Allied Digital Services Ltd (NSE: ADSL) Q3 2026 Earnings Call dated Feb. 05, 2026
Corporate Participants:
Nehal Shah — Whole-Time Director
Paresh Shah — Chief Executive Officer
Gopal Tiwari — Chief Financial Officer
Analysts:
Mayank Vaswani — Analyst
Kunal Bajaj — Analyst
Jyoti Singh — Analyst
Jainis Chheda — Analyst
Disha — Analyst
Pratik Dedia — Analyst
Presentation:
operator
Sa. Sa. Sa. Ladies and gentlemen. Good day and welcome to allied Digital Services Limited’s Q3 FY26 earnings conference call. 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 the call, please signal an operator by pressing Star then zero on your touchstone phone. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you. And over to you Mr. Vaswani.
Mayank Vaswani — Analyst
Thank you Rayo. Good afternoon and thank you for joining us on allied Digital Services Limited’s earnings call for the third quarter of financial year 2025 26. We have with us on the call today Mr. Nitin Shah, Founder and CMD Mr. Ramanand Ramanathan, Global Head of Strategy for Growth, innovation and partnerships Mr. Nehal Shah, hold time director, Mr. Paresh Shah, global chief executive officer and Mr. Gopal Tiwari, chief Financial Officer. We will begin with comments from Mr. Nehal Shah who will cover recent developments across the business. Mr. Paresh Shah will then discuss the operational performance and order wins followed by Mr.
Gopal Tiwari who will walk us through the financial highlights. Thereafter we will open the call for the Q and A session. Before we begin, I would like to point out that some of the statements made in today’s call may be forward looking in nature and a disclaimer to this effect has been included in the earnings documents that have been shared with all of you earlier. I would now like to hand over the call to Mr. Nehal Shah for his opening remarks. Over to you Nehal.
Nehal Shah — Whole-Time Director
Thank you, Mayank. Good afternoon everyone and thank you for joining us today.
I trust you have had the opportunity to review the earnings materials that we shared earlier. The third quarter of FY26 unfolded against a complex and evolving global operating environment. Though geopolitical uncertainty remained high, we saw gradual stabilization enterprise segments across key markets. This has led to improved visibility in technology spending decisions with continued emphasis on value efficiency and execution certainty. Against this backdrop, we are pleased to report a resilient and well balanced performance in quarter three, FY26 driven by disciplined execution, steady order flows and sustained engagement across both domestic and international markets. We have reported consolidated revenues of rupees447 crore in quarter three, FY26 higher by 12% on a year.
On year basis. EBITDA has increased by 11% year over year to Rs. 26 crore and PPT has increased by 13% year on year to rupees 22 crore as a master system integrator operating at the intersection of IT ot communication security infrastructure, we are seeing customers increasingly prioritizing integrated outcome driven solutions over fragmented deployments. This structure shift continues to play to our core strengths. From a geographic standpoint, our international operations continue to demonstrate improving momentum as the rest of the world operations reported a year on year growth of over 26% in quarter three FY26. In the US enterprise clients are moving from prolonged evaluation cycles to more decisive inactivity particularly in areas such as network modernization, digital workplace, cyber security managed services.
While budget cement under scrutiny, there is greater willingness to commit to multi year transformation programs where there is clear ROI and delivery confidence. Europe remains selective but stable with clients focusing on vendor consolidation of financial resilience with while the Middle east continues to offer opportunities driven by infrastructure led digital transformation government backed investments India Operations Regroup has reported a decline to standalone revenues by 5% year on year in quarter 3 FY26 as there were no significant project milestones which were to be achieved during quarter three. Activity remains strong and the next quarter we will see renewed billing as project milestones are completed.
The domestic market continues to benefit from the structural tailwinds and sustain government spending on digital public infrastructure. From a broader perspective, recent policy developments provide a supportive backdrop as you look ahead. The Union Budget has reiterated the government’s continued emphasis on strengthening India’s digital infrastructure. Incentivization of key areas such as data centers, artificial intelligence and data security has emerged as a central theme of this year. This priority is aligned closely with our business model and reinforce the long term relevance, relevance and growth potential of offerings. Enterprise customers in India are also showing increasing maturity in their technology adoption with a sharper focus on scalable architecture cybersecurity managed solutions rather than standalone CapEx deployments.
This has resulted in a steady flow of opportunities across both government and non government segments. From a segment perspective, our services business grew 16% year on year while solutions revenue remained flat. Segment wise, both our services solutions business continue to contribute in a complementary manner. As we have highlighted in the past, solutions often act as an entry point enabling deeper annuity led service engagements over time. This indicated model not only enhances revenue visibility but also improves customer stickiness and margin sustainability across cycles. Reflecting the renewed enterprise sentiments, revenue from non government customers increased 13% year on year outpacing growth on the government segments which reported 12% year on year growth.
This shift highlights a strengthening engagement investment appetite among the enterprise clients as we revive their digital transformation plans. Order flows during the quarter remained healthy with over 250 crore supported by a mix of new wins, renewals and follow on orders from existing customers. Importantly, we see an improvement in the quality of the pipeline with larger deal sizes, longer tenures and broader scopes less than multiple technologies and service players. While we remain disciplined on margin thresholds, we continue to evaluate strategically important opportunities where scale, long term energy potential or account expansion can create superior value over the life of the contract.
