Summary
Allied Digital Services Limited - Q3 FY 2026 Earnings Call Summary Thursday, February 05, 2026 2:00 PM
Event Participants
Executives 5 Gopal Tiwari (CFO), Nehal Shah (Whole-time Director), Nitin D Shah (Founder, CMD), Paresh Shah (Global CEO), Ramanan Ramanathan (Global Head Strategy)
Analysts 5 Disha (Sapphire Capital), Jainis Chheda (Kemfin Family Office), Jyoti Singh (Arihant Capital Markets), Kunal Bajaj (Choice Institutional Equities), Prateek Dedhia (Individual Investor)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹247 crores | +12% YoY; Highest ever quarterly revenue, driven by international momentum (+26% YoY). |
| EBITDA | ₹26 crores | +11% YoY; Margins improved slightly to 10.6% due to higher services mix. |
| PBT | ₹23 crores | +13% YoY; Improved scale despite challenging pricing environments. |
| PAT | ₹14 crores | Impacted by ₹4.8 crore prior year tax provision and ₹1.3 crore labor code adjustment. |
| Adjusted PAT | ~₹20 crores | Excluding one-time tax and labor adjustments; reflects operational efficiency. |
| Services Revenue | ₹[Not Specified] | +16% YoY; Growth driven by multi-year renewals and new international contracts. |
| Solutions Revenue | ₹[Not Specified] | Flat YoY; Impacted by election-related delays in Indian project milestones. |
| Order Flows | ₹250+ crores | Healthy mix of new wins and renewals; pipeline includes larger deal sizes. |
| DSO | 75 Days | Management noted no collection challenges from Government or Enterprise segments. |
Geographic & Segment Commentary
- International Operations: Reported 26% YoY growth in the “Rest of the World” segment. In the U.S., enterprise clients are shifting from evaluation to network modernization, digital workplace, and cybersecurity commitments.
- India Operations: Stand-alone revenues declined 5% YoY due to a lack of significant project milestones in Q3. This was attributed to seasonal delays caused by regional elections, with billing expected to resume in Q4.
- Services vs. Solutions: Services grew 16% while Solutions remained flat. Management strategy uses Solutions as an entry point to secure high-margin, annuity-led service engagements.
Company-Specific & Strategic Commentary
- AI-First Strategy: Implementing “Agentic AI” platforms for internal operations (NOC) and client solutions like WhatsApp chatbots and video analytics. Three recent deal wins explicitly leverage AI for operational efficiency.
- Data Center Focus: Positioned as a Master System Integrator for designing, building, and operating data centers rather than owning real estate. Currently managing migrations from on-prem to cloud for enterprise clients.
- Public Place Technologies: Diversifying beyond Smart Cities into “Public Place Tech” including railways, airports, and ports. Bidding for Western Railway surveillance projects following Supreme Court mandates for CCTV.
- Sales Expansion: Appointed a Chief Growth Officer in the U.S. and hiring more “feet on the ground” to acquire direct mid-sized customers to improve margins.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Run Rate | ₹250 crores/quarter | Management expects to sustain this run rate entering FY27. |
| Annual Revenue | ₹1,000 crores target | While unlikely for full FY26, management expects to hit the annualized run rate by Q4. |
| Revenue Growth | Mid-teens (FY27) | Conservative outlook; could reach mid-20s if one or two large contracts are secured. |
| EBITDA Margin | 11% - 12% | Near-term target as Smart City projects transition from implementation to high-margin O&M. |
Risks & Constraints
| Risk | Context |
|---|---|
| Audit Qualifications | Auditors flagged concerns regarding physical verification of inventory/fixed assets and long-pending receivables (>3 years). Management aims to resolve these by March 31, 2026. |
| Regulatory/Tax | One-time ₹4.8 crore tax provision for prior years and ₹1.3 crore for New Labour Codes impacted current PAT. These represent legacy settlement risks. |
| Seasonal Delays | Government project milestones and billings were delayed by elections in Maharashtra. Such dependencies create volatility in quarterly domestic revenue. |
Q&A Highlights
Order Book & Government Spending
- Question: Why are there no major government wins in the current ₹250 crore order book? (Kunal Bajaj)
- Answer: Elections in Maharashtra delayed bid processes and project milestones. Significant movement is expected in Western Railways and Metro projects over the next two months (Nehal Shah).
Audit & Inventory
- Question: Can you clarify the audit qualifications regarding inventory and receivables? (Jainis Chheda)
- Answer: Verification is ongoing via a third-party valuer for assets spread across customer sites. We aim to clear these and convert the U.S. subsidiary loan to equity by March 31, 2026, to remove qualifications (Gopal Tiwari, Nehal Shah).
AI Monetization
- Question: How is AI revenue structured and is it margin accretive? (Jyoti Singh)
- Answer: AI is integrated into existing solutions rather than sold standalone. It drives margins by reducing headcount through autonomous operations and improving end-user productivity (Paresh Shah, Nitin Shah).
Large Deal Appetite
- Question: What is the maximum order value the company can currently serve? (Disha)
- Answer: We can handle ₹400-₹500 crore deals independently. For “mega” projects like Mumbai City Surveillance (₹2,000+ crore), we bid with strategic partners (Nehal Shah).
Key Takeaway
Allied Digital reported a resilient Q3 FY26 with record quarterly revenues of ₹247 crores, representing 12% YoY growth. While international markets showed strong momentum (+26% YoY), domestic performance was temporarily hampered by election-related delays in project milestones. The company is aggressively transitioning to an “AI-first” strategy, deploying Agentic AI and intelligent video analytics to drive operational efficiency and margin expansion. Strategically, the firm is moving beyond Smart Cities into broader infrastructure categories like Railways. Despite a ₹14 crore reported PAT, adjusted profitability remains strong after accounting for one-time tax and labor code provisions. Management remains confident in achieving a ₹1,000 crore annualized revenue run rate by Q4 FY26. Investors should monitor the resolution of audit qualifications and the conversion of legacy loans by the fiscal year-end.
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