Allied Digital

Allied Digital reported a robust Q3 FY25, with consolidated revenue reaching Rs. 220 crore, marking a 29% year-over-year increase. This performance signifies the second consecutive quarter exceeding the Rs. 200 crore threshold, maintaining improved business momentum. The company also noted a strong rebound in margins, particularly on a sequential basis, with current EBITDA at approximately 12%, which management aims to maintain and improve.

The company secured over Rs. 200 crore in new orders and contract renewals during the quarter, further strengthening its order book and long-term growth visibility. Key wins included projects with a leading US-based multinational investment bank, a major US-based eye care provider, a large-scale cloud deployment project, and data center solutions for India's second-largest public sector bank. These wins contribute to a more diversified portfolio across various sectors.

India operations continued to excel, with standalone revenues growing 45% year-over-year, and overall India business showing a 56% YoY and 12% sequential growth. The US market also demonstrated improved traction, contributing to a 16% year-over-year revenue growth from the rest of the world segment. The Services segment grew 22% YoY, while the Solutions segment saw a significant 59% YoY increase, serving as a pipeline for recurring revenues.

Management emphasized a multi-pronged strategy focusing on long-term business, diversity in geography and customer base, and leveraging technology and AI for increased productivity and profitability. The company is investing in talent development and geographic expansion to capitalize on market tailwinds such as increased technology spending in digital engineering, cloud, and cybersecurity solutions, and the growing maturity of Indian enterprises. This approach enables them to compete and win larger, more complex contracts.

The company disclosed a cybersecurity incident involving a data breach that occurred before they onboarded a customer. While an ex-employee impersonation led to a subsequent attack, management clarified that the incident was not their fault and the company is fully covered by cyber security insurance, expecting no significant financial impact. The customer remains with Allied Digital, and the company is actively working with legal teams to resolve any claims, with the incident having taken place in December 2023.

Allied Digital reported approximately Rs. 180 crore in cash on its books. This liquidity is being maintained as a 'war chest' for potential strategic acquisitions and upfront investments required for acquiring larger customers. The company is actively seeking good acquisition opportunities to enhance its capabilities and market reach, ensuring they have sufficient funds without needing to secure money from banks.

For FY26, Allied Digital is targeting a top-line revenue of Rs. 1,000 crore, with a revenue mix of 75% from recurring services and 25% from solutions. The company aims to maintain and improve its EBITDA margin from the current 12% and reduce Days Sales Outstanding (DSO) from 72 days to a target range of 60-65 days. The tax rate for FY26 is expected to be over 20%, up from 12% in Q3 FY25.