Behari Lal Engineering Q1 FY27 earnings call
In brief
First post-IPO call: Q1 FY27 rev ₹151.7 cr (+18%), op EBITDA ₹27.6 cr (+20.6%), PAT ₹19.2 cr (+24.5%); ₹80 cr FY27 capex.
- Management's tone
- Confident
- What was said
- Leaned positive
- Guidance
- First guidance issued
- Analyst pushback
- Low
- Stock, next session
- +1.26% (Nifty 50 −0.86%)
- Q1 FY27 revenue ₹151.7 cr (+18% YoY); operating EBITDA ex-other-income ₹27.6 cr (+20.6%) at 18.2% margin; PAT ₹19.2 cr (+24.5%) at 12.7% margin.
- High-value products rose to 60.4% of revenue (+463 bps YoY); EBITDA per ton ₹13,457 (+8.8% YoY); volume 22,095 tons (+13.4% YoY).
- IPO closed Aug 19 at ₹285, raising ₹301 cr (₹93 cr fresh); promoter 70.84%; ₹56 cr into equipment+civil, ₹7 cr solar, ₹19 cr GCP.
- FY27 capex target ₹80 cr; ₹5 cr spent in Q1; Unit 3 (centrifugal casting for ICDP/HSS rolls) targeted to commission in Q1 FY28.
- Order book ₹162 cr (13,138 tons) at June 30, skewed high-value (~₹1.2 lakh/ton vs Q1 ₹93,000/ton); net worth ₹325 cr, D/E 0.03, ₹52 cr cash.
An AI read of the company's transcript · the filing
The numbers
The quarter, Q1 FY27
| This quarter | A year ago | Last quarter | Margin | |
|---|---|---|---|---|
| Revenue | ₹152 cr | — | — | |
| EBITDA (excl. other income) | ₹27.6 cr | — | — | 18.2% |
| Net profit | ₹19.2 cr | — | — | 12.7% |
| EPS (₹) | ₹4.92 | — | — |
From the company's filed results for the quarter ended 30 Jun 2026 (standalone), not from the call. EBITDA here excludes other income, so it can differ from the figure management quotes.
What moved the numbers, as management explained it
- Mix: high-value products rose to 60.4% of Q1 FY27 revenue (vs 55.7% YoY, +463 bps); gross margin 48.9% (+146 bps); EBITDA per ton ₹13,457 (+8.8% YoY).
- Volume: sales 22,095 tons (+13.4% YoY); capacity utilization 90.5% in Q1 (94% melt shop, 87.5% rolling mill); own-manufacture tonnage up ~12% QoQ.
- One-off in other income: Q4 FY26 included ₹5.9 cr Punjab Industrial Policy incentives (SGST reimbursement, electricity duty) recognized on sanction; Q1 other income normalized at ₹2.2 cr. (one-off)
- One-off tax effect: Q4 FY26 effective tax rate was 19% due to a ₹1.6 cr deferred tax credit; Q1 normalized at ~25.5%, partly explaining the QoQ PAT decline of 10%. (one-off)
- Price: scrap prices stayed range-bound through the quarter, supporting gross margin expansion alongside the richer mix.
The numbers management led with
- FY27 capex target: INR80 crores (INR5 cr spent in Q1; balance INR75 cr over next three quarters)
- Order book at 30 June 2026: INR162 crores / 13,138 tons at ~INR1.2 lakh per ton (vs Q1 revenue per ton INR93,000)
- High-value product share Q1 FY27: 60.4% of revenue (vs 55.7% YoY, 57.8% FY26); targeting ~70%
- IPO fresh capital: INR93 crores fresh capital (total issue INR301 cr at INR285/share; listed 19 August 2026)
Guidance
Guidance on this call
| What | For | What management said |
|---|---|---|
| FY27 capex | FY27 | we will spend around INR80 crores in capex in the current year |
| Unit 3 commissioning | Q1 FY28 | in the first quarter of the next financial year, we'll be able to commence Unit 3 |
| High-value product share | — | we'll be able to reach to around 70% of high-value products |
| Operating EBITDA margin growth | — | it will grow by 20% to 25% over the next two to three years |
| Defense sector revenue start | FY28 | Proper revenue is expected to start by next year |
The business
By business
Metal rolls
Q1 FY27 25.8% of revenue (~26% FY26); ICDP and HSS rolls planned via Unit 3 centrifugal casting; these grades are currently almost entirely imported into India.
