Prostarm Info Systems Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Revenue exploded on a single large order: Revenue grew 141% QoQ as a large CCTNS end-user computing order was executed, but this project-based spike makes the run-rate unsustainable.
• BESS is the real story, but revenue is still zero: The company holds a ₹900 crore BESS order book and a 1.2 GW factory nears commissioning, yet no BESS revenue has been recognized and commercial start waits until Q1 FY27.
• Margins compressed on project mix: EBITDA margin moderated from the prior quarter because the specific projects executed carried a different margin profile; management guides a 12%–15% range going forward.
• The balance sheet flipped to net debt-free: Long-term debt fell from ₹3.4 crore to ₹1.5 crore, and the company is now effectively net debt-free, though operating cash flow stayed negative on project execution.
• What to watch next quarter: Whether the Jhajjar BESS factory commissions on time, any progress on offloading BESS projects to third parties, and whether the core UPS order pipeline converts at the promised 20% rate.

The Quarter’s Revenue Spike: One Large Order, Not a New Baseline

• CCTNS order drove the surge: A large end-user computing order taken in October was executed entirely in Q3, with Prostarm acting as system integrator providing delivery, supply, installation and warranty as an end-to-end solution.
• Project-based lumpiness is structural: The company’s revenue profile depends on execution timing of discrete large orders, so the 141% sequential jump is not indicative of a new quarterly run-rate.
• Core business converts fast: Orders in the core product category carry short execution timelines of 3–6 months, meaning the conversion ratio from pipeline to revenue is very rapid once a win is secured.
• Operating cash flow turned negative: Project execution consumed cash during the quarter, though management notes these projects were done with good margins and expects operating cash flow to turn positive from FY27, with effects starting in Q2.

Ram Agarwal: "We are not going to be conventional or traditional company in this domain. We are working on too many strategies, too many opportunities. We are going to add on at least five to eight verticals in coming months, where each vertical is capable of doing three-digit number. So, it will give us overall good growth and sustainability in the organization for long run."

BESS: The Big Bet, Still Pre-Revenue

Factory and capacity

• Jhajjar facility nearing commissioning: A 1.2 GW BESS assembly and manufacturing plant in Haryana is expected operational by Q4 FY26, with commercial production starting from Q1 FY27.
• CAPEX is modest: Only ₹25 crore is invested in the plant and assembly line itself; the larger requirement is working capital, which management estimates at around ₹200 crore.
• Utilization target: Management is targeting 40%–50% capacity utilization in the next financial year, implying ₹400–₹500 crore of additional BESS revenue if achieved.

Order book and project structure

• ₹900 crore order book, two models: Out of the total BESS order book, ₹40 crore is on an EPC model and the remainder is on a rental model, backed by unconditional LCs from DISCOMs with a 5% penal interest over SBI benchmark rate for delayed payment.
• Two SPVs set up: Separate SPVs have been created for the Karnataka and Bihar projects; OEM and EPC activities sit in the parent company while the PPA and power-selling revenue sit in the SPVs, each with their own margins.
• Revenue recognition is back-end loaded: Revenue from the PPA will generate only from FY27 end, though management is exploring other options that could pull revenue recognition much earlier.
• Project offloading underway: The company is working on two to three options to offload the BESS projects, wanting to remain focused as an OEM, technology and solution provider rather than a developer.

Margins and competitive position

• Conservative margin target: Management expects a minimum 14%–15% EBITDA margin from BESS, calling this a conservative floor while hoping for better.
• Tariff trends are favorable: BESS tariffs have risen almost 20%, from below ₹1.69 to ₹2.15 in the latest auction, and management expects further increases due to supply chain issues from China and China’s reduction in export incentives on BESS from April 1.
• Project pricing is well above market: The company’s BESS projects are priced almost 50% above the lowest market tariff, which management says makes them safe and secure.
• Make in India policy tailwind: Management expects a policy from April 1 making 50% domestic manufacturing mandatory for all BESS tenders, which would create an entry barrier for Chinese imports and support both pricing and volumes for local manufacturers.

Ram Agarwal: "Like today, the lowest level what it has gone, we are almost 50% higher than what has gone in the market on the tariff side. So, our case are very safe and secure. And in terms of VGF also, we are Rs. 27 lakh, Rs. 18 lakh is a going VGF incentive. So, overall, we are much better space, much better and secured space."

