Good afternoon, everyone, and a warm welcome to Avalon Technologies 4Q FY26 post-result earnings call hosted by Motilal Oswal Financial Services. To take us through the result today, we have with us from the management Mr.

Kunhamed Bicha, Chairman and Managing Director; Mr. Suresh VR, Chief Financial Officer; Mr.

Shriram Vijayaraghavan, Chief Operating Officer; and Mr. Venky Venkatesh, Chief Sales Officer.

Mr. Bicha will give an overview of the business performance and will followed up by Mr.

Suresh remarks on financial performance, post which will open the floor for Q&A. As we move forward, it is important to bear in mind that any forward-looking statements made during this call are subject to potential risks and uncertainties, both known and unknown.

Now, without any further delay, I will hand over the floor to Mr. Bicha for the initial remarks, the CMD.

Thank you, and over to you, sir.

Thank you, Suman. Good afternoon, ladies and gentlemen.

On behalf of Avalon Technologies, a very warm welcome to our Q4 and full year FY26 earnings call. I want to begin by thanking our investors for your continued trust and support.

Your confidence in us has been instrumental in enabling us to execute consistently, invest with discipline, and build a business that is both resilient and scalable. FY26 has been our best year, and Q4 is our seventh consecutive quarter of growth.

What stands out is not just the growth rate, it is the quality of it: profitable, broad-based, and consistent across verticals and geographies. We delivered a 46% revenue growth for the full year, higher than our 40% guidance.

On net working capital, we reported 112 days, better than our guided range of 120 to 130 days. Our ROCE improved to 20.6%.

On revenue, profitability, working capital, and ROCE, we have delivered improved performance across all the key metrics. We have also made steady progress in new product introductions, especially on semiconductor manufacturing equipment and power systems.

All three of our growth engines are gaining momentum together, and that is the foundation of our journey forward. Moving to the financial highlights, for Q4 FY26, revenue came in at ₹480 crore.

Gross margin was at 33.7%, our guided range within our guided range of 33% to 35%. EBITDA margins came in at 11.8%, up from 11.5% in Q3.

Operating leverage is playing out as revenue scale. PAT for the quarter was 41.2 crore.

For the full year FY26, revenue was at ₹1,603 crore, up 46% year on year. Gross margin for the year was 34.3% at the upper end of our guided range.

Full year EBITDA margin was at 10.8%. Full year PAT was ₹113 crore.

Our average revenue growth over the last seven quarters has been 45%. As of March 31st, 2026, our order book grew 24.7% year on year to ₹2,196 crore with an average execution period of 14 months.

In addition, long-term contracts with execution timelines ranging from 15 to 36 months is at ₹1,245 crore. Order book growth remains well diversified across industry verticals and geographies.

India manufacturing operations, which continue to serve both domestic and global customers, accord accounted for 77% of our revenue in Q4 FY26, delivering healthy profitability at an EBITDA margin of 16.7% and a PAT margin of 12.2%. Revenue from our US operations contributed the remaining 23%.

Losses in US manufacturing have continued to narrow, coming in at approximately 5 crore in Q4 FY26. We are working towards a break break-even in US manufacturing in the later part of FY27.

Our presence in both India and US gives customers the option to start in the US and later transition to India or come directly to India. In FY26, revenue mix was 38% from India and 62% from US.

India business grew 29% year on year, while the US business grew 59% year on year. Moving to segment-wise contribution, Industrials contributed approximately 34% of our revenue, growing at 65% year on year.

Mobility contributed 28%, growing at 50% year on year. Within Mobility, within Mobility vertical, Rail accounted for 16% and Aerospace for 90% [19%?]

. Clean Energy stood at 20%, growing at 45% year on year, driven by driven by the ramp-up of our energy storage systems.

Communication contributed 8%, growing 58% year on year. Our mantra to focus on mission-critical complex box builds continue to gain traction.

Box build has increased from 44% 4 years ago to 56% in Q4 FY26. This highlights the deep integration we have with our customers and drives stickiness and long-term potential.

Net working capital continued to improve through the year. On a year-on year-on-year basis, net working capital improved by 12 days from 124 days in March 2025 to 112 days in March 2026.

Receivables reduced by approximately 12 days year on year. Inventory improved by 2 days as programs moved into execution phase.

