Centum Electronics: Navigating Growth and Strategic Realignment in H1 FY26

Centum Electronics Limited, a prominent player in India's electronics system design and manufacturing sector, has announced its financial performance for the second quarter and first half of fiscal year 2026 (Q2/H1 FY26). The company, deeply entrenched in Defence, Aerospace, Space, Industrial, and Medical applications, reported a mixed bag of results, showcasing robust standalone growth while grappling with challenges in its international consolidated operations. For H1 FY26, Centum recorded a consolidated operational income of INR 564 crore, reflecting a 12% year-on-year growth. However, consolidated EBITDA margins stood at 7.22%, impacted by subsidiary losses. On a standalone basis, the picture was brighter, with revenue growing by a strong 24% YoY to INR 391 crore and EBITDA margins expanding significantly to 12.88%.

The company's performance highlights a strategic focus on its domestic Build-to-Spec (BTS) business, which has been a key growth engine. This segment, catering to domestic Defence and Space customers, enabled higher deliveries in mission-critical sectors. The Electronic Manufacturing Services (EMS) business also demonstrated healthy growth, fueled by new customer acquisitions. Conversely, the international operations, particularly the Engineering R&D Services (ER&D) market in France, faced headwinds due to weak macroeconomic conditions, intense competition, and pricing pressures. This disparity underscores the importance of Centum's ongoing strategic realignment efforts for its global footprint.

Financial Snapshot: H1 FY26

Strategic Initiatives and Future Outlook

Centum Electronics is actively pursuing several strategic initiatives to bolster its growth trajectory and address operational challenges. A significant development is the Memorandum of Understanding (MoU) signed with Garden Reach Shipbuilders & Engineers Limited (GRSE) on October 8, 2025. This collaboration aims to co-develop indigenous advanced navigation systems for the Indian Navy, representing a substantial opportunity estimated at INR 500-600 crore over five years. This initiative aligns with the national objective of self-reliance under 'Aatmanirbhar Bharat' and leverages Centum's expertise in high-reliability electronics and system integration with GRSE's shipbuilding capabilities.

Another key partnership includes an MoU with Bharat Electronics Limited (BEL) to strengthen indigenous Defence Electronics, focusing on advanced electronic systems for Electronic Warfare (EW), radar, and military communications. These collaborations highlight Centum's commitment to enhancing India's defence capabilities and expanding its footprint in critical sectors. The company also successfully delivered nearly 400 critical modules for ISRO's CMS-03 satellite (GSAT-7R)/LVM3-M5 mission, demonstrating its execution capabilities in space programs and opening avenues for future orders for similar constellations.

Addressing International Headwinds

The management is taking decisive steps to address the underperformance of its international subsidiaries. The planned divestment of Canada operations is progressing, with a clear decision anticipated by the end of Q4 FY26. Furthermore, the company is evaluating the long-term strategic direction of its European business to mitigate losses stemming from the challenging macroeconomic environment and intense competition in the ER&D market in France. This proactive approach aims to prevent subsidiary losses from impacting overall consolidated numbers in the next financial year.

Management Confidence and Growth Projections

Despite the consolidated challenges, management expressed strong confidence in the standalone business's future performance. They project a robust 30% revenue growth for the full financial year 2026 on a standalone basis. Standalone EBITDA margins are expected to stabilize within the 13% to 15% range for FY26. The domestic BTS order pipeline remains strong, with expectations of significant order bookings between Q3 and Q4 FY26. Over a three-year horizon, the company targets over INR 2,000 crore in order bookings for its domestic BTS business, indicating a healthy long-term outlook.

Centum Electronics' strategic focus on indigenization, coupled with its strong domestic performance and proactive measures to address international challenges, positions it for sustained growth. The company's commitment to innovation, strategic partnerships, and disciplined execution underscores its potential to capitalize on emerging opportunities in India's rapidly evolving electronics and defence sectors.