From a customer behavior standpoint, one of the defining trends this quarter has been heightened scrutiny on pricing and contracting structures. Even as deal activity improves, customers are increasingly seeking outcome linked commercial models, tighter SLAs and faster implementation timelines. Our cycles remain competitive with sharper negotiations, but there is also clear preference for partners who can assume end to end responsibility from design integration to long term operation and support. Our track record, domain expertise and ability to deliver at scale continue to differentiate us meaningfully in this environment. The other exciting development this week is the announcement of framework for U S India Trade Agreement.
This improves over this, removes the overhang for last few months and will draw out a clear path towards incentivizing greater economic cooperation between the two countries. With our established presence in the US and integrated execution capabilities across influential cloud, cloud, cyber security and managed services, we believe these developments reinforce the long term opportunity set for Air Digital overall. While the external environment remains dynamic, we believe the worst of the worst of the demand uncertainty is behind us. The gradual recovery, discretionary spending combined with sustained public sector investments and increasing convergence of technology domains positioned us well.
As we move into final quarter of the financial year, our focus remains firmly on execution, excellent student capital allocation and building a robust diversified order book that supports sustainable growth. With that, I will now invite Parish Shah, our Global CEO to take through the order book, strategic initiatives and outlook in greater detail. Over to you Parish.
Paresh Shah — Chief Executive Officer
Thank you Nehal. Good day everyone and thank you for joining us. The quarter reflects yet another consistent execution across our global operations with a clear emphasis on delivery, scalability and client outcomes. We continue to strengthen our delivery engine, improve operational efficiency and deepen engagement with strategic customers across markets. During the quarter we secured several meaningful order wins and renewals across both international and domestic markets. These wins span multiple industry verticals and service lines including data driven platforms, AI LED solutions, infrastructure transformation and managed services. Importantly, the nature of these engagements reinforces our ability to deliver complex large scale programs while building long term recurring relationships alongside new wins.
We also saw continued traction in multi year renewals across existing clients spanning multiple industries, supporting revenue visibility and reinforcing confidence in our execution capabilities across these engagements. Our fiscal our focus remains firmly on discipline, delivery, timely execution and value creation for our customers. To briefly highlight some of the wins during the quarter in India, we secured an engagement with a leading private sector general insurance company where we will support its nationwide retail and corporate insurance operations enabling reliable and scalable IT services across multiple insurance lines. We were also awarded a project by. A state level healthcare and medical education facility overseeing a large network of medical, dental and nursing institutes institution. As part of this engagement we will deploy agentic AI based WhatsApp chatbot solution to enhance operational efficiency and improve communication and service delivery for citizens, students and stakeholders in the automobile spare parts sector and manufacturing sector. A globally enterprise of a global enterprise operating across the energy value chain selected Allied Digital to implement AI and machine learning based intelligent video analytics solution aimed at improving a production efficiency and strengthening operational performance across its manufacturing operations. In the US A leading brokerage alcohol company appointed Allied Digital to provide end to end support user support services across its offices, manufacturing facilities and warehouses, ensuring customers consistent IT support across the distributed footprint.
We also secured a mandate from a US headquartered global agriculture processing and food ingredients company to deliver desite support services along with technology wherein initiatives supporting end to end IT lifecycle management across its operations. Additionally, a Midwest US Retail chain selected Allied Digital to end to end IT infrastructure transformation and ongoing support. As part of this engagement we will operate a 24.7Global Service Desk in both English and Spanish supporting employees and contractors across North America. Overall, these wins reflect the increasing reliance on Allied Digital as its trusted execution partner for mission critical IT environments supported by our global delivery model and integrated service offerings.
With that I will now hand over to our CFO Mr. Gopal Tiwari who will take you through the financial performance of the quarter.
Gopal Tiwari — Chief Financial Officer
Thank you Paresh and good afternoon everyone. I’ll take you through the financial performance for the third quarter of FY26 and highlight some of the underlying dynamics shaping our results this quarter, particularly in comparison to the trends we witnessed in the earlier part of the year. We are pleased to report continued strong momentum in our business as reflected in robust double digit growth in top line performance. Revenues for Q3FY26 stood at rupees 247 crores representing a year on year growth of 12%. This also marks the highest ever quarterly revenue in our history and we are just about 3 crores short of hitting our target stated target of rupees 250 crore in quarterly revenues and that too a quarter ahead of our estimate on a YTD basis revenue were Rupees 700 crore compared to Rupees 603 crores for the nine months period of FY25.
This represents an increase of 16% YUI and clearly demonstrates the solid progress we are making and our team remains fully aligned towards achieving the milestone of 1000 crore in annualized revenue in Q3FY26 EBITDA grew by 4% year on year basis to rupees 26 crore as our top line continued to expand. We are seeing a parallel increase in profitability as we reported an improved margin in Q3 over Q2. However, the environment remains challenging with a few factors continuing to weigh on margin PBT before exceptional items for the quarter improved by 13% year on year basis to rupees 23 crore from rupees 20 crore in Q3 last year.
Once again reflecting the upward trajectory in our financial performance, we are pleased to note that no material provisions were required in relation to the new labor codes during the quarter. Our salary structures which were designed to be employee friendly while remaining fully compliant with applicable regulatory requirements are well aligned with the new framework. Consequently, the Company has recognized a provision of only Rs. 101 crore 3 lakhs towards certain limited one time adjustments arising from the implementation of the new level codes with the sorry. Given the non recurring nature of these adjustments and in line with best reporting and governance practices, the provision has been presented as an exceptional item.
