Detailed Narrative
Q1 FY26 Financial Performance Highlights
Apollo Micro Systems reported a strong Q1 FY26, with revenues increasing 46% year-over-year to INR234 crores. EBITDA grew by 83% to INR41 crores, resulting in a 600 basis point expansion of the EBITDA margin to 31%. Net profit saw a significant rise of 110% year-over-year, reaching INR18 crores, and the PAT margin improved by 400 basis points to 13%. These results underscore consistent execution and operational discipline.
Strategic Milestones: Export Order & Credit Rating Upgrade
The company achieved a maiden export order valued at $13.37 million, equivalent to approximately INR113.81 crores, for advanced avionics systems with dual-use applications. This marks a significant step in global progress. Additionally, ACUITE Ratings upgraded Apollo's long-term credit rating by two notches to A- (A2+ for short-term), reflecting enhanced confidence in the company's financial strength and future trajectory.
Order Book and Key Project Updates
As of June 30, 2025, the order book stood at INR735 crores. Management anticipates significant order inflows, including QRSAM orders before December and ATGM orders before September. Apollo is a DCPP partner for MIGM, expecting orders potentially around INR2,000 crores. The company is also involved in Project Kusha, developing onboard systems and software, with trial tests planned in the coming months and production expected within two years. MOD is projected to release INR2 lakh crores worth of orders in the next six months, with Apollo participating in 63% of the electronics and electromechanical activities for missile programs.
Capital Expenditure and Capacity Expansion
The second phase of Apollo's capex program is progressing smoothly, with no delays. This expansion is critical for future production capabilities and is expected to contribute to reducing the working capital cycle from FY27 onwards. Unit 3 is on track to be ready for occupation by October 2025, with operational listing targeted by December 2025, further enhancing the company's manufacturing capacity.
IDL Explosives Acquisition and Backward Integration
The acquisition formalities for IDL Explosives are expected to be completed within the current week. This strategic acquisition is aimed at backward integration, allowing Apollo to develop in-house propulsion and warhead capabilities. This will enable the company to produce full-fledged products such as short-range rockets, anti-submarine warheads, mines, and aerial bombs, thereby increasing its value share in various missile programs.
Financial Guidance and Long-Term Outlook
Apollo projects a revenue CAGR of 45-50% for FY26 and FY27, driven by its core business. Operating margins are expected to improve in the first half of FY26 due to favorable operating leverage and product mix, with moderate expansion continuing into FY27. The company is also committed to reducing its promoter pledge to zero by FY26 and aims to reduce the working capital cycle by 100-120 days from FY27 onwards.
Working Capital Management and Fund Utilization
To support its growth and operational needs, Apollo has raised funds through warrants. Currently, 50% of the warrants amount has been received, with the remaining INR325 crores expected within the next four months. These funds are specifically earmarked for meeting the company's working capital requirements, rather than for capital expenditure.
New Initiatives: RF Business and Drones
Apollo is actively building its own RF capabilities and had contemplated an acquisition in this area, though the IDL acquisition took precedence. The company is also developing delivery cargo drones, including for defense applications, with a final model to be released after internal trials. These initiatives highlight Apollo's focus on expanding its technological offerings and exploring new growth avenues in the defense sector.