AEQUS Q2 FY27 Earnings Call: Order Book Hits $1.1 Bn, Consumer Break-Even Timeline Withdrawn

AEQUS held its Q2 FY27 earnings call on October 26, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Top Line, Margin Compression from Consumer Ramp

• Q2 FY27 consolidated revenue of Rs.4,091 million — up 45% YoY and 3% QoQ; H1 FY27 revenue of Rs.8,046 million grew 50% YoY, with aerospace up 42% and consumer revenue more than doubled.
• Consolidated EBITDA of Rs.245 million at 6% margin — vs 16% in Q2 FY26; management stated the two periods are not directly comparable due to the consumer ramp-up. Sequentially EBITDA rose 14% (6% vs 5% in Q1 FY27), partly supported by other income rising from Rs.67 million to Rs.106 million on forex movement.
• Q2 FY27 net loss of Rs.522 million — broadly stable vs Rs.532 million in Q1 FY27; H1 FY27 net loss of Rs.1,054 million vs Rs.167 million in H1 FY26, reflecting higher depreciation (Rs.347 million), tax expense up Rs.135 million, and finance cost up Rs.37 million.
• Aerospace contributed 86% of Q2 FY27 revenue — (84% in H1 FY27); Q2 aerospace segment revenue up 44% YoY to Rs.3,514 million with EBITDA up 24% YoY to Rs.783 million at ~22% margin.
• Consumer Q2 revenue up 52% YoY to Rs.577 million — but segment EBITDA loss widened to Rs.401 million (vs Rs.77 million loss in Q2 FY26), attributed to post-commercial-launch expensing of new-capacity operating costs, new product variant costs, and higher ramp-up headcount.
• Net working capital days improved 15 days to 136 — in H1 FY27 from 151 at March-end FY26, though absolute working capital requirements increased; inventory rose Rs.1,157 million on aerospace growth.

Order Book Builds; Safran Agreements and Hosur Ecosystem

• Aerospace order book of US$1.1 billion, up 9% in Q2 FY27 — with a typical execution life of 5-7 years, progressing year-by-year based on customer demand; a signed 15-year contract was cited as an exception.
• New long-term agreements with six Safran entities — signed subsequent to Q2 FY27, broadening scope across critical aerospace components and including a landing gear track for the upcoming Hosur ecosystem; commercialization from these orders is expected to begin in FY29.
• Hosur spans a 250-acre SEZ and DTA site — extending the integrated model beyond Belagavi aerostructures into aero engine and landing gear component manufacturing; per the indicative roadmap, first-phase investment begins in Q4 FY27 and commercial production starts in FY29.
• 238 parts added in Q2 FY27 (+4% QoQ) — taking the portfolio to 5,978 products; 9 CNC machines installed, taking the fleet to 229 machines and 2.12 million annualized machining hours.
• Aerospace utilization at 69% in Q2 FY27 — up 8% YoY and 76% in India; management cited healthy program demand and improving utilization, driven mainly by India operations, as supporting operating leverage.
• Aerospace EBITDA growth lagging revenue — management attributed the gap to a higher other-income share in the year-ago period (FY 2025-2026), incremental SG&A/front-end investment to support 40-50% aerospace growth, and rising titanium content in the mix; framed as a timing issue, not a change in trajectory.
• Safran contracts involve predominantly Inconel and other super alloys — several such parts already machined at the existing Balagani facility; the upcoming Fashur facility will focus on titanium, super alloys and steels targeted at engines and landing gears.

Break-even Timeline Withdrawn; Utilization Slips

• Consumer EBITDA break-even milestone recalibrated — management had earlier guided for consumer EBITDA positivity by Q4 FY 2026-2027; no revised date was provided, pending scenario work on learning-curve pace in consumer electronics and the volume ramp-up with Metal in toys. Management stated the fundamentals of the plan are unchanged — only the pace has changed.
• Consumer electronics/toys utilization fell to 17% in Q2 FY27 — from 22% in Q1 FY27, on a longer-than-assumed consumer electronics qualification cycle (with capability built in-house) and toys supply-chain disruption compounded by weather-related logistics disruption.
• Management maintained the 40-50% utilization target — guiding to around 50% utilization by Q4 FY 2026-2027 (Rajiv Kaul); ~50% utilization has been communicated as the consumer EBITDA break-even point (period unspecified).
• Consumer EBITDA loss widened to Rs.401 million in Q2 FY27 — from Rs.361 million in Q1 FY27, driven by a Rs.151 million sequential revenue decline from Rs.734 million to Rs.577 million (Deputy CFO Harish Bung); attributed primarily to a largely fixed short-term cost base against lower volumes.
• No qualification issue in consumer electronics, per management — qualification has already happened; the recurring need arises because products change every year. Qualification cycles are typically a one-year process (sometimes extending to two years), and Aequs is actively shortening them.
• Toys customer transition in progress — the legacy toys customer is expected to be fully phased out within Q3 FY 2026-2027; Metal toys production is expected to begin scaling in Q3 FY 2026-2027, with the toys business "almost completely" metals-driven only from Q4 FY 2026-2027.
• Majority of consumer losses attributable to ATP — from a scale-of-investment perspective (vs toys); no percentage split or breakeven revenue level was disclosed, and management offered to revert separately on the fixed/semi-fixed cost breakdown.

