Azad Engineering Limited — Q2 FY26 earnings call

Call held 3 Nov 2025

Management summary

Azad Engineering reported its best-ever quarterly and half-yearly performance in Q2 and H1 FY26, driven by robust order inflows and strategic capacity expansion. Revenue grew 28.1% YoY to INR 143 crores in Q2, with EBITDA margin improving to 36.0%. The company secured significant contracts with Mitsubishi and signed an MOU with Safran, reinforcing its position in the global supply chain and setting a strong foundation for sustained growth.

Highlights

  • Q2 FY26 revenue of INR 143 crores, up 28.1% YoY, marking best ever quarterly performance.

  • Reported EBITDA margin improved from 35.7% in Q2 FY25 to 36.0% in Q2 FY26.

  • PAT margin increased from 18.9% to 23.1% during Q2 FY26.

  • H1 FY26 revenue of INR 277 crores, a 32.1% increase over H1 FY25.

  • Inaugurated a new lean manufacturing facility for Siemens and achieved NADCAP accreditation for coatings for its subsidiary Azad VTC Private Limited.

Key financials

2 periods

Q2 FY26

  • Revenue
    ₹143 Cr
    YoY +28.1%
  • EBITDA Margin
    36%
  • PAT Margin
    23.1%
  • PAT
    ₹33 Cr
    YoY +57%

H1

  • FY26 Revenue
    ₹277 Cr
    YoY +32.1%
  • FY26 EBITDA Margin
    36%

What they filed

Q1 FY27: revenue up 26.7%, net profit up 20.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue111 119 125 135 143 +29%156 +31%157 +26%171 +27%
EBITDA40 43 45 49 51 +28%60 +40%58 +29%64 +31%
Net profit21 24 26 30 33 +57%34 +42%35 +35%36 +20%
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

Share of Q2 FY26 Revenue
₹141 Cr Total
  • Energy and Oil and Gas ₹117 Cr 83.0%
  • Aerospace and Defence ₹24 Cr 17.0%

Order book

high confidence

Total value

₹1,387 Cr

as of 2025-11-03 quantified

Execution

Mitsubishi contract to be completed in 5 years

Composition

  • Mitsubishi (combined contract) (client type) ₹1,387 Cr

Pipeline

other

MOU with Safran Aircraft Engines for critical rotating engine components for strategic defence platforms.

The robust order book reflects deep trust from customers and reaffirms consistent value delivery through precision engineering and innovation. The company expects significantly stronger performance in H2 FY26 due to ramping up production at new facilities.

Source: Prepared remarks

Capital allocation

medium confidence
  • Capex Capex disclosed
    • New lean manufacturing facility for Siemens at Hyderabad plant
    • Plant expansion to meet Siemens Energy's global demand
    • Dedicated facility for a client
    • Upcoming center of excellence for innovation, technology, talent and capacity
    On the business front, we are steadily advancing with our capex plans. We recently inaugurated one of a new lean manufacturing facility for Siemens at our Hyderabad plant. This state-of-the-art facility will support and supply of highly engineered complex rotating and stationary airfoils, along with critical components of assemblies and assemblies for advanced gas, industrial and thermal float turbine engines. Through this expansion, we aim to meet Siemens Energy's global demand in the power generation and essential industrial sectors. With this, we now have three dedicated lean factories inaugurated at the new site. Our plant expansion is underpinned by a robust order book, reflecting the deep trust our customers place in us and reaffirming the consistent value we deliver through precision engineering and innovation. We are gearing up to capture opportunities across our business segments by setting a strong foundation for the next phase of innovation with our upcoming center of excellence. We are investing in technology, talent and capacity, the foundations that will define the next phase of Azad's journey.
  • Liquidity Liquidity disclosed Interest income on fixed deposits from unspent QIP funds contributed positively to the bottom line.
    Other income increased mainly due to interest income on fixed deposits from the unspent QIP funds contributing positively to the bottom line.

Guidance & targets

Revenue

  • Top line growth Revenue · FY26 · High confidence 25% to 30%
    With production at our new facilities steadily ramping up, we anticipate a significantly stronger performance in the second half of FY '26 and remain confident in achieving as projected 25% to 30% top line growth for the year.

    — Rakesh Chopdar

Margin

  • EBITDA Margin Margin · Near-term and medium-term · High confidence 36%
    No, we are already delivering 36% margin. So -- and I think we want to sustain that. And over time, I think as operational excellence kicks in, we'll have operating leverage that could further improve our EBITDA margin. See, one-off qualification cycle in our business is not capitalized. We expense out the qualification cycle. So we expect to improve our margins in the future. But right now, our focus is to sustain it and grow at 25% to 30%.

    — Vishnu Malpani

Capacity

  • New facilities stabilization Capacity · FY26 · High confidence Stabilized
    So that's the reason in the last con call also, I said and even in this, I say that FY '26 is key for stabilization. We need to stabilize first. We need to put things in place. We have signed up contracts. We have committed the customers.

    — Rakesh Chopdar

Working Capital

  • Working capital stabilization Working Capital · FY26 · High confidence Stabilized
    And FY '26, I think this also is going to be stabilized, and we are on track on that.

    — Rakesh Chopdar

Capex

  • Capex for FY26, FY27, FY28 Capex · FY26, FY27, FY28 · Medium confidence Ordered
    At the moment, I think it's very difficult to quantify because we have we have already for FY '26, FY '27, the capex has already been ordered. And FY '28 also partially we have ordered. And going forward, the company will generate its own good enough cash so that we can balance the other requirements.

    — Rakesh Chopdar

What to watch in Q3 FY26

New facilities stabilization progress

Next quarter / H2 FY26
Current In progress, aiming for completion in 12 months
Target Further stabilization and operational efficiency

Why it matters

Successful stabilization is key to achieving revenue growth targets and operational efficiency.

So this is something that's happening in parallel, right? So while the existing facilities that have been inaugurated are getting operational and the facility that has been operational is ramping up production. So our sense is that over the next about 12 months, we would want to finish the entire plant in terms of construction, including move our manpower base to there.

Risks & concerns

  • Raw material price volatility

    medium

    Company has a 5% fluctuation cap in long-term contracts, beyond which price adjustments are sought from suppliers or OEMs.

    Analyst acknowledged

  • Complexity and time for new facility ramp-up and stabilization

    medium

    Building facilities 10x current size, deploying machines, hiring/training staff, and managing existing growth simultaneously is a 'marathon task'.

    Management acknowledged

  • Product validation and qualification time for new OEM contracts (e.g., Safran)

    medium

    Getting products into engines involves extensive qualifications and approvals, making it a time-consuming process.

    Management acknowledged

  • Currency risk (foreign exchange fluctuations)

    low

    Company has a natural hedge due to 93.9% exports, balancing inflows and outflows.

    Analyst acknowledged

Q&A highlights

5 direct
Domestic sourcing and price negotiation sustainability Direct
So this will only ensure us that we have a better control on the supply chain, and this should sustain for us.

Analyst inquired about the sustainability of cost reductions from domestic sourcing; management confirmed it's a sustainable effort for supply chain control.

Asked by Amit Dixit

Safran MOU and involvement in domestic engine ecosystem Partial
Very soon, Amitji, very soon, not only with Safran, other OEMs also, you will come to know very soon about more details as this is a defence application program. So I cannot speak much on this.

Analyst sought details on the Safran MOU and its implications for India's defence ecosystem; management confirmed it's a breakthrough but limited disclosure due to defence nature.

Asked by Amit Dixit

Growth strategy and ramp-up of new facilities Direct
So in this context, we would say we are struggling at the moment to manage the growth, to manage the facilities, to manage the customers, to manage the contracts, quite a job. That's the reason we mentioned that the team is doing a great, great, great job.

Analyst questioned the shift in commentary from 'big shift' to 'stabilization' for FY26; management clarified the complexity of scaling up new facilities while maintaining growth.

Asked by Jai Chauhan

Mitigation of raw material price volatility and currency risk Direct
So what we show is, okay, this is, say example, $10 or $1 a kilo price is fixed and the contracts are long term and we see a 5 year, 7 years contract. So what we do is we have a cap of 5% fluctuation. A 5% fluctuation, we write them, we tell them Azad is going to bear the 5%, absorb

Analyst asked about risk mitigation for raw material prices; management explained long-term contracts with a 5% fluctuation cap borne by Azad.

Asked by Jai Chauhan

Termination/cancellation clauses in long-term contracts Direct
Every contract has that. Every contract has you know, that we can cancel. So if you don't perform, definitely, they can cancel the contract, right? Yes. So these are very standard contracts, which are favouring both of them.

Analyst inquired about safeguards in long-term contracts given significant capex; management confirmed standard termination clauses exist, favoring both parties.

Asked by Jai Chauhan

Revenue contribution from Siemens plant and other new facilities Partial
So obviously, in the H2 of this year, there will be contribution that you will see. But to what extent we'll be only able to talk about it in the next quarter, right?

Analyst asked when revenue from the completed Siemens plant would be visible; management indicated H2 FY26 contribution but specific details next quarter.

Asked by Rakesh Roy

Status of GTRE DRDO engine development contract Direct
I would tell you that we are going to deliver it very soon, in a couple of months more. We are going with stable on that, and we are on track to deliver that engine.

Analyst asked for an update on the DRDO engine development; management confirmed delivery 'very soon' and being on track.

Asked by Vishal

Capex plans for FY26, FY27, FY28 Partial
At the moment, I think it's very difficult to quantify because we have we have already for FY '26, FY '27, the capex has already been ordered. And FY '28 also partially we have ordered.

Analyst sought quantification of future capex plans; management stated capex for FY26-FY28 is already ordered but difficult to quantify precisely.

Asked by Vishal

2 min read 6 chapters

Detailed narrative

Q2 and H1 FY26 Financial Performance Highlights

Azad Engineering delivered its best-ever quarterly and half-yearly performance in Q2 and H1 FY26. Q2 FY26 revenue reached INR 143 crores, marking a 28.1% year-on-year increase. The reported EBITDA margin improved to 36.0% from 35.7% in Q2 FY25, while PAT margin increased significantly from 18.9% to 23.1%. For H1 FY26, revenue stood at INR 277 crores, a 32.1% increase over H1 FY25, with an EBITDA margin of 36.0% and PAT growth of 65%.

Strategic Partnerships and Project Milestones

The company achieved several important milestones, including securing Phase 2 of the Mitsubishi contract, which increased the combined contract value to INR 1,387 crores for highly engineered airfoils. A new lean manufacturing facility for Siemens was inaugurated in Hyderabad, dedicated to producing complex rotating and stationary airfoils. Additionally, Azad Engineering signed a Memorandum of Understanding (MOU) with Safran Aircraft Engines for long-term collaboration on critical rotating engine components for strategic defence platforms, marking its first partnership with this global leader.

Capacity Expansion and Growth Outlook

Azad Engineering is steadily advancing with its capex plans, including the inauguration of three dedicated lean factories. The company aims to meet Siemens Energy's global demand and is building an upcoming center of excellence to support future innovation. Management anticipates a significantly stronger performance in the second half of FY26 and remains confident in achieving a 25% to 30% top-line growth for the full year, driven by robust order books and ramping up production at new facilities.

Supply Chain Indigenization and Cost Management

Efforts to indigenize the raw material supply chain in India are progressing, with Sunflag and Star Wire approved for certain grades, contributing to reduced raw material consumption. This initiative is expected to sustain cost efficiencies and improve supply chain control. The company is also establishing a robust supply chain via a distribution network to resolve minimum order quantity challenges and enhance procurement agility, with this initiative expected to commence in Q4 FY26.

Raw Material and Currency Risk Management

To mitigate raw material price volatility, Azad Engineering's long-term contracts include a clause where the company bears up to 5% fluctuation in raw material prices, beyond which price adjustments are discussed with OEMs. For foreign exchange fluctuations, the company benefits from a natural hedge, with 93.9% of its revenue coming from exports, balancing inflows and outflows and covering associated risks.

Operational Stabilization and Future Plans

FY26 is viewed as a year for stabilization, focusing on integrating new facilities, machines, and manpower. The company is building infrastructure, including a housing colony for employees, with the goal of completing construction and stabilizing operations within approximately 12 months. Azad VTC Private Limited, a subsidiary, achieved NADCAP accreditation for coatings, validating its commitment to stringent quality standards in the aerospace and defence industry.

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

More Capital Goods earnings calls