ESDS lifts FY26 PAT margin to 25.59% as leverage declines

ESDS raised its profit after tax, or PAT, margin to 25.59% in Fiscal 2026 from 15.39% in Fiscal 2025, as revenue from operations rose to Rs 472.21 crore and EBITDA margin reached 49.60%. ESDS also reduced leverage, with its debt-to-equity ratio falling to 0.08 times from 0.15 times.

How did ESDS lift its FY26 PAT margin to 25.59%?

ESDS lifted its FY26 PAT margin by 10.20 percentage points to 25.59%, while PAT more than doubled to Rs 120.823 crore from Rs 55.612 crore in Fiscal 2025. PAT margin is PAT divided by revenue from operations for the relevant year, so the increase means net profit grew faster than revenue during Fiscal 2026.

Revenue from operations increased 30.69% to Rs 472.21 crore in Fiscal 2026 from Rs 361.335 crore in Fiscal 2025, after rising from Rs 286.518 crore in Fiscal 2024. Across the three fiscal years, PAT increased from Rs 13.609 crore to Rs 120.823 crore and PAT margin rose from 4.75% to 25.59%.

The margin progression accompanied higher earnings before interest, tax, depreciation and amortisation, or EBITDA. ESDS calculates EBITDA as profit or loss before exceptional items plus depreciation and amortisation expense plus finance costs, minus other income. EBITDA grew to Rs 234.234 crore in Fiscal 2026 from Rs 154.885 crore in Fiscal 2025 and Rs 101.881 crore in Fiscal 2024.

What drove the increase in ESDS EBITDA margin?

ESDS increased EBITDA margin to 49.60% in Fiscal 2026 from 42.86% in Fiscal 2025 and 35.56% in Fiscal 2024. EBITDA margin measures EBITDA as a proportion of revenue from operations, meaning the 14.04-percentage-point expansion over two years coincided with EBITDA rising faster than revenue.

The reported service mix changed materially in Fiscal 2026. Managed services generated Rs 194.591 crore, or 41.21% of revenue, compared with Rs 75.65 crore, or 20.94%, in Fiscal 2025. Infrastructure as a service, or IaaS, remained the largest individual category at Rs 207.197 crore, but its revenue share declined to 43.88% from 56.36%; software as a service, or SaaS, accounted for Rs 70.422 crore, or 14.91%.

Fiscal 2026 revenue growth was concentrated in managed services, whose revenue rose by Rs 118.941 crore year on year. IaaS revenue increased by Rs 3.556 crore, while SaaS revenue declined by Rs 11.622 crore. The disclosed figures do not assign a margin to each service line, so they do not establish the separate profitability of managed services, IaaS or SaaS.

ESDS operated five data centres at the end of Fiscal 2026, compared with four at the end of Fiscal 2025 and Fiscal 2024. The fifth Indian data centre has operated since October 2025, while the five facilities together covered more than 75,266 square feet and held Tier 3 status from either QSA International Limited or EPI Certification Pte. Ltd.

Did returns on capital improve alongside ESDS profitability?

ESDS reported higher return on equity, or RoE, and return on capital employed, or RoCE, in Fiscal 2026 alongside the higher PAT margin. RoE reached 25.12%, up from 17.27% in Fiscal 2025 and 6.23% in Fiscal 2024, while RoCE rose to 32.78% from 24.73% and 14.53%, respectively.

RoE is calculated as profit or loss for the year divided by average total equity. RoCE uses profit before exceptional items plus finance cost divided by average capital employed, with capital employed comprising total equity, current borrowings, non-current borrowings and deferred tax liability. These definitions mean the reported increase reflects movements in both earnings and the capital bases used in the calculations.

In the available Fiscal 2026 peer data, ESDS's 32.78% RoCE exceeded Nxtra by Airtel's 8.54%, Sify's 7.81% and E2E Networks' negative 0.52%. ESDS's Fiscal 2026 RoE of 25.12% also exceeded Nxtra by Airtel's 7.72%, Sify's 1.89% and E2E Networks' negative 0.95%; the peer measures are company-reported and may not be standardised between companies.

How did lower leverage and receivable days affect ESDS?

ESDS reduced debt relative to equity and shortened its collection period in Fiscal 2026. Its debt-to-equity ratio declined to 0.08 times from 0.15 times in Fiscal 2025 and 0.66 times in Fiscal 2024, while days sales outstanding, or DSO, fell to 79 days from 101 days and 88 days, respectively.

Debt-to-equity is calculated as current and non-current borrowings divided by total equity. Debt service coverage, calculated by ESDS as EBITDA divided by current borrowings, increased to 16.15 times in Fiscal 2026 from 7.00 times in Fiscal 2025 and 1.59 times in Fiscal 2024. Higher EBITDA and the lower debt-to-equity ratio occurred alongside the improvement in the reported debt-service measure.

DSO is trade receivables at year-end divided by annual revenue from operations, multiplied by the number of days in the year. The 22-day decline from Fiscal 2025 indicates a shorter average collection period under this definition despite revenue rising by Rs 110.875 crore. ESDS's Fiscal 2026 DSO of 79 days was higher than Sify's 77 days, while E2E Networks reported 25 days and Nxtra by Airtel reported 22 days.

What customer and revenue changes must persist for the FY26 result to continue?

ESDS's Fiscal 2026 expansion coincided with a larger customer base and a shift towards enterprise revenue. Total customers rose to 2,501 from 1,714 in Fiscal 2025 and 1,465 in Fiscal 2024, while enterprise customers contributed 55.09% of Fiscal 2026 revenue, up from 39.61% in Fiscal 2025.

The customer increase reduced average revenue per customer to Rs 18.9 lakh in Fiscal 2026 from Rs 21.1 lakh in Fiscal 2025, although it was near Rs 19.6 lakh in Fiscal 2024. ESDS attributed the reduction to the addition of 787 customers in Fiscal 2026, whose accounts were at earlier stages of engagement and had not reached full revenue potential.

Revenue from existing customers accounted for 72.63% of Fiscal 2026 revenue, down from 76.63% in Fiscal 2025 and 92.91% in Fiscal 2024. New customers supplied 27.37%, compared with 23.37% and 7.09%, respectively. Revenue retention, defined as current-year revenue from existing customers divided by prior-year revenue from operations, was 94.92% in Fiscal 2026, compared with 96.63% in Fiscal 2025 and 128.24% in Fiscal 2024.

Conclusion

ESDS's Fiscal 2026 results combined profit expansion, higher reported returns and lower leverage: EBITDA margin reached 49.60%, PAT margin reached 25.59%, RoE reached 25.12%, RoCE reached 32.78%, and debt-to-equity fell to 0.08 times. The changes occurred alongside 30.69% revenue growth, a managed-services revenue share of 41.21%, and a 22-day year-on-year reduction in DSO.

The next disclosed operational milestone is an AI cloud infrastructure agreement entered on March 31, 2026 with an Australia-based neocloud AI compute service provider. The initial five-year agreement has an approximate total contract value of Rs 11,831.25 crore, targets infrastructure delivery by September 2026, and expects revenue generation to begin in the third quarter of Fiscal 2027; execution against that timetable is the stated development to watch.