Mr. Kunhamed Bicha, Chairman and Managing Director, Mr. Bhaskar Srinivasan, President, Mr. Suresh Veerappan, Chief Financial Officer, Mr. Shriram Vijayaraghavan, Chief Operating Officer, and Mr. Venky Venkatesh, Chief Sales Officer. Mr. Bicha will give us an overview of the business performance, and will be followed up by Mr. Suresh Veerappan on the financial performance. Post which we will open the floor for Q&A. As we move forward, I would invite you 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 call to Mr. Bicha for his initial remarks as CMD. Thank you, and over to you, sir.
Thank you, Deepak. Ladies and gentlemen, on behalf of Avalon Technologies, we extend a very warm welcome to our Q2 FY 2026 earnings call. I would like to begin by expressing our sincere gratitude to our investors for their continued trust and confidence in Avalon. Our growth journey would not have been possible without your steadfast support. Over the past few quarters, we have delivered consistent sequential growth with every quarter building upon the previous one and meeting or exceeding our guidance. This steady upward trajectory reflects the strength of our diversified business model and a disciplined approach to execution. Our growth continues to be broad-based across verticals, geographies, and capabilities. During H1 FY 2026, the India business grew 54% and the U.S. business grew 52%. Our diversified customer profile is consistently supporting our growth.
This consistency, even in an evolving macro environment, underlines Avalon's ability to deliver sustainable and profitable growth while maintaining financial prudence. Building on this foundation, profitability has improved, further centering ROCE and asset turns supported by an expanding order book. On the topic of tariffs, which has been widely discussed across the industry, we would like to clarify that it is not limited to a simple two- or three-rate structure. We have effectively made 50 unique tariff trades during the last six months. Our long-standing presence in the U.S., deep understanding of the geography, and strong customer relationships have helped us maintain tariff recoveries of over 99% from our customers, underscoring the trust and partnership we share with them. With well-diversified growth, continued demand visibility, and traction from our new programs, we remain confident in the outlook of our business.
Accordingly, we are revising our full-year revenue growth guidance upwards to 28%-30% from the earlier 23%-25%. Let me now move to the key financial highlights for the first half of FY 2026. As of September 30, 2025, our order book stood at INR 1,863 crore, with an average execution period of 14 months, reflecting a 25.4% year-on-year increase. In addition, long-term contracts with executional timelines of 15 to 36 months stood at INR 1,168 crore. This growth has been well-balanced and diversified across industry verticals and geographies. For H1 FY 2026, revenue stood at INR 706 crore, representing a 48.7% growth over the same period last year. Our core expertise in box- build and system integration solutions continues to strengthen, now accounting for 53% of our total revenue. EBITDA for H1 FY 2026 is at INR 68 crore, reflecting an increase of 98.5%.
PAT is at INR 39 crore, an increase of 158.3%. ROCE improved to 18.4% from 8.2% a year ago, while asset turns remained healthy at 8.7x , indicating continued efficiency in capital utilization. Net working capital is at 131 days as of September 2025, compared with 124 days as of March 2025, mainly due to temporarily elevated inventory levels to support upcoming production and growth. On a sequential Q1 to Q2 basis, net working capital improved by 11 days, driven by a seven-day improvement in receivables, three-day improvement in inventory, and one-day improvement in payables. We remain focused on improving working capital efficiency and expect to bring it within 120-130 days in the next few quarters. Gross margin stood at 34.9% for H1 FY 2024, which remains at the higher end of our guided range of 33%-35%. For Q2 FY 2026, gross margin was at 34.3%.
India manufacturing operations, which continue to serve both domestic and global customers, accounted for 81% of the total revenue in Q2 FY 2026, delivering a healthy profitability with an EBITDA margin of 14.1% and a PAT margin of 10.9%. Revenue from our U.S. manufacturing operations contribute to the remaining 19%. U.S. operations scale up further, we expect operating leverage to support margin improvements in the later part of the year. Avalon's dual presence in U.S. and India offers a unique advantage. Our U.S. facility helps customers localize production and manage tariff exposure, while our India operations offer a cost-effective and scalable manufacturing base. This geographic flexibility positions Avalon well to support customers and adapt to changing trade dynamics. As tariff-related discussions in the U.S. and India continue, we are monitoring developments closely and will stay agile and measured in any strategic adjustments.
