Summary
Pennar Industries Limited - Q3 FY26 Earnings Call Summary Monday, February 16, 2026 11:00 AM IST
Event Participants
Executives 4 Aditya Rao (Vice Chairman and MD), K.M. Sunil (VP Investor Relations), Manoj (VP Corporate Planning), Shrikant Bhakkad (CFO)
Analysts 11 Aniket (CRK), Aniket Nikumb (ABN Capital), Ankit (Individual Investor), Ashish Soni (Family Office), Avnish Tiwari (Vaikarya), Chetan Kumar (Coheron Wealth), Deepak Poddar (Sapphire Capital), Miraj Shah (CJ Shah), Nitin Jain (Fair Value Equity Advisor), Prateek Bhandari (AART Ventures), Shubhankar Gupta (Equitree Capital), Sudarshan Bajoria (Individual Investor), Vedant (MAS Investments)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹959.02 crores | +13.3% YoY; Driven by Diversified Engineering (+25.19%) and US subsidiary growth. |
| EBITDA | ₹98.54 crores | +7.2% YoY; Impacted by higher manpower and subcontracting costs. |
| PAT | ₹33.55 crores | +10.14% YoY; Impacted by ₹4 crores in one-time labor-related provisions. |
| PAT Margin | 3.56% | -10 bps YoY; Adjusted for one-offs, margin would have been ~4%. |
| Finance Cost | ₹23.85 crores | +13.6% YoY; Represents 3.56% of net revenue, primarily due to TELCO acquisition and higher working capital. |
| ROCE | 21.3% | Sustained high returns driven by shift toward high-margin engineered products. |
| Working Capital Days | 76 days | Slight increase due to revenue timing in specific segments; target reduction in Q4. |
| PEB India Order Book | ₹810 crores | Remained strong; labor issues resolved late Q3, enabling higher execution in Q4. |
| US Order Book | $62 million | Includes $52M for buildings and $10M for Ascent Structural (TELCO acquisition). |
Geographic & Segment Commentary
- PEB (India): Revenue remained stable but was constrained by labor shortages and capacity utilization issues earlier in the quarter. Management confirmed labor issues are now resolved with new housing and skilled manpower sourcing in place. Capacity utilization at the Raebareli plant is at 60%, targeted to reach 70% by Q4.
- PEB (USA): The segment saw strong double-digit growth, bolstered by the TELCO (Ascent Structural) asset acquisition. Order backlog increased significantly to $62 million combined, with data centers and warehouses serving as primary demand drivers.
- Diversified Engineering: This segment grew 25.19% YoY to ₹520.31 crores, led by strong performance in the Steel BU, Boilers, and BIW (Body-in-White) sectors. The boiler division specifically saw an order backlog surge to ₹123 crores.
Company-Specific & Strategic Commentary
- TELCO Acquisition Integration: The asset purchase of TELCO (now Ascent Structural) was completed in late Q2; integration of systems and order transfers delayed material contribution in Q3, but it is now generating ₹18-20 crores in monthly orders.
- Hydraulics Recovery: Import duty in the US for specific components was reduced from 50% to 18%, leading to an expectation that the hydraulics order backlog will more than double in the coming weeks.
- Cost Management: The company recognized ₹4 crores in one-time costs related to New Labor Code compliance, a Chennai High Court order for union settlements, and wage revisions.
- Pass-Through Mechanism: Management reinforced that they operate on a near-perfect pass-through model for steel price volatility, protecting operating margins through quarterly rate contracts and escalation clauses.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| PAT Growth | 20%+ YoY | Management maintains a target of double-digit profit growth north of 20% for FY26/27. |
| PAT Margin | 7.00% | Target to be achieved over the next 2-3 years through a mix shift toward high-margin verticals. |
| Revenue Run Rate | ₹200-220 crores/month | Combined peak capacity revenue potential for PEB (India + US) at 80% utilization. |
| Tax Rate | ~25.50% | Guidance for sustainable consolidated effective tax rate. |
Risks & Constraints
| Risk | Context |
|---|---|
| Labor Availability | Previous quarters were impacted by manpower shortages in the PEB India segment; while resolved, maintaining skilled labor remains critical for 70%+ utilization. |
| Commodity Volatility | While pass-throughs exist, rapid steel price changes can impact short-term revenue and working capital requirements. |
| US Macro/Tariffs | Continued growth in US metal buildings depends on stable sectoral tariffs and demand for warehouses/data centers. |
Q&A Highlights
Labor Issues & One-offs
- Question: What were the specific one-time costs impacting PAT? (Deepak Poddar)
- Answer: Total impact was ~₹4 crores, comprising New Labor Code compliance provisions, a legacy union settlement court order from 10-12 years ago, and wage revisions (Shrikant Bhakkad).
PEB Execution & Growth
- Question: Why was PEB revenue flat despite a strong order book? (Aniket Nikumb)
- Answer: Capacity utilization was lower due to labor bottlenecks and a delay in the TELCO order transfer. Both are now fixed, and January saw ₹200 crores in incremental order bookings for PEB India alone (Aditya Rao).
US Market Strategy
- Question: How can a small player like Pennar scale in the competitive US market? (Vinod Krishna)
- Answer: US revenue has grown from $20M to a projected $110-120M in 5 years. Focus is on “Design-Manufacturer” (DM) relationships and the new “Express Plus” automated line for faster cycle times (Aditya Rao).
Margin Trajectory
- Question: When will the company hit 5% and eventually 7% PAT margins? (Vinod Krishna)
- Answer: Adjusted for one-offs, PAT margin is currently ~4%. Expect consistent improvement to reach 7% within 2-3 years as high-margin engineering services and boilers scale (Aditya Rao).
Key Takeaway
Pennar Industries reported a steady Q3 FY26 with 13.3% revenue growth, although PAT was temporarily suppressed by ₹4 crores in non-recurring labor provisions. The Diversified Engineering segment was the primary growth engine (+25%), while the core PEB India business overcame significant labor bottlenecks that had hampered previous quarters. Strategically, the company is successfully integrating the TELCO acquisition in the US and benefiting from reduced US tariffs in the Hydraulics segment. Management reaffirmed its commitment to 20% annual profit growth and a long-term 7% PAT margin target, supported by a consolidated order book exceeding ₹1,300 crores. With labor issues resolved and new capacity in the US and Raebareli scaling up, the company enters Q4 with strong execution visibility across all five key growth vectors.
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