Azad Engineering Q2 FY27 Earnings Call: Rs. 6,500 Cr Rolling Order Book, Guides Rs. 1,300 Cr+ Run-Rate By FY28

Azad Engineering Ltd held its Q2 FY27 earnings call on November 06, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Revenue Quarter, But PAT Compressed by Investment-Phase Costs

• Q2 FY27 standalone revenue of Rs.187.8 Cr — highest-ever quarterly revenue, up 31.6% YoY (vs Rs.142.7 Cr in Q2 FY26) and 10.1% QoQ (vs Rs.170.5 Cr in Q1 FY27); consolidated revenue was Rs.190 Cr (+31.1% YoY).
• EBITDA grew 37.1% YoY to Rs.70.4 Cr at a 37.5% margin (+150 bps vs 36% in Q2 FY26, in line with 37.6% in Q1 FY27); gross margin before depreciation rose 150 bps to 45.2% on operating leverage, local sourcing and backward integration.
• PAT of Rs.30.8 Cr at a 16.4% margin — PBT margin compressed from 32.8% to 21.9%, which the CFO attributed entirely to non-operational items: 6.4pp from other income, 4% from depreciation, 2% from finance costs.
• Other income fell to Rs.4.7 Cr (vs Rs.12.7 Cr in Q2 FY26), depreciation doubled to Rs.21.8 Cr after Rs.251 Cr of assets capitalized in H1 FY27, and finance costs rose to Rs.12.2 Cr (vs Rs.6.4 Cr); EBITDA covers finance costs 5.8x.
• Employee costs of Rs.50.3 Cr (vs Rs.32.5 Cr in Q2 FY26) reflect hiring ahead of revenue; management stated this phase is "largely behind us."
• H1 FY27 standalone revenue grew 29.3% to Rs.358.3 Cr, ahead of the >25% guidance; H1 PAT grew 6.6% to Rs.67.2 Cr (18.7% margin); tax of Rs.10.3 Cr at a 25% effective rate (H1 rate of 17.2% includes a one-time Rs.4.3 Cr deferred tax credit from regime migration).
• Q3 and Q4 FY27 will each carry a full quarter of depreciation for the two GE Vernova facilities inaugurated in September 2026 — depreciation steps up once more before stabilizing.

Rs.6,500 Cr "Rolling Order Book" — Management Pushes Back on Backlog Framing

• Order book of ~Rs.6,500 Cr as of Q2 FY 2026-2027 — Whole-Time Director Vishnu Malpani characterized it as a "rolling order book" of recurring annual demand across product lines, not project-based; management explicitly corrected the "order backlog" framing, saying it represents contracts based on demand customers have provided over the next 5 to 7 years, detailed by product and customer.
• BHEL approved Azad as a long-term source with a two-year rate contract worth ~Rs.52.68 Cr for gas turbine airfoils/blades — described as a strong start for power-sector indigenization in India.
• Baker Hughes agreement extended to 2030; the dedicated oil & gas facility ramp, tied to the customer's delivery plans, adds a growth lever from Q4 FY27.
• Customer recognition in FY 2026-2027 included Baker Hughes' Growth Collaboration Award and GE Vernova's Delivery Partnership Award.
• Management declined to quantify order book step-ups — responding to an analyst's Rs.7,000-8,000 Cr scenario with large new component inflows (e.g., hot section), it said such step-ups will happen but reiterated the rolling-contract framing; no prior-quarter order book comparison was provided.
• Wallet share remains under 2% per customer — management sees a long journey from single-digit to double-digit share and stated customer projections have remained intact since the 2010-2014 qualification/production phase.

All Six Dedicated Facilities Commissioned; Revenue Ramp Starts Q4 FY27

• All six customer-dedicated facilities commissioned — 44,800 sqm built at Tunki and Bolarama for Mitsubishi Heavy Industries, GE Vernova, Siemens Energy and Baker Hughes (GE Vernova now has three dedicated facilities, two inaugurated in September 2026); management stressed no capacity was built speculatively — all anchored to customer contracts.
• Ramp timeline: throughput begins Q3 FY27, supplies start end of Q3 FY27 into Q4 FY27, revenue ramps from Q4 FY27 as qualified parts clear customer acceptance, and all plants are expected fully ramped by H1 FY28 (Q2 FY28 per management).
• Rs.1,300 Cr+ annual revenue run-rate by end of FY28 — CEO Rakesh Chopdar guided the installed capacity should deliver this ARR from FY28 (more than double FY26 revenue); responding to an analyst's Rs.1,800-1,900 Cr total capacity potential estimate, the CEO said ARR is already Rs.1,300+ Cr and will "cross more than that," calling guidance conservative, with an exact range update promised in Q3 FY 2026-2027.
• Delta qualifications running in parallel — management explained delta is a revalidation (not a full qualification) triggered when machines, location or facility change, since customer systems must validate the move and that processes/parts remain as originally qualified.
• Working capital relief in motion — one OEM has agreed to a 50% advance against POs with ~$4.5 million expected (period unspecified); CFO Ronak Chhajed said only ~1% discount was given, with customers instead supporting working capital; bill discounting lines with ICICI Bank and DP World are in reserve, usable from Q4 FY27 onwards.
• Expansion optionality: one or two buildings remain at Tunki for new dedicated facilities, as unnamed aerospace customers seek multi-year bookings under the same dedicated-facility model; Phase 1 at Tumki Balaram is fully done and the Mangampet site is ready for Phase 2 development once current phases complete (post-FY30 land plan).

