Onward Technologies: A Record-Breaking Q2 FY26 and a Clear Path to Double-Digit Growth

Onward Technologies Limited, a prominent player in digital and ER&D outsourcing, has announced a stellar performance for the second quarter of Fiscal Year 2026 (Q2 FY26). The Mumbai-headquartered firm reported a record quarter in both revenue and EBITDA growth, underscoring its robust execution across key business verticals. This strong showing reinforces the company's commitment to its strategic objectives and its position in the global software outsourcing landscape.

For Q2 FY26, Onward Technologies posted a consolidated total revenue of INR 140.1 Crore, marking a significant 12.4% year-on-year increase. The company's EBITDA surged to INR 19.9 Crore, reflecting an impressive 151.9% growth compared to the previous year, with EBITDA margins expanding to 14.3%. While Profit After Tax (PAT) stood at INR 11.9 Crore, a slight sequential dip was attributed to a one-time tax credit in Q1 FY26. Despite this, management highlighted that from a cash generation perspective, Q2 FY26 was a record quarter.

Segmental Performance and Strategic Focus

The company's revenue streams are primarily driven by three focused verticals. The Industrial Equipment & Heavy Machinery (IEHM) segment continues to be the largest contributor, accounting for 63% of the Q2 FY26 revenue. This segment has shown consistent progress, leveraging Onward Technologies' expertise in product development, testing, and integration. The Transportation & Mobility (T&M) segment contributed 34% of the revenue, focusing on software services aligned with clients' critical paths, including SDV-led software services, end-to-end system design, and advanced driver assistance systems (ADAS). The Healthcare & Life Sciences (HCLS) vertical, while contributing 3%, is currently in an investment phase, transitioning to digital and software services under new leadership, with ambitious growth targets for the coming year.

Onward Technologies' strategic emphasis on North American and European markets has been a key growth driver. The company's global footprint, with 12 offices and over 2,500 engineers, supports its specialized offerings in advanced digital and ER&D services. The management noted that the demand in the U.S. is growing at an unprecedented speed, fueled by the manufacturing industry's push towards AI. Europe is also anticipated to follow suit, investing heavily in data centers, cloud, and AI, presenting further opportunities for the company.

Operational Efficiency and Future Outlook

Operational efficiency has been a cornerstone of Onward Technologies' success. The company reported a declining LTM attrition rate of 15.49% for Q2 FY26, indicating improved employee retention. Days Sales Outstanding (DSO) remained under control at 73 days, with a target of 65 days, reflecting efficient working capital management. The management also highlighted that the entire margin improvement is predominantly driven by utilization and productivity, with further scope for expansion.

Strategic investments in infrastructure are also underway. The company has invested approximately INR 18 Crore in upgrading its delivery centers across India, including new facilities in Bangalore and Hyderabad and substantial upgrades in Pune and Chennai. These investments are aimed at supporting anticipated offshore growth, with a model that typically involves 90% offshore delivery for new projects.

Management's Vision and Investor Confidence

Management expressed strong confidence in the company's future trajectory, reiterating guidance for double-digit revenue and EBITDA growth for the current and next financial year. They anticipate a good run rate into 2026, with all three verticals expected to perform better. The company also sees an opportunity to achieve 15% EBITDA margins by FY27, driven by continued improvements in utilization and productivity. While Q3 is expected to be a slower quarter due to furloughs from some clients, the long-term outlook remains positive, supported by a strong execution engine and strategic investments.

Onward Technologies' focus on deepening engagements with existing clients, rather than expanding its client base significantly, is a testament to its value-driven approach. The company aims to scale engagements with its top clients, transitioning from mechanical engineering to higher-value software and digital services. This strategic clarity, combined with disciplined execution and a strong financial performance, positions Onward Technologies for sustained growth and enhanced shareholder value in the coming years.