Allied Digital Services Ltd (ADSL) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Allied Digital Services Limited Q2 and H1 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.
Mayank Vaswani (CDR India): Thank you, Danish. Good afternoon, everyone, and thank you for joining us on Allied Digital Services Limited's earnings call for the second quarter of FY '26 '27. We have with us on the call today: Mr. Nitin Shah, Founder and CMD; Mr. Ramanan Ramanathan, Global Head of Strategy for Growth, Innovation, and Partnerships; Mr. Nehal Shah, Joint Managing Director; and Mr. Gopal Tiwari, Chief Financial Officer. We will begin with comments from Mr. Nehal Shah, who will cover recent developments across the business, including the operational performance and order wins, followed by Mr. Gopal Tiwari, who will walk us through the financial highlights. Thereafter, we will open the call for the Q&A session. Before we begin, I would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings documents that have been shared with all of you earlier. I would now like to hand over the call to Mr. Nehal Shah for his opening remarks. Over to you, Nehal.
Nehal Shah (Allied Digital Services Ltd): Thank you, Mayank. Good afternoon, everyone, and thank you for joining us today. I trust you have had the opportunity to review the financial results and earnings materials shared earlier. We are pleased to report another quarter of healthy growth with consolidated revenues of 265 crore in quarter 2 FY '27, representing an increase of 14% year-on-year. For the first half, revenues stood at 526 crore, growing 16% over the corresponding period last year, and making the highest ever H1 revenues in Allied Digital history. This is reassuring given the challenging operating back- backdrop. On the profitability front, EBITDA for the quarter stood at 27 crore with a margin of 10%, while profit before tax was 17 crore. Margins continue to reflect investments in talent, leadership, and growth capabilities alongside the competitive pricing in some of the segments,
Nehal Shah (Allied Digital Services Ltd): Our focus remains on centering the business with progressively improving operational efficiency and profitability. Let me turn to the industry landscape while, which continues to evolve rapidly, particularly in the terms of accelerating pace of innovation, even as enterprises remain committed to modernization, automation and digital transformation, we are becoming more deliberate in their investment decisions. With newer AI models and platforms emerging at a rapid pace, and then each new model promising superior capabilities at low, at lower in computing cost. Customers are understandably cautious about committing to technologies that could quickly be superseded. Consequently, investment decisions are increasingly focused on flexibility, cost efficiency, measurable returns, and long-term relevance. This means extended evaluation of upload cycles, particularly for larger transformation programs. We are witnessing this trends within our business, too. Customer inquiries remain robust and engagements are becoming deeper and more strategic, but large contracts are taking longer to conclude as clients re-evaluate technology choices and commercial considerations more closely. Smaller and mid-sized opportunities, however, are converting relatively faster, enabling us to sustain business momentum. An important element of our strategy is to increase the contribution from direct customer engagements, allied with us build a solid track record when participating in large partner-led projects, consortium-led projects which provide scale and allow execution responsibility and risks to be shared. However, direct leaderships, our relationships, give us greater ownership of the customer engagement and create more opportunity to expand our services, deeper relationships and increase our share of customer technology spending over time. We are, therefore, strengthening our sales organization and go-to-market capabilities in order to build a healthier balance between partner-led, consortium-led and direct business. We are now seeing, we are now starting to see renewed activity in the government segment as well. As we had highlighted in the earlier calls, the sharp increase in equipment and hardware cost had affected the commercial viability of certain projects leading to delays and and being more selective towards the bidding approach. While costs remain elevated, prices have shown signs of stabilization and we are beginning to see projects run to active consideration. Given our expertise in safe cities, smart cities, surveillance projects, command, command and control systems and integrated digital infrastructure, we remain encouraged by opportunity in the pipeline in this segment. Coming to operational development developments, we secured over 74 crore in new orders and renewals during the quarter. Among the key developments was strategic partnership in the US to deliver infrastructure cloud and cyber security services through our offshore delivery center. We also secured an engagement in the U US leading healthcare service provider to implement and support 24/7 AI-based, AI-powered service desk. In India, we were selected by MIDC to be the system integrator for implementation, maintenance and support of its internet lease line connectivity solution across Maharashtra. This marks an order win from a government agency after a gap of three quarters, validating our view that domestic government ordering activity is set to pick up again. Additionally, we renewed several long-standing customer engagements across pharmaceuticals, BFSI, real estate, medical devices, reinforcing the strength of our customer relationships. Internally, we continue to build a leading, build on the leadership augmentation and data, earlier this year. Our priorities are to strengthen sales execution, expand direct customer relationships, enhance delivery capabilities and accelerate the integration of AI across our services. We recognize that these investments will take time to translate into results, but believe they are essential for to building a more competitive and scalable organization. FY '27 is, therefore, also a period of consolidation and institutional strengthening as we prepare the business for its next stage of expansion. With that, I would like to hand over the call to our CFO, Mr. Gopal Tiwari, who will take you through the detailed financial performance for the second quarter and the first half of FY '27. Over to you, Gopal.