Payable days reduced by approximately 2 days year on year. Overall, the improvement in net working capital delivered a positive cash flow from operations of 57 crore in FY20 FY26.

We continue to follow a capex-light model. Asset turns are approximately 9.9 times.

Net debt to equity ratio is around 0.06. Return on capital employed stands at 20.6%, a meaningful improvement from 10% 2 years ago.

Now looking at the macro environment, it continues to stay positive. The reduction in US tariffs on Indian goods goods makes India manufacturing for customers more competitive, and we are seeing increased engagement as a result.

Importantly, the period of elevated tariffs also helped us accelerate a new set of business opportunities. We added new program wins in the US as customers look to diversify their supply chains and reduce risk.

This is over and above the wins in the India domestic business. We have also made progress in expanding exports into Southeast Asia, further broadening our geographic footprint.

The the government's focus on semiconductor equipment under ISM 2.0 aligns well with our capabilities, and business we have recently won in this space. Our efforts to build a meaningful sales presence in Europe over the last few quarters also coincides with the India-Europe trade deal.

Taken together, domestic demand, US export opportunities, and new geographies, the the structural tailwinds are intact. Now moving to our key growth drivers.

Our existing business continues to provide a strong, steady foundation, long product life cycles, mission-critical programs, and recurring revenues across Rail, Aerospace, Industrial, Clean Energy, and Communications. On new business wins, the programs we have been building over over the last 2 to 3 years are now progressing well.

Our energy storage system program continues to ramp in line with plans. Aerospace cabin subassemblies have progressed past first article inspection and are moving towards volume.

Production of locomotive engine subsystems has commenced. The Kavach anti-collision system has completed testing and is on track for commercial production.

In semiconductor equipment, we have completed the project readiness phase with our global partner, a meaningful milestone ahead of volume production expected in FY27. For our satellite communication customer, we have successfully completed the first tranche of prototypes for control units and expect volume orders from FY27.

Prototypes for industrial processing and power sector customers have also commenced. Today, on our opportunity pipeline, we continue to see healthy and expanding set of opportunities.

We are seeing increased interest from aerospace majors in various commodities. We are also pursuing opportunities in advanced metal cockpit assemblies and landing gear components, areas where we have not previously participated.

The three large US customers we onboarded last quarter across Industrial and Defense are progressing from prototype towards production. As mentioned earlier, Southeast Asia and Europe are adding new dimensions to our geographic reach.

Taken together, all three growth engines are gaining momentum, and we expect this to increasingly reflect in our numbers through FY27 and beyond. On revenue guidance, we had previously committed to doubling revenues from FY24 to FY27, a target of approximately ₹1,725 crore.

We are almost there a year ahead. That gives us confidence to set our sights on further doubling in the next 3 years, that is from the higher base of ₹1,603 crore in FY26 to approximately ₹3,200 crore in FY29.

The order book is healthy, new programs are entering production, and our customer base continues to expand. The foundation for the next doubling is already in place, and from a multi-year perspective, we are confident of our growth.

On FY27, we believe our growth story will sustain and continue. We always seek to be conservative and hence guiding for revenue growth of 24% to 27%.

In summary, FY26 has been a defining year for Avalon: strong revenues, improved profitability, better margins, a stronger balance sheet, and better capital efficiency, all delivered together. Our order book is healthy, our three growth engines are aligned, and the external environment remains supportive.

We enter FY27 with clear visibility, a strong pipeline, and the confidence that comes from consistent execution over seven consecutive quarters. With this, I will hand over to our CFO, Suresh Veerappan, for a detailed overview of our financial performance.

Suresh, to you.

Thank you, KB. Good afternoon, everyone.

Let me take you through the financials in detail. Revenue for Q4 FY26 was ₹480 crore, up 40% year on year from ₹343 crore in Q4 FY25 and up 14.9% sequentially from ₹418 crore in Q3 FY26.

For the full year FY26, revenues were at ₹1,603 crore, reflecting 46% growth year on year, ahead of our guided range of 40%. Gross margin for Q4 FY26 was ₹162 crore at a margin of 33.7%.

For the full year, gross margin was ₹550 crore at 34.3% at the upper end of our guided range of 33% to 35%. I would like to note that during the period of elevated tariffs, we passed on substantially all of the tariff impact to customers, absolute gross margins were not affected.