We are also seeing increasing engagement from customers in multiple geographies for made-in-India products, and we will share more updates in the coming quarters. Now moving on to our key growth drivers and an update on major programs. We remain encouraged by the continued momentum across our three growth engines. One, existing business. This is driven by long product life cycles, mission-critical products, and steady recurring revenues. The energy storage system program is progressing well, with production ramp-up underway as planned. In the aerospace vertical, cabin subassemblies are currently under critical inspection and progressing in line with our plan for ramp-up in the first half of the next calendar year. Despite India having the largest pending aircraft order book in the world, local manufacturing content is relatively small, but is growing rapidly. Our aerospace business is benefiting from this shift. H1 FY 2026 revenue grew 59% over H1 FY 2025.
Two, new business wins. This is based on sustained effort over the past few years, with these programs now translating into fresh orders and production ramps across multiple verticals. Our dual-shore model and the new Chennai export facility has supported this scale-up. Production for locomotive engine subsystems will begin in the second half of this year. Our railway business continues to gain momentum with new customer additions and expanded product lines. Notably, H1 FY 2026 rail revenue grew 58% over the same period last year. At the same time, we are making steady progress in advanced technology segment. As mentioned last quarter, our partnership with a leading global semiconductor company for box- build manufacturing is progressing well, with the volume ramp-up expected in FY 2027. Meanwhile, the railway Kavach system has completed testing and is on track for commercial production in the second part of next year.
These programs strengthen our market position and extend our reach. Three, opportunities pipeline. We continue to see a diverse and expanding set of opportunities progressing towards finalization, with encouraging potential in both size and scope. During the quarter, we onboarded three large U.S.-based customers across industrial and defense verticals. We will share more details over the next few quarters as these programs progress from prototyping to production. Manufacturing will initially commence in the U.S., followed by a transition to India, leveraging our dual presence advantage. With all three growth engines at different stages, we have continued to front-load investments in capabilities, manpower, inventory to stay ahead of the expected growth. On the infrastructure front, our export-focused Chennai plant has commenced production and is ramping up steadily. To meet rising domestic demand, we are progressing well to complete Phase 2 of our greenfield expansion in Chennai by the end of Q3 FY 2026.
These investments are aimed at ensuring readiness for next phase of our growth, and we remain confident that operating leverage will begin to take effect in the later part of the year. Avalon stands on a strong foundation to capitalize on vast potential emerging across our end markets. With a healthy order book, expanding capabilities, and a culture rooted in operational discipline, we are well-positioned to deliver the sustained growth and long-term value for our shareholders. To summarize, Avalon has started FY 2026 on a strong note with a broad-based revenue growth, a large order book, improved operational metrics, and a healthy capital efficiency. Our diversified business model, dual-shore presence, and expanding customer base provide both visibility and resilience. We are ramping up new projects across multiple industries, and our entry into the semiconductor equipment space marks a key step towards a high-potential advanced technology segment.
With a stronger growth outlook and disciplined execution, Avalon is well-positioned to sustain its momentum and remain focused on building long-term profitable growth rather than short-term gains. With this, I will hand over to our CFO, Suresh Veerappan, for a detailed overview of our financial performance.
Thank you, KB, and good afternoon, everyone. Thank you for joining the call today. During Q2 FY 2026, our revenues were INR 382 crores, reflecting a 39% year-over-year increase from INR 275 crores in Q2 FY 2025, and an 18% sequential growth from INR 323 crores in Q1 FY 2026. For the first half of FY 2026, revenues stood at INR 706 crores compared to INR 474 crores in H1 FY 2026. Representing a year-on-year growth of 49%. The growth was well diversified across verticals, geographies, and customers, driven by steady execution and strong traction in both our India and U.S. operations. We also marked our fifth consecutive quarter of sequentially good performance, underscoring the consistency of execution across business segments. Over the past few quarters, our growth has remained broad-based and disciplined, supported by customer diversification and focused operational delivery.
This sustained momentum, together with stronger demand visibility and a healthy order pipeline, positions us to raise our FY 2026 revenue growth guidance to 28%-30% from the earlier range of 23%-25%. The gross margin of Q2 FY 2026 was INR 131 crores, representing a margin of 34.3%. For the first half of FY 2026, the gross margin stood at INR 246 crores with a margin of 34.9%, which is at the upper end of our guided range of 33%-35%. This reflects a year-on-year growth of 7%. EBITDA for Q2 FY 2026 was INR 39 crores, a 28% increase from INR 30 crores in Q2 FY 2025 at a margin of 7.1%. For the first half of FY 2026, EBITDA stood at INR 68 crores, reflecting a year-on-year growth of 98.5%. [PAT] for Q2 rose to INR 25 crores, a 32.9% year-on-year increase from INR 17 crores in Q2 FY 2025.
