Demand For Radars To Drones Shows Defence Bet Paying Off, Says Axiscades

Axiscades Technologies Ltd. is poised to capitalise on its investments in defence research and development, and design certification as it transits to the production phase, according to its chief executive officer.

The engineering solutions firm has ventured into automotive and drones, alongside its legacy verticals in aerospace and heavy engineering, Arun Krishnamurthi, CEO at Axiscades Technologies, told BQ Prime's Niraj Shah.

It collaborates with domestic and overseas businesses, including Airbus. Last year, it renewed a three-year contract worth $75 million with Airbus, Krishnamurthi said.

Arun Krishnamurthi. (Source: BQ Prime)

Indian Defence In The Spotlight

The focus on the defence sector is driven by the Make-In-India initiative and the Russia-Ukraine war, which emphasise the need for resilient electronic communication and warfare capabilities, Krishnamurthi said.

Axiscades Tech is seeing demand for manufacturing of radars, sonars, telemetry devices, and drones, he said.

With the requisite approvals for their prototype designs, the company will be transitioning to a phase of increased production over the next three to four years and is expecting higher profit margin. This progress reflects the fruition of the investments in R&D and prototype development over the past decade, according to Krishnamurthi.

Defence currently represents 30% of Axiscades' business and it aims to double the revenue within three financial years. As production ramps up, the firm expects improved profitability with expanding Ebitda margin.

In the previous fiscal, production accounted for Rs 30 crore out of Rs 200 crore defence revenue, offering a high margin. This year, the estimate is Rs 100 crore revenue from production and Rs 200 crore over the following year, resulting in top-line and bottom-line growth, Krishnamurthi said.

The average margin stands at 15% at the end of fiscal 2023, with defence margin ranging between 19% and 22%, based on the relative mix of the business including R&D, design and manufacturing, he said.

Growth Of Strategic Verticals

Krishnamurthi highlighted that nascent verticals like automotives currently constituted less than 5% of the overall business. To strengthen these areas, Axiscades has expressed an intent to acquire ADD Solution—a German automotive solutions company serving major global original equipment manufacturers.

This strategic move and its expertise in millimetre-wave radar technology would aid in developing software and embedded solutions for autonomous vehicles, he said. These segments offered attractive prospects due to their higher margin in comparison with mechanical engineering, according to him.

The company is scouting for skilled talent due to the scarcity of aptitude in the automotive sector. Krishnamurthi said the firm hired over 800 people last year and it planned to add around 900 people this year as attrition was moderating.

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