What Went Wrong For Unimech in FY26?
Unimech Aerospace entered FY26 after revenue had grown from ₹100 crore in FY23 to ₹215 crore in FY24 and ₹242.93 crore in FY25. Management had initially targeted around 40% revenue growth for FY26. Instead, revenue from operations fell 1% to ₹240.49 crore, EBITDA declined 18% to ₹75.12 crore and PAT fell 24.17% to ₹63.28 crore.
The numbers show that the problem was not simply weaker aerospace demand. Unimech had expanded its manufacturing platform while customers were simultaneously slowing order pickups. Management said tariff uncertainty caused customers to delay order pickups, while the company was also entering new businesses that required qualification work and kept utilisation in the mid-50% range.
The result was a mismatch between the company’s expanded cost base and the revenue actually generated from it. Depreciation more than doubled to ₹26.26 crore from ₹10.56 crore, employee costs increased to ₹53.42 crore from ₹46.53 crore, and consolidated ROCE fell sharply from the previous year’s level. FY26 therefore exposed the financial cost of building capacity before its utilisation had caught up.
The Growth Story Broke Down And Operating Leverage Worked in Reverse
The scale of the miss becomes clearer when EBITDA is placed alongside revenue.
Revenue from operations declined only ₹2.44 crore year on year, from ₹242.93 crore to ₹240.49 crore. But EBITDA fell ₹16.94 crore, from ₹92.06 crore to ₹75.12 crore. That pushed the EBITDA margin from 37.9% to 31.2%.
The reason was the sharp increase in costs that did not fall when revenue stalled. Employee benefits rose ₹6.89 crore to ₹53.42 crore, while depreciation and amortisation increased ₹15.70 crore to ₹26.26 crore. Together, these two expenses increased by ₹22.59 crore in one year.
That is the clearest evidence of the capacity problem. Unimech was carrying substantially more fixed operating costs without generating substantially more revenue.
The company’s own FY26 annual report says it added two facilities, expanded its manufacturing footprint and ended the year with more than 150 CNC machines and installed capacity exceeding 6.8 lakh machine hours annually.
The issue, therefore, was not simply that management spent money on expansion. It was that the revenue base did not expand quickly enough to absorb the resulting depreciation and employee costs.
55% Utilisation Shows How Much Capacity Was Sitting Unused
The utilisation number makes this problem more tangible.
Management indicated that utilisation was around 55% during FY26, with newer businesses requiring qualification orders that did not efficiently utilise machines.
At 55% utilisation, roughly 45% of installed machine capacity was not being utilised. Against the annual-report disclosure of more than 6.8 lakh installed machine hours, that is a substantial amount of manufacturing headroom.
The economics can also be seen through the income statement. FY26 depreciation of ₹26.26 crore was ₹15.70 crore higher than FY25. Employee costs were another ₹6.89 crore higher. These two increases alone totalled ₹22.59 crore, compared with the ₹16.94 crore decline in EBITDA.
This means even a relatively small improvement in utilisation has potentially significant operating consequences because a large portion of the cost base is already in place. But that benefit will only appear if unused capacity converts into customer shipments rather than remaining tied up in qualification programmes.
The FY26 numbers therefore provide a more useful test of the expansion strategy: can Unimech move utilisation materially above the mid-50% range without another proportional increase in fixed costs?
Tariffs Hurt Through Customer Behaviour, Not Simply Through Higher Costs
The tariff explanation needs to be handled carefully because the available evidence is primarily management’s explanation rather than an independently quantified decomposition of lost revenue.
In November 2025, management explicitly said that customers were monitoring the tariff environment and delaying order pickup, resulting in slower revenue. The company later described FY26 revenue weakness as being primarily caused by slow customer order pickup during the tariff-affected year.
The quarterly pattern supports that explanation.
Q3 FY26 revenue from operations was only ₹33.7 crore, but Q4 revenue jumped to ₹81.8 crore, up 143% sequentially. EBITDA excluding other income increased from ₹1.5 crore to ₹35.2 crore over the same period. Management attributed the Q4 improvement to normalisation in customer ordering and execution of the order book.
That sequence is important. It does not prove that tariffs caused every rupee of the FY26 slowdown, but it does establish a documented chain:
tariff uncertainty → customers delayed order pickups → shipments slowed → FY26 revenue remained flat → Q4 recovery followed improved ordering behaviour.
That is stronger evidence than simply attributing the full-year decline to tariffs. To know more, check our latest video.
The Order Book Was Better Than Revenue, But Its Quality Matters
Unimech ended FY26 with an order book of approximately ₹214 crore, equivalent to about 89% of FY26 revenue.
More importantly, the composition had changed. Approximately ₹128 crore was in aero-tooling and ₹80 crore was in nuclear, with the balance in precision manufacturing. That means nearly 60% of the order book was aero-tooling and more than 37% was nuclear.
This is important because an order book is not automatically equivalent to near-term revenue. Aero-tooling orders can provide visibility, but nuclear programmes can have longer qualification and execution cycles. At the same time, Unimech had been adding capabilities in precision manufacturing and semiconductors where FY26 revenue contribution was still developing.
There was, however, evidence of improving order momentum after the year-end. Management reported a consolidated order book of approximately ₹314 crore by 26 May 2026, including Hobel, versus approximately ₹214 crore at FY26-end.
So the relevant question for FY27 is not simply whether the order book grows. It is whether ₹214 crore of FY26-end orders and the subsequent increase in bookings convert into quarterly revenue at a rate sufficient to lift utilisation and absorb the expanded cost base.
Other Income Made PAT Look Better Than Operating Profit
FY26 also requires a closer look at earnings quality.
Other income increased from ₹24.77 crore to ₹46.97 crore. Against consolidated PAT of ₹63.28 crore, other income was equivalent to 74.2% of reported PAT. It also represented 58.4% of profit before tax of ₹80.44 crore.
