Allied Digital services and international growth offset softness

Allied Digital Services Limited reported Rs 265 crore in second-quarter financial year 2027 revenue, or Q2 FY27, up 14% year on year, as services grew 31% and international business rose 36%, more than offsetting softness in domestic government projects. First-half FY27 revenue reached Rs 526 crore, up 16% from the corresponding prior-year period.

How has Allied Digital's revenue mix changed?

Allied Digital's Q2 FY27 growth was led by services and international operations rather than domestic government projects. Management said the services business, comprising predictable multi-year contracts, grew 31% year on year, while international business expanded 36%. It said these segments more than offset softness in domestic government projects during the Rs 265 crore quarter.

The mix shift gives a larger role to recurring service work and overseas customer activity. Allied Digital described services as annuity revenues and cited a US strategic partnership to deliver infrastructure cloud and cybersecurity services through its offshore delivery centre. It also secured a US healthcare-service-provider engagement to implement and support a 24/7 artificial intelligence-powered service desk.

Allied Digital has not exited government work despite its softer Q2 contribution. In India, Maharashtra Industrial Development Corporation selected the company as system integrator for implementation, maintenance and support of Internet leased-line connectivity across Maharashtra. Management described the award as a government-agency order win after a gap of three quarters, indicating renewed activity in this segment.

What were Allied Digital's Q2 FY27 profit and collection metrics?

Allied Digital reported earnings before interest, tax, depreciation and amortisation, or EBITDA, of Rs 27 crore in Q2 FY27, with a 10% margin, profit before tax of Rs 17 crore and profit after tax of Rs 13 crore. EBITDA was Rs 1 crore below Rs 28 crore in Q2 FY26, even as revenue rose 14%, reflecting investments in talent, leadership and growth capabilities, competitive pricing and operating-cost pressure.

Sequentially, EBITDA increased from Rs 25 crore in Q1 FY27 to Rs 27 crore in Q2 FY27, while the margin remained at 10%. Profit after tax rose by Rs 1 crore from Rs 12 crore in Q1 FY27. For H1 FY27, Allied Digital reported profit before tax of Rs 34 crore and profit after tax of Rs 25 crore.

Working-capital indicators improved as operations scaled. Trade receivables declined to Rs 264 crore on September 30, 2026, from Rs 320 crore at the end of March 2026, while debtor days improved to about 84 from 96 at the end of FY26. Cash and cash equivalents were Rs 185 crore, compared with Rs 162 crore a year earlier, while gross borrowings increased to Rs 167 crore from Rs 98 crore; management said the company retained a positive net-cash position.

Why were Allied Digital's government projects softer?

Allied Digital's domestic government-project activity softened because higher equipment and hardware costs affected the commercial viability of certain projects, according to management. The company therefore delayed some bids and became more selective in its bidding approach. Management said costs remained elevated but showed signs of stabilising, bringing projects back into active consideration.

Management said it was protecting project economics through pricing discipline and contract selection. In response to an analyst question, it said pricing on the Maharashtra Industrial Development Corporation Internet leased-line order had been locked with original equipment manufacturers, or OEMs, and that the company was comfortable with the product-pricing margin. Allied Digital also said it had declined prospective contracts that did not meet its profitability and commercial thresholds.

Government projects can be materially larger than enterprise engagements but have a distinct delivery profile. Management said safe-city, smart-city and implementation projects generally involve six to eight months of implementation followed by three to five years of maintenance. It described government order sizes as commonly between Rs 100 crore and Rs 500 crore, with some single-ticket orders reaching Rs 700 crore.

Can Allied Digital reach its Rs 1,000 crore annual revenue milestone?

Management said Allied Digital's Rs 526 crore H1 FY27 revenue established a run rate that left it well positioned to sustain its Rs 1,000 crore annual revenue milestone. The H1 total was the company's highest first-half revenue in its history and represented 16% growth over the corresponding prior-year period. Management did not provide a revised full-year forecast or disclose segment-level revenue values for services, international operations and government projects.

The operating plan is to increase direct customer engagement while retaining partner-led and consortium-led work. Management said direct relationships give Allied Digital greater ownership of customer engagement, opportunities to expand services and potential to increase its share of technology spending. The company is strengthening sales and go-to-market capabilities, delivery capacity and artificial intelligence integration, while cautioning that these investments will take time to translate into results.

Allied Digital secured more than Rs 74 crore in new orders and renewals during Q2 FY27, including renewals across pharmaceuticals, banking, financial services and insurance, real estate and medical devices. Management said large transformation contracts were taking longer to close as customers evaluated technology choices and commercial terms, while smaller and midsized opportunities were converting faster. That difference may influence the timing of revenue conversion in the second half.

How is Allied Digital balancing government and enterprise contracts?

Allied Digital is seeking a balance between selectively chosen government projects and direct enterprise customers. Management said enterprise contracts may be smaller than public-sector projects but can offer longer customer continuity, direct cross-selling opportunities and less exposure to changes in elections, government decision-makers or request-for-proposal processes.

The company said government projects combine products and services, with maintenance extending for three to five years after the six-to-eight-month implementation phase. Management also said payments from government customers can sometimes be delayed, although it had not seen large amounts stuck or unpaid. The reduction in receivables to Rs 264 crore at September 30, 2026, from Rs 320 crore at March-end provides the reported context for that collection focus.

Conclusion

Allied Digital's Q2 FY27 performance shows that 14% revenue growth to Rs 265 crore was supported by a 31% increase in services and 36% international growth, rather than domestic government projects. The result gives multi-year service contracts and overseas activity a larger role in the company’s reported growth mix, while government work remains relevant for its potential contract size.

The next issue to watch is whether stabilising OEM pricing results in government-project awards without changing Allied Digital's stated commercial discipline. Management said the Noida Safe City bid submission was due on November 6, 2026, and that results from other bids placed in the preceding days and weeks could emerge within two to four weeks. It also identified cost discipline, growth investment and progressively stronger profitability as priorities for the remainder of FY27.