Centum Electronics Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record standalone revenue, margin miss: Standalone revenue grew 26% YoY to ₹344 cr in Q4 (25% for the full year to ₹973 cr), but EBITDA margin of 12.42% fell short of the 13%-15% guided range due to EMS product mix.
• Overseas restructuring nears completion: Canada operations discontinued, French subsidiary in court-supervised sale with final bids expected shortly; divestment substantially concluded by July 2026, with no realization expected and no further exceptional losses anticipated.
• Marquee AESA radar win secured: A ₹570 cr+ AESA radar program from HAL for the UHM platform was won, spanning development through execution till FY30-FY31, anchoring the BTS order book.
• BTS order inflow slowed, spillover expected: BTS standalone order inflow was only ~₹470 cr (low growth ~4%) as some programs took time to conclude; a majority of spillover orders are expected to book in Q1 or Q2 of the current fiscal.
• What to watch next quarter: Whether the spillover BTS orders actually book in Q1, the pace of EMS margin recovery from a better product mix, and the timing of European subsidiary deconsolidation.

Overseas Restructuring: The Clean-Up

• Canada discontinued: Operations were discontinued in Q4 FY26, and the wind-up process is now in progress.
• France in court-supervised sale: The French subsidiary entered redressement judiciaire (legal restructuring) in March 2026. Multiple preliminary bids have been received, final bids are expected shortly, and the divestment process is expected to be substantially concluded by July 2026, subject to court approval.
• No realization expected: Management does not expect any realization from the European asset sale. The balance sheet carries significant liabilities held for disposal, with liabilities exceeding assets by over ₹100 cr.
• No further exceptional losses: No exceptional items or one-time losses are expected from European subsidiaries hitting the consolidated books in the next fiscal year. If a cessation-of-control event triggers in Q1, consolidation may cease in Q1 or Q2.
• Discontinued ops loss trajectory: The Q4 loss of ₹33 cr included several one-time items. The Q1 loss is expected to be lower, possibly not even at that range. Deconsolidation is likely by Q1 or, worst case, Q2.
• Strategic rationale: Overseas subsidiaries had been masking the standalone India business performance. The decisive step to restructure and exit those businesses allows management to focus on the India ESDM platform.

Nikhil Mallavarapu: "I think it's been a landmark year for us. We have taken the tough decisions of making the strategic calls with regard to underperforming overseas subsidiaries."

BTS: Defense & Aerospace Driving the Story

• Segment growth: BTS revenue grew ~37% YoY, driven by strong execution across space-based payload programs, radar subsystems, subsystems for land and missile programs, and other strategic defense and aerospace platforms.
• Marquee AESA radar win: The company secured an AESA radar program from HAL for the UHM platform, with an opportunity size exceeding ₹570 cr over the project lifecycle. The development phase is ~₹66-67 cr over 2 years, with the remaining ~₹500-plus cr for execution till FY30-FY31. This is a full turnkey radar system delivered to HAL.
• Second complete radar system order: A second complete radar system order was secured, this one for a satellite and space debris tracking application, a long-range, high-power radar system worth ~₹30-odd cr.
• Virupaksha order: A development order was won for 2 of 4 critical subsystems (antenna array and exciter-receiver) of a full radar, valued at less than ₹10 cr.
• Order inflow slowdown, spillover expected: BTS standalone order inflow was only ~₹470 cr (low growth ~4%) because some programs took time to conclude and orders got released. A majority of spillover orders are expected to book in Q1 or Q2 of the current fiscal. Despite the low inflow, the book-to-bill ratio remains healthy, with ~₹400 cr booked against ~₹250 cr in revenue.
• Order book trajectory: The BTS order book has grown at a 32% CAGR over 3 years, and that trajectory is expected to continue with increased focus on the BTS segment. BTS orders typically have a 2-2.5 year execution period.
• Management bandwidth: The release of management bandwidth from overseas restructuring will not have an immediate impact on next year's revenue due to the long-cycle BTS business model, but it should yield more results in the near future for order booking and long-term growth.

Sundararajan P.: "The management bandwidth that could get focused on the BTS will only yield more results in the near future in terms of order booking for the year or the next year and the further growth on a long-term basis."

EMS: Growth with Margin Pressure

• Segment growth: EMS revenue grew ~21% YoY, supported by a successful ramp-up with a leading semiconductor equipment OEM, new business wins across industrial electronics, electrification, grid automation, and defense export programs.
• Margin profile: EMS segment margins are pegged at 9%-10%, occasionally reaching ~11% before resetting due to price pressure, since the business operates largely on a cost-plus contract manufacturing model. Initial ramp-up quarters may have tighter margins that normalize over time.
• Margin shortfall driver: The standalone EBITDA margin of 12.42% for FY26 fell below the 13%-15% guided range primarily due to product mix in the EMS business. Management had anticipated a better product mix last year, some of which will now execute in the current financial year.
• Supply chain bottlenecks emerging: Bottlenecks are appearing in EMS, especially in copper clad laminate (affecting PCB lead times) and memories (due to AI data center demand). Lead times have increased, but supplies continue as per requirement with advance ordering.
• Middle East war impact: Short-term logistics delays occurred at the end of Q4, but no major supply disruptions directly from the war. Some opportunities are emerging from the region.

Sundararajan P.: "It is fairly pegged at between 9% and 10% or in some cases, if we get lucky, briefly, it will be at around 11%, then it will again get reset due to the price pressure because we operate on a cost-plus basis, right, largely, it's a contract manufacturing."

Nikhil Mallavarapu: "We had initially anticipated a slightly better product mix in the last year. Some of this will be executed in the current financial year. And with that, we should see better margin from the EMS business in the current year."

Semiconductor & New Customer Discussions

• Anchor customer ramp-up: Revenue from the semiconductor segment is progressing broadly in line with expectations for growth, with major growth coming from the anchor customer.
• New customer discussions begun: Preliminary discussions have begun with a couple of other customers beyond the anchor customer, though these are at an early stage.
• 80+ new product introductions: The company completed more than 80 new product introductions during FY26, supporting faster customer ramp-ups and new business wins.

Financial Health & Capital Allocation

• Working capital improvement: Adjusted net working capital days improved to 142 from 159, driven by better working capital management.
• ROCE improvement: Adjusted ROCE improved significantly to 21.16% from 12.40%, reflecting stronger profitability and improved capital efficiency.
• FY27 capex: Expected to be ₹40 cr to ₹45 cr, with roughly 50% or slightly higher allocated to the BTS segment for R&D capabilities.
• Manufacturing expansion: Continued investments were made in manufacturing capability expansion, including additional lines, process automation, and systems integration capabilities.
• Discontinued operations classification: Canada results were moved to discontinued ops in Q3 FY26, and European subsidiaries were moved to discontinued ops in Q4 FY26. Goodwill and intangible assets impaired in Q3 were reclassified under discontinued ops.

Guidance & Commitments

Key Metrics