Syrma SGS Technology Limited — Q1 FY26 earnings call

Call held 24 Jul 2025

Management summary

Syrma SGS Technology reported a strong Q1 FY26, marked by significant margin expansion driven by a favorable business mix and operational efficiencies. The company saw robust growth in its high-margin Automotive and Industrial segments, alongside a 29% increase in exports. A new joint venture for PCB manufacturing was announced, targeting the large Indian market. While IT and Railways segments were muted, management expressed confidence in achieving full-year guidance through strategic recalibration and capacity utilization.

Highlights

  • EBITDA margins expanded from 5.2% in Q1 FY25 to over 10% in Q1 FY26, reflecting improved business mix and operational efficiencies.

  • Gross material margin significantly improved from 15% to 24% in Q1 FY26.

  • Exports demonstrated strong growth, increasing 29% YoY to ₹232 crores in Q1 FY26.

  • The company entered a joint venture for PCB manufacturing, aiming to capture a share of the large, import-dependent Indian market.

  • High-margin Automotive and Industrial segments grew substantially, now accounting for 24% and 30% of revenue respectively, up from 16% and 19% YoY.

Concerns

  • IT and Railways segments were muted in Q1 FY26, though expected to pick up in subsequent quarters.

  • Working capital days remained at 69 days, with a target to reduce below 65 days in the next few quarters.

  • The low-margin consumer business, while being strategically reduced, still comprised 34% of revenue in Q1 FY26.

Key financials

  1. Consolidated Revenue ₹960 Cr +1.4%QoQ
  2. Operating EBITDA ₹96 Cr +75%YoY
  3. Operating EBITDA Margin 10%
  4. Gross Material Margin 24%
  5. PBT ₹67.1 Cr +128%YoY
  6. PAT ₹50 Cr +145%YoY
  7. Working Capital Days 69 days
  8. Smart Meter Revenue ₹57.5 Cr

What they filed

Q1 FY27: revenue up 68.3%, net profit up 112.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue833 870 924 944 1,146 +38%1,264 +45%1,465 +59%1,589 +68%
EBITDA71 80 108 87 115 +62%159 +99%174 +61%162 +86%
Net profit40 53 71 50 66 +65%110 +108%119 +68%106 +112%
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

SegmentRevenue ShareRevenue Share Q1 FY25
Automotive24%16%
Industrial30%19%
Consumer34%53%
Healthcare7%5%
IT and Railways——

Order book

high confidence

Total value

₹5,450 Cr

as of 2025-06-30 range

Composition

Mix 4 segments
  • Auto 37.5%
  • Consumer 26%
  • Industrial 26%
  • Healthcare 7%

Share of order book by segment· partial disclosure (96.5% of the book)

The order book position at the end of Q1 FY26 is approximately ₹5,400-5,500 crores, with a significant portion from the Auto and Industrial segments, indicating strong future visibility.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹35 Cr this quarter · ₹100 Cr (FY26) planned
    • Stuffing of plant and machineries ₹35 Cr
    • Balancing equipment, replacement (annual) ₹90 Cr
    During this quarter, we have spent approximately Rs. 35 crores of CAPEX towards stuffing of plant and machineries into my existing facilities largely. In the EMS, yes, the guidance remains same. Full-year CAPEX should be less than Rs. 100 odd crores for this year. Rs. 80 crores to Rs. 100 crores will be my annual CAPEX spend, whether it is on balancing equipment, some replacement and all that.
  • Debt Gross ₹780 Cr · Net ₹314 Cr
    We have a total gross debt of approximately Rs. 780 crores. As against the same, we also hold a healthy treasury balance of Rs. 467 crores. With this, my net debt position as on 30th June 2025 is Rs. 314 crores. Gross debt increased, but if you see simultaneously treasury has also increased. So, net debt basis, there is only an increase of Rs. 50 crores, and that is mainly on account of incremental working capital requirements.
  • M&A PCB Manufacturing JV Joint venture · Announced

    To address the large, import-dependent Indian PCB market ($5 billion, 90% imported) and leverage anti-dumping duties and PLI scheme.

    Expected EBITDA margin of 15-18% and ROCE of ~20% once stabilized. Initial CAPEX of $30-35 million for Phase-1, with 35-60% state government subsidies.

