Zen Technologies Share Price Drop: What Led to the Massive Decline

Zen Technologies witnessed a significant slump in its share price, plunging over 17% in early trade on Monday following the announcement of its Q3 FY25 financial results. Zen Technologies shares were down to ₹1,111.30, a 17.63% decline on BSE, reflecting investor concerns over the company's weakening performance in the last quarter.

The defence technology firm, known for its expertise in drone manufacturing, reported a net profit of ₹38.62 crore, marking a 22% YoY growth from ₹31.67 crore in Q3 FY24. However, net profit slumped 40.8% sequentially from ₹65.24 crore in the previous quarter, primarily due to declining revenues and reduced margins.

Market Performance: Revenue, EBITDA, and Profit Decline

Revenue Trends: Sharp Decline in Sequential Performance

• Revenue in Q3 FY25 stood at ₹141.52 crore, a 44% YoY increase from ₹98.08 crore in Q3 FY24.
• However, on a quarter-on-quarter (QoQ) basis, revenue dropped 41.44% from ₹241.69 crore in Q2 FY25, raising concerns about business volatility.

EBITDA Performance: Declining Margins

• EBITDA grew by 21% YoY, reaching ₹58.69 crore in Q3 FY25, compared to ₹48.41 crore in the corresponding quarter last year.
• But EBITDA dropped 33.18%, sequentially, from ₹87.84 crore in Q2 FY25.
• EBITDA margins fell to 35.90% from 47.34% YoY, though there was a slight improvement from 35.12% in Q2 FY25.

Net Profit Decline Raises Investor Concerns

• Zen Technologies' net profit in Q3 FY25 stood at ₹38.62 crore, a 22% YoY growth but a 40.8% sequential decline from ₹65.24 crore in Q2 FY25.
• The decline in net profit despite an increase in revenue year over year indicates that margin pressures and cost fluctuations are affecting overall earnings.

Zen Technologies CEO's Take on the Financial Results

Ashok Atluri, Chairman & Managing Director of Zen Technologies, acknowledged the fluctuations in quarterly earnings. He highlighted that the profit surge was primarily driven by higher other income while operational challenges persisted.

"In this quarter, we experienced a rise in profitability due to higher other income; however, we remain confident that we will achieve our EBITDA target of 35% and PAT margins of 25% by the end of the financial year.”

Regarding the order book, the CEO said, “Our order book remains robust at ₹816.91 crore as of December 2024, reflecting a healthy pipeline for the coming quarters."

Strategic Investments in UAVs & Robotics: Strengthening Defense Portfolio

Zen Technologies is aggressively expanding its defence capabilities through strategic investments in Vector Technics Private Ltd and Bhairav Robotics Private Ltd, announced on February 15. These acquisitions aim to boost the company's presence in UAV propulsion systems, robotics, and aerospace components.

Key Acquisitions and Their Impact

Vector Technics Private Ltd:

• Zen Technologies acquired a 51% controlling stake in Vector Technics. The company is a leading propulsion and power distribution solutions provider for drones and UAVs.
• With this acquisition, Zen Technologies can expand in the Aerospace Sector and build a strong position in the Global Drone Market.

Bhairav Robotics Private Ltd:

• Zen Technologies purchased a 45.33% stake in Bhairav Robotics, which will help bolster its expertise in defence robotics and autonomous weapon systems.
• Quadrupedal robotic technology and advanced autonomous weaponry is the specialisation of Bhairav Robotics, enhancing Zen's product portfolio for global defence markets.

Strategic Goals Behind the Acquisitions

• Enhance Zen Technologies' role in self-reliant defence manufacturing.
• Expand its market reach to international defence sectors.
• Strengthen UAV and autonomous weapon capabilities, positioning the company as a leader in cutting-edge military technologies.

Stock Market Reaction: How Investors Are Responding

Despite Zen Technologies' long-term growth plans, the market responded negatively to the drop in quarterly revenue and profit figures.

• Zen Technologies' stock was down 13.68% at ₹1,164.60 per share on the BSE at 9:20 AM on February 17.
• The stock hit an intraday low of ₹1,111.30, reflecting a 17.62% decline from the previous session.
• Investors appear cautious due to short-term earnings volatility despite the company's promising order book and strategic expansions.

Final Takeaway: What Does the Future Hold for Zen Technologies?

While Zen Technologies' YoY revenue and net profit growth indicate a positive long-term outlook, the sequential declines in revenue and profit have raised investor concerns. The company's strategic acquisitions in UAV propulsion and autonomous robotics strengthen its market position, but short-term financial volatility has impacted stock performance.

With an order book of ₹816.91 crore and ongoing expansion efforts, Zen Technologies remains a key player in India's defence technology sector. However, investors will closely monitor upcoming quarters to assess whether the company can stabilize its revenue and profit trajectory.