Updater Services Navigates Headwinds: A Deep Dive into Q2 & H1 FY26 Performance

Updater Services Limited, a prominent integrated business services provider, recently unveiled its financial results for the second quarter and half-year ended September 30, 2025 (Q2 & H1 FY26). The period presented a mixed performance, characterized by robust growth in its Integrated Facility Management (IFM) segment but notable headwinds impacting its Business Support Services (BSS) division. Despite these challenges, management articulated a clear strategic roadmap focused on technology integration, client diversification, and operational efficiency to drive future growth and profitability.

For H1 FY26, Updater Services reported a consolidated revenue of ₹1,440.2 crore, marking a 7% year-on-year growth. The IFM business was a significant contributor, achieving ₹960.8 crore in revenue, an impressive 10% year-on-year increase. In contrast, the BSS segment recorded ₹479.3 crore, with its growth impacted by various industry-specific challenges. Consolidated EBITDA stood at ₹81.5 crore, while Profit After Tax (PAT) was ₹48.8 crore. The company's EBITDA margin for H1 FY26 was 5.7%, and the PAT margin was 3.4%, reflecting the impact of upfront costs and market dynamics during the period.

Segmental Performance: A Tale of Two Halves

The IFM segment, which accounts for 67% of the company's total revenue, demonstrated resilience and strategic growth. Within IFM, IFMS (Integrated Facility Management Services) constituted 91.9% of the segment's revenue, followed by F&B at 7.5% and Feminine Hygiene at 0.6%. The growth in IFM was attributed to securing several new strategic contracts and a conscious shift towards a private sector-driven client mix, which typically offers better margins. Management is optimistic about the IFM segment, targeting a 10-12% revenue growth for the full year FY26.

Conversely, the BSS segment, representing 33% of total revenue, faced considerable pressure. Sales Enablement Services dominated the BSS revenue mix at 79.4%, with Audit & Assurances at 8.1%, Employee Background Verification Check Services at 4.8%, Warehouse Management and Niche Logistics Solutions at 4.5%, and Airport Ground Handling Services at 3.2%. The BSS companies, particularly Denave and Athena, experienced the brunt of global and industry headwinds, including significant spending cuts by IT companies and a broader slowdown in hiring activity. The global flight handling business also saw a temporary slowdown due to flight cancellations caused by the monsoon season.

Strategic Initiatives and Navigating Headwinds

Updater Services is proactively addressing the challenges in its BSS segment through strategic investments and operational adjustments. Denave is making encouraging progress with AI-led initiatives, such as the Intellibank platform and agentic AI pilots, aimed at enhancing sales efficiency and delivering resilient performance. Athena is diversifying its client base beyond traditional BFSI into new sectors like education, retail, and real estate to mitigate concentration risks. The Audit & Assurance business has expanded into fixed asset verification, a high-margin area, to move up the value chain.

The company is also strengthening its technology platforms for Employee Background Verification Check Services to enhance data security and deliver faster, more reliable checks. These proactive investments in technology and digital capabilities, while impacting margins in the short term, are strategic in nature and expected to yield significant long-term benefits in terms of competitive positioning, efficiency, and client experience.

Management transparently acknowledged an issue concerning its Avon subsidiary, where ₹28 crore is under review due to lapses in due diligence. A conservative provision of ₹3 crore has been made, and legal efforts are underway to recover the maximum possible amount. Crucially, internal controls and vendor verification processes have been significantly strengthened to prevent future recurrences. This transparent approach, coupled with immediate corrective actions, underscores the company's commitment to robust governance.

Outlook and Management Confidence

Despite the current headwinds, Updater Services' management remains confident in a stronger performance in the second half of FY26. They anticipate a normalization of collection cycles and a tapering off of one-off impacts. The company is targeting a consolidated revenue growth of 9-10% for the full year FY26, with the IFM segment expected to grow by 10-12% and the BSS segment by 3-3.5%. The overall PAT margin for the full year is projected to be around 4%, excluding any exceptional items.

Updater Services Limited is strategically positioned to capitalize on the increasing outsourcing and formalization trends in the integrated business services market. With its diversified client base, extensive PAN-India presence, and continuous investment in technology, the company aims to deliver steady and profitable growth in the years ahead, reinforcing investor trust through disciplined execution and transparent communication.