Elecon Engineering Company Ltd (ELECON) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to the Elecon Engineering Limited Q2 FY '27 earnings conference call, hosted by Elara Securities India Private Limited. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the management opening remarks. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Harshit Kapadia from Elara Securities India Private Limited. Thank you, and over to you, sir.
Harshit Kapadia (Elara Securities India Private Limited): Thank you, Ryan. Good evening, everyone. On behalf of Elara Securities, we welcome you all for the Q2 FY '27 and H1 FY '27 conference call of Elecon Engineering Limited. I take this opportunity to welcome the management of Elecon Engineering Limited represented by Prayasvin Patel, Chairman and Managing Director, Aayush Shah, Executive Director, Kamlesh
Harshit Kapadia (Elara Securities India Private Limited): Chief Financial Officer; Deepak Benani, Business Head, Gears; Kaushik Patel, Business Head, Material Handling Equipment. We will begin the call with a brief overview by the management followed by a Q&A session. I will now hand over the call to Prayasvin Sir for his opening remarks. Over to you, sir.
Prayasvin Patel (Elecon Engineering Company Ltd): Thank you, Harshit. Good evening, everyone, and welcome to Elecon Engineering's Q2 and H1 FY '27 earnings conference call. The earnings press release and investor presentation have been filed with the stock exchanges and are also available on our website. I will begin with the industry context, the operating environment, and our performance during the quarter. Chintan will then discuss our financial results in great detail after which we will take you through your questions. India's industrial outlook remains constructive, supported by public capital expenditure, infrastructure development and domestic manufacturing. Demand from cement and power together with the anticipated threefold expansion in the steel production capacity presents a substantial opportunity for the capital goods sector. Considering the industry research estimates, the Indian heavy-duty industrial gearbox market will grow at approximately 8% CAGR through FY '30. Key drivers include capacity creation, brownfield modernization and the need for efficient, reliable solutions. While global uncertainty, geopolitical developments and raw material volatility warrant continued vigilance, India's industrialization plans provide a strong and a durable foundation for long-term growth. At Elecon, our Gear and Material Handling Equipment divisions are distinct but complementary growth engines. Both serve critical industrial applications, and together they give us the scale, technical breadth and market access to convert structural demand into sustained business growth. Over more than seven decades, we have built a strong position in industrial gear solutions and material handling equipment. Our focus is clear: expand in overseas markets, deepen our domestic footprint, and execute with discipline, and convert opportunities into profitable revenue growth. We will continue to protect margins, strengthen earnings quality and allocate resources to areas where Elecon has a durable competitive advantage. Our MHE division is now establishing a meaningful international presence, securing orders worth approximately US$9 million during the first half. This outcome validates the strategic decisions and capability building initiatives undertaken in recent years. It also demonstrates that our engineering expertise is competitive in global markets and gives us confidence in the division's international growth roadmap. In the Gear division, Elecon continues to strengthen its leadership in India's organized industrial gear market. Our comprehensive product portfolio, deep application expertise and ability to manufacture customized high-precision solutions meeting DIN Class 2 standards for critical applications have enabled us to build enduring relationships across key industry sectors. Turning to the MHE division, we see an increasingly important growth engine supported by established engineering capabilities and leadership in bulk material handling. Our record in complex applications and demanding project environments is difficult to replicate. We we intend to build on this position by expanding in core industrial sectors
Prayasvin Patel (Elecon Engineering Company Ltd): improving execution. Moving to segment-wise performance, the gear division, which contributed approximately 76% consolidated revenue in Q2 FY '27, reported revenue of Rs 488 crore, representing year-on-year growth of 10.6%. This performance was led by 30.3% year-on-year growth in overseas markets, supported by stronger execution across international operations, and sustained demand from overseas customers. Domestic demand remained stable. The result reinforces the value of our international strategy and the strength of our execution capabilities. The MHE division regained momentum in Q2 FY '27, reporting revenue of Rs 151 crore with year-on-year growth of 10.4%. Execution improved progressively compared with Q1, while demand from steel, power, cement, fertilizers, and ports remained supportive. The division enters the second half with a clear execution agenda. Despite an uneven macroeconomic environment and delays in project execution clearances, our Q2 and H1 performance remained in line with expectations, with consolidated revenue growing by 11% in H1. This outcome reflects the resilience of our diversified portfolio across gear and MHE as well as growing contribution of international markets, which helped offset near-term softness in domestic activity. Our priorities for the second half are equally clear. We continue to build order pipeline and broaden our market footprint, maintain execution discipline, and sustain profitable growth to navigate through volatile market environment. Elecon's strategy for the long term is anchored in three priorities: extend our reach across markets and applications, expand our engineering capabilities, and execute consistently. Our investments in R&D technology and production development are directed towards practical customer outcomes, higher efficiency, reliability, and life-cycle value. This disciplined approach will broaden our addressable market, strengthen our competitive position, and create a scalable platform for sustained growth. With that, I will hand over to our CFO, Mr. Chintan Shah, who will take you through the Q2 and H1 FY '27 financial performance in greater detail. Over to you, Chintan.
