Canarys Automations Ltd — Q4 FY25 earnings call

Call held 30 Jun 2025

Management summary

Canarys Automations reported strong FY25 results with 19% revenue growth to INR90.6 crores, driven by its technology solutions vertical. The company made a strategic acquisition of Fortira Inc. for USD2.55 million to expand globally and enhance AI/ML capabilities. While margins saw a slight dip due to investments and market conditions, the order book remains robust at INR165 crores, and cash flow from operations turned positive.

Highlights

  • Total income for FY25 stood at INR90.6 crores, reflecting 19% year-on-year growth.

  • Technology solutions vertical grew 24% year-on-year, driving overall growth.

  • Order book reached INR165 crores, with INR105 crores from the high-growth technology solutions vertical.

  • Strategic acquisition of 51% stake in Fortira Inc. for USD2.55 million enhances global presence and AI/ML capabilities.

  • Cash flow from operations turned positive at INR3.8 crores, indicating improved operational efficiency.

Concerns

  • EBITDA margin at 15.5% (INR14.1 crores) and PAT margin at 9.2% (INR8.3 crores) saw a 'slight dip' due to market conditions and strategic investments.

  • Fortira Inc. had declining sales for the last 3 years prior to acquisition, attributed to previous owners wanting to retire.

  • Water resource management projects historically involved longer payment cycles, necessitating a more selective approach to mitigate cash flow issues.

Key financials

  1. Total Income ₹90.6 Cr +19%YoY
  2. EBITDA ₹14.1 Cr
  3. EBITDA Margin 15.5%
  4. PAT ₹8.3 Cr
  5. PAT Margin 9.2%
  6. Cash Flow from Operations ₹3.8 Cr

What they filed

Q4 FY26: revenue up 120.5%, net profit up 20.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY23Q4 FY23Q2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue29 46 31 44 38 +31%52 +13%101 +226%97 +120%
EBITDA3 10 4 7 6 +100%6 −40%12 +200%10 +43%
Net profit2 6 3 5 4 +100%4 −33%9 +200%6 +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

  • Water Resource Management
    35% Share of Total Business15% YoY Growth
  • IT Solutions
    22% EBIT Margin25% EBIT Margin (Upper)24% YoY Growth

Order book

high confidence

Total value

₹165 Cr

as of 2025-03-31 quantified

Execution

Most of the order book is for next two years and very minimum of this probably around 15% or so getting into the third year. But most of them is for next two years, this year and next year.

Composition

Mix 2 contract types
  • Multi-year contracts 60%
  • Short-term contracts 40%

Share of order book by contract type

The order book is healthy and provides good visibility for the next two years, with a significant portion from the technology solutions vertical.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt 0.1× EBITDA
    Debt-to-equity ratio remains pretty low at 0.1x, underlying a conservative, healthy capital structure.
  • M&A Fortira Inc. Acquisition · Closed · Consideration ₹[object Object] (mixed)

    Strategic milestone for global technology landscape, geographic expansion, strengthening presence in North American market, capability enhancement (AI, cybersecurity, cloud, DevOps, data analytics), cross-sell opportunity.

    Valued at USD5 million. Reported over USD13 million in revenue and USD1.35 million in profit before tax in FY24. Expected to contribute to consolidation with an order book close to USD15 million for the current year.

    A major highlight of FY25 was our step into the global technology landscape through the acquisition of Fortira Inc, a U.S. based AI ML data and IT consulting company. We completed this acquisition in April 2025, acquiring 51% stake for USD2.55 million, valuing the company at USD5 million... Fortira... reported over 13 million in revenue and USD1.35 million in profit before tax in FY24... Fortira also, this year order book is close to 15 million again there and we have the 51% on that. So there is a substantial addition to the order book what we have on the standalone.
  • Liquidity Cash ₹5 Cr INR5 crores available from IPO proceeds for solution development, other IPO funds utilized.
    most of the objects have been used except for the solution development object. That's around INR5 crores available and apart from that, we have utilized the other money in the other objects.

