Summary
Gala Precision Engineering Limited - Q3 FY2026 Earnings Call Summary Friday, February 06, 2026 4:00 PM
Event Participants
Executives 3 Balkishan Jalan (Whole Time Director), Satish Kotwani (Whole Time Director), Srinivasan Giridhar (CFO)
Analysts 8 Ajit Sethi, Darshan, Dhimit Mehta, Hiral, Jimit Mehta, Krupa, Manasvi Sharma, Nishchay Desai, Reeti Patel, Rohan Kapani, Stuti Agarwal, Vishal Maru
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹75 crores | +47% YoY; Driven by strong demand in SFS and scaling of Chennai facility. |
| EBITDA | ₹15 crores | +90% YoY; Margins at 13.12% (+387 bps YoY) aided by exchange gains and lower personnel costs. |
| Net Profit (PAT) | ₹8 crores | +57% YoY; Impacted by ₹1.64 crore one-time items; PAT margin at 10.56%. |
| Debt | ₹40.72 crores | Increased finance costs due to working capital requirements for growth. |
| Order Book | ₹85 crores | Reflects regular inflows from OEMs with 3-6 month visibility. |
| Segment Mix (9M) | 48% DSS, 35% SFS, 17% CSS | SFS (Special Fastening Solutions) remains the primary growth engine. |
Geographic & Segment Commentary
- Special Fastening Solutions (SFS): Revenue grew 149% YoY in Q3, driven by high-tensile bolt production at the new Chennai facility and increased wallet share with wind turbine OEMs. The segment is diversifying into off-highway equipment, tractors, and railways.
- Disc Springs & Washers (DSS): Sales grew 37% YoY in Q3, supported by a significant jump in export contribution from 44% to 51%. This segment remains a stable, recurring volume base for the company.
- Geographic Reach: Exports contribute 35-40% of total revenue, with Europe (20%) and the USA (14%) being the primary international markets. Management aims to maintain this mix while stabilizing new products in the domestic market first.
Company-Specific & Strategic Commentary
- Chennai Facility Expansion: Phase 1 is at peak utilization; Phase 2 expansion is slated to commence in Q1 FY27 with a planned CAPEX of ₹9-10 crores to reach a total plant revenue potential of ₹110-120 crores.
- Renewable Energy Focus: Concluded price agreements with four leading wind turbine OEMs for new bolt products; management targets a 15-20% domestic market share in wind fasteners over 2-3 years.
- Sustainability Initiative: Initiated a 1.8 MW solar power plant for captive consumption (₹6.2 crore CAPEX), expected to reduce annual power costs by 15-20% upon completion within six months.
- Digital Transformation: Migrating to SAP HANA in FY27 with a ₹3.48 crore five-year commitment to improve operational efficiency and scalability.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | 28% for FY26; 20-25% for FY27 | Driven by new product approvals and scaling of the SFS segment. |
| EBITDA Margins | 17% - 19% | Management expects margins to stabilize as capacity utilization improves and one-offs subside. |
| Capacity Utilization | Phase 2 start Q1 FY27 | Expansion at Chennai to meet rising demand from renewable and industrial sectors. |
Risks & Constraints
| Risk | Context |
|---|---|
| Regulatory/Labor Costs | A ₹9.4 million one-time provision was made this quarter due to the new Labor Code notification, impacting short-term PAT. |
| Export Incentives | Reversal of ₹7 million (RoDTEP) due to withdrawal of benefits for certain fastener products; management has corrected the claiming process. |
| Trade Tariffs | Section 232 of US trade law continues to impose a 25% tariff on Indian springs and fasteners, limiting immediate upside in the US market despite other tariff reductions. |
Q&A Highlights
Operational Performance & One-offs
- Question: Why was the P&L flat compared to the previous quarter despite EBITDA expansion? (Hiral)
- Answer: Profitability was hit by ₹1.64 crores in one-time items: ₹94 lakhs for Labor Code retirement benefits and ₹70 lakhs reversal of RoDTEP income (Srinivasan Giridhar).
Chennai Plant & Capacity
- Question: When will Phase 2 of the Chennai plant commence? (Darshan)
- Answer: Phase 1 is at peak utilization; Phase 2 will start in Q1 FY27. Total fastener revenue potential across Wada and Chennai is approximately ₹200-220 crores (Balkishan Jalan).
New Product Development
- Question: What is the status of seat retractor springs? (Darshan)
- Answer: Testing and validation are complete. Pilot lots are expected in Q4 FY26, with a month-on-month ramp-up starting in Q1 FY27 (Balkishan Jalan).
US Market Dynamics
- Question: Will the reduction in US tariffs impact demand? (Darshan)
- Answer: Currently, no. Gala’s products fall under Section 232, which still carries a 25% tariff for India. Only a reduction in this specific section would trigger demand improvement (Balkishan Jalan).
Key Takeaway
Gala Precision Engineering delivered a robust Q3 FY26 with 47% revenue growth, although reported PAT was tempered by ₹1.64 crores in one-time regulatory and incentive reversals. The Special Fastening Solutions (SFS) segment is emerging as a powerful growth driver, particularly through the new Chennai facility which contributed ₹11 crores in its first full quarter of scaling. Structurally, the company is shifting toward higher-value products like high-tensile bolts for wind OEMs and diversifying into electrolyzers and tractor implements. With Phase 2 expansion at Chennai starting in Q1 FY27 and a clear roadmap for 20-25% sustainable growth, Gala is well-positioned to capitalize on the renewable energy upcycle. Investors should monitor the stabilization of inventory days and the impact of Section 232 US tariffs on future export momentum.
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