Basilic Fly Studio Ltd Q1 FY26 Earnings Analysis

- Basilic Fly Studio expects strong growth in FY26 with revenues projected between INR 450 to 500 crores, up from INR 306 crores in FY25. - The VFX industry is poised for a strong recovery and expansion with a projected CAGR of 13% through 2027, reaching INR 147 billion. - The UK subsidiary's order book remains robust at around INR 290 crores as of May 2025, with a steady monthly delivery run rate of INR 35-40 crores. - Increased demand following industry events like the writer strike and large production budgets (e.g., Netflix's $18 billion spend in 2025) drive growth. - The company is investing in technology, offshoring work to India for cost arbitrage, and hiring senior talent to boost capacity and delivery. - Future volumes and margins are expected to improve due to more offshoring, technical integration, and higher resource utilization. - Growth opportunities also stem from planned technology advancements and AI lab initiatives to innovate and enhance production efficiency.

- The company expects consolidated revenue to reach INR 450-500 crores in FY26, driven by strong order books and industry recovery post-writer strike. - Margins are anticipated to improve by 2-3% due to increased offshoring work and completion of the first phase of tech integration. - PAT margins for the standalone business are expected to gradually increase with enhanced resource utilization and cost arbitrage from India. - UK subsidiary "One of Us" margins showed significant improvement, with further margin expansion expected as offshoring work grows. - Operating leverage is expected to improve as most employee hiring is complete, enabling better profitability even with limited employee cost increases. - Management is optimistic about continued margin improvement and expansion driven by technology upgrades and integration of global delivery centers. - Future ROE (currently 28%) and ROCE (currently 23%) are expected to improve as top-line grows and operational efficiencies increase, though exact guidance will be shared later.

- Basilic Fly Studio is investing deeply in future-proofing technologies, including embedding smart workflows powered by real-time cloud collaboration, modular infrastructure, and AI-driven tools. - The company plans to set up an AI lab in collaboration with teams in the UK and India, leveraging cross-border talent. - This AI lab initiative aligns with the UK-India trade agreement to benefit from R&D incentives while driving innovation in VFX and production technology. - There's a focus on technological upskilling and integration to enable more offshoring work, improve margins, and enhance delivery capabilities. - No immediate plans for large acquisitions, but the management remains open to attractive partnership or acquisition opportunities as part of their inorganic growth strategy. - Capital investment is clearly geared towards technology upgrades, talent enhancement, and expanding global operational capabilities.

- There is no immediate plan for fundraising this year as per management. - The company is open to exploring fundraising opportunities as and when the right opportunity arises. - They aim to maintain a balanced approach between investments and fundraising. - No specific debt or equity issuance has been announced or planned at present. - The management will consider fundraising based on future strategic needs and market conditions.

- As of the end of January 2025, the UK subsidiary's order book was around ₹300 crores. - By the end of May 2025, 55% (₹165 crores) of that order book was successfully executed. - Out of ₹165 crores executed, ₹110 crores (37%) were accounted for by March 2025. - As of May 2025, the refreshed order book stands close to ₹290 crores for the UK subsidiary, including old and new wins. - The order book is scheduled for delivery mostly between July to September 2025, with some portions extending into Q1 and Q3 of 2026. - The company is actively winning new orders with several big deals in the pipeline. - The management expects FY26 to be a landmark year with a growing order book due to increased industry demand and production spend.