Rs.6,500 mn Promoter Infusion; Capex Recalibrated Toward Aerospace

• Promoter group committed Rs.6,500 million via preferential warrants — announced with Q2 FY27 results, to support Hosur aerospace ecosystem development, capacity expansion, strategic JV investments, and working capital; Rs.3,250 million (50%, above the required minimum 25%) payable upfront on allotment, with the balance committed to be paid by end of December FY 2027-2028.
• Of the Rs.650 crore funding, Rs.289 crore allocated to capex — (existing aerospace Belagavi, Hosur, plus some consumer), Rs.100 crore to working capital, and Rs.100 crore to JV investments and new strategic initiatives (Belgaum and Hosur), with the balance toward general corporate purposes (Harish Bung).
• The Rs.650 crore is a contribution toward term loans — with the company planning about Rs.800 crore of term loans to support overall capex requirements (period unspecified), per Arvind Melligeri.
• Potential FY28 external fundraise "might be required" — CEO Arvind Melligeri said a capital raise in FY 2027-2028 remains possible in addition to the promoter infusion, given consumer loss-funding needs and aerospace acceleration.
• Capex deployment recalibrated — FY 2026-2027 capex guidance was initially Rs.660 crores, but management indicated it may end up "much lesser"; H1 FY27 capex actual was about Rs.160 crores, deployed predominantly toward aerospace. Consumer capex will be limited to capability enhancement for the time being.
• Balance sheet levers up — net debt-to-equity at 0.5x vs 0.2x at March-end FY26; borrowings increased Rs.1,576 million since March-end FY26; cash balance of Rs.1,710 million at H1 FY27-end; H1 FY27 capex of Rs.1,597 million.
• Proposed amalgamation of three wholly owned subsidiaries not approved — under the fast-track route on technical grounds; management is evaluating next steps and stated the internal restructuring has no material impact on ongoing business operations.

Deliberate Inventory Build; Normalization Expected Q1 FY29

• Inventory buildup in Q1-Q2 FY 2026-2027 flagged by analyst Priyankar Biswas (JM Financial) — partly citing West Asia crisis disruptions; management explained it had deliberately pulled in material earlier, especially for aerospace where orders are placed 3-4 quarters out.
• Inventory unwinding is "always like a 6 months to 9 months affair" — management expects inventory levels to normalize around Q1 FY 2027-2028.
• Targeting ~120 days inventory (period unspecified) — with the company growing at ~50% in FY 2026-2027, more first article inspections (FAIs) will require continued material inflows.
• Air freight and belly cargo: a "new normal" has set in — availability is largely settled but with some cost increases; Co-founder Rajiv Kaul added there is an increased lead time for logistics.
• Titanium is a pass-through — aerospace-grade processed from sponge, predominantly 6AL4V grade; management confirmed any further increase in titanium consumption cost would be a pass-through and "should not" impact margins. Aequs is "one of the largest titanium buyers in the country" with 1,000+ titanium parts across programs spanning the 787 and other Airbus programs.

Long-Term Targets Reaffirmed; Near-Term Guidance Under Review

• 4-6x growth guidance by 2031 reaffirmed — Arvind Melligeri reiterated the 4 to 6x growth guidance by 2031 (FY31), stating "we stand by that," with capital deployment required across both consumer and aerospace; aerospace is accelerating faster than anticipated.
• Aerospace on track for FY 2026-2027 — CFO Reena Joseph stated aerospace is "pretty much on track" for its FY27 growth plans, with two agreements signed during FY 2026-2027 in line with the growth potential; no updated aerospace revenue/EBITDA figures were provided on the call.
• Consumer PAT positivity guided for FY30 — previously communicated by management; Arvind Melligeri framed this as a longer duration given significant existing commitments. Vikas Singhvi referenced an earlier target of PAT break-even by end of FY 2026-2027.
• No revised FY27 consumer guidance provided — Reena Joseph said the consumer scale-up plan is being recalibrated due to internal, external and learning-curve factors, with management to revert by year end. No specific ATP portfolio yield or failure-rate figures were disclosed despite the analyst's request.
• Management declined to break out aerospace revenue for FY27-FY29 — as requested by an analyst; instead reiterated the 5x growth guidance by 2031.
• Management not adding 3D printing capabilities — despite the OEM customer progressively shifting toward additive/3D printing technology; Arvind Melligeri said Aequs is comfortable with its current capabilities, noting every new capability requires a separate business case.
• Reena Joseph joined as CFO — bringing nearly two decades of experience across corporate finance, capital markets, M&A, and investor relations.