Apollo Micro Systems Limited — Q1 FY26 earnings call

Call held 4 Aug 2025

Management summary

Apollo Micro Systems delivered a robust Q1 FY26, marked by strong revenue and profit growth, significant margin expansion, and a maiden export order. The company is actively pursuing a substantial order pipeline in the defense sector, progressing with its capex plans, and nearing completion of the IDL Explosives acquisition for backward integration. Management provided optimistic guidance for future revenue growth and margin improvement, alongside updates on key defense projects.

Highlights

  • Revenue surged 46% YoY to INR234 crores.

  • EBITDA increased 83% YoY to INR41 crores.

  • EBITDA margin expanded by 600 basis points to 31%.

  • PAT more than doubled, growing 110% YoY to INR18 crores.

  • PAT margin improved by 400 basis points to 13%.

  • Secured a maiden export order valued at $13.37 million (INR113.81 crores).

  • Credit rating upgraded to ACUITE A- / A2+.

  • Order book stood at INR735 crores as of June 30, 2025.

Key financials

  1. Revenue ₹234 Cr +46%YoY
  2. EBITDA ₹41 Cr +83%YoY
  3. EBITDA Margin 31% +6%YoY
  4. PAT ₹18 Cr +110%YoY
  5. PAT Margin 13% +4%YoY

What they filed

Q1 FY27: revenue up 87.3%, net profit up 38.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue161 148 162 134 225 +40%252 +70%293 +81%251 +87%
EBITDA33 38 36 41 59 +79%50 +32%68 +89%54 +32%
Net profit16 18 14 18 30 +88%23 +28%37 +164%25 +39%
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.

Order book

high confidence

Total value

₹735 Cr

as of 2025-06-30 quantified

Inflow this quarter

₹113.81 Cr

Pipeline

qualified rfp

MOD is releasing INR2 lakh crores worth of orders in next six months. Apollo is involved in 63% of electronics and electromechanical activities for missile programs. MIGM for Apollo and BDL could be around INR2,000 crores each. QRSAM order expected before December. ATGM order expected before September.

The company has a robust order book and is expecting significant new orders from various defense programs, including QRSAM, MIGM, ATGM, and torpedo systems, with strong participation in MOD's upcoming INR2 lakh crores orders.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Phase two capex for capacity expansion
    • Unit 3 facility for operational listing
    As we have been informing earlier, we expected to reduce it by 100 to 120 days from FY27 onwards once we fully, you know, take a full-fledged advantage of the capex that we commission upon, and also going to a lot of systems getting into the production phase. ... And the phase two of the capex, which we have been talking about, the phase two already has started.
  • M&A IDL Explosives Acquisition · Pending regulatory · Consideration ₹[object Object] (undisclosed)

    Backward integration for propulsion and warheads, especially for MIGM, and to build in-house capabilities for full-fledged products like short-range rockets, anti-submarine warheads, mines, and aerial bombs.

    And you also know that we have acquired IDL Explosives and the warhead of the MIGM will also be done by us. Strategically, we are aligning. ... IDL acquisition formalities going on. I think most probably this week we'll be completing.
  • Liquidity Liquidity disclosed 50% of the warrants amount received, remaining INR325 crores expected within next four months for working capital.
    Whatever we have already issued is fully paid-up share plus warrants, 50% of the warrants. Out of the warrants amount of INR400 plus crores, INR100 crores we have received another INR325 crores we are yet to receive within the next four months. ... It will not be for capex. It is only for working capital requirement.

Guidance & targets

Revenue

  • Revenue CAGR Revenue · FY26 and FY27 · High confidence 45-50%
    Looking ahead, we expect revenue to grow at a CAGR of 45% to 50% over FY26 and 27, driven solely by the core business, excluding any contribution from the recent acquisition.

    — Sai Kumar

Margin

  • Operating Margins Margin · H1 FY26 · High confidence Improve
    Operating margins are projected to improve in the first half of FY26 due to favorable operating leverage and product mix.

    — Sai Kumar

  • Operating Margins Margin · H2 FY26 and into FY27 · High confidence Moderate margin expansion
    However, ongoing capex is expected to moderate margin expansion in the later half of FY26 and into FY27.

    — Sai Kumar

Working Capital

  • Working Capital Cycle Days Working Capital · from FY27 onwards · High confidence Reduce by 100-120 days
    As we have been informing earlier, we expected to reduce it by 100 to 120 days from FY27 onwards once we fully, you know, take a full-fledged advantage of the capex that we commission upon, and also going to a lot of systems getting into the production phase.

    — Sai Kumar

Promoter Pledge

  • Promoter Pledge Promoter Pledge · by FY26 · High confidence Zero
    I think I have seen that the promoter pledge part has come down to 37% on. And the last time we spoke two quarters back, the roadmap was to bring it down to zero by FY'26. So, I just wanted to know if we are on track or any change in timelines? ... We are on track. We are on track.

    — Management

Export

  • Earmarked for Export Product Development Export · This year · High confidence INR1,000 million
    This year, we have earmarked close to INR1,000 million rupees for developing certain full-fledged products which will be qualified to get into an export -- for an export opportunity.

    — Management

Order Inflow

  • QRSAM Order Order Inflow · Before December · High confidence Expected
    I'm expecting before December, this QRSAM order we are expecting.

    — B. Karunakar Reddy

  • ATGM Order Order Inflow · Before September · High confidence Expected
    Yes, yes. Maybe, before September, I'm expecting [ATGM order].

    — B. Karunakar Reddy

  • MIGM Order Order Inflow · This financial year · High confidence Expected
    We are expecting we will get in this financial year [MIGM order].

