Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Avalon Technologies Ltd (NSE: AVALON) Q4 2026 Earnings Call dated May. 07, 2026
Corporate Participants:
Kunhamed Bicha — Chairman and Managing Director
Suresh Veerappan — Chief Financial Officer
Shriram Vijayaraghavan — Chief Operating Officer
Analysts:
Sumant Kumar — Analyst
Unidentified Participant
Sumit Sinha — Analyst
Santosh — Analyst
Karan Sanwal — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Avalon Technologies Limited 4Q FY26 earnings conference call hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal Financial Services Limited. Thank you and Otisa.
Sumant Kumar — Analyst
Yeah. Good afternoon everyone and warm welcome to Avalon Technology 4q to FY26 post result opening call hosted by Motila Financial Services. To take us through the result today we have with us from the management Mr. Kunamad Mishra Chairman Managing Director Mr. Suresh. We have Chief Financial Officer Mr. Sriram Vijay Rapunzel Chief Operating Officer Mr. Venki Venkates, Chief Sales Officer. Mr. Vicha will give an overview of the business performance and will followed up by Mr. Suresh remarks on financial performance post which will open the floor for Q A as we move forward.
It is important to bear in mind that any forward looking statement made during this call are subject to potential risks and uncertainties both known and unknown. Now without any further delay, I will hand over the floor to Mr. Bicha for the initial remarks. The CMD thank you. And over to you sir.
Kunhamed Bicha — Chairman and Managing Director
Thank you Suman. Good afternoon ladies and gentlemen. On behalf of Avalon Technologies, a very warm welcome to our Q4 and full year FY26. I want to begin by thanking our investors for your continued trust and support. Your confidence in us has been instrumental in enabling us to execute consistently, invest with discipline and build a business that is both resilient and scalable. FY26 has been our best years and Q4 is our seventh consecutive quarter of growth. But what stands out is not just the growth rate, it is the quality of it.
Profitable, broad based and consistent across verticals and geographies. We delivered a 46% revenue growth for the full year. Higher than our 40% guidance on net working capital. We reported 112 days better than our guided range of 120 to 130 days. Our ROCE improved to 20.6% on revenue, profitability, working capital and ROC. We have delivered improved performance across all the key matrices. We have also made steady progress in new product introductions especially on semiconductor manufacturing equipment and power systems.
All three of our growth engines are gaining momentum together and that is the foundation of our journey forward. Moving to the financial highlights for Q4 FY26 Revenue came in at Rupees 480 crores. Gross margin was at 33.7%. Our guided range within our guided range of 33% to 35%. EBITDA margins came in at 11.8% up from 11.5% in Q3. Operating leverage is playing out as revenues. Scale pat for the quarter was 41.2 crores for the full year FY26 revenue was at rupees 1603 crores up 46% year on year.
Gross margin for the year was 34.3%. At the upper end of our guided range, full year EBITDA margin was at 10.8%. Full year fat was rupees 113 crores. Raz rate revenue growth over the last seven quarters has been 45%. As of 03-31-2026 our order book grew 24.7% year on year to rupees 2,196 crores with an average execution period of 14 months. In addition, long term contracts with execution timelines ranging from 15 to 36 months is at 1,245 crores. Order book growth remains well diversified across industry verticals and geographies.
India manufacturing operations which continue to serve both domestic and global Customers accounted for 77% of our revenue in Q4FY26, delivering healthy profitability at an EBITDA margin of 16.7% and a FAAC margin of 12.2%. Revenue from our US operations contributed the remaining 23%. Losses in US manufacturing have continued to narrow, coming in at approximately 5 crores in Q5FY26. We are working towards a breakeven in US manufacturing in the later part of FY27. Our presence in both India and US gives customers the option to start in the US and later transition to India or come directly to India.
In FY26 revenue mix was 38% from India and 62% from US India business grew 29% year on year while the US business grew 59% year on year. Moving to segment wise contribution industrial contributed approximately 34% of our revenue growing at 65% year on year. Mobility contributed 28% growing at 50% year on year. Within Mobility Within Mobility. Vertical rail accounted for 16% and aerospace for 9%. Clean energy stood at 20% growing at 45% year on year driven by the ramp up of our energy storage Systems.
Communication contributed 8% growing 58% year on year Mantra to focus on mission critical Complex box bills continue to gain traction. Box build has increased from 44% four years ago to 56% in Q4FY26. This highlights the deep integration we have with our customers and drives stickiness and long term potential. Net working capital continued to improve through the year on a year on year basis. Net Working capital improved by 12 days from 124 days in March 2025 to 112 days in March 2026. Receivables reduced by approximately 12 days year on year inventory improved by 2 days as programs moved into execution phase.