    I am also happy to share with you that we have entered into a joint venture agreement for manufacturing of PCBs. The PCB industry in India, in our considered opinion, is ripe for entry of organized players. The market is estimated at about $5 billion, 90% of which is imported, approximately, and only 10% is made in India. So, $91 million is approximately CAPEX. And this will be entitled to a PLI. EBITDA margin 15%-18% once the whole process is stabilized and once we move into the higher layer margin business, because here also as the layers go up, the margin also goes up. So, we expect that once the plant is matured, we should be able to earn a 20%, 18%, 20%, 20% EBITDA margin, and the ROCE of about the same percentage around 20%. And this CAPEX is also entitled to state government subsidies, which are under negotiation, which could vary from 35%, 40% to 60% of the CAPEX.
  • Liquidity Cash ₹467 Cr Healthy treasury balance of Rs. 467 crores. Management believes internal accruals and efficient working capital will fund organic growth, making external fund infusion unnecessary for this purpose.
    We have a total gross debt of approximately Rs. 780 crores. As against the same, we also hold a healthy treasury balance of Rs. 467 crores. And we have enough cash on bank, I think. We are a zero-debt Company, almost a zero-debt Company. And we have internal cash accruals. This coupled with the more efficient working capital management, I think, gives us ample room for organic growth without infusion of external funds.

Guidance & targets

Revenue

  • Full-year Revenue Growth Revenue · FY26 · High confidence 30-35%
    Top line side, we are expecting we should be again get a good growth of 30%-35% over the previous year numbers.

    — J.S. Gujral

  • Consumer Vertical Revenue Share Revenue · Annualized · High confidence 30%
    You see, we have guided in the FY '25 Q4 Earning Call that our endeavor would be to bring down the consumer sort of vertical business to 30% of the total revenue. And on an annualized basis, we believe that we are on track to achieve that.

    — J.S. Gujral

  • Exports as % of Total Operating Revenue Revenue · Full year · High confidence 24-27%
    And on the expectation side, again, we have guided we should be doing about 24% to 27% of exports. And for the quarter, it is about 24.5% as of now.

    — Bijay Agrawal

  • Full-year Railways Revenue Revenue · FY26 · Medium confidence Rs. 80-100 crores
    We have orders in hand, and I expect that this year it should be between Rs. 80 crores and Rs. 100 crores of railway business.

    — J.S. Gujral

  • Full-year Smart Meter Revenue Revenue · FY26 · High confidence Rs. 250-300 crores
    My smart metering revenue for the first quarter is approximately Rs. 55 crores to Rs. 60 crores rupees. And it is in line with what we had expected that it should be anything between Rs. 250 crores to Rs. 300 crores this year, along that.

    — J.S. Gujral

Margin

  • Full-year Operating EBITDA Margin Margin · FY26 · High confidence 8.5-9%

    Previously 8% → 8.5-9%

    And margin, somewhere we are saying it should be somewhere in the range of 8.5% to 9%. EBITDA margin, operating EBITDA margin is what we are saying. Well, we believe that with what we have achieved in Q1, we would be able to deliver an EBITDA margin of 8.5% to 9% this year. What we had guided earlier was approximately 8%.

    — J.S. Gujral

  • PCB JV EBITDA Margin Margin · Once stabilized · High confidence 15-18%
    EBITDA margin 15%-18% once the whole process is stabilized and once we move into the higher layer margin business, because here also as the layers go up, the margin also goes up.

    — J.S. Gujral

ROCE

  • PCB JV ROCE ROCE · Once matured · High confidence 20%
    So, we expect that once the plant is matured, we should be able to earn a 20%, 18%, 20%, 20% EBITDA margin, and the ROCE of about the same percentage around 20%.

    — J.S. Gujral

Capex

  • PCB JV State Government Subsidy Capex · Negotiation · Medium confidence 35-60%
    And this CAPEX is also entitled to state government subsidies, which are under negotiation, which could vary from 35%, 40% to 60% of the CAPEX.

    — J.S. Gujral

  • EMS Full-year CAPEX Capex · FY26 · High confidence < Rs. 100 crores
    In the EMS, yes, the guidance remains same. Full-year CAPEX should be less than Rs. 100 odd crores for this year.

    — Bijay Agrawal

Capacity

  • PCB JV Commercial Production Start Capacity · FY27-28 · Medium confidence Q4 FY27 or Q1 FY28
    The commercial production we expect it should start sometime towards Q4 of FY '27 or first quarter of FY '28.

    — Bijay Agrawal

Working Capital

  • Net Working Capital Days Working Capital · Next few quarters · High confidence < 65 days
    But again, there is a continuous internal focus on reduction of the net working capital days, and we are confident of reducing or maybe bringing it below 65 days in the next few quarters.

    — Bijay Agrawal

Other

  • PLI Incentive (Q1 FY26) Other · Q1 FY26 · High confidence Rs. 4-6 crores
    That is somewhere around, should be in the range of around Rs. 4 crores to Rs. 6 crores.

    — Bijay Agrawal

What to watch in Q2 FY26

Working Capital Days Reduction

Next few quarters
Current 69 days
Target Below 65 days

Why it matters

Improvement in working capital is crucial for enhancing cash flow and ROCE, a key focus area for management.

