Centum Electronics Limited — Q4 FY26 earnings call

Call held 15 May 2026

Management summary

Centum Electronics concluded FY26 on a strong note, with record standalone revenue and robust order book growth driven by defense, aerospace, and semiconductor segments. The company is undergoing a strategic restructuring of its underperforming overseas subsidiaries, classifying them as discontinued operations, to sharpen focus on its core India ESDM platform. While full-year standalone margins were slightly below target due to product mix, management maintains a positive medium-term outlook for growth and margin expansion, despite ongoing supply chain challenges.

Highlights

  • Standalone FY26 revenue reached a record ₹973 crores, reflecting a strong 25% year-on-year growth.

  • EBITDA for standalone operations grew 28% year-on-year to ₹121 crores, translating into a margin of 12.42%.

  • Standalone order book grew 23% year-on-year to ₹1,645 crores, providing strong visibility for coming years.

  • Adjusted ROCE improved significantly to 21.16% from 12.40%, reflecting stronger profitability and improved capital efficiency.

  • Secured a marquee AESA radar program from HAL exceeding ₹570 crores over its life cycle, validating indigenous defense capabilities.

Concerns

  • FY26 standalone margins (12.42%) were below the guided range of 14-15% due to product mix in the EMS business.

  • One-time exceptional item of ₹203 crores related to provisions and impairments in overseas subsidiaries impacted full-year profitability.

  • Supply chain bottlenecks, particularly in copper clad laminate (CCL) and memories, are an emerging theme, potentially affecting PCB lead times.

  • No realization is expected from the sale of overseas subsidiaries, as liabilities significantly exceed assets.

Key financials

2 periods

FY26

  • Standalone Revenue
    ₹973 Cr
    YoY +25%
  • Standalone EBITDA
    ₹121 Cr
    YoY +28%
  • Standalone EBITDA Margin
    12.4%
  • Consolidated Revenue
    ₹953 Cr
    YoY +29%
  • Consolidated EBITDA
    ₹135 Cr
    YoY +37%
  • Working Capital Days
    142 days
  • Adjusted ROCE
    21.2%

Continuing Operations, FY26

  • Consolidated PAT
    ₹101 Cr
    YoY +100%

What they filed

Q1 FY27: revenue up 10.8%, net profit down 6.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue167 187 274 185 206 +23%238 +27%344 +26%205 +11%
EBITDA20 20 43 26 25 +25%25 +25%45 +5%23 −12%
Net profit10 8 28 15 13 +30%-178 −2325%33 +18%14 −7%
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 Growth (FY26)EBITDA Margin
Build-to-Specification (BTS)37%20%
Electronics Manufacturing Services (EMS)21%9%

Order book

high confidence

Total value

₹1,645 Cr

as of 2026-03-31 quantified

23% YoY

Execution

BTS orders have a fairly longer cycle game, from RFP to revenue realization. EMS orders have a shorter execution period, typically 6-9 months.

Composition

Mix 2 programs
  • AESA radar program (HAL UHM platform) ₹570 Cr 95%
  • Space debris tracking radar ₹30 Cr 5%

Share of order book by program, derived from disclosed amounts

Cancellations & deferrals

  • deferred: INR 100-150 crores of orders expected to come in, pushed to current fiscal (FY27) from end of last year.
The company has a strong standalone order book with good visibility for the coming years, especially in the BTS segment, and expects significant growth in order booking for the current fiscal.

Source: Prepared remarks

Capital allocation

  • Capex ₹40 Cr
    • BTS segment R&D capabilities
    And on the capex, the question is around what kind of capex we are looking for in the next fiscal year, it will be in the order of, I would say, about INR 40 crores, equally more or less 50% or could be slightly higher on the BTS segment in terms of the R&D capabilities. But otherwise it will be INR 40 crores to INR 45 crores you can expect.
  • Debt Debt disclosed
    And our balance sheet also remained healthy with total debt to equity maintained at a comfortable 0.28x
  • M&A Centum Canada operations Divestment · Abandoned

    Underperforming overseas operations, realigning management focus and capital allocation to core India business.