We continue to invest in talent, capacity, and inventory to support upcoming growth in new programs. These initiatives strengthen our foundation for long-term growth and are expected to enhance operating efficiency as volumes ramp up in the second half of the year. This impact being more visible towards the end of FY 2026 and carrying into FY 2027. Moving on to the balance sheet. Net working capital days improved by 11 days from 142 days in June 2025 to 131 days in September 2025. Net inventory days improved by three days from 104 to 101. Trade receivable days improved by seven days from 87 to 80. Trade payable days improved by one day, increasing from 49 to 50. As of September 30, 2025, total outstanding debt stood at INR 128.92 crores, with cash equivalents and investments of INR 68.36 crores, resulting in a net debt position of INR 60.56 crores.
CapEx for Q2 FY 2026 and H1 FY 2026 was INR 14.8 crore and INR 24.4 crore respectively. With a CapEx-light model, asset turns remain strong at 8.7x and return on capital employed stood at 18.4%. Our growth approach is built on a balanced mix of steady core revenues, new program ramp-ups, and a healthy pipeline of prospects. While we continue to monitor global geopolitical developments, the structural EMS growth story remains intact and continues to strengthen. With a resilient balance sheet, scalable operations and strong customer trust, Avalon is well-positioned to capture emerging opportunities and deliver sustained long-term value to all stakeholders. To summarize, Q2 reflects continued progress across all operating and financial metrics. Our priorities remain consistent, driving profitable growth, strengthening balance sheet efficiency, and deepening customer partnerships. As we look ahead, we remain focused on sustaining profitable growth through disciplined execution and operational efficiency. Thank you.
Thank you. Yes, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone keypad. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are sent in. First question is from the line of Tanay Shah from DAM Capital. Please go ahead.
Hello, Tanay.
Hi, sir. Good afternoon, and congratulations on a good set of-
Can you please be a little louder?
Yeah. Am I audible now?
Yes, sure.
Good afternoon, sir, and congratulations on a good set of numbers. My first question is on the U.S. operations. If you could give any sort of update on how the offtake is improving, despite the tariff implications. You did mention that has been recovered in terms of tariffs. Going forward, how do we expect the U.S. clients to accept the tariff implications, and do we expect the manufacturing per se to improve from the current 20% in U.S., which would thereby then have any sort of impact on margins?
That's a good question. We are seeing a lot of opportunities now with the global sourcing model that we have, where they can start in the U.S. and when the tariffs settle down, the longer term, the larger customers are taking that view. Let us start in the U.S. and transfer to India when the tariff settles down, because it's difficult today for our source to judge what is the tariff rate there, but they always want to come to India, and we are offering, I would say, initial stopover in the U.S. before they transfer, so they have consistency in revenues.
Saying that, some of our existing customers who always wanted to make in the U.S. are ramping up, especially our battery storage, energy storage systems customer, which we've been working for the last four years. We are seeing a substantial ramp for them, which has already started and into the next 12 months. We're very positive because we have a solution for customers to come to India, because otherwise it is very difficult for customers to say, "How can I come to India with a 50% tariff?" This dual-shore model helps us a great deal to make that happen.
So with that happening, we do not expect any interim impact on our margins to that extent?
If you look at our gross margins, we are still steady. On the margin front, I would say we are investing into the future. As you have seen, some of these larger ticket customers are coming. We have a few more in the next few quarters. We are getting the team ready, especially in India, to get ready for the ramp.
Thank you, sir. My second question would be on our domestic operations. Obviously, we have seen a very strong growth over the last year in the domestic market. If you could help me understand any new clients which are ramping up and under what segments would that be? Potentially, if you could even list down the opportunities for our railway business. You did mention that it grew very sharp at around 57% in the first half. Apart from [audio distortion] opportunities will come in next year, any other product categories which are also scaling up well out there? That is it. Thank you.
To answer the latter part of your question first. Railway opportunity is real and it is growing. We are growing, and last year also we grew substantially. This year we are seeing the first half growing, not only with our existing customers, new customers as well as new products from existing customers. We will continue to see this growth in the foreseeable future as India expands and as India grows in this segment. Apart from that, the next three large customers which we are kicking off are all India-based, and that gives us its. The timing of it is perfect. I think our goal is always to be 50/50, 50% exports and 50% India. Today in exports, we have started to see a lot of activity, and the numbers will reflect in the future. Apart from U.S., the other geographies are slowly kicking in.