Aerofoil Qualification in the "Last Leg"; Production Revenue From FY 2027-2028

• Aero engine aerofoil qualification, underway since 2024, is in its "last leg" and almost complete; first qualification batch delivery expected soon, after which parts move into production — an analyst referenced Vishnu Malpani's earlier comment that aerofoil deliveries begin in FY 2027-2028; capex for the commercial aerofoil line is already completed (CEO Rakesh Chopdar).
• Rolls-Royce currently contributes no production-level revenue (existing revenue is non-production); Rolls-Royce has provided 2 engines — once these enter production, the remainder of its engine portfolio moves into qualification, a cycle management explicitly links to its "massive growth" outlook; Pratt & Whitney and Safran follow behind Rolls-Royce.
• Rolls-Royce capex precedent: management invested a large portion of capex in 2024 against two visible engine programs; qualification for these two programs is almost complete and production is starting, while the customer — which has 10-20 engine programs — opens up more only after qualification is through.
• GTRE turbojet program: after delivering India's first indigenous expendable turbojet engine, Azad is positioned for end-to-end manufacture, assembly and integration of complete engine assemblies; testing is ongoing, the second engine is about to be delivered, and management said once an engine flies on the weapon the customer will "really open up" — it is 100% sure it will be "a big one," with production mode "not far away."
• Long-term mix shift: by FY 2030-31, management expects energy to contribute 55-60% of revenue with aerospace & defense taking the remainder; new qualification-led revenue starts flowing from FY 2027-2028.
• Hot section just started with Mitsubishi — described as a "big story" ahead with "super heavy" volumes under an 8-year contract; management may share hot-section replacement-cycle details from Q3 FY 2026-2027 onward.

Front-Loaded Hiring Peaks; Cash Generation Expected From Q4 FY27

• Manpower cost "drastic downfall" by Q4 FY 2026-2027 — CEO Rakesh Chopdar guided costs will decline from Q3-Q4 FY 2026-2027 as revenue flows through installed capacity; labor scales roughly linearly with sales but is hired front-loaded, a cycle that will repeat over the next 4-6 quarters (through FY 2027-2028); an analyst referenced management's earlier indication of hiring 150-200 people/month.
• Margin confidence: management is confident of meeting its long-term margin guidance around Q3 FY27; the CFO separately expressed confidence in returning to FY24 margins/cost-structure percentages (period unspecified).
• Working capital absorbed Rs.157.5 Cr in H1 FY27 (vs Rs.153 Cr in H1 FY26) on a 29% larger business; inventory rose Rs.98 Cr to Rs.425 Cr (Rs.72 Cr of it WIP on new lines in delta qualification, invoiceable only after customer approval); receivables rose Rs.92 Cr to Rs.402 Cr (69% not yet due).
• After-tax operating cash flow was negative Rs.45.8 Cr in H1 FY27, improved from negative Rs.76.5 Cr in H1 FY26; management expects cash generation to begin in Q4 FY 2026-2027 and become consistent from Q1 FY 2027-2028.
• Balance sheet: net worth Rs.1,619.6 Cr; net debt Rs.423.8 Cr (0.26x equity, 1.6x annualized EBITDA); of the Rs.700 Cr QIP, Rs.621.8 Cr is deployed and Rs.78.2 Cr held in FD; H1 FY27 capex was Rs.139.3 Cr; fixed assets incl. CWIP stand at Rs.1,169 Cr.
• Automation roadmap: management is adopting lean manufacturing and targets greater dependence on automation, ERP systems and new tools to reduce manpower dependency as it scales (no specific timeline disclosed).

25%+ Growth Reiterated; Next Capex Phase From FY29

• 25%+ long-term annual growth guidance reiterated (period unspecified beyond "long-term"); management's projections assume 25% growth over the next few years (period unspecified), under which the order book keeps getting consumed and replenished with new contracts.
• Next capex phase planned for FY29 onwards — after current qualifications are completed and the customer opens up additional programs; management may provide more color in Q3 FY 2026-2027 and would go for a QIP as growth materializes or when required (no timeline specified).
• Strategy ahead: gain wallet share with existing customers, serve newer global OEMs, evaluate selective acquisitions for large components and full-stack production, and co-locate with key OEMs; management framed the next six quarters as converting commissioned capacity into revenue and cash.
• No energy slowdown per management — customer projections have remained intact since the 2010-2014 qualification/production phase, and AI-related developments do not affect the business ("we have not come to that level"); the growth calculated for the next 5 years is unchanged.
• Aftermarket visibility is limited — management cannot distinguish whether OEM orders are for aftermarket/MRO or new build; typical cold-section replacement cycles are 10-12 years (gas turbines) and 16-18 years (steam/thermal).
• Unresolved query: an analyst's question on the sharp increase in other operating income in H1 FY 2026-2027 went unresolved (CFO responded on other income instead); the analyst is to follow up offline.