~26% of FY26 revenue · Q1 FY27 25.8% of revenue
Outlook: ICDP/HSS rolls via Unit 3 commissioning targeted Q1 FY28; India imported ~3.5 lakh tons of these grades in FY26; only domestic player adding capacity.
Engineering castings
Q1 FY27 19.8% of revenue (~20% FY26); 22-23 ton single-piece castings delivered for thermal power; forward integration into CNC machining, testing and NDT planned at Unit 3.
~20% of FY26 revenue · Q1 FY27 19.8% of revenue
Outlook: Capacity expansion in Unit 3 plus forward integration (CNC, testing, shot blasting, painting, NDT); thermal power demand rising; customer visibility to 2035.
Alloy steel products
Q1 FY27 47.7% of revenue (~46% FY26); bars 6-230 mm including valve, tool and die steel; in-house forging line planned to lower cost and scale highest-margin grades.
~46% of FY26 revenue · Q1 FY27 47.7% of revenue
Outlook: New forging line planned to lower cost; focus on shifting mix to higher-grade specialty bars including valve, die and tool steel.
Forging ingots and forged shafts
Q1 FY27 1.9% of revenue (~4% FY26); deliberately reduced as steel is converted internally into finished high-value grades rather than sold as ingots.
~4% of FY26 revenue · Q1 FY27 1.9% of revenue
Outlook: Mix to be reduced further as ingots are increasingly converted into finished high-value grades internally.
Balance sheet, capex and funding
- Net worth ₹325 cr; gross borrowing ₹11 cr (working-capital lines only); debt/equity 0.03x; annualized ROCE 27%, ROE 23.6%.
- Cash and bank balances ₹52 cr (largely FDs) at June 30, 2026, before IPO proceeds were received in August.
- Cash conversion cycle 94 days vs 93 at March 2026; net working capital absorbed ~₹10 cr in Q1 from higher WIP in rolls/castings and scrap stock.
- FY27 capex target ₹80 cr; ₹5 cr spent in Q1, balance ₹75 cr planned over the next three quarters (IPO proceeds, internal accruals; Unit 3 from internal accruals).
- IPO: ₹301 cr raised (₹93 cr fresh) at ₹285, listed Aug 19; ₹56 cr for equipment+civil at both facilities, ₹7 cr rooftop solar, ₹19 cr GCP, small debt repayment.
- Post-issue: 11 anchors including leading domestic mutual funds; promoter holding 70.84%.
The industry, as management sees it
India is moving from 150 million tons to 300 million tons of steel capacity by 2030, driving roll demand. Government push for 'Make in India' and 98% local procurement in defense cited as major tailwind. Thermal power capacity expected to double, with customers showing visibility up to 2035.
Risks management named
- Long customer approval cycle in defense sector (prototype-to-mass-production)
- Capacity constrained at 90.5% utilization - growth gated until Unit 3 commissions
- Export revenue lumpy due to casting shipment timing and order phasing
- Job work tonnage intentionally declining as company shifts to higher-value own manufacture
Q&A
Q&A was orderly and friendly with three analysts (Sapphire Capital, Moneybee Securities and host Systematix) covering capacity expansion, capex quantum, the defense ramp and ICDP/HSS roll opportunity. The only notable deflects were the specific Unit 3 capex quantum (deferred to exchange filings) and defense revenue mix (Aakarsh Goyal said he was 'not really sure' and could not give a figure). Pushback was light overall; the host (Systematix) did most of the structured follow-up questioning. Discussion focused heavily on the high-value mix strategy and import-substitution thesis, with management visibly confident on execution.
Not answered directly
- Unit 3 capex quantum (deferred to exchange filings)
- Defense revenue mix target (no figure given)
Asked for a number, answered without one
- Unit-3 capex size: Cannot share now because part of exchange filings; current FY27 total capex target of ₹80 cr includes IPO proceeds, internal accruals for Unit 3 and the rooftop solar project.
- Defense and aerospace revenue mix: Right now I'm not really sure; cannot give a definite figure, but management expects to ramp up numbers significantly in the defense sector.
- ICDP and HSS rolls commercial production quarter: Only a general "next year" / first quarter of next financial year for Unit 3 overall; no separate quarter given for ICDP/HSS commercial production.
