Zen Technologies Limited — Q2 FY26 earnings call

Call held 27 Oct 2025

Management summary

Zen Technologies reported a mixed Q2 FY26 with significant revenue growth on a low base, but H1 consolidated revenue saw a substantial decline. Despite top-line pressures, the company demonstrated strong margin resilience with consolidated EBITDA margin expanding to 52%. Management remains highly confident in achieving its Rs.6000 Crores cumulative revenue target by FY28, anticipating order acceleration in H2 FY26 and beyond, driven by strong demand for anti-drone systems and simulators. The company maintains a robust net cash position and emphasizes its strategic advantage through indigenous R&D and IP ownership.

Highlights

  • Consolidated EBITDA margin expanded to 52% in Q2 FY26 from 37% in Q2 FY25.

  • Consolidated PAT margin improved to 34% in Q2 FY26 from 26% in Q2 FY25.

  • Net cash position of Rs.1103 Crores as of September 30, 2025, maintaining debt-free status.

  • Management confident in achieving Rs.6000 Crores cumulative revenue target by FY28, anticipating order acceleration in H2 FY26 and beyond.

  • Strong focus on indigenous R&D and IP ownership, seen as a key differentiator and positive for long-term prospects.

Concerns

  • Consolidated revenue for H1 FY26 declined by 33.18% YoY to Rs.331.79 Crores, indicating overall slowdown in the first half.

  • Consolidated operational EBITDA decreased by 18.40% YoY in Q2 FY26 to Rs.65.54 Crores.

  • Consolidated PAT decreased by 5.22% YoY in Q2 FY26 to Rs.59.40 Crores.

  • Delays in regular procurement orders for training and simulation equipment due to government's focus on emergency procurement post-Operation Sindoor.

Key financials

  1. Consolidated Revenue ₹173.57 Cr +598.8%YoY
  2. Consolidated Operational EBITDA ₹65.54 Cr -18.4%YoY
  3. Consolidated Operational EBITDA Margin 38%
  4. Consolidated PAT ₹59.4 Cr -5.2%YoY

What they filed

Q1 FY27: revenue down 10.1%, net profit down 39.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue242 152 325 158 174 −28%178 +17%178 −45%142 −10%
EBITDA80 44 138 64 65 −19%67 +52%50 −64%38 −41%
Net profit63 43 114 53 62 −2%56 +30%47 −59%32 −40%
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.

Order book

high confidence

Total value

₹675 Cr

as of 2025-09-30 quantified

Inflow this quarter

₹94 Cr

Composition

Mix 4 entities
  • Zen (Standalone) 71.7%
  • UTS 14.5%
  • ARIPL 13.6%
  • Vector 0.1%

Share of order book by entity

Pipeline

qualified rfp

Order pipeline for Rs.6000 Crores cumulative revenue target

Cancellations & deferrals

  • deferred: Regular procurement of training and equipment and simulators delayed due to government's focus on emergency procurement post-Operation Sindoor.
Management expects order acceleration in H2 FY26 and beyond, with confidence in achieving the Rs.6000 Crores cumulative revenue target by FY28.

Source: Prepared remarks

Capital allocation

high confidence
  • Liquidity Cash ₹1,103 Cr Company maintains a debt-free status.
    Our net cash position as on 30th September 2025 is Rs.1103 Crores and we continue to debt free status.

Guidance & targets

Revenue

  • Cumulative Revenue Revenue · FY27 and FY28 · High confidence Rs.6000 Crores
    I do not think that what as of now our feeling is that all the Rs.6000 Crores whatever 6000 minus whatever we execute during FY2026 will be executed in FY2027 and 2028, assuming the order book will be in place as we are assuming.

    — Ashok Atluri

Order Inflow

  • Order Acceleration Order Inflow · H2 FY26 and 2027-2028 · High confidence Accelerating
    So Pritish, our feeling is that based on the pipeline, order pipeline that we have, that the orders will start accelerating in the edge to especially towards the end. And in 2027, also the acceleration will continue.

    — Ashok Atluri

  • H2 FY26 Orders Order Inflow · H2 FY26 · High confidence Will come through
    No, sir I think the orders will definitely come in H2, we are very confident about that.

    — Ashok Atluri

Emergency Procurement

  • Order Size Emergency Procurement · Per order · High confidence Less than Rs.300 Crores
    So, one thing is each size, each order should be less than Rs.300 Crores because this emergency procurement, the size is typically limited to less than Rs.300 Crores

    — Ashok Atluri

  • Order Conclusion Emergency Procurement · March 2026 · High confidence Before March 2026
    And the second one is with respect to when the orders will be concluded, I think they have to be concluded before March of 2026, unless there is extension given to the EP.

    — Ashok Atluri

Revenue Run Rate

  • Quarterly Revenue Revenue Run Rate · Next year and going forward · Medium confidence Rs.500-750 Crores
    Rs.500 Crores? I think that is easy. 750 would require some changes, but we are hopeful that we will be able to achieve that.

