Zen Technologies Ltd (ZENTEC) Q2 FY27 Earnings Call: Record Revenue Nearly Doubles YoY, Reaffirms Rs. 1,200-1,300 Cr Guidance

Zen Technologies Ltd held its Q2 FY27 earnings call on October 31, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Quarter, But Growth Is Back-Loaded

• Q2 FY 2026-2027 revenue of Rs.345.1 crores — a record quarter, up 98.8% vs Rs.173.6 crores in Q2 FY 2025-2026 and more than double Q1 FY 2026-2027's Rs.141.6 crores; management attributed the beat partly to some Q1 revenue spilling into Q2 (quantum not disclosed).
• Q2 EBITDA of Rs.132 crores at 38.2% — vs 37.3% in Q2 FY 2025-2026 and 27.3% in Q1 FY 2026-2027; PAT of Rs.89.5 crores, up 50.7% YoY.
• H1 FY 2026-2027 revenue of Rs.486.8 crores — up 46.7% YoY; H1 EBITDA of Rs.170.7 crores (35.1% margin, in line with guidance); H1 PAT of Rs.124 crores vs Rs.107.2 crores in H1 FY 2025-2026.
• Margins normalized toward guidance — management continues to guide a full-year FY 2026-2027 operational EBITDA margin in the mid-30s; the CFO noted ADS typically carries a higher margin profile than simulators, so mix drives quarter-to-quarter variation.
• Expense efficiency — employee and other expenses together fell to 24.4% of revenue in Q2 FY 2026-2027 from 26.3% in Q2 FY 2025-2026, despite performance incentives and R&D headcount ramp in AI/emerging product areas; warranty provisioning was Rs.9.3 crores higher YoY on a higher ADS mix.

FY27 Guidance Reaffirmed; Longer-Dated Targets Softened

• Order book of Rs.1,375.7 crores at 30 September 2026 — equipment Rs.994 crores and AMC Rs.380.7 crores; Q2 inflows of Rs.481.8 crores exceeded execution of Rs.345.1 crores, growing the book from Rs.1,239 crores.
• FY 2026-2027 revenue guidance of Rs.1,200-1,300 crores reaffirmed — Rs.485 crores (Rs.486.8 crores H1) already achieved, with the balance expected across Q3 and Q4 FY 2026-2027; management said it should achieve "a little more" than the range.
• Rs.4,000 crore two-year top-line guidance not reaffirmed — the analyst cited prior guidance of Rs.1,500 crore in FY27 and Rs.2,500 crore in FY28; management declined to confirm, saying it can guide better closer to Q4 FY 2026-2027 and cannot currently say what FY 2027-2028 turnover will be. Conditionally, a ~Rs.3,000 crore order book (analyst's scenario, by end of FY27) "should be a good ground for us to give very good numbers."
• Rs.2,500-3,000 crore order book target by March 2027 explicitly disavowed — management clarified it had only indicated a possibility of some orders if FTPs are concluded, without attaching a number; it did not recommit to last quarter's (Q1 FY 2026-2027) Rs.2,500 crore order book figure, citing government process delays.
• Execution confidence — management does not foresee deferment or delays in executing the existing order book and said the operations team could comfortably execute even if the load doubled; typical execution timelines run 12-18 months from order receipt.
• Working capital flag — the cycle extended to 379 days at 30 September 2026 from 255 days at Q1 FY 2026-2027 end; H1 net operating cash flow was negative, funded entirely from own resources. The analyst noted receivables and inventories rose ~2 to 2.5x; management did not directly address this.

Counter-Drone Orders Still Pending; FTP Is the Swing Factor

• No C-UAS orders in hand yet — counter-drone tenders have not been floated despite multiple AONs; FTP approvals have happened and management expects tenders/RFPs within 1-2 months (around Q3 FY 2026-2027), with procurement typically completed by March (end of FY 2026-2027).
• Capital acquisition route is slow — management expects this route to take at least 2-3 years to play out into placed orders, i.e., not before FY 2028-2029.
• CUS tender/FTP conclusion expected at the earliest in Q4 FY 2026-2027 — if missed, it could slip into Q1 FY 2027-2028 or, worst case, Q2 FY 2027-2028; management noted it has historically never gone beyond Q2.
• ~70-80% of the CUAS market addressable — Zen skips very low-end systems (individual shops/farmhouses) and builds high-end, made-for-war systems; competitors may win some contracts where tender specs are not stringent.
• TAM context — the analyst cited CFO Hariharan Chalat's earlier reference to a 150 billion CUAS TAM over the next 2 to 3 years (FY 2027-2028 to FY 2029-2030); Ashok Atluri called it "a very huge number" and said the market, including globally, is growing extremely fast.
• Spec-framing risk — the government wants to be "very wise" in framing specs as requirements are highly evolving; the biggest challenge will be whether procurement goes to an Indian company with Indian IP or to a collaborator reselling foreign goods.
• Middle East: nothing advanced — talks are ongoing with some Middle East governments "especially those friendly to us," but as of the Q2 FY 2026-2027 call no orders have come through; management cited the cost asymmetry of a $20,000 Shahid drone versus $4 million spent to block it.

