Updater Services Limited Q3 FY26 Earnings Call Summary

Summary

Updater Services Limited - Q3 FY 2026 Earnings Call Summary Friday, February 06, 2026, 11:00 AM IST

Event Participants

Executives 4 Amitabh Jaipuria (Non-Executive Director), Raghunandana Tangirala (Promoter & Managing Director), Snehashish Bhattacharjee (CEO of BSS), Surinder (CFO)

Analysts 3 Keshav Garg (Counter Cyclical PMS), Nitin (Investec), Rahul Kumar (Vaikarya Fund)

Financials & KPIs

Geographic & Segment Commentary

Integrated Facilities Management (IFM): The segment reached a record revenue run rate, supported by 13 new marquee logo additions. Performance is driven by structural shifts toward organized players following new Labour Code rollouts and a full pass-through of statutory wage revisions. Management expects margins to normalize as large strategic contracts complete their ramp-up phase.

Business Support Services (BSS) - Denave: Revenue grew ~10% for 9M FY26, though margins compressed to 4% due to a mix shift toward lower-margin field services. The segment is transitioning to an “Agentic AI-enabled” model to offset weaker performance in the ASEAN region and changes in global customer marketing spends.

BSS - Global (Airport Services): Recorded its highest-ever profit this quarter, fueled by Patna election-related non-scheduled flights and festive winter traffic. The company is now active in 24 airports (15 EBITDA positive) and secured BCAS approval for airport security staff training.

BSS - Matrix (Audit & EBGC): The Audit & Assurance (A&A) wing saw healthy growth, executing large-scale nationwide engagements for FMCG and quick-commerce clients. Conversely, Employee Background Verification (EBGC) remains sluggish due to IT sector hiring weakness, prompting a pivot toward BFSI and BPO sectors.

Company-Specific & Strategic Commentary

Strategic Acquisitions: Management is in final-stage discussions with potential targets to deploy ₹205.3 crores in cash, focusing on scale and ROCE-accretive opportunities.

AI Transformation: The company is transitioning from a “people-led” to a “technology-led” model, specifically through the IntelliBank platform to automate sales and marketing for large global clients.

Operational Cleanup: Operations in Avon’s troubled logistics and brokerage vertical have been completely halted following a ₹23 crore cumulative bad debt provision to insulate the core mailroom business.

Succession Planning: Snehashish Bhattacharjee is transitioning out of the Denave CEO role to be replaced by a 15-year veteran (former CRO), moving the group toward a fully professionalized management structure.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

BSS Margins and Mix

• Question: What is driving the margin pressure in Denave and what is the outlook? (Nitin)
• Answer: Margins hit a bottom at 4% due to a shift toward field-oriented services. Recovery is expected in 2-3 quarters as high-margin, AI-led “Revenue as a Service” models scale up (Amitabh Jaipuria/Snehashish Bhattacharjee).

Avon Provisioning and Controls

• Question: How can investors trust the systems after an 80% net worth write-off in a subsidiary? (Keshav Garg)
• Answer: The incident was limited to a specific logistics vertical that has now been shut down. Management took a conservative full hit to ensure transparency and is revamping control systems (Amitabh Jaipuria).

Capital Allocation

• Question: Why pursue acquisitions instead of buybacks when trading below book value? (Keshav Garg)
• Answer: The Board considers buybacks a valid tool for capital deployment, but the current priority is value-accretive acquisitions that enhance long-term ROCE (Amitabh Jaipuria).

Leadership Transition

• Question: Why has the Denave founder resigned from the Board? (Rahul Kumar)
• Answer: This was a planned move to give the new professional CEO operational freedom and avoid “promoter interference,” following the highest traditions of corporate governance (Snehashish Bhattacharjee/Amitabh Jaipuria).

Key Takeaway

Updater Services reported a quarter of operational contrasts, with the IFM segment reaching record revenues of ₹518.2 crores while the BSS segment faced margin headwinds from a mix shift and a ₹20 crore final provision for a fraud-hit logistics vertical in Avon. Despite these one-offs, the core IFM business grew 14% YoY, and the Global airport services wing achieved peak profitability. Strategically, the company is pivoting toward AI-enabled service delivery and is in the final stages of deploying over ₹200 crores in cash for acquisitions. Management has guided for a 9-10% consolidated revenue growth for FY26 and expects margins to stabilize around 6% as strategic contracts ramp up. While the Avon incident weighed on sentiment, the structural shift toward organized labor and the stabilization of BSS margins suggest a recovery trajectory heading into FY27.