Pace Digitek Limited — Q2 FY26 earnings call

Call held 20 Nov 2025

Management summary

Pace Digitek reported a consolidated turnover of INR900 crores for H1 FY26, experiencing a dip compared to the previous year due to a shift towards service-oriented projects. Despite this, the company maintained strong PAT and EBITDA margins at 13.61% and 21% respectively. Management provided robust revenue guidance for FY26 and FY27, driven by a growing order book, particularly in the Battery Energy Storage Systems (BESS) segment, where capacity is being doubled to 10 GWh.

Highlights

  • H1 FY26 Consolidated Turnover at INR900 crores, down 24.24% YoY.

  • H1 FY26 PAT margin improved to 13.61% from 12.79% YoY.

  • H1 FY26 EBITDA margin stood at 21%.

  • Current order book for Energy projects is INR5,869 crores, and Telecom projects is INR3,266 crores.

  • Guidance for FY26 Revenue is INR2,600-2,700 crores with 11-12% PAT margin.

  • Guidance for FY27 Revenue is INR3,100-3,200 crores with 11-12% PAT margin.

  • BESS manufacturing capacity is being expanded from 5 GWh to 10 GWh with an additional INR100 crores capex.

  • Energy projects order book is expected to increase by INR8,000-10,000 crores by end of FY26.

Key financials

  1. Turnover ₹900 Cr -24.2%YoY
  2. PAT ₹122 Cr -19.7%YoY
  3. PAT Margin 13.6% +6.4%YoY
  4. EBITDA Margin 21%
  5. Debt ₹150 Cr
  6. Net Worth ₹1,331 Cr

What they filed

Q1 FY27: revenue up 51.2%, net profit up 12.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue846 567 683 367 533 −37%644 +14%1,097 +61%555 +51%
EBITDA187 121 76 80 94 −50%118 −2%163 +114%86 +8%
Net profit102 71 56 55 68 −33%79 +11%106 +89%62 +13%
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.

Guidance & targets

Order Book

  • Energy Projects Order Book Order Book · before end of FY26 · High confidence INR8,000 to INR10,000 crores
    Going forward, we see our energy projects order book to increase by INR8,000 to INR10,000 crores before end of this financial year.

    — Rajiv Maddisetty, Whole-Time Director

  • BSNL 4G Order Book Booked Order Book · this year (FY26) · High confidence INR1,300-1,400 crores
    Sir, this INR2,573 crores of order book of this BSNL 4G saturation, out of which about INR1,300-1,400 crores will be booked this year.

    — Rajavendhan P, Chief Financial Officer

Revenue

  • Top-line Revenue Revenue · FY26 · High confidence INR2,600 crores to INR2,700 crores
    So, FY '26, we keep a guidance of about INR2,600 crores to INR2,700 crores as a top-line guidance with a PAT margin of about 11% to 12%.

    — Rajavendhan P, Chief Financial Officer

  • Top-line Revenue Revenue · FY27 · High confidence INR3,100 crores to INR3,200 crores
    For FY '27, which is next financial year, we keep a top-line target of about INR3,100 crores to INR3,200 crores with a PAT margin of again 11% to 12%.

    — Rajavendhan P, Chief Financial Officer

  • Annual Revenue from Developer Model Revenue · annual (from FY28, portion from FY27) · High confidence INR420 crores
    Four projects which we have as on date is about INR3,300 crores. This is expected to give an annual revenue of about INR420 crores without GST and EBITDA margin of around 85%.

    — Rajavendhan P, Chief Financial Officer

  • Peak Revenue from 10 GWh BESS Capacity Revenue · overall · Medium confidence INR6,000 to INR7,000 crores
    It should be somewhere between INR6,000 to INR7,000 crores. Right.

    — Rajiv Maddisetty, Whole-Time Director

  • Annual Annuity Revenue from Energy Revenue · every year (for 12 years) · High confidence INR500 crores
    Once we finish the complete execution of the project, the annuity model starts and we'll have almost 12 years of annuity revenue of about INR500 crores every year from the energy.

    — Rajiv Maddisetty, Whole-Time Director

  • Annual O&M Revenue from Telecom Revenue · year on year · High confidence INR200 to INR250 crores
    Also, from telecom, we have the O&M business of around INR200 to INR250 crores year on year.