Payable days reduced by approximately two days year on year. Overall improvement in networking capital delivered a positive cash flow from operations of 57 crores in FY26. We continue to follow a capex like model. Asset turns are approximately 9.9 times net debt to equity ratio is around 0.06. Return on capital employed stands at 20.6%, a meaningful improvement from 10% two years ago. Now looking at the macro environment, it continues to stay positive. The reduction in US Status on Indian goods makes India manufacturing by customers more competitive and we are seeing increased engagement as a result.
Importantly, the period of elevated tariffs also helped us accelerate a new set of business opportunities. We added new program WINS in the U.S. As customers look to diversify the supply chains and reduce risk. This is over and above the winds in the India domestic business. We have also made progress in expanding exports into Southeast Asia, further broadening our geographic footprint. The government’s focus on semiconductor equipment under ISL 2.0 aligns well with our capabilities and business we have recently won in this space.
Our efforts to build a meaningful sales presence in Europe over the last few quarters also coincide with the India Europe trade deal. Taken together domestic demand, US Export opportunity and new geographies, the structural tailwinds are intact. Now moving to our key growth drivers, our existing business continues to provide a strong steady foundation. Long product lifecycles, mission critical programs and recurring revenues across rail, aerospace, industrial, clean energy and communications. On new business wins the programs we have been building over the last two to three years are now progressing well.
Our energy storage system program continues to ramp in line with plan. Aerospace cabin sub assemblies have progressed fast, pass particle inspection and are moving towards volume production of locomotive engine subsistence has commenced. The Kavach Anti collision system has completed testing and is on track for commercial production in semiconductor equipment. We have completed the project readiness phase with a global partner. A meaningful milestone ahead of volume production expected in FY27 for our satellite communication customer, we have successfully completed the first tranche of prototypes for control units and expect volume orders from FY27.
Prototype for industrial processing and power sector customers have also commenced. Three on our opportunity pipeline, we continue to see healthy and expanding set of opportunities. We are seeing increased interest from aerospace majors in various commodities. We are also pursuing opportunities in advanced metal cockpit assemblies and landing gear components, areas where we have not previously participated. The three large US Customers we onboarded last quarter across industrial and defense are progressing from prototype towards production and as mentioned earlier, Southeast Asia and Europe are adding new dimensions to our geographic reach.
Taken together, all three growth engines are gaining momentum and we expect this to increasingly reflect in our numbers through FY27 and beyond. On revenue guidance, we had previously committed to doubling revenues from FY24 to FY27, a target of approximately 1,725 crores. We are almost there a year ahead. That gives us confidence to set our sights on further doubling in the next three years, that is from the higher base of 1,603 crores in FY26 to approximately 3,200 crores in FY29. The order book is healthy, new programs are entering production and our customer base continues to expand.
The foundation for the next doubling is already in place and from a multi year perspective we are confident of our growth on FY27. We believe our growth story will sustain and continue. We always seek to be conservative and hence guiding for a revenue growth of 24 to 27%. In summary, FY26 has been a defining year for Avalon. Strong revenues, improved profitability, better margins, a stronger balance sheet and better capital efficiency all delivered together. Our order book is healthy, our three growth regions are aligned and the external environment remains supportive.
We enter FY27 with clear visibility, a strong pipeline and the confidence that comes from consistent execution over seven consecutive quarters. With this, I will hand over to our CFO Suresh Veerappan for a detailed overview of our financial performance.
Suresh Veerappan — Chief Financial Officer
Thank you kb. Good afternoon everyone. Let me take you through the financials in detail. Revenue for Q4FY26 was Rupees 480 crores, up 40% year on year from Rupees 343 crores in Q4FY25 and up 14.9% sequentially from Rupees 418 crores in Q3FY26. For the full year FY26 revenues were at Rs. 1603 crores, reflecting 46% growth year on year ahead of our guided range of 40%. Gross margin for Q4FY26 was Rs. 162 crores at a margin of 33.7%. For the full year, gross margin was Rs. 550 crores at 34.3% at the upper end of our guided range of 33 to 35%.
I would like to note that during the period of elevated tariffs, we passed on substantially all of the tariff impact to customers, so absolute gross margins were not affected. However, since both revenue and costs were grosser by the tariff pass through, gross margin percentage was optically impacted by approximately 110 basis points. Adjusting for this, our underlying gross margin performance was better than the reported percentage suggests. EBITDA for Q4FY26 was Rs 57 crores, up 37.5% year on year with a margin of 11.8%, up from 11.5% in Q3FY26.
For the full year, EBITDA was Rs 173 crores at a margin of 10.8% reflecting year on year growth of 50.9%. The sequential margin improvement reflects operating leverage as revenues. Scale Pact for Q4FY26 was Rs. 41 crores, up 69.5% year on year with a margin of 8.4%. For the full year, Pact was Rs 113 crores, reflecting year on year growth of 78% and a margin of 6.9%. Finance costs for the year were rupees 15 crores and depreciation was rupees 34 crores on working capital. Trade receivable days improved from 84 days to 72 days year on year.
