The Chatter: SBI, Delhivery, Titan & More
Q1 FY27 | Edition #78
Welcome to the 78th edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 5 companies across 5 industries.
Financial Service
State Bank of India
Logistics
Delhivery
Retail
Titan Company Limited
Engineering & Capital Goods
Hitachi Energy India Limited
Defence
Apollo Micro Systems Limited
Financial Service
SBI | Large Cap | Financial Services
State Bank of India (SBI) offers a diverse range of products and services to individuals, businesses, and institutions through its extensive network and remains a leading player in the banking sector.
[Concall]
SBI explained that the 18% YoY credit growth in Q1 benefited from a weak base and reiterated that sustainable growth should remain above nominal GDP.
“18% credit growth has to be viewed in the context of the base effect. Q1 of the previous year was a muted quarter. This was not limited to SBI; the entire banking system had muted credit growth in Q1 of the previous year. That is why we have given guidance anchored to the bank’s nominal GDP expectations. We believe nominal GDP may be around 12-12.5%, and SBI has always grown 2-3% more than that. That is why we have given credit growth guidance of 14-15%.”
— C. S. Setty, Chairman
SBI highlighted strong visibility on corporate lending, with a substantial pipeline across term loans, undisbursed sanctions and working-capital facilities.
“The pipeline is very strong. Overall, if you include term loans, undisbursed amounts, unutilized working capital, and the pipeline, it exceeds 9 lakh crores. There is a strong pipeline for corporate credit. As I explained, M&A is a very good opportunity, and we are seeing very strong interest.”
— Ashwini Kumar Tewari, Managing Director, Corporate Banking & Subsidiaries
SBI sees the newly opened M&A financing opportunity bringing in customers, including software companies that historically had little need to borrow from banks.
“Even in the mergers and acquisitions space, which is a newly opened space for us, we are seeing very good traction because everybody is consulting us and we see a lot of opportunity there, including in this space. It is opening up new segments and new classes of customers that we were previously unable to handle. For example, software companies never borrowed from us, but now they are borrowing from us because they want to acquire companies. They are borrowing from us for that purpose as well. I think there is significant opportunity available, and yes, we will set those benchmarks.”
— Ashwini Kumar Tewari, Managing Director, Corporate Banking & Subsidiaries
SBI believes India’s large investment requirements will require pension funds, mutual funds and insurers to become much larger providers of long-term capital.
“One of the constraints, as you pointed out, would be how we fund this requirement and where the capital pool will come from. This brings me to my favourite narrative: the shift in household savings that has taken place. Growth of 30 lakh crore cannot be funded by banks alone. One question is how many banks will actually enter the business of funding this capital expenditure. The other question is the capability of banks to fund this capital expenditure. Therefore, the overall funding structure has to change. As I mentioned earlier, if household savings are going to pension funds, mutual funds, and insurance companies, all of them will have to contribute to this capital expenditure in one form or another.”
— C. S. Setty, Chairman
SBI sees securitisation as a way to recycle large illiquid loan books and create additional capacity to fund India’s investment cycle.
“Many of us have illiquid asset portfolios on our books. Take home loans, for instance. I mentioned earlier, and I am reiterating, that the overall system has 34 lakh crore or even more in home loans. This is an absolutely illiquid home loan portfolio. Therefore, we need to consider whether securitisation structures can be introduced. However, if securitisation structures are introduced, they will not work unless there is participation from non-banks. We are consciously working as a market leader to introduce those structures and help the funding capability in the system grow.”
— C. S. Setty, Chairman
The bank is repricing parts of its corporate portfolio away from T-bill-linked loans toward MCLR and is prepared to let customers leave rather than compromise on pricing.
“On the corporate side, we did mention that there has been significant growth in T-bill-linked pricing. What we see on the corporate side is a combination of moving part of that portfolio to MCLR and, in the process, some customers who were not willing to pay MCLR looking for alternatives. However, T-bill pricing itself has largely been renegotiated in many cases, improving the yield. This is still a work in progress; the transition is not complete. However, there is general awareness, both among our teams and our customers, regarding our pricing expectations. Growth will probably be based on these expectations.”