Did I answer your question or did I miss something?
No, sir, that did help. Just wanted to understand any particular segments in which we are seeing this ramp-up for the domestic operations apart from rail.
It is mostly mobility and industrial.
Understood, sir. Thank you so much. That answers my question.
Hello?
Yes, that answers my question. Thank you.
Thank you, Tanay.
Thank you. The next question is from the line of Sameet Sinha of Macquarie. Please go ahead.
Yes. Thank you very much. Question regarding gross margins. Sequentially, gross margins [audio distortion] increased nicely, and I think you kind of hinted at it that you are investing into it. But if you can break it down between your India and U.S. operations, seems like India operations, your gross margins improved sequentially, while in the U.S. operations it went down. Can you explain that dynamic? Because I thought possibly that all the investments were happening in India, but I see that maybe there is something in the U.S. as well.
You are talking of gross margin. I believe we have not changed much. Our range has always been between 33% and 35%, and we are well within on the higher side of the range. A few quarters, we may have 36% or 37% in certain times, but our guidance always been between 33% and 35%, and on H1 we are at 34.9%, and Q2 we are 34.3%. It is to be because of product mix and there is no change in gross margin guidance.
Got it. In terms of these new business that you are seeing, kind of a broader question. These three large customers in India, can you talk about which verticals and sectors they are coming from? Can you also kind of comment on the average ASP and order size of these sort of customers? Is it larger, average? Any sort of context would be appreciated.
I would just say power and industrials are the two key areas, and we will start seeing activity maybe later this quarter or next quarter. Substantial, this will be top 10 in our different customers in the next calendar year or so. Did I answer your question, Sameet?
Yeah. Absolutely. Thank you very much.
Just to add, the transition customers coming to U.S. first and then to India. One is in the power sector, from Europe, coming to U.S. first and then moving to India. Number 2 is industrial customer, that is again starting in the U.S., and third is the defense customer.
Excellent. Thank you.
Thank you.
Thank you, Sameet.
I repeat, you may press star and one to ask a question. Next question is from the line of Praveen Sahay from PL Capital . Please go ahead.
Yeah, thank you for opportunity. My question is related to the guidance of [48%-50%] of our revenue guidance for this year. That gives me a second half growth to be in the range of around 17-odd percent. Why in the back-to-back quarters in the past, we had seen a very good growth f or the last four quarters at least? Now you are saying about the lower growth for the second half with your guidance. Why is it so?
As you know, Praveen, I am not sure. We are conservative, so the reasons, there is growth. There is multi-quarter growth. How we look at ourselves and kind of rate ourselves is can we double in three years? Which we are doing. Then can we further double three years from 2027? Because that has been our motto rather than looking at quarter to quarter. As you have seen in our last five quarters, we have delivered more than 40% total. We intend to continue. But because of when the projects will fit in, whether it will be in December of this year or March of next year, so that is the question mark. Business is there, and we intend to exceed and excel with the expectations set in. Whatever was happening, we are sticking with it.
Okay. I have got it. Second question related to the, as you are changing, the ramping of your energy storage or battery storage plans in the U.S. Do we see the contribution of the clean energy in your business to go up from here?
From year to year, it has grown 34%. Relative to others, we are growing a little bit faster because some of our industrial grow year- to- year grew 73%, communication grew 68%, mobility grew 59%. Relative to that, it is a little bit slower. But on a year-to-year basis, it is growing at a healthy rate of 34%.
Growth is very well diversified across verticals. I think there is benefit in clean energy also. We have already started seeing that happening in this quarter.
We will maintain the contribution at least perhaps what we have been having right now?
Absolutely. Our intention always to have it between 20% and 25%. We are diversified.
The next question is related to domestic and U.S. mix. As you had, answering to the last question, you said 50/50 you want to be at U.S. and India level business mix. Right now it is skewed towards in the U.S., around 60% is the U.S. Do we see a U.S. business growth outperforming the coming quarter and year?
Both sides are growing, but we feel that it is a quarter-to-quarter thing, three or four points move. I think last quarter it was [33%] India. This quarter it is 40%. Our intention is to get to 50%, and I think we should get there sooner than we expect. With saying that, U.S. is also growing. When we say U.S., it is not U.S. manufacturing. We make products for U.S. in India, so we categorize that also. So the 81% includes some of the manufacturing we do for U.S. in India.