Every question, with its answer
1. Capacity utilization and growth drivers
Deepak Poddar, Sapphire Capital
Question. The company is already at ~90-91% capacity utilization. What will drive growth going forward?
Answer, Lovlish Garg, Whole-Time Director. Management highlighted fungibility as the differentiator: the same plant produces all three product lines and capacity has been doubled every 3-4 years since 2012. Mix optimization toward high-value products is the intra-cycle lever. Last melting addition was in FY24; Unit 3 under construction and will add meaningful melting capacity next year. CFO Aakarsh Goyal added that high-value share rose from 47% (two-three years back) to 57% in FY26 to 60% in Q1 FY27 - mix shift is the FY27 driver since no new melting capacity comes online until next year.
Follow-up. Can you share Unit 3 capacity addition, commissioning timeline and capex? And what is the realization vs volume growth expectation?
Answer. Aakarsh Goyal said exact capex numbers are yet to be finalized and will be disclosed via exchange filings. Shed is under construction and most machinery ordered. Commissioning targeted for Q1 of next financial year (Q1 FY28). The company is targeting INR80 crores of capex in FY27, sourced from IPO proceeds, internal accruals (Unit 3) and internal accruals (solar). INR5 cr of this was spent in Q1 FY27. Growth will come from both realization improvement and volume.
2. Defense and aerospace vertical
Deepak Poddar, Sapphire Capital
Question. You mentioned venturing into defense and aerospace. What exactly is being done, what approvals are required, and when can revenue start flowing?
Answer, Lovlish Garg, Whole-Time Director. Management has been working in this space for the past few years and has begun receiving orders from major government PSUs including Bharat Dynamics Limited and Nuclear Power Corporation of India, plus some private sector suppliers forwarding to defense end-customers. Customer approval cycle is long - prototype stage precedes mass production. Citing the Defense Minister's statement that 98% of defense procurement must come from local industry, management sees a 'huge boom' and is aligning capex toward specified grades currently not made in India. CFO Aakarsh Goyal clarified that a small portion of revenue has already started in the prototyping stage, but meaningful revenue is targeted from next financial year (FY28). When pressed for a revenue mix number, Aakarsh declined to give a specific figure.
Follow-up. What revenue mix are you targeting from defense - 5% or something?
Answer. Aakarsh Goyal said he is 'not really sure' about a specific defense revenue share currently and could not give a definite figure; confirmed the company would do 'really good numbers' in defense.
Not answered directly.
3. Centrifugal casting and foundry expansion
Vatsal Mehta, Moneybee Securities
Question. What is the update on centrifugal casting and the expansion?
Answer, Lovlish Garg, Whole-Time Director. Unit 3 will house centrifugal casting capacity for ICDP (Indefinite Chill Double Poured) rolls, which are currently almost entirely imported. India is moving from 150 million tons to 300 million tons of steel capacity by 2030, driving roll demand. Both vertical and horizontal centrifugal casting planned. Orders placed and construction on track. Management claimed it will be 'the only ones in the domestic steel space to venture in this kind of rolls' and is looking at 'very big market share'. On foundry expansion: Unit 3 is foundry-only (metal rolls, ICDP rolls, HSS rolls, engineering castings). The current plant is also seeing casting share rising, with strong uptick from the power sector - customers have shown visibility till 2035 for thermal power orders. Recently produced 22-23 tons of single-piece castings for a prestigious thermal power customer. CNC machines are being ordered for precision machining to provide ready-to-use castings, addressing a gap in the domestic foundry ecosystem where most players lack forward integration (testing, shot blasting, painting, NDT, finish machining).
4. ICDP and HSS rolls - demand visibility and entry barriers
Shweta Dikshit, Systematix Group
Question. On ICDP and HSS rolls which are largely imported - do you already have an order book or inquiries, and when can commercial production begin? Also, what is the entry barrier - other metal rolls producers could theoretically enter this segment if demand grows.
Answer, Lovlish Garg, Whole-Time Director. Lovlish Garg argued that entry barriers are substantial: (1) BEHARI LAL Engineering already caters to 11.5% of India's roll demand with 1,800+ customers and century-old family relationships that any new entrant would be '100 years behind' on; (2) ICDP/HSS technology requires deep metallurgical expertise and the team has visited global producers and engaged senior metallurgists; (3) most of the production chain (scrap procurement, melting, downstream heat treatment, machining, testing) is already in place - only the centrifugal casting step needs to be added in Unit 3; (4) existing customers buying general metal rolls are the same customers who will buy ICDP/HSS rolls, enabling trial orders from day one; (5) company has 21-country export footprint. Management expects 'very bright future' for ICDP/HSS and framed the opportunity within the Make in India push.