Inventory days improved from 86 days to 84 days as programs moved into execution phase, trade payable days moved from 46 days to 45 days. Overall, networking capital improved by 12 days year on year to 112 days in March 2026, better than our guided range of 120 to 130 days on a sequential basis. Networking capital improved by 6 days from 118 days in December 2025, supported by improvement in inventory. The substantial improvement in working capital supported cash flow from operations of rupees 57 crores in FY26 compared to Rs.
25 crores in FY25. As of March 31, 2026, total debt was Rs. 183 crores with cash and investments of rupees 143 crores resulting in a net debt of rupees 40 crores. Net debt to equity ratio stands at 0.06. A very comfortable position. Capex for Q4FY26 was rupees 21 crores and rupees 56 crores for the full year. Asset terms are at 9.9 times and return on capital employed improved to 20.6% and from 15.7% a year ago, a consistent and meaningful improvement. As Katie mentioned, we doubled our revenues ahead of schedule.
We are now committed to doubling our gains from the higher base of Rs. 1603 crores in FY26 to approximately Rs. 6200 crores by FY29. The balance sheet is clean, working capital is improving and and operating leverage is playing out. The financial foundation for that journey is firmly in place. With that, I request the moderator to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on the Touchstone for telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Tanesha from Dam Capital. Please go ahead.
Shriram Vijayaraghavan
Hi sir. Good afternoon and congratulations on an amazing set of numbers. I think we’ve truly seen all our efforts translating into the growth which we’ve delivered. So my first question is on any potential supply chain disruptions with respect to components. I mean, order books are strong and we’re seeing healthy growth coming into the quarters. But any sort of supply chain disruption which we’re seeing. Sriram, do you want to answer that?
Unidentified Participant
Yes, sure. Hi Tanmay. Right now, I mean there are a few things here and there, but nothing that’s adversely affecting us. As you know, we service mostly industrial mobility and clean sector. For these at the moment, visibility is okay.
Shriram Vijayaraghavan
All right. So don’t expect any major pressure on margins or anything of that sort. Given the supply chain problems
Kunhamed Bicha
As you see it now, we don’t see any effect. Okay. Saying that, what I would say is we saw the tariffs which was the question of last year. Right. We managed to do that. So I think our gross margins will hold between the range we have specified.
Shriram Vijayaraghavan
Sure. So my second question is, you know, all the incremental growth drivers which we spoke about across, you know, sectors, could we possibly, you know, speak a little More about them in detail as to what are we trying to do out there. I mean just a little more on the product specification if you could and the potential size which it can deliver deliver for us into our revenues going forward.
Kunhamed Bicha
So Tanay, I’ll give you the verticals growth. Right. So you know industrial is a 34% of our business. It’s grew at 65 and it will continue high growth rate. Mobility is at, you know, 28% of our sales is growing at 45. Clean energy is at 20% growing at 45 again. So you’re going to see a broad based growth. It’s not lumpy because in our business a lot of it is once the business comes in, it sustains for the next five, 10 years. It’s not which comes and goes and products don’t change over a period of time.
So once it comes into production it normally stays. And these are larger Fortune 100 type companies who are working with us. So I don’t see too much of a lumpy. Once it comes in, it’s going to stay.
Shriram Vijayaraghavan
Understood, sir. And so my last question is on the US manufacturing. Obviously it’s inched up on a quarter on quarter basis due to the tariffs. But what do we expect it as a percentage of sales going forward? Should it be at around this 20, 22% or should it logically inch up a little higher with the US execution happening with our customer out there and if so, then the control on margins out there and how do we expect to break even and how soon would that be? Thank you.
Kunhamed Bicha
So I’ll talk about the first part of your question and Suresh will talk about the second part. So you’re seeing growth from all sides. Close to 77 to 80% is made in India for India and for export. And that is our focus. How we get customers into this model is why the US factory. That is the primary reason, secondary reason, during the saddle times and all that it was easier to onboard customers in the US and then give them time to transfer to India. So we anticipate this 80, 20, 78, 22, that kind of range and that is what is in our planning.
The more that comes for India manufacturing the better off we are. But this is something which we need for for our future as well as the confidence from customers on having local support. Suresh, you want to answer the second part?
Suresh Veerappan
Just to add to that. In FY26, 79% of our business is from India manufacturing and 21% is from US manufacturing. So it has been around this range of let’s say 19 to 23% which is what we have been discussing in the earlier calls. And the operating leverage benefits are expected both from our India manufacturing as well as from our US manufacturing plants. So that’s the way forward. We are looking at it.
