Apollo Micro Systems Limited — Q4 FY25 earnings call

Call held 26 May 2025

Management summary

Apollo Micro Systems delivered a strong performance in FY25, achieving significant revenue and profit growth, driven by robust order execution and strategic initiatives. The company announced the acquisition of IDL Explosives to enhance its defense capabilities and is undertaking substantial capacity expansion. Management provided optimistic guidance for future growth and margin improvement, alongside a large capital raise to support these plans.

Highlights

  • FY25 Revenue reached ₹562.07 crores, a robust 51.24% YoY growth.

  • FY25 EBITDA stood at ₹132 crores, a 54% YoY increase with a 23.5% margin.

  • FY25 Net Profit surged by 81.18% YoY.

  • Q4 FY25 Revenue increased by 19% to ₹162 crores.

  • Q4 FY25 EBITDA grew by 25% to ₹36 crores, with a margin of 22% (up 100 bps YoY).

  • Acquisition of IDL Explosives Ltd. announced, with consolidation starting Q2 FY26.

  • Current order book stands at ₹615 crores, with a target to triple by March '26.

  • Preferential fundraise of ₹816 crores is underway, with approvals received.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹162 Cr
    YoY +19%
  • EBITDA
    ₹36 Cr
    YoY +25%
  • EBITDA Margin
    22%

FY25

  • Revenue
    ₹562.07 Cr
    YoY +51.2%
  • EBITDA
    ₹132 Cr
    YoY +54%
  • EBITDA Margin
    23.5%
  • Net Profit Growth
    —
    YoY +81.2%

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

₹615 Cr

as of 2025-05-23 quantified

The company expects significant order inflows from various defense programs, including naval mines, torpedoes, and missile systems, which are transitioning to production phase.

Source: Q&A

Capital allocation

high confidence
  • Capex Capex disclosed
    • Unit-3 Phase-1 development ₹150 Cr
    • Unit-3 Phase-2 development ₹100 Cr
    • Test equipment for Unit-3 ₹50 Cr
    The total capital expenditure allocated for Phase-1 is Rs. 150 crores and for Phase-2 is around Rs. 100 crores. The Phase-2 of Unit-3 is expected to commence work in Q4 FY '26. ... we are equipping ourselves within the Unit-3 by investing close to more than Rs. 50 crores for these test equipment
  • M&A IDL Explosives Ltd. Acquisition · Announced

    Enhances manufacturing capabilities, broadens solution portfolio across critical areas of defense supply chain, vertical integration, increase portfolio into warheads, rocket propellants, rocket motor designs, enter complete ammunition cycle, huge export potential.

    Financial results to be consolidated starting from Q2 FY26. Expected to become positive EBITDA in subsequent quarters after takeover. Accumulated loss will provide tax benefit.

    We are also pleased to announce a significant strategic milestone, which is the acquisition of IDL Explosives Ltd. ... The financial results of the acquired entity namely IDL Explosives Ltd. will be consolidated starting from Q2 FY '26.
  • M&A RF space companies Acquisition · Announced

    To accelerate and increase RF portfolio.

    So RF side we went a little slow. This year we are going to accelerate, we are talking to couple of companies in RF space for acquisition further actually, the RF portfolio we will increase.

Guidance & targets

Revenue

  • Revenue Growth (core business) Revenue · next two years (FY26, FY27) · High confidence 45% to 50% CAGR
    Looking ahead, we expect the revenue growth which we have been giving guidance earlier also to grow at a CAGR of 45% to 50% over the next two years also, driven solely by the core business, excluding any contribution from the recent acquisition.

    — Addepalli Sai Kumar

  • Consolidated Revenue Growth (with acquisition) Revenue · this financial year (FY26) · High confidence double
    If I take into account the contribution of the recent acquisition, I am very happy to share with you that our revenue would double in this financial year.

    — Addepalli Sai Kumar

Operating Margin

  • Operating Margins Operating Margin · H1 FY26 · Medium confidence improve
    The operating margins are projected to improve in the first half of FY '26 due to favorable operating leverage and product mix.

    — Addepalli Sai Kumar

  • Operating Margins Operating Margin · H2 FY26 and into FY27 · Medium confidence moderate margin expansions
    However, ongoing and planned capital investments are expected to moderate margin expansions in the latter half of FY '26 and into FY '27, but continuing to maintain the balance of the profitability in terms of the PAT.

    — Addepalli Sai Kumar

Order Book

  • Order Book Value Order Book · by March '26 · High confidence triple
    I think we will triple our order book by March '26.

    — Baddam K. Reddy

Working Capital

  • Working Capital Cycle Days Working Capital · from FY27 onwards · Medium confidence reduce by 100 to 120 days
    The working capital cycle days are expected to reduce by approximately 100 to 120 days from FY '27 onwards.

