Azad Engineering Limited — Q4 FY25 earnings call

Call held 26 May 2025

Management summary

Azad Engineering reported a strong close to FY25 with significant revenue and profit growth, driven by robust operational performance and strategic order wins. The company's EBITDA margins expanded, and its full-year PAT saw substantial growth. Capacity expansion is underway with new facilities becoming operational, and management anticipates over 30% revenue growth for FY26, supported by a strong order pipeline and improved working capital efficiency.

Highlights

  • Q4 FY25 standalone revenue grew 34.2% year-on-year to INR 125 crores.

  • Q4 FY25 EBITDA margin improved to 36.5% from 33.8%, driven by operating leverage and enhanced product mix.

  • Q4 FY25 net profit grew 74.4% to INR 26 crores from INR 15 crores in Q4 FY24.

  • Full-year FY25 revenue from operations grew 32.9% year-on-year to INR 453 crores.

  • Full-year FY25 PAT was INR 89 crores, a 51.5% growth compared to FY24.

  • Secured new orders from global OEMs including GE Vernova, Mitsubishi, Baker Hughes, and Rolls-Royce Defense, leading to an order book over INR 6,000 crores.

  • New facilities in Hyderabad became operational in Q1 FY26, marking a pivotal moment in growth journey.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹124.5 Cr
    YoY +34.2%
  • EBITDA
    ₹45.4 Cr
    YoY +44.9%
  • EBITDA Margin
    36.5%
  • PAT
    ₹26 Cr
    YoY +74.4%
  • PAT Margin
    20.3%

FY25

  • Revenue
    ₹452.9 Cr
    YoY +32.9%
  • EBITDA
    ₹161 Cr
  • EBITDA Margin
    35.5%
  • PAT
    ₹88.5 Cr
    YoY +51.1%
  • PAT Margin
    19.5%
  • Operating Cash Flow
    ₹63 Cr

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 Revenue
₹215.7 Cr Total
  • Energy, Oil & Gas (Q4 FY25) ₹97 Cr 45.0%
  • Aerospace & Defense (FY25) ₹80.7 Cr 37.4%
  • Aerospace & Defense (Q4 FY25) ₹25 Cr 11.6%
  • Oil & Gas (FY25) ₹13 Cr 6.0%

Order book

high confidence

Total value

₹6,000 Cr

as of 2025-03-31 quantified

Execution

split over multiple years, with 3, 5, and 6-year contracts

The order book to sales ratio is extremely big, supporting the need for progressive addition of manufacturing facilities.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹700 Cr through QIP
    • Building infrastructure and capacity ₹700 Cr
    So Mr. Bagmar, we did a QIP of INR 700 crores. Now the reason the QIP was done to foster the growth of the company, right? So this capital that we raised will be deployed towards building our infrastructure and also capacity, and in a staggered way over the next few years.
  • Debt Gross ₹243 Cr · Net cash ₹412 Cr · 1.5× EBITDA
    Gross debt for FY '25 was around INR 243 crores, which is approximately 1.5x of EBITDA, which our long term guidance. But if you take the net debt position, which is gross debt minus cash and bank balance, is still negative INR 412 crores, and we have a strong liquidity system of around INR 656 crores, because of QIP raised in the last quarter.
  • Liquidity Cash ₹656 Cr Strong liquidity system due to QIP raised in the last quarter.
    But if you take the net debt position, which is gross debt minus cash and bank balance, is still negative INR 412 crores, and we have a strong liquidity system of around INR 656 crores, because of QIP raised in the last quarter.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY26 · High confidence 30%-plus
    We are confident in achieving approximately 30%-plus revenue growth in FY '26, supported by a robust order pipeline, operational readiness and a sharp strategic focus.

    — Rakesh Chopdar

Profitability

  • EBITDA Margin Profitability · going ahead · High confidence consistent with FY25 (35.5%)
    Yes. So our EBITDA guidance will be consistent. So we would maintain the EBITDA guidance that we have done. For the last financial year, whatever we have delivered, we would want to continue at the same rate.

    — Vishnu Malpani

Working Capital

  • Cash-to-Cash Conversion Cycle Working Capital · by the end of this financial year (FY26) · High confidence 170 to 180 days
    So we believe that we want to get to by the end of this financial year, we want to get to about 170 to 180 days of cash-to-cash conversion cycle.

    — Vishnu Malpani

Asset Utilization

  • Incremental Asset Turnover Asset Utilization · next year · High confidence 2
    So the incremental asset turnover for the next year will be 2, blended across verticals

    — Vishnu Malpani

Capacity Utilization

  • New Facilities Utilization Capacity Utilization · by this year (FY26) · High confidence 70-plus percent
    our aim towards the end of this year we should be able to reach an optimum utilization of 70-plus percent by this year.