However, since both revenue and costs were grossed up by the tariff pass-through, gross margin percentage was optically impacted by approximately 110 basis points. Adjusting for this, our underlying gross margin performance was better than the reported percentage suggests.

EBITDA for Q4 FY26 was ₹57 crore, up 37.5% year on year with a margin of 11.8%, up from 11.5% in Q3 FY26. For the full year, EBITDA was ₹173 crore at a margin of 10.8%, reflecting year-on-year growth of 50.9%.

The sequential margin improvement reflects operating leverage as revenues scale. PAT for Q4 FY26 was ₹41 crore, up 59.5% year on year with a margin of 8.4%.

For the full year, PAT was ₹113 crore, reflecting year-on-year growth of 78% and a margin of 6.9%. Finance costs for the year were ₹15 crore, and depreciation was ₹34 crore.

On working capital, trade receivable days improved from 84 days to 72 days year on year. Inventory days improved from 86 86 days to 84 days as programs moved into execution phase.

Trade payable days moved from 46 days to 45 days. Overall, net working capital improved by 12 days year on year to 112 days in March 2026, better than our guided range of 120 to 130 days.

On a sequential basis, net working capital improved by 6 days from 118 days in December 2025, supported by improvement in inventory. The sustained improvement in working capital supported cash flow from operations of ₹57 crore in FY26 compared to ₹25 crore in FY25.

As of March 31, 2026, total debt was ₹183 crore with cash and investments of ₹143 crore, resulting in a net debt of ₹40 crore. Net debt to equity ratio stands at 0.06, a very comfortable position.

Capex for Q4 FY26 was ₹21 crore and ₹40 ₹56 crore for the full year. Asset turns are at 9.9 times, and return on capital employed improved to 20.6% from 15.7% a year ago, a consistent and meaningful improvement.

As KB mentioned, we doubled our revenues ahead of schedule. We are now committed to doubling again from the higher base of ₹1,603 crore in FY26 to approximately ₹3,200 crore by FY29.

The balance sheet is clean, working capital is improving, and operating leverage is playing out. The financial foundation for that journey is firmly in place.

With that, I request the moderator to open the floor for questions. Thank you.

Hi, sir. Good afternoon, and congratulations on an amazing set of numbers.

I think we've truly seen all our efforts translating into the growth which we've delivered. My first question is on any potential supply chain disruptions with respect to components.

Order books are strong and we're seeing healthy growth coming into the quarters, but any sort of supply chain disruption which we're seeing? Yeah.

Shriram, you want to answer that?

Sure. Hi, Tanay.

Right now, there are a few things here and there, but nothing that's adversely affecting us. As we service mostly industrial, mobility, and clean sectors.

For these, at the moment, visibility is okay.

All right. You don't expect any major pressure on margins or anything of that sort given the supply chain problems?

As you see it now, we don't see any effect, okay? Saying that, what I would say is we saw the tariffs, which was the question of last year, right?

We managed through that. I think our gross margins will hold between the range we have specified, yeah?

Sure. My second question is on all the incremental growth drivers which we spoke about across sectors.

Could we possibly speak a little more about them in detail as to what are we trying to do out there? Just a little more on the product specification if you could, and the potential size which it can deliver for us into our revenue going forward?

Tanay, I'll give you with our verticals, our growth, right? Industrial is a 34% of our business, it's grew at 65%, and it will continue a high growth rate.

Mobility is at 28% of our sales, it's going at 45%. Clean Energy is at 20%, growing at 45% again.

You're going to see a broad-based growth. It's not lumpy because in our business, a lot of it is once the business comes in, it sustains for the next 5, 10 years.

It's not which comes and goes, and products don't change over a period of time. Once it comes into production, it normally stays, and these are larger Fortune 100 type companies who are working with us.

I don't see too much of a lumpy sales. Once it comes in, it's going to stay.

Understood, sir. Sir, my last question is on the US manufacturing.

Obviously, it's inched up on a quarter-on-quarter basis due to the tariffs. What do we expect it as a percentage of sales going forward?

Should it be at around this 20%, 22%, or should it logically inch up a little higher with the US execution happening with our customer out there? If so, then the control on margins out there, and how do we expect to break even and how soon would that be?

Thank you.

