Kirloskar Pneumatic Company Ltd (KIRLPNU) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (Antique Stock Broking Limited): Ladies and gentlemen, good day, and welcome to Kirloskar Pneumatic Company Ltd Q2 FY '27 Earnings Conference Call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev from Antique Stock Broking. Thank you and over to you, sir.
Sanjeev (Antique Stock Broking Limited): Thank you, operator. Good evening. On behalf of Antique Stock Broking, I welcome you all to 2Q FY '27 earnings conference call of Kirloskar Pneumatic Limited. I am pleased to have with us today Mr. Aman Kirloskar, Managing Director and Mr. Ramesh Birajdar, Chief Financial Officer. So without much ado, may I now invite Mr. Aman Kirloskar to discuss the results, post which we can take the Q&A. So over to you, Aman, thank you.
Aman Kirloskar (Kirloskar Pneumatic Company Ltd): Yeah. Thank you. Good evening. Thank you all for joining the call today. I have with me Mr. Ramesh Birajdar, Chief Financial Officer, and Mr. Jitendra Shah, Company Secretary. Before proceeding with the business updates, I kindly ask Mr. Jitendra Shah, our Company Secretary, to read out the disclaimer statement.
Jitendra Shah (Kirloskar Pneumatic Company Ltd): Thank you, sir. The presentation uploaded on the website of the company and discussion on the financial results during the earnings call may contain statements relating to future business developments and economic performance that could constitute forward-looking statements. While these forward-looking statements represent the company's judgments and future expectations, a number of factors could cause actual developments and results to differ materially from expectations. The company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.
Jitendra Shah (Kirloskar Pneumatic Company Ltd): further. Investors are requested to exercise their own judgment in assessing various risks associated with the company and also the effectiveness of the measures being taken by the company in tackling them as indicated during the discussions. Thank you, sir.
Aman Kirloskar (Kirloskar Pneumatic Company Ltd): Thanks, Jitendra. I will proceed with the business updates. Q2 was a challenging quarter on all fronts, order booking, sales and execution, making it a rather poor first half of the financial year. For the second time in two years, our sales are lower than the corresponding period last year. Sales in the first half was at 624 crores as against 650 crores last year. The challenges came from delayed package shipment to the Middle East, as well as delays in the execution of our dispatches from the Precision Engineering Division. With no large domestic package dispatches scheduled this quarter, our performance rested largely on the equipment business. Order booking for large package orders have yet to pick up steam, though as we speak, some large packages are coming close to finalization. On a positive note, export sales have dramatically increased from 31 crores last year to 64 crores in the first half. We've seen moderate growth in order booking in this quarter, which is largely attributable to renewed demand coming from the CNG markets, and we expect this year to be a good one for this segment after a few years of fairly stagnant demand. We have also booked significant orders for our refrigeration equipment coming from the food processing space. Our focus on innovation continues. We filed more than 65 IP applications in the first half of FY27. While there were no new product launches this quarter, we are developing several new technologies and extending the range of recently launched products such as Khione and Taichi. Our subsidiary Systems and Components had a muted half on the sales side with revenues of 9 crores. However, its order book has grown from 4.1 crores at the start of the year to 22 crores today, which gives us confidence in its growth over the coming quarters. Now, I will come to the individual businesses. Starting with the air compressor segment. This segment has had several bright spots this year. We have been seeing some good growth in segments like diesel portables and pet blowing compressors, which we have reentered after a long time. These are in addition to some segments where we have traditionally been strong such as CO2, cement, etc. We are also seeing traction in syngas compressors and have booked a few orders for these as well. Additionally, our newly launched Hydreno is seeing good traction in the pharmaceutical space. Coming to refrigeration, like last year, our packaging business remains slow in the first half, while demand for food processing and cold storage has been quite strong. We booked orders across all three product lines, Khione, KC, KCX, and Taichi. Our ammonia reciprocating compressors remain the dominant machine in this space and saw strong traction this year as well. This was largely driven by the food processing industries. We are also continuing to build out the Zephyrus range and we have successfully commercialized it this quarter. Coming to process gas, this year looks to be a strong one for this business. After a slower start to the year, the demand for CNG compressors seems to be very strong with large orders being booked last quarter and even as even in this quarter the trend continues. The opportunity pipeline for gas system also looks strong, but order finalization is taking some time. We expect this to pick up in the current quarter. Last quarter, we also dispatched India's first 1,000-bar hydrogen refueling station. It's a first of its kind installation and a clear demonstration of KPCL's capabilities in this segment. Our tie-up with Kobe Compressors will broaden the range of products we can offer both existing and new customers. Under our current partnerships, we could not address certain downstream petrochemical markets requiring API 617 and API 618 compressors. We will now be able to compete there against what are largely imported packages.
