Isgec Heavy Eng Q1 FY27 earnings call

Where management's figures differ from the filing

• Consolidated EBITDA: said ₹137 cr consolidated EBITDA; filed ₹123.6 cr (excluding other income). Management's figure appears to include other income of ₹13.46 cr; filed EBITDA explicitly excludes other income per the definition.

What moved the numbers, as management explained it

• Manufacturing income lifted by dispatch of a ~₹130 cr large US customer order that had been on hold; supported standalone EBIT growth this quarter. (one-off)
• Q1 FY26 standalone other income was inflated by forex gains, dividends timing and interest income — base effect compressing YoY PBT growth to just 10% on a 51% revenue rise. (one-off)
• Philippines ethanol plant's ₹83 cr segment loss (₹37 cr depreciation, ₹20 cr interest, ~₹10 cr forex, plus unrecovered fixed costs) — first-year ramp at 65-70% utilization.
• Export revenue jumped to 25% of total from 15% in Q1 FY26 (₹385 cr), driven by US order and Africa/Latin America wins; weaker rupee aiding realizations.
• Saraswati Sugar Mills revenue down due to lower cane availability last season from untimely rainfall — agroclimatic base effect, not structural.
• Q1 FY27 depreciation higher at consolidated level due to inclusion of Philippines plant under WDV method; FY27 full-year Philippines depreciation estimated ~₹95 cr. (accounting)

The numbers management led with

• Standalone order book: INR 7,727 cr as on 30 June 2026
• Export revenue mix: 25% of total (INR 385 cr), up from 15% in Q1 FY26
• Board-approved manufacturing capex: INR 502 cr across Bhartauli, Dahej, Bawal and Rattangarh

Guidance on this call

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 borrowings reduced by ₹140 cr during the quarter to ₹240 cr (vs ₹381 cr at Mar 2026 and ₹408 cr at Jun 2025).
• Consolidated net borrowings reduced by ₹170 cr during the quarter to ₹304 cr (vs ₹476 cr at Mar 2026 and ₹832 cr at Jun 2025).
• Capex of ₹47 cr spent in Q1 funded entirely from internal accruals; earlier ₹100 cr+ capex also self-financed.
• Board-approved ₹502 cr capex programme for manufacturing capacity expansion (presses at Bhartauli, modules at Dahej SEZ, casting/tubing/press shops) under implementation.
• Shorter-duration, technology-intensive orders improving working capital; only borrowing source is onlent funds to Philippines business.

The industry, as management sees it

Management flags that geopolitical tensions have not impacted existing order bookings but have raised logistics costs and transit times; commodity prices (steel, copper, aluminium, nickel) are largely stabilised but slightly above pre-war levels. Container freight rates and ship availability remain challenged. The weaker rupee at INR 95/USD is seen as a competitive advantage for Indian exporters versus other bidding countries, though not versus domestic peers.

Risks management named

• Geopolitical tensions raising logistics/freight costs and lengthening transit times
• Steel, copper, aluminium and nickel prices slightly above pre-war levels
• Philippines ethanol plant losses persisting until 90% capacity utilisation achieved in Dec 2026
• Saraswati Sugar Mills revenue lower on weak cane availability last season
• Reduced ship/container availability and elevated freight rates on export logistics

Not answered directly

• Philippines ethanol EBITDA at 90% capacity utilisation
• Quarter-by-quarter growth outlook for remaining three quarters
• FY27 capitalisation quantum and incremental depreciation

Asked for a number, answered without one

• Capitalization amount and incremental depreciation for FY27: CFO Chatnani said he did not have the number ready; hadn't thought in those terms.
• Philippines ethanol plant EBITDA at 90% utilization: CFO said it depends on pricing of sugarcane, molasses and ethanol; did not have a number for current prices.

Every question, with its answer

1. 1. Revenue growth guidance

   Rehan, Coheron Wealth

   Question. Why is the growth guidance conservative at 10-12% despite strong execution and improving order book with higher realisations from new orders?

   Answer, Aditya Puri, Managing Director. While the order book has improved substantially, a good part of the execution will carry forward to the next financial year, which is why guidance is set at 10-12% top-line growth.

