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Zen Technologies in FY26: a softer year, but FY27 execution looks clearer

Zen Technologies ended FY26 with weaker headline numbers versus FY25, and management did not try to hide that. Consolidated revenue from operations fell to INR 687.69 crore in FY26 from INR 973.64 crore in FY25. The Q4 picture was similar: Q4FY26 revenue from operations was INR 178.08 crore versus INR 324.97 crore in Q4FY25.

Even so, the company’s investor communication framed FY26 as a transition year. Management argued that the business has broadened from a largely training-focused defence player into a company with multiple offerings, ranging from training simulation and systems to counter-drone solutions, automated weapon stations, combat robotics, and drones.

FY26 financial performance: lower revenue, but margins still elevated

On a consolidated basis, FY26 EBITDA was INR 332.66 crore compared to INR 431.91 crore in FY25. Profit after tax (adjusted for non-controlling interest, as stated in the presentation) was INR 193.45 crore in FY26 versus INR 280.24 crore in FY25.

For Q4FY26, EBITDA was INR 73.69 crore (Q4FY25: INR 162.74 crore), and PAT (adjusted for non-controlling interests) was INR 31.53 crore (Q4FY25: INR 101.04 crore).

Management provided more colour on quarterly margin movement in the earnings call. The CFO listed five factors that impacted margins in Q4FY26: a lower revenue base (with a largely fixed cost structure), year-end employee incentives (about INR 5 crore sequentially), higher warranty provisioning for anti-drone systems supplied in FY25 (about INR 3.1 crore), post-supply export costs (about INR 2.7 crore), and higher R&D expense (about INR 3.3 crore sequentially). Among these, R&D was positioned as a structural commitment going forward.

Financial summary (consolidated)

Order book: the key bridge from FY26 to FY27

The central anchor of Zen’s FY27 narrative is the consolidated order book. As per the investor presentation, consolidated order book as of March 31, 2026 stood at INR 1,336.04 crore. The company also disclosed a split of INR 1,247.26 crore domestic and INR 88.78 crore export. The presentation notes that the March 31 order book includes INR 121.81 crore related to subsidiary companies.

In the earnings call, the CFO added an important execution lens: out of the INR 1,336 crore order book, around INR 1,000 crore is expected to be dispatched in FY27, with most deliveries expected in Q2 and Q3 of FY27. The balance, he said, is largely AMC revenue (around INR 326 crore) recognised over the AMC contract period.

This matters because FY26 revenue decline was repeatedly attributed to timing of order execution rather than demand weakness. Management also highlighted new order inflow of INR 431.36 crore in Q4FY26 alone, while Q4 execution (revenue from operations) was INR 178.08 crore.

Subsidiaries: meaningful contribution and disclosed margins

One of the stronger disclosures in the call was around subsidiaries. The CFO stated consolidated FY26 revenue was INR 688 crore while standalone was INR 423 crore, implying subsidiaries contributed around INR 260 crore in the year.

He attributed most of this to two entities:

ARI (acquired end of FY25, with full-year consolidation in FY26) contributed around INR 131 crore to topline, with PAT margin stated at around 30.3%.

UTS contributed most of the remaining, with PAT margin stated around 26.5% for the full year.

For FY27, the CFO guided that UTS and ARI together are expected to deliver around INR 365 crore of revenue, with broadly similar margin ranges (ARI around 27% to 30% and UTS around 30% to 31%, as stated).

Strategy and product push: counter-UAS, simulation, and new systems

The management commentary was heavily focused on how modern conflicts are reshaping procurement priorities. The CMD emphasised the rising importance of counter-drone systems and trained forces, and repeatedly linked product direction to operational realities.

On counter-UAS, he discussed a move beyond pure software jamming to include hard-kill capabilities, and also spoke about expanding frequency dominance to address evolving drone control bands. He mentioned coverage from 70 MHz to 12 GHz in the call.

Zen also outlined multiple new products and additions, including:

An anti-drone simulator developed by ARI

A cyber security suite with multiple layers, positioned as having zero foreign dependencies

An unmanned ground vehicle called Vrishabh, with commercial launch planned in FY27

An interceptor drone called HyperStrike, with production stated to start in FY27

A gun-missile CIWS concept in collaboration with an associate

A smart 30mm ammunition concept, with testing underway and manufacturing expected from the next financial year

While these announcements do not come with contracted revenue numbers in the documents, they provide context on where the company is placing R&D effort and why management expects the order pipeline to expand.

Balance sheet and working capital: strong cash, higher inventories for FY27

The CFO stated cash and bank balances aggregated to INR 1,308 crore as of March 31, 2026, and that the group remains debt-free.

Working capital days stood at 196 days at March 31, 2026 compared to 194 days at end of Q3FY26. Management highlighted an improvement in DSO to around 119 days from around 161 days on December 31, 2025, but noted working capital remains elevated due to higher inventory days and advances to suppliers for projects scheduled for FY27 deliveries.

On working capital outlook, management indicated that while cycles can rise during periods of heavy execution build-up, the longer-term expectation remains around 140 to 150 days (as stated in the call).

What to track in FY27

Zen’s FY26 message is internally consistent: revenue was softer because execution shifted, while the order book and pipeline are expected to drive FY27 deliveries. The most verifiable near-term checkpoint is the company’s own statement that most deliveries tied to the current order book will occur in Q2 and Q3 of FY27.

Management also reiterated long-term margin guidance of 35% operational EBITDA margin and 25% PAT margin, even after walking through the specific Q4FY26 margin pressures.

The FY27 story, therefore, is likely to be shaped by two measurable outcomes: order-to-revenue conversion from the INR 1,336 crore consolidated order book, and the stability of operating margins as execution ramps and R&D intensity stays elevated.