Supply chain and integration

• Only lithium cells are imported: The company imports lithium cells (currently from China, with discussions ongoing for local sourcing) and performs all downstream integration — cell to module, module to rack, rack to containerization — at its own premises.
• In-house component strategy: Prostarm is an OEM for PCS and EMS, and is gradually tying up with cooling and firefighting companies to bring those components in-house for integration.
• No cell shortage, only price risk: Management says there is no shortage of lithium cells; the challenge is price volatility driven by geopolitical issues and policy changes in China.

Core UPS Business: Restructuring for Growth

• Ahmedabad facility to replace China imports: A new factory is being set up in Ahmedabad with CAPEX of around ₹6 crore, focused entirely on UPS from 1 kV to 600 kV, with all new plant and machinery. The target is to completely exit importing finished UPS from China by the end of next financial year.
• Three new verticals being targeted: The company is entering the domestic segment (competing with Microtek and Luminous), the IT segment (small UPS for computers), and the power partner segment (selling UPS without integration).
• Technology-led differentiation in domestic UPS: The domestic offering will use inverter with lithium battery only, AI-based software, remote monitoring, and proactive service where the machine itself logs a call when it stops working, with real-time routing to the nearest engineer’s app.
• Pune factory focused on customized solutions: The Pune facility will concentrate on hybrid solar inverters, customized solutions, and PCS for BESS, targeting oil and gas, wells, metro and aviation projects. Regular UPS products are subcontracted to well-known manufacturers to minimize costs.
• UPS is both cash cow and growth engine: Management describes UPS as a cash cow because of its established position, but also a growth engine because the overall market is expanding across all sectors.

Ram Agarwal: "We want to give the service which nobody can match. Like, if machine will stop working then it itself will call log us. Customer do not have to call log us. And the call log in real time will go to our nearest engineer's app. Every call can be monitored. Every customer can see anything and everything... We are going to do out of the box which is not in the market."

Order Book and Pipeline

• Total order book: ₹946 crore across 91 projects, with execution timelines ranging from the current quarter to 18 months; approximately 20% was executed in the current financial year, with the large part falling in FY27 and beyond.
• Bids under evaluation: ₹775.4 crore of bids are under evaluation, providing pipeline visibility; management expects at least 20% conversion from the core segment portion of this pipeline.
• BESS order book composition: Of the ₹900 crore BESS order book, ₹40 crore is EPC and the remainder is rental-model, with projects backed by unconditional LCs from DISCOMs.
• No new BESS bids placed: The company has not bid for any BESS projects in the last six months, choosing to wait for the market to settle while sitting on what it describes as a good BESS order book with handsome margins.
• Other notable orders: Wins from South Central Railway, Steel Authority of India (SAIL), and Hitachi Payment Services were highlighted.

Financial Health: Debt-Free but Cash-Consuming

• Net debt-free: Long-term debt was reduced from ₹3.4 crore to ₹1.5 crore, and the company is now effectively net debt-free.
• Working capital remains stretched: The working capital cycle runs around 150+ days, with receivable days around 190, driven by debtors being booked in the last month of the quarter. Management expects receivable days to come down by year-end FY26.
• Operating cash flow negative: Project execution consumed cash, but management points to good margins on these projects and expects operating cash flow to turn positive from FY27, with effects starting from Q2 and full positivity by Q3.
• BESS working capital strategy: Management is trying to manage BESS working capital by operating like an EPC or OEM, where hardly any major credit is offered, to calibrate the working capital requirement. The estimated BESS working capital need is around ₹200 crore.

Digitization and Systems Build-Out

• SAP B1 and Salesforce being implemented: The company is integrating its entire operation with Salesforce software to strengthen internal controls, operational efficiency and CRM.
• QR codes on products: QR codes have been introduced on products to improve traceability, service responsiveness and customer satisfaction.
• AI-based remote monitoring: AI-based software enables remote monitoring and proactive service, where the machine itself logs a call when it stops working, with real-time routing to the nearest engineer.
• Referral program planned: The company intends to bring a referral scope to every user and customer in coming time, though no timeline was specified.

Guidance & Commitments

Key Metrics