Shriram Vijayaraghavan
All right, thank you. Thank you so much for answering my questions and all the best.
Sumit Sinha
Thank you. Thank
Suresh Veerappan
You.
Operator
Thank you. Our next question comes from the line of Adiraj Singh from, from Amicus Capital Partners. Please go ahead.
Sumit Sinha
So firstly congratulations on a good set of numbers. I just had a couple of questions. First when we look at the growth. So we’re growing by 46% this year. We have added about 500 crore of revenue this year. So how much of this additional revenue or growth is coming from new customers? Programs essentially Programs customers that you would have onboarded one and a half to two years back. And how much would it, how much of the growth would be from vintage programs and customers.
Kunhamed Bicha
So it’s very broad based and depending on the size of the customer cut in it could vary anywhere from 75, 85%. Two thirds. One third is what you probably need to look at but it varies. You may have a certain much larger customer cut in and that varies a little bit. But the next year they become existing customers. Right. So it’s and we are developing and managing these programs into production that is 18 months ahead. So that gives you a broad range on what we think it is
Suresh Veerappan
Just to add to that. So typically the average lifecycle of a customer with this is very long. A product life cycle is also wrong. So a customer who is this year and you will become an existing customer when they continue for a period of 8 to 10 years.
Sumit Sinha
No sir, that I understand. I mean I just wanted to understand in this 500 crore how much would be coming in from let’s say programs that you would have started one one and a half years back and how much from the Windbridge Programs
Kunhamed Bicha
Out of 570 will be existing and then 30 will be approximately. Okay,
Sumit Sinha
Okay, understood. And second question sir, a number of your peers are getting into you know components manufacturing like PCB manufacturing and have gotten ECMS scheme for that. Do you have any plans to get into components manufacturing?
Kunhamed Bicha
So we are very focused on what we do. So we are a Boxville high end Boxville complicated technology oriented Boxville. We will look for further business in that segment. Instead of trying to do a greenfield though there is a lot of money available for that. We think there is enough growth in what we do. Managing growth is what we strive on doing. And I think instead of going in multiple directions, we like to stay focused and deliver on what we say.
Sumit Sinha
Sure, sir. Thank you so much and all that’s what I finally said.
Kunhamed Bicha
Thank you, thank you,
Operator
Thank you. Our next question comes from the line of Santosh Sesadri with Evindis Park. Please go ahead.
Santosh
Yeah, good afternoon. Thanks for taking up my question. So basically, could you. Sorry to interrupt
Operator
You, sir. Mrs. Antos, in case you’re using the speaker mode, may I request that you use your handset mode. Please say audio is not very clear, sir. Thank you.
Kunhamed Bicha
It sounds better
Santosh
Yet. My first question is on the quarterly revenue trajectory across different verticals. Maybe specifically for the clean energy as well. Given that the US business is ramping up and that is usual one, two seasonality that we have observed historically, how should we think about the dynamics? Quarterly dynamics. And also if you could give some color on the cadence for other divisions as well, that would be helpful.
Kunhamed Bicha
For us that doesn’t play out as much. Okay. So we try to level load our production across. Customers tend to do that instead of, you know, because only certain businesses, you know, which are government oriented could have this issue. But we have not seen that as much. So if you look at quarter to quarter, it’s been fairly consistent whether it’s growth or whether it is, you know, and in clean energy we want to see growth. Okay. As, as for, for the near future or foreseeable future. So it’s not, it’s not seasonal for us as far as we know.
Santosh
Got it. And just to be clearer, our first quarter FY or maybe like first half FY27 revenue could be sequentially higher than last year. Right.
Suresh Veerappan
So Santosh Suresh, we would request you to look at us from a three year perspective in the opening remarks. KB would have highlighted that from a higher base of thousands of crores in FY26, we are looking to double it in FY29. And we generally do not give a quarterly revenue growth guidance
Kunhamed Bicha
Saying that we are very confident.
Santosh
Fair enough. And just one more question. And given our, given our aspiration to double revenues over the next few years and considering that our, you know, asset turns are already closer to 10 times, how should we think about the incremental CapEx and also about the timing of CapEx, you know, in capacity expansion.
Kunhamed Bicha
So at least for me it’s not aspirational. They’re going to do that. Okay. The doubling. So saying that, see when we started talking of doubling in 24, you’re supposed to double by 27 and we are close to one year ahead of that schedule. We’re close to doubling already. So we’ll continue to stay momentum. There may be a few quarters up or down, but if you look at us in a three year time frame, we will do what needs to be there to do that. The answer to the question is the last part will tell
Suresh Veerappan
From
Kunhamed Bicha
A capex perspective. As far as we know we’ll continue our aspiration is to keep the roces higher than 20 and keep the set terms between eight and 10 times. And we still believe that with this capex, as far as we know today we are going to have that for this rate of growth
Santosh
And any particular timeline that we are contemplating to spin this capex,
Kunhamed Bicha
Usually we say 50 to 60 crores may be a little bit over or the next year. I mean that’s annually.