    — Ashok Atluri

Product Mix

  • Simulator vs Anti-Drone Product Mix · Evolving situation · Medium confidence 50-50

    Previously 40-60 → 50-50

    But typically, we are thinking, we are thinking 40-60, but now we are starting to think maybe it is 50-50 kind of thing.

    — Ashok Atluri

Exports

  • Export Market Surprises Exports · H2 FY26 and H1 FY27 · Medium confidence Very nice pleasant surprises
    And we do hope that between H2 and H1 of next year, there will be very, very some very nice pleasant surprises in exports market and we will get a lot of revenues in that regard.

    — Ashok Atluri

What to watch in Q3 FY26

Order inflow acceleration

H2 FY26
Current Delayed in H1 FY26
Target Acceleration in H2 FY26

Why it matters

Order inflow is the leading indicator for future revenue growth in the capital goods sector.

So Pritish, our feeling is that based on the pipeline, order pipeline that we have, that the orders will start accelerating in the edge to especially towards the end.

Risks & concerns

  • Software malware risk from foreign IP in defense systems

    high

    Government is concerned about potential malware in foreign software, driving demand for Indian IP.

    And the government is saying that we want Indian IP, because they are really worried about what will happen if the software inside has a malware. We have seen again as I said earlier, the even the pager incident with the Hezbollah was a wakening call in the sense, you could even program them to be destructive. So whatever we are getting from outside is a question mark.

    Management acknowledged

  • Delay in order placements for training and simulation equipment

    medium

    Regular procurement of training and equipment and simulators was delayed due to the government's extreme focus on emergency procurement post-Operation Sindoor.

    Again, as explained in the press release, this delay in orders has been attributable to the government's extreme focus on emergency procurement post-Operation Sindoor. And while part of that was good news because in that we had our anti-drone systems also, but the regular procurement of training and equipment and simulators were delayed.

    Management acknowledged

  • Competition in the anti-drone market

    medium

    Analyst noted the anti-drone space is getting crowded, but management asserts Zen's indigenous IP and comprehensive solution as a differentiator.

    Noted, sir. And sir, just one thing, this we are talked about a lot on the anti-drone system, soft kill and hard kill, but as we know that this space is also getting crowded. So what is the differentiator for you?

    Analyst downplayed

  • Scaling up to Rs.6000 Crores cumulative revenue target

    medium

    Analyst questioned the feasibility of scaling up to Rs.6000 Crores given the current run rate, but management expressed confidence in achieving it.

    So we are looking little worried about the scale up to Rs.6000 Crores in three years' time. This will really mean that from something like Rs.100 Crores order in a quarter, we will have to scale next year to maybe Rs.500 Crores in a quarter and then going forward to Rs.750 Crores in a quarter.

    Analyst acknowledged

Q&A highlights

8 direct
Impact of low-cost Shahed-136 drones on anti-drone companies Direct
So there is no competition with respect to our anti drone system globally. So to your point about, what is our answer to those drones, I think that is something the drone companies are working on and Zen has acquired vector techniques that are trying to make something better than the Shahed kind of drones, which are really cheap and the cost to neutralize them is very, very high but the anti-drone system, which are basically soft kill like the ones we have, are very effective solutions and can block those kinds of drones effectively.

Addresses a key competitive threat and highlights Zen's technological advantage in soft-kill anti-drone systems.

Asked by Manish Gupta

Long-term prospects of the Indian defense industry and Zen Direct
I think that is good news for companies like Zen which believe in this IP ownership and own R&D so I think fundamentally it has it is changed in a way, which is very positive for companies like that.

Reassures investors about the long-term growth story, emphasizing indigenous R&D and IP as critical for survival and success in the evolving defense landscape.

Asked by Manish Gupta

Feasibility of Rs.6000 Crores cumulative revenue guidance given weak H1 FY26 Direct
I do not think that what as of now our feeling is that all the Rs.6000 Crores whatever 6000 minus whatever we execute during FY2026 will be executed in FY2027 and 2028, assuming the order book will be in place as we are assuming.

Clarifies the timeline for the ambitious revenue target, linking it to expected order book build-up in future years.

Asked by Pritish Urumkar

Differentiator for Zen in the crowded anti-drone system market Direct
So, one thing is the software, the hardware, everything is indigenous. What we are developing is completely IP owned by us. And we have seen in 23 when tenders were issued that under IDDM, it is very difficult for any other Indian company to qualify.

Highlights Zen's unique selling proposition of complete indigenous IP ownership and comprehensive solutions as a competitive advantage.

Asked by Pritish Urumkar

Delay in orders despite emergency procurement post-Operation Sindoor Direct
So, the thing is, anti-drone system tenders have just been floated. As we speak this is it is almost a week in terms of government time. May this thing happened, they started doing it in June, July, August. Now we are in September, it is the three or four months after the Operation Sindoor. But we think that in the next couple of months, most some of the results will come through and you will probably hear good news.

Explains the reason for order delays and provides a timeline for when new anti-drone orders are expected to materialize.