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · This year and next year · Medium confidence Around 20%
    We have been growing around 20% and even if you continue at the same pace with Fortira Inc. coming in and Fortira we anticipate to again grow not to decline this year.

    — Sheshadri Srinivas

Profitability

  • EBITDA and PAT Margins Profitability · At least this year · Medium confidence Similar to historical data
    It is similar. If you look at, we have given the last 3 years' data. So they continue to simulate this one going forward, at least this year.

    — Sheshadri Srinivas

What to watch in Q1 FY26

Fortira Inc. integration and growth

Next quarter/coming years
Current Integration process ongoing, aiming for faster growth and approaching customers with new solutions.
Target Evidence of successful integration, increased revenue contribution, and new customer wins from Fortira.

Why it matters

Fortira is a key strategic acquisition for global expansion and capability enhancement, crucial for future consolidated performance.

we are in the integration process now. So we are investing all our efforts in integrating these two entities, but yes definitely after this year, we would like to plan on that. So this year, our focus is only on the integration, growing the business and approaching all the Fortira's customer and taking their confidence into the new solutions what we want to bring onto the table.

Risks & concerns

  • Market conditions and sentiments impacting margins

    medium

    Market conditions and low market sentiments contributed to a 'slight dip' in EBITDA and PAT margins, alongside strategic investments.

    Management acknowledged

  • Longer payment cycles in water resource management projects

    low

    Historically, water projects had long payment cycles, but the company is now selectively pursuing tenders with 60-70% upfront payments to improve cash flow.

    Management mitigated

  • Fortira's historical declining sales

    low

    Fortira Inc. experienced declining sales for 3 years prior to acquisition, attributed to previous owners' desire to retire, but new leadership aims for faster growth.

    Analyst acknowledged

Q&A highlights

7 direct
Revenue split between IT and water segments post Fortira acquisition Direct
Fortira Inc. is a pure IT solutions company. So the impact will be 100% on IT solutions vertical. There is not much impact on water resource management... Right now, the water management is at around 35% of the entire business... percentage-wise, definitely it will reduce because once you increase the revenue of the technology solutions and the overall company.

Clarifies the strategic shift towards IT and the expected proportional reduction in the water segment's revenue share within the consolidated entity.

Asked by Neeraj Chhajed

Fortira's historical declining sales and strategy for founders' continuation Direct
we deliberately want the founders to be with us for the next 2 to 3 years because the transition has to happen smooth... there is a decline because a couple of them wanted to take little easy and they want to retire from the business... But with the new leadership in place now, so we are definitely looking at growing this business at a much, much faster pace and with the solutions what we have in-house.

Addresses concerns about Fortira's past performance and outlines the strategy for future growth under new leadership and retention of key personnel.

Asked by Neeraj Chhajed

Valuation basis for purchasing the remaining 49% stake in Fortira Direct
No, it is an EBITDA multiple.

Provides clarity on the financial metric that will be used for any future acquisition of the remaining stake in Fortira.

Asked by Neeraj Chhajed

New bidding criteria for water resource management projects and impact on debtors days Direct
the government also changing and some of the latest tenders which they are floating has the new norms. So we are very specific to participate in only tenders which are in the new norms now. So we do not want to participate the 40% of the contract value, which was the previous term. So we have stopped participating in such tenders. So the new term 60% to 70%, so in such tenders only we participate now.

Explains the company's strategy to mitigate cash flow issues from water projects by focusing on tenders with higher upfront payments, which should improve working capital management.

Asked by Neeraj Chhajed

Order book execution timeline for FY25-26 Direct
Most of the order book is for next two years and very minimum of this probably around 15% or so getting into the third year. But most of them is for next two years, this year and next year.

Provides clarity on the expected revenue recognition timeline from the current INR165 crore order book.

