ISGEC Heavy Engineering Ltd. Q3 FY26 Earnings Call Summary

Summary

ISGEC Heavy Engineering Ltd. - Q3 FY 2026 Earnings Call Summary Tuesday, February 10, 2026, 4:00 p.m. IST

Event Participants

Executives 2 Aditya Puri (Managing Director), Kishore Chatnani (Joint Managing Director & CFO)

Analysts 7 Abhishek Kumar (Neste Wealth LLP), Digant Haria (GreenEdge Wealth), Hiten (Sequent Investments), Manish Goyal (ThinQwise Wealth Managers), Mohit Kumar (ICICI Securities), Nidhi Shah (ICICI Securities), Renjith Sivaram (Mahindra Manulife Mutual Funds)

Financials & KPIs

Geographic & Segment Commentary

• Manufacturing & Machine Building: Segment saw margins of 15.5% this quarter, though management targets double-digit margins sustainably. Strategic focus is on expanding revenue from ₹400 crores to ₹1,000 crores per year via phased capex. Primary drivers include automobile presses, forging presses, and emerging demand in defense and nuclear sectors.
• EPC & Projects: Shifting focus toward private sector (85% of order book) and shorter-cycle projects to reduce working capital intensity and milestone-based payment risks. Management noted a deliberate move away from long-duration PSU contracts to mitigate commodity price volatility.
• Exports: Export revenue reached ₹378 crores for the quarter (+166% YoY). Focus remains on high-margin international markets for boilers, sugar machinery, and presses, where better payment terms (LCs) are available.
• Philippines (Cavite Biofuel): Plant is operational at 75% capacity using sugarcane and molasses. Despite the failed sale transaction due to buyer fund mobilization issues, the asset remains classified as “held for sale” with a carrying value of ₹1,098 crores.

Company-Specific & Strategic Commentary

• Capacity Expansion (Machine Building): Board approved a cumulative investment of ₹218 crores (July 2027 completion) to scale output to ₹1,000 crores annually, targeting automobile, forging, and defense presses.
• Dahej SEZ Expansion: Revised investment to ₹110 crores (from ₹87 crores) for larger-sized skidded modules to meet domestic and export demand; Phase 1 completion by March 2027.
• Iron Castings Vertical: New machining facility approved with ₹22.6 crores outlay to provide in-house machining, adding ₹20 crores in value-addition per annum by July 2026.
• Risk Management & Hedging: Management utilizes back-to-back supplier offers to hedge commodity risks, leaving only ~10% of order value (structural steel) exposed to market fluctuations.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Margin Sustainability

• Question: Is the 15.5% manufacturing margin sustainable or a one-off? (Digant Haria)
• Answer: Margins fluctuate by quarter based on raw material costs and liquidated damages; however, a double-digit margin is the long-term target (Aditya Puri).

Philippines Asset Status

• Question: What is the current investment and operational status of the Philippines plant? (Manish Goyal)
• Answer: Total assets held for sale are ₹1,098 crores. The plant is breaking even on a cash basis and operating at 75% capacity (Kishore Chatnani).

Working Capital & Redemptions

• Question: When will the stuck retention money from FGD/NTPC projects be released? (Renjith Sivaram)
• Answer: Roughly ₹250 crores in redemptions are expected in the March quarter as projects reach 99% completion (Kishore Chatnani).

Order Book Composition

• Question: Why has the “Other” segment in the order book doubled to 21%? (Rabindra Nath Nayak)
• Answer: This represents a diversified mix of smaller orders like waste heat boilers for cement or material handling for aluminum, which aren’t classified under major headers (Kishore Chatnani).

Key Takeaway

ISGEC Heavy Engineering delivered a strong Q3 FY26, characterized by a 72% YoY increase in consolidated PBT and a robust order book of ₹8,709 crores. The company is undergoing a strategic pivot toward manufacturing and exports, evidenced by the Board’s approval of multiple capex projects totaling over ₹350 crores to scale the Machine Building and Dahej facilities. This shift has successfully de-risked the balance sheet, with private sector orders now comprising 85% of the book and net debt falling by ₹340 crores QoQ. While the failed sale of the Philippines biofuel asset remains a drag on the consolidated PAT, the plant’s operational break-even at 75% capacity provides some relief. Management maintains a conservative 7-9% revenue growth guidance for FY26 but anticipates continued margin expansion through higher capacity utilization and a shift toward shorter-cycle, high-value engineering exports.