Cyient DLM — Q4 FY25 earnings call

Call held 22 Apr 2025

Management summary

Cyient DLM reported strong Q4 FY25 results with significant growth in revenue and profitability, driven by a favorable business mix and the Altek acquisition. While the full-year backlog was challenging, management is confident in rebuilding it and expects sustainable double-digit margins and positive OCF in FY26. The company is strategically leveraging its US presence to tap into new opportunities arising from global trade dynamics.

Highlights

  • Q4 FY25 consolidated revenue of INR 428.1 crores, up 18.3% YoY.

  • Q4 FY25 consolidated EBITDA of INR 57.4 crores, up 50.9% YoY.

  • Q4 FY25 consolidated PAT of INR 31 crores, up 36.5% YoY.

  • Q4 FY25 consolidated EBITDA margin at 13.4%, expanded 290 bps YoY.

  • Full Year FY25 consolidated revenue of INR 1519.6 crores, up 27.5% YoY.

  • Full Year FY25 adjusted EBITDA of INR 145.2 crores, up 30.8% YoY.

  • Order backlog stood at INR 1906 crores with 18 months visibility.

  • Targeting positive operating cash flow (OCF) for FY26.

Key financials

2 periods

Q4 FY25

  • Consolidated Revenue
    ₹428.1 Cr
    YoY +18.3%
  • Consolidated EBITDA
    ₹57.4 Cr
    YoY +50.9%
  • Consolidated PAT
    ₹31 Cr
    YoY +36.5%
  • Consolidated EBITDA Margin
    13.4%
  • Consolidated PAT Margin
    7.3%
  • Positive Cash Generated
    ₹53 Cr

FY25

  • Consolidated Revenue
    ₹1,519.6 Cr
    YoY +27.5%
  • Adjusted EBITDA
    ₹145.2 Cr
    YoY +30.8%
  • PAT
    ₹74 Cr
    YoY +21%
  • Adjusted EBITDA Margin
    9.6%

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.

Segment breakdown

  • Industry Mix (Post-Altek)
    35% Medical Share14% Industrial Share53% Aerospace Segment Growth
  • Geographic Mix (Future)
    80% Rest of World Share20% India Share

Order book

high confidence

Total value

₹1,906 Cr

as of 2025-03-31 quantified

Execution

18 months kind of a visibility

Pipeline

deal pipeline tcv

Robust pipeline of opportunities

Backlog has been down this year, but management is confident of building it back up with a robust pipeline expected to convert quickly.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    But the capex is the one that is substantially underutilized because we have not really spent a lot of money on capex in the last couple of years and so we might take a year or 2 to sort of complete that.
  • Debt Debt disclosed Maturity: Long-term debt with 1-year moratorium on principal payment.
    • New borrowing Dollar debt for Altek acquisition, linked to SOFR rates, with 1-year moratorium on principal.
    • Rate reset Expect reduction in interest cost due to loan restructuring and reliance on PCFC loans.
    It's a long-term debt. There is, in fact, a moratorium of 1 year after which the payment starts, but the interest is there in the first year itself, which is already accounted for in the books.
  • M&A Altek Acquisition · Integrated

    Provides US manufacturing presence, onshore proximity to clients, access to new industries (aero, defense, ITAR), and leverages client engineering capabilities.

    Contributed to revenue and changed business mix, integration fully complete.

    We are two quarters into the acquisition of Altek and I'm happy to report that the integration is now fully complete.
  • Liquidity Liquidity disclosed INR 115-120 crores of IPO proceeds remaining for incremental working capital.
    And there is still about INR120 crores, INR115 crores of money left for the incremental working capital of next financial year.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · Full year basis · Medium confidence 10-12%
    So on a full year basis, it is around 10% to 12% is what you're saying? I'll just stop at double digit. Yes, but you're right. It should be around that.

    — Shrinivas Kulkarni

Growth

  • Revenue Growth Growth · Next year (FY26) · Medium confidence Good year overall
    I'm confident we will have another good year ahead of us in FY '26.

    — Krishna Bodanapu

Order Book

  • Order Backlog Order Book · New year · High confidence Build back up
    While backlog has been down this year, we are very confident of building this back up into the new year since we see a robust pipeline and we are confident that the pipeline will start to convert into orders very, very quickly.

    — Krishna Bodanapu

Interest Cost

  • Interest Cost Interest Cost · Next year (FY26) · High confidence Reduction
    No, I don't think it will go up for sure. In fact, we should see a reduction in the interest cost because we have restructured a lot of the loans.