    Operations discontinued in Q4 FY26, wind-up process in progress. Financials classified under discontinued operations. No realization expected from asset sale due to significant liabilities.

    In Canada, operations were discontinued during Q4 FY26 and the wind-up process is under progress... Importantly, beginning this quarter, the financials relating to these subsidiaries have already been classified under discontinued operations, thereby providing clearer visibility into the performance of the continuing core business... And we don't expect to receive anything as a result of this asset sale process.
  • M&A Centum French subsidiary (Europe) Divestment · Pending regulatory

    Underperforming overseas operations, realigning management focus and capital allocation to core India business.

    Entered legal restructuring process (redressement judiciaire) in March 2026. Asset sale process progressing with multiple preliminary bids, expected to substantially conclude by July 2026. Financials classified under discontinued operations. No realization expected from asset sale due to significant liabilities.

    In Europe, the French subsidiary entered the redressement judiciaire or the legal restructuring process during March 2026, and we are currently progressing through a court-supervised asset sale process. We have already received multiple preliminary bids and with final bids expected very shortly. Subject to the court approval process, we expect the divestment process to be substantially concluded by July 2026... And we don't expect to receive anything as a result of this asset sale process.

Guidance & targets

Growth

  • Standalone Revenue Growth Growth · medium-term · High confidence 25-30%
    So as we said, we in the medium-term, we continue to work towards a 25% to 30% growth rate. And we feel we are continuing along those lines, and we should be in line with those expectations.

    — Nikhil Mallavarapu

Profitability

  • Standalone EBITDA Margin Profitability · medium-term · High confidence 13-15%
    And similarly, as I mentioned, 13% to 15% EBITDA is what we're working towards, and we maintain that target.

    — Nikhil Mallavarapu

  • Overall Margin Improvement Profitability · next 1-2 years · Medium confidence 13-15%
    As I said, we are targeting to be at 13% to 15% in the next 1 to 2 years' time horizon.

    — Nikhil Mallavarapu

Capex

  • Capex Spend Capex · FY27 · High confidence ₹40-45 crores
    And on the capex, the question is around what kind of capex we are looking for in the next fiscal year, it will be in the order of, I would say, about INR 40 crores, equally more or less 50% or could be slightly higher on the BTS segment in terms of the R&D capabilities. But otherwise it will be INR 40 crores to INR 45 crores you can expect.

    — Sundararajan P.

Program Execution

  • HAL UHM Platform Development Phase Program Execution · within 2 years · High confidence ₹66-67 crores
    So the INR 570 crores order is basically divided into 2 phases. This is -- the first phase is the development phase that accounts for about INR 66 crores INR 67 crores or so. And the second phase is the remainder about INR 500-plus crores. This is without tax or anything. So the development phase of this is expected to be done in basically in 2 years.

    — Nikhil Mallavarapu

  • HAL UHM Platform Remainder Execution Program Execution · till FY30-FY31 · High confidence ₹500+ crores
    And the second phase is the remainder about INR 500-plus crores. This is without tax or anything. So the development phase of this is expected to be done in basically in 2 years. So we've 2 years from the date of the order. So that is in progress right now. And once it's successfully demonstrated, we expect to have the remaining part of it coming in -- which is to be executed out till basically FY30, FY31.

    — Nikhil Mallavarapu

What to watch in Q1 FY27

Overseas Subsidiary Deconsolidation

Q1 or Q2 FY27
Current Financials classified as discontinued operations; asset sale process ongoing.
Target Full deconsolidation by Q1 or Q2 FY27.

Why it matters

Successful and timely deconsolidation will remove the drag from underperforming overseas assets and provide clearer visibility into core India business performance.

Broadly speaking, just to add. The main point here is that it is already a discontinued operation. And there is no cash that is going from the standalone entity or parent company to the subsidiaries. And it hasn't -- there hasn't been any over the last several quarters, in fact. So this will be deconsolidated very shortly. And we are looking at whether this will happen at the end of Q1 or I would guess worst case in Q2.