Full-Stack IP, HyperStrike Ramp, Naval Opening

• 100% homegrown C-UAS command-and-control — fully owned by Zen and its subsidiaries, integrating detectors, radars, jammers, EO cameras and remote-control weapon stations with nothing outsourced; radar systems including ASAR are 100% in-house with all algorithms developed internally. Management said the product the armed forces see will be "completely different" within the next 3-6 months (Q4 FY 2026-2027 to Q1 FY 2027-2028).
• HyperStrike: no orders yet; first revenue expected in FY 2027-2028 — CFO Hariharan Chalat expects the first order and revenue in FY28, with the majority of orders and production ramp-up in FY29 (FY 2028-2029); capacity of ~15,000 units/month on three shifts (180,000 units per annum at full ramp), sized at close to $1-1.5 billion of annual capacity at an assumed ~$10,000 average price, phased from ~600 units/month.
• Naval CTCs: a newly opened market — the ARI and AnaWave acquisitions together provide a complete suite of marine simulators (AnaWave bringing rare submarine and fast-craft simulators); orders are yet to come, but management expects the pipeline around choke-point training, sea-mine handling and shipboard counter-drone simulators to grow "really big" over the next 3-4 years.
• Cognit acquisition (tank guidance/command and control) — management called it "one of the best acquisitions" and expects it to become a significant revenue contributor at least five years from now (FY 2031-2032 or later); its sensor-stitched common picture can also be used across Zen's other simulators.
• R&D intensity at 12% of revenue in FY26 — management expects FY 2026-2027 R&D spend to remain in a similar range; acquisitions are also effectively IP purchases, typically targeting companies with 10-15 years of accumulated R&D. The company has applied for more than 235 patents, with grants arriving roughly every 10 days.
• "Pareto technologies" framework — management focuses on the 20% of technology delivering 80% of the outcome in war, citing the Israel-Iran war as won by the Shahed drone (0.1% of equipment winning 99% of the war); focus areas are command and control, space, and robotics/automation (via Bhairava Robotics).

Geopolitics Delayed Deals; US/Europe Optionality in FY28

• Export orders disrupted by the Iran-Israel war — negotiations that were almost on the verge of signing were derailed; management expects some export orders over H2 FY 2026-2027 from the Middle East, CIS countries and possibly Southeast Asia, unquantified.
• US entry targeted for FY 2027-2028 — Zen is working through US compliance requirements (described as one of the most difficult markets to penetrate) and is in talks with a couple of large primes on collaboration within the US defense legal framework; management expects something to materialize probably in FY 2027-2028.
• Europe: SAFE regulation requires 65% local content — Zen is talking to large players on both C-UAS and simulators, with European interest notably in Zen's simulators for Russian equipment; management expects positive developments by the beginning of FY 2027-2028.
• Europe/America framed as aspirational, not guidance — management views them as "really good and interesting markets" in the long term; a breakthrough there would be a "very pleasant positive black swan."
• CUAS exports slow so far — one export order won a couple of years back; based on positive Indian Armed Forces feedback on systems working at very high altitude, management expects really good orders when the FTP process happens.

Balance Sheet Strong; Watch the FTP Clock

• Debt-free with ~Rs.968 crores of cash and bank balances — the working capital build was funded entirely from own resources; management noted receivables are recent and largely against government and defense contracts where collection risk is low.
• Capex of ~Rs.150 crore budgeted for FY 2026-2027 — with a similar amount for FY 2027-2028, covering both infrastructure and R&D (CFO Hariharan Chalat).
• Simulator pipeline of ~Rs.400 crore expected in FY 2026-2027 — management is "reasonably sure" on this (materializing ahead of Q4 FY 2026-2027, though conversion is taking time); it is "not so sure" on counter-drone order timing given government processes.
• Bulk of new orders over the next 6-9 months expected to be counter-drone systems — per management, with the previously indicated Rs.400 crore of simulator orders confirmed (period unspecified for that figure).
• FTP execution window — if the FTB order is received in Q1 FY 2027-2028, "maybe a major part" could be executed within FY 2027-2028; receipt in Q2 FY 2027-2028 would mean a lesser portion, with most orders executed within 12 months of receipt.
• Domestic demand broadening — the government is "really seized of the matter" and trying to protect key installations and infrastructure projects beyond border areas; Zen is interacting with a few customers in this regard. Management also expects H2 FY 2026-2027 to be "reasonably good" with revenues "reasonably assured" from the existing book.