Bharat Electronics Limited Q3 FY26 Earnings Call Summary

Summary

Bharat Electronics Limited - Q3 FY2026 Earnings Call Summary Wednesday, January 28, 2026 4:00 p.m.

Event Participants

Executives 3 Damodar Bhattad S (Director Finance & CFO), Manoj Jain (Chairman & Managing Director), S. Sreenivas (Company Secretary)

Analysts 11 Amit Anwani, Amit Dixit, Atul Tiwari, Balasubramanian, Bhalchandra Vasant Shinde, Dipen Vakil, Hardik Rawat, Harshit Patel, Jyoti Gupta, Kavish Parekh, Mohit Pandey, Umesh Raut

Financials & KPIs

Geographic & Segment Commentary

• Defense Segment: Remains the core driver contributing ~93% of revenue. Key project executions include LRSAM, HimShakti EW, and Battlefield Surveillance Systems, with major upcoming orders like QRSAM (₹30,000+ Cr) and NGC (₹12,000+ Cr) in the pipeline.
• Non-Defense Segment: Currently accounts for ~7% of revenue with a strategic target to reach 10-15%. Growth is focused on Rail & Metro (KAVACH, CBDC, Platform Screen Doors), Civil Aviation (Air Traffic Management), and Cyber Security.
• Exports: Contributing 3-4% of turnover with a long-term target of 10%. Focus areas include Satellite Communication, TR Modules for France, and Coastal Surveillance systems for international customers.

Company-Specific & Strategic Commentary

• Indigenization Focus: Average indigenization levels range from 70% to 73%. Management noted that specialized semiconductor chips, which comprise 20-30% of Bill of Materials, are being addressed via in-house fabless designs and MOUs with Indian fabs.
• Strategic Partnerships: Formed a 50:50 consortium with L&T for the AMCA (Advanced Medium Combat Aircraft) project. Also collaborating with startups for AI-driven secure data center solutions and military satellite prototyping.
• Service/Product Evolution: Transitioning from a component manufacturer to a System Integrator (SI). While SI roles may involve lower margins due to profit sharing with partners, they enable much larger contract sizes like the Kusha (Indigenous S-400) program.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Order Pipeline & QRSAM

• Question: What is the breakdown and timeline for the QRSAM project? (Kavish Parekh)
• Answer: QRSAM is expected to be a ₹30,000-₹32,000 crore order. BDL will handle the missile portion (~30% of value) as a sub-vendor to BEL. Execution is expected to span 4-6 years once the order is finalized, likely between Q4 FY26 and Q1 FY27 (Manoj Jain).

Margin Sustainability

• Question: Why not revise EBITDA guidance upward given 9M is at 29-30%? (Amit Anwani)
• Answer: The 27% guidance is a floor. Product mix in Q4 may be less favorable than 9M. Management prefers a conservative stance but ensures margins will not drop below 27% (Damodar Bhattad).

Semiconductor Exposure

• Question: How are you managing chip shortages and price hikes? (Amit Dixit)
• Answer: Chips comprise 20-30% of BOM. BEL has moved to generic designs to allow for alternate sourcing. Exchange Rate Variation (ERV) clauses in defense contracts help pass through some cost impacts (Manoj Jain).

Provisioning Impact

• Question: What explains the decline in “Other Expenses” this quarter? (Umesh Raut)
• Answer: There was a provision write-back of ₹256 crores in Q3, which lowered the expense base for the quarter compared to the previous year (Damodar Bhattad).

Key Takeaway

Bharat Electronics delivered a robust 9M FY26 performance with 19% revenue growth and elevated EBITDA margins of 30%, though management maintains a conservative full-year margin floor of 27% citing product-mix variability. Strategically, the company is pivoting toward large-scale system integration, evidenced by the ₹30,000+ crore QRSAM pipeline and the 50:50 AMCA partnership with L&T. While 70-73% of content is indigenous, BEL is aggressively investing in R&D (targeting ₹2,000+ crores in FY27) to address critical gaps in semiconductors and airborne sensors. Despite potential short-term order spillovers in the NGC and QRSAM programs into H1 FY27, the current order book of ₹73,450 crores and a diverse pipeline of 30+ large projects provide strong multi-year visibility. Management remains committed to a 15% annual revenue growth trajectory while scaling non-defense and export contributions to 10% each in the medium term.