Summary
Electrosteel Castings Limited - Q3 FY2026 Earnings Call Summary Friday, February 06, 2026 4.00 pm IST
Event Participants
Executives 4 Ashutosh Agarwal, Gaurav Somani, Madhav Kejriwal, Sunil Katial
Analysts 5 Eshaan Kulshreshtha, Rajesh Agarwal, Rajesh Bhandari, Radha Agarwalla, Saket Kapoor, Ujjain Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales Volume (DI, CI, Fittings) | 1.34 lakh tonnes | -31% YoY, -3.5% QoQ; impacted by domestic demand slowdown and JJM funding delays. |
| Total Income (Consolidated) | ₹1,526 crores | Lower YoY due to reduced domestic volume, partially offset by intermediary product sales. |
| EBITDA (Consolidated) | ₹88 crores | Includes ₹28 crore railway siding provision write-back; impacted by lower realizations. |
| EBITDA Margin (Consolidated) | 5.8% | Sharp decline YoY due to product pricing pressure and lower capacity utilization. |
| PAT (Consolidated) | Loss of ₹22 crores | Significant drop from ₹145 crores in 9M; includes ₹38 crore exceptional labor law provision. |
| Net Debt (Standalone) | ₹812 crores | Reduced by ₹455 crores QoQ; aided by ₹370 crore unencumbered arbitration award. |
| Export Volume | Up 11% QoQ | Strengthened overseas performance partially offset domestic weakness. |
| Order Book | ~7 months | Management maintains visibility despite immediate administrative headwinds. |
Geographic & Segment Commentary
- Domestic Market: Subdued performance due to temporary delays in Government spending under Jal Jeevan Mission (JJM) and AMRUT. Execution slowed across central and state-funded projects, leading to a demand-supply mismatch and pricing pressure. Management views this as administrative/fiscal rather than structural, expecting a rebound starting April 2026.
- Exports & Middle East: Export volumes grew 11% QoQ with the Middle East accounting for 40% of total exports. The company claims to be the largest exporter to the Middle East, even surpassing Chinese competitors in specific segments. Realizations in export markets remain marginally better than the current depressed domestic rates.
- Valves (TIS Italy): Integration of the Italian valve acquisition is progressing with a focus on high-technology moats. The segment reported a calendar year turnover of ~€37.8 million (₹400 crores) with EBITDA margins between 12-13%. Approvals are currently being sought for expansion into Spanish, French, UK, and Middle Eastern markets.
Company-Specific & Strategic Commentary
- JJM Funding Outlook: Management expects the release of ₹17,000 crores in central shares shortly, which could trigger ₹34,000 crores in total spending (including state shares). A total allocation of ₹67,600 crores for FY27 reinforces long-term policy intent despite current irregularities being investigated by the government.
- Product Diversification: The company is aggressively moving into Ductile Iron valves and other high-tech water infrastructure products to reduce dependence on pure DI pipe cycles. Strategy focuses on expanding the “product basket” to provide a one-stop-shop for EPC contractors.
- Operational Efficiency: Active cost reduction and disciplined capital management are being used to “weather the storm.” The company utilized the domestic slump to reduce working capital and inventory levels while maintaining an on-time 50-55 day domestic collection cycle.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Demand Recovery | Q1 FY2027 (April 2026) | Expecting a rebound as JJM funds reach contractors and new tendering cycles begin. |
| Gross Margins | 30% - 35% (Medium-term) | Recovery from current lows expected as pricing stabilizes; unlikely to reach historical peaks immediately. |
| Volume Run-rate | Q4 FY2026 | Expected to be similar to Q3 (weathering the storm) before the April uptick. |
| Valve Growth | 15% - 18% YoY | Anticipated growth over the next 3-4 years following global approvals and domestic launch. |
Risks & Constraints
| Risk | Context |
|---|---|
| JJM Irregularities | Government “pause” on funds due to project execution anomalies (e.g., non-functional taps) has stalled cash flows to contractors. |
| Asset Impairment | ₹1,200 crores in coal block assets remain on books; ₹250 crore compensation is currently challenged by JSW in court. |
| Pricing Pressure | NSR (Net Sales Realization) has collapsed due to industry-wide excess stock and aggressive competitor pricing during the demand lull. |
Q&A Highlights
JJM Funding & SPARSH
- Question: What is the status of JJM payments and fresh tendering? (Rajesh Agarwal)
- Answer: ₹17,000 crores central share is pending cabinet approval. New SPARSH platform will channelize payments directly to contractors, bypassing state accounts to prevent fund diversion (Madhav Kejriwal).
Substitute Threats (OPVC)
- Question: Is OPVC a threat to DI pipes in irrigation/water projects? (Ujjain Shah)
- Answer: DI pipes remain superior for long-term O&M due to durability and hygiene (no microplastics). OPVC is only viable for smaller diameters and doesn’t align with Electrosteel’s high-pressure application focus (Sunil Katial/Madhav Kejriwal).
Coal Block Compensation
- Question: What is the outlook on the ₹1,200 crore asset write-off and JSW challenge? (Radha Agarwalla)
- Answer: The book values are based on Ministry-nominated authority scrutiny. While JSW is challenging the ₹250 crore portion, the company maintains its numbers are in good faith (Madhav Kejriwal).
Key Takeaway
Electrosteel Castings reported a challenging Q3 FY26, characterized by a 31% YoY drop in sales volumes and a consolidated loss of ₹22 crores. The performance was severely impacted by a near-complete halt in Jal Jeevan Mission (JJM) funding, which traditionally accounts for 50% of domestic demand. Despite the domestic slump, export volumes showed resilience with 11% QoQ growth, and the acquisition of the Italian valve company (TIS) provided a strategic hedge with 12-13% margins. Management effectively utilized the period to reduce net debt by ₹455 crores and inventory levels. Looking ahead, the company anticipates a demand rebound in April 2026 (Q1 FY27), supported by the government’s ₹67,600 crore budget allocation for water infrastructure. The key watch point remains the legal resolution of coal block compensations and the stabilization of domestic realizations as administrative hurdles in JJM are cleared.
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