Pace Digitek Revenue Jumps, But Margins Dip on Project Mix

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AuthorAditi Singh|Published at:
Pace Digitek Revenue Jumps, But Margins Dip on Project Mix
Overview

Pace Digitek reported a strong 13.5% year-on-year revenue growth to ₹644.0 crore in Q3 FY2026. However, gross and EBITDA margins saw a decline due to a shift in project mix. The company is aggressively expanding its Battery Energy Storage Systems (BESS) capacity and order book, targeting significant contributions from this segment by FY2027.

Pace Digitek Sees Revenue Surge, Focus Shifts to BESS Amid Margin Squeeze

Pace Digitek Limited announced its third-quarter financial results for FY2026, showcasing robust revenue growth alongside a notable dip in profitability margins. The company posted a consolidated revenue from operations of ₹644.0 crore for the quarter ended December 31, 2025, marking a healthy 13.5% increase year-on-year and an impressive 20.7% jump quarter-on-quarter. This top-line performance signals strong demand for its services.

Financial Performance: Growth Amidst Margin Pressure

While revenue expanded, the company's profitability faced headwinds. Gross profit stood at ₹169.2 crore, but the gross margin contracted to 26.3%, down from 32.9% in the same quarter last year. Management attributed this decline primarily to a shift in the project mix, indicating a greater proportion of lower-margin projects being executed during the period. Employee expenses also saw a significant 44.5% year-on-year increase, driven by capacity building in the burgeoning energy sector.

Consequently, EBITDA for the quarter was ₹117.9 crore, translating to an EBITDA margin of 18.3%, a decrease from 21.4% in Q3 FY2025. The company noted that this was also impacted by the project mix and the ongoing execution phase of new projects. Despite these margin pressures, Profit After Tax (PAT) managed an 11.3% year-on-year growth, reaching ₹78.8 crore, with a PAT margin of 12.2%.

Over the first nine months of FY2026, revenue from operations stood at ₹1,544.5 crore, a figure the company stated was impacted by execution timing differences compared to the previous year.

Strategic Push into Energy Storage

The company is making substantial strategic investments in its Battery Energy Storage Systems (BESS) business, which is poised to be a key growth driver. The current order book for the energy segment stands at a significant ₹6,000 crore, with a target to expand it to ₹10,000 crore by March 2026. Pace Digitek has already delivered 400 MWh of BESS in Q3 FY2026, with 200 MWh commissioned and performing well.

To support this growth, BESS manufacturing capacity is slated to double to 5 GWh by March 2026 and further expand to 10 GWh by September 2026. Manufacturing of BESS containers will also commence by mid-April 2026. The company projects a strong FY2027, with an expected consolidated revenue target of ₹3,200 crore, significantly boosted by the BESS segment. Approximately 40% of the total BESS order book is anticipated for execution in FY2027.

Financial Health and Expansion Plans

Pace Digitek highlighted its comfortable financial position with low leverage, providing ample flexibility for its growth ambitions. The company is managing its working capital effectively, employing milestone-based billing across its segments. Finance costs have decreased year-on-year due to lower borrowing levels, though they are expected to rise as debt is taken on for new Built-Own-Operate (BOO) projects. The company has incorporated TransGreenX Energy Private Limited as a wholly-owned subsidiary to manage Special Purpose Vehicles (SPVs) under the BOO model, which holds a substantial order book of ₹3,250 crore.

Capex plans include significant investments in doubling BESS capacity to 10 GWh and for container fabrication. The company is also exploring export markets in Africa and the Middle East for its BESS products.

Outlook and Risks

Looking ahead, Pace Digitek appears well-positioned for sustained growth, backed by its substantial order book and expanding manufacturing capabilities in the BESS sector. The company aims to make Lineage Power a 100% subsidiary in the next financial year. Key risks for investors to monitor include the company's ability to manage project execution effectively amidst capacity building, and the potential for margin improvement as the project mix evolves. The increasing reliance on debt for BOO projects will also require careful oversight of finance costs and debt servicing.

Peer Comparison

Pace Digitek operates in dynamic sectors with several established players. Competitors in the energy storage and telecom infrastructure space include companies like Sterling and Wilson Renewable Energy, which also focuses on solar EPC, and Exicom Tele-Systems, a strong player in EV charging infrastructure and BESS. While Pace Digitek shows robust revenue growth, investors will be keen to see how its margin performance compares with peers as the BESS market matures and competitive pressures potentially increase. The company's strategic focus on BESS and the BOO model differentiates it, but execution will be key against well-funded rivals in a rapidly evolving energy landscape.

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