While the amount could have been absorbed within employee expenses, we believe this classification provides greater transparency and clarity to stakeholders during the quarter. We have made a provision of this 4.8 crore pertaining to prior year taxation. This has served to increase the tax expense for the quarter. We have reported profit after tax of rupees 14 crore in PY FY26. If we adjust for this tax pertaining to the prior year of open date crore and the exceptional item of 1 crore 30 lakhs due to their one time nature, the adjusted PAT would have been about rupees 20 crore which is reflective of the improved scale and progress of our operations.
In summary, Q3 FY26 showcases that we continue to build scale and maintain financial discipline in challenging pricing environment. With a healthy order book and improving visibility improving visibility on execution, we remain confident in our ability to deliver sustainable and profitable growth over the coming quarters. With that, I’ll now hand over the call back to the moderator for question and answer. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue you May press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles to ask questions. Please press star and 1. The first question is from Kunal Bajaj from Choice Institutional Equities. Please go ahead.
Kunal Bajaj
Yeah, hi, good afternoon. Thank you for the opportunity. So mostly I had two broad questions. Firstly, when we see the order book of around 250 crores, so when we try to split it up it is mostly from the enterprise side. We don’t see any major order wins from the government spending side. So how do we see this going forward? And this is mostly, are we seeing the fact that the government a bit cautious on spending on smart cities or is it that, that they are delaying their expenditure? Any, any particular reason for that? So that is one.
And the second is around the solutions and services mix. Obviously we know that solutions is the first leg of the contract we generally get and that is why we see the services revenue is mostly growing a bit better as compared to solutions because we see that most of the deal wins we had have moved on from the solutions end to the services end. So what we see, how do we see the mix going forward on the next two, three quarters? Yeah, that are the most broad two questions I have. Thank you.
Nehal Shah
Thanks Kunan for the questions. I think the government orders typically are large orders and they take time. Once we have the whole bid process going on. While we are talking, you are aware that Maharashtra underwent elections, different municipal elections and stuff. And a lot of this orders that, that were in the pipeline were delayed for that reason for the last quarter. But we are seeing a lot of movement happening, biddings, bidding going, going to the next stage of financial opening and stuff. So we see a lot of progress happening there. And the next two months are going to be crucial because while we are talking there are a lot of bids that we have submitted and looking for the bids to open up typically in the, in the rest of India also the case is that wherever there is a pipeline which is available and there we are bidding, the evaluation of those projects are on and we are expecting there also some movement to happen.
But our focus typically for the current quarter and the next quarter is going to be for the Western Railways, Metros and Maharashtra State. So we see a very healthy pipeline coming in there and we’ll see some kind of announcements coming in of order bids if you win some of them in the next two months. And regarding submission services Split the mix is always going to be there. We would eventually want our services revenue always to be higher because that gives a lot of stability with terms of revenue recognition. But solutions gives us that mix where it also helps us in getting the top line visa vis also making sure we are working on large projects and then eventually converting into services business.
So that mix is going to be there. This quarter was a little bit slow because even the project that we are implementing, the current project which is being implemented, Pune also saw some delays with request to the implementation due to the ongoing election. So permissions for deployments were a bit delayed and that’s why there was a little slowness for this quarter. However, as you are aware elections are once in five year thing and it’s not a thing that happens every quarter, every year. So this was very seasonal one time you see a lot of movements happening.
Why we are talking, I mean there’s a lot of progress that is happening on the ground after the elections were done and things were moving ahead. So we see a lot of milestones for Pune project also getting closed by 3-30-31st. Sure, got it.
Kunal Bajaj
So mostly. Yes, yes. So mostly as in we see the majority of the uptick which we see in terms of margins. So is it safe to say that this is because of the higher exposure of the services mix and it is a one time thing going forward when we have some attraction as solutions business, as in solutions part of the business, the mix might cool off. Is it safe to say that?
Nehal Shah
Yeah, absolutely. So once, once we have this solution business coming in, we will have that mix getting cooled off. And as you are also aware that we had one order about 2/4 back, sorry a quarter back of the largest pharma company in Europe. Even that has started getting US revenue being getting recognized. So you see that kind of a jump coming in from the services side as well. So that is also helping us making sure that you know, services revenue keeps on increasing.
Kunal Bajaj
Sure, sure.
Nehal Shah
Services revenue will always be higher because solution revenue will be only for the year where we deploy solution and that culminates into services renu. So our that pipeline is always going to be very high when it comes to services business. Typically it’s a multi year contract that we sign up and solution business is just one year.
Kunal Bajaj
Sure, that’s helpful. Wanted to check on the fact that we obviously have given a outlook on the quarterly run rate of around 250 crore. So mostly we are there. As we see this quarter we are almost 247 crore. So going forward we see this growth rate to sustain and mostly on the margins front as well. Is there any outlook we see going forward on that front?
Paresh Shah
If you don’t, I’ll answer that question. Yeah. So, you know, overall our strategy is bearing fruit and dividends as we have stated in the earlier calls. Also there is a tremendous focus now on AI enabled infrastructure services, smart cities as well as technology management. There is also a growing need for agentic AI solutions whether it is in edge AI or whether it is in application development or whether it is in the infrastructure management. And also the Indian government has now through all the FTA and through the renewed focus on India AI mission, GCCs and AI data centers being increased to be established in India.