I'll talk about the first part of the question, and Suresh will talk about the second part. You're seeing growth from all sides.

Close to 77% to 80% is made in India for India and for export, and that is our focus. How we get customers into this model is why the US factory, that is the primary reason.

The secondary reason, dealing with tariff times and all that, it was easier to onboard customers in the US and then give them time to transfer to India. We anticipate this 80/20, 78/22, that kind of range, and that is what is in our planning.

The more that comes for India manufacturing, the better off we are, but this is something which we need for our future as well as the confidence from customers on having a local support. Suresh, you want to answer the second part?

Just to add to that, in FY26, 79% of our business is from India manufacturing and 21% is from US manufacturing. It has been around this range of, let's say, 19% to 23%, which is what we have been discussing in the earlier calls.

The operating leverage benefits are expected both from our India manufacturing as well as from our US manufacturing plants. That's the way forward that we're looking at.

All right. Thank you so much for answering my questions, and all the best.

Thank you, Tanay.

Thank you, Tanay.

Firstly, congratulations on a great set of numbers. I just had a couple of questions.

When we look at the growth, we have grown by 46% this year. We have added about 500 crore of revenue this year.

How much of this additional revenue or growth is coming from new customers' programs, essentially customers that you would have onboarded 1 and 1/2 to 2 years back? How much of the growth would be from vintage programs and customers?

It's very broad-based, and depending on the size of the customer cut-in, it could vary anywhere from 75%, 85%. 2/3, 1/3 is what you probably need to look at.

It varies. You may have a certain much larger customer cut-in and that varies a little bit.

The next year they become existing customers, right? We are developing and managing these programs into production at least 18 months ahead.

That gives you a broad range on what we think it is.

Just to add to that, Adhiraj, typically the average life cycle of a customer with us is very long. The product life cycle is also long.

A customer who is this year a new will become an existing customer, and then they continue for over a period of 8 to 10 years.

No, sir, that I understand. I just wanted to understand in this 500 crore, how much would be coming in from, let's say, programs that you would have started 1, 1 and 1/2 years back, and how much from the vintage programs?

Out of 500, 70 will be existing, and then 30 will be new approximately,

okay? Understood.

Second question, sir. A number of your peers are getting into component manufacturing, PCB manufacturing, and have gotten ECMS scheme for that.

Do you have any plans to get into components manufacturing?

We are very focused on what we do. We are a box build, a high-end box build, complicated, technology-oriented box build.

We will look and look for further business in that segment instead of trying to do a greenfield, though there's a lot of money available for that. We think there's enough growth in what we do.

Managing growth is what we strive on doing. I think instead of going in multiple directions, we like to stay focused and deliver on what we say.

Sure, sir. Thank you so much, and all the best for FY27.

Thank you.

Yeah. Good afternoon.

Thanks for taking my question. Basically, could you help us [unclear]—

Fair enough.

That sounds better.

Yeah. My first question is on the quarterly revenue trajectory across different verticals, maybe specifically for the Clean Energy as well.

Given that the US business is ramping up, and there's usual 1Q seasonality that we have observed historically, how should we think about the dynamics, quarterly dynamics? Also if you could give us some color on the cadence for other divisions as well, that would be helpful.

For us, that doesn't flare out as much, okay? We try to level load our production across, in our customers tends to do that instead of because only certain businesses which are government-oriented could have this issue.

We have not seen that as much. If you look at quarter-to-quarter, it's been fairly consistent whether it's growth or in Clean Energy, we're going to see growth, okay, for the near future or foreseeable future.

It's not seasonal for us as far as we know.

Got it. To be clearer, our first quarter FY or maybe first half FY27 revenue could be sequentially higher than last year, right?

Santhosh, Suresh here. We would request you to look at us from a three-year perspective.

In the opening remarks, KB would have highlighted that from a higher base of 1,600 crore in FY26, we are looking to double it in FY29, and we generally do not give a quarterly revenue growth guidance.

Saying that, we are very confident.

Fair enough. Just one more question.

Given our aspiration to double revenues over the next few years, and considering that our asset turns are already closer to 10 times, how should we think about the incremental capex and also about the timing of capex in capacity expansion? It's at least

for me it's not aspiration, we're going to do that, okay, the doubling, okay? Saying that, see when we started talking of doubling in '24, we're supposed to double by '27, and we are close to one year ahead of that schedule, we're close to doubling already.

