Allied Digital Services Limited — Q3 FY26 earnings call

Call held 5 Feb 2026

Management summary

Allied Digital reported a resilient Q3 FY26 with consolidated revenues of ₹247 crores, up 12% YoY, and a YTD revenue of ₹700 crores, up 16% YoY. PBT before exceptional items grew 13% to ₹23 crores. The company secured over ₹250 crores in order flows, with strong growth in international markets (26% YoY) and non-government customers (13% YoY), despite a 5% decline in India operations due to election-related project delays. Management is focused on resolving audit qualifications and aims for ₹1,000 crore annualized revenue, driven by a strong pipeline in AI-enabled services, Smart Cities, and data centers.

Highlights

  • Consolidated revenues reached ₹247 crores in Q3 FY26, marking a 12% year-on-year growth and the highest ever quarterly revenue in the company's history.

  • Year-to-date revenue for 9M FY26 stood at ₹700 crores, an increase of 16% year-on-year, demonstrating solid progress towards the ₹1,000 crore annualized revenue milestone.

  • PBT before exceptional items improved by 13% year-on-year to ₹23 crores, reflecting an upward trajectory in financial performance.

  • Order flows remained healthy at over ₹250 crores for the quarter, supported by a mix of new wins, renewals, and follow-on orders.

  • International operations showed strong momentum with a 26% year-on-year growth in Q3 FY26.

Concerns

  • India operations de-grew by 5% year-on-year in Q3 FY26 due to the absence of significant project milestones and delays caused by state elections.

  • EBITDA growth was 4% YoY to ₹26 crores, which is lower than revenue growth, and an analyst noted that gross margin improvements were not translating to EBITDA level.

  • The company has outstanding audit qualifications related to physical verification of fixed assets and inventory, and old debtors (3+ years) requiring ECL provisions, which are targeted for resolution by March 31, 2026.

Key financials

2 periods

Headline

  • Revenue
    ₹247 Cr
    YoY +12%
  • EBITDA
    ₹26 Cr
    YoY +4%
  • PBT before exceptional items
    ₹23 Cr
    YoY +13%
  • PBT
    ₹22 Cr
    YoY +13%
  • PAT
    ₹14 Cr
  • Adjusted PAT
    ₹20 Cr

9M FY26

  • YTD Revenue
    ₹700 Cr
    YoY +16%

What they filed

Q1 FY27: revenue down 4.3%, net profit down 17.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue91 100 100 95 101 +10%95 −5%97 −3%91 −4%
EBITDA10 10 -14 9 9 −11%12 +18%-27 −95%14 +57%
Net profit6 6 -4 8 6 +10%4 −35%-19 −339%7 −17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • International Operations
    0.26 yoy_pct Revenue Growth
  • India Operations
    -0.05 yoy_pct Revenue Growth
  • Services Business
    0.16 yoy_pct Revenue Growth
  • Solutions Revenue
    0 yoy_pct Revenue Growth
  • Non-Government Customers
    0.13 yoy_pct Revenue Growth
  • Government Segments
    0.12 yoy_pct Revenue Growth

Order book

high confidence

Inflow this quarter

₹250 Cr

Pipeline

deal pipeline tcv

Healthy pipeline for Western Railways, metros, and Maharashtra; bids submitted and awaiting opening; strong pipeline for Government, Enterprise, and global customers.

Cancellations & deferrals

  • deferred: Orders in pipeline delayed due to Maharashtra elections and ongoing elections, leading to delayed permissions for deployments and bill approvals.
Management notes a healthy order book and improving visibility on execution, with a strong pipeline across government, enterprise, and global customers, despite some election-related delays in Q3.

Source: Prepared remarks

Capital allocation

medium confidence
  • Debt Debt disclosed
    • Equity conversion Loan from Allied India to Allied Inc. (US subsidiary) to be converted into equity by March 31st to resolve audit qualification.
    We are planning, we are working on it so that this loan amount can be converted into equity finally by 31st March. So that this qualification will also be removed permanently.