Asked by Nupur

Reasons for inconsistency and slight dip in EBITDA/PAT margins Direct
when the company is in the rapid growth, you need a lot of investments into a lot of buckets, especially when you are acquiring and also investing quite a lot in the business expansion... we are constantly investing in terms of the expansion and the solutioning. So that's the reason there was a little change in the last couple of years. But we definitely anticipate to correct this in the coming years and ensure that we again repeat what we used to try in the earlier years and grow much beyond that.

Explains the drivers behind recent margin compression (growth investments, M&A) and management's commitment to improve them in the future.

Asked by Nupur

Fortira's revenue contribution to consolidated entity in FY26 Partial
As I said, the hype is pretty strong. So close to $15 million or so was mentioned, right. So That will be the contribution to consolidation.

Gives an approximate figure for Fortira's expected revenue contribution to the consolidated entity, though management avoided firm guidance.

Asked by Rachit Jain

Utilization of IPO proceeds Direct
most of the objects have been used except for the solution development object. That's around INR5 crores available and apart from that, we have utilized the other money in the other objects.

Provides an update on how the funds raised from the IPO have been deployed and the remaining balance for specific purposes.

Asked by Nupur

2 min read 6 chapters

Detailed narrative

FY25 Performance Overview

Canarys Automations Limited reported a total income of INR90.6 crores for FY25, marking a 19% year-on-year growth. This growth was primarily driven by a strong 24% year-on-year increase in the technology solutions vertical. Despite a 'slight dip' attributed to market conditions and strategic investments, the company achieved an EBITDA of INR14.1 crores (15.5% margin) and a PAT of INR8.3 crores (9.2% margin). Cash flow from operations turned positive at INR3.8 crores, and the debt-to-equity ratio remained low at 0.1x.

Strategic Acquisition of Fortira Inc.

A major highlight of FY25 was the acquisition of a 51% stake in Fortira Inc., a U.S.-based AI ML data and IT consulting company, for USD2.55 million, valuing the company at USD5 million. This acquisition, completed in April 2025, is expected to strengthen Canarys' presence in the North American market, enhance capabilities in AI, cybersecurity, cloud, and DevOps, and provide cross-selling opportunities. Fortira reported over USD13 million in revenue and USD1.35 million in profit before tax in FY24.

Business Transformation & Technology Focus

Canarys is transforming from a project-based IT services company to a solution-led digital transformation specialist, focusing on building proprietary technology and full-stack solutions. The company emphasizes its own software tools, partnerships with global technology leaders (Microsoft, GitHub, GitLab, SAP), and a deep talent pool of over 400 professionals skilled in automation, cloud, AI, DevOps, and legacy modernization. Over 100 professionals were added in FY24-25 across various business units, and 35% of 'Canarians' are being trained in AI, ML, and data skills.

Order Book & Growth Outlook

The company's order book stands at a healthy INR165 crores, with INR105 crores specifically from the technology solutions vertical. This order book is expected to be executed over the next two years, with a small portion extending into the third year. Over 60% of contracts are multi-year, while 40% are short-term (around 6 months, extendable). Management expressed bullishness for the current year, anticipating continued growth, especially with the integration of Fortira Inc., which has an additional order book of approximately USD15 million for the current year.

Capital Allocation & IPO Proceeds

The Fortira acquisition was funded through a mix of IPO proceeds and internal accruals, demonstrating a disciplined approach to capital deployment. From the INR47 crores raised in the IPO, approximately INR5 crores remain available for solution development, with the rest utilized for other stated objectives. The company maintains a conservative capital structure with a low debt-to-equity ratio of 0.1x.

Water Resource Management Strategy

While water resource management contributed to growth with a 15% year-on-year increase, Canarys is adopting a more selective and disciplined approach to this vertical. This is due to the historically longer payment cycles associated with these projects. The company now only participates in tenders that align with new government norms, requiring 60-70% upfront payment, aiming to improve cash flow and operational efficiency.

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