We'll continue the same momentum. There may be a few quarters up or down, but if you look at us on a three-year timeframe, we'll do what needs to be there to do that, okay?

Then answer the question, the last part, Suresh.

Capex perspective.

From a capex perspective, as far as we know, we will continue our aspiration is to keep the ROCEs higher than 20% and keep the asset turns between 8 and 10, 10 times. We still believe that with this capex, as far as we know today, we are going to have that for this rate of growth.

Any particular timeline that we are contemplating to spend this capex?

Usually, we say 50 to 60 crore, maybe a little bit over, over the next year, and that's annually, yeah.

Santhosh, in FY25, our capex was 58 crore. In FY26, our capex is 56 crore.

For us to continue this trajectory of growth, we did not foresee any major capex. Nothing in the near term that we can see.

Thank you very much, sir.

Hello, sir. Thank you so much for the opportunity.

Am I audible?

Yes, Mehul, you are perfectly audible.

Okay. Thank you so much.

Sir, my first question is about how much of our future order book growth can we expect from the box build and system integration opportunities versus the traditional PCB assembly?

Sir, we started to look at it around 3 years back, we were on 44% of box build, and our aspiration is to grow that number. Today last quarter, we are at 56% 56%.

We'll continue that trajectory, and for us that's why we are very vertically integrated to achieve that, okay? We'll continue down that, and that is our goal.

We may start with a certain commodity, but our goal is to do the whole box in a 2 to 3 year period with the customer.

Sir, what kind of margins differential is the how much high margin can we command for box build compared to the traditional?

Usually higher because it's vertically integrated, I don't want to get into how much, okay, because that depends on industry, that depends on vertical, that depends on commodity. If you more of a certain commodity, you'll have a better margin.

Ultimately we look at it as a box.

Right, right. Sir, I am not sure if you answered this one, but my question is about what is our margin aspiration?

Currently, our margins stand at 11%. Do we have any operational levers to improve our margins beyond 11%?

If you look at our 80% of our business, which is India manufacturing, EBITDA is at 16, 16.7% and PAT is at 12.2%, okay? We're already higher there in 80% of our business.

This quarter I think is 77% of our business, 77,

okay.

Then with US break-even and with the leverage playing out there after break-even, we see some room to improve.

Right. Sir, are we expecting any capex in FY27?

Our regular capex has been in the last 2 years in the range of 55 to 58 crore. We see something similar there, nothing major at the moment.

Okay. Thank you very much, sir.

Thank you, Mehul.

Yes, thank you very much, and I echo some of the sentiments. It's been a really, really strong year, great execution.

My first question would be in terms of your guidance for next year. I know last year you started at 18% to 20% year-over-year growth, and you ended the year at 46%, so that's been tremendous.

Should we assume a certain degree of conservatism for the guidance that you've given for fiscal '27? The geopolitical situation is still pretty fragmented right now, it's hard to get some color on that.

Second question is, in terms of your Make in India for India, that revenue growth slowed to about 13% year over year. Is that basically because of a high base?

I have a follow-up question after that.

Okay. On your first question, Sumit, you ask that question every time, which So, we're definitely conservative in nature with the things going around in the world.

Every time we want to commit higher, we just, with the macroeconomics, we want to be conservative. Number two is that the programs cutting in are fairly large in size.

It could cut in this quarter or a quarter from now, which we don't control as much. Our customer does.

Ultimately it's all there. It's when it cuts in and how it cuts in, at what timeframe, right?

That's the conservative nature on what you're saying apart from the macroeconomics.

In terms of the percentages that you mentioned, Sumit, if you look at FY26 as whole, then the India manufacturing business grew by approximately 33%. The growth has been broad-based across industry verticals, across geography, across manufacturing locations as well.

Got it. One, my final question from my side, and this is a real inflection that I saw in your free you finally generated free cash flow, right, which I define as cash flow from operations minus capex.

Is that something of a goal that you want to continue to stay positive steadily with that metric?

See, we always, I'll let Suresh get into detail of it, but from our perspective, we always want to maintain the ROCE is the a number we strive for, okay? The asset turns we strive for, okay?

Unless we do this business, I think we can manage that between 8 to 10 times asset turns. That they play in mind, that's what is build into all of us.

