Cyient DLM — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

Cyient DLM reported a challenging Q3 FY26 with revenue declining 31.7% YoY to INR 3,033 million due to the completion of a large FY25 order and tariff-related uncertainties. Despite this, the company maintained strong order momentum with INR 387 crores in new wins and a book-to-bill ratio of 1.3, growing its order book to INR 23.5 billion. Normalized EBITDA margin expanded by 207 bps YoY to 10.2%, driven by improved mix and operational efficiencies. Management expressed confidence in a strong Q4 FY26 and substantial FY27 growth, with the worst of revenue challenges behind them.

Highlights

  • Order intake of INR 387 crores in Q3 FY26, leading to a book-to-bill ratio of 1.3 for the quarter, and YTD book-to-bill of 1.56.

  • Order book closed Q3 FY26 at INR 23.5 billion, marking three consecutive quarters of growth with a QoQ increase of INR 583 million.

  • Normalized EBITDA margin expanded to 10.2% (up 207 bps YoY), demonstrating improved operational efficiencies and favorable revenue mix.

  • Normalized PAT margin improved to 4.6% (up 73 bps YoY), despite a decline in absolute PAT.

  • Strategic diversification into automotive, industrial, and medical segments is gaining traction, with two new logos added this quarter.

  • Commenced revenue realization from B2S programs, with a clear runway for significant scale-up in coming quarters.

  • Management expects positive year-over-year revenue growth in Q4 FY26 and substantial growth in FY27, with the worst of revenue challenges behind them.

Concerns

  • Q3 FY26 revenue declined by 31.7% year-on-year to INR 3,033 million, primarily due to the completion of a large cyclical order in FY25.

  • One-time M&A evaluation expenses of $17.75 million were incurred for a deal that did not materialize.

  • One-time wage impact of INR 16.3 million due to new labor code.

  • DIO inventory is elevated due to customer-specific shipment delays in Q3, leading to a temporary increase in net working capital.

Key financials

  1. Revenue 3,033 Mn -31.7%YoY
  2. Normalized EBITDA 309 Mn -14.4%YoY
  3. Normalized EBITDA Margin 10.2% +2.1%YoY
  4. Reported EBITDA 275 Mn
  5. Reported EBITDA Margin 9.1%
  6. Normalized PAT 138 Mn -18.6%YoY
  7. Normalized PAT Margin 4.6% +0.73%YoY
  8. Reported PAT 112 Mn +1.9%YoY
  9. Reported PAT Margin 3.7%

What they filed

Q1 FY27: revenue up 34.5%, net profit up 128.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue389 444 428 278 311 −20%303 −32%369 −14%374 +35%
EBITDA32 28 57 25 31 −3%28 +0%43 −25%39 +56%
Net profit15 11 31 7 32 +113%11 +0%22 −29%16 +129%
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.

Order book

high confidence

Total value

₹23.5 Bn

as of 2025-12-31 quantified

2.5% QoQ

Inflow this quarter

₹387 Cr

Execution

orders get shipped in 15 to 16 months

Composition

  • Aerospace, Industrial, Medical (industry)
  • India (geography)

Cancellations & deferrals

  • deferred: Customer-specific shipment delays in Q3 and inventory buildup for Q4 shipments, expected to ease out by year-end.
Order momentum remains strong, with a book-to-bill ratio above 1 for the third consecutive quarter, indicating sustained demand and effective commercial strategy.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed internal accruals and dry powder
    We are net cash positive. So we have ability to go up to, from a pure working capital perspective, another INR350 crores to INR400 crores... we have enough dry powder, which we talked about, and we can do it in a pretty quick time, okay?
  • Debt Debt disclosed
    • Rate reset Reduced interest rates due to lower borrowings
    However, these were largely offset by a drop in finance costs due to lower borrowings and reduced interest rates.
  • M&A Undisclosed International Acquisition Acquisition · Abandoned

    Terms did not fit into what we were expecting

    Incurred M&A evaluation expenses of $17.75 million for a deal that did not go through.

