Some basic resources -
Following is Radar 101 for Indian Defence, mandatory reading to understand companies in radar.
Following is good summary of players/products in C-UAS (counter drone systems) in Indian defence.
Advancements of India in Counter-UAS Systems - alphadefense.in
Mr. Arun Krishnamurthi (DIN: 09408190) has submitted his resignation as Chief Executive Officer & Managing Director of the Company, vide letter dated January 02, 2025.
Mr. Arun Krishnamurthi has resigned as CEO & MD, how do the investors in the company see this development? Any thoughts from @rupeshtatiya would be much appreciated.
Disclosure: Not invested.
Arun Krishnamurthi steps down as CEO and MD.
To me, it seems that the new guard which brought fiscal discipline and turned around the company after the mistral acquisition, is out. Mr Shashi is still there though I think.
Bit sceptical about the storytelling of the new management. Might be wrong based on the market fancy.
So, the mystery of why Mr Arun Krishnamurthy seemed to be sidelined at the last concall where they announced the major restructuring, has been solved with the resignation. I don’t know, but the way this has all come about makes me feel this is more of a coup. What this means in terms of the transition, how seamless would it be, and the new course that the company would take, is to be seen
Mistral .pdf (269.6 KB)
Do these (forced) resignations including the CEO amidst restructuring mean any red flag?
For me at least, this is the whole thesis (management change). The capabilities have been there but hunger has been missing and ability to deal with misfortune lacking (renegotiating contracts, closing down loss-making entities, paring down headcount to improve bottomline etc.). I am relatively new to this business so my read could be wrong, but to me this move implies things are progressing in the right direction. Rajeev Ramachandra (CTO) and Mujahid Alam (CEO) have been with Mistral since founding in '97 but since exit after Axiscades acquired Mistral, their priorities are bound to be aligned differently. Murali Krishnan who takes over from them should be capable with his incentives aligned towards growth. The price-action as well implies that the market likes the moves being made.
Disc: Invested
Now this is interesting and also answers some of our questions regarding the management changes. Of course, they could have been more transparent during the investor call about what they are thinking.
They are getting in as group CEO, someone with good international experience in the ER&D space!
“Mr. Alfonso Martinez is a qualified Engineer & MBA with close to 3 decades of experience in Aerospace, Defence, Telecom, Automotive, Transportation, Energy, Infrastructures, Life Sciences, Financial Services, Public Administration, Naval, Railways, and Chemicals sectors globally.”
Discl: Invested
AXISCADES Appoints Nick Santhanam as Advisor for Electronics, Semiconductors and AI (ESAI) Domain
HIs LinkedIN Profile - Nick Santhanam - Avail Infrastructure Solutions | LinkedIn
How is Data Patterns and AstraMicro different from Axiscades? One of the posts here mentions their competencies being better and relative order size also bigger. By being bigger and better what is stopping them from doing what axiscades is doing?
Prima Facie, results seemed strong for Axiscades after a long long time of tracking the stock. Mainly due to the execution in defense segment the overall contribution to revenue by defense went up to ~34% as seen in the pictures below.
This contribution and swift execution led to defense EBITDA margins to ~18% from 8% YoY.
Waiting for the concall
Notes from concall ( please verify correctness )
Dr Sampath - Focus on top 3 core area Aerospace Defense & ESAI as 99% EBIT comes from these vertical.
Employee 60: 40 nos 1600 : 1100 core v/s non core.
Focus is to recalibrate noncore business employee count may drop or move to core from non core ( sense of call )
In Aerospace vertical revenue comes from repair support of old aircraft focus is to grow recalibration of old aircraft interior of aircraft and so on.
Margin 18% in defence & 24 % aerospace defence grew 88% aerospace 11% .
When asked management about vision and nos for Fy26 & onwards
Goal is to grow atleast 1.5X of FY 2025 nos by Fy 2026. With 300-350 bps higher margin. Topline will be function of that .
To be in top 3 player in aerospace defence & ESAI .
Presenantion details of investment.