We try to grow with that, okay? A lot of times most of this capex is going for building and infrastructure.

Just to add two points there. A couple of years ago in FY24, our ROCE was 10%, and then right now it is at 20.6%.

The second aspect on the operation cash flows, FY25 our operation cash flows was 25 crore and now we are at 57 crore. Both the working capital improvement, the focus on working capital improvement, and the focus on maintaining a high asset turns are helping us get those operational cash flows and maintain and improve the ROCE.

Got it. If I can just add on to that point.

When you double your revenues from this year onwards, what is the expected ROCE at that point? What's your goal?

Put it this way, in the past we have operated at 25%, I would say there is a target for us to march over a period of time, that should be some goal.

Got it. Thank you very much.

Congratulations.

Thank you. Thank you, Samit.

Yeah. Thank you for the opportunity.

Sir, congratulation on good set of numbers. I had a few questions regarding the semiconductor business that we have onboarded.

If you could help us understand how are we, if you can quantitatively state how is this program expected to ramp up and what kind of competition are we doing it against and what kind of products we would be catering to in this segment?

Yeah. Hi, Karan.

Shriram here. For the semiconductor equipment, we're building complex box builds, right?

It's really state of the art complex builds. Now, this is a fairly large program with multiple subprograms, right?

These are often very, it's complicated to build. The first article inspection takes time, approval takes time.

These are very sort of longer gestational programs, right? We are in a journey of getting these approved and getting through deployment, right?

This is a long journey. This is not one that cuts in in weeks and months, right?

It takes, we've been working on this program for a fairly long period of time. We're on the journey, and hopefully in FY27, we will start to reach the benefits of this program.

Okay. This FAI has been completed now, or this ongoing first article inspection?

It's in progress. You'll have some part numbers that are done, some part numbers that are progressing, some that we're yet to start.

It's a very you've got a spectrum of this progress. Karan, they're multiple products.

This is not one product.

Yeah.

I would say 50%, 60% is done and waiting for production approval. The other 40%, we are in the process of doing it.

We'll get it. The reasonable production will start sometime in '27.

Understood. Also, what would be the major sector, apart from Clean Energy, which will be contributing to our export revenue?

A lot of it will be in Aero and Industrial, if I can answer that. The growth has been broadly, Karan, even across India and in US.

It is not just concentrated in one industry. It's across Industrial, Clean Energy, and Communication.

Understood. One last question, what would be our client concentration like, what was the concentration of top five, top 10 clients for the full year?

I'll let Suresh give the exact numbers, but as large customers cut in, things will start moving up and down for a short period, and then it moves on. Suresh, you want to give the top— Our top 10 customers, that's the one that we share, which is 61% in FY26.

Understood. Great.

Thank you so much, and all the very best.

Thank you, Karan. Thank you, Karan.

Yes. Thank you for the opportunity.

Sir, my first question was related to the manufacturing plant from US. We have almost doubled the production from US now.

Just wanted to understand how are we breaking even at separate levels for US?

Sure. Firstly, we have been discussing about increasing the revenues in US manufacturing alongside our growth that we are seeing in the India manufacturing.

Which is what we have seen the last one year. The losses have significantly narrowed down.

If you look at it a couple of years ago, the quarterly losses were around 14 crore, and if you look at Q2 of this fiscal year, it was 9 crore, and Q3, it came down to 7 crore, and in Q4, it has again further come down to 5 crore.

There is operating leverage that has started to play out, but having said that, we expect to see ramp-up of many of the new programs which are at various stages, some on prototype, some in commercial, some pending to be ramped up fully. With that scale up expected to happen in FY27, we see this trend of losses coming down and moving towards break-even in later part of FY27.

Chirag, one thing you'll realize is that a lot of the customers we enjoy the margins and we enjoy the profitability in India is because it came through this route where it starts in the US and then it moves to India. You can't just look at it from a plant-wise.

There is a lot of business effectiveness for India doing manufacturing in the US. It originates.

It originates there. I understand that.

That is the earlier assumption we had. It is also kind of manufacturing towards India mode, and now it is to gain more clients, we are now again starting to route it from US.

Down the line, probably we would be giving some cost benefits to the client, and that would again shift to India. Is that my understanding correct?

Correct, Chirag. I think you got it right.