   Follow-up. On a like-to-like basis you have done 46% consolidated growth — what is the run rate over the next 2-3 quarters? How do commodities help?

   Answer. Annual 10-12% is similar across quarters. Q2 projects business to be around INR 1,000 cr; standalone manufacturing at similar levels. Isgec Hitachi Zosen expected to do ~10% better than last year's INR 670 cr. Saraswati Sugar revenue will be down on weak cane. Engineered-to-order model means minimal inventory gains — except sugar where unsold inventory could carry some profit.

2. 2. Manufacturing revenue run rate

   Rehan, Coheron Wealth

   Question. What is the size of the large order dispatched this quarter, and what is the steady-state run rate for the manufacturing segment consolidated?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Large US-customer order was about INR 130 cr — customer had paid 95% 2-3 quarters ago but delayed lifting due to project site not being ready. Manufacturing segment steady state should be INR 750 cr+ for next quarter and increase a bit later.

3. 3. Revenue guidance conservatism

   Manish Goyal, Thinqwise Wealth Managers

   Question. Q1 incremental revenue alone of INR 570 cr appears to cover the entire FY guidance of INR 500 cr incremental — why the conservative 10-12% guidance?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Better to give a conservative guidance and meet it rather than an aggressive one and be uncertain. Hitachi Zosen EBIT margins are expected to hold; absolute profit should rise ~10% YoY.

   Follow-up. Are all expansions completing this year, and what is the incremental revenue potential from the INR 700-800 cr capex plan?

   Answer. Board-approved investment for manufacturing capacity alone is INR 502 cr. Bhartauli Phase 1 (INR 73 cr) completes first week of September with revenue potential of INR 225 cr/year; major phase completes end-CY27/Q1 CY28. Dahej process-module facility completes May 31, 2027. Total potential revenue addition of INR 1,200 cr/year when fully ready, with full benefit from FY29.

4. 4. Philippines ethanol losses

   Manish Goyal, Thinqwise Wealth Managers

   Question. Cavite Biofuel: Q1 loss appears large despite full quarter operations and DOE sanctions — why is the loss so big and should we expect Q2 to improve?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Q1 loss largely depreciation (Q1 INR 37 cr under WDV method; FY27 total depreciation ~INR 95 cr). Plant crushed 84,000 tonnes cane, used 20,000 tonnes molasses, produced 10.5 million litres, sold 8 million+. It is the first year so utilisation not yet at 90%. Q2 loss will be substantially lower, mainly depreciation + interest.

   Follow-up. Should we look at continued molasses buying in H2 FY27, and at 90% utilisation would you still look for buyers?

   Answer. Plant continues on molasses; sugarcane season resumes November. Capacity utilisation expected at 90% by December. Plan to look for buyers continues.

5. 5. Export order inflow

   Manish Goyal, Thinqwise Wealth Managers

   Question. Are large orders booked this quarter from exports in sugar machinery, and is sugar + power mix visible in the order inflow breakup?

   Answer, Aditya Puri, Managing Director. Yes, large export orders have been received. INR 750+ cr of export orders booked this quarter; July-to-date INR 1,200 cr on standalone. Order inflow driven by Latin America, Africa, SE Asia. Sugar refinery exports particularly strong. Currency at INR 95 helping competitiveness vs other countries (not vs Indian competitors).

6. 6. Standalone PBT bridge

   Manish Goyal, Thinqwise Wealth Managers

   Question. Standalone revenue up 58% and EBITDA up 64%, yet PBT up only 10% — how should we view the rise in interest cost and decline in other income?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Other income was high in Q1 FY26 from dividends (now split across quarters), interest income, and Forex. Forex on Philippines loans will swing other income/expenditure quarterly. Operating income is the cleaner read and is better this quarter. Management did not have incremental depreciation/capitalisation numbers ready.

   Follow-up. How much capitalisation will happen this year and how much can depreciation increase?

   Answer. Did not have the number ready to share.

   Not answered directly.

7. 7. Bhartauli capex and capacity ramp

   Devam, Ardeko

   Question. Can you quantify the Bhartauli Phase 1 production starting next month and outline the stepwise completion timeline?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Bhartauli has two phases: Phase 1 INR 73 cr investment completing first week of September with annual revenue potential of INR 225 cr; Phase 2 INR 218 cr investment completing end-CY27/Q1 CY28. Q1 FY28 onwards billing jump expected; FY27 reflects work-in-progress build-up only.