Startegic investment 1 - GCC for unmanned warfare -&
Startegic investment 2- ESAI hub
1.8 lac & 44000 sq ft facility would require around 150-200 Cr investment . Will eventually lay plan on funding the same
Staregic investment 3 - Would require very big investment would come up with more details in a quarter or so .
The team & advisory board is in place with 1-2 more changes / new onboard hiring done and expected. Mainly team is X axiscades .
Looks well positioned with experience team in place . How does the order flow in defence flow needs to be seen.
With new team & introduction of them time for Q & A was found to be limited ( my view )
Disc - Invested and added in last 30 days. Not qualified to advise . Biased positively
What you seems to have missed is the vision that they shared.
They aspire to be a billion-dollar revenue company with a 25%+ EBITDA margin by FY29, and aims for a top 3 position in India across all core businesses with a substantial global presence.
Thats almost 50% cagr in revenues and ~90% cagr in Ebitda !!!
I had visited the Axiscades / Mistral stall in Aero India '25 along with a few others (@nirvana_laha @ananth @satishwe @GourabPaul @saintsat and Piyush). We spent over an hour at the stall in trying to understand all the products and pipeline. Summarizing them here with some pictures.
LCA Tejas
The most important thing we learned was that Mistral is already supplying to LCA Tejas Mk1. There is no delay due to GE Engine procurements. In fact the increase in production contribution in the last quarter is due to this.
The flyer with the parts being supplied from Mistral. The total per aircraft is around 10 Cr.
They had on display a scale model of LCA Tejas Mk1 along with actual parts being supplied to it placed around it.
The key component driving the numbers is the Exciter/Receiver processor for Radar jamming. There are two of these that go into each aircraft and their individual value is ~4 Cr (so 8 Cr per aircraft). There’s no competetion here for Mistral. They will supply this for the Mk1A and Mk2 as well. This component is high value-add and so high gross-margins as well.
This is the TR module operating in S-band (which I believe is GaN based) that will go into Uttam AESA radar and will be used in Tejas Mk1A and Mk2. So along with having a presence in Radar jammer, they will also have a presence in the actual radar as well in this subcomponent that goes into the cockpit.
Submarines
Flyer for submarines
They showed us a transparent submarine model video (from DRDO) that showed where these components would actually go. They had a scale model on display again with the actual components.
Mistral makes radar and sonar components here and the total value per submarine is 25 Cr. They will be supplying to 3 Scorpene class submarines this year.
Flyer for Mistral’s inhouse developed X-band radar used in the submarine. This is activated when submarine surfaces (sonar does the job underwater). This is one of the high value add components.
AEW&CS
AEW&CS stands for Airborne Early Warning and Control System. These aircrafts are used in military aviation for surveillance, command, and control. They can detect and track enemy aircraft, ships, and ground targets from a long distance.
Mistral currently supplies 100 Cr of components (6 in no.) per aircraft and is one of the high value suppliers. They are going to compete with Data Patterns, BEL, Astra etc. to be a system integrator which would mean a revenue of 3000 Cr for 6 aircrafts if they win it. It is an aspirational thing clearly for them to move up the value chain (new management also pushing for it)
Direct RF
This is perhaps the most high-tech and new age thing that they showed us. Direct RF tech was developed originally by US DoD/DARPA along with private players like Altera. Now US has allowed the use of such tech for allies like India and currently Mistral is the only one that has this tech. Although other players like Astra Microwave also had Direct RF on display in their stalls, what we understand is that those systems can handle only upto 6 GHz whereas Mistral’s will be able to go upto 32 GHz
The key difference appears to be speed of ADC/DAC data handling which Altera’s FPGAs provide to process signals in real-time. The key advantage along with speed of processing is the reduced number of components and cooling required and consequently the weight. The cost might be almost the same but performance benefits are huge.
Mistral seems to be pushing for Direct RF adoption in Su-30 upgrades.
LLTR Radar
The Arudhra LLTR radar control unit was on display. Looks like an upgrade of this one will be used in Ashwini LLTR
Counter-Drone Systems
The flyer
There are three systems in this pic. One hand-hand, one man-mounted (backpack) and another which is vehicle mounted or stationary.