Okay. No further questions.
Thank you, Praveen.
Thank you. The next question is from the line of Vipraw Srivastava from PhillipCapital . Please go ahead.
Hi, Sir. Welcome. Last year for H1, actually when you started for H2 more than H1, that is why we saw an inventory build-up happening in Q2. This year, based on the guidance, just because of math calculation, we will see H2 more or less in line with H1. A slight maybe side upside. Then why is this H1 inventory basis so high and the cash flow margins is negative?
Like what KB had mentioned earlier, some of the new programs are ramping up in Q3 and Q4. Yes, the inventory days as of June 2025 was 104, and right now it is 101. If you look back at March 2025, it was 86. We have to upfront our investments in people and in inventory before a new large program starts in. We expect that to start some of it in Q3, some of it in Q4. What we had given as a guidance on overall networking capital for the end of the year is 120-130 days. I think with the way how we are looking for the ramp up, we are confident of getting to that range of 120-130 by the end of the year.
Noted. Some of full year cash flow from operations will be [positive]?
Definitely the increase in revenue can help in operating leverage, creating in more profits from that perspective. That in combination of reduction in networking capital can help in cash flow from operations, but let us wait for the next one, two quarters, and then we will see from there. Yeah.
Got you.
We have had positive cash flow from operations for the previous two years. Second half did help even in the last two years. So yes.
Last question on the operating leverage part. Given that based on the current guidance, Q3 and Q4 will be relatively lesser than Q2. Do you see some margin pressure happening because of overall deleveraging in Q3 and Q4?
Let's put it this way. You will see the continued growth profile move. It is when and how it catches. So what you see in the last five quarters, you will see it going forward. The timing of it, when each program kicks in, is going to be the question, whether it is going to be this quarter or next quarter. It is either going to be December or January, because these delays are not controlled by us, it is controlled by the customer. But we are very confident that we will continue our growth profile, what we had in the last five quarters, as well as, the three-year doubling, which we have committed as when we went IPO. That from 2024 to 2027 we will double. I think that holds good even today.
Most of our expenses below the gross margin line are semi-fixed or fixed in nature. In the past also for us, operating leverage has played out. Right now, like what we have been highlighting the last six months and even earlier in the call, we are up-fronting some investments in people and inventory right now for the new programs which are kicking up, in the second half. Yes, it is on the positive side of operating leverage is what we are also expecting.
And sir, lastly from my end, in the first half, roughly H1 manufacturing has happened in India based on your presentation, and H2 has happened in U.S. Where do you see this number heading for the remaining two quarters? Do you see it trending upwards or trending flat-ish?
We have always guided to 80/20. A few quarters there will be a couple of points up or down either way. But we still in the next two quarters, we see it as 80/20.
Okay, sir. This will have no impact on margin side, this U.S. manufacturing?
I do not believe. I think it will get better as U.S. numbers improve. Our top line is increasing so the U.S. side also will increase.
Sure.
You are welcome, Vipraw.
Thank you. [audio distortion ] star and one to ask a question. Next question is from the line of Chirag from Keynote Capital. Please go ahead.
Yeah, thank you so much, [audio distortion], and congratulations for the great results. My first question is, how is your utilization of capacity? I just wanted to understand one thing that someone is buying from a U.S. facility, someone is buying from an Indian facility. What is the cost differential when the client is getting?
Okay, that's an interesting question. There's not a flat increase by percentage. It all depends on the labor content. Sometimes even from a $4 per hour in India to $35 per hour in U.S., it's still cheaper to make in India, i f you have a five-hour labor content. But if you have an automated project, it may not be as simple as that. So it varies by project and complexity. Some of the products we have have 200, 300 hours of labor in each part since we make complex parts. So it's difficult to move back and forth. And these are $50 billion, $60 billion companies. They are not going to change because, like the textile industry or the leather industry, something's cheaper, something is higher. Because you've got 25% tariffs average across any country you go to, o kay, i n the cost- effective countries.
It's a change we see that the consumer industry where it moves very quickly, you've seen it on numbers. Customers who make in India continue to make in India. And these products have a 10- to 15-year life cycle. Just because of a two or three quarter change, they have to make a switch. And it takes a year or year and a half for them to make a switch, even if they decide something. They rather wait it out and pay the. As you see , most of our customers have paid on the tariff shift.