Follow-up. Of the INR80 crores FY27 capex target, how much was spent in Q1?
Answer. CFO Aakarsh Goyal said INR5 crores was spent in Q1 FY27 and the balance INR75 crores is targeted across the next three quarters.
5. Long-term mix and margin targets
Shweta Dikshit, Systematix Group
Question. Post the current expansion cycle, once all greenfield projects reach peak utilization, where would the high-value product mix settle vs ~58% currently? And where should this take operating EBITDA margin?
Answer, Aakarsh Goyal, Chief Financial Officer. High-value product mix was 57% in FY26, 60.4% in Q1 FY27; management targets reaching around 70% of high-value products in the near future. Operating EBITDA margin was around 25% in previous financial years (note: this appears to be a verbal reference, since the reported FY26 number was 19.6% and Q1 FY27 was 18.2% - the 25% reference appears to relate to a different metric or prior period context) and is expected to grow by 20-25% over the next two to three years.
Partly answered.
What was said
Topic by topic, in the order it was spoken
Company Introduction & Heritage · Lovlish Garg (Whole-Time Director)
- Fourth-generation family business; company incorporated 1995 in Mandi Gobindgarh, Punjab - one of India's oldest steel hubs.
- Serves 1,871 customers; meets ~11.5% of India's metal rolls demand per CRISIL.
- FY26 baseline: revenue INR534 cr, 19% EBITDA margin, 27% ROCE, D/E 0.06; near debt-free operating philosophy.
- Four product lines: metal rolls (26%), engineering castings (20%), alloy steel (46%), forging ingots (4%); high-value products called out as the strategic focus.
- Customer list includes SAIL, JSW, Tata Steel, Vizag (rolls); Metso, Propel, Kleemann (castings); BDL, BEML, BHEL (defense/PSUs).
Operating Model & Fungibility · Lovlish Garg (Whole-Time Director)
- Single integrated melt shop feeds rolls, castings and alloy steel lines via induction melting, ladle refining, vacuum degassing.
- Plant utilization 88% in FY26 and 90.5% in Q1 FY27 (94% melt shop, 87.5% rolling mill).
- Fungibility enables mix optimization in response to demand; capacity additions historically every 3-4 years.
Three-Year Track Record · Lovlish Garg (Whole-Time Director)
- Revenue CAGR 9% over 3 years (INR446 cr to INR534 cr); EBITDA CAGR 29% (INR61 cr to INR101 cr); PAT CAGR 34%.
- High-value product share rose from 45% (FY25) to 58% (FY26); EBITDA per ton from ~INR9,100 to ~INR11,500.
- Gross margin expanded 1,120 bps in 2 years (36% to 47%); EBITDA margin +530 bps; PAT margin +400 bps - attributed to mix, not raw material luck.
- ROE 23.6%, ROCE 27%; net worth INR194 cr to INR306 cr; gross borrowings under INR18 cr; growth funded entirely from internal accruals.
Q1 FY27 Operational Performance · Lovlish Garg (Whole-Time Director)
- Revenue INR151.7 cr (+18% YoY); volumes 22,095 tons (+13.4% YoY, -2% QoQ on seasonal Q4 strength).
- EBITDA INR29.7 cr (+23.4%, margin 19.6%, +85 bps); operating EBITDA INR27.6 cr (+20.6%, margin 18.2%, +39 bps).
- PAT INR19.2 cr (+24.5%, margin 12.7%, +65 bps); EPS INR4.92 pre-IPO / INR4.54 post-issue.
- Sequential volume ex-job work +12.5% QoQ; revenue per ton +3.9% QoQ; scrap prices range-bound through quarter.
Q1 FY27 Financial Detail · Aakarsh Goyal (CFO)
- Gross margin 48.9% (+146 bps YoY); material cost 51.1% of revenue (vs 52.6%).
- Employee cost INR12.1 cr (8% of revenue); other expenses INR34.5 cr (22%); power and fuel INR8.9 cr (5.9% vs 6.3%).
- Depreciation INR3.55 cr; finance cost INR0.43 cr (<0.3% of revenue); effective tax rate ~25-25.5%.
