Pace Digitek targets 10 GWh full utilisation despite FY28 guidance

Pace Digitek Limited expects its 10 gigawatt-hour (GWh) battery energy storage system (BESS) capacity to reach full utilisation by end-Q4, while its FY28 revenue guidance remains Rs 4,000 crore to Rs 4,200 crore because output will include job work, engineering, procurement and construction (EPC), and build-to-operate projects rather than only direct system sales.

Why does 10 GWh utilisation not mean Rs 5,000 crore revenue?

Pace Digitek said 100% direct product sales from 10 GWh of capacity could generate Rs 5,000 crore to Rs 6,000 crore of revenue, but management did not use that assumption in its FY28 projection. Its Rs 4,000 crore to Rs 4,200 crore guidance instead incorporates product sales, EPC execution, job work and build-to-operate activity.

The difference is principally the route to market and revenue timing. Pace Digitek said much of the output will be supplied into EPC and build-to-operate projects that run for about two years, meaning revenue is recognised over the project duration rather than immediately as standalone BESS product revenue.

Management also linked the mix to the working-capital requirement of operating 10 GWh of capacity. Pace Digitek plans to allocate 20% of capacity to job work, under which customers provide inputs and the company undertakes assembly work, reducing its working-capital requirement while protecting margins, according to management.

When will Pace Digitek reach full 10 GWh utilisation?

Pace Digitek expects the expanded 10 GWh capacity to reach full utilisation by the end of Q4. Management said production at the expanded capacity would start in Q4 and that reaching full utilisation would probably take one quarter, following completion of the additional 5 GWh setup during the current quarter.

The target is based on management's view of expanding BESS demand. Pace Digitek estimated demand in the current financial year at 30 GWh to 35 GWh and said it could rise to about 236 GWh by FY32, while adding that its existing manufacturing capacity was already operating at full capacity.

Management said bidding conditions had changed from six months earlier. Typical participation in BESS tenders had fallen to six to eight bidders from 25 to 30 previously, although Pace Digitek said margin pressure remained and it had added relatively few projects during the period of more intense competition.

Pace Digitek said it sets a margin threshold for each reverse auction based on the mix of product supply, EPC and build-to-operate work. Management cited a targeted blended earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 16% to 17% and a profit after tax (PAT) margin of 10% to 11% when determining whether to bid.

How will job work and EPC affect Pace Digitek's margins?

Pace Digitek expects job work to preserve rather than significantly lift profitability. Management said larger customers generally price job work using the company's existing cost structure and bear financing costs themselves, so the company expects at most a 1 percentage-point addition to EBITDA margin.

Margin expectations differ by activity. Pace Digitek put manufacturing EBITDA margin at 8% to 10% initially and said it could rise to 13% to 15% as operations stabilise; it put EPC EBITDA margin at 7% to 10%. Where Pace Digitek supplies its own products to its own EPC projects, management estimated a blended margin of about 15% from the two stages.

Commercial and industrial (C&I) BESS products could change that mix, but management did not quantify their eventual contribution. It said C&I margins are higher than utility-scale BESS margins and that a growing C&I business could add at least 1 to 2 percentage points to blended energy margins once larger commercial sales begin.

For FY28, management guided to PAT margin of about 10%, later describing the range as 10% to 11%. It contrasted this with the 11% to 12% PAT margin reported in H1 FY27, which it attributed to turnkey telecom projects completed in that period, while expecting energy to account for a larger share in the following year.

What contribution will build-to-operate projects make in FY28?

Pace Digitek has placed build-to-operate behind manufacturing, direct product sales and EPC because the model is capital intensive. Management said it had paused bids for further build-to-operate projects unless it obtains external investment, while considering a 10% to 15% capacity allocation once investors are in place.

Its existing build-to-operate pipeline is still expected to contribute revenue. Pace Digitek said projects currently under execution represented Rs 197 crore of revenue, while two more projects expected to be commissioned by March 2027 could add another Rs 200 crore; management projected FY28 build-to-operate revenue of Rs 325 crore to Rs 375 crore.

Management estimated project internal rate of return (IRR) at about 10% and equity IRR at about 15%. It said additional build-to-operate projects are generally funded with about 70% debt, and described an additional Rs 1,100 crore as expected peak debt by FY27, supported by build-to-operate assets expected to increase by Rs 1,600 crore.

How could integration and working capital affect execution?

Pace Digitek said in-house container fabrication is expected to reduce BESS system cost by about 4%, improve EBITDA margin and shorten lead times. Management expects fabrication to cover 50% of capacity, with the balance using imported containers, while it targets localisation of all components other than lithium-ion cells and battery management systems over the next two quarters.

Management expects the energy business to have a net working-capital cycle of about 90 to 120 days, comprising receivables of around 150 days and payables of 60 to 90 days. This compares with debtor days of about 286 days in March 2026, which Pace Digitek attributed largely to telecom-project retention amounts of 5% to 10%.

Consolidated receivables declined to Rs 1,792 crore in September from Rs 2,067 crore in March, while consolidated payables fell to Rs 1,500 crore from about Rs 1,800 crore. Pace Digitek said energy-project retention periods are generally 90 to 180 days, and management expects the shift from telecom toward energy to ease the working-capital cycle over time.

Conclusion

Pace Digitek's end-Q4 target for full 10 GWh utilisation measures manufacturing throughput, whereas its FY28 guidance of Rs 4,000 crore to Rs 4,200 crore reflects how that output will be deployed. A 20% job-work allocation, EPC delivery and potential build-to-operate capacity create different revenue timing from the Rs 5,000 crore to Rs 6,000 crore outcome cited for a fully direct-sales model.

The next disclosed milestones are the Q4 start of production at 10 GWh capacity, the end-Q4 utilisation target and commissioning of two build-to-operate projects by March 2027. Management's ability to secure external investment for further build-to-operate bids, commence larger C&I sales and revise FY28 guidance are further matters to watch.