Suresh Veerappan
So Santosh, in FY25 our capex was 58 crores, in FY26 our capex is 56 crores. And so for us to continue this trajectory of growth, we do not foresee any major, major capex. But it’s something, nothing in the near term that we can.
Santosh
Thank you Ramatza.
Operator
Thank you. The next question comes from the line of mehul Panjwani from 40 cents. Please go ahead.
Sumit Sinha
Hello sir. Thank you so much for the opportunity. Am I audible?
Kunhamed Bicha
Yes, you are perfectly audible.
Sumit Sinha
Okay, thank you so much. My first question is about how much of a future audible growth can you expect from the box build and system integration opportunities versus the traditional PCB assembly?
Kunhamed Bicha
If you historically look at it around three years back, we are on 44% of box build and our aspiration is to grow that number. And today, last quarter we are at 56%. So we continue the trajectory and for us that’s why we are very vertically integrated to achieve that. So we continue down that and that is our goal. You know, we may start with a certain commodity, but our goal is to do the whole box in a two to three year period with the customer.
Sumit Sinha
What kind of margin? Differential, how much high margin can we command for box B compared to the producer?
Kunhamed Bicha
Usually it’s higher because it’s vertically integrated. So I don’t want to get into how much again because that depends on industry, that depends on vertical, that depends on commodity. If you are, you know, more of a certain commodity, you’ll have a better margin. So ultimately we look at it as a box.
Sumit Sinha
Right? Right. I’m not sure if you have answered this one, but my question is about what is our margin expiration? Currently our margins stand at 11%. So do we have any operational levers to improve our margins beyond 11%?
Kunhamed Bicha
So if you look at 80% of a business which is India manufacturing, EBITDA is at 16.7 and PAT is at 12.2%. So we are already high up there in 80% of our business this quarter, I think 7% of our business. Okay. And then with us breakeven and with the leverage playing out there after breakeven, we see some room to improve.
Sumit Sinha
Sir, are we expecting any capex in FY27?
Suresh Veerappan
So our capex has been the last two years in the range of 55 to 50 crores. We see something similar there. Nothing major at the moment.
Sumit Sinha
Okay, thank you very much.
Suresh Veerappan
Thank you.
Operator
Thank you. The next question comes from the line of Samit Sinha with Macquarie. Please go ahead.
Sumit Sinha
Yes, thank you very much. And I echo some of the sentiments. It’s been a really, really strong year of great execution. I guess my first question would be in terms of your guidance for next year. I know last year you started at 18 to 20% year over year growth and you ended the year at 46%. So that’s been tremendous. Should we assume a certain degree of conservatism guidance for the guidance that you’ve given for fiscal 27? You know, the geopolitical situation is still is pretty fragmented right now.
So just wanted to get some color on that. Second question is in terms of your make in India, for India that revenue growth slowed to about 13% year over year. Is that basically because of a high base? I have a follow up question after that.
Kunhamed Bicha
Okay. On your first question, Samit, you ask the question every time. We are generally conservative in nature with the things going around in the world. Every time we want to commit higher, we just with the macroeconomics we want to be conservative. Number two is that you know, the programs cutting in are fairly large in size. It could cut in this quarter or a quarter from now, which we don’t control as much our customer does. So ultimately it’s all there. It’s when it cuts in and how it cuts in at what time frame.
Right. So that’s the conservative nature of what we’re saying apart from the macroeconomics
Suresh Veerappan
And in terms of the percentages that you mentioned, if you look at FY26 has sold then the India manufacturing business grew by approximately 33%. So the growth has been broad based across industry verticals, across geography, across manufacturing location as well.
Sumit Sinha
Got it. One, my final question from my side, and this is real inflection that I saw in your final generated free cash flow, right. Which I define as cash flow from operations minus capex. Is that something of a goal that you want to continue to stay in the positive territory with that metric?
Kunhamed Bicha
We always suresh get into detail of it but from our perspective we always want to maintain the ROCs. There’s a number we strive for, the asset terms we strive for. Okay. And unless you know we do this business, I think we can manage that between eight and ten times a certain. But that play in mind, that’s what is built into all of us. We try to grow with that. Okay. And a lot of times most of this capex is going for building an infrastructure.
Suresh Veerappan
Just to add two points there. A couple of years ago in FY24 our ROCE was 10% and then right now it is at 20.6%. And the second aspect on the operation cash flows, FY25 operation cash flows was 25 crores and now we are at 57 crores. So both the working capital improvement, the focus on working capital improvement and the focus on maintaining a high asset turn are helping us get those operational cash flows and maintain and improve the roce.
