Allied Digital Services Limited — Q4 FY26 earnings call

Call held 22 May 2026

Management summary

Allied Digital delivered record revenues in FY26, growing 20% YoY to ₹968 crore, driven by strong domestic and international performance. Profitability was affected by one-time charges, but underlying performance remained robust. The company successfully addressed prior audit qualifications and is strategically investing in AI to enhance margins and service delivery, while maintaining a strong order pipeline for future growth.

Highlights

  • Achieved highest annual revenue of ₹968 crore in FY26, a 20% YoY growth.

  • Reported highest quarterly revenue in Allied Digital's history in Q4 FY26.

  • Profit after tax for FY26 grew 10% YoY to ₹36 crore, despite one-time charges.

  • All audit qualifications from the previous year have been addressed and are in the process of being fully resolved.

  • Strong order pipeline, including a ₹150-200 crore Mumbai Government contract and over ₹2,000 crore in Maharashtra.

Concerns

  • Profitability in FY26 was impacted by certain one-time charges and provisions, including a ₹36 crore ECL provision.

  • Government revenues were lower by 6% in FY26 due to geopolitical events and equipment cost fluctuations.

  • The Western Railway project (₹165 crore and ₹85 crore) had to be rebid due to significant equipment cost increases.

Key financials

  1. Consolidated Revenue ₹968 Cr +20%YoY
  2. Adjusted EBITDA ₹112 Cr +14%YoY
  3. EBITDA Margin 11%
  4. PBT (before exceptional items) ₹81 Cr +33%YoY
  5. PAT ₹36 Cr +10%YoY

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

  • Domestic Business
    17% Revenue Growth FY2637% Revenue Growth Q4 FY26
  • International Business
    22% Revenue Growth FY26
  • Services Business
    21% Revenue Growth FY26
  • Solutions Business
    17% Revenue Growth FY26
  • Enterprise Customers
    31% Revenue Growth FY26
  • Government Customers
    -6% Revenue Growth FY26

Order book

high confidence

Inflow this quarter

₹166 Cr

Pipeline

deal pipeline tcv

Maharashtra state pipeline, two large contracts in Maharashtra, Noida Smart City, Western Railway re-tender, high court orders

Cancellations & deferrals

  • rebid: Western Railway project rebid due to 25-30% equipment cost increase, impacting two orders.
The pipeline is very strong, both domestically and internationally, with significant traction from existing and new customers. The company is confident in converting the pipeline into active delivery, despite some delays in customer acceptance and billing.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed
    • Equity conversion Rs. 112 crore out of Rs. 117 crore of non-interest-bearing loans to subsidiaries converted into equity. ₹112 Cr
    • Interest charged Interest started being charged on remaining small loans of Rs. 5-6 crore to subsidiaries. ₹5 Cr
    I am pleased to share that the majority of these loans amounting to Rs. 112 crore out of total Rs. 117 crore had already been converted into equity by end of the financial year. The balance amount has either been squared off or interest has subsequently been charged, thereby aligning the treatment with regulatory requirements. ... And there are certain other small loans about Rs. 5 crore, Rs. 6 crore that we have given to our subsidiaries to make sure that they are able to sustain themselves. We have started charging interest on them.
  • Dividend ₹1.5/share (interim)
    Recognizing the resilient performance, the Board of Directors has maintained the dividend at 30% equivalent to Rs. 1.50 per equity share with a Rs. 5 face value.

Guidance & targets

Revenue

  • Revenue Growth Revenue · short-term (year-over-year) · High confidence 20-25%
    So, from a guidance perspective, I would try to give anywhere between 20% to 25% growth. But internally, we have a more aggressive growth. But for the outside world, it is anywhere between 20% to 25% kind of a growth that we are looking at year-over-year because our long-term target is to do 10x in 10 years is what we are trying to achieve.

    — Nehal Shah

  • Long-term Revenue Growth Revenue · next decade · High confidence 10x
    Looking ahead, we aspire to scale the business 10x over the next decade, which would imply a compounded annual trajectory growth of approximately 20% to 25%.

    — Nehal Shah

Margin

  • EBITDA Margin Margin · short-term (this year) · High confidence 12.5-13%

    From 11% today

    So, margins currently due to all these one-offs, our margins were in the tune of about 11% EBITDA. We want to target it to anywhere between 13% to 15% on the long term. So short term, we should be able to do 12.5%, 13% and on the longer term, we should be able to be 15%.

