Zetwerk Q2 FY27 Earnings Call: Guides 60-70% EBITDA Growth, Record Backlog Hits Rs. 14,500 Cr

First Call Since Listing: Margin Expansion Outpaces Revenue

• Q2 FY27 revenue grew 12% QoQ — gross profit grew 39% QoQ, with gross margin at ~15% versus 13% a year earlier and 12% in Q1 FY27 (Amrit, Founder & CEO).
• Adjusted EBITDA of Rs.171 crore (excluding non-cash ESOP) was up 66% QoQ and above the year-earlier level, attributed to operating leverage as most costs are upfront people costs in software and product engineering.
• H1 FY27 revenue grew 33% YoY with adjusted EBITDA growth of 70%; management expects H2 to be seasonally larger, as in FY26 when H1 was 40% of revenue and 40% of adjusted EBITDA.
• Operating cash flow remained negative but improved ~67% QoQ and 50% YoY; working capital was described as "around 30 odd days" (30-31 days per Ankit as of Q2 FY27).
• Q2 cash PBT was Rs.100 crore positive after adjusting for non-cash charges such as hedging and depreciation; the higher Q2 ESOP charge reflects one-time IPO-related vesting, expected to normalise.
• IPO listed on 23 October — Q2 numbers (as of September) are pre-IPO; the bulk of proceeds is primary, to be used to retire debt.

Manufacturing Leads; Ecosystem Soft on Commodity Prices

• Manufacturing Q2 FY27 revenue of Rs.2,500 crore was up 34% QoQ; H1 FY27 revenue was Rs.4,448 crore (+20% YoY) at 25% gross margin, versus FY26 revenue of Rs.9,400 crore at 19% gross margin.
• Record manufacturing gross margin of 25.5% in Q2 FY27 (versus 22% a year earlier and 23% in Q1 FY27), with segment EBITDA margin at 8.5% versus 6.6% in Q1 FY27; H1 FY27 segment EBITDA was Rs.211 crore.
• Ecosystem segment Q2 revenue of Rs.2,000 crore declined 7% QoQ due to commodity prices, though H1 FY27 grew 50% YoY; gross margin is 2-3% and EBITDA about 1%, with H1 FY27 segment EBITDA of Rs.20 crore.
• Revenue mix (H1 FY27): Energy 64%, precision 22%, capital goods 14% of manufacturing revenue; international rose to 41% of revenue in FY27 versus 30% in FY26.
• Margin mix improving across models: marketplace gross margin moved from 17% in FY26 to 24% in H1 FY27, captive from 23% to 25%, India from 15% to 19%, and international from 28% to 32%; management's eventual goal is a full-year gross margin close to 25%.
• Captive fulfilment was 60% in H1 FY27, with management expecting the mix to skew toward marketplace in H2 FY27; build-to-print is 76% of revenue and own-design ODM 24%.

Record Backlog, Defense Inflection, US AI Capex Exposure

• Order backlog hit an all-time high of Rs.14,500 crore at Q2 FY27 (+67% YoY; Amrit later cited Rs.15,000 crore), covering roughly the next 3 years, with ~46% international and ~33% ODM.
• H1 FY27 order wins of Rs.7,800 crore (+50% YoY; Amrit later cited Rs.8,000 crore) at a typical win rate of about 20%; revenue coverage (backlog plus new orders divided by current-year revenue) is roughly 3 years.
• Defense inflection: Amrit said Zetwerk already has "1500 to 2000 crores" of aerospace, defense and precision orders from defense PSUs, space companies and private firms, versus almost none a year earlier (FY 2025-2026), after 3 to 5 years of category-building work.
• US AI capex exposure is 10-20% of the order book as of Q2 FY27, which Amrit described as diversified across other growth options; thermal power, renewables, and aerospace and defense in India are growth drivers that "fundamentally did not exist last year" (FY 2025-2026).
• Rs.500-1,000 crore of solar orders won in H1 FY27 from largely domestic customers in India; the company had not yet seen an impact from the solar regulatory changes on its book, and Amrit said regulatory discontinuities typically impact for "a couple of quarters at best."
• Repeat customers contributed 80% of revenue (Amrit's opening figure; 83% in the later slide discussion), with customers placing larger orders each year.
• Geographic focus is India and the US for now — Amrit said the company would wait for China decoupling in Europe before seriously considering Europe as a market, and described data center capex in India as not yet begun.

