Kirloskar Oil Engines Limited (KOEL) Q3 FY26 Earnings Call Summary

Summary

Kirloskar Oil Engines Limited - Q3 FY 2026 Earnings Call Summary Thursday, February 12, 2026 3:30 p.m. (IST)

Event Participants

Executives 6 Farah Irani, Gauri Kirloskar, Kiran Bhagnure Khapre, Rahul Sahai, Sachin Kejriwal, Samrat Gupta

Analysts 9 Aditya Mongia, Amit Shah, Harsh Shah, Jason (IDBI), Krish, Mihir Manohar, Palak (MIV), Prolin Nandu, Saif Sohrab Gujar, Sourabh Arya, Umakant Sharma

Financials & KPIs

Geographic & Segment Commentary

• Domestic Power Gen: Delivered 44% YoY growth, significantly outpacing industry averages. Growth was led by the retail LHP segment and massive traction in High Horsepower (HHP), which grew 235% YoY as the company gains market share in data centers and commercial infrastructure.
• Industrial & Defence: Recorded 41% YoY growth despite temporary inventory correction in Construction & Mining. Momentum is driven by specialized segments like Nuclear and Marine; the company recently bagged a ₹798 crore NPCIL order for 6.3 MW gensets to be executed over two years.
• International Business: Reported 26% YoY growth with a focus on Middle East and Africa. Strategy involves “Capability, Capacity, and Coverage” (3Cs), including the recent incorporation of a South African entity to internalize regional operations and ongoing investments in the U.S. via Kirloskar Americas.
• Financial Services (Arka): Revenue grew 7% YoY to ₹227 crores with NIMs up 28%. Management is actively “granularizing” the book, shifting focus toward retail products like used wheel financing and small-ticket LAP across 110 branches.

Company-Specific & Strategic Commentary

• B2C Restructuring: Completed the slump sale of the B2C segment to LGM (now KOEL Fluid Dynamics) on October 10. This integration aims to unlock synergies in pumping solutions while allowing the standalone entity to focus purely on B2B engine and power solutions.
• HHP Expansion: HHP sales grew 132% YTD (9M FY26). The company is moving beyond 1,000 kVA into 2,500-3,000 kVA ranges, supported by intensive “soft skill and technical” training for sales teams and genset OEMs to navigate consultant-led buying cycles.
• Strategic Subsidiaries: Incorporated Kirloskar Advanced Systems Limited to focus on system integration for Defence and Railways, specifically handling specialized contracting and potential unmanned systems.
• Manufacturing Strategy: Executing a ₹700 crore capex plan to ramp up operations in line with the “2-by-30” strategy (aiming for $2 billion revenue by FY2030).

Guidance & Outlook

Risks & Constraints

Q&A Highlights

HHP Market Penetration

• Question: How is KOEL making inroads with consultants for HHP? (Aditya Mongia)
• Answer: KOEL is running development programs for frontline teams and OEMs focused on technical and negotiation skills. The “Optiprime” multi-engine solution requires significant groundwork and witnessing by consultants, which is now yielding traction. (Kiran Khapre, Gauri Kirloskar)

Industrial Segment Drivers

• Question: What is driving the 41% growth in Industrial? (Palak)
• Answer: Success is due to a long-term Key Account Management strategy and identifying white spaces in Defence and Marine. This growth is broad-based and does not yet include the recently won ₹798 crore NPCIL order. (Gauri Kirloskar, Rahul Sahai)

Margin Volatility

• Question: Why did EBITDA margins dip sequentially? (Prolin Nandu)
• Answer: The QoQ dip was primarily due to product mix changes and a loss of operating leverage compared to the previous quarter. (Sachin Kejriwal)

Arka Book Strategy

• Question: What is the current retail vs. wholesale split? (Umakant Sharma)
• Answer: The wholesale book is ₹2,600 crores of the ₹7,600 crore total AUM. Pure retail (LAP and used vehicles) is currently ₹328 crores, with plans to scale this institutionally. (Samrat Gupta)

Key Takeaway

KOEL delivered a record-breaking Q3 FY26, with standalone revenue increasing 35% YoY to ₹1,371 crores and consolidated net profit surging 90%. The performance was characterized by double-digit growth across all business units, most notably a 235% jump in High Horsepower (HHP) Power Gen and a 41% rise in Industrial sales. Strategically, the company completed the B2C slump sale to LGM to streamline focus, while diversifying its industrial footprint through the newly formed Kirloskar Advanced Systems. Management remains committed to its long-term target of $2 billion revenue by FY2030, supported by a ₹700 crore capex plan and a shift toward high-margin aftermarket and export markets. While sequential margins saw a slight dip due to mix, the robust order book in Nuclear/Defence and increasing market share in HHP position the company for a strong close to the fiscal year.