    — Nehal Shah

  • EBITDA Margin Margin · long-term · High confidence 13-15%

    From 11% today

    — Nehal Shah

Tax

  • Tax Rate Tax · FY27 · Medium confidence 25% +/- 1-3%
    It should be 25%, maybe 1%, 2% or 3% here or there, depending upon the deferred tax we get.

    — Nehal Shah

Project Timeline

  • Mumbai Project Implementation Project Timeline · post-award · High confidence 9 months
    So, the implementation will take about 9 months and then we have O&M, which will go on for 5 years. It is typical transaction that we do for all our other projects.

    — Nehal Shah

Headcount

  • Resource Reduction due to AI Headcount · 6 months to a year · High confidence 20-25%
    So, a lot of filtering as well as routing happens to the Al agent, okay? And that will definitely impact the low-level resources, which are definitely addressing the issue of the customer first. okay? So, we see definitely a reduction on the resource count for any customer close to 20%, 25% in a matter of 6 months or a year.

    — Paresh Shah

What to watch in Q1 FY27

RBI approval for loan conversion

next 2 quarters
Current Process started, 50% done (US part)
Target Full RBI approval and clean audit sheet

Why it matters

Crucial for resolving past audit qualifications and enhancing governance perception.

in next 2 quarters, we should be able to get a clean sheet coming in from everywhere.

Risks & concerns

  • Government project slowdown due to geopolitical events and pricing volatility

    medium

    Ongoing war between Iran and Israel caused equipment cost fluctuations, leading to tender delays and project re-bids (e.g., Western Railway project).

    Management acknowledged

  • Impact of one-time charges and provisions on reported profitability

    medium

    Profitability in FY26 was affected by certain one-time charges and a ₹36 crore ECL provision, masking underlying operational strength.

    Management acknowledged

  • Delays in RBI approvals for loan conversion to equity

    low

    While most loan conversions are complete, RBI approvals for remaining procedures are pending, which could delay a 'clean audit opinion'.

    Management acknowledged

Q&A highlights

7 direct
Client investment deferrals, competition, and margin pressures Direct
There are, of course, major margin pressures that are happening across the industry, and we are also facing the same. But we look at that as an opportunity because a lot of our service delivery, we have started using Al. And with Al getting implemented, AlOps getting implemented, we are seeing that there is a cost reduction that is happening across the line.

Management acknowledges industry-wide margin pressure but highlights AI as a key strategy for cost reduction and margin improvement.

Asked by Kunal Bajaj

Decline in Government projects despite India business growth Direct
Government last quarter, if you would have realized due to the ongoing war between Iran and Israel, a lot of these Government tenders had to be put on the back burner. Typically, we also had certain customers that we bidded for and we were about to win, but the equipment cost due to the war absolutely went haywire and went up. And eventually, we had to go out of those deals.

Explains the specific reasons for the slowdown in the Government segment, attributing it to external geopolitical factors and pricing volatility, rather than internal issues.

Asked by Kunal Bajaj

Timeline for resolving audit qualifications (Section 186 and FEMA compliance) Partial
50% of the work which was to be done is done where we had to convert the loan to equity, which has already been done in the U.S. There are certain procedures that we have to get done through the RBI and get the approval of the RBI. The process for that has started. We are pretty sure generally, it takes about a quarter or 2. So in next 2 quarters, we should be able to get a clean sheet coming in from everywhere.

Provides a clear timeline for the full resolution of audit qualifications, which is critical for investor confidence and financial reporting integrity.

Asked by Jay Adwani

Announcement timeline for the Mumbai project win Direct
So, the paperwork is going on. We should be able to announce probably in 2 to 3 weeks.

Gives a specific timeframe for the announcement of a significant new Government contract, providing near-term positive news flow.

Asked by Jay Adwani

Reasons for increased purchases and expenses impacting profit Direct
in this quarter, our multiple projects were on. Because of that, our direct expenses, supply of equipment got increased by around 3%, 4% in comparison to the standard or direct expenses level. So that impacted. And secondly, other expenses also you will find in this quarter is higher because that onetime provision is also taken under that, the Rs. 36-odd crore that ECL provision, that is also part of this quarter's expenses.