    — Vishnu Malpani

Cost Efficiency

  • Manpower Cost as % of Revenue Cost Efficiency · over the next few years · Medium confidence 15%, 16%, 17%
    we are at about 20%, 21% of manpower cost right now for the business, but we anticipate this cost to over time, normalize to about 15%, 16%, 17%. But this will happen over the next few years.

    — Vishnu Malpani

Revenue Mix

  • Energy Segment Contribution Revenue Mix · next few years · Medium confidence 55%, 60%
    So we anticipate in the next few years, the business would reach about 55%, 60% energy, and the balance 35%, 40% will be contributed by aerospace and defense and oil and gas.

    — Vishnu Malpani

  • Aerospace & Defense and Oil & Gas Contribution Revenue Mix · next few years · Medium confidence 35%, 40%

    — Vishnu Malpani

What to watch in Q1 FY26

Revenue Contribution from New Facilities

Next quarter
Current Started generating revenue
Target Progressive increase, contributing to 30%+ FY26 growth

Why it matters

This is a key driver for FY26 revenue growth and validation of the significant capacity expansion.

this year, FY '26, we are obviously generating revenue out of the new facility. Any incremental that revenue comes out over FY '25 will come out of the new facilities.

Q&A highlights

7 direct
Order book and commissioning of 95,000 sq meters Phase-2 capacity Direct
So for the first phase, Mr. Bagmar, we are building 95,000 square meters. And as you would have heard in the call, we are doing 1 facility after another. So we have inaugurated 2 lean factories for 2 of our customers, which have happened respectively, in the last financial year. And now we are going to be getting them online. So those factories would start generating revenues while we start focusing on the rest of the factories, which will come up during the course of the year and next. So it will be a staggered approach.

Clarifies the current status and staggered approach for commissioning new capacity, linking it to future revenue generation.

Asked by Kamlesh Bagmar

CAPEX plans over the next 3-4 years Direct
Yes. So Mr. Bagmar, we did a QIP of INR 700 crores. Now the reason the QIP was done to foster the growth of the company, right? So this capital that we raised will be deployed towards building our infrastructure and also capacity, and in a staggered way over the next few years. So this is exactly what we are planning to do.

Explains how the recently raised QIP funds will be utilized for future capacity and infrastructure development.

Asked by Kamlesh Bagmar

Ramping up of dedicated facilities for Mitsubishi and GE Vernova and their revenue generation Direct
So this year, FY '26, we are obviously generating revenue out of the new facility. Any incremental that revenue comes out over FY '25 will come out of the new facilities. But you will see that progressive development happening quarter-on-quarter. And I think towards the end of this year, we should be able to reach a full capacity in terms of those lean facilities in terms of output.

Provides a timeline for the new facilities to reach optimum capacity and confirms they will contribute to FY26 revenue growth.

Asked by Mulesh Savla

Diversification strategy and growth in Aerospace & Defense and Oil & Gas segments Direct
If you look at our businesses growth across verticals, you would see that some of our verticals, for example, it's a testament to the fact that we kept talking about diversification. And this is the first year where one of our verticals other than energy has demonstrated reasonable numbers. So we closed aerospace with INR 80 crores segmental revenue, up from about INR 43 crores last year, which demonstrates the fact that our qualifications have been completed. If you look at our other vertical, which is oil and gas, last year, we delivered about INR 4.4 crores. And this year, FY '25, we have been able to deliver about INR 13 crores.

Highlights the successful execution of the diversification strategy, with non-energy segments showing significant growth and expected to grow faster than the blended rate.

Asked by Rajesh Vora

Asset turnover on incremental CAPEX versus revenue growth guidance Partial
Yes. So Karan thank you for the question. I think for us, this year, so we are not looking at getting our capacity line. We are looking at consolidation as a thing. And the asset turn that you are saying, incremental asset turn of 2 will happen over time, because now the deployment of capital is also towards infrastructure, towards capacity. So by the time we are investing and returning, you would see that towards the end or quarterly progressively, you'll be able to see the ramp-up moving from 1.0 to 2.0 of incremental asset turn.

Addresses analyst's concern about the discrepancy between asset turnover and growth, clarifying that 2x asset turn is a long-term outcome as capacity ramps up progressively.

Asked by Karan Danthi

Improvement in working capital days, especially inventory and receivables Direct
So Amit, there is a small catch in this. Look, there's one way we are looking to reduce all the working capital, as I mentioned in the last call as well, that most of the qualifications are now done and the inventory which is sitting is now getting off. And not long in a few quarters, you will see declining the number of days. And very soon, you will witness that. On the other hand, we are seeing these contracts which we are signing, where we need to really showcase the customers that we need to hold some kind of inventory for showing the raw material because these contracts are bound on the OTDs what we do, the deliveries is what we really have to demonstrate that, look, we are holding the raw material for you.