    — Addepalli Sai Kumar

Shareholding

  • Promoter Shareholding Shareholding · Medium confidence close to 51%
    Currently, promoter holds around 55% overall stake in the company. It will come to close to around 50-point some change which is close to 51%.

    — Addepalli Sai Kumar

Promoter Pledge

  • Promoter Pledge Percentage Promoter Pledge · next one week, 10 days' time · Medium confidence come down by 15%
    Maybe I am expecting some 15% will come down, next one week, 10 days' time.

    — Baddam K. Reddy

What to watch in Q1 FY26

Unit-2 manufacturing operations commencement

Q2 FY26
Current Partial operations started
Target Full-fledged operations

Why it matters

Indicates progress in capacity expansion and potential for increased revenue recognition.

Our Unit-2 is scheduled to commence manufacturing its operations from the Q2 of this financial year. Partial operations have already started but a full-fledged operation will start from the Q2

Risks & concerns

  • Integration and turnaround of IDL Explosives

    medium

    IDL Explosives has not reported gross profits in the past three years due to COGS issues and ammonium nitrate price fluctuations. Management expects it to become positive EBITDA in subsequent quarters after takeover.

    Analyst acknowledged

  • Working capital intensity during development phase

    medium

    Past operating cash flows were negative due to long cycles in the development phase. Management expects significant improvement as products transition to the production phase.

    Analyst acknowledged

  • Moderation of margin expansion due to capital investments

    low

    Ongoing and planned capital investments are expected to moderate margin expansions in H2 FY26 and into FY27, though profitability will be maintained.

    Management acknowledged

  • Promoter share pledging

    low

    Analyst concern regarding increased promoter share pledging. Management clarified it's for company investments and expects a 15% reduction in pledge percentage soon.

    Analyst acknowledged

Q&A highlights

7 direct
IDL Explosives acquisition rationale despite past losses Direct
So, I would like to tell you that primarily the post-Lebanon issue, there was a setback in the company in terms of the COGS point of view. So, that has continued to give a setback in subsequent years as well. So as we see today, as of March 31, 2025, the company reported around Rs. 551.8 crores of revenue, but there is a significant improvement in terms of the COGS. Primarily the ammonium nitrate is a very sensitive item and the pricing of which keeps fluctuating. So that is the reason overall there is, I mean to say, EBITDA level loss that is marked in the company. But as we take over it will become a positive EBITDA in subsequent quarters is what we foresee.

Analyst questioned the acquisition of a loss-making entity; management explained the historical reasons for losses and future turnaround strategy.

Asked by Dhruv Nachrani

Impact of IDL's loss margins on Apollo's EBITDA target Partial
No. But you have to actually look towards the operational standalone P&L of Apollo Micro Systems, not on a consolidated basis for the next few quarters. But you can also appreciate that the overall accumulated loss which will be there in the company, that will give a benefit for us in terms of the taxation if you take it in the consolidated basis.

Management clarified that the immediate impact would be on standalone P&L, and the accumulated losses of IDL would offer tax benefits on a consolidated basis.

Asked by Dhruv Nachrani

Negative operating cash flows in past years and future outlook Direct
As the percentage of the production volumes in the overall top line keeps increasing the operating cash flow, there will be a significant improvement. You will see a huge remarkable change in FY '25 in our operating cash flow, it will be totally positive and it is something that is going to carry forward in the subsequent years also.

Addressed a key concern about cash flow, attributing past negativity to development phases and projecting positive cash flow with increasing production volumes.

Asked by Dhruv Nachrani

Update on naval programs (mines, torpedoes) Direct
The multi-influence ground mine, if you are tracking the news, around three and a half weeks back, the last phase of the limited explosive trial is conducted, which is a combat trial. And it has been a very successful trial... We are expecting this order to flow in this financial year... Coming back to the heavy weight Torpedoes, the Varunastra approval, the financial approval is already obtained, given by MOD. All the formalities are complete. It is only BDL getting an order that after subsequent to that we will get our size of opportunity. Same is the case with ALWT. I am restricted to give the numbers, but the numbers are going to be very, very large for ALWT, and we are having a significant contribution in that.

Provided detailed updates on critical naval defense projects, indicating progress towards order finalization and significant future revenue potential.

Asked by Rupesh Tatiya

Role in DRDO's Project Kusha and RF/microwave subsystems Direct
Kusha is like S-400 type of a program. It is going to be 150 kilometer range, 250 kilometer, 400 kilometer kind of a thing, okay. We are providing lot of subsystems to Kusha. In fact, because of urgency and lot of pressure from MOD, DRDO has placed order on couple of industries. We are the first people to deliver the systems. Almost four, five subsystems we are doing for the Kusha program, it goes into onboard this thing. Critical actuation system like radar actuation, front actuation and all we have already supplied. We are the first people to deliver the subsystems. We are also doing launcher systems also we are making, and we will be completing any time next quarter before September.

Clarified the company's significant and early involvement in a strategic defense program (Project Kusha) and other missile systems like QRSAM and Akash-NG.