Sumit Sinha
So if I can just add on to that one. So when you double your revenues from this year onwards, what is the expected ROCE at that point? What’s your goal?
Suresh Veerappan
I would put it this way. In the past we have operated at 25%. So I would say there is a target for us to march over a period of time. That would be some good.
Sumit Sinha
Got it. Thank you very much. Congratulations.
Suresh Veerappan
Thank you.
Operator
Thank you. The next question comes from the line of Karan from Nivashai. Please go ahead.
Karan Sanwal
Yeah, thank you for the opportunity. So congratulations on good side of number. I have a few questions regarding the semiconductor business that we have onboarded. So if you could help us understand how are we, you know, if you can you know quantitatively state how is this program expected to ramp up and you know, what kind of competition are we doing it against and what kind of products we would be catering to in this segment.
Unidentified Participant
Yeah. Hi, Taran Sridharam here. So for the semiconductor equipment we’re building, complex box builds, right? Really state of the art complex builds. Now this is a very large program with multiple sub programs, right? So these often very complicated to build. The first article inspection takes time, approval takes time. These are very of longer gestational programs. So we are in a journey of getting these approved and getting through deployment. So this is a long journey. This is not one that cuts in in weeks and Months.
Right. It takes. We’ve been working on this program for a fairly long period of time. So we’re on the journey and hopefully in FY27 we will start to reap the benefits of this.
Karan Sanwal
Okay, so this FCIS has been completed,
Unidentified Participant
It’s in progress. You know you have some part numbers that are done, some part numbers that are progressing, some that we are, you know, get to start with a variety. You’ve got a spectrum of this program. Look
Kunhamed Bicha
At multiple products, it’s just not one. One product. Yeah.
Sumit Sinha
So
Kunhamed Bicha
I would say 50, 60% is done and waiting for production approval. The other 30% we are in the process of doing it and then we’ll get it. So reasonable production will start sometime in 27.
Karan Sanwal
Understood. So also what would be the major sector apart from clean energy which will be contributing to our export revenue?
Kunhamed Bicha
A lot of it will be in aero and industrial. If I can answer that.
Suresh Veerappan
The growth is broadly current even across India and in us it is not just concerted in one industry, it’s across industrial, clean energy and communication.
Karan Sanwal
One last question. What would be our client concentration? Like what was the contribution of Prop 5 top 10 clients for the full year?
Kunhamed Bicha
So I’ll let SUDH give the exact numbers but as large customers cut in things will start moving up and down for a short period and then it moves on. So that you want to give the. So
Suresh Veerappan
Our top 10 customers, that’s the one that we share. It is 61% in fit.
Karan Sanwal
Great. Thank you so much and all the very best. Thank you Karan.
Suresh Veerappan
Thank you Karan.
Operator
Thank you. Our next question comes from the line of Chirag from Keynote. Please go ahead.
Sumit Sinha
Yes, thank you for the opportunity. My first question is related to the manufacturing plant of qs. We have almost doubled the production from now. Just wanted to understand how the breaking even at SATA levels for us.
Suresh Veerappan
Sure. So firstly we have been discussing about increasing the revenues in US manufacturing alongside our growth that we are seeing in the Indian manufacturing. So which is what we are seeing the last one year the losses have significantly narrowed down. If you look at it a couple of years ago the quarterly losses were around 14 crores. If you look at Q2 of this fiscal year it was 9 crores and Q3 it came down to 7 crores. And in Q4 it is again further come down to 5 crores. So there is operating leverage that has started to play out.
But having said that, we expect to see ramp up of many of the new programs which are at various stages, some on commercial, some in pending to Be ramped up fully. With that scale up expected to happen in FY27. We see this trend of losses coming down moving towards breakeven in later part of FY27.
Kunhamed Bicha
But Chirag, one thing I realized is that a lot of the customers we enjoy the margins and we enjoy the profitability in India because it came through this route where it starts in the US and then it moves to India. So it’s. You can’t just look at it on a plant wise. There’s a lot of business effectiveness for India doing manufacturing in the U.S.
Sumit Sinha
Yeah, I understand that the earlier assumptions we had because we were manufacturing towards India and now it is like to gain more clients. We are now again starting rooted from us and down the line probably we would be given some cost benefits to the client and that would again shift to India.
Kunhamed Bicha
Correct. I think you got it right.
Sumit Sinha
The second question is more related to back end journey and the future perspective of what you have commented related to manufacturing.
Kunhamed Bicha
You’re breaking up. You’re breaking up. If I may ask you talk a little louder. Am I audible
Sumit Sinha
Now?
Kunhamed Bicha
No, no, you’re fine.
