Summary
Zen Technologies Limited - Q3 FY2026 Earnings Call Summary Monday, February 02, 2026
Event Participants
Executives 3 Abhilasha Atluri (Investor Relations Officer), Ashok Atluri (Chairman & Managing Director), Hari Haran Chalat (Chief Financial Officer)
Analysts 8 Amit Dixit (Goldman Sachs), Ashish Soni (Family Office), Bala Krishna (Oman Investment Advisors), Bright Buttar (Individual Investor), Dipen Vakil (Phillip Capital), Jatin Jadhav (Sahasrar Capital), Rajamohan Vaikuntaraman (Professional Advisor), Vikas Singh (ICICI Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹177.8 crores | +16.8% YoY; Driven by resilient execution and favorable product mix despite timing headwinds in order inflows. |
| Operational EBITDA | ₹66.8 crores | +51.1% YoY; Significant margin expansion due to cost discipline and product mix. |
| EBITDA Margin | 37.6% | +870 bps YoY; Expansion partially offset by higher employee costs (salary arrears, ESOPs, and labor code changes). |
| Net Profit (PAT) | ₹55.7 crores | +30.6% YoY; PAT margin stood at 31.3% for the quarter. |
| 9M FY26 Revenue | ₹509.6 crores | -21.4% YoY; Decrease attributed to a slower pace of government procurement processing earlier in the year. |
| Order Book (Jan 2026) | ₹1,427 crores | Significant buildup from ₹1,082 crores in Dec 2025; Includes ₹1,100 crores in equipment and ₹338 crores in AMCs. |
| Cash & Equivalents | ₹1,188 crores | Maintained strong liquidity with zero net debt; Positioned for aggressive organic and inorganic expansion. |
Geographic & Segment Commentary
- Domestic Market: Remains the primary revenue driver accounting for 93% of the current order book. Management noted a shift toward emergency procurement for anti-drone “Hard Kill” systems and integrated combat training nodes.
- Exports: Currently 7% of the order book but targeted to reach 20-30% of turnover by FY2028. Key focus areas include the Middle East, Africa, SE Asia, and a new strategic push into the EU following the FTA.
- Anti-Drone Systems (ADS): Now 50% of the order book; evolving from soft-kill/jamming to advanced “Hard Kill” (kinetic) solutions and wideband frequency coverage (70MHz to 18GHz).
- Simulators: Represents 50% of the order book; focus is shifting toward complex Naval (Submarine) and Air Force simulators through acquired IP (Anawave/ARI).
Company-Specific & Strategic Commentary
- Revised Strategic Outlook: Management moderated the 3-year cumulative revenue target to ₹4,000 crores (from ₹6,000 crores) due to government procurement delays, though FY2027 is expected to see record turnover.
- Inorganic Growth: Actively scouting for acquisitions in the EU and India to acquire deep tech IP; sitting on ₹1,100+ crores of “gunpowder” for these moves.
- EU FTA Strategy: The India-EU FTA is viewed as a major catalyst, allowing Zen to position its Russian-equipment simulators for European nations wargaming against Russian threats.
- IP Ownership: Reaffirmed a “Designed in India” philosophy (Apple model vs. Foxconn model) to ensure strategic autonomy and higher margins (targeted 25% consolidated PAT).
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue (2-Year) | ₹4,000 crores (FY27-FY28) | Scaled down from ₹6,000 crores due to the slower pace of government order processing. |
| Order Book | ₹2,500 - ₹3,000 crores | Target level required by end of FY27 to achieve the ₹4,000 crore execution goal. |
| PAT Margin | 25% (Consolidated) | Long-term target despite potential margin pressure in the competitive anti-drone segment. |
| Execution Timeline | 18 Months | Standard timeframe for equipment order delivery, excluding long-term AMCs. |
Risks & Constraints
| Risk | Context |
|---|---|
| Procurement Volatility | Revenue performance is highly sensitive to the timing of MoD orders; a “weak” H1 FY26 was caused by order book depletion. |
| Margin Dilution | New segments like anti-drone systems have historically lower margins than simulators; integration of subsidiaries (ARI) also impacts short-term margins. |
| Regulatory (US) | The US defense market has high regulatory barriers and registration cycles, making EU market penetration potentially faster than US. |
Q&A Highlights
Order Book & Capacity
- Question: Do you have the capacity to execute the ₹4,000 crore target? (Rajamohan Vaikuntaraman)
- Answer: Current capacity supports ₹2,000 crores annually; the supply chain has scaled to meet the new target, with ongoing investments in plant, machinery, and R&D for potentially larger volumes in FY2028 (Ashok Atluri).
Naval Segment & Synergies
- Question: What is the outlook for Anawave and ARI acquisitions? (Rajamohan Vaikuntaraman)
- Answer: These are highly synergistic. Anawave brought crucial submarine and tactical trainer IP. Combined naval/air force efforts could conservatively exceed ₹500 crores in 3 years (Ashok Atluri).
Anti-Drone Technology
- Question: How do you counter electronic warfare and distinguish false tracks? (Jatin Jadhav)
- Answer: Zen has moved beyond commercial drone jamming to wideband (70MHz-18GHz) band-agnostic systems. AI-based algorithms are used to suppress false alarms based on operational feedback (Ashok Atluri).
Margin Outlook
- Question: Will increased competition in drones impact margins? (Vikas Singh)
- Answer: While ADS margins are lower than simulators, Zen is adding high-value features like “Hard Kill” and spoofing to maintain a competitive gap. The 25% PAT margin target remains firm (Ashok Atluri/Hari Haran Chalat).
Key Takeaway
Zen Technologies reported a resilient Q3 FY2026 with 16.8% revenue growth and 30.6% PAT growth, supported by a significant order book buildup to ₹1,427 crores as of January 2026. While management prudently lowered its 3-year cumulative revenue target to ₹4,000 crores due to government procurement delays, the outlook for FY2027 remains bullish with expectations of record-high turnover. Strategically, the company is pivoting toward global markets, leveraging the India-EU FTA and the acquisition of high-end Naval IP to diversify beyond its traditional domestic simulator base. With a cash reserve of ₹1,188 crores, Zen is positioned for aggressive R&D and international acquisitions. The primary watch point remains the conversion of a strong domestic pipeline into firm orders and the successful integration of its subsidiary operations to maintain consolidated 25% PAT margins. Management anticipates significant export contributions by FY2028.
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