Updater Services Limited — Q3 FY26 earnings call

Call held 6 Feb 2026

Management summary

Updater Services reported a mixed Q3 FY26, with strong performance in its IFM segment and parts of BSS, but faced a significant INR230 million write-off in its Avon logistics subsidiary. While IFM revenue grew 14% YoY and overall EBITDA margins were 5.7% for Q3, Denave experienced margin compression and Athena saw a revenue decline over nine months. Management is focused on profitability growth, technology-led interventions, and strategic acquisitions, with INR2,053 million cash on hand.

Highlights

  • IFM segment revenue grew 14% year-on-year in Q3 FY26, reaching its highest ever quarterly run rate of INR5,182 million.

  • IFM EBITDA for Q3 FY26 stood at INR233 million, indicating strong segment profitability.

  • Global (BSS subsidiary) delivered strong operational and financial performance in Q3 FY26, recording its highest profit driven by high-margin non-scheduled flight operations.

  • Audit & Assurance business delivered healthy growth in Q3, onboarding multiple large clients and expanding across marquee accounts.

  • Company holds INR2,053 million in cash, earmarked for value-accretive acquisitions.

Concerns

  • A total provision of INR230 million was made for receivables from Avon's logistics brokerage business, with INR200 million recognized in Q3 FY26, impacting net worth.

  • Denave's margins compressed to 4% in Q3 FY26 (from 5.2% in previous 9 months) due to a mix shift towards lower-margin field services and technology changes.

  • Athena's 9-month revenue declined by 18% year-on-year, though Q3 revenue stabilized quarter-on-quarter.

  • DSO (Days Sales Outstanding) increased overall, despite an improvement with one large customer.

Key financials

2 periods

Q3 FY26

  • EBITDA
    442 Mn
  • EBITDA Margin
    5.7%

9M FY26

  • EBITDA
    1,277 Mn
  • EBITDA Margin
    5.8%

What they filed

Q1 FY27: revenue up 9.1%, net profit up 3.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue680 695 709 700 729 +7%767 +10%743 +5%764 +9%
EBITDA44 46 36 39 32 −27%21 −54%43 +19%42 +8%
Net profit28 31 34 29 20 −29%7 −77%27 −21%30 +3%
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

  • IFM Segment
    14% Revenue Growth (YoY Q3 FY26)5,182 Mn Quarterly Run Rate Revenue (Q3 FY26)233 Mn EBITDA (Q3 FY26)
  • Avon (Logistics)
    230 Mn Total Provision for Receivables30 Mn Provision Recognized (Previous Qtr)200 Mn Provision Recognized (Current Qtr)
  • Denave (BSS)
    9.5% 9 Months Growth4% Current Margin5.2% Previous 9 Months Margin
  • Athena (BSS)
    -18% Revenue Decline (9 Months YoY)20% Margin Percentage (9 Months)24% Previous Year Margin Percentage

Capital allocation

high confidence
  • Liquidity Cash ₹2,053 Mn Cash on books planned to be deployed towards value-accretive acquisitions.
    Apart from the organic growth, we also have cash of about INR2,053 million on our books, which we plan to deploy towards value-accretive acquisitions.

Guidance & targets

Revenue

  • Consolidated Revenue Growth Revenue · Full Year · Medium confidence 9-10%
    For the full year, we are targeting consolidated revenue growth of around 9%, 10% and given our scale, diversified client base and the disciplined execution, we believe UDS is well positioned to deliver improved profitability, increase its ROCE and generate steady profitable growth over the next years to come.

    — Raghunandana Tangirala

  • IFM Segment Revenue Growth Revenue · Future · Medium confidence 10-12%
    The outlook is looking great. We are targeting a 10%, 12% revenue growth in the IFM segment, supported by a strong favorable long-term industry outlook in India.

    — Raghunandana Tangirala

  • Athena Revenue Revenue · Future · High confidence flat
    Yes. Athena, in Athena and in that business, flat is a reasonable assumption, yes.

    — Amitabh Jaipuria

Profitability

  • IFM Margin Recovery Profitability · Coming quarters · Medium confidence steady recovery
    Our focus going forward will be on driving profitability growth -- profitable growth by improving client level profitability, optimizing manpower deployment through technology-led interventions. We are also pursuing margin accretive opportunities in specialized services and integrated contracts, which should support a steady recovery in profitability in the coming quarters.

