Azad Engineering Limited — Q4 FY26 earnings call

Call held 16 May 2026

Management summary

Azad Engineering reported strong Q4 and full-year FY26 results, driven by robust revenue growth and margin expansion, supported by operational efficiencies and product mix. The company secured a significant 8-year contract with Mitsubishi Heavy Industries and commissioned new manufacturing facilities, laying a strong foundation for future growth. While inventory buildup is noted for ramp-up, management is focused on normalizing working capital and converting qualifications into revenue, projecting 25%+ top-line growth for FY27 and beyond.

Highlights

  • Q4 FY26 Revenue of INR157 crores, up 26.4% YoY.

  • Q4 FY26 EBITDA margin improved to 36.7% from 36.5% in Q4 FY25.

  • Q4 FY26 PAT margins expanded to 22.3% from 20.9% in Q4 FY25.

  • Full year FY26 Revenue of INR590 crores, up approximately 30% plus YoY.

  • Full year FY26 PAT of INR134 crores (consolidated), growing 54.4% YoY.

  • Awarded an 8-year single-source contract by Mitsubishi Heavy Industries Japan for hot section Nozzle Vanes segments.

  • Successfully inaugurated four dedicated lean manufacturing facilities, with two commissioned in FY26 and one recently in April 2026.

Concerns

  • Inventory reflects a deliberated and strategic buildup for ramp-up, requiring normalization of working capital cycle in FY27.

  • Timelines for Saudi Arabia capex with Baker Hughes have shifted due to current situation and priorities.

Key financials

3 periods

Q4 FY26

  • Revenue
    ₹157 Cr
    YoY +26.4%
  • EBITDA Margin
    36.7%
  • PAT Margin
    22.3%

FY26

  • Revenue
    ₹590 Cr
    YoY +30%
  • EBITDA Margin
    36.9%

FY26, Consolidated

  • PAT
    ₹134 Cr
    YoY +54.4%

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

SegmentRevenue (FY26)Share of Revenue (FY26)YoY Growth (FY26)Revenue (Q4 FY26)
Energy and Oil & Gas₹481 Cr81.5%34%₹128 Cr
Aerospace & Defence₹101 Cr17.2%25%₹28 Cr
Oil & Gas (specific)————

Order book

high confidence

Total value

₹6,500 Cr

as of 2026-03-31 quantified

Execution

expected to consume INR6,500 crores over the next 5-6 years

Composition

Mix 3 segments
  • Energy $400 Mn 57.1%
  • Aerospace & Defence $200 Mn 28.6%
  • Oil & Gas $100 Mn 14.3%

Share of order book by segment, derived from disclosed amounts

Order book conversion is driven by agreed production schedules, capacity availability, and qualification status, providing strong forward visibility.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹180 Cr QIP proceeds and incremental term funding
    • Capitalized assets for capacity expansion ₹392 Cr
    • CWIP and capital advance for capacity expansion ₹191 Cr
    • Deployment of QIP proceeds for growth CapEx ₹180 Cr
    During FY '26, we have capitalized assets worth INR392 crores, as I mentioned. The company utilized incremental term funding of INR154 crores to support ongoing capacity expansions and total borrowing stood at INR457 crores on gross basis and INR272 crores on a net basis. Our treasury balance stood at INR184 crores, including INR160 crores from QIP proceeds. ... And if you our CFO covered that the balance deployment of about INR180 crores...
  • Debt Gross ₹457 Cr · Net ₹272 Cr
    • New borrowing Incremental term funding to support ongoing capacity expansions ₹154 Cr
    total borrowing stood at INR457 crores on gross basis and INR272 crores on a net basis.
  • Liquidity Cash ₹184 Cr Treasury balance includes INR160 crores from QIP proceeds. GST credit of INR100 crores accumulated, expected to realize by H1 FY28, supporting future cash flow.
    Our treasury balance stood at INR184 crores, including INR160 crores from QIP proceeds. Receivables stood at INR309 crores, broadly in line with historical level. ... Additionally, we have GST credit of approximately INR100 crores accumulated over the past 2 years. This is on the back of capital expenditure, which we have done historically, which we expected to realize by H1 FY '28, supporting future cash flow and increase the liquidity in the system.

Guidance & targets

Revenue

  • Top-line growth Revenue · FY27 and multiyear basis · High confidence 25% plus
    that's why we remain confident in delivering 25% plus top line trajectory, not just for FY '27, but on a multiyear basis.

    — Vishnu Malpani

Margin

  • EBITDA margin Margin · Ongoing · High confidence 33% to 35% plus
    We always say 33% to 35% plus, and that plus can be anything.

    — Rakesh Chopdar

Working Capital

  • Inventory days Working Capital · H1 FY27 · High confidence closer to 200 days
    you will see a drastic change coming to closer to 200 days.