Risks & concerns

  • Product mix impacting EMS margins

    medium

    FY26 standalone margins were below target due to a less favorable product mix in the EMS business, though improvement is expected in FY27.

    Analyst acknowledged

  • Supply chain bottlenecks (CCL, memories)

    medium

    Emerging bottlenecks in copper clad laminate (CCL) and memory components are impacting PCB lead times, driven by demand and AI data center build-out.

    Analyst acknowledged

  • Financial impact of overseas subsidiary restructuring

    medium

    No financial realization is expected from the sale of overseas subsidiaries as liabilities exceed assets, and there was a ₹203 crore exceptional item for impairments in FY26.

    Management acknowledged

  • West Asia crisis impact on supply chain

    low

    Short-term logistics impacts were seen at end of Q4, but no major supply disruptions are currently observed, though the situation is being monitored.

    Analyst downplayed

Q&A highlights

7 direct
Standalone EBITDA margin below guidance Direct
Yes, it was first of all, I think just in terms of our broad guidance, we're targeting to be in the range of 13% to 15% at a combined level and we are slightly below that for the full year, basically because of the product mix in the EMS business. We had initially anticipated a slightly better product mix in the last year. Some of this will be executed in the current financial year. And with that, we should see better margin from the EMS business in the current year. So that's fundamentally the point.

Analyst questioned why FY26 standalone margins were below the 14-15% guidance, and management attributed it to product mix in EMS, expecting improvement in FY27.

Asked by Ankit Babel

Realization from overseas business sale Direct
No, no, that also remains unchanged. We don't expect to have any realization. As you will probably see in the balance sheet today, there is a significant amount of liabilities that have been held for disposal that has been reported. And we don't expect to receive anything as a result of this asset sale process.

Management confirmed no financial realization is expected from the sale of overseas subsidiaries due to significant liabilities, clarifying previous statements.

Asked by Ankit Babel

Acceleration of standalone business growth post-restructuring Partial
No, I think 25%, 30% was never at the consolidated level. What we always maintained, it was at the standalone level, whereas the subsidiary was relatively flat in terms of performance. So what we are continuing to look at this type of a 25%, 30% on a medium-term basis is what I'm saying.

Analyst asked if focusing solely on standalone business would accelerate growth beyond the 25-30% target, but management reiterated the existing target was always for standalone and is achievable.

Asked by Ankit Babel

Exceptional losses from French subsidiary in Q1/Q2 FY27 Direct
But at that point in time also, as we explained, the balance sheet carries much larger liabilities, over INR 100 crores excess over assets. So we don't expect any write-down coming in hitting the consolidated books. Moreover, we'll also be evaluating the point in time of cessation of control in terms of having a necessity to consolidate.

Management clarified that despite the ongoing restructuring of the French subsidiary, no further exceptional losses are expected to hit consolidated books in Q1/Q2 FY27 due to liabilities exceeding assets and anticipated deconsolidation.

Asked by Chirag Jethalia

Margin profile of Defense vs other sectors in EMS Direct
So on the So there is no major differentiation, I would say, in the EMS between these segments. It could be there on a momentary basis or temporary basis. If we are ramping up a particular customer in the industrial segment, initial quarters could be a tighter margin, then we gradually scale better yield, better process and better supply chain efficiency, all that will kick in. And again, it will get normalized. It will not be substantially exceeding in excess of 10%, I would say. This is broadly, this is how the industry also operates in the segments that we are in.

Management explained that EMS margins are generally 9-10% across segments, with no major differentiation, while BTS margins are higher at 20%+.

Asked by Chirag Jethalia

Supply chain bottlenecks for CCL (copper clad laminate) Direct
Copper clad laminate, okay. Yes. Yes, supply chain bottlenecks are clearly an emerging theme in the EMS part of the business I think it's not only the copper clad laminate, which essentially affects the PCB lead times. But beyond this, I think some of the other impacts that we've also seen is on specific component categories like memories, where there is also a lot of demand and pull coming in because of the Al data center build-out that we are seeing.

Management acknowledged emerging supply chain bottlenecks in CCL and memories, impacting PCB lead times, and stated they are monitoring and mitigating these challenges.

