Paramount's MD blamed depreciation for the EBITDA miss. Then he was told it doesn't affect EBITDA.
Managing Director Ali Asgar Roshan Hararwala cited depreciation to explain a margin shortfall, then conceded the error when an analyst pointed out the mistake. The real issue is market volatility.
What's new
- FY27 revenue guided at ₹150-160 cr, a 25-33% increase from FY26's ~₹120 cr.
- EBITDA margins guided at 6-7% in H1FY27, improving to 8-10% in H2.
- MD stated maximum revenue potential of ₹250-300 cr at full capacity, with a long-term 14-15% EBITDA margin target.
Themes from the call
Guidance
Management guided for ₹150-160 cr revenue in FY27 and deferred meaningful margin recovery to FY28.
Execution
A ₹23-24 cr capex is targeting commercial production in H1FY27 to unlock 6,000-8,000 tons per annum capacity.
Credibility
The MD's initial EBITDA explanation revealed a fundamental misunderstanding of the metric, raising questions about the clarity of the margin walk.
Guidance watch
- FY27 revenue guided at ₹150-160 cr; EBITDA margins of 6-7% in H1, 8-10% in H2.
- Long-term target of 14-15% EBITDA margin on a ₹250-300 cr revenue base.
- Refused to guide on segment-level margins, quarterly P&L progression, or specific defense revenue timing.
Risk flags
- The MD's confusion about EBITDA mechanics suggests a lack of financial rigor in the margin explanation.
- FY27 margins remain compressed at 6-10%, with the 14-15% target deferred to an unspecified future.
- New capacity is targeting 6,000-8,000 tons annually, but commercial production is only in H1FY27 with clearer results in H2.
Key quotes
-
"The maximum revenue potential can reach between Rs 250-300 crore"
— Ali Asgar Roshan Hararwala, Managing Director -
"It looks difficult because as expansions are completed, depreciation will be much higher since the entire plant will be capitalized this year."
— Ali Asgar Roshan Hararwala, Managing Director -
"It does not play a role in EBITDA. However, due to volatility in the current market and rising manufacturing costs, we foresee some impact on margins."
— Ali Asgar Roshan Hararwala, Managing Director
The brief
Paramount Spec Forg's earnings call will be remembered for a basic accounting error. Managing Director Ali Asgar Roshan Hararwala initially blamed higher depreciation for the company's inability to hit a 14-15% EBITDA margin in FY27. An analyst pointed out that depreciation is excluded from EBITDA calculations. Hararwala conceded the mistake and pivoted to citing market volatility and rising manufacturing costs as the real pressure points.
The incident overshadowed the company's actual guidance. Paramount is guiding for ₹150-160 cr in FY27 revenue, a 25-33% jump from ₹120 cr in FY26. That growth is tied to a ₹23-24 cr capacity expansion adding a 10-ton hammer and a 2,000-ton press, which management says will unlock 6,000-8,000 tons of annual capacity. EBITDA margins are expected to stay thin at 6-7% in the first half, improving to 8-10% in the second.
The margin walk remains vague. Management says efficiency gains of 3-4% are underway and fixed costs will stay flat as volumes scale. The long-term target of 14-15% EBITDA margin on ₹250-300 cr revenue is presented as a given, but the path from 6-7% margins today is unquantified. The company also refused to provide segment-level margin guidance.
Beyond the numbers, the call raised a credibility question. The MD's initial confusion about EBITDA mechanics suggests the margin explanations may not be as rigorous as they sound. For investors, the 14-15% long-term target now carries a caveat: the person explaining it may not fully understand the metric.
Paramount's capacity expansion story is intact, but the MD's EBITDA stumble makes the margin guidance harder to trust.