    — Rakesh Chopdar

  • Inventory days Working Capital · H2 FY27 · High confidence 160-170 days
    And H2, we get down to 160, 170 days. That's we have already planned, and it's in execution, and we will achieve it.

    — Rakesh Chopdar

  • Working capital cycle Working Capital · over this period (FY27) · High confidence normalizing
    Fourth, normalizing the working capital cycle over this period.

    — Vishnu Malpani

Capacity

  • New dedicated facilities Capacity · over 6 months · High confidence 4 more new facilities
    Yes, you're right. We are on track.

    — Rakesh Chopdar

  • Infrastructure build-out completion Capacity · Current · High confidence 70% to 80% complete
    That infrastructure phase is now approximately 70% to 80% complete.

    — Rakesh Chopdar

  • Commissioning of remaining plants Capacity · balance of the year, FY27 · High confidence remaining plants
    Second, commissioning the remaining plants that are still under construction or are in WIP stages by the balance of the year, FY '27, with the same discipline that we followed through FY '26.

    — Vishnu Malpani

Segmental Growth

  • Oil & Gas segment contribution Segmental Growth · Current financial year (FY27) · High confidence material numbers
    So we expect to add material numbers by our Oil & Gas segment this year.

    — Vishnu Malpani

  • Oil & Gas segment revenue Segmental Growth · next couple of years · Medium confidence breach INR100 crores
    And similarly, Oil & Gas will not even take 5, 6 years. Oil & Gas should be able to breach that number over the next couple of years.

    — Vishnu Malpani

What to watch in Q1 FY27

Revenue growth acceleration

Coming quarters
Current 26.4% YoY in Q4 FY26
Target Jump in revenues as new facilities stabilize

Why it matters

To verify management's expectation of accelerated growth post facility stabilization, crucial for achieving 25%+ annual guidance.

Definitely, there will be a jump coming in. Maybe in coming quarters, I would definitely elaborate on the numbers of the growth we are seeing.

Risks & concerns

  • Inventory buildup for ramp-up

    medium

    Inventory during FY '27 reflects a deliberated and strategic buildup to support ramp-up of new facilities, requiring working capital normalization.

    Management acknowledged

  • Shifted timelines for Saudi Arabia capex

    low

    Timelines for the Saudi Arabia capex with Baker Hughes have shifted due to current situation and priorities, though the opportunity still exists.

    Management acknowledged

  • Geopolitical tensions impacting supply chain

    low

    Management believes the company is derisked from major geopolitical risks due to strong order book, capacity, and established customer relationships.

    Analyst downplayed

Q&A highlights

3 direct, 1 evasive
Conservatism of 25%+ revenue growth guidance given macro tailwinds and OEM projections Direct
Yes, you're right. There is massive pressure from our existing customers. And what we say 25% plus is a growth number. As during the last call and this call and a couple of calls, we have been mentioning that we are moving to the new facility, and it's not a small facility, which is in the making. ... Definitely, there will be a jump coming in. Maybe in coming quarters, I would definitely elaborate on the numbers of the growth we are seeing.

Analyst challenged management's growth guidance as conservative, prompting management to acknowledge potential for higher growth post stabilization of new facilities.

Asked by Amit Dixit

Roadmap and delivery timeline for ATGG engine project Evasive
So Amit, I would just give you an idea, it was years, years got to months, now it has come to weeks. So we are not far away. Even we are super excited, especially me, myself, I'm super excited to deliver this to the government, much needed for the country at this hour. So it's not far away.

Management was evasive on specific numbers and timelines for the ATGG engine, citing its nature as a national defense program, indicating high strategic importance but limited disclosure.

Asked by Amit Dixit

Impact of underutilized new plants on margins and future operating leverage benefits Direct
We always say 33% to 35% plus, and that plus can be anything. So keep expecting some kind of -- definitely a growth is always because we just don't make we just don't produce. We do a lot of improvements, continuous improvements on the floor. So that's our team's culture. So definitely, I wish and hope that we deliver that plus every time.

Analyst questioned how margins were improving despite new plants being underutilized, and management confirmed expectations for continued margin expansion through operational efficiencies.

Asked by Gaurav

Utilization levels and timeline for new facilities to reach 90%+ utilization Partial
Yes. Bhavika, see, if any plant is inaugurated, that means brand-new building, brand-new machines. We don't wait for the shop to complete 100%. When you talk about Baker Hughes, we were around 50%, 60% of the capacity machines were inside. And when we cut the ribbon, we start producing the parts the same day. But when you see in the numbers, it will take some time to flow of the material to come to the dispatch area, right?