Fair enough, sir. Sir, I just wanted a clarification on one thing. Our earlier strategy was similar to what we are thinking right now, where initial manufacturing for U.S. client was done in U.S. and to showcase them some benefits of shifting it to the India facility where everything what we used to manufacture in U.S. is similar that we did in [India]. We were able to get a certain client from U.S., India, which benefited Avalon from a perspective that we were able for shift India what was previously coming into the U.S., led to a significant margin improvements on EBITDA levels .
Would it be correct for me to understand when we are getting new orders or certain clients related to battery electric vehicles are initially [focusing] on U.S., would we expect them to move to India when they are showcased the kind of quality of product we can deliver?
See, you are right and wrong in that notion. If you look at us three, four years back, we started in the U.S., then brought in India for some time. Around a year and a half back, if I recall the timing right, we started bringing customers directly to India to kind of cost- effectively reduce our overhead in the U.S. That was starting to work. It was working till this tariff situation came. We are back to the old model where, okay, [let's star t] building there at a higher cost. When it moves to India, of course, we have to deal with the labor piece. The customers are looking at it on the longer-term perspective.
If you are going to tell a customer today, a new customer, saying that, "Come to India, I will make it cheaper, faster, better. But you have got to pay 50% tariffs." That is not going to work. What we are saying is that let us start in the U.S. and then in six months. These are substantially large customers. You have an opportunity to move to India, and you will not waste the time in transferring the technology. That is what is working in our favor today, having the two- plan strategy in two countries.
Sir, these problems are [audio distortion ] actually helping us to acquire more clients.
Absolutely.
We are actively working.
Absolutely. Like I said, w e are seeing more activity now than before.
Right. Sir, over the last two, three years, where our revenue used to be around INR 200 crores-INR 250 crores annually. We have done a phenomenal job to almost get it to INR 400 crores roughly rate. One thing I wanted to actually understand, sir. Earlier [audio distortion] inflow rate on a monthly basis in last five to seven quarters, used to be in the range of [audio distortion ] crores on monthly levels, and about INR [1,500] crores-INR 1,700 crores, about INR 1,500-INR 1,600 crores on a quarterly level, on an annualized level. But today also, I am able to see that on a quarterly basis, our order inflow rate is still around [INR 460, INR 470], which is monthly about INR [300] crores roughly. Revenue has jumped from INR 200 crores to INR 400 crores.
I am able to. Is there any particular strategy to garner more orders, or is there any capacity constraint that you have today, which is expected to unlock when we are expecting that order book inflow on a quarterly basis is expected to jump from current levels to INR [audio distortion] crores, INR [600] crores on ongoing basis?
The way you need to look at it is, see what comes as physical orders and not contracts is INR 1,863 crores for the next 14 months. I have got another set of orders and contracts, which is from 14 months to 36 months. The total is around INR 3,031 crores. We have got orders past the three years, some contracts are for 15 years. Those we do not count. We are just looking at the near term. If you are just chasing the order book, what can we ship in the next 12 months is what we look at. We are not taking our usual contracts anywhere from five years to insome cases 15 years in the aero industry. But we are not counting the last part of it. Does it answer your question, Chirag?
Got it. Just to clarify one, long-term contracts, which is more than 15 months to three years, are separate [audio distortion] compared to the INR 1,800 crore, INR 1,900 crore order book that we have today?
Absolutely. We have INR 3,000 crore plus. We have got more after that.
Got it. Fair enough. [audio distortion]. One thing. Sorry.
Sorry, sir. May I request you to rejoin the queue for your question?
No, it's okay. Thank you.
Thank you, Chirag.
The next question is from the line of Neel Mehta, Equirus Securities. Please go ahead.
Hi, sir. Thank you for the opportunity and congratulations on a spectacular number.
Sir, can you please raise your volume a little?
We can't hear you.
Sir, am I audible, sir?
Now a lot better now.
Please can you speak a little louder?
Yeah. Sir, I was thinking about on the side on the new side. What can be the proportion of order book in case of Mar-?
We still can't hear you, Mr. Mehta.
Hello.
Yeah, a lot better. Go ahead, Neel.
Yeah. Really sorry for the inconvenience, sir. Sir, I just wanted to ask you about close to detail recent order-
It drops off after the first few words. It kind of drops off, Neel.
We can't hear you properly, Mr. Mehta. I request you to rejoin the queue. The next question is in the line of Debashish from Svan Investment. Please go ahead.
