Summary
Onward Technologies Limited - Q3 FY26 Earnings Call Summary Friday, January 16, 2026 4:00 PM
Event Participants
Executives 2 Jigar Mehta (Managing Director), Jyoti Gupta (EY Investor Relations)
Analysts 7 Abhijit (PI Asset), Amrish (Individual Investor), Burramsetty Suresh (Burrams Financials), Dhruvin Doshi (NV Alpha), Harsh Chaurasia (Orbit Exports Family Office), Jayshree Bajaj (Trinetra Asset Managers), Madhur Rathi (Counter Cyclical Investments), Prasenjit Paul (Paul Asset), Sarvesh Gupta (Maximal Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹136.1 crores | +11.7% YoY for 9M FY26; performed close to Q2 levels despite seasonal furloughs. |
| EBITDA Margin | 13.9% (9M FY26) | Well ahead of the 11-12% internal target; driven by a shift to offshore engagements. |
| DSO | 70 days | Improvement noted at the end of Q3 FY26 due to better collections. |
| Cash & Bank Reserves | ₹116 crores | Maintained as a safety buffer; management aims for 6 months of payroll cash on hand. |
| Headcount | 2,491 count | Stable vs previous periods; focus on automation and productivity over volume hiring. |
| Attrition | 14.73% | Reduction noted; company implemented “good increments” for top performers effective Oct 1. |
Geographic & Segment Commentary
- Industrial Equipment & Heavy Machinery (IEHM): This remains the largest vertical with a focus on delivery-led growth in North America. A new vertical head joined in Jan 2026 to lead the transition toward digital and AI services and spearhead expansion into Europe.
- Transportation & Mobility (T&M): Performance is driven by strong GCC (Global Capability Center) market presence in India and new leadership focusing on US/European OEMs. Strategy involves initial on-site embedded and digital work which eventually transitions to higher-margin offshore delivery.
- Healthcare & Life Sciences (HCLS): A relatively new vertical for the company characterized by recent client wins. Management views this as a high-growth runway over the next 1-3 years as they deepen existing experimental relationships.
Company-Specific & Strategic Commentary
- Leadership Transition: The company has completed its shift from a promoter-driven to a professionally-led structure with three dedicated vertical heads now in place.
- Offshore Shift: Strategic focus on offshore delivery has driven recent margin expansion; new business is increasingly being structured as offshore engagements.
- Infrastructure Expansion: Significant capex was deployed to upgrade centers in Pune, Hyderabad, and Chennai; Chennai will host the majority of 2026 offshore headcount additions.
- Business Model Preference: Management explicitly stated a preference for maintaining a 90% Time & Material (T&M) revenue mix until reaching the ₹1,000 crore milestone for stability and cash flow.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue & EBITDA Growth | Double-digit YoY | Target for FY26 and FY27; based on current organic momentum and transition to digital. |
| Revenue Milestone | ₹1,000 crores | Long-term target ($100M); management will re-evaluate IP-led strategy only after hitting this scale. |
| Headcount | 3,000 count | Projected requirement to reach the $100M revenue milestone. |
Risks & Constraints
| Risk | Context |
|---|---|
| Legal Litigation | An ex-employee in the US has filed a lawsuit involving an ex-parte order and frozen cash; management claims all dues were paid and is defending the case. |
| Client Concentration | Top 10 clients account for ~70% of revenue; while wallet share is growing, the company is vulnerable to shifts in these specific OEMs’ budgets. |
| Talent Management | Q3 saw a “reality check” resulting in the exit of the bottom 5% of performers; maintaining high-quality engineering talent is a constant execution hurdle. |
Q&A Highlights
Business Model & Strategy
- Question: Why choose Onward over a client’s own GCC? (Madhur Rathi)
- Answer: GCCs typically outsource 30% of their work for agility and specialized niches (mechanical/embedded) that they don’t want to build in-house. Onward focuses on being one of the 5-6 specialized suppliers for these niches (Jigar Mehta).
- Question: Why not shift to IP-led or Outcome-based models for better stickiness? (Madhur Rathi)
- Answer: T&M is preferred (90% target) until reaching ₹1,000 Cr revenue because it is steady and sustainable. The company is currently too “young” to pivot away from the dependable T&M cash flow model (Jigar Mehta).
Growth & Financials
- Question: Is double-digit growth too conservative for a company of this size? (Sarvesh Gupta)
- Answer: Onward is purely organic; engineering services require building deep trust and capability which takes time. There are no limitations to growing faster, but “double-digit” is the confident commitment to shareholders (Jigar Mehta).
- Question: What is the plan for the ₹116 Cr cash balance? (Jayshree Bajaj / Burramsetty Suresh)
- Answer: Management is evaluating M&A (specifically competitors serving existing clients), buybacks, and campus investments. A primary goal is maintaining “6 months of payroll” as a pandemic-style safety net (Jigar Mehta).
Operations & Margins
- Question: What drives the margin expansion if you’re a “low-cost” provider? (Dhruvin Doshi)
- Answer: The elimination of the H1B on-site program and a massive shift to offshore work centers has significantly improved EBITDA margins from 9% to nearly 14% (Jigar Mehta).
- Question: Can you explain the US litigation mentioned in the footnotes? (Prasenjit Paul)
- Answer: It involves a non-performing ex-sales employee in the US. The company has submitted all documentation proving dues were paid; the employee’s lawyers have already quit the case (Jigar Mehta).
Key Takeaway
Onward Technologies delivered a resilient Q3 FY26, maintaining revenue at ₹136.1 crores and achieving a 9-month EBITDA margin of 13.9%, significantly outperforming its original 11-12% guidance. The company has successfully transitioned to a professional leadership structure with three key vertical heads (IEHM, T&M, and HCLS) now managing day-to-day operations. Strategically, the firm is doubling down on offshore delivery to drive margin expansion and is utilizing its ₹116 crore cash reserve to build out infrastructure in Chennai and Pune. While maintaining a cautious stance on US litigation and macroeconomic furloughs, management remains committed to a double-digit growth trajectory for both revenue and EBITDA. The company intends to maintain its Time & Material-heavy model until it crosses the ₹1,000 crore revenue threshold, prioritizing cash flow and organic client penetration over speculative IP investments.
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