Guidance & targets

Revenue

  • Annualized Revenue Revenue · near future · Medium confidence ₹1,000 crore
    In closing, I would like to reiterate that we remain excited about the traction and momentum in the business and are looking forward keenly towards achieving our target of Rs. 1,000 crore annual revenues in the near future.

    — Nehal Shah

  • Quarterly Revenue Run Rate Revenue · from next quarter onwards · High confidence ₹250 crore
    So, our idea of Rs. 1,000 crore is to achieve Rs. 250 crore quarterly and I feel run rate should be Rs. 250 crore. So, we are at Rs. 247 crore, we should be able to do Rs. 250 crore from next quarter onwards and then keep on improving.

    — Nehal Shah

  • Pharma Company Order (Europe) Annual Revenue Revenue · a year for 4 years · High confidence $12 million
    So, we are looking at a revenue top line of about $1 million a month, about $12 million a year for 4 years. That is close to about $50-odd million.

    — Nehal Shah

Revenue Growth

  • FY27 Revenue Growth Revenue Growth · FY27 · Medium confidence mid-teens
    With respect to future projects, I think the mid-teens will be a conservative growth target that I would want to give out.

    — Nehal Shah

Margin

  • Smart City Gross Margins (overall project) Margin · overall when we complete the whole project · High confidence double digits upwards of 20%
    but a solution provider like us who does end-to-end from building a Smart City to managing it for a period of 5 years, will have improved margins overall in the tune of double digits upwards of 20% overall when we complete. And I am talking about gross margin, when we complete the whole project.

    — Nehal Shah

  • Pharma Company Order (Europe) Margins Margin · Medium confidence in the teens
    Margins would be in the teens.

    — Nehal Shah

Debt

  • US Subsidiary Loan Conversion to Equity Debt · by March 31st · High confidence completed
    We are planning, we are working on it so that this loan amount can be converted into equity finally by 31st March. So that this qualification will also be removed permanently.

    — Gopal Tiwari

Audit

  • Resolution of Audit Qualifications Audit · by March 31st · High confidence cleared
    We are contemplating to complete that entire process by 31st March, I mean, by year-end, this financial year-end. So whatever outcome will be there of that verification and the exercise, we are going to take care of that by end of the year.

    — Gopal Tiwari

Order Wins

  • Better and Larger Order Wins Order Wins · next 2-3 quarters · Medium confidence expected
    And the pipeline, I am assuming in the next 2 or 3 quarters, we will see better and larger order wins coming in.

    — Nehal Shah

  • Government Wins and Announcements Order Wins · by March 31st · Medium confidence expected
    But with the RFPs and the order bidding that we have done, we see that by March 31, you will see some wins and some announcements coming from our side for sure.

    — Nehal Shah

What to watch in Q4 FY26

Resolution of Audit Qualifications

By March 31st, 2026 (FY end).
Current Outstanding, actively being addressed (physical verification, old debtors, US subsidiary loan conversion).
Target Resolved, qualifications removed.

Why it matters

Essential for financial transparency and investor confidence, as these have been recurring issues.

We are contemplating to complete that entire process by 31st March, I mean, by year-end, this financial year-end. So whatever outcome will be there of that verification and the exercise, we are going to take care of that by end of the year. ... We are planning, we are working on it so that this loan amount can be converted into equity finally by 31st March. So that this qualification will also be removed permanently.

Risks & concerns

  • Audit Qualifications

    high

    Outstanding issues related to physical verification of fixed assets/inventory, old debtors, and US subsidiary loan conversion.

    Management acknowledged

  • Geopolitical Uncertainties

    medium

    Geopolitical uncertainties remain high, though gradual stabilization seen in Enterprise segments.

    Management acknowledged

  • India Operations De-growth

    medium

    India operations de-grew by 5% YoY in Q3 FY26 due to lack of project milestones and election-related delays.

    Management acknowledged

  • Margin Compression at EBITDA Level

    medium

    Gross margin improvements are not fully translating to EBITDA due to investments in large customer contracts and compliance activities.