— C. S. Setty, Chairman
SBI said corporate borrowers are switching much faster between bank loans and capital markets, making CP and NCD yields increasingly important for bank pricing.
“On the corporate side, pricing will be determined less by the available liquidity and more by what happens in the market. One of our DMDs mentioned that the shift from market to bank and bank to market is now very fast. Earlier, there used to be a lag. When market prices, bond rates, and CP rates increased, customers took a long time to return to banks. Now, they seem to be reallocating quickly. Therefore, I believe corporate pricing will be determined more by CP rates and NCD rates, which in turn will be determined by liquidity in the system. There could be some moderation. As I mentioned at the beginning, as far as SBI is concerned, we have communicated our pricing expectations. I do not think we will deviate significantly from that path.”
— C. S. Setty, Chairman
Despite changing liquidity conditions and FCNR(B) mobilisation, SBI retained its full-year domestic NIM guidance.
“Regarding the margin outlook, I still maintain that I am not going to give you a quarterly outlook. We are sticking to the full-year outlook of 3% that I mentioned at the beginning of my speech.”
— C. S. Setty, Chairman
SBI said it is unwilling to chase expensive wholesale deposits simply to report stronger deposit growth.
“Deposit growth has to be viewed through the lens of the liquidity available to us. Deposits have become extremely competitive, and wholesale deposit rates have increased significantly, which is not a rate that we are willing to pay.”
— C. S. Setty, Chairman
SBI highlighted the strength of its retail liability franchise despite industry-wide pressure on CASA deposits.
“Our retail franchise is performing extremely well. If you look at our retail term deposit growth, it is 14%. It continues to be 14%. Even in the last quarter, we recorded 14% deposit growth in retail term deposits. More notably, Savings Bank, with a base of 17.5 lakh crore, has grown by 10%. While the entire industry is struggling with CASA, we are probably an exception, having posted a 10% CASA growth rate.”
— C. S. Setty, Chairman
The bank said its large liquidity buffer allows it to treat bulk deposits as a tactical treasury decision rather than a structural funding requirement.
“We also have very significant liquidity on our balance sheet. As of June 30, we had excess SLR of 3.06 lakh crore. As we speak, also contributed by the FCNR(B) flows, we have excess SLR of 4 lakh crores. This means that we strongly believe, as I mentioned earlier, that bulk deposits are a treasury activity.”
— C. S. Setty, Chairman
SBI expects the overseas portfolio to be remixed toward FCNR(B)-linked deployment without materially diluting group or domestic NIM.
“What the foreign offices are doing is that, if they are funding FCNR(B) by providing leverage, they are reducing trade finance. The margins are equivalent, or sometimes the margin on supply chain finance is much lower than what they are earning on FCNR(B). Therefore, overall, I do not think there is any impact either on the whole-bank NIM or on domestic NIM.”
— C. S. Setty, Chairman
SBI sees fee income as an underpenetrated earnings stream and believes it can meaningfully increase its contribution.
“We still have a long way to go compared with many banks. Fee income as a percentage of overall income is still just about 15%. We definitely have the potential to take it up to 20%. Therefore, our focus on fee income continues. All the sub-themes in this area, whether loan processing charges, government business, or CV activity, are being focused on. Every area is being addressed.”
— C. S. Setty, Chairman
SBI disclosed the scale of its gold loan franchise across personal and agricultural lending.
“Our personal gold loans are of the order of 1.25 trillion. Our agricultural gold loans are of the order of 1.85 trillion. Together, we crossed the 3.1 trillion mark as of June.”
— Ram Mohan Rao Amara, Managing Director, Retail Business & Operations
The bank explained why it is aggressively growing gold loans despite yields being lower than some competitors.
“I also believe that gold loan growth needs to be viewed from an opportunistic perspective. This is not our core portfolio. There is a growth opportunity today, there is no capital allocation requirement, and the risk weight is virtually zero. From that perspective, it is ROE-accretive, with a small compromise on margins. It is also a safe portfolio.”
— C. S. Setty, Chairman
SBI said its larger average ticket size and conservative LTV make price a key customer proposition, limiting its appetite for aggressive repricing.
“Our loan-to-value ratio is less than 55-56%. With this combination of factors, the people who come to us are essentially coming for the price. Therefore, we will never move into double-digit territory there.”