The second question is more related to back-end journey and the future perspective, what we have commented related to manufacturing.

Chirag, you're breaking up. You're breaking up, may I ask you to talk a little louder?

Am I audible now?

Now you're fine.

Yes, sir.

Sir, my next question was more related to a back-end journey what Avalon had. Let's say we started with manufacturing and then shift EMS, and we shifted to box build.

We thought from the perspective that this is a higher integrated complex product, and we can serve our client a bit better, helps us to have better return ratios down the line, and growth, and maybe let's say from a product to an component from component to an assembly supply kind of a thought process. This is like a forward integration.

Just wanted to understand, you are remaining focused related to manufacturing box build only. Even if you would have started manufacturing PCB at your end, have you considered this fact that this is not going to be value accretive, and you want to make sure that it remains an outsourced product for you, and you don't want to get into that complication of manufacturing PCB?

Because this anyhow helps us from the perspective that 90% of the PCB is imported in India. We are now from the perspective that we can control our value chain and make sure that we keep on growing at the pace we are without any hindrance related to raw material.

Just wanted to understand your thought related to this.

Okay. As a country, it's a personal opinion, I believe that we need to have PCB manufacturing in India because as we scale up electronics, as we scale up being a global player, how competitive can be without subsidies, I don't know, okay?

As a country, we do need it. Our spend on PCBs is, I would say less than, very, very small percentage in the not even in the teens.

It does not make sense for us to look at it as a vertical integration model. There are enough players coming in now where there will be enough competition to get the PCB cheaper than what we can make.

Is that is our thought process on this, Chirag.

Down the line, yes, would be correct for me to understand if the manufacturing of PCB start happening in India itself, this can become a gross margin accretive for us because we would be start sourcing it into India, and even further margin profitability can take place for Avalon. See,

like you said, it's not even in the teens for us, the PCB buy. It's much lower because of our vertical integration.

I don't think it'll be an effective change. It'll be better, but it's not something which we will chase, okay?

Shriram, you want to add something to

that? I think, Chirag, just to add to that, right, the way we're thinking about this is to grow into more complex box builds, in which case our effort is going into more complex assemblies of different things, right?

There that's where the focus is not on getting into deeper down the value chain in terms of PCBs, but more up into more complex builds.

Another thing, Chirag, PCB is a chemical business, okay? It's a very different type of business.

You need size and scale. It's something which we don't want.

Our focus is always to do the complex box build. We want to do the $100,000 boxes, okay, which will make a lot more business sense in our focus as well as delivery.

We believe there is enough growth in what we do across these verticals, across geographies. We're also looking at other geographies as export geographies as well now.

When there is enough growth, with a higher asset turn, we have one of the industry-leading gross margins in what we do.

Got it. Happy to hear that one direction focus is there.

We are not intending to start manufacturing something else where we don't have some kind of an edge. Very happy to hear that.

Just one last question related to semiconductor that you have mentioned to the earlier analyst. As almost as you said that 50%, 60% of the products have gone some acceptance by the client for now, there are some 40% still in trials and working procedures.

You're saying that from FY27 itself, we can start expecting some kind of a revenue to come into picture. Just a ballpark number, from the perspective that it is now just one year ahead for us.

Just a ballpark number, how big this can be in terms of order book that we can expect, even if the large program is divided into subprograms?

Things are going very well. I'm not saying no, but these are slow things which kind of take time to materialize.

We're saying that our goal is to in the next 2 to 3 years, I would say 3 years, make it a vertical for us, okay? You can understand the scope of it.

It could be a smaller vertical or we hope it's a larger vertical, but it will become a—

Hello?

Chirag, did you get that?

Sir, I missed the last part. When you said that it will become a vertical for us?

It will become a vertical for us, right now it's in the Industrial piece, and then we'll spin it off in the next 2 to 3 years as a separate vertical. Our size of our verticals and we hope to have that, whether it's a smaller or a larger vertical, we'll be there.

Just to confirm one thing, whenever you say a new vertical, that is approximate 8% to 10% of revenue coming from that, and then only you divide it in another vertical. Is that correct?

Chirag, without putting a number to that, okay, there is enough scope and scale to grow in this. We have just gotten to one customer right now, which means there is multiple customers there, and within each customer, we can get into multiple products.

