Don’t Trade in the Dark—Get Your Pre-Market Report Every Day.Join Now
Search stocks
Basilic Fly Studio Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤23rd Feb 26

Summary : Basilic Fly Studio shows strong India growth, strategic global expansion, and AI integration, despite short-term margin pressures from investments and persistent legacy receivables.

Management Perspective positive : Management consistently highlighted "strong business performance," "robust growth," and expressed confidence in their "strategic direction." They are "quite optimistic" about future growth and margin improvement, despite acknowledging challenges.

Concall Report Analysis & Insights

Business Overview

  1. Basilic Fly Studio, founded 2013, provides end-to-end visual effects services.
  2. Services span films, television series, web content, and commercials globally.
  3. Operates with an integrated delivery model across India, UK, France, and Canada.
  4. Acquired 70% stake in UK-based One of Us (OOU) in July 2024, enhancing capabilities.
  5. Serves premium clients including Netflix, Amazon, Disney, Sony, and Warner Bros.

Future Growth Prospects

  1. Achieved 2.1x revenue and 2.5x PAT growth for India standalone business.
  2. Added 12 new clients, serving 66 active clients across global regions.
  3. Investing in global business development teams and high-level VFX supervisors.
  4. Actively pitching for high-value projects, including with Amazon MGM.
  5. Scaling offshore capabilities in India, increasing headcount by 58 FTE.

Management Insights

  1. Delivered strong business performance and robust growth in Q3 and YTD FY26.
  2. Strategic initiatives are strengthening global leadership, client relationships, and technology adoption.
  3. Confident in strategic direction and committed to delivering sustainable value to stakeholders.
  4. India standalone business shows robust growth in revenue and margins.
  5. Transitioned to IndAS compliance smoothly and optimized infrastructure costs.

Signs of Skepticism

  1. Management did not provide a detailed breakup of one-time costs impacting margins.
  2. Receivables over 180 days persist, with full collection expected over two quarters.
  3. Specifics on future margin improvement are given as a range, not precise targets.
  4. Acknowledged difficulty in predicting revenue due to project-based nature, not standard billing.

Risk Factors

  1. Consolidated EBITDA and PAT margins shrunk for the quarter and YTD.
  2. Margin shrinkage attributed to strategic initiatives and one-off costs.
  3. Receivables over 180 days remain at Rs.53.05 crores as of March 2025.
  4. Collections impacted by European holidays and longer cycles for India business.
  5. Revenue predictability is challenging due to project-based work and deferments.

Good To Know

  1. Company listed on NSE SME in September 2023 with 287x oversubscription.
  2. Three projects (Mission: Impossible, Electric State, Shutter Bird) nominated for Academy Award.
  3. Successfully completed TPN, Apple, and Disney certifications and compliance audits.
  4. Transitioning to a hybrid infrastructure model by July 2026 for 50% cost reduction.
  5. 48% of Rs.85 crore QIP funds utilized, remaining for inorganic growth M&A.

Key Drivers

  1. New client wins drive growth.
  2. AI integration boosts efficiency.
  3. Offshore expansion reduces costs.
  4. M&A in advanced stages.

Key Analyst Discussions

Competitive Environment

  1. 85-90% of work is direct, with 10-15% subcontracted.
  2. Delivering full VFX work for major networks like Netflix, Amazon, and Warner Bros.
  3. Cross-selling from the OOU acquisition is contributing 8-10% of revenue.
  4. OOU was a vendor for offshoring work before acquisition, now exclusive.

Market Trends & Consumer Behavior

  1. Industry revival is driving robust growth and increased project wins.
  2. Company positioned as a "vendor of first choice" for production houses.
  3. VFX work cycle follows production, invoicing, and collection processes.
  4. European holidays impacted December collections, causing timing gaps.
  5. Studios are increasing working capital cycles due to higher demand.

Financial Highlights

  1. Margin dip due to annual appraisal, leadership hiring, severance costs, and IndAS conversion.
  2. Total OCI margin for YTD is 13%, would be 15.8% if one-offs are added back.
  3. Outstanding order book is Rs.200 crores, to be delivered from April 2025 to December 2026.
  4. Infrastructure cost optimization is expected to save Rs.5-15 crores annually.
  5. Employee cost as a percentage of revenue improved from 69.7% to 66.6%.

Product Composition

  1. Workforce is 65% on 3D and 35% on 2D (CGAV team).
  2. Implemented AI-enabled production platform and AI-assisted workflows.
  3. Delivering AI-generated product-based commercials for clients.
  4. Exploring M&A opportunities in North American market for experience/commercials.

Strategic Considerations

  1. Leadership hiring focuses on business development and high-level VFX supervisors.
  2. Offshoring headcount increased by 58 FTE, with gradual onsite reduction.
  3. Hybrid cloud solution (AWS + on-prem) aims for significant cost savings.
  4. Targeting 25-30% CAGR on top line and 1.5-2% margin improvement.
  5. Working on upcoming Disney movies and a major Warner Bros. TV series.