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    CANARYS

    CANARYS
    Information Technology·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

    5

    • 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

    3

    • 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.

    What Changed2

    vs Q2 FY26

    Guidance items6 → 2 (-4)Risks discussed4 → 3 (-1)

    Key financials

    Single quarter

    06 metrics
    1. 01Total Income₹90.6 Cr+19%YoY
    2. 02EBITDA₹14.1 Cr
    3. 03EBITDA Margin15.5%
    4. 04PAT₹8.3 Cr
    5. 05PAT Margin9.2%

    Segment breakdown

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

    Order Book

    high confidence

    Total Value

    ₹ 165 crores

    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

    Mix2 contract types
    • Multi-year contracts60.0%
    • Short-term contracts40.0%

    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

    3
    high confidence
    CategoryHeadline
    Debt

    0.1x EBITDA

    M&A

    Fortira Inc.

    acquisition · closed · Consideration ₹NaN (mixed)

    Liquidity

    Cash ₹5 crores

    INR5 crores available from IPO proceeds for solution development, other IPO funds utilized.

    Guidance & targets

    2
    CategoryTargetPriority
    Revenue
    Overall Revenue Growth
    Around 20%
    		Medium
    Profitability
    EBITDA and PAT Margins
    Similar to historical data
    		Medium

    Fortira Inc. integration and growth

    Next quarter/coming years
    CurrentIntegration process ongoing, aiming for faster growth and approaching customers with new solutions.
    TargetEvidence 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.

    How to verify

    capital_allocation.m_and_a[target='Fortira Inc.'].status and key_financials.metrics[label='Total Income']

    Risks & concerns

    3
    RiskSeverity

    Market conditions and sentiments impacting margins

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

    medium

    Longer payment cycles in water resource management projects

    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 acknowledged

    low

    Fortira's historical declining sales

    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

    low

    Q&A highlights

    8

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.