Asked by Garvit Goyal

Promoter share pledging and thought process Direct
So primarily, two and a half years back we have done a preferential round. In order to maintain the shareholding percentage, the promoter had also participated in it. Not only for that reason, promoter by himself is quite positive and bullish about the company and in the current preferential round also promoters participated. So the participation has been done by raising funds by pledging the shares. As per the terms and conditions governing the Loan Against Securities (LAS) facility, when the market price of the pledged securities exceeds a predefined upper threshold, a proportionate release of shares may occur, as the Loan-to-Value (LTV) ratio improves significantly. Conversely, in the event of a price decline, the LTV ratio deteriorates, necessitating an increase in collateral to maintain the required coverage. So you will see a share pledge and release from time to time happening for that reason actually.

Addressed a sensitive topic, explaining that pledging is for company investments and subject to market-linked LTV adjustments, not for personal use.

Asked by Deekshant B

Clarification on margin commentary (H1 FY26 improvement, then flat/contract?) Direct
No. It's not that the expansion will stop actually. You will have to understand that as the quarters progress, there is a lot of interest loading that keeps happening because of the long-term debt that is there in the company, okay? So, initial part of the financial year there will be a margin expansion, later there may not be a significant margin expansion but it would be flat actually. It is not that it will reduce. There is an interest loading that happens because of the continuous completion. By September we will be drawing the complete this thing. That is the guidance that we are giving at this point of time.

Clarified the margin trajectory, indicating improvement in H1 FY26 followed by stabilization rather than contraction, due to capital investments and interest loading.

Asked by Ankush Agrawal

Timeline for large naval defense orders Direct
As the day stands, the information what we are getting it will not go beyond. The file is moving and, what is this thing, RFQ in June month we are expecting. From there it is only processing time.

Provided an updated timeline for significant naval defense orders, indicating RFQ in June and subsequent processing time, suggesting orders are imminent.

Asked by Deepanshu Bhatia

2 min read 5 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

Apollo Micro Systems reported a strong FY25, with revenue reaching ₹562.07 crores, marking a 51.24% year-on-year growth. EBITDA for the full year stood at ₹132 crores, reflecting a 54% increase and a healthy margin of 23.5%. Net profit surged by 81.18% year-on-year. For Q4 FY25, revenue increased by 19% to ₹162 crores, and EBITDA grew by 25% to ₹36 crores, with the EBITDA margin expanding by 100 basis points to 22% compared to Q4 FY24.

Strategic Acquisition of IDL Explosives

The company announced the strategic acquisition of IDL Explosives Ltd., a move aimed at becoming a fully integrated Tier-1 defense OEM. This acquisition will enhance manufacturing capabilities, broaden the solution portfolio to include warheads, rocket propellants, and rocket motor designs, and enable entry into the complete ammunition cycle. While IDL Explosives had not reported gross profits in the past three years due to COGS issues, management expects it to achieve positive EBITDA in subsequent quarters post-takeover, with financial consolidation beginning Q2 FY26. The accumulated losses of IDL are also expected to provide tax benefits to Apollo Micro Systems.

Capacity Expansion & Operational Efficiency

Apollo Micro Systems is expanding its operational footprint with Unit-2 scheduled to commence full-fledged manufacturing operations from Q2 FY26, with partial operations already underway. Unit-3 will be occupied in phases, with Phase-1 capital expenditure of ₹150 crores and Phase-2 of ₹100 crores, the latter commencing work in Q4 FY26. The company is investing over ₹50 crores in Unit-3 for critical test equipment. These expansions, coupled with the transition of several products into the series production phase, are expected to significantly reduce the working capital cycle by 100-120 days from FY27 onwards, improving operational cash flow.

Order Book & Key Defense Programs

The current order book stands at ₹615 crores as of May 23, 2025, and management aims to triple this by March '26. The company is actively involved in several critical defense programs, including Project Kusha (S-400 type), QRSAM, Akash-NG, and ASTRA, providing various subsystems and launcher systems. Significant progress has been made on naval programs, with combat trials for multi-influence ground mines successfully completed and orders expected in the current financial year. Financial approvals for heavy-weight torpedoes (Varunastra, ALWT) are obtained, with orders from BDL anticipated this financial year. Limited series orders for EHWT torpedoes are also expected within the next two weeks.

Capital Raise & Promoter Shareholding

Apollo Micro Systems is undertaking a preferential round to raise ₹816 crores, with approvals already received from exchanges. These funds will be utilized for working capital, R&D expenditure, innovation in future technologies, and general corporate purposes. The promoter group has participated in this fundraise, and management clarified that funds raised through share pledging are deployed into the company, not for personal use. The promoter shareholding is expected to adjust from around 55% to approximately 51% post-dilution, and a 15% reduction in promoter pledge percentage is anticipated within the next 1-2 weeks.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls