Detailed Narrative
Robust Q3 and 9M FY26 Financial Performance
Azad Engineering delivered strong financial results for Q3 FY26, with revenue growing over 31% YoY to INR155.8 crores and EBITDA increasing over 40.7% to INR60.1 crores, maintaining a healthy 38% margin. Profit after tax also saw significant growth of over 40.1% to INR34 crores. For the 9-month period, revenue grew nearly 32% YoY, and PAT surged by 55% YoY, significantly outpacing revenue growth and exceeding the full year FY25 profitability, underscoring the structural strength of the business model.
Strong Order Book and Strategic OEM Engagements
The company's order book remains robust at over INR6,500 crores, providing multiyear revenue visibility and reflecting consistent growth since listing. A key highlight was the progression of contracts with Safran and Pratt & Whitney for critical aerospace components, built on extensive validation. Management emphasized Azad's role as a global supplier, benefiting from increasing trust from global OEMs and expanding wallet share, with energy and oil & gas contributing the majority of revenues while aerospace and defence steadily increase their share.
Capacity Expansion and Stabilization Phase
FY26 is a crucial year for stabilization, with new plants dedicated to GE, Mitsubishi, and Siemens programs now capitalized and undergoing validation. While full capacity utilization is expected by FY28, stable operating levels are anticipated by FY27. The company is strategically building capacity against firm contracts and long-cycle programs, avoiding speculative expansion, and managing the complex process of construction, equipment commissioning, and workforce training with discipline.
Long-term Growth and Profitability Outlook
Azad Engineering is confident in achieving 25%+ revenue growth over the coming years, supported by plant readiness and secured order book. This growth is expected to be accompanied by a sustainable EBITDA margin in the range of 33-35% from FY27 onwards, as operating leverage benefits become more visible with improved capacity utilization. The company's focus remains on profitable growth, ensuring every growth initiative aligns with long-term sustainability and value creation.
Capital Allocation and Funding Strategy
From IPO proceeds, INR180 crores out of INR240 crores were allocated to debt reduction. QIP proceeds of approximately INR700 crores are being deployed for capex, with INR200-250 crores for infrastructure and INR450-500 crores for plant & machinery. Approximately INR250 crores has been capitalized on plant and machinery in the first nine months, with the balance QIP funds to be deployed over the next 1-2 years. The company expects an asset turn of 1.7 to 2 on new machinery, supporting a revenue roadmap towards INR1,500-1,600 crores and beyond.
Manpower Development and Operational Excellence
To support its scaling infrastructure, Azad Engineering is actively building capability by hiring 150-200 skilled personnel per month, including engineers, machinists, and quality professionals. The company has established an internal training center, enabling deployment of trained personnel to the shop floor within 50 days. Operational efforts are focused on strengthening execution, embedding lean principles, improving domestic sourcing for agility, and managing working capital effectively, while maintaining stringent OEM qualification standards.
Indigenous Jet Engine Development and Market Potential
The company is in the final stages of developing India's first 100% indigenous jet engine, currently 70-75% complete, with delivery expected in a couple of months. Management views this project as a matter of national pride and a strategic initiative, with substantial volume potential as an import substitute. While current focus is on successful development, the market for strategic defense drones, UAVs, and anti-ship missiles, where this engine will be used, is considered huge.