Aequs Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record quarter, landmark year: Q4 FY26 was the strongest quarter in Aequs history with ₹367.1 crore revenue and 47% YoY growth, capping a year where consolidated revenue grew 33% and EBITDA grew 43%.
• Consumer ramp-up compressed margins: Q4 EBITDA margin fell to 9% as the consumer electronics plant hit full operating costs while still at 23% utilization, a planned investment phase that management expects to reverse sharply as volumes scale.
• Aerospace order book at \$889 million: The order book is growing faster than in the past, supporting 25–30% revenue growth guidance for FY27, with the engine components ecosystem starting to contribute only from FY28.
• Two state MoUs anchor a decade of expansion: ₹1,900 crore committed to a new Hosur aero-engine ecosystem and ₹2,856 crore to Karnataka clusters, funded through debt and internal accruals, signaling confidence in multi-year demand visibility.
• What to watch next quarter: Whether consumer utilization progresses from 23% toward the 40–50% year-end target, the pace of Hasbro-to-Mattel volume absorption, and any update on the CFO succession search.

Consumer Segment: The Investment Phase

• Revenue surged, losses widened by design: Consumer revenue grew 84% YoY to ₹184 crore for the full year, but EBITDA loss expanded 173% to ₹78.3 crore as the company built capacity ahead of demand. Q4 was the first quarter where all manufacturing costs hit simultaneously because full capacity was commissioned toward the end of Q3.
• Utilization is the margin lever: The plant is currently at 23% utilization. Management targets 40–50% by FY27 year-end, at which point depreciation and fixed costs will be absorbed across higher volumes and margins will recover sharply. Steady-state margins of 18–20% are achievable at 75–80% utilization.
• Hasbro exit, Mattel entry: Hasbro unexpectedly revised its manufacturing strategy and will stop raising purchase orders, but a long-term agreement with Mattel is expected to absorb the capacity impact. Both sides are fully committed to scaling volumes.
• Customer-driven capex logic: Management is adding capacity despite low current utilization because the customer wants Aequs to have a meaningful share of their requirements. Not investing would risk the customer seeking alternatives.
• Not an assembly business: Management pushed back on the comparison to low-margin assembly, emphasizing the high complexity and value-add done in-house, which underpins confidence in sustaining 20% EBITDA margins at maturity.

Aravind Melligeri: "It's not like assembly business. So, that's what I want to bring the differentiation and communicate to you. It's a highly complex, you know, huge amount of value-add on these products, what we do in-house."

Aerospace Segment: The Growth Engine

• 27% revenue growth, 76% EBITDA growth: Aerospace delivered ₹1,046.4 crore revenue with EBITDA of ₹281.3 crore in FY26. ROCE improved to 20% from 14%, demonstrating the ability to scale efficiently within the existing ecosystem.
• SKU expansion at pace: The portfolio expanded 26% to 5,654 SKUs, with 433 new parts added in Q4 alone. Surface treatment capabilities, built over 15 years, enable Aequs to deliver 100–150 new parts per month, a rate management calls unmatched in the region.
• Engine components: a FY28 story: The 25–30% FY27 growth guidance is predominantly aerostructures-driven from the Belagavi cluster. The engine components business, including the new Hosur ecosystem, will start contributing revenue only from FY28.
• Margin philosophy is deliberate: Management believes current aerospace margins are at the right level for the global competitive environment. Increasing margins would reduce the win rate, so the focus is on achieving the right ROCE and growth combination rather than margin maximization.
• Ecosystem as competitive advantage: The integrated Belgaum cluster provides ESG benefits by minimizing part travel and gives customers confidence to award more work, creating a long-term relationship with a large order book tail.

Aravind Melligeri: "That's a definite MOAT for us as a company. We have invested over the last 15 years to get there."

Working Capital & Balance Sheet

• Inventory build is precautionary, not structural: Net working capital days increased to 151 from 132, driven by revenue growth and a 4–6 week precautionary inventory build ahead of West Asia crisis logistics disruptions. Sea logistics increased by 5–6 weeks, air by 6–8 days. Management expects elevated inventory for another two quarters until stabilization.
• West Asia crisis: limited margin impact: Material prices are largely covered under long-term agreements, and plastic material price increases on the consumer side are passed through via back-to-back agreements. Some supply constraints and slight logistics cost increases occurred but were not material.
• FY27 capex plan: ₹500 crore for consumer and ₹160 crore for aerospace, funded through a mix of debt and internal accruals. Management declined to provide the split between the two funding sources.
• Depreciation and interest trajectory: The Q4 depreciation run rate of ₹45–46 crore will continue plus additions during the year for capacity enhancement in both segments. Interest costs are expected to decline compared to the previous year.

Strategic Expansion: Hosur & Karnataka

• Hosur: India's first fully integrated aero-engine ecosystem: The MoU with Tamil Nadu commits ₹1,900 crore over 10 years for a 250-acre vertically integrated aerospace manufacturing ecosystem covering aero engine and landing gear components. This is a greenfield build that extends Aequs beyond its Belagavi base.
• Karnataka: deepening the home cluster: The ₹2,856 crore MoU over five years covers aerospace precision engineering expansion and consumer segment capacity enhancement across existing Belagavi and Hubballi clusters.
• Engine ecosystem built on aerostructures credibility: Management noted that success in aerostructures gives customers the confidence to help Aequs build the engine ecosystem, reflecting the relationship-driven nature of aerospace supply chains.

Aravind Melligeri: "This will be India's first fully vertically integrated aero engine and landing gear components manufacturing ecosystem."

People & Leadership

• CFO transition underway: Dinesh Iyer will step down at the end of June 2026 for personal reasons. Harish Bang will serve as in-charge and single point of contact while a search for a replacement proceeds.
• Key consumer hire from Apple: Ravi Kumar Assudani joined as head of engineering for the consumer segment effective Q1 FY27, bringing over 16 years of experience at Apple Inc. leading global tooling and manufacturing design operations.
• R&D partnership with IIT Dharwad: An advanced materials R&D ecosystem has been established focusing on material characterization, failure analysis, and manufacturing process simulation, reflecting a long-term commitment to strengthening India's advanced manufacturing ecosystem.

Guidance & Commitments

Key Metrics