Summary
Apollo Micro Systems Limited - Q3 FY 2026 Earnings Call Summary Monday, February 09, 2026, 11:00 AM
Event Participants
Executives 3 Addepalli Sai Krishna Kumar (Whole-Time Director, Operations), Baddam Karunakar Reddy (Managing Director), Sudarshan Chiluveru (CFO)
Analysts 8 Abhi Shah, Akshay, Ankush Agrawal, Deepen, Deekshant, Disha, Manoj Jain, Shreyans Gathani
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Quarterly) | ₹252 crores | +70% YoY; Highest ever quarterly revenue driven by production-phase transitions. |
| Revenue (9M FY26) | ₹611 crores | +53% YoY; Supported by robust order book execution and indigenization focus. |
| EBITDA (Quarterly) | ₹50 crores | +33% YoY; Excluding other income; margins impacted by consolidation of IDL. |
| EBITDA (9M FY26) | ₹151 crores | +61% YoY; Margin expanded by 134 bps YoY to reach 24.7%. |
| PAT (Quarterly) | ₹23 crores | +25% YoY; Growth moderated by higher employee expenses and travel costs. |
| PAT (9M FY26) | ₹71 crores | +67% YoY; Significant bottom-line growth on high-margin electronic systems. |
| Order Book | ₹1,305 crores | Consolidated basis as of Dec 31, 2025; ₹800cr standalone, ₹500cr IDL. |
| R&D Expenditure | 6% - 8% | Historically 6-8%, expected to cross 10% in FY26 due to weapon system development. |
Geographic & Segment Commentary
- Weapon Systems: The company has transitioned from a subsystem manufacturer to a full-fledged weapon system manufacturer. Major focus areas include the QRSAM and Akash NG programs, where the company provides 63% of the subsystems.
- Naval & Underwater Systems: Successful completion of heavyweight torpedo trials and pending bulk production orders. Management expects a major “game-changer” order of ₹2,500 crores for MOORED Mines and MIGM variants following imminent DAC clearance.
- Explosives (IDL): Acquired subsidiary contributed ₹50.8 crores in revenue for 45 days. Focus is on transitioning to defense-grade explosives and backward integration for missile propellants and warheads.
Company-Specific & Strategic Commentary
- Capacity Expansion: Commissioned Phase 3 at Hardware Park with ₹150 crores outlay; additional 5-acre land allotted by Telangana Government for a potential ₹150 crores further expansion.
- Acquisitions: ADIPL is conducting due diligence on three companies; management expects to close at least one strategic acquisition before the end of FY26.
- Operational Efficiency: Implementing SAP and Industry 4.0 automation across all units to monitor micro-level machinery and manpower utilization.
- Product Innovation: Developing 5 critical subsystems for LCA Mk2; trials for anti-drone “hard-killing” rockets are scheduled for Q1 FY27.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue CAGR | 45% - 50% | Over next 3 years; solely from core business excluding future acquisitions. |
| PAT Margin | 15% (Target) | Targeted for standalone operations; consolidated margins may be slightly lower initially. |
| IDL Profitability | Positive PAT by Q1 FY27 | Turnaround expected as Coal India ban is lifted and export markets are explored. |
| R&D Investment | ₹100 crores | Allocated for new missile programs and high-end electronic warfare systems. |
Risks & Constraints
| Risk | Context |
|---|---|
| Order Concentration | A significant portion of the growth outlook depends on the ₹2,500 crore MOORED Mine order, which is subject to government DAC clearance timelines. |
| Margin Dilution | The consolidation of IDL Explosives currently exerts downward pressure on consolidated margins due to historical low-margin mining contracts. |
| Promoter Pledge | While management intends to clear pledges “step-by-step,” the timeline has shifted from the current quarter to subsequent periods. |
Q&A Highlights
Order Book & DAC Clearances
- Question: What is the status of the widely anticipated underwater mine orders? (Deekshant)
- Answer: All technical trials and documentation are complete; the file is currently awaiting DAC approval for a value of approximately ₹2,500 crores (Karunakar Reddy).
IDL Explosives Performance
- Question: When will IDL Explosives turn profitable? (Abhi Shah)
- Answer: The subsidiary saw a ₹4 crore loss this quarter over 45 days. We expect EBITDA break-even this quarter and full PAT positivity by Q1 FY27 (Sai Kumar).
Related Party Transactions & Governance
- Question: Why did institutional shareholders reject the proposal for ₹500 crore related party transactions? (Manoj Jain)
- Answer: The resolution was intended for corporate guarantees to support subsidiary financial independence. Certain proxy agencies misinterpreted this as a fund diversion to promoters; we will re-approach shareholders with a comprehensive presentation (Sai Kumar).
Acquisition Strategy
- Question: What are the details regarding the new acquisitions being planned? (Shreyans Gathani)
- Answer: We are bound by NDAs but targeting spaces where we lack a footprint, specifically looking for strategic fits that offer vertical integration (Sai Kumar).
Key Takeaway
Apollo Micro Systems delivered a record performance in Q3 FY26, with revenue surging 70% to ₹252 crores and 9M PAT growing 67% YoY. The company is successfully pivoting from a components supplier to a lead integrator in weapon systems, evidenced by its participation in 80-90 DRDO programs and a 63% contribution to missile subsystems. Strategically, the acquisition of IDL Explosives facilitates backward integration into propellants and warheads, though it currently dilutes consolidated margins. Management maintains a robust 45-50% revenue CAGR guidance for the next three years, underpinned by a ₹1,305 crore order book and an impending ₹2,500 crore underwater mine contract. Near-term focus remains on the turnaround of IDL Explosives and the execution of high-value production orders for the QRSAM and Akash NG programs. Management expects consolidated profitability to align with standalone targets by the start of FY27.
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