Isgec Heavy Eng Q2 FY26 earnings call

Where management's figures differ from the filing

• Consolidated PAT (incl. discontinued ops): said ₹56 cr vs ₹96 cr; filed Net profit to owners ₹43.95 cr. Management quoted total PAT including discontinued ops and NCI; filed is to owners only

What moved the numbers, as management explained it

• Increase in Isgec standalone revenue and Saraswati Sugar Mills revenue drove consolidated total income +3% to ₹1,725 cr.
• Better profits in ISGEC Hitachi Zosen drove consolidated PBT from continuing operations +16% to ₹136 cr (vs ₹117 cr).
• Loss in discontinued operations (CBPI Philippines) dragged consolidated PAT to ₹56 cr vs ₹96 cr YoY — base effect from prior-year inclusion. (one-off)
• Foreign exchange fluctuation loss and interest on discontinued operations added to the PAT drag (per Q&A).

The numbers management led with

• Consolidated order book: INR8,789 crores as on 30 Sep 2025 (vs INR7,066 crores YoY)
• Export share of consolidated order book: 26% (~INR1,644 crores export orders on standalone basis)
• Dahej SEZ skids & modules investment: INR87 crores (INR65 cr phase 1 + INR22 cr phase 2), expected INR160-275 crores incremental annual revenue
• CBPI Philippines assets held for sale: INR1,076 crores

Guidance on this call

Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.

Guided on earlier calls, and what was filed

Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.

By business

Balance sheet, capex and funding

• Standalone net borrowing ₹429 cr (vs ₹96 cr at March 2025); rise driven by ₹462 cr ECB loan for CBPI Philippines lender repayment
• Consolidated net external borrowing ₹656 cr (vs ₹836 cr at March 2025); reduced ~₹180 cr over 6 months
• ~₹230 cr capex under implementation in FY26
• ₹87 cr new capex approved for skids & modules at Dahej SEZ (₹65 cr phase 1 + ₹22 cr phase 2)
• CBPI Philippines assets held for sale of ~₹1,076 cr; running costs ~₹10-11 cr/quarter
• ~₹400 cr FGD retention money expected to be released largely within current year

The industry, as management sees it

Management is constructive on the broader Indian capital goods cycle over the next 4-5 years, citing large investment commitments by customer industries in metals, oil and gas, cement, autos and infrastructure. Government guidelines have specifically curtailed FGD / air pollution control demand, and the sugar sector is described as currently muted, but other core sectors are seen as healthy and inquiry pipelines as robust.

Risks management named

• Air pollution control / FGD demand curtailed by recent government guidelines
• Sugar sector currently in a downturn, may be muted
• Process equipment margins under temporary competitive pressure
• Philippines CBPI divestment uncertain; INR1,076 crores of assets still on books
• Customers unable to lift INR80-90 crores of ready equipment due to site-readiness issues

Not answered directly

• Philippines bid pricing range
• Inorganic growth targets
• Specific ROCE potential at CBPI
• Product/geographic gap disclosure

Asked for a number, answered without one

• Philippines operations ROCE: I don't have that figure. I can't say, but as I mentioned to you, there will be no operational loss. It will actually be throwing up some operational profit, which can be used to service part of the Isgec loan.
• Philippines bidder quote range: I don't think that is a subject to be discussed like this.
• High-pressure boilers current run rate: Boilers, the demand is good. There is always competition, but I wouldn't describe it as pricing pressure. We have a large part of our project business order book is from boilers.

Every question, with its answer

1. 1. FY26 guidance

   Palash Jain, ICICI Securities

   Question. What is your guidance for FY26 and FY27 on capex, margins and revenue?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Half year is past. For the full year we expect revenue and profit growth in the range of 7-8%. Order book has expanded and we are investing in manufacturing facilities — the new Bhartoli plant (operational July 2026) and the skids & modules plant at Dahej SEZ. Both will support next year. The order book, especially the project business, will be executed over time and we can see a significant increase in revenue next financial year.

   Follow-up. Can you give a broad range on the quantum of capex?

   Answer. It is about INR230 crores. That is now already under implementation.

2. 2. Order book execution timeline

   Amber Singhania, Nippon India Mutual Fund

   Question. On the consolidated order book of ~INR8,800 crores, what is the execution timeline? And can you give a breakup of legacy low-margin / FGD orders?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Consolidated order book of INR8,789 crores. Execution timelines vary by product: castings ~1 month, manufactured items 3-12 months, sugar plant/distillery ~14 months, boiler ~20-21 months (up to 27-28 months for multiple boilers at one site). Isgec Hitachi Zosen has ~INR937 crores in its order book, typically 12-18 month execution. We expect revenue to grow in current year and a good growth in revenue and profitability next year.