8. 8. Guidance realism

   Devam, Ardeko

   Question. Is there an inflationary component in the 10-12% guidance, or is the company simply being conservative after Q1 overshoot?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. We are being realistic; stating things we are sure of achieving. Aditya Puri adds: 'realistic with a conservative bias.' Manufacturing EBIT margin remains in 12-13% range with Q1 at 12% — reasonably certain to stay there for FY27.

   Follow-up. Are you seeing raw material/cost pressure on machinery EBIT margins?

   Answer. Some cost pressures from war on inputs; contingencies in place; comfortable staying in 12-13% band.

9. 9. Project mix shift

   Devam, Ardeko

   Question. How is the shift to shorter-duration private/export projects playing out, and what is the long-duration share now?

   Answer, Kishore Chatnani, Joint Managing Director and CFO. Maximum project duration now capped at 2.5-3 years (vs 4+ years earlier). Focus on orders where customer values technology, enabling premium pricing. Avoiding pure civil/erection work. Margins improving, working capital reducing. Q1 capex INR 47 cr self-financed; standalone borrowings down INR 140 cr in spite of it.

10. 10. Order book execution timeline

    Shubham Borade, ICICI Securities

    Question. Of the INR 89 bn consolidated order book, what is the execution timeline and what is the order inflow outlook for the next three quarters, particularly international?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Manufactured items: 4-6 months to 10-12 months; project business 14 months to 2.5 years; Isgec Hitachi Zosen 15-18 months; Eagle Press 6-9 months. Q1 FY27 bookings already INR 2,323 cr; July-to-date INR 1,200 cr booked on standalone. Pipeline healthy across industries and exports.

11. 11. Philippines depreciation method

    Sandeep Baig, Independent

    Question. Philippines depreciation of INR 37.5 cr in Q1 annualises to INR 150 cr — are we depreciating the entire INR 900-1,000 cr asset base in 6-7 years?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Written-down value method is used, not straight-line, so depreciation is higher initially and reduces each quarter. FY27 total depreciation expected ~INR 95 cr. Interest cost ~INR 19-20 cr per quarter (inter-company, adjusted on consolidation).

    Follow-up. Would shutting or selling the Philippines plant be better financially and for management focus? What EBITDA can 90% utilisation generate at current prices?

    Answer. All options including shutdown/sale are always under consideration but nobody buys a shut asset. Management hopeful plant will start covering interest and costs. Did not have 90% utilisation EBITDA number ready.

    Not answered directly.

12. 12. Quarterly growth outlook

    Sandeep Baig, Independent

    Question. Given Q1 strength and Q2 run-rate commentary of INR 750 cr manufacturing + INR 1,000 cr projects, the 10% growth appears largely secured — what growth do you foresee for the remaining 3 quarters?

    Answer, Kishore Chatnani, Joint Managing Director and CFO. Already answered — full year 10-12%. Capital goods quarter-to-quarter predictability is limited; war, other disruptions possible. Better to give a number we will achieve. Management agrees the company may do better but stands by 10-12% today.

    Not answered directly.

13. 13. Subsidiaries and services division

    Manish Goyal, Thinqwise Wealth Managers

    Question. What is the revenue base for Isgec Titan, and what is the plan for the new Global Industrial Services division — current base and margin profile?

    Answer, Aditya Puri, Managing Director. Isgec Titan did INR 102 cr in FY26, expected ~INR 150 cr in FY27. Services division carved out from existing O&M, retrofit, spares work because smaller orders were losing attention to bigger boilers. Expectation to double existing O&M base in two years. Margin profile is slightly higher than core.

    Follow-up. Could you expand on the defence, nuclear and contract manufacturing opportunity?

    Answer. Contract manufacturing growing across defence, nuclear, hydro and steel. Provides hedge to auto-linked press business (which is ~70% dependent on auto sector). Profitable on its own and utilises capacity when auto demand softens.

Topic by topic, in the order it was spoken

In their words