Explains the dual factors influencing working capital – reduction from completed qualifications and strategic inventory holding for new contracts, with an overall target for cash-to-cash cycle.

Asked by Amit Dixit

Progress on advanced gas turbine engines for GTRE and their market potential Direct
Okay. Thanks, Amit. First of all, on this engine, the jet engine, so it is in production at the moment, and very soon, we are going to deliver the first 2 engines. And looking at the market, if you ask me, it's not really defined to us, because this is utilized in multi platforms. It's used in the UAVs, it is used in anti-ship missiles and it has a mass, quite a few platforms where this engine will be used. So this engine is a very strategic decision, right? So this is just a key to the bigger door. It's a small key. And if you see this capability development, we will be the first one to manufacture this engine in India.

Highlights the strategic importance of this project for India's defense ecosystem and its multi-platform applicability, with initial deliveries expected soon.

Asked by Amit Dixit

Clarification on Sangareddy facility capacity numbers (75,000 vs 67,000 sq meters) Direct
Currently, what we are developing is Phase 1 of it, which is 95,000 square meters. So all the investments that you are seeing are going in the 95,000 square meters, and this is coming up one-by-one. As soon as this entire 95,000 square meters, all the plants in it come and get completed, we will move on to the second phase, which is 75,000 square meters.

Clarifies the phased development of the mega-factory, distinguishing between the current 95,000 sq meters (Phase 1) and the subsequent 70,000-75,000 sq meters (Phase 2).

Asked by Divy Agrawal

2 min read 6 chapters

Detailed narrative

Strong Q4 and Full-Year FY25 Performance

Azad Engineering reported a robust Q4 FY25 with standalone revenue growing 34.2% YoY to INR 125 crores. EBITDA for the quarter stood at INR 45 crores, with margin improving to 36.5% from 33.8%. Net profit surged 74.4% YoY to INR 26 crores. For the full year FY25, revenue from operations increased 32.9% YoY to INR 453 crores, and PAT reached INR 89 crores, marking a 51.5% growth compared to FY24. The company achieved its highest ever full-year EBITDA margin of 35.5%.

Diversification and Strategic Order Wins

The company successfully diversified its revenue streams, with the Aerospace & Defense segment revenue increasing to INR 80.7 crores in FY25 from INR 43.8 crores in FY24. The Oil & Gas segment also saw growth, reaching INR 13 crores in FY25 from INR 4.4 crores last year. New orders were secured from global OEMs such as GE Vernova, Mitsubishi, Baker Hughes, and Rolls-Royce Defense, contributing to a current order book exceeding INR 6,000 crores, which is spread across 3, 5, and 6-year contracts.

Capacity Expansion and Operational Readiness

Azad Engineering has taken bold steps to expand capacity, with a new lean manufacturing facility for Mitsubishi Heavy Industries and another for GE Vernova becoming operational in Q1 FY26. These facilities are part of a mega-factory vision, with dedicated spaces for key clients. The company is building 95,000 square meters in Phase 1 and plans for another 70,000-75,000 square meters in Phase 2. The aim is to reach an optimum utilization of 70-plus percent in the new facilities by the end of FY26.

Capital Infusion and Debt Management

A Qualified Institutional Placement (QIP) of INR 700 crores was completed in February, strengthening the company's balance sheet and providing a strong liquidity system of INR 656 crores. Gross debt for FY25 was around INR 243 crores, resulting in a net debt position of negative INR 412 crores (gross debt minus cash and bank balance). The net debt to EBITDA ratio is approximately 1.5x, which is within the company's long-term guidance, indicating a healthy financial position for future investments.

Focus on Working Capital Efficiency

Management is actively working to optimize working capital, with inventory days reducing significantly from 246 in FY24 to 155 in FY25. The company aims to achieve a cash-to-cash conversion cycle of 170-180 days by the end of FY26. This improvement is expected to be driven by the scaling of revenues in newer verticals and better control over inventory for new contracts, ensuring efficient cash flow management.

Outlook and Growth Ambitions

Azad Engineering anticipates approximately 30%-plus revenue growth for FY26, supported by its robust order pipeline, operational readiness, and sharp strategic focus. EBITDA margins are expected to be maintained at FY25 levels (around 35.5%). The long-term strategy involves scaling with precision, investing with intent, and growing with agility, with a target revenue mix of 55-60% from energy and 35-40% from aerospace, defense, and oil & gas in the next few years.

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