Aman Kirloskar (Kirloskar Pneumatic Company Ltd): Coming to the outlook for the second half of this year. The first half of this year was largely impacted by slower execution of orders from the precision engineering division than what was expected. We expect this to change, and I am pleased to say that the first dispatches are ongoing as I speak. Dispatches have started in this quarter and will continue into the next one. In addition to this, the orders for our equipment business, especially the CNG and refrigeration products, should allow us to more than catch up in the second half. Last year, since most orders were booked in Q4, we did not have much to dispatch in the first half in terms of packaging. Starting this quarter, that should change. We remain confident of delivering strong growth this year despite the quarter gone by. We expect a strong Q3 and an even stronger Q4 driven by dispatches of a precision engineering business, large packages, and a standard equipment sales. Before I conclude the business update, I would like to take a moment to wish all of you a very happy Diwali and prosperous new year. Now, I will request Mr. Ramesh Birajdar, our CFO, to take you through the financial aspects.
Ramesh Birajdar (Kirloskar Pneumatic Company Ltd): Thank you, Aman. Good evening, everyone. Our Q2 and H1 financial FY '27 financial results are now available on the BSE and NSE websites following our board meeting. For a deeper look into our performance, you can also access the comprehensive earnings presentation on our investor section on the company's website. For your convenience, I would like to provide a summary of our performance for the second quarter as well as first half of fiscal year 2027. Sales for Q2 FY '27 stood at 320 crore compared with 378 crore in Q2 FY '26. The H1 sales were at 620 crore compared to 650 crore of H1 FY '26. While revenue was lower year-on-year, the company maintained a healthy level of business activity and continued to demonstrate resilience in a challenging operating environment. The quarter was impacted by timing differences in few export consignments due to prevailing global uncertainties, while a strong order pipeline and continued focus on the execution, the company remains confident of improving business momentum in the coming quarters. The business mix for H1 FY '27 showed a notable shift towards the equipment business compared to the previous year. Contributed 78% of the total business in the equipments in H1 FY '27, while it was 65% in H1 FY '26. While the packaged business contributed 22% of total business in H1 FY '27 against 35% in H1 FY '26. Company has an order book of over 2,040 crore as on 1st October '26 against Rs 1,863 crore at the beginning of the year. Other income for the Q2 FY '27 was at Rs 8 crore, up from 6.8 crore in Q2 FY '26, while other income for H1 FY '27 at 15.9 crore, which is little higher than H1 of FY '26 of Rs 15 crore. Material costs for Q2 FY '27 was at 44.7% to sales compared to 52.1% of sales in the corresponding quarter of the previous year. For H1 FY '27, material cost to sales was at 44.3%, while in H1 FY '26 was at 50% of sales. There was reduction in the material cost by 5.7%. This is due to the better product mix and efforts of our backward integration of manufacturing. The employee-related expenses rose to 109 crore in H1 FY '27 up from 97.4 crore in H1 FY '26. This increase was primarily driven by headcount addition and operational expansion at Nashik plant, along with scaling up business activities at Saswad and Hadapsar facilities. Company remains debt-free, resulting into zero interest cost or borrowing-related expenses for both Q2 as well as H1 FY '27. Depreciation increased by approximately Rs 3 crore in H1 FY '27, primarily due to capital expenditure incurred our Nashik as well as Saswad plant in the previous year. Accordingly, depreciation charged during H1 FY '27 stood at 17.9 crore compared with 14.9 crore in H1 FY '26.