    — Raghunandana Tangirala

  • Denave Margin Impact Profitability · Next 2 quarters · High confidence continue for another 2 quarters
    So, from my perspective, I don't see a revenue impact. The margin impact that you see today, like I said, probably will continue for another 2 quarters because of the transition that is happening in the high-margin business and the adjustments that we are making on the way we deliver and the adoption that is happening vis-a-vis that with respect to our customers.

    — Snehashish Bhattacharjee

  • Denave Margin Improvement Profitability · Next couple of quarters, picking up steam in next few quarters · Medium confidence steady-state improvement
    But long story short, I don't see an immediate revenue impact. Margin, like we said, we will see a steady-state improvement over the next couple of quarters before it picks up steam maybe in the next few quarters. Does that answer your question?

    — Snehashish Bhattacharjee

  • EBITDA Margin (without one-offs) Profitability · Next year onwards · Medium confidence 6% ballpark
    So right now, we are at about 5.8% approximately in that ballpark. I think because right now, some of our businesses, as we have already been talking about, have gone through a little bit of a transition and some of them are still a little bit in transition. IFM is showing strong momentum. So, we believe that these margins should be stable in this ballpark. So, in the 6% ballpark. Please don't take that as forward-looking guidance, but that's what we believe, yes.

    — Amitabh Jaipuria

What to watch in Q4 FY26

Avon Logistics Recovery

Next quarter
Current INR230 million provisioned, legal steps initiated
Target Progress on recovery of receivables

Why it matters

To assess the effectiveness of recovery efforts and mitigate the impact of the write-off.

As collections from this business did not progress as expected the management in line with being prudent and conservative approach and decided to fully provide for the exposure. However, I'd like to comment here, add here that we are taking all steps and necessary actions, legal to recover this.

Risks & concerns

  • Receivables write-off in Avon Logistics

    high

    A total provision of INR230 million was made for uncollected receivables from Avon's logistics brokerage business, with INR200 million recognized in Q3 FY26. Management states it's a one-off incident and legal steps are being taken for recovery.

    Management acknowledged

  • Margin compression in Denave

    medium

    Denave's margins declined to 4% in Q3 FY26 from 5.2% in the previous 9 months, attributed to a mix shift towards lower-margin field services and technology changes. Management expects this impact to continue for 2 more quarters before improving.

    Management acknowledged

  • Technological uncertainty in Athena

    medium

    The evolving technology landscape and experimental nature of AI-powered voice bots pose uncertainty for Athena's business. Management believes the business has stabilized and is actively experimenting with AI solutions.

    Management acknowledged

  • Overall DSO increase

    medium

    Days Sales Outstanding (DSO) has gone up overall, despite an improvement with one large customer. Management is continuously focusing on improving DSO.

    Management acknowledged

  • AI and automation disruption to BSS segment

    medium

    Analysts raised concerns about AI and automation impacting the BSS segment. Management views it as an opportunity for efficiency and better client outcomes, rather than a direct threat, and is investing in technology.

    Analyst acknowledged

Q&A highlights

8 direct
Avon Logistics Impairment Direct
The answer is yes. On a conservative basis, we have taken the entire hit as far as Avon is concerned. And as far as this particular incident is concerned, yes.

Confirms the one-time nature of the significant write-off and that no further similar incidents are expected from this specific issue.

Asked by Nitin

Denave Revenue and Margin Trajectory Direct
We don't see a revenue drop, like I said, which is why this business was built with that in mind. We've gone through in the past 27 years, multiple changes in markets, and we've tried to build insulation for that change, which is why we have a mix of a low margin and a high-margin business. Right now, the low-margin business is kicking the revenue ticking while the higher-margin business is picking up on the margin and building the base.

Clarifies that while margins are under pressure due to mix shift, revenue is not expected to decline, and higher-margin business is being built up.

Asked by Nitin

Denave Margin Comparison Direct
So we were at 5.2%. Right now, we are at 4%.

Provides a clear quantitative comparison of Denave's current margin with the previous period, highlighting the compression.

Asked by Nitin

Athena Business Stabilization Direct
So, we believe that we have now got to a stage where these have stabilized. Also, if you look at it, the Athena margins continue to be very, very good. So, if you look at a 9-month to 9-month number, our margin percentage is still at about 20%.

Indicates that the revenue decline in Athena has halted and margins remain healthy, providing confidence in its future stability.

Asked by Nitin

DSO Improvement Direct
One very large customer has brought down DSO dramatically in one of our businesses because they have agreed to revise terms. Their terms earlier were 120 days plus. Now they have brought that down to, I think, 45 days or thereabouts.