— C. S. Setty, Chairman
SBI attributed slower growth in unsecured personal loans partly to existing customers shifting toward cheaper gold-backed borrowing.
“Coming to Express Credit, we are seeing a good amount of sourcing and disbursements in the current quarter and in the quarter that we have just completed. However, it is not moving into double-digit territory because of gold loans. Many of our regular Express Credit customers are opting for gold loans. There is an interest rate arbitrage of almost 3%. As the gold loan growth slows down, some movement will take place toward Express Credit.”
— C. S. Setty, Chairman
SBI plans to integrate analytics and AI with its physical distribution network to create a more sophisticated collection ecosystem.
“We are extensively using our analytical and AI capabilities to develop models and combine feet on the street, the branch network, and the contact centre to create a collection ecosystem. This will help us expand into the product range you are referring to. We have the products; we need to deepen them.”
— C. S. Setty, Chairman
SBI expects to disclose a more precise ECL assessment with Q2 results but believes capital augmentation and regulatory transition relief should contain the impact.
“The correct approach would be to provide the numbers when we meet again for Q2. However, I can give you one assurance: it will not have any major impact for two reasons. First, we will have some capital augmentation from the mutual fund and, hopefully, from the other major divestment that we are planning. We also intend to use the regulatory dispensation for the transition, which means that the annual impact on CRAR would be lower.”
— C. S. Setty, Chairman
Despite fresh slippages rising to roughly ₹7,000 crore, SBI said Q1 seasonality and subsequent recoveries suggest no deterioration in underlying asset quality.
“Regarding gross and net NPAs and fresh slippages, I think we should not really be worried about this. Just to give you a number, fresh slippages are normally higher in Q1. You should compare Q1 of last year with this quarter. Of the 7,000 crores of slippages we had, as we speak, we have pulled back almost 1,450 or 1,500 crores. So there is no concern on the gross NPA, net NPA, or SMA front.”
— C. S. Setty, Chairman
Government current-account balances are structurally declining, but SBI is offsetting this through significantly stronger penetration among non-government customers.
“We have been one of the largest holders of government current account balances, but those balances are drying up. Still, we are maintaining our share of the current account market because our penetration in the non-government segment is increasing significantly. The non-government segment has grown by 14%. I think we are doing fairly well. We can do much better, but overall current account balances in the system are going to decline.”
— C. S. Setty, Chairman
Logistics
Delhivery | Large Cap | Logistics
Delhivery is India’s largest fully integrated logistics service provider, specialising in express parcel delivery, freight, and supply chain solutions. The company utilises a proprietary technology stack and extensive automated infrastructure to serve thousands of e-commerce and B2B customers across the country.
[Concall]
The increase in freight pricing is largely driven by internal efficiency gains rather than just passing on higher fuel costs. This organic yield growth is a positive sign for the long-term margin potential of the freight division.
“On PTL yields, this is not a seasonal improvement in yields at all. It is a planned and delivered improvement in yields. We have been saying for several years that, as the quality of the network continues to improve and our relative scale continues to improve, our ability to generate higher yields will also improve. Of course, part of the improvement is linked to fuel pass-throughs, but I think we have seen something like a 37-paisa improvement in yield, of which only about 6 paisa is coming from fuel inflation. Most of it is simply organic improvement in yield. There is no reason to believe that this will not be sustainable, and it is across all distances.”
— Sahil Barua, MD & CEO
Delhivery is launching a financial services arm to help its truck partners get financing without using its own cash to make loans. By helping partners grow their fleets, the company secures a more reliable supply of transport while keeping its own balance sheet light.
“Our intention is not to lend heavily from the Delhivery balance sheet at all. We have a number of high-quality lending partners with whom we intend to work, and discussions are already underway. The logic is that Delhivery understands and knows both the demand side and the supply side, and therefore the information we have is valuable. The second part is that, to some extent, we are underwriting the demand that the supply side of the fleet owners is expected to serve. Fundamentally, we do not anticipate having to allocate significant capital ourselves for lending. The idea for Delhivery is to facilitate fleet owners in obtaining both insurance and fleet financing and in expanding their fleets. The benefit to us, of course, is that a larger pool of supply ultimately becomes a more stable pool of supply for us as we grow and also reduces our cost of service over time.”