Karan Sanwal
Right.
Sumit Sinha
So. So my next question is more related to a backend journey. What Avalon had. So let’s say we started with manufacturing and EMS and we shifted to box build. We thought for the perspective that this is a higher integrated complex product and we can serve our client a bit better to help us to have better return ratios down the line and growth and maybe let’s say from a product to a component, from component to an assembly supply kind of a hot process. This is like a forward integration. Just wanted to understand you are remaining focused related to manufacturing box bit only.
Even if you would have started manufacturing PCB at your end, have you, have you considered this fact that this is not going to be value accretive and you want to make sure that it remains an outsourced product for you. And we don’t want to get into that complication of manufacturing TCB because this anyhow helps us from the perspective that 90% of the TCB gets imported in India. And we are now from the perspective that we can control our value chain and make sure that we keep on growing at the pace we are without any interest in raw material.
So just wanted to understand the thought a little.
Kunhamed Bicha
Okay. So as a country, the personal opinion, I believe that we need to have PCB manufacturing in India because as we scale up electronics, as we scale up being a global player, how competitive can be without subsidies, I don’t know. Okay. But as a Country, we do need it. See, our spend on PCBs is I would say less than, you know, very, very small percentage, not even in the teens. So it does not make sense for us to look at it as a vertical integration model. There are enough players coming in now where there’ll be enough competition to get the PCB cheaper than what we can make.
That is our thought process on this Chiral
Sumit Sinha
Down the line it would be correct for me to understand if the manufacturing of PCB starts happening in India itself, this can become a gross margin accretive for us because we would be start sourcing it into India. And even further margin profitability can take place for avalanche.
Kunhamed Bicha
So like I said, it’s not even in the teens for us. The TCB value, it’s much lower because of vertical integration. I don’t think it will be an effective change. It will be better, but it’s not something which we will
Unidentified Participant
Chase
Kunhamed Bicha
And Srilam, you want to add something? Yeah,
Unidentified Participant
I think just to add to that. The way we are thinking about this is to grow into more complex box builds in which case our effort is going into more complex assemblies of different things. So that’s where the focus is not on getting into deeper down the value chain in terms of pcb, but more up into more complex business.
Kunhamed Bicha
Another thing, Chirag PCB is a chemical business. Okay. It’s a very different type of business and you need size and scale and so it’s something which we don’t want. Our focus is always to do the complex box build. We want to do the $100,000 boxes. Okay. Which will make a lot more business sense in our focus as well as delivery.
Suresh Veerappan
And we believe there is enough growth in what we do across these verticals, across geography. They’re also looking at other geographies as well, export geographies as well now. So when there is enough growth with a higher asset and we have one of the industry leading gross margins in what we do.
Sumit Sinha
Got it. Happy to hear that one direction focus is there. We are not diluting it to start manufacturing something else where we don’t have kind of an edge. Very happy to hear that. Just one last question related to the semiconductor that you have mentioned to the earlier analysts as almost as you said that 50, 60 percentage of the products have gone some acceptance by the client. For now there is some 40% that’s still in trials and working prospectuses. So what can one. And you’re saying that from 2027 itself we can start expecting some kind of a revenue to come into picture just a ballpark number as now the perspective that it is not just one year ahead for us, just a wall back.
Now how big this can be in terms of order book that we can expect even if the large program is divided into sub programs.
Kunhamed Bicha
Yeah, things are going very well. I’m not saying no, but these are slow things which kind of take time to materialize. I was saying that our goal is to in the next two to three years. I would say three years, make it a, a vertical for us. Okay. So you can understand the scope of it. It could be a smaller vertical. We hope it’s a larger vertical. But it will become.
Sumit Sinha
Hello,
Kunhamed Bicha
Did you get that?
Sumit Sinha
It will become a vertical.
Kunhamed Bicha
It will become a vertical for us. So right now it’s in the industrial piece and then we’ll spin it off in the next two to three years as a separate vertical. So you know, you know the size of our verticals and we hope to have that. Whether the smaller or a larger vertical, we have to, we’ll be there.
Sumit Sinha
Just to confirm one thing, it is approximate 8 to 10 Percentage of revenue coming from that and then divided to another vertical
Suresh Veerappan
Without putting a number to that. Okay. There is enough scope and scale to grow in this. We have just gotten to one customer right now which means there is multiple customers there and with the need customers they can get into multiple products. India just got into the semiconductor equipment manufacturing and even in the last budget there was a mention of India Semiconductor Mission 2.0 which focused on silicon equipments. Definitely. We also hope for greater things to come here but we did not want number to that at this stage.
Sumit Sinha
Thank you. Thank you so much sir.
Kunhamed Bicha
Thank you Chira.
Operator
Thank you. The next question comes from the line of Arit Jain with Walford Financial Services limited. Please go ahead.
