Prime Focus Q4 FY26: Growth, margins and a major legal overhang

Prime Focus ended FY26 with a sharp improvement in reported profitability, driven by strong project activity and operating leverage. FY26 revenue rose to INR 4,676 crore, up 30% year on year. EBITDA increased to INR 1,423 crore, up 81% year on year, with an EBITDA margin of 30%. The company reported profit after tax of INR 301 crore for FY26, compared to a loss of INR 458 crore in FY25.

The momentum was visible in Q4 FY26 as well. Quarterly revenue grew to INR 1,384 crore, up 41% year on year and up 15% sequentially. EBITDA rose to INR 488 crore in Q4 FY26, translating into a 35% margin versus 24% in Q4 FY25. Net profit for the quarter came in at INR 118 crore.

What drove the quarter

In its operating commentary, the company attributed Q4 revenue growth to tentpole projects, naming Ramayana, Dune 3, Masters of the Universe and Blade Runner 2099. The quarter also showed a better cost mix, with personnel cost as a share of revenue declining to 56% from 62% a year ago, which management linked to operational efficiencies and productivity.

The business narrative in the investor presentation continues to be built around an integrated platform spanning three verticals: Creative, AI/Technology and Production.

The Creative vertical is anchored by DNEG and ReDefine. The presentation positions DNEG as the world’s number one independent VFX and animation services provider, with long-standing client relationships and multiple top industry awards.

The AI/Technology vertical is presented as Brahma AI, described as an AI-native enterprise content platform. The company highlighted continued commercial traction in the quarter, including new multi-year deals, renewals, and conversion of proof-of-concepts into enterprise engagements. It also highlighted a strategic partnership with Google Cloud with a joint operating framework across go-to-market, PR and co-innovation.

The Production vertical, through Prime Focus Studios, is described as pursuing selective strategic co-productions, with a FY27 release slate that includes Ramayana (Diwali 2026), The Angry Birds Movie 3 (December 23, 2026), Animal Friends (January 22, 2027) and Cocomelon The Movie (February 19, 2027).

Financial summary

Note: EBITDA is presented excluding other income and FX in the quarterly bridge; reported tables show separate FX and other income lines.

Cash flow and balance sheet: strong operating cash flow, but leverage remains a focus

FY26 operating cash flow was INR 1,024 crore. The company reported a working capital outflow of INR 684 crore, which it attributed primarily to content investments. It expects this working capital impact to reduce significantly over the next twelve months, driven by release and monetisation of key projects.

Net capex was INR 529 crore in FY26. The company stated capex was ramped up toward compute, render, memory and other equipment, and linked this to scaling technology capabilities of Brahma AI.

On leverage, total gross debt increased to INR 5,062 crore in FY26 from INR 4,234 crore in FY25. Cash and cash equivalents (including current financial investments per the note) were shown at INR 924 crore in FY26. Net debt stood at INR 4,138 crore.

The company highlighted that the increase in gross debt was primarily driven by a non-cash FX impact from conversion of foreign currency loans into INR terms, quantified at about INR 440 crore. It also stated that excluding forex impact, there was a slight reduction in net debt year on year.

Importantly, the company has articulated a debt reduction strategy with an explicit target. It stated an endeavour to reduce debt by USD 150-200 million over the next twelve months, supported by three pillars: monetisation of investment content assets, operational working capital improvement, and a capital markets fundraise.

Corporate announcement: insolvency proceedings create a clear overhang

Alongside the investor presentation, Prime Focus made stock exchange disclosures in early May 2026 that materially change the risk framing.

On May 7, 2026, the company disclosed that the NCLT Mumbai Bench had orally pronounced admission of a petition filed under Section 7 of the Insolvency and Bankruptcy Code against Prime Focus Limited. The petitioner alleged a financial debt of INR 353.79 crore (including interest) under a loan agreement executed in 2019. The company stated the written order was awaited at the time of that disclosure and that it had filed an appeal/application before the NCLAT seeking urgent relief including a stay.

On May 8, 2026, the company disclosed that the NCLT and NCLAT orders were available. The disclosure stated that as per the NCLT order, NPV Insolvency Professionals Private Limited was appointed as the interim resolution professional, and that the amount of default was INR 353.79 crore inclusive of interest on principal of INR 200 crore. The NCLAT, in an interim direction dated May 8, 2026, directed that till the next date of hearing on May 11, 2026, the IRP shall not take further steps in pursuance of the impugned NCLT order.

The company’s stated position is that no amount was ever disbursed by the petitioner to the company under the loan agreement in question, and therefore the petitioner does not qualify as a financial creditor. It also stated that the underlying dispute pertains to a business transfer agreement entered into in 2014, and that it has instituted a commercial suit before the Bombay High Court for adjudication of the dispute. The company also said business operations continue without disruption.

While the final legal outcome is unknown based on the provided documents, the presence of an admitted CIRP order and the ongoing appellate process is a major development that investors will need to track closely.

Takeaways

Prime Focus delivered a strong FY26 on operating metrics, with 30% revenue growth, a meaningful step-up in margins, and a return to positive PAT. Cash generation from operations was also robust, although a large working capital outflow linked to content investments remains a key moving part.

At the same time, leverage is still high, and the company has put a specific debt reduction target on the table. The biggest swing factor, however, is the insolvency-related litigation disclosed in May 2026. Until there is clarity from appellate proceedings and the company’s stated debt reduction actions, the risk-reward will likely be shaped as much by legal and balance sheet outcomes as by operating execution.