— Sahil Barua, MD & CEO
Rising minimum wages are currently a bigger threat to margins than fuel costs because they cannot be automatically passed on to customers via contracts. This suggests that the company must rely on price negotiations or productivity gains to offset these rising labour expenses.
“Minimum wages would be expected to have a larger impact because there is no contractual pass-through clause for minimum wages. To some extent, in this quarter the contractual pass-through of fuel rates provided some cushion against cost increases and therefore some margin protection. The full benefit will be visible in the second quarter. For minimum wages, there is no such contractual clause. Therefore, yes, the impact would be larger.”
— Vivek, CFO
Management believes they can eventually pass on higher labour costs to customers because these wage hikes affect the entire compliant logistics industry. This provides some confidence that the current margin pressure from wages is a timing issue rather than a permanent loss.
On wage costs, the reality is both yes and no. Wage costs do not have the same contractual structure as fuel costs... Fundamentally, when wage changes are as dramatic as they have been, the increase does get passed on. It is not as difficult a discussion with customers as you might think, because when the minimum wage rises, it is a statutory wage increase. Unless a shipper is specifically deciding to work with a non-compliant partner—which large and meaningful shippers generally are not willing to do, because they ultimately want their goods to be delivered safely and through a reliable network—the reality is that this inflation is borne by all service providers. Therefore, it is not really as difficult a negotiation.”
— Sahil Barua, MD & CEO
Delhivery is avoiding the hype of 15-minute consumer delivery, viewing it as a low-margin commodity service that will eventually be taken in-house by platforms. Instead, they are focusing on the more profitable backend logistics of moving goods into the warehouses that feed these quick-commerce networks.
“As long as quick commerce continues to grow, there will obviously be a significant challenge in getting goods to mother warehouses and dark stores on time. Ensuring that this happens reliably is where Delhivery will participate. We have stayed away from 2 specific parts of quick commerce, as I have pointed out before. We do not run dark stores for quick-commerce players... We also do not deliver from dark stores to consumers... Similarly, we do not view last-mile delivery in quick commerce as a differentiated capability. I think that is something the quick-commerce players will ultimately keep captive, and they will reduce rates over time. We have seen this happen, for example, in food delivery, where the outsourced percentage is fairly small. We think the same thing will happen, and we have stayed away.”
— Sahil Barua, MD & CEO
The company is using real-time software to decide which packages to accept and how to route them through the network for maximum profit. This level of automated decision-making is presented as a key barrier to entry that competitors will struggle to match.
“Even from a software standpoint, a lot of the company’s focus has been on establishing these kinds of serviceability rules and making them more intelligent over time. This involves determining the right node from which to deliver a specific form factor... Our belief is that these systems create value that is very difficult to replicate. These are difficult decisions to make, even offline, and they become particularly complex in real time. Over time, we have matured our systems to the point where many of these decisions are now made in real time. Which packages do we accept? Which packages do we not accept? Which packages go to which type of location? What is the right architecture? As I mentioned, we have been withdrawing freight backwards into the network.”
— Sahil Barua, MD & CEO
Retail
Titan Company Ltd. | Large Cap | Gems, Jewellery & Watches
Titan Company Ltd. is an Indian luxury goods manufacturer that leads the domestic market in jewellery, watches, and eyewear. It operates prominent brands such as Tanishq, Fastrack, and Titan Eye+, serving a wide range of consumer segments through its extensive retail network.
[Concall]
The Damas acquisition is currently facing losses due to geopolitical conflict reducing consumer spending in the Middle East. While this segment is under pressure, the rest of the international portfolio remains profitable and is expected to stay in the green.
“You are right that the core business was not loss-making. However, given the current situation of the war, purchasing jewellery in Dubai, Saudi Arabia, and other countries is the last priority for anyone there. Footfall has fallen, ticket size has fallen, and if a business that was operating at a certain level declines by 20-30% from that level, it will end up making a loss. I would say that the rest of our international business portfolio, excluding Damas, is making a profit with a mid-single-digit EBIT margin, say 6%, and that should continue. Overall, Damas’ contribution to the international business will not be very high. Therefore, I would expect the overall portfolio to still deliver a positive EBIT performance for the full year. Damas’ performance is contingent upon the current situation. As soon as that situation ends, I am sure it will also improve quite rapidly.”
