Centum Electron

Centum Electronics reported consolidated revenue from operations of INR281 crores for Q3 FY25, marking an 8% quarter-on-quarter increase but a 6% year-on-year decline. Adjusted for gross value, Q3 FY25 revenue grew 13% QoQ and 6% YoY. Consolidated EBITDA margins stood at 6.9%, leading to a net loss of INR19 crores for the quarter, primarily due to an exceptional item^📎. For the nine months ended FY25, consolidated revenue was INR787 crores, a marginal 1% YoY decline, with an EBITDA margin of 7% and a net loss of INR24 crores.

In contrast to the consolidated figures, the standalone business demonstrated resilience. Standalone revenue for Q3 FY25 was INR181 crores, growing 8% QoQ and 2.5% YoY, with a healthy EBITDA margin of 11.79% and a net profit of INR9 crores. The domestic Build To Spec (BTS) business, focused on defense and space, is performing strongly, with its order book increasing from INR376 crores at end of FY23 to INR563 crores at end of 9M FY25. The overall order book stands at INR1,675 crores as of December 31, 2024, with BTS orders executable over 2-2.5 years and EMS orders over 9-12 months.

The Canadian subsidiary remains a significant drag on consolidated profitability, primarily due to uncompensated costs for engineering teams and a slowdown in the PAPIS business. Management aims to make strategic decisions in the coming quarters to ensure the Canadian operations cease to be a drag by June (best case) or September (worst case). The French engineering services business is currently at a breakeven level, with efforts to improve utilization and margins to 7% in the short term and 11-12% in subsequent years. Work is being shifted from Canada to India to leverage cost advantages.

Due to the underperformance of the subsidiaries, management revised its full-year FY25 consolidated EBITDA target downwards to INR100 crores from the earlier INR130 crores. Similarly, the consolidated revenue growth on a gross accounting basis for FY25 is now expected to be 13%, down from the previous 18%. However, standalone revenue growth for FY25 on a gross accounting basis is still expected to be around 26%. For FY26, standalone EBITDA margin is targeted at 13-14%, while subsidiary EBITDA margin (including Canada) is aimed for 6-7%.

Centum Electronics is well-positioned in the domestic defense and space markets. The company recently secured a contract worth over INR300 crores for satellite-based payloads for Electronic Warfare Applications. Management expects substantial orders from the radar domain and naval programs in Q4. They are also actively involved in indigenizing Russian imported products for land systems. In the space sector, Centum has moved up the value chain to deliver full satellite payloads and is pursuing opportunities in situational awareness and debris tracking, with expectations of new projects from ISRO in the coming years.

The consolidated net loss for Q3 FY25 included an exceptional item^📎 of INR19 crores, which is a provision for the entire exposure to Ausar Energy, an associate company (30% shareholding) that has been referred to redressement judiciaire in France. Management is hopeful of recovering at least a partial amount, as four interested parties are bidding on the company. Additionally, the Board has approved fundraising through a QIP or other means, with the timing to be announced later, in anticipation of significant growth opportunities, especially in the standalone business.