Logistic Drones (Xherpa)
After having seen at least 20 other stalls with drones, which appears to be the most commoditised tech we saw, this was the least exciting product in the stall.
Other obsevation on management change - It appears that there’s lot of hunger going by inputs we got in terms of expansion, both in capabilities and capacities, as well as moving up the value-chain and general aggression in getting things done in the last 3 months.
P.S Please excuse the distortion in the pics. They were shot from close-ranges with wide-angle so there’s lot of barrel distortion in the pics. My knowledge of all this stuff is very rudimentary and novice level, so I am bound to have made several mistakes
Thanks to @rupeshtatiya @Sanjay_Kumar_E and @Anant for their inputs and discussion post our visit which helped piece together this post.
Disc: Invested
In December - As lack of manufacturing making them miss out on few big opportunities. Focus on acquiring a defense-class manufacturing company to address lack of manufacturing capabilities.
In Feb FY25Q3 - No immediate plans for inorganic acquisitions, focusing on core domains (Aerospace, Defense, ESAI).
Does facility in Electronic City – Bangalore is the replacement for planed manufacturing capabilities. through acquisition? Any more details for this direction change in such small time?
Mistral Solutions Private Ltd, (Mistral) a subsidiary of
AXISCADES Technologies Limited (AXISCADES), a chip to product company and a pioneer in
Defense, Electronics, Semiconductor and Artificial Intelligent (ESAI) applications, today
announced the launch of the DCP1000 Module, a compact and user-friendly Radar Data
Capture and Playback Module designed for real-time mmWave Radar data streaming &
Playback together. Based on the award-winning low power Lattice Nexus™ FPGA platform, the
DCP1000 delivers high-speed, low-latency data capture with Gigabit Ethernet connectivity and
HIL (Hardware-In-Loop) playback functionality. This state-of-the-art module is now available for
early samples.
e6a2b2c2-b6e2-4bf2-9191-6fb39c211644.pdf
Any thoughts? How impactful would this be?
My limited opinion on this specific board ..
1. It’s a 650$ development board only, meant for developers it wont be used in production as it’s not a rugged board.
2. Total tam for mmWAVE is $5 B , and test/prototype jigs form 5% of the TAM. so Tam for Mistral is $250M.
3. Used in autonomous cars, drones, defence/university labs, industrial robotics , traffic monitoring, Radar data acquisition, surveillance, reconnaissance.
4. Usual order size is 2-50 units per customer. and can expect around 100-200 customers.
Many things have happened since the I started this thread and some of my thoughts as things stand today are written below.
Resignation of Arun and Mistral Top Team (Muju, Rajiv etc.)
There were two ways the company could have gone when this thread was started - it could have become a decent engineering services company (like Cyient, Tata Elxsi etc.) or it could have gone on to become aerospace & defense technology company. My own preference has always been for the latter - as technology business > manpower business in my view and there is a large opportunity available in aerospace/defense over next several years.
I think Arun wanted to steer the company in the engineering services side given his background and hence he acquired Add Solutions, Epcogen and hired people to seed digital capabilities. I think the owner and board felt this was not the direction they wanted to take given the opportunity in aerospace & defense and hence this reset was needed.
I would still credit Arun for completing the Mistral acquisition through disputes, deleveraging balance sheet through fund raise, bringing relative stability in management and relatively improved communication.
Coming to resignation of Mistral Top team, there are two aspects that I wanted to understand -
First was that whether this will impact relationship with DRDO/DPSU (BEL, HAL, BDL etc.) and various Shipyards. Over time with my interactions with management, I became convinced that the relationship has remained and not deteriorated. The next level leadership in Mistral has taken over this networking part within Indian Defense establishment.
The second aspect is usually the management in acquired company leaves or is asked to resign as new owner wants to imprint their vision on the company. This is fair in business. The owner/board wanted more aggressive pursuit of the opportunities in aerospace and defense, and they felt that there needs to be a shakeout in the leadership. I also got convinced, over time by talking to various stakeholders, that resignations were not due to any financial issues and more of an issue where board wanted more aggressive approach.