For the quarter, we are currently at 69 days of net working capital days investment... we are confident of reducing or maybe bringing it below 65 days in the next few quarters.

Risks & concerns

  • Tariff Uncertainty (US)

    medium

    Uncertainty regarding US tariffs is holding back large export orders, though management expects resolution by September 2025.

    Management acknowledged

  • PLI Approval Delays for PCB JV

    medium

    Delays in government approvals for the PLI scheme could push out the PCB project timeline.

    Management acknowledged

  • Lumpy Nature of Railways and Defense Business

    low

    These segments are project-based, leading to non-linear revenue recognition and potential quarter-on-quarter volatility.

    Management acknowledged

Q&A highlights

8 direct
Order Book Composition & Full-Year Guidance Direct
So, the order book position as on quarter end June '25 is approximately Rs. 5,400 crores to Rs. 5,500 crores. Of which, if I give you the breakup, auto segment comprises 35% to 40%. Consumer segment is 25% to 27%, as of now. Industrial is again 25%-27%. Healthcare is 6% to 8%, which includes med tech business also. And balance is IT and Railways. Top line side, we are expecting we should be again get a good growth of 30%-35% over the previous year numbers. And margin, somewhere we are saying it should be somewhere in the range of 8.5% to 9%.

Provides a comprehensive overview of the current order book and reiterates the full-year revenue and margin guidance.

Asked by Ankur

Consumer Business Strategy and Mix Direct
You see, we have guided in the FY '25 Q4 Earning Call that our endeavor would be to bring down the consumer sort of vertical business to 30% of the total revenue. And on an annualized basis, we believe that we are on track to achieve that. So, this consumer vertical, when we classify, it includes a low margin, high volume, as well as my ODM, which is high margin and low volume. So, we believe that going forward, 33 quarter-on-quarter, it could be 1%, 2% here and there, but on an annualized basis, we are confident that we should be able to achieve the 30% mark which we have set out for us at the beginning of the year.

Clarifies the strategic rationale behind reducing the consumer business share and confirms the company is on track to meet its target.

Asked by Ankur

PCB Manufacturing JV Details Direct
The CAPEX plan in Phase-1, which will be spent not in a bullet way, but over the next three to four years, is $91 million. PCB business typically is a positive 15%, 12% to 15% EBITDA margin business. We believe that with the world-class plant and a high-technology plant, we would be able to drive yield efficiencies which would enable us to achieve these EBITDA margins. So, we expect that once the plant is matured, we should be able to earn a 20%, 18%, 20%, 20% EBITDA margin, and the ROCE of about the same percentage around 20%. And this CAPEX is also entitled to state government subsidies, which are under negotiation, which could vary from 35%, 40% to 60% of the CAPEX.

Provides critical financial and operational details for the newly announced PCB manufacturing joint venture, outlining its potential impact on margins and returns.

Asked by Ankur

PCB JV Timeline Direct
So, the JV agreement has been signed. The application has been filed with the central government for the PLI scheme... assuming we expect the approval to come in somewhere in August or September, we have already applied to the various, in talks with the various state governments... I think by about Q2, end of Q2, by September '25, we should be in a position to sort of start the execution of the project. The commercial production we expect it should start sometime towards Q4 of FY '27 or first quarter of FY '28.

Outlines the expected timeline for the PCB JV, from regulatory approvals to the start of commercial production, which is crucial for project tracking.

Asked by Kishore Kumar

Export Growth and Tariff Impact Direct
Exports we are probably doing to Western Europe and USA. Mix... on an overall basis, if we see, neither Western Europe nor America is growing at the pace at which our exports have grown, which is about 22%, I think, in Q1 at Rs. 233 crores. The tariffs uncertainty is definitely holding back customers from releasing large orders. Hopefully, within this quarter, between now and September, this uncertainty won't sort of be a thing of the past. And then we can expect more aggressive stance from our customers for going ahead with purchasing from India or other countries.

Addresses the impact of tariff uncertainty on exports and management's expectation for its resolution, which could unlock further export growth.

Asked by Uttam Kumar

FY27 Revenue Growth with Low CAPEX Direct
Yes, you see, at the end of the day, we expect that once, even now, if we take current year, some of the plants are working at less than 50%. The new plants which have been commissioned are working at less than 50%, 40% of the capacity. So, we believe that once the plants mature and the businesses flow into the new plants, we should be able to achieve not only this year's revenue, but with some minor investments every year, we should be able to achieve the next year's revenue also.

Explains how the company plans to sustain revenue growth in FY27 despite lower CAPEX, by leveraging existing underutilized capacity and maturing new plants.