    The first one-off relates to M&A evaluation expenses amounting to $17.75 million. We incurred this expense to evaluate a deal that did not go through, and hence, we have taken the hit in this quarter.
  • Liquidity Undrawn ₹350 Cr Net cash positive, with ability to deploy INR 350-400 crores for working capital or new capital expansions/acquisitions.
    We are net cash positive. So we have ability to go up to, from a pure working capital perspective, another INR350 crores to INR400 crores.

Guidance & targets

Revenue

  • Q4 FY26 Revenue Growth Revenue · Q4 FY26 · High confidence positive year-over-year
    I'm confident that we'll be there by end of this Q4, so we'll be seeing a positive growth when compared to year-over-year.

    — Rajendra Velagapudi

  • FY27 Revenue Growth Revenue · FY27 · High confidence 20-25%
    Yes, absolutely. There is no doubt on that one, Deepak.

    — Rajendra Velagapudi

Profitability

  • Q4 FY26 Margins Profitability · Q4 FY26 · Medium confidence slightly more than double-digit
    I think you will be seeing slightly more than that in Q4 and probably also in FY '27.

    — Rajendra Velagapudi

  • FY27 Margins Profitability · FY27 · Medium confidence double-digit and slightly more

    — Rajendra Velagapudi

Product Mix

  • Build-to-spec mix Product Mix · FY27 · High confidence double-digit number (>10%)

    From 6-7% today

    the build-to-spec is close to around 6% to 7% in FY '26. And we expect that definitely will grow to a double-digit number in FY '27.

    — Rajendra Velagapudi

Working Capital

  • Net Working Capital Levels Working Capital · end of Q4 · High confidence normalize
    We continue to work on taking necessary steps to improve the same. Those actions expected to result in better NWC levels by end of Q4.

    — R. M. Subramanian

IPO Proceeds Utilization

  • Capex Utilization IPO Proceeds Utilization · coming quarters · High confidence balance to be deployed as planned
    Working capital utilization stands at 97.2%, while capex utilization is 15.4%, with the balance to be deployed as planned in the coming quarters.

    — R. M. Subramanian

What to watch in Q4 FY26

Q4 FY26 Revenue Growth

next quarter
Current -31.7% YoY in Q3 FY26
Target Positive YoY growth

Why it matters

Verifies management's confidence that the worst of revenue challenges are over and growth is resuming.

I'm confident that we'll be there by end of this Q4, so we'll be seeing a positive growth when compared to year-over-year.

Risks & concerns

  • Revenue softness due to customer-specific issues and tariff uncertainty

    medium

    Q3 revenue was soft due to year-end holiday period and tariff-related uncertainty, causing customer-specific issues and push-outs.

    Management acknowledged

  • Elevated DIO inventory and temporary increase in net working capital

    medium

    DIO inventory increased due to customer-specific shipment delays in Q3, impacting net working capital.

    Management acknowledged

  • One-time M&A evaluation expenses for an abandoned deal

    low

    $17.75 million expense incurred for an international acquisition that did not materialize due to unfavorable terms.

    Management acknowledged

  • Impact of new labor code

    low

    INR 16.3 million one-time impact from the new wage code.

    Management acknowledged

Q&A highlights

8 direct
Q4 FY26 Revenue Growth Outlook Direct
I'm confident that we'll be there by end of this Q4, so we'll be seeing a positive growth when compared to year-over-year.

Analyst sought clarity on short-term revenue trajectory after a soft Q3, and management confirmed positive YoY growth for Q4.

Asked by Sameet Sinha

FY27 Growth Story and Drivers Direct
FY '27 is going to be far, far better than FY '26.

Analyst questioned how the company would resume growth after a defense step-down in FY26, and management provided strong directional guidance for FY27.

Asked by Balasubramanian

Abandoned M&A Deal and Expenses Direct
This did not go through we did actively pursued it. It's an international acquisition. And since some of the terms did not fit into what we were expecting, so we had to call it off.

Analyst inquired about the $17.75 million one-time M&A expense, and CFO provided a clear explanation for the abandoned international acquisition.