    Management acknowledged

  • Pricing Pressure and Outcome-Linked Models

    medium

    Heightened scrutiny on pricing and contracting structures, with customers increasingly seeking outcome-linked commercial models and tighter SLAs.

    Management acknowledged

Q&A highlights

8 direct
Government Orders and Smart City Project Delays Direct
While we are talking, you are aware that Maharashtra underwent elections or different municipal elections and stuff and a lot of the orders that were in the pipeline were delayed for that reason for the last quarter, but we are seeing a lot of movement happening, bidding going to the next stage of financial opening and stuff. So, we see a lot of progress happening there.

Analyst questioned the lack of government wins; management explained election-related delays and identified key focus areas (Western Railways, metros, Maharashtra) for upcoming orders, providing clarity on pipeline execution.

Asked by Kunal Bajaj

Solutions vs. Services Mix and Margin Trajectory Direct
So, once we have this Solution business coming in, we will have that mix getting cooled off. And as you are also aware that we had won an order about a quarter back of the largest pharma company in Europe. Even that has started getting us revenue getting recognized. So, you see that kind of a jump coming in from the Services side as well.

Analyst inquired about the higher Services mix driving margins. Management confirmed this trend and highlighted a large European pharma order contributing to Services revenue, indicating a positive shift in revenue mix and margin potential.

Asked by Kunal Bajaj

Data Center Strategy and Opportunities Direct
Typically, our expertise lies in architecting, designing and implementing a data centre. We have done that for about 15 cities across India. And our core competence lies in implementing data centre rather than owning the realty space and making a data centre and giving hosting service to our clients.

Analyst sought clarification on their data center involvement. Management detailed their 'game of skill' approach focusing on design, implementation, and management rather than real estate ownership, aligning with government and enterprise needs and leveraging AI.

Asked by Kunal Bajaj

Audit Qualifications and US Subsidiary Loan Resolution Direct
We are planning, we are working on it so that this loan amount can be converted into equity finally by 31st March. So that this qualification will also be removed permanently.

Analyst pressed on recurring audit qualifications. Management provided a clear plan and timeline (by March 31st) for resolving issues related to physical verification, old debtors, and converting a US subsidiary loan to equity, which is crucial for improving financial transparency.

Asked by Jainis Chheda

AI Monetization and Impact on Margins Direct
Number two, over time, the Al basically becomes autonomous, and the automation helps to make sure we deploy lesser people. There is definitely cost savings on our operations, which will lead to improved profit margins for sure.

Analyst questioned the financial impact of AI. Management explained that AI, integrated into services, drives productivity and automation, leading to cost savings and improved profit margins, although client benefits are currently seen slowly.

Asked by Jyoti Singh

FY27 Revenue Growth Outlook Direct
With respect to future projects, I think the mid-teens will be a conservative growth target that I would want to give out. The reason is beyond the macroeconomic conditions that we also have to keep in mind. But having said that, the pipeline looks strong.

Analyst asked for FY27 growth guidance. Management provided a 'mid-teens' conservative target, indicating confidence in the strong pipeline and potential for higher growth if large contracts materialize.

Asked by Jyoti Singh

Translation of Gross Margin to EBITDA Level Direct
implementation, we have not seen the translation happening on the EBITDA level, so which probably would come down in the coming quarters, is it correct? That is right.

Analyst observed that gross margin improvements were not translating to EBITDA. Management confirmed this, implying that current investments in large contracts are impacting EBITDA, highlighting a short-term margin pressure point for investors to monitor.

Asked by Prateek Dedhia

Enterprise Order Announcement Policy Direct
Unfortunately, with the growing top line, the threshold for announcements have also gone up. We typically have a threshold of about 10% of our top line. So, any orders now that we get above Rs. 100 crore or maybe Rs. 90 crore will be announced.

Analyst questioned why enterprise orders aren't announced publicly. Management clarified their revised threshold for stock exchange announcements (above ₹90-100 crores), explaining that smaller, strategic deals are reported quarterly, which is important for understanding disclosure practices.