We are in a sweet spot in terms of being in the right area, in the right technologies and in the right service capability. So all of these are going to play an important role in the growth of ADSL going forward. We are increasingly getting services businesses from the enterprise sector. We are also getting it from the international market. And the growing importance of cybersecurity is again another area of our focus for the last several years. And now we are seeing increasing demand in these services. So with this business trends and technology trends accelerating in the marketplace, ADSL is well positioned to leverage and capitalize on the demand from the market and be able to therefore grow in a in a significant manner over the next couple of years.
Kunal Bajaj
Sure, thank you.
Kunal Bajaj
And one more last question from my side please if you may. We I over the press release we see that you have mentioned about data centers. So what exactly are we doing in the data center space?
Nehal Shah
So the opportunities in data center are multiple and while I’ll also have Rohan and Mr. Nitin Shah respond, but the data center there are three areas that is happening. One is there is a growth of data centers in India itself. There’s going to be sovereign data centers being set up and therefore data centers will have to be implemented, they’ll have to be managed and also the cyber security related elements for these data centers will have to have managed services associated with it. The second is that there is more and more intelligent infrastructure being implemented and these are edge AI applications or agentic AI applications that will need to be harnessed in order to manage the infrastructure intelligently and give and bring automation in the management of these whether it is servers, networks and devices and so on.
And the third aspect is of course on top of this there will be a number of AI based services that will, that will come up and that is the opportunity that we are also looking at Mr. Nitin Shah if you want to add anything more to this.
Kunal Bajaj
Yeah, we had been building data center for almost last 30 years for several corporates we have built. So we have got complete capability of designing, architecting, building data center and that’s what our sweet spot is. So there is, there are data centers which are, which are owned by somebody else, large players and they, they give provisions of infrastructure to the clients. So we don’t do that job but we rather operate also on their behalf. So build on, operate and transfer. So we are into the build of data center, operate of data, operation of data center and manage data center.
That’s how our job is. We are not going to be typically compete with large data centers like Adani and Ambani and all. So Kunal, I hope you got the point. Typically our expertise lies in architecting, designing and implementing a data center. We’ve done that for about 15 cities across India. And our core competence lies in implementing data center rather than owning the reality space and making a data center and giving hosting service to our clients.
Nehal Shah
Yeah, definitely. So we do have any projects which we are in pipeline for this space?
Kunal Bajaj
Yes, there are a lot of projects. Any government or smart city, safe city project or any railways project or anything of that sort that we take up are all having data center by default inbuilt in those RFPs. So there are a lot of government projects that are there which are there where data centers need to be built up. Apart from that there are a lot of enterprise customers who have requests either to manage their existing data centers or help them in migration of their on prem data centers to cloud data centers. So this kind of requirements keep on coming in and this is our core competence.
Very briefly there are two games. One is game of skill, the other one is game of money. So we rather would like to remain to play game of skill which is what where we are game of money. We are not in that, that is just on real estate and on data centers. But there are, I mean a lot of things that has got to be done after you build a data center in terms of migration, digital transformation. So all that we do for a client.
Paresh Shah
So and just to add you must be aware of the recent budget policy on cloud services tax holiday. So that’s a big announcement. We having an international entity can bring in the US customers cloud services and manage that out of the India based data center. Especially GCCS and lot of customers are moving into that. It gives a great opportunity for us to deliver managed services through these New data centers.
Kunal Bajaj
Sure. Perfect. Thank you. That helps. All the best.
Nehal Shah
Thank you.
Gopal Tiwari
Thank you.
operator
Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Jyoti Singh from Arihan Capital Markets. Please go ahead.
Jyoti Singh
Yeah, thank you for the opportunity sir. So just follow up question from earlier participant on the you were explaining about the data center for the smart city things so. But not similar on that. But on the smart world city side, one big player in the it. Those who are invested in the smart smart city but they are not seeing the kind of margin we make in other segments. It is a way lower margin in the smartwell city thing. So what kind of margin we make in this business? I I wanted to understand sir.
Nehal Shah
So Jyoti, the margins typically whenever you are in the implementation phase, since there are a lot of products being deployed across the Safe series machine, the margins are pretty, pretty lower. But when you are in the implementation and the wheream phase, that’s when the margins shoot up. So that’s why what we call in our parlor as services revenue. So once you move out from a solution space to a services revenue, your margins keep on improving. So yes, if somebody is a player who is only doing the hardware business, they will have single low digit margins.
But a solution provider like us who does end to end from building a smart city to managing it for a period of five years will have improved margins overall to the in the tune of double digits upwards of 20% overall when we, when we complete and I’m talking about gross margin when you complete the whole project.
Jyoti Singh
Okay. And another. Yeah, yeah. Yes sir. And another on the revenue side in nine months we have given around 700 crore. So what kind of growth band should we expect going forward in FY27 it will be low teens or mid teens kind of.
Nehal Shah
So yeah, we are looking at mid teens to be a little conservative.
Jyoti Singh
Okay. And this is largely driven by any, any project, if you can talk about that we are expecting going forward. And also earlier you mentioned on the government project side. So what kind of improvement we are seeing? Because now DSO has improved to 75 days. So are we seeing this will going to sustain on the government and large enterprise exposure as it is been increasing or what what your thoughts is?
