Summary
Salzer Electronics Ltd - Q3 FY26 Earnings Call Summary Thursday, February 12, 2026 11:00 AM
Event Participants
Executives 5 Jitendra Vakharia (Director, Kaycee), K M Murugesan (Company Secretary), K. Raman (CFO), R. Menaka (General Manager, Accounts), Rajesh Doraiswamy (JMD)
Analysts 8 Ankit Kapoor (Individual Investor), Arun (Individual Investor), Darshil Jhaveri (Crown Capital), Devashish Shroff (Individual Investor), Girish S (Individual Investor), Kishore Jasotani (Individual Investor), Navneet Bhaiya (Individual Investor), Rabindra Nath Nayak (Sunidhi Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹424 crores | +24% YoY; Driven by strong demand in industrial switchgear and wire harness segments. |
| EBITDA | ₹37 crores | +4% YoY; Margins compressed by 200 bps due to unprecedented spikes in silver and copper costs. |
| PAT | ₹13 crores | Flat YoY growth; Impacted by higher interest costs and commodity price volatility. |
| Industrial Switchgear Revenue | ₹236.1 crores | +12% YoY; Contributed 56% of total Q3 revenue with 12% EBITDA margins. |
| Wires & Cables Revenue | ₹165.3 crores | +49% YoY; Strong volume growth offset by high copper prices; EBITDA margins at 5%. |
| Export Revenue | ₹89 crores | 21% of total revenue; Temporarily impacted by US tariff exposure which has now been resolved. |
| Smart Meter Revenue | ₹1.25 crores | Significant lag in execution; 9M FY26 cumulative revenue stands at ₹25 crores. |
| Debt (Short-term) | Undisclosed Abs. | Management noted debt remains stable relative to March but elevated due to smart meter working capital. |
Geographic & Segment Commentary
- Industrial Switchgear: This segment remains the primary growth engine, contributing 56% of revenue. Growth is driven by three-phase dry-type transformers, wire harnesses, and new products like contactors. Management is targeting 12% margins and expects volume-led growth from data centers and renewable energy sectors.
- Wires & Cables: Experienced a massive 49% YoY revenue jump in Q3, though largely volume-driven. EBITDA margins are suppressed at 5% due to copper prices rising from ₹800 to ₹1,300 per kilo. Strategy involves scaling volumes to improve PAT margins, with a target to reach 6.5% EBITDA.
- Exports: Contribution stood at 21% for the quarter. Competitiveness is expected to rebound following the U.S.-India interim trade agreement (Feb 6, 2026), which reduced tariffs from 50% to 18%. Management is already seeing renewed inquiry levels from U.S. customers.
Company-Specific & Strategic Commentary
- Smart Metering Bottlenecks: Despite a 4 million meter annual capacity, execution has stalled due to stringent eligibility criteria for new entrants and lack of dispatch clearances from customers on existing ₹50 crore orders.
- New Product Innovation: Granted a patent for a high-voltage (1,000V) disconnecting and earthing device for railway locomotives. Temperature sensor products are under validation with Tier-2 auto OEMs with commercial supply expected in Q4 FY26.
- International Expansion: Salzer Saudi Arabia (100% subsidiary) has commenced machinery installation; commercial production is slated for June 2026.
- Infrastructure Projects: The Effilume SPV for the Bengaluru energy saving project is on track with revenue recognition expected to begin in September 2026.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | 20% YoY for FY26 & FY27 | Guidance excludes smart meters; driven by core industrial switchgear demand. |
| EBITDA Margin | 9.5% - 10.0% (FY27) | Expected improvement as operating leverage kicks in and high-margin segments scale. |
| Smart Metering | No specific guidance | Management refrained from giving numbers due to past volatility and execution delays. |
| New Products | Q4 FY26 Launch | Commercialization of temperature sensors and scaling of EV chargers (60-360 KW). |
Risks & Constraints
| Risk | Context |
|---|---|
| Commodity Pricing | Sharp rises in Silver and Copper prices impacted margins by 200 bps in Q3; price hikes are planned for Feb/March 2026 to mitigate. |
| Execution Risk | Smart meter orders are subject to DISCOM clearances and AMISP readiness, leading to underutilization of the 4mn meter capacity. |
| Leverage | Increasing short-term debt associated with working capital for new divisions is weighing on the bottom line through higher interest expenses. |
Q&A Highlights
Smart Meter Underperformance
- Question: Why has the company significantly missed past guidance on smart meters? (Arun)
- Answer: We faced stringent eligibility barriers as a new entrant and evolving tender conditions. While we have the orders and capacity, we lack dispatch clearances from certain customers for the second half of our ₹50 crore order (Rajesh Doraiswamy).
Margin Pressures
- Question: How are you addressing the 200 bps margin hit from commodity costs? (Girish S)
- Answer: Small price hikes were taken in November, but a major price hike is scheduled for February and March 2026 to counter the 3x rise in silver prices (Rajesh Doraiswamy).
Future Growth Drivers
- Question: Which segments will drive the 20% growth guidance if smart meters are excluded? (Kishore Jasotani)
- Answer: Industrial switchgear, specifically three-phase transformers and control gears, is seeing robust demand from data centers and renewables (Rajesh Doraiswamy).
Capital Structure
- Question: When will the company reduce its debt levels? (Ankit Kapoor)
- Answer: Debt will remain stable at current levels through FY26. Reduction will only begin once smart meter operations reach a steady-state run rate (Rajesh Doraiswamy).
Key Takeaway
Salzer Electronics delivered a 24% YoY revenue growth in Q3 FY26, reaching ₹424 crores, primarily fueled by a 49% surge in the Wires & Cables segment and steady demand for industrial switchgears. However, profitability was tempered by a 200 bps margin contraction due to spiking copper and silver costs, alongside persistent delays in the Smart Metering vertical which contributed only ₹1.25 crores this quarter. Strategically, the company is pivoting toward high-voltage railway components and temperature sensors while benefiting from a major reduction in US export tariffs from 50% to 18%. Management has issued a 20% revenue growth guidance for FY27, notably excluding smart meter contributions to remain conservative. While core industrial demand remains strong, the key watch points remain the successful pass-through of raw material costs via February price hikes and the commencement of the Saudi Arabian facility in mid-2026.
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