   Follow-up. What is the quantum of legacy FGD order book still pending and when will it complete?

   Answer. We expect all legacy FGD orders to be completed within June 2026. Quantum is between INR300 crores to INR400 crores.

3. 3. FGD retention receivables

   Amber Singhania, Nippon India Mutual Fund

   Question. How much pending receivables / working capital is stuck in legacy FGD projects on the retention side?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. I don't want to answer customer order-wise, but for FGD orders, milestone-based retention payments of about INR400 crores should come out, largely within the current year, with INR40-50 crores potentially spilling into next year.

   Follow-up. On the Philippines plant, which is operational, will it be accounted in our numbers? Where are you on finding a new buyer? Any timeline?

   Answer. The plant is operational. Sugarcane season runs mid-December to early April; the plant can run on sugarcane and molasses. Assets held for sale will be disclosed as a separate line item per accounting standards. We are engaged with a few parties doing due diligence but cannot share names, discussions or timeline.

   Partly answered.

4. 4. Philippines quarterly drag

   Amber Singhania, Nippon India Mutual Fund

   Question. In the status quo, do we need to account for further losses on the Philippines operations and how much per quarter?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Loss is already being accounted under discontinued operations in the consolidated results. Quarterly costs are ~INR10-11 crores covering salaries, insurance and plant maintenance. Plus interest (largely to Isgec) and forex fluctuations. Next quarter (Jan-Mar) the plant will show revenue and normal operations but will continue to be shown separately as discontinued operations.

   Follow-up. Why has revenue growth been muted given a healthy order book? Any concern on clients not lifting orders or slow execution?

   Answer. No orders are on hold. In manufactured items, ~INR80-90 crores of equipment is ready for dispatch but the customer site is not ready; we have collected 95% of payment and are holding the goods with the customer paying storage charges. Project business execution is in line with expectations and we expect a good improvement in revenue next year.

5. 5. Order pipeline by sector

   Amber Singhania, Nippon India Mutual Fund

   Question. Which sectors and geographies look promising in the order pipeline and how sustainable is it?

   Answer, Aditya Puri, Managing Director. We see growth in all product lines except air pollution control equipment — recent government guidelines have curtailed FGD demand significantly. Sugar may be a little muted. Otherwise we are getting orders from metals including steel, oil and gas, automobiles, cement; core infrastructure sectors are healthy. We are well insulated by sectoral diversification.

   Follow-up. With current capacity and new capex, what is the revenue potential from the gross block, and when can capacity be fully utilized?

   Answer. All announced expansions should be completed in another 12 months. They are in the manufacturing area and should add about INR400 crores of revenue from manufacturing. From INR2,500 crores of FY25 manufacturing revenue we should reach INR3,200-3,300 crores annually once these are done, with others also being evaluated.

6. 6. US tariff exposure

   Amber Singhania, Nippon India Mutual Fund

   Question. Any impact of US tariffs? How big is the US for you — any slowdown, cancellation or margin impact?

   Answer, Aditya Puri, Managing Director. Not as yet. If these tariffs have a general impact on the Indian economy, it might impact us. But as of now, we have no significant exposure to the U.S.

   Follow-up. Any thoughts on inorganic growth to fill gaps in geography, clientele or segment?

   Answer. We are always evaluating. If something fructifies, we'll get back to you.

7. 7. Inorganic / portfolio gaps

   Amber Singhania, Nippon India Mutual Fund

   Question. Do you see any gap in product basket, geography or clientele that you would like to fill?

   Answer, Aditya Puri, Managing Director. There are certainly gaps. We are evaluating but I don't think we can disclose them until something is concrete.

   Not answered directly.

8. 8. Order book mix

   Dikshit Mittal, LIC Mutual Fund

   Question. Can you give a breakup of the order book into EPC/projects and manufacturing?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Consolidated order book of INR8,789 crores. Projects business INR6,004 crores and manufacturing INR2,785 crores.

   Follow-up. Project business is still at low single-digit margins. Will the current order book deliver a better margin profile?

   Answer. It will be better. We are building in higher margins while bidding. We no longer take significant site work or civil construction and we are restricting durations to 27-30 months at the most. Profitability has improved substantially over 4-5 years even though revenue has improved only a bit.