Nehal Shah
No. So DSO and other things from a delivery perspective, we don’t see a challenge. They are pretty decent. There are sometimes certain delays that keep on happening but that is very seasonal and transactional which are manageable. We are not seeing any kind of uneasiness in getting our monies from the government with respect to future projects, I think the mid teens will be a conservative growth target that I would want to give out. The reason is beyond the macroeconomic conditions that we also have to keep in mind. But having said that, the pipeline looks strong. Our strategy of acquiring new customers looks bang on because there is a lot of strong pipeline with respect to government orders, enterprise customers and global customers as well.
It’s all depending upon the closure and for us, at the size that we are, if one large contract comes in, our growth numbers could change from mid teens to mid 20s. You know it’s a question of hitting out on large contracts and the pipeline. I am assuming in the next two or three quarters we’ll see better, better larger order bins coming in.
Jyoti Singh
Great, Great. As now we are getting a lot of buzz around AI so I’m going to ask some question on that front. So what percentage of 26 revenue are AI influenced for US vs AI native and how is monetization structured in each cases? If you can explain and are AI led deals margin accretive from day one and or do they dilute margin before scaling? So just wanted to understand your perspective and which are the segment that we are implementing AI for us.
Paresh Shah
Yeah, great question. Let me just update you. We have adopted AI first strategy so every services of our organization will be embracing AI and delivering part of that solution or service as AI enabled. As you know we have also developed our agent AI platform. We are also working on several Agent Ki platforms, commercial platforms like Microsoft Copilot and Google Gemini. We already had couple of deployments already running today with our customers as well as an internal operations. Today Our NOC drives AIOps as part of building complex solutions and resolving critical issues using our own AI engine.
So we see tremendous traction in terms of usage of AI over time. And if I look at it definitely there will be more and more percentage of AI getting significantly contributing in the coming months. That’s what I see. I cannot exactly give you any percentage but it has become now ingrained into every services. So definitely there will be a portion of AI and today we have one few deals this quarter also you can, you know I already talked about it, at least three deals of them are already leveraging AI and to some or the other extent.
So this is what we see that you know the traction is real. Obviously the benefits to the customers we slowly seen Right now a lot of customers are taking this as proof of concepts but solidifying the use and you know there will be a Stage where they will see that, yes, it has also impacted the ROI today. Okay. So once that is true, we see that, you know, at every kind of sale or every new customer going forward, definitely there will be use of AI and this will be a contributor big factor for us in the revenues. And what AI does is basically today, you know, saves employee productivity, especially automation. Okay. You know, AI generates an automation opportunity. And this is where we are moving fast to see how we can kind of give value to the customer as well as, you know, improve our profit margins.
Jyoti Singh
Great, great.
Paresh Shah
AI is so much integrated to our existing business. It’s very difficult to give a kind of numbers. How much did we get on AI? Because it is, it is completely integrated with our solutions. But we try to put AI almost in almost all the solutions that we provide. And our company is completely ready to face any challenge on AI.
Jyoti Singh
Okay, great, thank you. One last question. Yeah. How does the net new client contribution in FY26 compare with 25 in term of revenue depth and contract duration? If you can explain on that side.
Paresh Shah
So, so revenue from last year to this year, net new revenue has grown, gone up. You would have seen our order releases that we did. We’ve announced thousand crore worth of just two wins that we had this year. So typically when we go in the, in the, in the coming 2026, 2027, we see a lot of this billing happening. So net new order wins are going up and we are, we are progressing towards renewals as well. So renewals are happening. We have about 90% plus renewals that we have been able to do and net new business also gone up.
So I don’t see that as a challenge. And this will continue to make sure that the momentum is high, which is also reflecting in our revenues. Our revenues have also grown considerably. If you just go two years back, what we are at today.
Jyoti Singh
Okay, thank you so much.
operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to ask questions. The next question is from Janice Cheddar from Chemifin family office. Please go ahead.
Jainis Chheda
Good afternoon, sir. Am I audible?
Paresh Shah
Yeah, yeah.
Jainis Chheda
Yes sir. I want to draw your attention to. The audit qualifications that have been made in the, in the audit note. So can you just give us some. Light on what is happening with respect to inventory receivables and the unbilled revenue part.
Gopal Tiwari
See, I would like to explain that in fact these notes, the points are not new. In fact last March onwards these similar points are coming continuing. These are few things which we have realized we had, we have accepted their points and we are seriously working on that to rectify those points. So one is your physical verification. They have pointed out physical verification of inventory. That process is on. We are doing it ourselves and we have appointed a third party valuer also. So we are contemplating to complete that entire process by the 31st of March, I mean by air end this financial year end.
So whatever outcome will be there of that verification and exercise, we are going to take care of that by end of the year.
Jainis Chheda
Just to add to this, the inventory typically is taking a lot of time. The reason is because we are in and a lot of our inventory is put across various office locations and also at customer site. So the auditor is wanting us to do physical verification of all the assets to be done through a third party. So that process is on and I’m pretty sure that we should be able to complete the process by 31st of March 2026.
Gopal Tiwari
And remaining this. Yeah, the latest part, there are few receivables are lying in our books which are three years more than three years old. But those are all under consideration and we are constantly in touch with the customers and we are expecting payments of that but it might take little longer time. But however we have ECL provisions we are making as per the ECL policy. So that also we are going to relook into by year end and any new policy implemented by the board we will adhere to that and whatever impact is required to be taken will be taken in the books by the 31st of March.
So those are all under consideration and we are actively working on that to clear those points highlighted by the auditors.