Asked by Balasubramanian

US Tariff Mitigation Strategies Direct
we have 4 options, which we are working out and which we have given it to our customers. And those are the things which are really helping us to reduce the impact of the U.S. tariffs on our customers right now.

Analyst probed on how the company is managing the 50% US tariffs impacting 40% of revenue, and management detailed proactive mitigation strategies.

Asked by Sameet Sinha

Working Capital Normalization Direct
this quarter has been a bit of a slippage essentially because of the inventory buildup... expected to result in better NWC levels by end of Q4.

Analyst asked about working capital and cash flow, and CFO acknowledged Q3 issues but provided a clear timeline for normalization.

Asked by Vipraw Srivastava

Indian Order Book Sector Composition Direct
I mean majorly, the order book, what you are seeing it is on aerospace side and then the industrial and medical, predominantly.

Analyst sought clarification on the sector driving Indian order book growth, and management specified non-defense segments.

Asked by Vipraw Srivastava

FY27 Revenue Growth Confirmation Direct
Yes, absolutely. There is no doubt on that one, Deepak.

Analyst sought confirmation on a specific 20-25% growth target for FY27, which management affirmed, providing strong forward guidance.

Asked by Deepak Lalwani

Build-to-Spec Mix and Margin Drivers Direct
the build-to-spec is close to around 6% to 7% in FY '26. And we expect that definitely will grow to a double-digit number in FY '27... Both. It will be both because of the industry mix and also the B2S.

Analyst inquired about the build-to-spec mix and its impact on margins, receiving specific targets and confirmation of multiple drivers.

Asked by Aryan Bhatia

2 min read 5 chapters

Detailed narrative

Q3 FY26 Financial Performance and Margin Resilience

Cyient DLM reported Q3 FY26 revenue of INR 3,033 million, a significant 31.7% year-on-year decline, primarily attributed to the completion of a large cyclical order in FY25. Despite the revenue softness, the company demonstrated strong margin resilience, with normalized EBITDA margin expanding by 207 basis points YoY to 10.2%, reaching INR 309 million. Normalized PAT stood at INR 138 million, with its margin improving by 73 bps YoY to 4.6%, reflecting a healthy mix and operational efficiencies.

Robust Order Book and Positive Growth Outlook

The company maintained strong order momentum, securing INR 387 crores in new orders during Q3 FY26, resulting in a book-to-bill ratio of 1.3 for the quarter and 1.56 year-to-date. The total order book closed Q3 FY26 at INR 23.5 billion, marking three consecutive quarters of growth. Management expressed high confidence in achieving positive year-over-year revenue growth in Q4 FY26 and anticipates substantial growth, potentially 20-25%, in FY27, signaling that the revenue challenges are largely behind them.

Strategic Diversification and Build-to-Spec Expansion

Cyient DLM is actively diversifying its industry mix, with automotive, industrial, and medical segments showing increased traction and contributing more meaningfully to the pipeline. Two new logos were added this quarter in the medical and industrial sectors. The company is also focusing on expanding its build-to-spec (B2S) offerings, targeting growth from 6-7% of revenue in FY26 to a double-digit percentage in FY27, which is expected to be a key driver for future margin expansion alongside industry mix changes.

Working Capital Management and Tariff Mitigation

Net working capital saw a temporary increase in Q3 due to elevated DIO inventory, caused by customer-specific shipment delays. However, management expects NWC levels to normalize by the end of Q4. Addressing US tariffs, which previously imposed a 50% duty on certain shipments, the company has provided customers with four options to mitigate the impact, expecting these solutions to facilitate product shipments in Q4 and reduce the overall tariff burden.

Capital Allocation and M&A Strategy

The company remains net cash positive and possesses significant dry powder, with the ability to deploy an additional INR 350-400 crores for working capital or new capital expansions/acquisitions. During the quarter, Cyient DLM incurred a one-time expense of $17.75 million for an international M&A opportunity that was pursued but ultimately abandoned due to unfavorable terms. IPO proceeds utilization stands at 93.2% for working capital and 15.4% for capex, with the remaining capex to be deployed as planned in the coming quarters.

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