This does not mean the ₹46.97 crore was artificial. A substantial part came from interest income and investment-related gains on the company’s cash and financial investments. But these earnings do not have the same economic characteristics as revenue generated from manufacturing.
The cash-flow statement makes the distinction particularly useful. Consolidated cash flow from operations was ₹60.56 crore in FY26, compared with ₹81.41 crore in FY25. After ₹34.81 crore of property, plant and equipment expenditure, operating cash flow less reported PP&E capex was approximately ₹25.75 crore.
That is a much more revealing measure of FY26’s capital efficiency than PAT alone. The company remained cash-generative, but the cash generated by operations was below FY25 even as the manufacturing platform had become significantly larger.
The next phase therefore needs operating cash generation to rise alongside EBITDA, rather than relying on income from the company’s financial assets.
Capital Efficiency Took the Biggest Hit
The deterioration in capital efficiency was arguably the clearest financial consequence of FY26.
Unimech’s reported ROCE fell sharply from FY25 levels as the company added manufacturing assets ahead of revenue growth. Independent financial data puts FY26 ROCE at approximately 6.3%, versus 11.5% in FY25, while the company’s own earlier investor presentation had already shown ROCE falling to 6.5% in H1 FY26 as new capex was added.
The direction is consistent with the underlying numbers: higher depreciation, substantially more installed capacity and almost flat revenue.
This is why utilisation matters more than simply adding machines. If revenue rises while the asset base remains broadly stable, depreciation is spread across a larger revenue base and ROCE can recover quickly. If assets continue to rise faster than revenue, the opposite happens.
FY26 therefore created a measurable capital-efficiency test for the business: the next growth phase has to come increasingly from using the assets already installed, rather than continually adding assets ahead of demand.
Customer Concentration Amplified the Shock
Customer concentration made the order slowdown harder to absorb.
CRISIL’s FY25 assessment noted that more than 85% of revenue came from three large customers.
That concentration has two sides. In aerospace manufacturing, large customers can provide repeat programmes, long qualification cycles and potentially sticky relationships. But when procurement decisions change at a small number of customers, there are fewer alternative revenue streams to compensate immediately.
FY26 demonstrated that sensitivity. The company’s management explicitly linked slower revenue to delayed customer order pickups during the tariff-affected period. With such a concentrated customer base, procurement timing at a few accounts can have a disproportionate effect on annual revenue.
The important FY27 metric is therefore not simply the number of customers. Unimech reported more than 35 customers by FY26-end, but investors need to see whether new customers become meaningful revenue contributors rather than remaining at qualification or small-order stages.
CRISIL Added a Separate Investor-Confidence Issue
The CRISIL episode should be separated from the operating slowdown because it addresses a different question: information quality.
CRISIL migrated Unimech’s rating from A-/Positive to BB+/Stable with an “Issuer Not Cooperating” designation in November 2025 and subsequently withdrew the rating at the company’s request. CRISIL said it had not received the information required to take a forward-looking view of the company’s credit quality.
This does not establish that the operating business was weaker than reported. But it created an additional investor-confidence issue during a year when revenue, EBITDA and PAT were already declining.
For investors, the relevant test is now whether future financial disclosures, management commentary and operating performance provide enough evidence to reconcile the company’s growth claims with actual cash generation and capacity utilisation.
What Should Investors Watch in FY27?
FY27 should be judged against a much more concrete scorecard than simply “growth recovery.”
- Utilisation: The first threshold should be a move out of the mid-50% range. Sustained utilisation of 65% or higher, followed by progress towards 70%, would demonstrate that the existing manufacturing base is being absorbed more effectively.
- EBITDA: FY25 EBITDA was ₹92.06 crore. Getting back above that level would show that operating profitability has recovered beyond the pre-slowdown base rather than merely benefiting from a low FY26 comparison.
- Operating cash flow: FY26 CFO was ₹60.56 crore. A recovery should produce CFO comfortably above this level and increasingly close the gap between accounting profit and cash generation.
- Capital efficiency: FY26 ROCE was around the mid-single digits on third-party financial data. A return to at least the FY25 level of roughly 11% would demonstrate that the expanded asset base is beginning to earn an adequate return.
- Order conversion: The ₹214 crore FY26-end order book needs to translate into revenue rather than merely remain a headline number. Its conversion should be tracked alongside the newer ₹314 crore consolidated order book reported in May 2026, particularly because the latter includes Hobel.
These metrics would provide a much cleaner distinction between a temporary demand disruption and a structural utilisation problem.
Conclusion
Unimech’s FY26 problem was not simply that aerospace demand slowed. The financial statements show a more specific mismatch.
Revenue from operations fell only 1% to ₹240.49 crore, but EBITDA declined 18% to ₹75.12 crore because employee costs increased by ₹6.89 crore and depreciation rose by ₹15.70 crore. At the same time, management indicated utilisation was around 55%, leaving roughly 45% of installed machine capacity unused.
Operating cash flow fell to ₹60.56 crore from ₹81.41 crore, while FY26 ROCE deteriorated sharply as the asset base expanded faster than earnings. Other income of ₹46.97 crore also became equivalent to 74.2% of PAT, making operating earnings and cash generation more important measures of the underlying business.
There are signs that the situation began changing in Q4: revenue rose 143% sequentially and the order book reached ₹214 crore at year-end, before rising to approximately ₹314 crore by May 2026 including Hobel.
The FY27 question is therefore no longer whether Unimech has built enough capacity. It is whether that capacity can move from roughly 55% utilisation toward materially higher levels, convert the order book into revenue, restore EBITDA above ₹92.06 crore and generate operating cash flow and ROCE commensurate with the capital already invested.