Karan Sanwal
Hi. Thank you and congratulations on good numbers. Am I Audible?
Kunhamed Bicha
Yes, A.R. You are.
Karan Sanwal
Yeah. So. So I came across a recent news that the Middle east has disrupted the supplies of raw materials at PCBs and cooked up their prices. So I just wanted to know since regarding the tightening of the availability of PCBs how has that impacted us and our inventory and how has the pricing impacted us too?
Kunhamed Bicha
Most of our pricing is passed through, pass it through to our customers. There has been some increases, but it will always be passed through. So it’s not something which will affect. If you look at over a five year period, our gross margins of average between 33 and 35% or sometimes even higher. We always aspire to keep that. So even if some of these Prices increase, we pass it through to our customers. Did that answer your question?
Karan Sanwal
No. And regarding the inventory thing, so regarding the shortening of the availability of PCBs, I mean how do we hold those in an inventory and what’s our outlook on that?
Kunhamed Bicha
You want to answer? Yeah,
Unidentified Participant
I’ll take that. Arbit. So you know, we manage this actively with the help of our customers. So we work very closely with them as to what kind of inventory we should hold for their products. Right. We are always, we keep our eye out. So where we feel it’s getting tight, we will hold more inventory. And where we feel, you know, the lead times are good. Right. We don’t have to do so. So this is actively managed across programs, across commodities, whether it’s pcb, metal, wire harness, whatever it is.
Right. So these are fluctuating that we manage day to day. But at the moment nothing that we see is critical. Obviously there are things that are long lead times and things are moving around but we’re always actively managing them.
Karan Sanwal
Okay, but
Kunhamed Bicha
Saying that this changes on a daily basis, as of now we don’t see a material impact. But you never know what will happen geopolitically.
Karan Sanwal
Okay. And okay, so my next question was I see a growth impact year on year higher than the growth in ebitda. So correct me if I’m wrong. So I believe with depreciation and with the tax and with interest and all being stable across the year, there’s a component of other income that has increased substantially. So I just wanted to know what does this other income comprise of?
Suresh Veerappan
So other than, see we are an export business. Major product is also in exports. So there is a good currency depreciation. There is a benefit on forex income as well, which is part of the other income. It won’t be part of EBITDA but it will be part of other income.
Karan Sanwal
Okay. Okay. Thank you.
Operator
Thank you. Our next question comes from the line of mehul Panjwani with 40 cents. Please go ahead.
Sumit Sinha
Thank you so much for the follow up all my questions and answers. Thank you.
Operator
Okay, thank you. Thank you. Our last question for today comes from the line of Achoo with who’s an active investor. Please go ahead.
Unidentified Participant
I have a question on order book. Like I’ve seen that the current order book is around 2000 plus crore. What is the timeline to execute this?
Kunhamed Bicha
So Ashut, the order book is around 3441 crores. Out of that 2196 crores is executable in 12 to 14 months and 1245 crores is executable between 14 months to 36 months. And we have got orders further than three years which you don’t count in the order book.
Unidentified Participant
Okay. And the second question is regarding EBITDA margins. I remember that in previous phone calls somewhere we have mentioned that the operating margins have increased from Q4 of FY26. So I just wanted to understand if operating margins are going to increase going forward
Suresh Veerappan
So I can talk about the cost. So in Q4, FY26, like, like you also rightly highlighted, the ebitda percentage is 11.8%. And if you look at our India manufacturing is which is approximately 39% that has generated 16.7% EBITDA. So the you can see a consistent increase in EBITDA percentage over the last few quarters. Now with the increase in sales expected in FY27, we believe there is a further scope of operating leverage in both India plan as well as US plan. So there is a little bit more scope as well.
Unidentified Participant
Okay. Can we give any long term guidance on EBITDA margins? I mean because if you see other EMS players are able to make around 16%. So I think to make much more margins
Suresh Veerappan
We generally do not provide guidance on the EBITDA margin percentage.
Operator
Thank you ladies and gentlemen. That is the last question for today. As there are no further questions from the participants. I now hand the conference over to the management for closing comments.
Kunhamed Bicha
Fy 26 was a great year for Avalon with robust revenue growth and solid execution. We remain focused on scaling new programs, enhancing capabilities and investing ahead of our growth. Our entry into semiconductor equipment space marks a key step as we expand into more advanced high potential technologies and segments. With a healthy order book, expanding customer engagement and a flexible global manufacturing model, we are well positioned to sustain momentum through the year and deliver profitable growth.
We thank our investors for their continued support and look forward to updating you in the coming quarters. Thank you very much.
Suresh Veerappan
Thank you.
Operator
Thank you on behalf of Motilal OSWAL Financial Services Ltd. That concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.