Canarys Automations Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Strong top-line, margin dip on investment: Total income grew 19% YoY to ₹90.6 crores, while EBITDA margin softened to 15.5% as the company funded team expansion, solution development and global scaling.
• Order book tripled, providing multi-year visibility: The order book surged to ₹165 crores from ₹55.9 crores in FY24, with roughly 85% executable in the next two years.
• Acquisition opens US beachhead: The 51% stake in Fortira Inc, a US-based AI/ML/data consulting firm, closed in April 2025 and is expected to contribute without decline this year.
• Selectivity is reshaping the water business: Water resource management grew 15% YoY but the company is now pursuing only tenders with improved upfront payment norms, prioritizing commercial efficiency over volume.
• What to watch next quarter: Whether the Fortira integration stays on track, the pace of new customer additions, and if margins stabilize as guided while investment spend continues.

Revenue & Profitability

• Technology solutions drove the quarter: Revenue grew 24% YoY, powered by 248 projects delivered across banking, insurance, manufacturing and government, plus 63 new customer additions in new sectors and regions.
• Water segment grew selectively: 15% YoY increase despite a deliberate pullback from tenders with longer payment cycles; the company now only participates where government norms provide 60-70% upfront payment versus the previous 40% structure.
• Profitability held while investing: PAT of ₹8.3 crores at a 9.2% margin reflects a conscious choice to fund rapid growth across multiple buckets, including the Fortira acquisition, business expansion and talent pool growth, rather than optimize margins in isolation.
• Cash flow turned positive: Cash from operations reached ₹3.8 crores, driven by improved operational efficiency and tighter working capital management, while the debt-to-equity ratio stayed conservative at 0.1x.
• Revenue per employee grew: The metric rose despite adding over 100 professionals in engineering, consulting, DevOps and AI roles, indicating orders and margins are intact even as headcount expands.

Srinivas: "With the technology revolution, like AI and data coming in, right, customers also expect quick turnarounds... they want to fail fast or succeed fast. So that's the route everyone is looking at."

Order Book & Visibility

• Order book tripled YoY: The ₹165 crores total splits into ₹105 crores from technology solutions and ₹60 crores from water resource management, a jump management attributes to investments in people, platforms, solutions and partnerships, plus the shift from services to solutions.
• Tenure is front-loaded: Most of the order book is for the next two years; only about 15% extends into the third year, giving near-term visibility while leaving room for new wins in the remaining three quarters of FY26.
• Project duration varies by unit: Consulting projects run 3-6 months while managed solutions are multi-year, so no single constant applies; the AI and data revolution is pushing customers toward quicker turnarounds, and Canarys is adopting tools to raise productivity and deliver faster.
• No internal revenue forecast: Management declined to provide top-line or bottom-line guidance for FY26 or FY27, stating it has not given thought to any ballpark number, though it is bullish and trying to grow at a much faster pace with the acquisition and North American investments.

Fortira Acquisition & M&A Strategy

• Deal structure: Canarys acquired a 51% stake in Fortira Inc, a US-based AI/ML/data/IT consulting company, in April 2025 for USD 0.26 crores, valuing the company at USD 0.5 crores, funded through IPO proceeds and internal accruals.
• Founders stay for continuity: The founders will continue with the company for the next 2-3 years to ensure a smooth transition, but under a different, lower remuneration arrangement.
• Path to full ownership exists: The option to purchase the remaining 49% stake is linked to an EBITDA multiple and is not a put option from the sellers; management will plan on acquiring it after this year, with the current year's focus solely on integration, growing the business and approaching Fortira's customers.
• No near-term deals: No other acquisitions are planned in the next quarter or so, but doors remain open for strategic growth investments.
• Fortira outlook: Management anticipates Fortira will not decline this year and has a good number of projects in its pipeline; the acquisition is 100% on the IT solutions vertical with no impact on water resource management.

Srinivas: "We deliberately want the founders to be with us for the next 2 to 3 years because the transition has to happen smooth. So they will continue to be with us for the next 2 to 3 years, but there is a different remuneration arrangement with them."

Partnerships & Capabilities

• Microsoft ecosystem deepened: Achieved advanced specialization partner status in "Accelerate Developer Productivity with Microsoft Azure," plus solution partner designations for data and AI, digital and app innovation, and Azure infrastructure.
• GitHub Co-pilot at scale: As a GitHub co-pilot partner, Canarys has trained over 35,000 developers globally and supported more than 100 enterprise customers.
• Proprietary IP emerging: More than 10 proprietary domain-agnostic solutions have been developed and are now featured on Microsoft Azure, GitHub, SAP cloud and Canarys' own marketplace.
• Partner ecosystem: 15-plus partnerships including 13 OEMs (Microsoft, GitHub, GitLab, SAP, Atlassian, SonarQube, Snyk, LambdaTest and others) and 2 AI-focused alliances.
• Product development underway: The company has identified and started working on a couple of products to scale the business, with good investment directed at North America.

Margins & Investment

• Margin dip is investment-led: EBITDA margin at 15.5% reflects market conditions and strategic investments in team expansion, solution development and global scaling; margins have declined in recent years because the company is in rapid growth mode requiring simultaneous investment across acquisitions, business expansion and talent.
• Water margins carry a working-capital drag: Water resource management margins are similar to IT solutions at roughly 22-25%, but they dip due to working capital requirements and upfront investments.
• Post-Fortira margin outlook: Management expects EBITDA and PAT margins will continue to simulate the last three years' data, at least for this year.
• Promoters back the story: Promoters intend to exercise the warrants issued to them, signaling alignment with the growth plan.

People & Upskilling

• Headcount grew to capture complexity: Over 100 professionals were added between FY24 and FY25 across engineering, consulting, DevOps and AI roles, enabling the company to manage larger and more complex transformation programs.
• AI/ML upskilling is the top FY26 priority: The goal is to empower 25% of Canarians in AI, ML and data skills, building talent from within rather than relying solely on external hiring.
• Broader training push: 35% of Canarians are training to the next level in technology and solutioning, part of the Vision 2028 pillar of constant upskilling.

Guidance & Commitments

Key Metrics