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Avalon FY26: Scaling box builds, tightening working capital, and setting up the next doubling

Avalon Technologies ended FY26 with a sharp step-up in scale and a clearer medium-term growth roadmap. Consolidated revenue for FY26 was INR 1,603 crore, up 46% year-on-year, while EBITDA rose to INR 173 crore with a margin of 10.8%. Profit after tax reached INR 113 crore, translating to a PAT margin of 6.9%. In Q4 FY26, revenue came in at INR 480 crore, EBITDA at INR 57 crore (11.8% margin), and PAT at INR 41 crore (8.4% margin). Management highlighted that Q4 was the seventh consecutive quarter of sequential improvement.

What made the year stand out was not just growth, but the company’s ability to improve capital efficiency while sustaining a capex-light model. Asset turns were reported at 9.9x and ROCE improved to 20.6% in FY26. Net working capital days improved to 112 in March 2026 from 124 in March 2025, aided primarily by lower receivables days.

Growth was broad-based across verticals

Avalon’s revenue is spread across five end-market verticals, and FY26 showed diversification rather than dependence on a single segment. The investor presentation disclosed the following FY26 mix: Industrials at 34%, Mobility and Transportation at 28%, Clean Energy at 20%, Communications at 8%, and Medical and Others at 10%. Management commentary on the call reinforced that growth was broad-based and supported by long product life cycles, which it believes reduces lumpiness once programs enter production.

A key operating theme continues to be a push toward complex, mission-critical box builds and system integration. Box build contribution was stated as 54% of revenues in FY26 in the presentation, while management said box build reached 56% in Q4 FY26. The company’s claim is that deeper integration improves customer stickiness and expands wallet share over time through cross-selling across PCBA, cables, metals, magnetics, plastics and final integration.

Financial snapshot

One margin nuance in FY26 was tariff pass-through. The CFO stated that the company passed on substantially all tariff impact to customers, so absolute gross margin was not affected, but the gross margin percentage was “optically impacted” by about 110 basis points because both revenue and costs were grossed up.

Geography: customer mix is US heavy, manufacturing is India heavy

Avalon’s customer geography mix in FY26 was 62% from US market customers and 38% from Indian market customers. However, the manufacturing footprint remains predominantly India-led: management indicated that about 79% of business was from India manufacturing and 21% from US manufacturing.

The US plants play a strategic role in customer onboarding and local support. Management explained that customers can begin in the US and later transition production to India. That said, US manufacturing is currently a drag. Losses in US manufacturing narrowed to about INR 5 crore in Q4 FY26, and management is working toward breakeven in the later part of FY27. The company expects the India-US manufacturing mix to remain around the 80-20 range.

Order book visibility and program ramps

Order book was INR 2,196 crore as of March 31, 2026, with an average execution period of roughly 14 months. In addition, long-term contracts were disclosed at INR 1,245 crore with execution timelines of 15 to 36 months. Management also clarified on the call that the combined executable visibility discussed by them was INR 3,441 crore, split between the near-term order book and longer-term contracts.

Beyond the backlog, management outlined several program ramps that it expects to reflect more meaningfully through FY27 and beyond:

• Energy storage systems ramping in line with plan.
• Aerospace cabin subassemblies have passed first practical inspection and are moving toward volume.
• Production of locomotive engine subsystems has commenced.
• Kavach anti-collision system has completed testing and is on track for commercial production.
• Satellite communication control-unit prototypes were completed, with volume orders expected from FY27.

A newer theme is semiconductor equipment manufacturing. Management described it as complex box builds with long gestation, involving multiple part numbers and approval cycles. They stated the project readiness phase with a global partner has been completed and volume production is expected in FY27. Management also said it expects semiconductor equipment to become a separate vertical over the next 2 to 3 years, though it did not quantify the revenue size.

Guidance: conservative for FY27, ambitious to FY29

Management gave explicit FY27 guidance of 24% to 27% revenue growth. It also reset its medium-term aspiration after noting that it is almost at its earlier goal of doubling revenue from FY24 to FY27 (about INR 1,725 crore) a year ahead. From the FY26 base of INR 1,603 crore, it is now targeting another doubling to about INR 3,200 crore by FY29.

On capital allocation, the company reiterated a capex-light posture. Capex was INR 56 crore in FY26 (and INR 58 crore in FY25), and management indicated a similar annual level of roughly INR 50 crore to INR 60 crore.

Key investor takeaways

Avalon’s FY26 shows the benefits of scaling an integrated EMS model with a rising share of box builds. Execution has been supported by improving working capital and strong order book visibility. The next milestones to watch, based on management commentary, are the pace of program ramps in FY27, progress toward US manufacturing breakeven in the later part of FY27, and whether semiconductor equipment ramps into a meaningful, separable vertical over the next few years.