— Ashok, CFO
Titan is using product innovation, such as lower-caratage jewellery, to protect its margins against high gold costs. A shift away from low-margin gold coins toward higher-margin jewellery pieces is expected to support overall profitability.
“There are also various things happening in the system. We had discussed the acceptability of lower-caratage jewellery and the introduction of lower-caratage jewellery, which generally has a positive impact on margin. Various initiatives are being undertaken, and as we move forward, if gold prices stabilise, the product mix may also improve. The overall product mix, in which coins used to have a slightly higher share, may start shifting down, and we are seeing signs of that. All of this can result in a margin closer to that number. That is our belief at this point, and that is why we are saying that we are very hopeful of delivering something around that number on a full-year basis.”
— Ashish, Management Team
Customers are increasingly shifting toward the Riva Golden Advantage scheme as a way to hedge against volatile gold prices. This shift demonstrates the company’s success in using financial products to stabilise consumer demand during price uncertainty.
“On a value basis, we are tracking, but I would say that we started the Golden Harvest program many years ago, and then 2-3 years ago we added Golden Advantage. What is really happening is the dynamic between the two. We are seeing more customers prefer Riva Golden Advantage because it helps with rupee-cost averaging. We are seeing a shift in preference from Golden Harvest to Riva Golden Advantage, which is good for the customer. It was also introduced to solve the problem of gold rates either increasing or moving up and down. That is the dynamic playing out.”
— Ajoy Chawla, Managing Director
Management reports that the disruptive narrative of lab-grown diamonds vs. natural diamonds is fading as both products find their own niches. Stable pricing in the natural diamond segment is helping to maintain consumer confidence in premium jewellery.
“Regarding natural-diamond prices specifically in India, we have seen greater stability in pricing, perhaps, for both solitaires and small diamonds. At the retail end also, we have kept prices stable for both. I think the intent of your question may be how this is playing out relative to lab-grown diamonds and how the narrative is playing out in the customer’s mind. At the market level, it has stabilised. The narrative that was previously very prominent around lab-grown versus natural diamonds has declined substantially. Both exist in the market. Pricing is stable, and the narrative and sentiment are also stable.”
— Ajoy Chawla, Managing Director
Titan remains focused on capturing a larger share of the unorganised market and expanding its presence in tier-2 and tier-3 cities. The combination of market formalisation and a diverse product portfolio across various price points underpins their aggressive long-term growth outlook.
“The larger point I would like to direct everyone’s attention to is that the headroom for growth across all our businesses is very high. This is partly because of the tailwinds from formalisation, largely because of India’s growth story, and because of the opportunity in Middle India and our multiple-segment portfolio. This is true for jewellery, eye care, watches, fragrances, bags, sarees, and all our businesses. We have headroom both to gain market share and to benefit from India doing well, the inclusion of multiple segments in the consumption basket, and the premiumization story. These are the 5, 6, or 7 forces that we discussed when we met. Specifically on jewellery, I would reiterate that our growth drivers include gaining market share through regionalisation, high-value studded jewellery, retail transformation, brand differentiation, portfolio play, and core growth in both studded and gold jewellery in the sub-50,000 and sub-1 lakh price points through buyer growth.”
— Ajoy Chawla, Managing Director
Engineering & Capital Goods
Hitachi Energy India Ltd. | Large Cap | Heavy Electrical Equipment
Hitachi Energy India is a global leader in power technologies, providing integrated solutions for transmission, distribution, and grid modernisation. The company focuses on enabling sustainable energy transition through high-voltage products, grid automation, and power quality systems across utility and industrial sectors.
[Concall]
India’s power infrastructure is entering a multi-year growth phase, supported by investments in transmission, renewable energy, grid modernisation, urbanisation and digital infrastructure. This gives the company a structural growth runway beyond near-term geopolitical volatility.