Now coming to new management and new approach, one thing that has definitely changed is that communication has improved and now analyst community is asking more questions on aerospace and defense and program specific details. In the equity markets, Axiscades is now at least considered part of aerospace & defense industry and hopefully we will get more coverage like other listed players in defense.
The second aspect is that the new management has set aggressive growth target of 1bn$ sales in 5-6 years and entire organization is asked to align with this. There will always be an element overselling that promoters/managements tend to do. We, as investors, need to validate management talk through scuttlebutt, talking to industry players, cross questioning and being generally conservative on timelines or revenue/margin guidance that management gives. I would be happy if the company achieves 500mn$ sales in 5-6 years.
So, I am happy that second and third level of management is at least thinking of faster growth, pursuing opportunities etc.
Operational Aspects
Now coming to some operational aspects -
LCA Tejas Mk1A Orders
GE recently delivered first engine needed for LCA Mk1A. Hopefully this supply chain will get revived and hopefully there will be no more delays.
Secondly, with events like - IAF chief’s public bashing, parliamentary panel’s comments on HAL’s inefficiencies and defense minister’s show of solidarity with LCA/HAL at Aero India – I feel that HAL is under tremendous pressure to deliver this program.
I feel orders for electronics components for the last 33 LCA from first order of 83 and second order of 97 (which have indigenous radars and EW components) are around the corner and are probably delinked from engine delivery supply. If one reads through conference call transcripts of industry players (Astra Micro, BEL, Axiscades, Data Pattern etc.) - it becomes evident that HAL would like to get everything ready and then wait for engines to show up.
My confidence on industry getting LCA orders in FY26 has gone up quite significantly. We need to observe how the execution of these orders is partitioned over the years. But if GE ramps up supply, then FY26 can see supply of components for 5-10 planes and FY27 onwards this number ramping to 15-20.
Su-30 Orders
What I understand through various conversations at Industry events is that final configuration of Su-30 is finalized, and vendors are getting development/prototype orders for various electronics components.
Su-30 is lower risk than LCA because there is no engine upgrade involved. My sense is that starting H1 FY27, we will start seeing some production orders for Su-30 and execution picking up space in FY28.
One thing that has become clear is that Su-30 tenders will have more competition from newer players as well existing players expanding into new products. So, there are chances that production orders might be split across multiple vendors and also chances at the other end that some of the players might increase their wallet share vs LCA.
I feel mixed about Mistral’s chances in increasing contribution in SU-30 - so we have to keep tracking these things as they evolve.
But Su-30 program is moving ahead from discussion to prototyping and hopefully it is on time for production starting FY28.
Other Orders at Mistral
Some of the areas where order visibility has increased are -
The X-Factors
These are the orders or areas where company is pursuing opportunities after change in management.
The first clear area where there seems to be progress is offset contract business. In recently concluded Arihant Bharat Conference - company said that they are negotiating a deal which will result in center of excellence (CoE) in missile testing for MBDA. The cost of one missile test bench is 4-5mn$. They are also hoping that the client will fund part of the capex. Let us see how this deal evolves.
The other thing company confirmed is that - they are thinking seriously about MRO business and thinking of establishing MRO facility near Bangalore airport. MRO business, if successful, can contribute 100cr to revenue as per management in 2 years time.
Both of these are fluid and negotiations/outcome can take a long time to materialize. But these are two programs where the probability of deal has increased.
There are several other programs which are slightly longer term and visibility will improve in the coming year (Netra AEW&C order, QRSAM order, HEAUV order etc.). We will talk about these as and when these programs make progress.
Finally, in Arihant Bharat Conference, participants managed to get some projections from management which are listed below -
In summary, the order cycle for Mistral seems to be improving, Non-Mistral (Direct to Defense) business has some deals under negotiations and overall probability of increased profitability in non-core areas has gone up.
Disc - Axiscades is the largest holding for me, no buy/sell transactions for more than 30 days. I am positively biased due to my holding. The stock has doubled from the lows and valuations are on the higher side. Please do your own due diligence. This is not a buy/sell advice, I am not a SEBI registered advisor.
