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    Onward Technologies Limited

    ONWARDTEC
    Information Technology·17 Oct 2025
    Management Summary

    Onward Technologies reported a record Q2 FY26, driven by strong revenue and EBITDA growth, achieving a 14.3% EBITDA margin. The company saw improved operational efficiencies, reflected in declining attrition and controlled DSO, while making significant infrastructure investments. Management expressed confidence in achieving double-digit revenue and EBITDA growth for the current and next fiscal years, despite some ongoing client furloughs and currency headwinds.

    Highlights

    5

    • Record quarter for both revenue and EBITDA growth, with EBITDA margin at 14.3%.

    • LTM attrition declined to 15.49%, indicating improved talent retention.

    • DSO maintained under control at 73 days, with a target to reduce to 65 days.

    • Significant capex investment of approximately INR 18 crores in infrastructure upgrades to support offshore growth.

    • Strong demand growth in the US manufacturing industry, particularly driven by AI adoption.

    Concerns

    3

    • Q3 is expected to be a slow quarter with ongoing furloughs for some clients, with uncertainty until mid-December.

    • Dollar depreciation had an approximate 5% negative impact on margins this quarter.

    • PAT decreased QoQ due to a one-time tax credit received in Q1 from Canada.

    Key financials

    Metrics

    4

    Periods

    2

    Headline

    3
    • EBITDA Margin
      14.3%
    • DSO
      73 days
    • Headcount
      2,525 employees

    LTM

    1
    • Attrition
      15.5%

    Order Book

    high confidence

    Pipeline

    other

    The company does not have a traditional client pipeline for new client acquisition, focusing instead on deepening engagement with existing clients and scaling ODCs.

    "Current order book is very good, very exciting. We do not share transactional data."

    Source:
    Prepared remarks

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Guidance & targets

    4
    CategoryTargetPriority
    DSO
    Days Sales Outstanding
    around 65 days
    		Medium
    Headcount
    Headcount increase
    10-20% increase
    		Medium
    Healthcare Vertical
    Clients crossing $1 million revenue
    at least one to three clients cross $1 million per year
    		Medium
    Margin
    EBITDA Margin
    15%
    		High

    Double-digit Revenue Growth

    Next year (FY27)
    CurrentRecord quarter for revenue growth (no specific number)
    TargetDouble-digit revenue growth

    Why it matters

    Key indicator of the company's ability to sustain growth momentum as guided.

    I'm very positive that we will be able to deliver double-digit revenue growth and EBITDA growth this year and next year as well.

    How to verify

    guidance_and_targets[category='Revenue'][target_period='this year and next year'].target_value

    Risks & concerns

    3
    RiskSeverity

    Furloughs

    Q3 is typically slow with furloughs; some clients continue, with uncertainty until December 15. — Management acknowledged

    medium

    Currency Impact (Dollar depreciation)

    Dollar impact was approximately 5% negative this quarter. — Management acknowledged

    low

    EV Transition Impact on Scope

    Transition towards EV and potential shift back to ICE in US/Europe is not impacting scope negatively; company is involved in OEM budgeting for next year. — Analyst downplayed

    low

    Q&A highlights

    8

    “For us, the entire margin improvement as we've been sharing over the last several quarters, is consistent and predominantly driven by utilization and productivity. And I think we still have a lot more room to improve over the next few quarters. In terms of the dollar, I don't think there's been any benefit because I believe the dollar impact has been approx. 5% negative this quarter.”

    Clarifies that margin improvement is structural (utilization/productivity) rather than currency-driven, and currency was actually a headwind.

    asked by Nitish Rege

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 FY26 Performance Overview

    Onward Technologies reported a record quarter for both revenue and EBITDA growth, with EBITDA margins improving to 14.3%. The company's LTM attrition rate declined to 15.49%, and Days Sales Outstanding (DSO) remained under control at 73 days, with a target to reach 65 days. Headcount remained steady at 2,525 employees, supporting a revenue growth from approximately INR 100 crores to INR 500 crores over the last five years.

    02

    Strategic Focus and Market Shift

    The company has transitioned its business focus from primarily the India market five years ago to predominantly global markets, particularly North America and Europe. Management emphasized a strategy of deepening engagement with existing clients rather than new client acquisition, aiming to scale current engagements from 50 engineers to 500. This approach is supported by continuous investment in digital and software services, with a strong push towards AI capabilities.

    03

    Infrastructure and Capex Investments

    Onward Technologies invested approximately INR 18 crores in upgrading its infrastructure across all Indian delivery centers, including new facilities in Bangalore and Hyderabad, and substantial upgrades in Pune and Chennai. These investments, particularly in new offices, hardware, and labs, led to a higher depreciation this quarter and are aimed at supporting anticipated offshore growth from clients.

    04

    Vertical Performance and Outlook

    The Industrial Equipment and Heavy Machinery vertical continues to show strong progress. Transportation & Mobility and Healthcare verticals are in investment mode, with Healthcare specifically targeting at least one to three clients to cross $1 million in annual revenue by next year. Management expressed confidence in achieving double-digit revenue and EBITDA growth for both the current and next fiscal years (FY26 and FY27).

    05

    Operational Efficiency and Margin Expansion

    The improvement in EBITDA margins to 14.3% was primarily driven by enhanced utilization and productivity, with management noting significant room for further improvement. Despite a negative impact of approximately 5% from dollar depreciation this quarter, the company's operational efficiencies were the main driver of margin expansion.

    06

    Capital Allocation and Future Plans

    The Board discussed potential buyback options to enhance equity and EPS, with the CFO mandated to evaluate all options. However, the company is not actively pursuing M&A, preferring to acquire companies that support existing top 25 clients rather than expanding into new geographies. Leadership hiring, particularly for CXO roles and P&L leaders, is planned for the next year or two to strengthen business units.

    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.