Hi . Thank you so much for the opportunity and congrats on the [audio distortion] deliveries. I have two, three questions. First one is linked to the U.S. operation. If we see the U.S. revenue growth this time has come significantly better. It has not [audio distortion] to the EBITDA margin. My understanding is a large part of the [inaudible] utilization [improvement] and the EBITDA of the U.S. operations should improve. That is not visible in this quarter at least. Is it more transient in nature and going forward we will see the U.S. manufacturing facility to improve with more [inaudible] margins? I just wanted to get some sense here.
Hi, Debashish. Suresh here. You are absolutely right in the U.S. manufacturing operations revenue going up because we have been talking about the energy storage system program ramping up, which is what is happening now. That is one of the reasons why the revenue is also surging there. In terms of [calculation] to EBITDA, a year ago, if you had looked at it, the EBITDA would have been INR -13 crore. But right now that is not the case, where the operating leverage with increased revenue over there is helping the U.S. operations also, which is what is the hope in the coming quarters to continue there.
Last year was INR -13 crore. What is it now this year, sir?
EBITDA is-
INR -5 crore, right?
Correct.
Understood. The second question is, this is again related to guidance. I do not want to hold you to a specific number. This is more of a long-term question and trying to get some sense. You were talking about doubling the revenue between FY 2024 to FY 2027. Now if I just looking the run rate of revenue quarter, we have almost [audio distortion] in FY 2026 itself. Not exactly [audio distortion] close to that. Just trying to get some sense, you are still maintaining that this [FY 2024] number will be doubling in FY 2027? You think that because of higher traction as compared to what you initially thought, the FY 2027 numbers will be better than FY [audio distortion], I mean that initial guidance that you were thinking of ?
What we are thinking is little bit longer term, because we think, this is very much possible, like you said. Okay. We are looking at doubling from that point in the next three years. The planning is based on the next three years already.
Sure.
FY 2027-
But, sir, what I am trying to get some sense is, I mean, in FY 2024 we achieved around INR 900 crores, INR [audio distortion] crores. My sense is that in FY 2026 itself we will be crossing INR [1,600] crores type of [run rate] . In FY 2027 you are kind of INR 1,700 crore, INR 1,800 crore number that you are looking or they were targeting much higher numbers? Because as far as our last discussion is concerned, you were already working on some of the few large projects in railways and all. This is some sense I am trying to get. I am very much confident that posting next three years you would be again doubling that number. There is no doubt about it. I am just trying to understand whether there is any preponement as compared to what you thought initially when you-
We will all be happy if it happened earlier and we strive to do that. As you know, we are very conservative in our approach. We still maintain doubling again in the next three years. If it comes earlier, all of us are happy. The investors are more happier than what we are. Our internal targets are much higher.
Sure. Understood. If you can-
Sorry to interrupt, but I would like you to rejoin the queue for follow-up questions.
Sure, sure. Thank you so much.
Thank you. The next question is from the line of [Himanshu] from Krijuna Research and Analytics. Please go ahead.
Hello, sir. Am I audible?
Very much, [Himanshu]. Go ahead.
Congratulations on your good numbers. My first question is on the last transcript. You said you are entering into semiconductor equipment manufacturing space. You buy the Industry 4.0 complex box-build. So in this quarter or last two quarters, anything manufacturing you start? You can give me a broad view.
Yeah.
Excuse me.
Sorry, [Himanshu]. Sorry. Go ahead.
You can give me a broad view that you are doing in the semiconductor equipment manufacturing space.
Look, we've already started, invested quite a bit into that, and we are starting to see the first set of prototypes going out this quarter, and we'll see high-level production into the next few quarters. So everything is in line, and we believe one year plus of work is finally going to pay dividends in the future quarters.
Okay. My second question is, what is the synergy gain on collaboration with Zepco Private Limited?
Yes.
What is your synergy gain on collaboration with Zepco Private Limited?
Yeah, that's correct. We have multiple [inaudible] gains. It takes time, but what we're seeing is a lot of our customers are starting to engage in design activity in the power side of things. Zepco is one of the leaders in that today. They're also on a second project working on motors for the drones in the India market. That is also progressing well. But collectively for us, the more important part is the design part, which are customers in the power and clean energy. We have a design partner now which can take the design part of it, and of course, we are more interested in manufacturing it. All that is playing out as we plan.
You start a manufacturing? Are you planning for this?
The design usually takes a year to 18 months at least. Once it starts now, the manufacturing is a long-term play. It's not something which can happen overnight.
And sir-
Sorry to interrupt you, sir, but can I request you to rejoin the queue?
I re join the queue?