- Mix shift: alloy steel 47.7%, metal rolls 25.8%, engineering castings 19.8%, forging ingots 1.9% (down from 4.4% as ingots are internally routed to higher-value grades).
- End-user mix: automotive 33% (vs 38.7% FY26, commodity alloy bars being deprioritized), infrastructure 26.4%, industrial 15.4%, aggregate crusher 13.5%, thermal power 10.5%; domestic 94.3%, export 5.7%.
Balance Sheet & IPO · Aakarsh Goyal (CFO)
- Pre-IPO balance sheet at 30 June: net worth INR325 cr, gross borrowings INR11 cr (working capital), cash INR52 cr (largely FDs), D/E 0.03x, ROE 23.6%, ROCE 27%.
- Cash conversion cycle 94 days (vs 93 at March); incremental NWC absorption INR10 cr in quarter.
- IPO completed post-quarter: INR301 cr issue at INR285/share, listed 19 August; 11 anchor investors including leading domestic mutual funds; promoter holding 70.84% post-issue.
- IPO use of proceeds: INR56 cr equipment and civil at both facilities, INR7 cr rooftop solar, small debt repayment, ~INR19 cr GCP; INR93 cr fresh capital received in August.
Forward Strategy & Capex · Lovlish Garg (Whole-Time Director)
- Four strategic levers: (1) capacity - IPO-funded machining and melting upgrades + Unit 3; (2) new grades - ICDP and HSS rolls currently almost fully imported; (3) forging line for valve/die/tool steel; (4) cost - solar power, NABL-accredited lab, defense vertical.
- India imported maximum quantity of ICDP/HSS rolls since FY20 (~3.5 lakh tons in FY26).
- High-value share targeted to move from ~60% to ~70% over time.
- FY27 capex targeting INR80 cr (INR5 cr spent in Q1, balance over next three quarters).
- Unit 3 construction underway; shed in construction, machinery ordered; commissioning targeted Q1 FY28.
Order Book & Closing KPIs · Lovlish Garg (Whole-Time Director)
- Order book INR162 cr / 13,138 tons at 30 June - more than one quarter of revenue; ~INR1.2 lakh per ton (vs Q1 revenue per ton INR93,000) - skewed toward high-value products.
- Exports INR8.6 cr in Q1 vs INR11.5 cr YoY - attributed to casting shipment timing and order phasing, not a trend change; export customer base and country count growing.
- Management to be judged on high-value share and EBITDA per ton metrics reported quarterly.
In their words
The one word that matters here is fungible. The same melt shop feeds all three product lines. When rolls demand is strong, we pour rolls. When specialty bars are strong, we pour ingots. When castings is strong, we pour castings.
We did not chase tonnage. We moved the mix. High-value products went from 45% of the total revenue in FY25 to nearly 58% in FY26. EBITDA per ton went from about INR9,100 to about INR11,500.
We see the trust investors have placed in us as a responsibility, not a reward.
To check next time
What management committed to on this call, or the dates they gave.
- FY27 capex deployment: ₹75 cr remaining vs ₹80 cr target (₹5 cr spent in Q1).
- Unit 3 construction progress; targeted commissioning Q1 FY28 with centrifugal casting for ICDP/HSS rolls.
- IPO capex deployment: ₹56 cr equipment+civil and ₹7 cr rooftop solar at both facilities.
- High-value product mix progression toward 70% target (currently 60.4% of Q1 FY27 revenue).
- Defense and aerospace revenue ramp-up; "proper" revenue expected from FY28 onwards.
- Order book movement vs ₹162 cr (13,138 tons) and its high-value skew (~₹1.2 lakh/ton vs Q1 revenue ₹93,000/ton).
Transcript
Read along with the recording
The whole call, 253 lines from 10 speakers over 46:22. Click any line to hear it, jump to the Q&A, or find a word. Free with an account.
The stock after the call
| After the call | Close | Stock | Nifty 50 |
|---|---|---|---|
| Next session Wed 9 Sept 2026 | ₹456.75 | +1.26% | −0.86% |
| 5 sessions Wed 16 Sept 2026 | ₹428.40 | −5.02% | −1.77% |
From the close of Tue 8 Sept 2026, ₹451.05: the call began at 16:00 IST, after the market closed, so that day's close is the base. Adjusted daily closes; the move includes everything else that happened in those sessions.