Bharat Electronics Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Confident guidance retained: Revenue growth >15% and EBITDA margin 23-25% reaffirmed with 100% confidence; FY25 order inflow to cross ₹25,000 crore.
• The big orders are arriving, not just promised: QRSAM and NGC (MRSAM/MFSTAR) both expected before March '26, with NGC alone worth ₹14,000-15,000 crore; FY26 order inflow could land between ₹25,000 crore and ₹50,000 crore.
• Execution engine is running hot: LRSAM, WLR, IACCS, Shakti EW, ADC&RS and Akash subsystems drove Q3; LCA module teething issues are resolved and fuse production is now on track to meet Army commitments by March.
• Non-defense ambition is real but distant: Management wants 20-25% of turnover from non-defense over 5 years, but the current ~8% share will rise slowly because defense order sizes dwarf everything else.
• What to watch next quarter: Whether the ₹25,000 crore FY25 inflow target is met, the April guidance for FY26 revenue and margins, and any concrete quantification of BEL's share in the P-75/P-75I submarine programs.

The Big-Order Pipeline

The next 12 months could reshape BEL's order book. Two programs dominate: QRSAM and NGC (the MRSAM/MFSTAR naval system). Management expects both before March '26, and NGC alone carries a ₹14,000-15,000 crore headline. QRSAM execution runs 18-24 months for the first half (5-10% of value), then another 2 years; NGC spreads over 4-5 years at roughly ₹2,000-3,000 crore annually.

• QRSAM: More than 90% confidence of receiving the order in FY26; planned as a next-financial-year item with delivery starting within 18-24 months of receipt.
• NGC (MRSAM/MFSTAR): Expected to finalize next year; BEL's portion is the electronic modules, not the missile (that sits with BDL).
• P-75 and P-75I submarines: Good progress and deep BEL involvement in both programs; order size will be 4-digits only (less than QRSAM/NGC); quantified figures promised by April.
• LCA Mk-1A (97 aircraft): All electronic module inquiries have come to BEL; contract-related discussions already started. Mk-2 remains in prototype/certification and is years from production.
• Other large orders: 3-4 major projects in the pipeline for next year, each in the ₹2,000-3,000 crore range; 5-6 orders expected next year, with the 3-year pipeline much larger.

Manoj Jain: "We are more than 90% sure as on today to get that deal in next financial year itself."

Current Execution & Program Health

Revenue through Q3 was driven by LRSAM as the top contributor, followed by WLR, IACCS, Shakti EW System, ADC&RS, Akash subsystem supplies, and one civilian CBIC project. Non-defense and export together accounted for ~11% of execution (non-defense ~8%, export ~3%). Gross margin for 9 months stood at 44.5%, within the guided 42-44% range.

• LCA program: Initial teething problems from last year are solved; production rate is now streamlined to meet HAL's requirement. Engine-related delays on Mk-1A do not affect BEL because electronic modules can be separately tested by HAL at the subsystem level.
• Fuse production: Ramped up over the last 9 months; whatever was committed to the Army will be met by March. First 2 years carry slightly lower quantities, with the ramp now on target after initial teething problems in the first 6 months.
• HimShakti: Majority of supplies will be delivered in FY26; the program is only for next year, not beyond.
• MPR Arudhra and BMP-2: Both are 4-year-plus programs.
• Provision in other expenses: A large provision was taken toward liquidated damages on account of certain supply delays.

Kavach: The Next Big Indigenous Bet

BEL has received an initial R&D/prototype order for Kavach, the indigenous train collision avoidance system. The company must first develop, install, and get its solution certified by the railway authority before it can bid for the large-scale rollout orders.

• Development timeline: Hardware and software development to be completed by June; installation and integration testing on a railway-provided test line follows. Certification/reliability testing by railways typically takes 1-2 months, sometimes more.
• Commercial pathway: Once cleared, BEL qualifies for the next big order. A recent RFP was issued where BEL does not yet qualify. After qualification, BEL will bid; the order will be split across multiple vendors based on L1 discovery.
• Cost discovery: Management is explicit that it needs to complete the prototype, prove the designs, and understand its own final cost before it can assess the business share it can capture in subsequent years.

Manoj Jain: "So let me firstly successfully complete this execution order, prove my designs, and then only we will know also our even cost, what cost we have made the final solution. And based on that only we will have the correct assessment of how much business share we can get in subsequent years to come."

Electronic Warfare & Anti-Drone Systems

BEL supplies EW systems for all aircraft and helicopters across the Air Force, Army Aviation, and Navy Aviation, with at least one EW system mandatory as a strategic requirement. The company is migrating from basic EW systems to EW Suites with multiple components; the D-29 program is the EW Suite for MiG-29 aircraft.

• D4 anti-drone system: A complex high-end hard-kill and soft-kill solution supplied to the Army, Navy, and Air Force; all three supplies are complete. BEL is now L1 for a BSF order, expected this year.
• Export interest: 8 to 10 countries have shown interest; demonstrations have been given; management hopes a contract may be finalized or a good lead generated during the next Aero India.
• Sole-supplier position: DRDO gave the technology to 4-5 bidders, but per BEL's knowledge, nobody else has fully acquired the technology and built a prototype. BEL is the only supplier. [18-19]
• Repeat orders: BEL is in constant touch with the Army, Navy, and Air Force for repeat D4 orders.

Manoj Jain: "We are the leader in a complex high-end, high energy hard-kill and soft-kill-based solution, which was originally designed by DRDO."

Non-Defense Diversification

Non-defense currently sits at ~8% of execution. Management's stated ambition is to reach 10-15% initially, with a healthy long-term target of 20-25% of turnover. The pace will be slow because defense order sizes (QRSAM, NGC) are far larger and will keep the mix defense-heavy for years.

• Target areas: Network and cybersecurity, homeland security, data centers, border security projects, BSNL programs (next big opportunity after partial success), telecom civilian domain, and e-governance/digitization/software solutions.
• Timeline: Hoping to cross 10% very soon, maybe next year or the year after; the 20-25% region is a 5-year aspiration.

Manoj Jain: "Finally, as a healthy sign, nondefense should be around 20% to 25% of our turnover as a logical mix."

Margins, Costs & Wage Revision

Gross margin for 9 months was 44.5%, within the guided 42-44% range. The next wage revision is due from January 2027, so FY26-27 will carry only 3 months of impact. Management expects projected turnover growth to absorb the increase such that employee cost as a percentage of turnover does not vary materially.

• Localization and margin pass-through: When asked what share of localization benefits BEL retains versus passes to the Ministry of Defence in lower nominated contract prices, management answered only that localization is factored into negotiated prices and did not address the retention/pass-through split.
• EBITDA margin guidance: 23-25%, may touch around 25% based on Q3 performance.

Damodar Bhattad: "And even going overall employee wage revision happens, the projected turnover increase what we are expecting, we'll ensure that the employee cost to turnover percentage doesn't very much."

Guidance & Commitments

Key Metrics