Chintan Shah (Elecon Engineering Company Ltd): Thank you, sir. I will take you through Elecon's finance financial performance for Q2 FY '27 and the first half, along with the key operating drivers. The results reflect disciplined execution and the resilience of our business model. Before discussing our financial performance, I am pleased to share two important developments. The outlook for the company's long-term credit rating has been upgraded from AA-Stable to AA-Positive, while its short-term rating has been reaffirmed at A1-Positive. In addition, our lead banker has released collateral security for both fund-based and non-fund-based working capital limits, thereby removing the hypothecation of movable and immovable properties, including plant and machinery. Both the above developments reflect the continued strengthening of our balance sheet and our growth outlook. Coming back to financial performance for Q2 FY '27, revenue from operations increased 10.5% year-on-year to Rs 639 crores compared with Rs 578 crores in Q2 FY '26. When compared with revenue of Rs 521 crores in Q1 FY '27, your company has registered a growth of 22.7%. This reflects a clear acceleration in
Chintan Shah (Elecon Engineering Company Ltd): and an improved conversion across our businesses. Profitability strengthened faster than revenue. EBITDA increased 17.7% to Rs. 148 crores while EBITDA margin expanded by 140 basis points to 23.1%. Profit after tax grew 9.8% to Rs. 96 crores with PAT margin at 15.1%. Financial performance for H1 FY '27, for like-to-like assessment, H1 FY '26 revenue and EBITDA are adjusted for Rs. 25 crores of one-time arbitration settlement and income recorded in MHE. On this basis, H1 FY '27 revenue grew 11.1% year-on-year, demonstrating the underlying strength of our businesses. H1 EBITDA reached Rs. 257 crores, up 11.4% over adjusted H1 FY '26 EBITDA. EBITDA margin was sustained at 22.2% compared with 22.1% in the corresponding adjusted period. This consistency demonstrates our ability to protect profitability while supporting the growth. Profit after tax was Rs. 167 crores. Adjusted PAT increased 6.5%, excluding the after-tax impact of arbitration income and Rs. 80 crore net of tax unrealized mark-to-market gain from reclassification of investment in the prior period. Now let me take you all through our segment-wise performance. Beginning with Gear division. The Gear division delivered a strong Q2 with revenue increasing 10.6% year-on-year to Rs. 488 crores. H1 revenue reached Rs. 903 crores, representing growth of 13.1% with power remaining our high-contributing industry. Profitability improved decisively. Q2 EBIT rose to 27.2% to Rs. 108 crores and EBIT margin expanded by 290 basis points to 22.1%. H1 EBIT increased 21.8% to Rs. 182 crores with margin at 20.2%. This demonstrates the earning potential of disciplined execution. Q2 order intake was Rs. 493 crores, broadly stable year-on-year, while H1 order intake increased 8.8% to Rs. 1,063 crores. The open order book was Rs. 1,056 crores as of September 30, 2026. This is up by 37% year-on-year, providing strong H2 visibility. Power, steel and cement, our three largest contributing industries, remain supported by India's mid-term and long-term development priorities. With established technology, manufacturing depth and customer relationship, the Gear division is well-equipped to translate demand into sustained earning growth. Coming to Material Handling Equipment division. The MHE division delivered improved execution in Q2. Revenue increased 10.4% year-on-year to Rs. 151 crores from Rs. 137 crores. H1 revenue stood at Rs. 256 crores, up 4.5% over adjusted H1 FY '26. With improved clearances on the project, MHE has started scaling up the operations. We made tangible progress in Q2 and are positioned to accelerate through the remainder of H2 FY '27. Demand indicators are encouraging. Q2 order intake increased 32.5% to Rs. 253 crores. This includes overseas orders of Rs. 68 crores. H1 order intake rose 34.8% to Rs. 438 crores. The open order book reached to Rs. 579 crores as of September 30, up 27.3% year-on-year. This provides sound execution visibility. Now coming back to geographical mix. Our overseas business continued to build momentum. Q2 overseas revenue increased 30.6% year-on-year to Rs. 159 crores. H1 overseas revenue reached Rs. 309 crores with a growth of 26.2% year-on-year. Now overseas business contributes 27% of consolidated revenue compared with Rs. 245 crores in H1 FY '26. Balance sheet and capital allocation. Elecon's financial position remains a strategic strength. As of September 30, 2026, shareholders' fund stood at Rs. 2,109 crores. The balance sheet carried no conventional borrowings
Chintan Shah (Elecon Engineering Company Ltd): The debt in our balance sheet primarily report represents lease liabilities. This gives us resilience and capacity to invest. Working capital performance improved during H1, with the cycle towards normalizing to 89 days from 98 days in FY26. We continue to maintain a strong balance sheet, with a net cash position of approximately ₹700 crores. We also remain committed to our capital expenditure program for three years, which remains on track. Furthermore, we are pleased that the board has declared an interim dividend of ₹0.50 per equity share of face value of ₹1 each, reaffirming our commitment to delivering value to our shareholders. As an outlook, as we enter the second half, our priorities are clear. We wish to accelerate MHE execution, convert the order pipeline with discipline, sustain margins and advance our international strategy. Given continued macroeconomic uncer- uncertainty and inflationary environment, but improved execution cycle, we are expecting a medium double dig- double-digit consolidated revenue growth for remaining part of the year, while maintaining minimum EBITDA margin at last year's level. We have the financial capacity and operating capabilities to deliver profitable growth while building a stronger, more diversified Elecon. With that, we conclude the financial review and welcome all your questions. Thank you.
Moderator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of CA Garvit Goyal from Serene Alpha Analytics. Please go ahead.
Garvit Goyal (Serene Alpha Analytics): Hello, am I audible?
Moderator: Yes, please go ahead.
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