Asked by Keyur Pandya

Working Capital Loan and Normalization Direct
Yes, gross debt increased, but if you see simultaneously treasury has also increased. So, net debt basis, there is only an increase of Rs. 50 crores, and that is mainly on account of incremental working capital requirements. No, it is like mix is like it is broadly in line what we are expecting there. What we see going forward, we should be able to, this should normalize or maybe this should maybe reduce slightly going forward towards the end of the year.

Clarifies the reason for the increase in net debt and provides management's expectation for working capital normalization by year-end.

Asked by Praveen Sahay

Capital Raising for PCB JV vs Organic Growth Direct
No, you see, at the end of the day, PCBs would require some money when we spend $91 million over the three to five-year period. The initial expenditure, we said, is about $30 million. $30 million could be funded by our own equity, maybe some individual partner or from fund raise. And then we get back 40%-50% from the government. So, it is only a bridge financing which is required. So, it is a thing which we will decide once we start rolling out the plans. But one thing is reasonably clear that fundraise for organic growth may not be required in the coming years.

Distinguishes between funding needs for the PCB JV and organic growth, indicating that organic growth can be self-funded while the JV might require bridge financing.

Asked by Rajesh Kothari

3 min read 7 chapters

Detailed narrative

Strong Q1 FY26 Performance and Margin Expansion

Syrma SGS Technology delivered a robust Q1 FY26, with EBITDA margins expanding significantly from 5.2% in Q1 FY25 to over 10% this quarter. Gross material margins also saw a substantial improvement, rising from 15% to 24%. This positive performance was attributed to a healthy business mix, reduced reliance on lower-margin consumer and IT businesses, and continuous operational efficiency efforts. The company reported a consolidated revenue of approximately ₹960 crores, with PBT at ₹67.1 crores (128% YoY growth) and PAT at ₹50 crores (145% YoY growth).

Strategic Business Mix Recalibration

The company continued its strategic shift towards higher-margin segments. Automotive and Industrial verticals demonstrated strong growth, now contributing 24% and 30% of total revenue in Q1 FY26, up from 16% and 19% respectively in Q1 FY25. Conversely, the low-margin consumer business was consciously reduced from 53% to 34% of revenue, aligning with the management's goal to bring it down to 30% annually. Healthcare also saw a bump from 5% to 7% of revenue.

Entry into PCB Manufacturing via Joint Venture

Syrma SGS announced a joint venture for Printed Circuit Board (PCB) manufacturing, targeting the $5 billion Indian market, which is currently 90% import-dependent. The Phase-1 CAPEX for this multi-layer and single-layer plant is estimated at $91 million over 3-4 years, with an initial $30-35 million expected in the first 12-18 months. The venture is expected to achieve 15-18% EBITDA margins and ~20% ROCE, supported by PLI schemes and 35-60% state government subsidies. Commercial production is targeted to start in Q4 FY27 or Q1 FY28.

Export Growth and Tariff Outlook

Exports showed strong momentum, growing 29% YoY to ₹232 crores in Q1 FY26, representing 24.5% of total operating revenue. These exports are primarily directed to Western Europe and the USA. While tariff uncertainty in the US market has caused some customers to hold back large orders, management expects this to resolve by September 2025. They are confident that India will be favorably positioned, viewing tariffs as a significant opportunity for increased market share in global export markets.

Capacity Utilization and Future Growth Strategy

Despite current plants operating at less than 50% capacity, management is confident in achieving its full-year revenue growth guidance of 30-35%. This will be driven by maturing existing plants, new business flowing into available capacity, and minor annual investments of ₹80-100 crores for balancing CAPEX. The Bangalore plant, currently under construction, is expected to come on stream by the end of the calendar year, further supporting future growth.

Working Capital Management and Debt Position

The company maintained its net working capital days at 69, similar to the previous quarter, with a target to reduce it below 65 days in the coming quarters. Gross debt stood at ₹780 crores, with a healthy treasury balance of ₹467 crores, resulting in a net debt of ₹314 crores as of June 30, 2025. Management emphasized that internal accruals and efficient working capital management would fund organic growth, with external fundraising primarily considered for large inorganic acquisitions or significant new projects like the PCB JV.

Order Book and Segmental Outlook

The order book as of Q1 FY26 end stood at approximately ₹5,400-5,500 crores, providing strong visibility for future revenue. The Auto segment comprises 35-40% of the order book, with Industrial at 25-27%, Consumer at 25-27%, and Healthcare at 6-8%. While IT and Railways segments were muted in Q1, management expects them to pick up, with Railways projected to achieve ₹80-100 crores in revenue for the full year. Smart meter revenue for Q1 was ₹55-60 crores, targeting ₹250-300 crores for the full year.

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