Asked by Akshay Patel

Total addressable market for simulators and anti-drone systems in India and stagnation risk Direct
I think next four to five years, the growth will continue Akshay and two things. One is for simulator market simulators will be required, they will have a typical lifecycle of 10 years. And after 10 years, they need to buy again. So as we grow and keep supplying the simulators, I think the growth will keep happening but those old simulators are required to be refurnished. So there is a recycling of the market that is happening. Second is the anti-drone system. Again, they also have a very limited life cycle of 10 years.

Provides insights into the market longevity and recurring demand for both segments, mitigating concerns about stagnation.

Asked by Akshay Patel

Ability to scale up to Rs.6000 Crores target given current run rate Direct
So the two things Shrenik, one is the will we get the order book, will the order book scale up to that? And second is your will you be able to execute the orders? So I think the first is given the pipeline that we have with the order pipeline is very, very strong, and we should be able to get it. Second is as we speak, we are scaling ourselves to execute these large orders, whether you are saying exactly, it is Rs.500 Crores and Rs. 750 Crores per quarter, that is a very, very strong order. And given the fact that we have done Rs.250 Crores – Rs. 300 Crores, let us not take this as an exception, but we have done Rs.250 Crores - Rs.300 Crores, will we be able to scale to Rs.500 Crores? I think that is easy. 750 would require some changes, but we are hopeful that we will be able to achieve that.

Addresses concerns about execution capability and scaling, with management expressing confidence in achieving higher quarterly run rates.

Asked by Shrenik Mehta

Competitive landscape in counter-drones and capabilities for global competition Direct
In the anti-drone segment, Abhijeet, we look at, distance and how far can you detect it and how can you disable the incoming drones? And what are the different ways you can do? Can you do, jamming? Can you do spoofing? Can you do actually hard kill? Can you shoot them down? So these are the different characteristics that that are there. And then there also what kind of frequency ranges you can do.

Details the technical capabilities and evolving threat landscape in anti-drone systems, showcasing Zen's focus on advanced solutions for global competitiveness.

Asked by Abhijeet Singh

3 min read 6 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Zen Technologies reported a consolidated revenue of Rs.173.57 Crores for Q2 FY26, showing a significant increase from Rs.24.84 Crores in Q2 FY25, though the Q2 FY25 base appears to be an anomaly. On a half-yearly basis, consolidated revenue for H1 FY26 was Rs.331.79 Crores, a 33.18% decline from Rs.496.46 Crores in H1 FY25. Despite the top-line challenges, consolidated EBITDA margin expanded to 52% in Q2 FY26 from 37% in Q2 FY25, and consolidated PAT margin improved to 34% from 26% in the same period, demonstrating strong operational efficiency.

Order Book and Execution Outlook

The company's consolidated order book stands at Rs.675 Crores as of September 30, 2025, comprising Rs.375 Crores for equipment and Rs.300 Crores for AMC. New order wins in Q2 FY26 amounted to Rs.94 Crores, with Rs.90 Crores from subsidiaries. Management reiterated its confidence in achieving a cumulative revenue target of Rs.6000 Crores by FY27-FY28, expecting order acceleration in H2 FY26 and beyond. They anticipate a quarterly revenue run rate of Rs.500-750 Crores in the coming year to meet this target.

Anti-Drone Systems: Market & Differentiation

Zen Technologies highlighted its strong competitive position in the anti-drone market, emphasizing its indigenous IP ownership for software and hardware. The company's soft-kill anti-drone systems are deemed highly effective against low-cost drones like Shahed-136. Management noted that new anti-drone system tenders have recently been floated, with results expected in the next couple of months. The market for anti-drone systems is evolving, with threats shifting from commercial frequencies to wider bands (100 MHz to 12 GHz), where Zen claims to have advanced detection and disabling capabilities.

Strategic Acquisitions and R&D Focus

The company's acquisition strategy focuses on strengthening its position in training and simulation (e.g., ARI for naval simulation) and anti-drone systems. Zen has invested in Vector techniques and Bhairav Robotics to enhance its offerings, particularly for automated weapon systems and hard-kill capabilities. A significant focus is placed on AI integration, both for internal processes and product development, such as AI-powered coaching in simulators and threat classification in anti-drone systems. The company's R&D spend in H1 FY26 was approximately Rs.12.3 Crores, supporting these initiatives.

Long-Term Industry Outlook and IP Ownership

Management expressed strong optimism about the long-term prospects of the Indian defense industry, particularly for companies with indigenous R&D and IP ownership. They believe the government's focus on 'Make in India' and local IP is a significant positive, driven by concerns over malware in foreign software. The company aims to be a prime contractor and expand sales to friendly allied nations, leveraging its deep technological capabilities rather than just being a manufacturing partner for foreign technology.

Capital Allocation and Liquidity

Zen Technologies maintains a strong financial position with a net cash balance of Rs.1103 Crores as of September 30, 2025, and remains debt-free. The company focuses on maintaining strong liquidity and leveraging its asset-light business model. No specific capex plans or M&A activities were detailed for the quarter, but the company is open to technical partnerships for capabilities it lacks, provided it involves joint R&D and IP development rather than just manufacturing.

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