Highlights a positive development in working capital management, with a significant reduction in DSO for a key customer, despite overall DSO increase.

Asked by Nitin

Snehashish Bhattacharjee's Exit from Denave Board Direct
See, I -- this is my personal opinion. I strongly believe as a promoter, when I'm sitting on the Board, I will always have an opinion, and that might be contrary to what the CEO might want to do. And when I have that authority, it will hamper the CEO's ability to want to execute a few plans, and you need new plans as we move forward.

Explains the rationale behind a key leadership change as a strategic move to empower the new CEO and ensure operational freedom, aligning with corporate governance principles.

Asked by Rahul Kumar

Concerns about Write-offs and Controls Direct
Now that hit is what has wiped out the net worth and made a significant impact on the net worth of this one subsidiary company of ours called Avon. We have learned from our from what this entire incident. And that learning is going to, as we move forward, impact the way we look at our entire control systems and revamped it.

Addresses a critical investor concern about the company's internal controls and the potential for future write-offs, with management acknowledging the learning and corrective actions.

Asked by Keshav Garg

AI and Automation Risk to BSS Segment Direct
AI is something which is both an opportunity and a threat in some of our businesses. In the IFM business, it's a clear opportunity... Denave and Athena are the 2 businesses where there is both opportunity and as Snehashish mentioned, it is something to be careful about. But today, we believe that we have the experimentation and our own innovation that is going on, which will enable us to use it more as an opportunity than a threat.

Provides management's perspective on a significant industry trend, detailing how AI impacts different segments and their strategy to mitigate risks and leverage opportunities.

Asked by Keshav Garg

2 min read 7 chapters

Detailed narrative

Avon Logistics Provision and Impact

Updater Services reported a significant provision of INR230 million related to receivables from its Avon logistics brokerage business. Of this, INR30 million was recognized in the previous quarter, and the remaining INR200 million was recognized in Q3 FY26. This full provision was made due to non-progression of collections, impacting the company's net worth. Management emphasized that this is an isolated incident, and legal actions are underway to recover the dues.

IFM Segment Strong Performance

The Integrated Facility Management (IFM) segment demonstrated robust growth, with revenue increasing by 14% year-on-year in Q3 FY26. This segment achieved its highest-ever quarterly run rate revenue of INR5,182 million and recorded an EBITDA of INR233 million for the quarter. The company added 13 new logos, including marquee names, and expects continued growth of 10-12% driven by workforce formalization and increased outsourcing.

BSS Segment: Denave and Athena Dynamics

In the Business Support Services (BSS) segment, Denave's 9-month growth was approximately 9.5%, but its current margin compressed to 4% from 5.2% in the previous 9 months due to a mix shift towards lower-margin field services. Athena's 9-month revenue declined by 18% year-on-year, although Q3 revenue stabilized quarter-on-quarter, with margins remaining healthy at 20%. Management expects Denave's margin pressure to continue for two more quarters before improving, while Athena is anticipated to remain flat.

Leadership Transition and Governance

Snehashish Bhattacharjee's exit from the Denave Board was clarified as a planned succession move, part of a long-term strategy to empower the new CEO and ensure operational freedom. Management highlighted that the company is professionally run with promoters largely stepping away, ensuring strong corporate governance. This move is intended to allow the new leadership to execute plans without potential conflicts of interest from a promoter on the Board.

AI and Automation Strategy

Management addressed concerns regarding AI and automation, stating that it presents both opportunities and challenges across their businesses. In IFM, AI is seen as a clear opportunity for efficiency. For Denave and Athena, while caution is exercised, the company is investing in experimentation and innovation to leverage AI as an opportunity rather than a threat. They believe current AI applications primarily focus on routine drudgery, not replacing humans.

Working Capital Management

The company noted an increase in overall Days Sales Outstanding (DSO) during the quarter. However, there was a positive development where one large customer's DSO was dramatically reduced from over 120 days to approximately 45 days due to revised terms. Management reiterated its continuous focus on improving DSO and expects it to come down in the future.

Capital Allocation and Growth Outlook

Updater Services holds INR2,053 million in cash on its books, which it plans to deploy towards value-accretive acquisitions. The company is in the final stages of discussions with potential targets, aiming for opportunities that enhance scale, profitability, and ROCE. For the full year, the company targets consolidated revenue growth of 9-10% and expects EBITDA margins to stabilize in the 6% ballpark from next year onwards.

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