during the same period. Explaining the rationale of the disproportionate increase in profits, Mr Reddy said, “The sales mix during the Q1 has been slightly skewed in favour of dometic sales, which offers improved operating margins compared to exports. We expect to do Rs 180 crore worth of sales in the second quarter, with an even mix of domestic and export sales.”

CRISIL has re-affirmed “CRISIL A/stable” for long- term bank facilities and similarly has also re-affirmed “CRISIL A1” for short term bank facilities.

Order Book

The company had an order book of Rs 1,561 crore as of March-end this year, of which Rs 723.25 crore (46.33%) has been towards exports where its margins are lower compared to domestic business. On the current order book, Mr Reddy says, “We have booked around Rs 42 crore worth of orders during the quarter and the cumulative order book stands at Rs 1,472 crore as at the end of Q1. We expect to book around Rs 400 crore in orders in Q2 as the company has successfully completed negotiations with customers and is awaiting release

Adds a confident Mr Reddy, “The company expects to book further orders to the tune of around Rs 300 crore during the coming period and carry an order backlog of close to Rs 1,500 crore into the next financial year.”

Commenting on the company’s growth plans, Mr Reddy points out that “we will continue to look at organic and inorganic options to stabilise topline performance, as the present subsystems business is project-driven and hence lumpy in nature. In order to augment present activities, we have budgeted capital expenditure of about Rs 30 crore, to be funded through internal accruals and term loans.”

RADAR MAINSTAY

On the business prospects from the domestic defence sector, Mr Reddy says, “For us, the major contribution will come from the radar domain, where we have already been qualified and succeeded in proving the prototype. Likewise, SDR is another programme where we got the proto delivered and won that main array. Similarly, for the digital active container antenna array, we are expecting an order from the DRDO.”

Continuing, Mr Reddy says, “In Uttam radar too, we have taken reasonable quantifiable business for the next one or two years and for other programmes like Ashlesha and MPR which are proven with DRDO, we are a major supplier to both these programmes. With regard to Aakash missiles, we are expecting the army to place an order on Bharat Dynamics (BDL), because the sub-system which we manufacture goes into missiles and has bright prospects. And in the Astra missile also we have our sub-systems, which are going into production.”

On the Uttam radar, he says, “We will be supplying the modules for the Uttam radar being integrated at DRDO, initially for the first few numbers. Thereafter, in parallel, we will be bidding for the technology too so as to manufacture the complete radar. However, as on date, we are supplying only modules for missiles.”

Regarding the current status and prospects from the space segment, Mr Reddy notes, “Currently, ISRO is focusing only on high-priority projects so the other projects are taking some time. Besides, the orders which we have on hand got into some technical issues and we are resolving it as all these projects are basically BTP from ISRO, wherein the design is being changed and now, more or less, things are coming under control.” Stressing AMP’s strength and preparedness, Mr Reddy adds, “We are taking adequate steps to take advantage of recent government decisions to encourage the domestic defence industry for supply of critical defence equipment for our armed forces. The Covid19 impact is under control at our operations and we expect to sail through without major hurdles.”

VERSATILE SYSTEMS

The company is engaged in designing and manufacturing of high value added Radio Frequency (RF) and microwave super components and sub-systems finding applications in defence, space, telecom, meteorology and civil communication systems. All its five manufacturing units are located in Telangana, of which one unit is an EOU.

Astra Rafael Comsys (ARC) is a 51:49 per cent joint venture between Astra Microwave Products and Rafael Advanced Defence Systems, Israel. ARC will be engaged in India to develop, produce and integrate high-end digital communication systems within the country, including a wide range of technologies and products like Software Defined Radio (SDR), ESM technology and Cognitive Radio. Mr Reddy says that “ARC has an order book of Rs 692 crore.” The company has invested Rs 20 crore towards the equity capital in ARC. The company has also invested Rs 6.90 crore in Bhavyabhanu Electronics Pvt Ltd (WOS) engaged in automatic assembly, and Rs 5.52 crore in Aelius Semiconductors Pte Ltd. Singapore (WOS), engaged in development and sale of MMICs.

We will be supplying the modules for the Uttam radar being integrated at DRDO, initially for the first few numbers. Thereafter, in parallel, we will be bidding for the technology too so as to manufacture the complete radar. However, as on date, we are supplying only modules for missiles.