Okay. Thank you, [Himanshu] .
Thank you. The next question is from the line of Jalaj from Svan Investment. Please go ahead.
Hi, Jalaj.
Thanks for the opportunity. My question was again still to the manufacturing in the U.S. At what scale of operations do we believe that this would reach to a pretty much break-even operations or break-even EBITDA level? Can you repeat what was the EBITDA loss in the last year [in the same quarter]?
Suresh, you want to answer?
Yeah. Q1 FY 2025 was INR -12.7 crore. That was the number which I was referring to in my context. Is there any part you want to take?
Q2 FY 2024, what was the number?
It was INR -5 crores.
There is large scale improvement.
Yeah. You will start seeing it play out in the next few quarters, w hich will be a positive gain for us.
Suresh, specifically, I am still confused. The 2Q FY 2025, the losses were INR -5 crores?
Approximately around that number. I think it should be around. You are talking about Q2 FY 2026 or Q2 FY 2025?
2025. 2025.
Q1 FY 2025 is INR -13 crores. Q2 FY 2025 is INR -3.9- odd crores.
If that is the number, then our EBITDA losses have rather increased in absolute terms since our revenue has increased by almost from INR 30 crores to INR [62] crores. Almost gain of [audio distortion]. I am just trying to get my head around that losses have increased in [audio distortion] .
No. Right now, like what we had said earlier, we had spoken about this earlier also where we are upfronting our investments today in the people as well as in the inventory for the revenues that are yet to flow in. Today you have the cost that is there without the matching revenues which are yet to flow in. Whatever revenues that you are having in now, these are complex products, Jalaj, which means that you got to train the people for a quarter or slightly more than a quarter to deliver them. The cost what we are incurring right now, the matching revenues we hope to see in the coming quarters.
Got it.
One thing, see. Jalaj, one thing you have to understand is because we are starting there is why India is doing very well, because the products are moving here. It is something which is interrelated rather than you can look at it separately because we start there and then move it here and all the profitability comes to India after.
Got it. Then, sir, because of these tariffs, have you seen some-?
Jalaj, I request you to rejoin the queue for follow-up questions.
Thank you. Best of luck.
Thank you.
Thank you.
The next question is from the line of Chirag from Keynote Capital. Please go ahead.
Thank you for the floor. Sir, my question which I asked about the inflow of order book. I' m still after having long-term and short-term order book, our quarterly run rate is still around INR [audio distortion] crores compared to INR 400 crores a year back. Whereas our revenue has improved from almost INR 275 crores to almost INR 380 crores. Just wanted to understand the reason for that. Are you [audio distortion] headwinds and garnering more orders at this moment?
Can you hear us?
Yes, sir.
Hello, can you hear? Okay. In the context, when you have a five-year project, where we know that this amount is given every year, sometimes certain customers release it on a 12-week rolling. Okay. I may be doing $15 million with the customer. Okay. But order on the book will be only $3 million because he is giving a rolling PO. You have a contract for five years. We only count the rolling number.
Got it. Fair enough. Would [audio distortion] actually compare order book growth and revenue growth together to go align in future also?
Yeah. You can see it in our growth itself, right? If you look at it 12 months back and what our numbers are today.
Last question from my end. As we have a JV with Zepco and the collaboration [audio distortion] Zepco. Is it fair to assume that we are potentially going from being an EMS company to an ESDM company and spending more on design to be incorporated in our [audio distortion] client perspective and increase in the part of revenue from designs going forward?
So just to clarify, Zepco is a small investment for us. We have only invested INR 7 crore. The reason for the investment is we are a manufacturing company and EMS company. Is that if we can get the design element done, our interest is in the next 10 years of manufacturing, not the first INR 1 crore or INR 2 crore in design. Our interest is once it is designed, can I make this product for the next 10 years? That is a INR 200 crore activity, right? So that is why Zepco, and us are partner, to make that possible for our power and clean energy customers. Did I answer your questions, Chirag?
Yes, sir. Our focus still for the next 10 years would be on manufacturing. This is just a small type of a collaboration for certain related designs that we are doing so that we can get the orders coming.
The expertise to do that.
Got it. Fair enough. That is from my end. Thank you.
Thank you, Chirag.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you. FY 2026 has started strong for Avalon with robust revenue growth, solid execution, and continued customer traction across key markets. The upward revision in our revenue growth guidance reflects our confidence in our business outlook. We remain focused on scaling 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 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 the continued support. We look forward to updating you in the coming quarters. Thank you.