    — Rajiv Maddisetty, Whole-Time Director

Profitability

  • PAT Margin Profitability · FY26 · High confidence 11% to 12%
    So, FY '26, we keep a guidance of about INR2,600 crores to INR2,700 crores as a top-line guidance with a PAT margin of about 11% to 12%.

    — Rajavendhan P, Chief Financial Officer

  • PAT Margin Profitability · FY27 · High confidence 11% to 12%
    For FY '27, which is next financial year, we keep a top-line target of about INR3,100 crores to INR3,200 crores with a PAT margin of again 11% to 12%.

    — Rajavendhan P, Chief Financial Officer

  • EBITDA Margin for Developer Model Profitability · annual · High confidence 85%
    Four projects which we have as on date is about INR3,300 crores. This is expected to give an annual revenue of about INR420 crores without GST and EBITDA margin of around 85%.

    — Rajavendhan P, Chief Financial Officer

  • BESS Business EBITDA Margin Profitability · overall · Medium confidence 13% to 15%
    Anywhere between 13% to 15%, sir. If it is only product supply, we would have a little higher. If it is a project execution, it will be between, it will be around 13%. If it is a product, it will be 15%.

    — Rajiv Maddisetty, Whole-Time Director

  • Full Year PAT Margin Profitability · complete financial year · High confidence 11.5%

    Previously 13.61% → 11.5%

    So, the current number of 13.61% will get stabilized at 11.5% for the complete financial year.

    — Rajavendhan P, Chief Financial Officer

  • Overall EBITDA Margin Profitability · overall business · High confidence 25% to 30%
    That's right.. So, the overall EBITDA margin will be about 25% to 30%, wherein after the depreciation and the interest portion, it will be about 11% of PAT.

    — Rajavendhan P, Chief Financial Officer

Capacity

  • BESS Capacity Expansion Capex Capacity · for new 5 GWh facility · High confidence INR100 crores
    So, the erection and implementation of the new 5 gigawatt would cost us about INR100 crores.

    — Rajiv Maddisetty, Whole-Time Director

  • BESS Capacity Commissioning Capacity · next financial year (FY27) · High confidence Q3 or Q4
    Yes, it will be in Q3 or Q4 of next financial year.

    — Rajiv Maddisetty, Whole-Time Director

Working Capital

  • Net Working Capital Working Capital · by 31st of March, 2026 · High confidence reduced
    And it is expected to come down because now the project is getting completed and the last milestones are getting closed, and the retention whatever is available with the customers is getting released. So, this is expected to come down by 31st of March,26.

    — Rajavendhan P, Chief Financial Officer

Depreciation

  • Annual Depreciation for INR3,300 crores project Depreciation · every year (from FY28) · High confidence INR200 to INR250 crores
    So, it will be mostly on the written down value method. So, for a INR3,300 crores worth of project, the depreciation every year will be about INR200 to INR250 crores. Not for the next year, it will be from FY '28.

    — Rajavendhan P, Chief Financial Officer

Risks & concerns

  • Stretched Net Working Capital

    medium

    Net working capital is currently stretched due to the EPC nature of the business, though expected to normalize by March 31, 2026.

    Management acknowledged

  • Lower Margins in BESS Business

    medium

    The battery energy storage system business is demanding, and margins are currently a little lesser, prompting efforts for cost reduction and backward integration.

    Management acknowledged

  • Aggressive Competitive Bidding in BESS Tenders

    medium

    Recent BESS tenders have seen very low bids, which management believes are 'closer to impossible' and expects a market correction.

    Analyst acknowledged

Areas of evasion (1)

  • Specific DSO targets for working capital reduction

Q&A highlights

2 direct
Working Capital Management for Large Orders Partial
For the EPC orders and the supply orders, we would be using our own internal approvals with the LC limits in place. So, this would be funded majorly through one, the internal approvals to the LC limits. Third, these EPC contracts and the supply contracts are a portion of advance, mobilization advance of 10% to 30%. So, it would be funded majorly through these three sources.

The analyst inquired about managing working capital for large orders, a critical aspect for EPC companies. Management provided an overview of funding sources but did not offer specific targets or detailed strategies for optimizing working capital beyond general project completion.

