Pitti Engineering Limited Q3 FY26 Earnings Call Summary

Summary

Pitti Engineering Limited - Q3 FY26 Earnings Call Summary Friday, February 6, 2026 4:00 PM

Event Participants

Executives 1 Akshay Pitti (Managing Director and CEO)

Analysts 6 Abhijit Mitra, Avnish Tiwari, Balasubramanian, Meet Rachchh, Mohit Jain, Rahul Kumar, Ravidrnath Naik

Financials & KPIs

Geographic & Segment Commentary

• Railways: Remained a primary growth driver contributing 31.9% of total revenue. Performance is split between domestic supply and international supply chains for traction motors.
• Power Generation & Data Centers: Power generation contributed 14.4% of revenue, while data centers grew significantly to 3.7% of total revenue (up from 2.7% QoQ). Management expects 25-30% medium-term growth in data centers, primarily supplying stators and rotors for Cummins’ DG sets.
• Exports: Contributed 28% of total revenue for 9M FY26. While Q3 saw a seasonal lull due to supply chain realignments, the reduction in US tariffs on Indian steel (from 50% to 18%) is expected to improve export competitiveness and hasten new customer acquisition.

Company-Specific & Strategic Commentary

• Value-Added Mix: Focus is shifting toward integrated products and machine-shaft assemblies to combat high manufacturing costs in Western markets. High-value assemblies contributed to higher revenue realizations but lower gross margins due to expensive raw materials.
• Inventory & Working Capital: Management has secured BIS-approved steel supplies from Korea and Japan, allowing for the liquidation of ₹200 crores in excess inventory by April 2026.
• Export Strategy: PEL is adopting a symbolic “pain-sharing” approach with US customers regarding tariffs while focusing on reducing net costs by increasing value-add in India rather than the US.
• Factoring Receivables: The company is initiating factoring of export receivables to release working capital and reduce finance costs by an estimated ₹15 crores in FY27.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Data Center Potential

• Question: What is the presence in the data center value chain and market share? (Meet Rachchh)
• Answer: PEL manufactures stators and rotors for DG sets, holding a 90%+ market share with its main customer, Cummins. The segment has a ₹100-₹120 crore annual opportunity. (Akshay Pitti)

US Tariff Impact

• Question: How does the reduction in US tariffs from 50% to 18% change the competitive landscape? (Rahul Kumar)
• Answer: It makes India more competitive against China and Vietnam. While the benefit is recent, it will hasten the acquisition of two “on-the-fence” US customers in the pipeline. (Akshay Pitti)

Inventory Liquidation

• Question: Can you quantify the inventory reduction and impact on finance costs? (Mohit Jain)
• Answer: Inventory will drop from ₹500 crores to ₹300 crores by April. This is expected to reduce finance costs by ₹15 crores in FY27. (Akshay Pitti)

Export Market Mix

• Question: What is the outlook for new export customers in the next 3 years? (Avnish Tiwari)
• Answer: Four new customers in the pipeline could add $10 million to $15 million in revenue over 2-3 years, specifically in the NEMA motors segment. (Akshay Pitti)

Key Takeaway

Pitti Engineering delivered a resilient Q3 FY26, with total income rising 15% YoY to ₹484.3 crores and EBITDA margins expanding to 17.5%. The performance was characterized by a healthy product mix where railways and power generation remained dominant, while data centers emerged as a high-growth niche now contributing 3.7% of revenues. Strategically, the company is transitioning from lamination manufacturing to providing integrated value-added assemblies, which is expected to support a steady 17% EBITDA margin. To address working capital pressures, management has secured BIS-certified steel sources in Korea and Japan, targeting a ₹200 crore inventory reduction by April 2026 and a ₹15 crore reduction in finance costs for FY27. With a ₹150 crore capex program nearing completion and favorable US tariff reductions for Indian steel (50% to 18%), Pitti Engineering is well-positioned to scale toward its FY27 revenue target of over ₹2,000 crores.