    — Shrinivas Kulkarni

Market context

  • EBITDA Margin Profitability · Going forward · High confidence Double-digit
    I'm happy to announce that we will be reporting double-digit margins in this quarter and we see a line of sight to continue these levels of margins going forward.

    — Krishna Bodanapu

  • Operating Cash Flow Operating Cash Flow · Next year (FY26) · High confidence Positive
    No, I think for next year, we are targeting a positive OCF, Deepak.

    — Shrinivas Kulkarni

What to watch in Q1 FY26

Order Book Growth

Next quarter (Q1 FY26)
Current INR 1,906 crores (down this year)
Target Increase in order backlog

Why it matters

Key indicator for future revenue growth and sustained business momentum in the Capital Goods sector.

While backlog has been down this year, we are very confident of building this back up into the new year since we see a robust pipeline and we are confident that the pipeline will start to convert into orders very, very quickly.

Risks & concerns

  • Economic Uncertainties & Supply Chain Vulnerabilities

    medium

    Global supply chains face disruption from geopolitical tensions, trade restrictions, impacting critical component availability and OEM decision-making for new program launches.

    Management acknowledged

  • Backlog Decline

    medium

    Financial year was challenging from a backlog perspective, with backlog being down this year.

    Management acknowledged

  • US Tariffs Impact on Supplier Costs

    low

    Some suppliers are indicating potential cost increases due to tariffs, though no current shortages are impacting business.

    Management monitoring

Q&A highlights

6 direct
Order Book Conversion and US Market Impact Partial
So, wins that we might announce in the next quarter, that would start to convert into revenue probably towards the later part of the fiscal year if you were to just take a guess. There could be some transfer programs or other programs which could convert more quickly, but our business is a little different than like for example a consumer EMS business where the certifications are not quite as high and you can transfer a program relatively quickly and even if it's in the same quarter be recognizing revenue on that.

Clarifies the longer lead time for revenue conversion from US opportunities due to complexity and certifications, impacting near-term revenue recognition.

Asked by Deepak Krishnan

Operating Cash Flow (OCF) for FY26 Direct
No, I think for next year, we are targeting a positive OCF, Deepak. I think there are several initiatives we are taking on DSO, DIO as well as DPO; which are all playing out well now and therefore, we saw that impact in H2. So we're quite confident of continuing that momentum as we go into the next year. So we will see a positive cash next year itself.

Provides clear guidance on OCF target for FY26 and outlines the operational initiatives supporting it, addressing a concern about negative OCF in FY25.

Asked by Deepak Krishnan

Impact of European Defense Spending Direct
Yes. So that's absolutely spot on. There's been some recent announcements regarding the defense. I think even in the last 10 days there has been some notable headlines. But we've actually been seeing really for the past fiscal year very robust growth on that sector on defense and then even on European defense just with our clients there. And then this has been also a focus for us on a couple of key opportunities.

Confirms that increased European defense spending is already translating into robust growth and new opportunities for Cyient DLM.

Asked by Deepak Krishnan

Sustainability of Double-Digit Margins Direct
I didn't follow the second part of the question, but let me address the first part. So in terms of margins, I think if you take the one-offs that are there that we have explained, the rest of the margin is a sustainable margin, which is already double-digit. Now the business mix change has a big bearing on the overall margin and therefore, the drop in revenue because of the one large Indian client, which was a drag on the margin is actually now sort of going to play itself into the margin scenario.

Reassures investors about the sustainability of double-digit margins, attributing it to business mix changes and improved absorption, even after accounting for one-off gains.

Asked by Vipraw Srivastava

FY26 Growth Outlook and Order Book Partial
Yes. Look, I think we definitely don't want to give a guidance right now. I think we have sort of refrained from giving guidance even in the past 2 years where predictability was actually a little bit higher. This is a business that is not at a level of stability where we can really predict. One deal can quickly change everything, right? So let's see how this plays itself out. We will have a soft start to the year especially Q1, but we are hopeful that we'll be able to recover and have a good year.

Management avoids specific FY26 growth guidance due to business dynamism but indicates a soft Q1 followed by a recovery, highlighting the strong pipeline.