Asked by Manali Gala

PAT Margin Discrepancy in Annuity Projects Direct
Yes, you're right. So, as we stated that we have started going on ground in this Q2. So, you will see a bigger depreciation in the next financial year. So, this annuity revenue has not started flowing in this financial year. It will start flowing from the next financial year. Today, we are standing this year, we are just executing the project.

The analyst challenged the low PAT margin (11-12%) on annuity projects despite high EBITDA (85%), given the current low depreciation. Management clarified that significant depreciation and interest expenses would materialize in future financial years (from FY27/FY28), impacting the net PAT.

Asked by Deepesh Sancheti

BESS Market Competition and Pricing Pressure Direct
So, to your first question, see, they're going lower and lower in the numbers when they're bidding and winning the project and the recent projects. But we see that that numbers are closer to impossible and because of which this will go through a correction over the next few months.

The analyst raised concerns about aggressive low bids in recent BESS tenders and how Pace Digitek plans to maintain margins. Management acknowledged the intense competition but expressed confidence in their product, cost advantage from manufacturing, and anticipated a market correction.

Asked by Aniket

3 min read 6 chapters

Detailed narrative

H1 FY26 Financial Performance and Outlook

Pace Digitek reported a consolidated turnover of INR900 crores for H1 FY26, a decrease from INR1,188 crores in H1 FY25, primarily due to a higher service component this year compared to heavy material supplies last year. Despite this, the PAT margin improved to 13.61% from 12.79% YoY, with EBITDA margin at 21%. The company's net worth increased to INR1,331 crores as of September 30, 2025. Management projects full-year FY26 revenue between INR2,600-2,700 crores and FY27 revenue between INR3,100-3,200 crores, both with a PAT margin of 11-12%.

Strategic Expansion in Battery Energy Storage Systems (BESS)

The company is aggressively expanding its BESS manufacturing capacity from 5 GWh to 10 GWh, with an additional INR100 crores capex for a new facility expected to be commissioned by Q3 or Q4 of FY27. This expansion is supported by a robust energy project order book of INR5,869 crores, which management expects to grow to INR8,000-10,000 crores by the end of FY26. The first MSEDCL BESS project site has been commissioned, and the company targets executing 40 sites by the end of FY26.

Developer Model and Annuity Revenue Streams

Pace Digitek's developer model projects, valued at INR3,300 crores, are anticipated to generate an annual revenue of INR420 crores (without GST) with an impressive 85% EBITDA margin, with contributions starting from FY27. The company's annuity business, including energy and telecom O&M, is a key focus. Energy annuity projects are expected to yield INR500 crores annually over 12 years post-execution, while telecom O&M contributes INR200-250 crores year-on-year, both characterized by high EBITDA margins of 80-85%.

Working Capital Management and Profitability Outlook

Management acknowledged that net working capital, currently at INR970 crores, is 'slightly stretched' due to the EPC nature of the business but expects it to reduce by March 31, 2026, as projects complete and retention money is released. While the overall EBITDA margin is projected at 25-30%, the full-year PAT margin is expected to stabilize at 11.5% (down from H1's 13.61%). This is due to significant depreciation (INR200-250 crores annually for INR3,300 crores projects) and interest expenses that will impact profitability from FY28.

Competitive Advantage and Pricing Strategy

In the highly competitive BESS market, Pace Digitek maintains a competitive edge by being a product manufacturer with backward integration, reducing dependency to only lithium-ion cells. The company benefits from importing cells at a 5% custom duty, significantly lower than the 20% duty on finished containerized products. Management employs back-to-back agreements with suppliers to freeze prices and mitigate fluctuations, expressing confidence in their product's performance despite aggressive low bids observed in recent tenders.

Order Book Conversion and BSNL 4G Project

The total order book of INR9,135 crores is expected to convert into revenue primarily in the next financial year (FY27) and subsequent years. Specifically, for the BSNL 4G saturation project with an order book of INR2,573 crores, INR1,300-1,400 crores is expected to be booked in FY26, with the remaining INR1,200 crores to be filled over the next 3-4.5 years, largely from the O&M portion.

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