Asked by Vineet Khatri

Competition with customers as Centum moves up value chain Direct
It's -- it depends on the program, I would say. I mean, in many cases, our customers, I would say, in many cases, are basically HAL, DRDO and in certain cases with BEL. So this is -- it's an evolving scenario. There are programs that we are collaborating. There are certain programs where we will compete. And I think that's a natural process of evolution of the ecosystem in the country, and it's not unique in India. It's something that is seen world over.

Analyst questioned potential competition with existing customers as Centum moves into system integration; management confirmed it's an evolving scenario with both collaboration and competition depending on the program.

Asked by Raj Agrawal

Tax benefit from historical losses Direct
Okay. So the losses incurred in subsidiary with tax benefit, etcetera would accrue, if someone is acquiring the company that's holding the tax credits. I don't think that's going to happen -- that's not going to be the reality. As far as the losses incurred in standalone business is concerned, where we booked INR 200 crores of exceptional items. Out of that, the investment-related impairment, that INR 153 crores that will be -- that's a capital loss. So that will be available for us for the future for, any capital gains set off, whereas the other items have been used to offset against the profits made during the current year.

Management clarified that tax benefits from subsidiary losses are unlikely to be realized, but the ₹153 crore capital loss from standalone impairment can be set off against future capital gains.

Asked by Raj Agrawal

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Detailed narrative

Strategic Restructuring of Overseas Operations

Centum Electronics has initiated decisive restructuring actions for its underperforming overseas operations, classifying them as discontinued operations. Canada operations were discontinued in Q4 FY26, with the wind-up process underway. The French subsidiary entered a legal restructuring process in March 2026, and its asset sale is expected to conclude by July 2026. Management does not anticipate any financial realization from these sales, as liabilities significantly exceed assets, but expects full deconsolidation by Q1 or Q2 FY27, which will improve focus on the core India business.

Robust Standalone Performance and Order Book Growth

The company reported a strong FY26, with standalone revenue growing 25% year-on-year to a record ₹973 crores. Standalone EBITDA increased by 28% year-on-year to ₹121 crores, achieving a margin of 12.42%. The standalone order book closed at ₹1,645 crores, representing a 23% year-on-year growth, providing strong revenue visibility. The Build-to-Specification (BTS) business saw particularly strong growth of 37% year-on-year, while Electronics Manufacturing Services (EMS) grew 21% year-on-year.

Key Program Wins and Strategic Positioning

Centum secured a marquee AESA radar program from HAL for the UHM platform, with an opportunity size exceeding ₹570 crores over its life cycle, validating its capabilities in indigenous defense electronics. Additionally, a ₹30-crore order for a second complete radar system for satellite and space debris tracking further strengthens its position in strategic surveillance. These wins reinforce Centum's positioning in high-potential sectors like defense, aerospace, space, semiconductor equipment, and industrial electronics.

Margin Dynamics and Future Outlook

While FY26 standalone EBITDA margins of 12.42% were slightly below the 13-15% target, management attributed this to product mix in the EMS business. EMS margins typically range from 9-10%, while BTS margins are 20%+. Management expects margin improvement in FY27 due to better product mix and operating leverage, reiterating a medium-term target of 13-15% EBITDA margin. The company aims for a 25-30% standalone revenue growth rate in the medium term.

Capital Efficiency and Capex Plans

Centum demonstrated improved capital efficiency, with adjusted net working capital days improving to 142 days from 159 days in the previous year. Adjusted ROCE significantly improved to 21.16% from 12.40%. For FY27, the company plans a capital expenditure of ₹40-45 crores, with a significant portion allocated to enhancing R&D capabilities in the BTS segment, supporting future growth and technological advancements.

Supply Chain Challenges and Mitigation

Management acknowledged emerging supply chain bottlenecks, particularly for copper clad laminate (CCL) and memory components, which are impacting PCB lead times. These challenges are partly driven by increased demand and the AI data center build-out. The company's supply chain team is implementing proactive measures to mitigate these issues and is closely monitoring the situation to ensure continued supplies and execution.

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