Asked by Vipraw Srivastava

US Market Sustainability and Customer Profile Direct
Absolutely. So first, the question on sustainability. This business has been in operation for over 50 years and has had a very solid base through times including the current times, which present a lot of changes. So the stability of that business is what we view as a key asset for it. Regarding the types of opportunities that are coming in, the core types of opportunities that this site demonstrates when a client walks through is they see very high reliability industrial and medical type devices there and similar types of opportunities are coming in in that regard.

Explains the strategic rationale and sustainability of Altek's US operations, focusing on high-reliability, complex industrial and medical electronics, which are less price-sensitive.

Asked by Mihir Manohar

Status of Large Indian Defense Client Order Direct
No. I mean we have not lost a client. I think it's a client where the project has come to an end. The nature of the work is such that it was a 2.5-year project which we signed up long ago and we have delivered to the entirety of the project now. Now the client is dependent on further order from the Ministry of Defense in India for the renewal. There definitely is going to be a renewal at some stage.

Clarifies that the decline in defense revenue was due to project completion, not client loss, and positions the company favorably for future renewals.

Asked by Akshat Bairathi

Future BL Tenders and Margin Impact Direct
So we would classify it as we provided a very good service and have been a good provider on that business. We feel that we are very well positioned for future opportunities that come up in that regard. So again right now that might take a quarter or two to realize. On the flip side, that is a program that can ramp very quickly.

Indicates the company's intent to bid for future BL tenders and highlights their strong position, while acknowledging the potential for lower margins on such programs but positive working capital impact.

Asked by Rahul Deshmukh

3 min read 7 chapters

Detailed narrative

Strong Q4 FY25 Performance and Full Year Growth

Cyient DLM delivered robust Q4 FY25 consolidated results, with revenue growing 18.3% YoY to INR 428.1 crores. EBITDA surged 50.9% YoY to INR 57.4 crores, resulting in an EBITDA margin of 13.4%, a 290 bps expansion. For the full fiscal year 2025, consolidated revenue reached INR 1519.6 crores, marking a 27.5% YoY growth, with adjusted EBITDA at INR 145.2 crores, up 30.8% YoY.

Altek Integration and US Market Expansion

The integration of the Altek acquisition is now fully complete, significantly enhancing Cyient DLM's manufacturing presence in the US. This strategic move allows the company to capitalize on new opportunities arising from US tariffs on China, with many OEMs showing interest. Altek's focus on high-value, low-volume, and complex products in industrial, aerospace, and medical sectors aligns well with the company's core capabilities, offering onshore proximity to clients' R&D centers.

Evolving Business Mix and Geographic Focus

The company's industry mix is becoming more diversified post-Altek, with Medical contributing 35% and Industrial 14%. While defense saw degrowth due to the completion of a large Indian customer order, the aerospace segment grew 53%. Management anticipates a future geographic mix of 80% from the rest of the world and 20% from India, with higher growth expected from international markets in the near term.

Margin Sustainability and Working Capital Improvement

Cyient DLM achieved double-digit margins in Q4 FY25 and expects to sustain these levels, targeting around 10-12% for the full year FY26, even after accounting for one-off gains. Working capital management showed progress, with DIO reducing by 6 days. The company generated INR 53 crores of positive cash in Q4 FY25 and is targeting positive operating cash flow for FY26 through continued focus on DSO, DIO, and DPO.

Order Backlog and Pipeline Outlook

The order backlog stood at INR 1906 crores, providing approximately 18 months of visibility. While the backlog has been down in FY25, management expressed strong confidence in rebuilding it in the new fiscal year, citing a robust pipeline. New wins, particularly from US operations, are expected to convert to revenue in the later part of FY26 due to the complex nature and certification requirements of these programs.

Capital Allocation and Debt Strategy

Of the IPO proceeds, 76.6% have been utilized, primarily for the Altek acquisition, with INR 115-120 crores remaining for incremental working capital. Capex remains substantially underutilized. The company funded part of the Altek acquisition with attractive dollar debt linked to SOFR, which includes a one-year moratorium on principal. Management expects a reduction in overall interest costs in FY26 due to loan restructuring and its net exporter status, which allows for greater reliance on PCFC loans.

New Client Acquisitions and Growth Drivers

Cyient DLM onboarded 6 new logos in FY25, 5 of which are large multinational A-list companies. These new clients, particularly in the medical and industrial sectors, are expected to contribute significantly to future revenue and order backlog, with each having the potential to become a $50 million-plus client annually. The company's unique value proposition, including its engineering capabilities, is a key differentiator in securing these larger engagements.

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