Ramesh Birajdar (Kirloskar Pneumatic Company Ltd): The increase in manufacturing and other expenses was primarily attributed to the full year impact of the operations at our Nashik plant and the higher activity levels in our service business. These expenses comprises of both fixed and variable cost and stood at 149.3 crore in H1 FY27 against 133.5 crore in corresponding period of the previous year. EBITDA for the Q2 FY27 stood at 48.7 crore with a margin of 14.9% compared to 64.8 crore at 16.8% margin in the corresponding quarter of the previous year. For the first half of the financial year, H1 FY27, EBITDA was at 103 crore with a margin of 16.2% against 109 crore with 16.4% was recorded in H1 FY26. Profit before exceptional Profit before tax before exceptional items of rupees 39.6 crore that is 12.1% for Q2 H FY27 against rupees 56.9 crore in Q2 FY26 at the rate of 14.8%. PBT of rupees 85.1 crore for H1 FY27 while PBT of rupees 93.8 crore in H1 FY26. Exceptional items an exceptional income of rupees 11 crore was recognized below the PBT line in Q2 and H1 due to surrender of 1.77 acres of land out of 160 acres of land in Nashik for state government's road infrastructure project. Management has strategically taken early precautions to design and set up the facility expansion well clear of the proposed road development lines. Consequently, business continuity is fully maintained and all operations at Nashik plant are completely unaffected by the surrender of this land. Profit after tax followed a similar trend in both Q2 as well as H1. For H1 FY27, PAT rose to 74 crore, up from 71.3 crore in H1 FY26. This is primarily driven by the exceptional earnings recorded in Q2 FY27. During Q2 FY27, the company's equity shares were subdivided from face value of rupees 1 rupee 2 to rupee 1 per share. Accordingly, basic and diluted earnings per share for the both current and previous year have been restated to reflect the new face value. Basic EPS for H1 FY27 stood at 5.69 per share compared to 5.49 per share in H1 FY26. Company has net cash and cash equivalent position of rupees 513.7 crore as on 1st October 2026. During H1 FY27, the company incurred a capital expenditure approximately of 34 crore and paid a dividend of rupees 57 crore. Company issued 43,500 equity shares in H1 under the employee stock option program. Consequently, the paid-up share capital increased marginally as compared to the beginning of the year. With over 94% of revenue is coming from the compression segment, it remains the only reportable segment. The segment profitability in Q2 is at 20.5% and in H1 FY27 at 21.3 as against 20.3 in Q2 FY26 and 19.5 in H1 FY26. Capital employed in the compression segment reduced by 118 crore, reaching 299 crore at the end of H1 FY27 compared to 419 416.9 crore at the start of the year. We have regrouped, rearranged the financials wherever necessary. We have published consolidated financial statements which now includes the financial results of our newly acquired subsidiary, Kirloskar South East Asia Company Limited, for the month August and September 26 along with those of our existing subsidiary, Systems and Components India Private Limited. The consolidated financial statements are not fully comparable with the corresponding previous period, as the financial results of Kirloskar South East Asia Company have been consolidated from August 2026 onwards for
Ramesh Birajdar (Kirloskar Pneumatic Company Ltd): following the acquisition. Prior to opening the floor for the discussion, let me take this opportunity to wish you and your families a happy, safe Diwali and successful prosperous new year. Now, this forum is open for discussion with our investors.
Moderator (Antique Stock Broking Limited): Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
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