Gopal Tiwari (Allied Digital Services Ltd): Thank you, Nehal, and good afternoon, everyone. I'll take you through the key financial highlights for the quarter and the first half along with some important developments relating to working capital and the balance sheet. As Nehal mentioned, revenue for Q2 stood at 265 crore, growing 14% year-on-year, while H1 revenue reached 526 crore, an increase of 20 16%, sorry, 16% over the corresponding period last year. Having crossed 500 crore in first half revenues, we have established a healthy revenue run rate and remain well positioned to sustain our annual revenue lap milestone of 1,000 crore. A notable feature of our performance has been the strength of our services business, representing predictable multiyear annuity contracts which grew 31% year-on-year in Q2. International revenues also
Gopal Tiwari (Allied Digital Services Ltd): this quarter, more than offsetting the softness in domestic government projects. These trends reinforce the resilience of our diversified business model and the progress we have made in scaling our global operations. Coming to profitability, EBITDA for Q2 stood at ₹27 crore, improving sequentially from ₹25 crore in Q1, with margins remaining stable at 10%. On a year-on-year basis, EBITDA was marginally lower compared with ₹28 crore in Q2 FY '26. Margins continue to reflect the investments we have made in expanding our sales engine over the last over the past year, alongside prevailing cost pressures. We remain focused on optimizing our cost structure, improving delivery productivity and enhancing resource utilization to progressively strengthen profitability. Importantly, we have also adopted a disciplined approach to new business acquisitions, with clearly defined profitability and commercial thresholds for evaluating prospective engagements. We remain selective in pursuing opportunities and have declined to take on contracts that do not meet our return expectations. Our focus is to deliver profitable and sustainable growth. Profit before tax for Q2 stood at ₹17 crore, broadly stable substantially subsequently, while profit after tax improved to ₹13 crore from ₹12 crore in Q1. For H1 FY '27, PBT stood at ₹34 crore and PAT at ₹25 crore. While profitability continues to absorb the impact of growth investments and cost pressures, our focus is on translating increasing business scale into stronger earnings. With the significant one-time accounting adjustments undertaken in FY '25 and FY '26 now behind us, we are placing greater emphasis on operational efficiency, consistency in financial reporting, and sustainable margin improvement. Turning to the balance sheet, I'd like to highlight some encouraging developments in our working capital position. Despite the increasing scale of our operations and execution of larger contracts, trade receivables declined to ₹264 crores as of 30th September compared with ₹320 crore as at end of the March 2026. Debtor days also improved to approximately 84 days from 96 days at the end of FY '26, reflecting our continued focus on timely milestone billing and collection efficiency. On the liquidity front, cash and cash equivalents stood at ₹185 crores as of September 30, 2026 compared with ₹162 crore a year earlier. Gross borrowings increased from ₹98 crore to ₹167 crore over the same period, largely reflecting the higher funding requirements associated with the growing scale of our business. Importantly, we continue to maintain a positive net cash position. On governance and financial reporting, we had shared a detailed update during our previous calls regarding the resolution of legacy audit observations. Having addressed those matters, our emphasis is now on maintaining the strengthened controls and reporting practices as part of regular financial processes. Overall, our priorities for the remainder of FY '27 are clear: maintaining cost discipline, supporting growth investments, and progressively strengthening profitability. While the business environment remains competitive, we believe a greater contribution from managed services, better utilization of resources, and increased automation can support operating efficiency over time. With that, I'll now hand the call back to moderator for the question-and-answer session. Thank you.
Moderator: Thank you so much, sir. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one. If you wish to remove yourself from the question queue, you may please press star and two. We request everyone to use handsets while asking a question. We'll wait for a moment while the question queue assembles. Our first question comes from the line of Rushil Katiyar with Choice Institutional Equities. Please go ahead.
Rushil Katiyar (Choice Institutional Equities): Yeah. Hi. Am I audible?
Moderator: Yes sir, you are.
Rushil Katiyar (Choice Institutional Equities): Yeah. We see order book have declined from 120 crores to 74 crores, and you indicated that in the last call that OEM pricing stabilization will enable to participate more aggressively in large government tenders. So, wanted some color on that. And what's the status on Noida smart city project?
Nehal Shah (Allied Digital Services Ltd): So, yeah, thanks Rushil for the question. You're correct. In fact in my previous calls also I had said that we are going slow on government orders due to the price increase and viability of those projects becoming difficult. However, having said that, I think this quarter
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