Pace Digitek Limited

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%.

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.

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%.

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.

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.

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.