Apollo Micro Systems: Firing on All Cylinders in India's Defence Push

Apollo Micro Systems Limited, a pivotal player in India's burgeoning defence and aerospace sector, has reported an exceptional performance for Q2 and H1 FY26, underscoring its robust operational discipline and unwavering commitment to indigenization. The company's latest financial disclosures reveal a period of significant growth, strategic expansion, and enhanced profitability, positioning it as a key contributor to India's 'Atmanirbhar Bharat' vision in defence.

For the second quarter of fiscal year 2026, Apollo Micro Systems recorded its highest-ever quarterly revenue and Profit After Tax (PAT). Revenue from operations surged by an impressive 40% year-on-year, reaching INR 225.3 crore. This growth was further amplified by a 69% quarter-on-quarter increase, reflecting strong execution of its order book and the seamless transition of high-value systems into production. The Profit After Tax (PAT) witnessed a remarkable 91% year-on-year growth, climbing to INR 30.03 crore, with a 70% increase quarter-on-quarter. This translated into a PAT margin of 13.3%, an expansion of 350 basis points year-on-year, driven by enhanced operational efficiency and a favorable product mix.

The first half of FY26 continued this strong trajectory, with revenue growing by 42% semi-annually to INR 358.85 crore. EBITDA (excluding other income) for H1 FY26 stood at INR 100.13 crore, an 81% semi-annual increase, with the EBITDA margin expanding by 600 basis points to 28%. PAT for the half-year reached INR 47.71 crore, a 97% increase, underscoring the company's sustained focus on productivity improvement and cost optimization.

Strategic Moves and Expansion Initiatives

Apollo Micro Systems is not merely riding the wave of defence spending; it is actively shaping its future through strategic initiatives. A significant milestone is the acquisition of 100% equity stake in IDL Explosives Ltd for INR 107 crore. This acquisition represents a crucial backward and forward integration, enhancing the company's manufacturing capabilities and broadening its solutions portfolio across critical areas of India's defence supply chain. The acquired entity's substantial land bank, with only 40% utilized, offers significant potential for brownfield expansion and future capacity enhancement. The company anticipates consolidating IDL's results from Q3 FY26, with IDL expected to turn profitable by Q2 next financial year.

In terms of capacity expansion, Apollo Micro Systems is aggressively pursuing greenfield and brownfield projects to scale its operations to three times the current capacity. New manufacturing units in Hyderabad and Rourkela are being developed, with full production at Unit 3 expected to commence by June CY 2026. This expansion includes a new weapon integration facility, with Unit I dedicated to R&D and Units II and III for production, aiming to streamline operations and meet rising demand. The total capital expenditure allocated for Phase 1 is INR 150 crore, with an additional INR 100 crore for Phase 2.

Research and Development remains a cornerstone of Apollo Micro Systems' strategy. The company has earmarked INR 100 crore for R&D in FY26, focusing on driving innovation and developing cutting-edge technologies in defence and strategic electronics. These efforts have already led to the successful development of Aerial Bombs, Underwater Acoustic Sensors, Critical Actuation Systems, and Secured Data links, with ongoing work on advanced solutions.

Market Opportunities and Future Outlook

The company is strategically positioned to capitalize on the 'Make in India' and 'Atmanirbhar Bharat' initiatives, which are driving increased indigenous development in the defence sector. The Ministry of Defence's decision to observe 2025-26 as the 'Year of Reforms' and earmark 75% of the modernization budget for procurement through domestic sources further bolsters this outlook. Global geopolitical tensions and regional conflicts are also fueling a surge in demand for explosives and ammunition, with India's defence exports crossing INR 23,622 crore in 2024-25.

Apollo Micro Systems is actively pursuing large-ticket and complex projects, leveraging its 40 years of experience and proven track record in indigenous missile programs. The company has secured MoUs with key public sector entities like Munitions India Ltd, TCL, BDL, and GRSE for joint development and supply of advanced weapon and electronic systems. The management expects revenue to grow at a CAGR of 45-50% over the next two years, driven solely by its core business, excluding the recent acquisition. Furthermore, the company aims to reduce its working capital cycle by 100-120 days from FY27 onwards as programs transition into the production phase.

Conclusion: A Future Forged in Innovation

Apollo Micro Systems Limited's Q2 and H1 FY26 performance reflects a company in a strong growth phase, driven by strategic vision, operational excellence, and a deep commitment to national defence. The management's focus on backward integration, capacity expansion, and robust R&D, coupled with a healthy order book and a favorable market environment, positions the company for sustained growth and leadership in India's evolving defence ecosystem. As India continues its journey towards self-reliance in defence, Apollo Micro Systems stands ready to deliver advanced, indigenous solutions, reinforcing investor trust and shaping the future of national security.