    — Sai Kumar

  • MOD Order Release Order Inflow · Next six months · High confidence INR2 lakh crores
    As per the defense secretary, this thing, next six months' time, he said INR2 lakhs crores worth of orders MOD is releasing.

    — B. Karunakar Reddy

Project Timeline

  • Project Kusha Development Completion Project Timeline · Next 2 years · High confidence Complete
    Under 2 years' time DRDO actually wants to take. Kusha is not a single missile. Almost four variants are there. One of the variants, I think, shortly is coming for test file, there is a time period that MoD has fixed. In the next 2 years' time, the development activity is complete. And it has to go to production phase.

    — B. Karunakar Reddy

What to watch in Q2 FY26

IDL Explosives Acquisition Completion

Next quarter
Current Formalities ongoing, expected to complete this week
Target Acquisition closed, integration started

Why it matters

Crucial for backward integration and expanding product capabilities, especially for MIGM, impacting future revenue and margins.

IDL acquisition formalities going on. I think most probably this week we'll be completing.

Risks & concerns

  • National Security Sensitivity of Discussions

    medium

    Management requested participants to avoid extremely sensitive questions as recorded calls are published and could jeopardize national security.

    Management acknowledged

  • Exclusivity of DRDO Technology Transfer for DCPP Partners

    medium

    Analyst questioned if DCPP partners have sole access to DRDO technology, citing DRDO website; management stated it's an internal issue being addressed, clarifying MIGM case is unique.

    Analyst acknowledged

  • Rare Earth Metal Supply Chain Challenges

    low

    Analyst inquired about challenges from rare earth metal restrictions; management stated no current challenges but it's a sensitive topic they are restrained from discussing.

    Analyst downplayed

Q&A highlights

6 direct, 1 evasive
Order Book as of June 30th and updates on MIGM/QRSAM orders Direct
Okay. The order book currently stands at around INR735 crores. And regarding the MIGM order update, I would like to say that the priorities keep shifting in certain things. ... I'm expecting before December, this QRSAM order we are expecting.

Provides the current order book value and specific timelines for anticipated large defense orders, crucial for future revenue visibility.

Asked by Shreyansh Gatani

IDL acquisition progress and its impact on Apollo's value share in missile programs Direct
IDL acquisition formalities going on. I think most probably this week we'll be completing. ... We are contemplating as a backward integration using IDL and the capacities will be more than sufficient for this. How the approach towards getting into a full-fledged missile programs and their warheads and other things like is something that we are contemplating to do over next few quarters actually.

Clarifies the imminent completion of the IDL acquisition and its strategic role in backward integration to enhance Apollo's capabilities and value capture in missile systems.

Asked by Kripashankar

Apollo's involvement and potential share in MOD's announced INR2 lakh crores order pipeline Partial
While you are telling our portion is, I am not supposed to disclose right now. But a good number of systems we are supplying to all these programs. ... if you consider all the missile programs, whatever DRDO is doing, 63% of electronics and electromechanical activities and all, we are doing.

Highlights Apollo's significant positioning in the upcoming large defense orders from MOD, indicating strong future growth potential, even if the exact quantum cannot be disclosed.

Asked by Dipen Vakil

Apollo's involvement and timeline for Project Kusha Direct
But Kusha, we are also doing a couple of onboard systems we are doing. And we are the software, we are the only people, only company delivered these systems. ... Next couple of months, the trial test file is they're planning DRDO. ... In the next 2 years' time, the development activity is complete. And it has to go to production phase.

Confirms Apollo's critical role in Project Kusha, providing insights into its development status and the timeline for transitioning to the production phase.

Asked by Dipen Vakil

Updates on various torpedo programs (Varunastra, EHWT, ALWT) Direct
EHWT complete homing system we are providing. EHWT goes into, it's three variants we are doing. ... ALWT, you're talking about ALWT, has a good number of production is there. ... Varunastra already 63 number order already BDL received. And we are supplying your signal processing and other technologies we are supplying. Right now, negotiation is going on.

Provides a comprehensive overview of Apollo's involvement and progress in multiple key naval defense programs, showcasing its diverse capabilities.

Asked by Rupesh

Exclusivity for DCPP partners in DRDO technology transfer, specifically for MIGM Evasive
No. But I think, that's a question. That's a question we are addressing internally with DRDO. I think in the investor forum, we are not able to talk about it and it will be unfair on our part to talk. ... MIGM case is different. MIGM case, no, spec to design, actually. We have complete development, we have done, actually. So, we are the only people holding the technology, like Apollo Micro Systems and BDL.

Highlights a potential concern regarding DCPP partner exclusivity and management's cautious approach to discussing sensitive internal matters, while clarifying the unique position for MIGM technology.

Asked by Subodh

Utilization of funds raised through warrants Direct
We have received only 50% of the amount mobilized. ... Whatever we have already issued is fully paid-up share plus warrants, 50% of the warrants. Out of the warrants amount of INR400 plus crores, INR100 crores we have received another INR325 crores we are yet to receive within the next four months. ... It will not be for capex. It is only for working capital requirement.

Clarifies the status of fund receipt from warrants and their specific allocation towards working capital, providing transparency on liquidity management.

Asked by Ashok Shah

Plans for RF business and drone development Direct
Yes, RF, you we have started building up our own RF capabilities and we were also contemplating for an acquisition of a RF company. ... Regarding drones, yes, we are developing certain delivery cargo drones. It's in offing actually. ... It's for the defense only, sir.

Outlines Apollo's strategic focus on building in-house RF capabilities and venturing into drone technology, particularly for defense, indicating new growth avenues.

Asked by Shreyansh Gatani

3 min read 8 chapters

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.

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