Paresh Shah
Yeah, and even the unbilled revenue that you look at, the number unbilled revenue is also for a customer who is currently active with us and we are slowly progressing towards coming up to a solution. This was a disputed service delivery that we had done about a couple of years years back for which the customer says that it was. It was not a part of the contract but however it was a requirement which needed to be done and there was a dispute regarding this. So. So since we had done, we had spent money and we had accounted cost for it, we had also had to take revenue.
Nehal Shah
Yeah.
Paresh Shah
So we are looking towards the closure on that and. And hopefully there will be some progress over that also coming in. So we have set an internal target of about 31 March to have most of these things cleared or at least have a strong conclusion of how things are going ahead.
Jainis Chheda
So. So will all of these things lead to an impact in the P and L once again for the year end because the same thing happened last year also in Q4 where there were forex related issues. So is that same thing going to repeat in this year?
Gopal Tiwari
Not exactly. Not last year was some unusual and some, some legacy items were there and pretty old matters which were highlighted by the new auditors. So these are the, this is not going to be of that scale, but definitely whatever impact will be there, it will be, it will not be of that level. But we’ll take corrective measures in this year itself. Most of the points.
Jainis Chheda
Okay. And so in the end also there’s previous year taxes which have been charged. So what is that about?
Gopal Tiwari
Yeah, that amount pertains to earlier period. Earlier period provisions were made but actual tax outflow were more than that. So that amount we have to take into account and we have taken that. Amount in this quarter pertaining to earlier period. Would have improved by that amount.
Jainis Chheda
So that is where the challenge is that there’s a lot of volatility in net earnings. So that is a bit of a challenge as an investor. One more last question from my end. You are talking about consolidating your US subsidiary into you. So any comments on that? So typically the subsidiary that we had acquired in the US was run through one of our companies that we had opened up as a spv, Allied Inc. So typically what had happened in the transaction is that we had given a loan, a fund was provided from Allied India to Allied Inc. Which is a US company and Allied Inc. Had acquired 81%, sorry about 30% stake of Allied LLC which was called as Onpan Global Services. Now this was always in the virtue of an investment.
However, since it is shown as a loan in the books, we have to get the money back. And the way to get the money back is to close the SPV and have all the shares transferred off of Allied LLC to be transferred back to India. So this typically will resolve all of our outstanding issues that we have with terms of the first qualification that we have got. Since it was an investment which was done to acquire a company. We have never considered it as it.
Gopal Tiwari
Was a cozy equity, quasi equity. In fact, that’s why no interest were charged in last year’s. So we are planning, we are working on that so that this loan amount can be converted into equity finally by the 31st of March so that this qualification will also be removed permanently. This is also expected by end of this year. Yeah, yeah, yeah, that has to be because then, then this point will go forever. That loan amount will be converted into equity so that non compliance will not be there. Okay, one more question if I may.
Jainis Chheda
If I may ask. You are speaking that this Q3 has been impacted because of the elections. So will that lead to any impact in the top line in the near term or you still maintain your 250 plus for guidance by end of the year? No, the impact is already done in Q3. I mean we were not able to bill out because the permissions were not in place and bill approvals were not there. Since the government elections are going on. Since all of that is over we are seeing a lot of progress happening there and a lot of billing which is supposed to be happening would happen by March30, 31st.
So I don’t see that you know, impacting any of our top line. Thank you so much. I’ll turn back to Q. Thank you.
operator
Participants who wish to ask questions please press star and one. Ladies and gentlemen, to ask questions please press star and one. The next question is from Disha from Sofia capital. Please go ahead.
Disha
Hello, Am I audible?
Gopal Tiwari
Yeah, please go ahead.
Disha
Yeah. So firstly coming on to the guidance, I think this year we’re targeting thousand crore. So are we on track for that?
Paresh Shah
We should be able to do it in the last quarter if not in the first and second. So our idea of thousand crore is to achieve 250 crore. It should be 250. So we are at 247. We should be able to do 250 from next quarter onwards and then keep on improving. So you might not see a thousand crore coming in the top line for the whole year but we are progressing towards it. So in the next year for sure.
Disha
Okay, okay, that’s very clear. And so based on the margin guidance I think last time we spoke you mentioned that in the next three four quarters we’re looking to go to 11 to 12%. And then next two, three years move closer to the mid teens. As we’ve seen the improvement I think we’re around 10.6% this quarter. We expect this momentum to sustain.
Paresh Shah
Yes, we would want that to continue and that is possible since as soon as our largest master D implementation projections move into O and M we see better and improved margins coming in. But you know Disha, the problem is that when we have large customer contracts being closed I think you all should look at the ticket size of the contract that we are closing in as well. With a 700800 crore revenue top line, we announced two large deals worth 500 crore each last year. So when we acquire such Kind of large customers, there are a lot of investments that also go in to make sure that we are having the right kind of team ability.
And also since most of these large contracts are multi country also lot of investments going to do compliance activities there as well. So any such kind of cost will always try to put a little bit burden on ebitda. But having said that, our target from our internal process is very simple to make sure that we keep on acquiring large customers because there was a lot of long term stability and then keep on improving on our operational cost. So while we are constantly improving our operational cost to make sure that our margins improve, sometimes due to some additional cost, the margins do get impacted.
So our gross margins, if you say our gross margins are pretty much improving quarter over quarter.
Disha
Right, right, right.