9. 9. Project margin trajectory

   Dikshit Mittal, LIC Mutual Fund

   Question. What is the margin potential in the project segment and by when can you reach that level?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Project margins continue at ~5-7%. Scope to improve if we focus on areas where we have specific engineering skills (e.g. boilers) and on exports which normally give higher margins. ~26% of the consolidated order book is from exports; export order booking has picked up after being low post-COVID. As export order book rises, project margins should improve.

   Follow-up. On the Bioeq subsidiary, we reported a loss this quarter. You mentioned fixed costs of INR10-11 crores per quarter. Any one-off this quarter? How to look at full year?

   Answer. There is no operational one-off. The loss is on account of forex fluctuation loss, interest cost and forex movement.

   Partly answered.

10. 10. Philippines feedstock

    Dikshit Mittal, LIC Mutual Fund

    Question. If the sugarcane season is only December to April, how does the plant operate for the remaining ~8 months?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. The plant will be operating on molasses feedstock. Molasses will be purchased from sugar mills in the Philippines.

    Follow-up. What should we expect in terms of overall profitability for the Philippines company on a full year basis?

    Answer. Expecting close to INR470-480 crores of revenue for the full year. It will pay for all its expenses and working capital interest and generate ~INR30-40 crores of profit besides that.

11. 11. Philippines total exposure

    Dikshit Mittal, LIC Mutual Fund

    Question. What is the total investment in CBPI / Philippines? You have given ~INR400 crores of debt this quarter. What is the total exposure as of now?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Assets held for sale is about INR1,076 crores, as visible from published results.

    Follow-up. As and when the sale goes through, do we expect to recover the full amount? How is management thinking?

    Answer. We are working sincerely to sell it and recover the amount.

    Partly answered.

12. 12. Sale pricing posture

    Dikshit Mittal, LIC Mutual Fund

    Question. Are we open to selling at a discount to focus on the core business?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. One has to be open for anything, but we are also going to be running it. We are not going to be desperate to sell it out.

    Follow-up. If we have to run CBPI, is a 10-12% ROCE possible?

    Answer. I don't have that figure. But there will be no operational loss — it will throw up some operational profit that can be used to service part of the Isgec loan.

    Not answered directly.

13. 13. IR communication

    Dikshit Mittal, LIC Mutual Fund

    Question. Request for more regular communication with the investor community going forward, given communication has been erratic.

    Answer, Kishore Chatnani, Joint Managing Director and CFO. We'll certainly look at it, sir. We'll try to schedule something.

14. 14. Boiler pricing pressure

    Palash Jain, ICICI Securities

    Question. On boilers and process equipment tenders, are you seeing any pricing pressure? What is the current run rate in high-pressure boilers?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Boiler demand is good and boilers remain our largest product line. There is always competition but I wouldn't call it pricing pressure. A large part of our project business order book is from boilers.

    Follow-up. How is the competitive landscape for boilers?

    Answer. Competitive landscape for boilers is fine. We have no issues with that.

15. 15. Process equipment margin outlook

    Palash Jain, ICICI Securities

    Question. On process equipment, do you believe margins will normalize?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Process equipment is facing competitive pressure and orders come in bunches. Margins are not as great as they used to be, but we believe it is a temporary phase. Our view on capex in India over the next 4-5 years is strong — most of our customer industries will be investing large amounts. Capital goods do see temporary phases of demand concentration and pricing pressure but it does not last for long.

16. 16. Other income composition

    Rabindra Nath Nayak, Sunidhi Securities

    Question. Is there any write-back of liabilities this year contributing to higher other income, similar to last year?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Other income comprises foreign exchange gain and interest accrued on loans given to subsidiaries. There is no write-back.

    Follow-up. On the Philippines project with INR1,076 crores invested, what is the minimum and maximum bid quote currently being received?

    Answer. I don't think that is a subject to be discussed like this.

    Not answered directly.

17. 17. Order book split

    Arun M. S., Capital Market Publishers

    Question. Could you give the project and manufacturing split of the order book?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Consolidated order book INR8,789 crores: projects INR6,004 crores, manufacturing INR2,785 crores. On a standalone basis, manufacturing domestic INR1,125 crores and manufacturing export INR692 crores, total manufacturing INR1,817 crores out of the standalone order book of INR7,700 crores; the balance is projects.

Topic by topic, in the order it was spoken

In their words