“Despite the geopolitical challenges that the country continues to deal with, the underlying fundamentals of our business remain exceptionally strong. India continues to witness unprecedented investments in transmission infrastructure, renewable energy integration and deployment, grid modernisation and resilience, urbanisation, and digital infrastructure. These long-term structural drivers continue to create significant and sustainable growth opportunities for our industry.”
— N Venu, MD & CEO
Order intake grew strongly in Q1, with new wins across battery storage, wind evacuation, solar infrastructure and data centres. The diversification into these newer segments broadens the company’s growth opportunity beyond traditional transmission projects.
“Order intake in Q1 increased by 26.1% year-on-year and 39% quarter-on-quarter. This growth was driven by several notable wins across key sectors. Among these, I would like to highlight Hitachi Energy India’s first Battery Energy Storage System project, a 2-gigawatt wind power evacuation project in Europe, which is part of a 2-gigawatt wind power evacuation program, and the supply of GIS and AIS solutions for a 100-gigawatt solar park in India. In addition, we secured multiple data centre orders from a hyperscaler during the quarter.”
— N Venu, MD & CEO
Profitability improved sharply, with EBITDA margins expanding despite an unrealised forex loss. This points to stronger operating leverage as execution scales up.
“Profit before tax grew by 120% to 389.5 crores, representing a margin of 15.6%. On a year-on-year basis, the margin was 12%. Profit after tax was 11.8%, compared with 8.9% earlier. Operational EBITDA was 399 crores, representing a margin of 16%, compared with 11.5% on a year-on-year basis. It is important to note that this EBITDA performance includes an unrealised foreign exchange loss of 36.37 crores, which was recorded in this quarter.”
— Ajay Singh, CFO
Revenue from large HVDC projects is still building up, with execution expected to accelerate from the second and third years. This means the current financials do not yet fully reflect the scale of the existing HVDC backlog.
“If you have been following us, we have been telling you that in the first year, revenue and execution will be slightly on the lower side, and then they will pick up from the second and third years. That is what we have been saying. Therefore, not all of the HVDC revenue has been shown, or it is not all reflected in this particular quarter. That much we can say. However, it is picking up.”
— Management, Executive Team
Battery energy storage is expected to become a scalable growth opportunity as the technology matures and localisation improves. The addition of digital monitoring and services could also create an additional revenue stream.
“Right now, the margin profile is affected by the fact that this technology needs to mature, and we also need to undertake significant localisation. Over a period of time, these margins will become similar to the margins we have in the rest of the business. The key point is that this is a scalable version that is easy to fit and easy to deploy. There is significant revenue potential going forward because we add a substantial digital layer to the solution, enabling us to monitor the system and provide digital services going forward.”
— Management, Executive Team
The company is increasing local manufacturing and component localisation to improve competitiveness and build an end-to-end supply chain. The new capex is therefore aimed at both capacity expansion and greater control over costs.
“The whole idea is that we will continue to localise more and more components and create an end-to-end manufacturing scenario over a period of time. That is the intention behind undertaking this capex.”
— N Venu, MD & CEO
A high percentage of the company’s order book (70%) is protected by price-variation clauses, mitigating the risk of raw material inflation. This structural protection is critical for preserving margins in long-duration infrastructure projects.
“At the moment, we do not see any material impact. Most of the contracts we have discussed, approximately 70%, have a variable clause. Overall, in this quarter, there was no commodity impact as such. Even where there was a small impact, it was managed. At this point in time, we do not have the details, and we also do not want to share the segment-wise quantum.”
— N Venu, MD & CEO
Defence
Apollo Micro Systems | Small Cap | Defence
Apollo Micro Systems Limited is an engineering company that specialises in designing and manufacturing high-performance solutions for Defence, Space, and Homeland Security sectors. They offer custom solutions using common technology IPs, allowing for re-configuration to meet specific customer requirements.
[Concall]
Apollo reiterated its strong growth outlook, expecting both standalone and consolidated revenues to continue expanding at 40–45% from FY27 onwards.
“Regarding the guidance, we have been giving guidance earlier, and we continue to stand by the same guidance as far as growth is concerned. We expect continued growth of somewhere between 40% and 45% from this financial year onwards. For the next financial year, we will give you separate guidance at the end of this financial year.”