Asked by Prateek Dedhia

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Detailed narrative

Q3 FY26 Financial Performance Overview

Allied Digital reported consolidated revenues of ₹247 crores for Q3 FY26, marking a 12% year-on-year increase and representing the highest quarterly revenue in the company's history. Year-to-date revenue for the nine months ended December 31, 2025, reached ₹700 crores, up 16% YoY from ₹603 crores in the prior year, positioning the company close to its stated target of ₹1,000 crore in annualized revenue. PBT before exceptional items grew 13% YoY to ₹23 crores, while reported PAT for the quarter was ₹14 crores, which would be ₹20 crores on an adjusted basis after accounting for one-time items.

Segmental Performance and Geographic Trends

The company's international operations demonstrated strong momentum, growing 26% year-on-year in Q3 FY26. Revenue from non-Government customers increased by 13% YoY, outpacing the 12% YoY growth from Government segments. Conversely, India operations experienced a 5% year-on-year decline in stand-alone revenues for Q3 FY26, primarily due to the absence of significant project milestones and delays caused by state elections. Management anticipates renewed billing in India in the next quarter as project milestones are completed, with a focus on Western Railways, metros, and Maharashtra.

Order Book and Pipeline Health

Allied Digital secured healthy order flows exceeding ₹250 crores during the quarter, comprising a mix of new wins, renewals, and follow-on orders. The company highlighted two significant wins totaling ₹1,000 crores earlier in the year, with billing expected in 2026 and 2027. The pipeline quality is improving with larger deal sizes, longer tenures, and broader scopes. Key focus areas for upcoming government orders include Western Railways, metros, and Maharashtra, with expectations of better and larger order wins in the next 2-3 quarters, contributing to the target of ₹250 crore quarterly run rate.

Strategic Focus on AI, Smart Cities, and Data Centers

The company has adopted an 'AI-first' strategy, integrating AI into all its services and developing its own Agentic AI platform. Three deals in Q3 FY26 leveraged AI, contributing to improved productivity and profit margins, although customer benefits are currently seen slowly as they move from proof-of-concept. Allied Digital is actively involved in architecting, designing, and implementing data centers across India, with opportunities arising from sovereign data centers, intelligent infrastructure, and AI-based services. The recent Union Budget's focus on digital infrastructure, AI, and data centers provides a supportive backdrop for their 'game of skill' approach.

Margin Dynamics and Operational Efficiency

While gross margins are improving quarter-over-quarter, the translation to EBITDA level has not been fully realized, with EBITDA growing 4% YoY to ₹26 crores. Management acknowledged that investments associated with acquiring large customers, including team capabilities and compliance activities for multi-country contracts, can temporarily burden EBITDA. However, the company aims to improve operational costs and expects better margins as larger Smart City implementation projects transition into the Operations & Maintenance (O&M) phase, where gross margins can reach double digits upwards of 20%.

Audit Qualifications and US Subsidiary Loan Resolution

The company is actively addressing audit qualifications related to the physical verification of fixed assets and inventory, and old debtors (over 3 years old). A provision of ₹1.3 crore was recognized for New Labour Codes as an exceptional item, and ₹4.8 crore for prior year taxation. Crucially, Allied Digital plans to convert a loan provided to its US subsidiary (Allied Inc.) into equity by March 31, 2026, to permanently resolve a recurring audit qualification. These actions are aimed at enhancing financial transparency and governance by the fiscal year-end.

Growth Outlook and Long-Term Vision

Allied Digital maintains a conservative 'mid-teens' growth target for FY27, noting that a single large contract could potentially push growth to the mid-20s. The company is confident in its ability to deliver sustainable and profitable growth, supported by a healthy order book and improving visibility on execution. Management reiterated its commitment to achieving ₹1,000 crore in annual revenues in the near future, underpinned by comprehensive transformation across governance, human capital, and sales/marketing frameworks, ensuring the organization remains agile and resilient.

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