Paresh Shah
Apart from that there are other things also that we are doing in the U.S. we have also hired a chief growth officer. We are also hiring more sales people to put more foot on the ground to acquire more direct mid sized customers so that our revenues from a mid side customer also keeps on increasing which will also help us to improve our margins because then we are direct to those customers.
Disha
Okay. Yeah. Okay, makes sense. And so currently you mentioned our focus is winning large customer contracts, right? So currently with our current infrastructure that we have what sort of like the maximum order value we can solve right now and where would we want to see this number going ahead?
Paresh Shah
Technically I don’t see that as a challenge to even go and you know, do order worth 2,000, 3,000 crore. But it has to be a combination of technical and financial capability both. So if we have, if we see that we have to go and bid for a large contract which is about 2,000 3,000 crore, which we did, we did bid for the Mumbai city surveillance as well. We go with a partner and contract sizes which are 500 crore, about 700,000 crore, we would want to do it by ourselves. So maybe one one to two mid sized contracts in the range of 400, 500 crore is something which we have an appetite to do it by ourselves.
We will continue to do so other than the smaller ones that we keep on getting between 50 crore, 70 crore, 100 crore. But slowly and steadily we are progressing towards more larger deals. And this is what our strategy is, that next two to three years you should be able to hear good large deals coming in from us.
Disha
Okay, okay, fair enough sir. And so just one more thing. Last time I think we spoke to there are also major European contracts that are in pipeline. So any update on that? And given The India usda. What sort of opportunity you see from that market?
Paresh Shah
So we did announce Risha last year, the large contract that we spoke of. So there are, apart from that there are three, four good orders. I wouldn’t say very large, but good orders that we’ve got with good customer base that we’ve already announced throughout the year in our earning presentations as well. And Faresh has been talking about this wins consequently, and we will. And while we are talking the pipeline that we review every weekly, we also are seeing a lot of movement happening on the, on the weekly pipeline as well. Large contracts coming in, bidding for them going on.
The only question is sometimes a decision is taken in certain quarters, sometimes the decision is postponed. So you know, if this thing goes our way, then the numbers will improve accordingly. Yeah.
Gopal Tiwari
Just to add to what Nehal said, if you see we are steadily growing both our international business as well as enterprise sector business. Now both these businesses are heavily service oriented and therefore the margins on these business are continuing to, we are continuing to do well or improve on them. On the smart cities also. Now the type of projects that are coming up and where we also have the ability to get higher margins is in the service solutioning part where there are more and more AI application oriented solutions that are required. For example, you may have heard in Davos the declaration by the Maharashtra State that they’re going to create an innovation city in Panvel and so on.
Now if you are talking about an innovation city, there’s a lot of smart technology which has to go in and also smart solutions which have to go along with that, including water management or electricity management and so on and so forth. So these are all opportunities where the margins can improve not only because of the infrastructure that is being rolled out. But also solutions that we will develop. And replicate in many other locations.
Disha
Right. And so this order that we’d won for this pharma company in Europe, what’s the revenue visibility from that and what’s the margins there?
Nehal Shah
So we are looking at a revenue top line of about 1 million a month, about 12 million a year for four years. That’s close. About 50 odd billion margins would be in the teens. However, I will have to come back to you with the exact numbers because they keep on changing due to the change request and other things that keep on coming in.
Disha
Okay. All right, fair enough. Thank you so much, sir. I’ll be to my side.
operator
Thank you. Participants who wish to ask questions, please press star and 1. The next question is from Pratik Dedia, who’s An individual investor, please go ahead.
Pratik Dedia
Yeah, okay, thanks. So I’m on this check. You mentioned about a lot of agentic AI chatbots being implemented across multiple projects and New Order wins that you work. So just wanted to understand from an efficiency perspective, does it help to get better margins or does it help to lower your cost while you build the customer with those AI implementation?
Paresh Shah
Yes, absolutely. So we have successfully deployed for a. Large FMCG company and also we are also doing our AIOps which makes a big difference for 50 plus customers in our NOC. So definitely the big plus point on the AI is two areas. One is it improves the productivity of the end user, especially the Gen Z, because they are used to, you know, quickly getting solutions. Number two, over time the AI basically becomes autonomous and the automation helps to, you know, make sure we deploy lesser people. There is a definitely cost savings on our operations which will lead to improved profit margins for sure. And the other aspect is, you know, we are also deploying AI based solutions, especially major analytics computer vision in the Smart city, which also gives us a lot of visibility in terms of making sure lot of scenarios or use cases get covered in that and it brings a value both to the end customers and for us to make sure we have a kind of controlled staff to deliver the overall sla.
So definitely indirectly, overall you will see the good improvement in the profit margins.
Pratik Dedia
Okay, that’s very good. I think it was probably a couple of quarters ago that you had mentioned that there were a lot of Smart city projects that you had bid for across multiple cities and different states across India. So can you give us status of where we stand on that?
Nehal Shah
Oh, so Pratik, we were, we were seeing that there are a lot of opportunities that are there coming in from different cities and we will pick and choose the ones that you want to bid for and we continue to do so. While right now our focus from a state perspective has been Maharashtra because we have good connects and we have done too many projects in Maharashtra. Apart from that, we have also changed our focus towards railways because we are seeing a lot of contracts coming in from railways after the Supreme Court order of making sure that all the railway coaches across India have CCTV surveillance and command and monitored through a command and control center.