— Management, Apollo Micro Systems
Apollo expects a purchase order for the MIGM programme around December–January and believes it could secure about 70% of the overall ₹3,800 crore opportunity.
“The DAC approval has come for MIGM. We are expecting a call from the Indian Navy next month. In fact, we are already discussing it. Before floating the enquiry, they will discuss it with Apollo and BDL. After that, they are going to float the enquiry. Perhaps, by the end of next month, they are going to float the enquiry. We are expecting the order by December or January; we expect the purchase order by then. As you know, the total budget is around 3,800 crores. It is also good that they are accepting a 20% advance payment in this order. This is definitely a very good encouragement for our company. We are expecting a 70% share of the MIGM order, based on the 3,800 crores.”
— Karunakar Reddy Baddem, Managing Director
Apollo expects the MIGM programme to cover approximately 1,000 units, with execution spread across three years.
“Yes. We are expecting it over 3 years. They are expecting 1,000 units.”
— Karunakar Reddy Baddem, Managing Director
From the current consolidated order book of roughly ₹1,700 crore, Apollo expects a single ₹2,500–3,000 crore-plus order to potentially lift its order book substantially by year-end.
“As far as we are concerned, the current order book stands at around 1,700 crores. By the end of this financial year, we are expecting a single order of more than 2,500-3,000 crores, which could cumulatively bring our order book to approximately 3,500-4,000 crores on a consolidated basis. This is the guidance that we can give based on the new AON that has already been accorded. It is already in the news.”
— Krishna Sai Kumar Addepalli, Whole-time Director, Operations
Beyond MIGM, Apollo expects multiple bulk-production programmes to progress during FY27, including QR SAM, Akash NG and Pinaka.
“We are expecting QR SAM as one opportunity, and the Ministry of Defence has already cleared around 1,000 units of Akash NG. Another opportunity is Pinaka, where the Ministry of Defence is going to place orders with 2-3 vendors for 2,000 units. Pinaka is also an opportunity. I am talking only about bulk production; I am not quoting small items here. We are expecting all these opportunities during this financial year. We are expecting QR SAM and MRSAM orders during this financial year, before the end of this financial year. We are also partly expecting Pinaka orders.”
— Management, Apollo Micro Systems
Apollo sees Premier Explosives as both backward and forward integration, allowing it to move beyond weapon electronics toward manufacturing complete weapons.
“As you rightly understood and pointed out, the acquisition of Premier is primarily a part of our backward integration as well as forward integration. We have been quite vocal all the time that we have a very strong presence in weapon-system electronics and that we are part of every indigenous weapon of the country. We are also developing our own independent rockets, both guided and unguided rockets. For these systems, we already have a very strong presence across the entire range of weapon-system electronics technologies, from the fuze part to the seeker part and to the actuation of the fin. As far as propulsion systems are concerned, Premier is very strong in both space applications as well as weapon applications. This partnership would enable us to move towards the journey of making a complete weapon by ourselves without having any interdependence with any other company.”
— Management, Apollo Micro Systems
Premier’s propulsion and explosives capabilities could allow Apollo to take prime-OEM responsibility rather than remain predominantly a subsystem supplier.
“At the same time, it is also going to bring us a lot of synergy in terms of becoming a prime OEM for the weapons that we are developing in-house. That was the core objective, not only specifically in terms of missile programs but also various other ammunition programs, where we are very strong in fuzes and in engineering and other aspects. This partnership, by virtue of acquiring the holding in Premier, would make us an integrated defence platform company from the point of view of weapons, arms, and ammunition.”
— Management, Apollo Micro Systems
Apollo expects backward integration into explosives and propellants to improve economics versus outsourcing as consumption rises from FY28.
“As consumption starts, we will be able to provide more clarity from a margin point of view. However, compared to outsourcing, as the Managing Director has already said, there will definitely be an improvement because it will be in-house production for us, although it will be on an arm’s-length basis. Overall, from a margin-level point of view, compared to an outsourced basis, there will be an improvement with in-house production.”
— Management, Apollo Micro Systems
Apollo expects the restructuring of the loss-making IDL acquisition to take another few quarters, with new products, lower overheads and better margins aiding the turnaround.