Analyst inquired about the ramp-up time for new facilities to achieve high utilization, and management clarified that while production starts immediately, it takes time for material flow to translate into dispatch and revenue.

Asked by Bhavika Singhvi

Risks from Middle East geopolitical tension on supply chain Direct
Yes. See, we have -- if you take away the macro risks that are there in every business that is existing today, from our business perspective, I think we have derisked ourselves from majority issues that can be faced in our business, right? Our business can get impacted if we do not have demand. We have purchase orders and visibility over the next 5, 7 years. The other thing that we can have a risk on is capacity creation, which we've been able to do to a large extent.

Analyst probed on geopolitical risks, and management asserted that the company is largely derisked due to strong order book, capacity, and established customer relationships.

Asked by Pratik Dharmshri

Status of Saudi Arabia capex with Baker Hughes given current geopolitical situation Partial
No. So that is still on. From an opportunity perspective, I think we are still going ahead with that. But yes, the time lines have been shifted. We are still in discussions with our customer on how do we best take this forward given the current situation and priorities. ... But I think we want to take it up not as the most important priority today. We want to get our current plants up and do that, and then that can happen alongside. But that opportunity still lies.

Analyst asked about potential delays in the Saudi Arabia capex, and management confirmed shifted timelines due to priorities, indicating a reprioritization of capital deployment towards existing facilities.

Asked by Sahil Karia

Manufacturing process for hot section nozzle vane segment (Mitsubishi contract) and its margin accretive nature Partial
Yes. So I think, see, the process of manufacturing hot section components cannot be discussed on the call. We would -- if you're very keen, we would invite you to our company and please visit us. We'll be able to explain the manufacturing process. But I can only give you one statement that there are only 3 players around the world of precision manufacturing that have been able to crack this materially, okay? ... Yes, will be above company's blended EBITDA margin band, right?

Analyst inquired about the complexity and margin profile of the new Mitsubishi contract, with management confirming high complexity (only 3 global players) and higher-than-blended EBITDA margins.

Asked by Jai Chauhan

2 min read 6 chapters

Detailed narrative

Strong Q4 and Full-Year FY26 Financial Performance

Azad Engineering delivered robust financial results for Q4 FY26, with revenue growing 26.4% YoY to INR157 crores. EBITDA margin improved to 36.7% from 36.5% in Q4 FY25, and PAT margins expanded to 22.3% from 20.9%. For the full year FY26, revenue increased over 30% to INR590 crores, with a consolidated PAT of INR134 crores, marking a 54.4% YoY growth. The consistency in growth and profitability reflects strong execution across all business segments.

Capacity Expansion and Strategic Customer Integration

The company successfully inaugurated four dedicated lean manufacturing facilities for marquee global customers, with two commissioned in FY26 and one for Baker Hughes in April 2026. This infrastructure build-out is approximately 70-80% complete, with the remaining plants expected to be commissioned by the end of FY27. This expansion is crucial for converting qualifications into revenue and supporting the next phase of growth.

Significant Order Book and New Contract Wins

Azad Engineering maintains a strong order book of approximately INR6,500 crores as of FY26 end, representing 11-12x its FY26 revenue. This order book is expected to be consumed over the next 5-6 years. A key highlight was securing an 8-year single-source supplier contract with Mitsubishi Heavy Industries Japan for highly engineered hot section Nozzle Vanes segments, a testament to the company's technical and process capabilities.

Segmental Growth and Diversification

The Energy and Oil & Gas segment remained the largest contributor, accounting for 81.5% of FY26 revenue at INR481 crores, growing over 34% YoY. The Aerospace & Defence segment contributed INR101 crores, representing 17.2% of revenue with 25% YoY growth. The company is actively diversifying, with Oil & Gas expected to add material numbers in FY27 and potentially breach INR100 crores in the next couple of years, reducing reliance on any single segment.

Capital Allocation and Working Capital Management

In FY26, the company capitalized assets worth INR392 crores and recorded INR191 crores in CWIP and capital advance. Total gross borrowing stood at INR457 crores, with net debt at INR272 crores. The treasury balance is INR184 crores, including INR160 crores from QIP proceeds. Management is focused on normalizing the working capital cycle in FY27, aiming to reduce inventory days to closer to 200 in H1 and 160-170 in H2, which is currently elevated due to strategic buildup for ramp-up.

Outlook and Strategic Focus for FY27

Management projects a '25% plus' top-line growth for FY27 and on a multiyear basis, while maintaining EBITDA margins in the '33% to 35% plus' range. Key priorities for FY27 include ramping up the four newly capitalized plants, commissioning the remaining plants under construction, deepening customer relationships, and normalizing the working capital cycle. The company continues to invest in capabilities, capacity, people, and systems to sustain its growth trajectory.

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