Onward Technologies stock rallies over 17% after robust Q4 FY25 performance

Shares of Onward Technologies Limited (NSE: ONWARDTEC; BSE: 517536) rose sharply by 17.42% on May 16, 2025, closing at ₹312.10 after opening at ₹271. The rally followed the company’s announcement of its Q4 and full-year FY25 results, which beat expectations across several key metrics. A notable 75.8% year-on-year jump in quarterly net profit, along with robust client activity and expanding engineering capabilities, triggered renewed investor interest.

More than 12 lakh shares changed hands during the session, significantly higher than the stock’s recent average volumes. This spike in activity suggests increased traction among both retail and institutional investors, particularly those targeting high-conviction bets in the smallcap IT and engineering R&D segments.

How Did Onward Technologies Perform in Q4 FY25?

The company posted revenue from operations of ₹127.3 crore for the March 2025 quarter, representing a 3.2% sequential and 7.5% year-on-year growth. The revenue uptick was matched by a sharp expansion in profitability. Onward Technologies reported EBITDA of ₹13.9 crore, a 44% YoY surge, with its EBITDA margin improving to 10.9%, up from 8.2% in the same quarter last year.

Net profit for the quarter stood at ₹10.6 crore, rising 58.6% YoY, while profit margins expanded by 269 basis points to 8.3%. Diluted earnings per share climbed to ₹4.6, up from ₹2.9 in Q4 FY24. Management attributed this operational performance to effective cost management, improved utilisation rates, and a growing revenue contribution from high-margin digital engineering and ER&D contracts.

What Do Full-Year FY25 Results Reveal About Onward Technologies’ Growth Trajectory?

On a full-year basis, Onward Technologies reported revenue from operations of ₹491.3 crore in FY25, a 4.0% increase over the previous year. However, the company saw a contraction in profitability, with EBITDA declining 14.4% to ₹44.7 crore. The EBITDA margin also narrowed to 9.1%, down from 11.1% in FY24.

Despite the margin compression, the company managed to maintain its revenue growth within the guided range, highlighting the resilience of its core digital engineering and outsourcing model. Net profit for FY25 was ₹27.1 crore, down 20.1% from the prior year. The decline was largely due to increased investments in talent acquisition and new-age technology capabilities, as well as higher offshore delivery capacity spending.

Which Sectors and Clients Are Driving Onward’s Performance?

Onward Technologies derives its strength from a well-diversified vertical mix. In FY25, its Industrial Equipment and Heavy Machinery (IE&HM) segment contributed 57% of total revenues, followed by Transportation and Mobility (T&M) at 38%, and Healthcare and Life Sciences (HCLS) at 4%.

The company maintained 80 active clients during the year, with its top 25 clients accounting for a significant 84% of total revenues. This concentration strategy appears to have worked in its favour, as deeper client engagements have translated into multi-year budgeting partnerships and larger deal sizes.

The latest commentary from Managing Director Jigar Mehta emphasized the company’s focus on advanced engineering and AI-powered capabilities. These initiatives, along with capacity ramp-up across its India-based delivery centers, are being positioned as critical levers for the next leg of growth.

Why Are Smallcap Investors and Funds Showing Renewed Interest?

The current rally in Onward Technologies’ stock is underpinned by broader optimism around Indian engineering R&D and digital transformation service providers. As OEMs and manufacturing companies globally increase their digital product budgets, players like Onward, with specialised ER&D capabilities and established offshore centers, stand to gain.

Analysts note that the improved EBITDA margins in Q4 FY25 and the sharp uptick in PAT suggest a turnaround in operational efficiency. The stock’s inclusion in multiple smallcap fund portfolios has further boosted momentum, with market chatter indicating fresh buying from domestic mutual funds and high net worth individuals (HNIs).

Additionally, the attrition rate for FY25 came in at 17.3% on a last twelve-month (LTM) basis, indicating a relatively stable talent pool—a critical metric in an industry plagued by high churn.

What Does Institutional Sentiment Suggest About ONWARDTEC’s Near-Term Outlook?

Institutional sentiment toward Onward Technologies appears to be turning positive, especially in light of the company’s better-than-expected margin recovery. The stock’s rally also coincides with a broader trend of capital rotation into niche technology and digital engineering firms that can deliver high-value outcomes with lean cost structures.

The firm’s commentary on ramping up AI capabilities and its continued investment in top client accounts aligns with institutional criteria for sustainable growth visibility. Moreover, the uptick in free cash flow generation, as implied by higher PAT margins and lower capital expenditure intensity, is an added tailwind.

While full-year earnings came in below FY24 levels, the Q4 rebound suggests that the worst of the margin pressures may be behind the company. Fund managers are also closely watching the company’s progress in scaling its healthcare and mobility verticals, where deal activity is projected to rise.

What Are the Growth Catalysts and Risks Going Forward?

Onward Technologies is entering FY26 with momentum on its side. The company’s emphasis on building long-term relationships with its top 50 customers and expanding its AI-centric engineering offerings is expected to create meaningful differentiation in a crowded midcap IT landscape.

With more clients outsourcing complex digital engineering functions, the company’s offshore capabilities could see higher utilisation, particularly across the IE&HM and T&M verticals. Growth is also likely to be supported by a growing demand for embedded systems design, automotive engineering, and connected products.

However, investors should also monitor key risks, including wage inflation in the Indian IT sector, delays in overseas enterprise tech budgets, and potential client concentration challenges. Any softness in macro demand from the U.S. or European manufacturing sector could impact deal ramp-ups in the second half of FY26.

Is Onward Technologies Share Price Rally Sustainable in 2025?

While the 17% single-day gain reflects strong market approval of the latest earnings print, sustainability will depend on how quickly the company can translate its AI and digital investments into top-line growth. Analysts are expected to revise earnings estimates based on the stronger Q4 show, but continued traction in FY26 is crucial for upward re-rating.

The stock remains attractively positioned within the Indian midcap digital engineering landscape, especially as investors pivot from traditional IT services to ER&D specialists with deep domain capabilities. Onward’s low-debt profile, strong offshore presence, and visible deal pipeline provide a constructive backdrop for medium-term appreciation.