So a lot of these RFPs for Western Railway are coming in and we have already close to, if I’m not wrong, we have already bid for about 3 of those Western Railway contracts. There is another safe city which is happening at Noida for which we are waiting for the RFP to come in which should be coming in soon and we’ll bid for it. Mumbai City Suburban, we bid it for it. Unfortunately we couldn’t win it with a partner. There was another company that that one and shortlisted. And apart from that there are, there is one that coming UP in Maharashtra MIDC.
There are three more MIDCs that are preparing RFAs while we are talking for the Safe City. So we have done the Talosa Safe City which is, which was an MITC Talosa midc. Similar to that, there are three more MIDC cities that are coming in for Smart City. So these are all in the different stages. Some are in the pre RFP stage, some are in the RFI stage, some are in the RFP and some are post bidding stage. So as and when there is any milestone that we achieve from an order win, we keep on announcing to the stock exchange to make sure that all our investors are aware of any material information that needs to be informed.
Paresh Shah
And just a thing to add. As we have now good insight into Smart cities. Over 10 years now in implementing large scale solutions close to 16 cities across the country, we have stretched ourselves into public place technologies. As Nehal mentioned. You know what this means is, you know, because every government infrastructure is in digitization space. So Western Railways is one example that he talked about. But we now see a lot of opportunities on infrastructure automation modernization for several government initiatives. So we see that as a big opportunity and as per our learnings from the smart cities, we become highly eligible for these projects.
Pratik Dedia
Okay. And when you speak about the railway project, so in terms of the construct of the contract, it will be similar to what you had in the smart society, right? So you have the solution part being implemented at the start of the contract and then you have the services part. Yes, understanding, correct?
Nehal Shah
Absolutely. Yeah, yeah, absolutely. Only this time the services could be a little lower than the than the ones in the Safe cities margin because railways is pretty straightforward and standard. You don’t see a lot of changes like like you have in the city space. So it’s going to be a little lesser. But yes, the construct is the same. It is, it is solution, designing, implementation, maintenance.
Paresh Shah
So in short, we have broadened not just mad cities but it more of broader public place technologies. It can be airports, it can be ports, it can be railway stations. Several other opportunities.
Pratik Dedia
Okay, got it. And in terms of services contact division. So say suppose Smart City has 10 years. This probably would be five years, seven years, is that correct?
Nehal Shah
No. So even Safe cities smart cities are also five years. Typically they are one year implementation and Fire om and all these contracts are done in the same fashion. In some cases, if the infrastructure and all is good, we do get extensions for for another five years. Ideally the first time that you get the contract is one always.
Jainis Chheda
Okay, got it. And my another question in terms of gross margins, you mentioned that gross margin has been increasing, but due to solution implementation, we’ve not seen the translation happening on the EBITDA level. So which probably would come down the bottom, correct?
Nehal Shah
That’s right.
Pratik Dedia
Okay, okay. And one suggestion. So while you’ve been mentioning about order wins on the enterprise level, is there a possibility of to making it public while you get that order similar to what you probably would get at the government level? Because we’ve not seen announcements happening for enterprise levels.
Nehal Shah
Yeah, yeah, you’re right. So Pratik, what we have done is that we’ve kept a threshold. Unfortunately, with the growing top line, the threshold for announcements have also gone up. We typically have a threshold of about 10% of our top line. So any orders now that we are that we get about 100 crore or maybe 90 crore will be announced. The smaller size ones are not going to the stock exchange. But we keep on adding and announcing it through the press release quarterly. This year due to various elections, other things, it was a tad slow in acquiring good government customers.
But with the RFPs and the order bidding that we’ve done, we see that by March 31st you’ll see some wins and some announcements coming from outside for sure.
Pratik Dedia
Okay, yeah, that I understand on the government side, but on the enterprise, private enterprise level also, if you could make those announcements public then that would be great. Rather than waiting for the quarterly press release, you could be informed on a regular basis.
Nehal Shah
Yeah, yeah. So if it does meet our threshold guidelines, we do announce through the stock exchange, the value is higher because generally what happens, I’ll tell you, the government orders are bigger in number, enterprise are smaller but are very, very lucrative. And we get a lot of farming opportunity inside. So I might enter a customer with a 10 crore or 12 crore kind of an order, which I find it difficult to announce every order in that scenario. But when we are inside, we see through farming those customer revenues going up. And that is I think most the strategy that most of the big, big companies also you enter small and then you farm and you grow the customer and same strategy that we are applying.
So any wins that we do, we make sure that we are announcing quarterly to make sure even if it’s a small order, but it is very strategic to us, we keep on announcing sure.
Pratik Dedia
Okay, fair enough. Thanks. Thanks for answering my question.
operator
Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.
Nehal Shah
Thank you for your participant engagement during today’s call. In closing, I would like to reiterate that we remain excited about the traction and momentum in the business and are looking forward keenly towards achieving a target of 1,000 crore annual revenues in the near future. Over the past few years, we have undertaken a comprehensive transformation across multiple dimensions, including governance, transparency, human capital, leadership development and our sales and marketing framework. These initiatives are strengthening the foundation of the organization, making it more agile and resilient, and ensuring that our growth remains sustainable, well balanced and not defined by financial performance alone.
If you have any additional questions or queries, further information about our company, please feel free to reach out to our team or contact CDR India. We appreciate your continued support and confidence. Allied Digital. Thank you.
Paresh Shah
Thank you.
operator
Thank you very much on behalf of allied Digital Services Ltd. That concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.