India has just got into the equipment manufacturing, and even in the last budget, there was a mention of India Semiconductor Mission 2.0, which focus on semiconductor equipment. Definitely we also hope for greater things to come here, but we do not want to put a number to that at this stage.

Okay. Thank you.

Thank you so much, sir.

Thank you, Chirag.

Hi. Thank you, and congratulations on good numbers.

Am I audible?

Yes, Arpit, you are.

Yeah. I came across a recent news that the conflict in the Middle East has disrupted the supply of raw materials and PCBs and pushed up their prices.

I just wanted to know, regarding the tightening of the availability of PCBs, how has that impacted us, and our inventory, and how has the pricing impacted us, too?

Arpit, see most of our pricing is a pass-through,

okay,

passed through to our customers. There has been some increases, but it'll always be pass-through, it's not something which will affect.

If you look at over a five-year period, our gross margins have averaged between 33% and 35%, sometimes even higher. We always aspire to keep that.

Even if some of these pricings increase, we pass it through to our customer. Did that answer your question, Arpit?

No. Regarding the inventory thing, regarding the shortening of the availability of PCBs, how do we hold those in our inventory, and what's our outlook on that?

I'll

take that, Arpit. We manage this actively with the help of our customers.

We work very closely with them as to what kind of inventory we should hold for their products, right? We keep our eye out.

Where we feel it's getting tight, we will hold more inventory, and where we feel the lead times are good, right, we don't have to do so. This is actively managed across programs, across commodities, whether it's PCB, metal, wire harness, whatever it is, right?

These are fluctuations that we manage day to day, Arpit. At the moment, nothing that we see is critical.

Obviously, there are things that are long lead times and things are moving around, but we're always actively managing them.

Okay.

Saying that, this changes on a daily basis, okay? That as of now, we don't see a material impact, but you never know whatever happens geopolitically.

Okay.

My next question was, I see a growth in PAT year on year higher than the growth in EBITDA. Correct me if I'm wrong.

I believe with depreciation and with the tax and with interest and all being stable across the year, there's a component of other income that has increased substantially. I just wanted to know what does this other income comprise of?

See, we are an export business. Major part of our business is also in exports.

With currency depreciation, there is a benefit on forex income as well, which is part of the other income. It won't be part of EBITDA, but it'll be part of other income.

Okay.

Okay. Thank you.

Thank you so much for the follow-up. All my questions have been answered.

Thank you.

Okay. Thank you,

Mehul.

Yeah. Hello, I have a question on order book.

I have seen that the current order book is around 2,000-plus crore. What is the timeline to execute this?

Achuth, the order book is around ₹3,441 crore. Out of that, ₹2,196 crore is executable in 12 to 14 months, and ₹1,245 crore is executable between 14 months to 36 months.

We have got orders further than 3 years, which we don't count in the order book.

Okay. My second question is regarding EBITDA margins.

I remember that in previous con calls, somewhere they have been mentioned that the operating margin could increase from Q4 of FY26. I just wanted to understand if operating margins are going to increase going forward.

I can talk about the past. In Q4 FY26, like you also rightly highlighted, the EBITDA percentage is 11.8%, and if you look at our India manufacturing, which is approximately 79%, that has generated 16.7% EBITDA.

You can see a consistent increase in EBITDA percentage over the last few quarters now. With the increase in sales expected in FY27, we believe there is a further scope of operating leverage in both India plant as well as US plant, there is a little more scope as well.

Okay. Can you give any long-term guidance on EBITDA margin?

Because if you see other EMS players are able to make around 15%, 16%, I think we have still room left to make much more margins than the current. See,

we generally do not provide guidance on the EBITDA margin percentage, Achuth. There is a lot of scope of operating leverage, a scope for us to play out.

Okay.

Okay. Thank you, sir.

FY26 was a great year for Avalon with robust revenue growth and solid execution. We remain focused on scaling new programs, enhancing capabilities, and investing ahead of our growth.

Our entry into semiconductor equipment space marks a key step as we expand into more advanced high-potential technologies and segments. With a healthy order book, expanding customer engagement, and a flexible global manufacturing model, we are well positioned to sustain momentum through the year and deliver profitable growth.

We thank our investors for their continued support and look forward to updating you in the coming quarters. Thank you very much.

Thank you.