Apollo Micro Systems: Q3 FY26 Performance and Strategic Growth

Apollo Micro Systems Limited, a prominent player in India's defence and aerospace technology sector, has reported an exceptional financial performance for the third quarter and nine-month period ended December 31, 2025. The company achieved its highest-ever quarterly and nine-month revenue, underscoring its robust execution capabilities, operational discipline, and unwavering commitment to India's indigenization and 'Make in India' initiatives. This strong showing positions Apollo Micro Systems as a key contributor to the nation's defence infrastructure, with significant strategic advancements on the horizon.

For Q3 FY26, the company's consolidated revenue from operations surged by an impressive 70% year-on-year, reaching ₹252.22 crore. This substantial growth was primarily fueled by the successful execution of its healthy order book and the seamless transition of several high-value systems into the production phase. The momentum continued into the nine-month period (9M FY26), with revenue from operations climbing 53% to ₹611.07 crore compared to the previous year. This consistent growth trajectory highlights the company's expanding market presence and operational efficiency.

Profitability metrics also demonstrated strong upward trends. The consolidated EBITDA (excluding other income) for Q3 FY26 increased by 33% to ₹50.39 crore, while for 9M FY26, it rose by 61% to ₹150.52 crore. This led to an expansion of the EBITDA margin by 134 basis points in 9M FY26, reaching 24.63%. The Profit After Tax (PAT) for Q3 FY26 grew by 25% year-on-year to ₹22.88 crore, and for 9M FY26, it climbed by 67% to ₹70.59 crore. The PAT margin also improved by 100 basis points in 9M FY26, reaching 11.6%. These figures not only underscore the company's operational excellence but also reaffirm the strength of its growth trajectory, exceeding its own guidance of 45-50% topline growth and 22-23% EBITDA margin for FY25.

Strategic Expansion and Indigenization Drive

Apollo Micro Systems is actively pursuing a multi-pronged strategy involving strategic acquisitions and significant greenfield expansion to solidify its market position and enhance its capabilities. A major milestone was the completion of the 100% equity stake acquisition of IDL Explosives Ltd for INR 107 crore. This acquisition is pivotal, transforming Apollo Micro Systems into a fully integrated Tier-1 defence Original Equipment Manufacturer (OEM) and broadening its solutions portfolio across critical areas of India’s defence supply chain. IDL Explosives, as the first Indian-owned explosive company and a Star House exporter, brings substantial value, with an order book of approximately INR 500 crore already in place.

Further reinforcing its growth strategy, the company announced an additional acquisition by ADIPL, a subsidiary of Apollo Micro Systems, which is expected to be completed before the end of the current financial year. This move is anticipated to significantly enhance organic growth and overall strength. The company's commitment to indigenization is evident in its substantial contribution to various missile programs, accounting for 63% of subsystems, and its unique offerings in underwater mines, including Shallow Water, Deep Water, and Limpet Under Water Mines.

Capacity Enhancement and Future Outlook

To support its ambitious growth plans, Apollo Micro Systems is undertaking a significant greenfield expansion in Hyderabad. The company has been allotted Plot Nos. 4 and 5, totaling 22,988.00 Sq.mts, at the Industrial Park TSIIC- Hardware Park Phase-II. This expansion, with an estimated investment of ₹300 crore for facility development, aims to scale manufacturing, assembly, integration, and testing operations by 12 times. This state-of-the-art facility will be dedicated to Weapon System Platforms such as Grad Rockets, Anti-Submarine Warfare Rockets, Anti-Tank Mines, and Artillery Munitions. The land acquisition alone amounted to ₹27.5856 crore, part of an MoU signed with the Government of Telangana.

Management has provided a positive outlook, projecting a revenue CAGR of 45% to 50% over the next three years, driven solely by the core business. This guidance excludes any contribution from recent or future acquisitions in the current financial year. The company is also targeting a 15% PAT level on a standalone basis. Furthermore, IDL Explosives is expected to turn EBITDA and PAT positive from Q1 FY27, indicating a successful turnaround strategy. An allocation of INR 100 crore has been earmarked for R&D in FY26, reflecting the company's continuous investment in technological innovation.

Addressing Challenges and Strengthening Governance

While the growth trajectory is strong, Apollo Micro Systems is proactively addressing potential challenges. Management acknowledged an expected margin dilution on a consolidated basis due to the IDL acquisition, primarily influenced by previous contracts with Coal India. However, the successful removal of the ban by Coal India, leading to a new order worth INR 421 crore, signals a return to stable operations for the acquired entity. The company is also implementing SAP and automating its factories to Industry 4.0 standards to enhance operational efficiency and control costs.

The company's working capital cycle, inherently high due to the nature of the defence industry and the need for extensive inventory, is being actively managed, with a reduction from 600 days in FY24 to 445 days in FY25. Management also transparently addressed the shareholder rejection of a corporate guarantee proposal for subsidiaries, explaining the rationale and their plan to re-approach shareholders. This proactive communication and strategic planning demonstrate a commitment to disciplined execution and long-term value creation.

Conclusion

Apollo Micro Systems Limited's Q3 FY26 and 9M FY26 performance reflects a company in a strong growth phase, driven by strategic acquisitions, capacity expansion, and a deep commitment to indigenization. With a robust order book, clear growth guidance, and proactive management of challenges, the company is well-positioned to capitalize on the increasing demand in the defence and aerospace sectors, contributing significantly to India's vision of 'Atmanirbhar Bharat'. The focus on innovation, operational excellence, and strategic partnerships underscores its potential for sustained growth and leadership in the evolving defence landscape.