Clarifies that the increase in expenses and impact on profitability were due to project-specific equipment costs and a one-time accounting provision, rather than a systemic issue.

Asked by Jay Adwani

Update on the Western Railways project and re-tender Direct
So that Western Railway project, unfortunately, we had to let it go because by the time the pricing was about to open, the equipment procurement cost went up by 25%, 30%. And our margins that we are sitting on was all getting wiped off. So, we conveyed our message to Western Railway and asked them to do a retender since they were not able to increase the price in the tender itself. ... we are expecting the tender to be out by mid-July, where we should be able to bid again.

Explains the loss of a significant project due to external cost pressures and provides a timeline for its re-tender, indicating continued pursuit of the opportunity.

Asked by Jay Adwani

Impact of AI on margins and headcount reduction Direct
profitability definitely will improve. There is no doubt. ... we see definitely a reduction on the resource count for any customer close to 20%, 25% in a matter of 6 months or a year.

Confirms the positive impact of AI on future profitability through efficiency gains and significant headcount reduction, a key driver for margin expansion.

Asked by Pratik Dedhia

Risk of losing clients due to internal AI adoption Direct
Not so far Pratik. We have not seen any customers taking anything in-house. In fact, rather, the requirements of outsourcing have gone up where opportunities are being created for vendors who have made Al adaptability very easy. CIOs today are talking and wanting vendors who can help them in their Al journey.

Addresses a potential concern about AI cannibalizing services, with management indicating that AI is creating more outsourcing opportunities rather than leading to client losses.

Asked by Pratik Dedhia

2 min read 6 chapters

Detailed narrative

Record Annual and Quarterly Revenue Performance

Allied Digital achieved its highest-ever annual consolidated revenue of ₹968 crore in FY26, marking a 20% year-on-year growth. This performance was capped by the highest quarterly revenue in the company's history during Q4 FY26. The company also confirmed that its Q4 revenue run rate has pushed it past the ₹1,000 crore annualized revenue milestone, aligning with its long-term aspirations.

Profitability Impacted by One-Time Charges and Provisions

While revenue growth was strong, profit after tax for FY26 grew by 10% year-on-year to ₹36 crore, up from ₹32 crore in FY25. This modest growth was attributed to certain one-time charges and provisions, including a ₹36 crore ECL provision. However, adjusted EBITDA, excluding these non-recurring items, increased by 14% year-on-year to ₹112 crore, maintaining resilient EBITDA margins at 11% and indicating strong underlying operational performance.

Resolution of Prior Audit Qualifications

Management announced the successful resolution of all observations and qualifications raised by their new auditors in the Q4 FY25 audit report. This included the conversion of ₹112 crore out of ₹117 crore of non-interest-bearing loans to subsidiaries into equity, with interest now being charged on the remaining small loans. The company expects to receive full RBI approvals for the remaining procedural aspects within the next two quarters, aiming for a clean audit opinion.

Mixed Segmental and Geographic Growth Dynamics

Both domestic and international businesses contributed to growth, with India revenues up 17% YoY in FY26 and international revenues growing 22% YoY. The Services segment saw a 21% growth, and Solutions grew by 17%. Enterprise customers were a strong driver, growing 31% YoY. However, Government revenues declined by 6% in FY26 due to geopolitical events and equipment cost volatility, though a rebound is anticipated in FY27-28.

Strategic AI-First Approach for Margin Enhancement

Allied Digital is adopting an 'AI-first strategy' across its offerings, including Smart City Solutions and Managed Services. The company is investing in AI, automation, and training to reduce labor costs and improve efficiency. Management projects that AI implementation could lead to a 20-25% reduction in customer resource counts within 6-12 months, driving short-term EBITDA margins towards 12.5-13% and long-term targets of 13-15%.

Robust Order Pipeline and Key Deal Wins

The company secured ₹166 crore in new orders and renewals during Q4 FY26. A significant Mumbai Government contract, valued at ₹150-200 crore, is expected to be announced within 2-3 weeks. The pipeline remains strong, with over ₹2,000 crore worth of opportunities in Maharashtra, including two individual ₹600 crore contracts. The Western Railway project, previously lost due to equipment cost increases, is expected to be re-tendered in mid-July.

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