Captive Margin Headroom, Supplier Utilization, Zetwerk OS

• Captive pricing at "6% market price" — Amrit said the captive model has "the full margin headroom to beat pricing up and down," while the marketplace model operates at market price.
• SME suppliers run at "45 to 50% capacity utilization" in India, mainly because they serve one customer; Amrit said lifting utilization to "75, 80%" is the source of Zetwerk's margin in the marketplace model.
• Speed commands a premium: Zetwerk offers transformers in "2 years" against an industry lead time of "3 to 4 years" and charges a premium in such categories, while pricing at market for comparable offerings; analyst Varun Gandhi (Finavenue Growth Fund) concluded the company has pricing power from a deeper value proposition.
• Zetwerk OS spans the full order lifecycle — in-house software built over the last 8 years, covering RFQ pricing, supplier selection, project management, quality, shipping and order-to-cash.
• AI platform "Zeus" analyses customer drawings to recommend suppliers (e.g., comparing vendors with 80% and 50% on-time delivery); Amrit said the company is "not even 1%" into its AI journey, and a tender-to-bill-of-material tool is being embedded across operations.
• RFP response time goal of 24 hours, down from 7 to 10 days — no timeframe was given for reaching this goal.

Supply-Constrained Growth; Management Bandwidth the Binding Constraint

• Business is supply-constrained — capacity is being added through captive and partner networks; the supply model is a matrix of materials and processes with roughly 100 combinations, of which Zetwerk is good at about 10 to 15 (steel fabrication, machining, die casting, injection molding).
• 3,500 employees, ~800 (roughly 20%) in design and engineering as of Q2 FY27; all salespeople are engineers, and engineering expertise matches new customer parts to suitable suppliers (e.g., a Coimbatore die-casting supplier now serving a renewable energy customer).
• Management bandwidth is the main constraint — mature categories such as transformers now have dedicated CEOs tasked with growing faster than the industry; a senior executive from Hitachi heads the transformer business, and one founder has spent "100%" of his time on aerospace and defense for the last 2 to 3 years.
• New categories: near-term low-hanging fruit includes battery energy storage and wires and cables; longer-term projects include space and robotics, which Amrit called a 3-year project.
• New categories start with a 5 to 10 person team and total investment of Rs.1 to 10 crore, and are not material drivers of near-term profitability.
• Rs.10 crore per year from FY 2027-2028 for the next 3 to 5 years — Amrit said the company is willing to invest this to create a $100 million category that does not exist today, viewing the trade-off as worth it.

FY27 Guidance, PBT Inflection and Cash Flow Path

• FY27 guidance: revenue growth of 25-30% and adjusted EBITDA growth of 60-70%, both against FY26 (FY26 adjusted EBITDA of Rs.420 crore).
• FY27 adjusted EBITDA of Rs.650-700 crore implied — Amrit derived this from H1 FY27 adjusted EBITDA of almost Rs.270 crore divided by the 0.4 H1 contribution share, consistent with the FY26 pattern of H1 at 40% of revenue and EBITDA, expected to continue in FY27 "plus or minus."
• FY27 gross margin guided "closer to 21%" on a full-year basis, improving by 100 to 200 basis points a year, with the 25% gross margin mark likely closer to FY 2028-2029.
• PBT positive guided in H2 FY27; finance costs are expected to "materially come down" in H2 FY27 and on a full-year basis in FY 2027-2028 as IPO proceeds retire debt, and ~Rs.30 crore of interest allocation to discontinued operations will not recur.
• OCF: full-year FY27 "neutral to positive" (Ankit), with OCF positive "for sure" from FY 2027-2028 onwards; Amrit noted TTM OCF was negative Rs.150 crore as of Q2 FY27, which differs from the full-year view.
• Discontinued operations: provisions were taken in FY 2025-2026 and Q1 FY27, with no further provisions or losses guided; the segment was operationally break-even in Q2 FY27 and will be consolidated over the next three quarters.
• Order book to grow faster than revenue (period unspecified) per Amrit's overall guidance; no sub-category guidance is given because defense is "notoriously cyclical," and US shipments are being rerouted around Africa due to the Middle East crisis, causing delays.