“Broadly, various cost measures and overhead measures related to the post-acquisition integration of IDL into Apollo have already been undertaken, and we have been able to significantly reduce the multiple overheads associated with it. Going forward, we are also going to undertake a few more measures. This is an acquisition of a loss-making company, as you are all aware. The restructuring process is ongoing. We have already stated that it will take at least 3-4 quarters for us to bring it to the desired level. That is what we are working on, and we expect it to be fully positive from the next financial year.”
— Management, Apollo Micro Systems
Apollo currently has no export revenue, but expects Unit 3 commissioning to enable a more aggressive export push and sizeable orders next year.
“During this financial year, we are likely to receive some meaningful breakthrough orders. That is what I can broadly say. I will not be able to provide a firm commitment or guidance, but in the next financial year, there will definitely be sizeable orders, particularly from export opportunities. That is the current guidance I can confidently provide.”
— Management, Apollo Micro Systems
Apollo sees a potentially large opportunity in converting existing Air Force bombs into guided, range-extended precision weapons.
“The smart bomb that they are looking for needs to be made smart, with guidance and a range extension. We are familiar with this technology, and I am sure that very soon we are going to establish this technology. Once the Air Force is satisfied with the performance, I am sure there will be a requirement for good numbers. The Air Force has thousands of units in its inventory. Under the modernisation scheme, it wants to convert them into smart bombs. There is a very large requirement.”
— Management, Apollo Micro Systems
Autonomous platforms across land, air and sea are becoming a major strategic focus, supported by emerging commitments from the armed forces.
“Going forward, we will also be building a swarm of autonomous USVs. A new program is coming up, and activity has already started in the company for it. Going forward, in the autonomy area, during this financial year and the next financial year, the company will be investing heavily in the autonomy segment across land, air, and sea.
Now that PSO sanction orders and firm commitments are coming from the armed forces, we will also accelerate our internal development activity.”
— Krishna Sai Kumar Addepalli, Whole-time Director, Operations
Apollo believes the emerging autonomous defence opportunity is large enough to support multiple successful suppliers with sizeable order books.
“In terms of the size of the orders, the opportunity is extremely large. I am not commenting on it in detail at this stage, but I would like to say that even if 2 or 3 players enter the field and prove their mettle, everyone could still continue to enjoy orders worth several thousand crores.”
— Krishna Sai Kumar Addepalli, Whole-time Director, Operations
Premier may not be the end of Apollo’s inorganic expansion, with management indicating that additional acquisitions are already being evaluated.
“We are planning to acquire 2-3 companies. This may not be the right time to tell you. Once we sign memorandums of understanding with these companies, we will announce it.”
— Management, Apollo Micro Systems
The 150-km Kusha variant has completed testing, while longer-range versions are expected to undergo trials in the coming months.
“Converting this into an order may take 2-3 years, but I think it will definitely happen. The program is progressing on a fast track. Testing of the 150-kilometre version has been completed, and the 250-kilometer and 500-kilometer versions are also expected to undergo trials by DRDO over the next few months.”
— Management, Apollo Micro Systems
Apollo’s Make-2 anti-drone programme is approaching trials, after which management expects to have better visibility on the addressable opportunity.
“The size is very large. TAM is continuously and dynamically changing. I will be able to provide guidance around the quarter ending in December regarding the opportunity size that it could culminate into. Currently, the trials are scheduled for the next few months. Once the trials are complete, I will have more clarity and visibility, and I will definitely share it with you.”
— Management, Apollo Micro Systems
The overarching strategy is to combine Apollo’s electronics, guidance and control capabilities with explosives, propulsion, ammunition and autonomous platforms to address a much larger portion of the defence value chain.
“Taken together, these developments demonstrate the growing breadth of our capabilities across the Indian Air Force and the Indian Navy, with a strong entry into autonomous technology under the Make-2 category. As we expand into indigenous product development, autonomous systems, and precision defence technologies, we are building a broader technological portfolio that enables us to serve a larger role in India’s journey towards a stronger and more self-reliant defence ecosystem.”
— Management, Apollo Micro Systems
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Quotes in this newsletter were curated by Srusti, Shahid & Meher.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.