Detailed Narrative
Strong Q2 FY26 Performance and H1 Momentum
Shilchar Technologies delivered a robust Q2 FY26, with revenue from operations reaching INR 171 crores, marking a 31% year-on-year growth. The company maintained strong profitability, with EBITDA margins at 31%, consistent with Q2 FY25 levels. Net profit for the quarter surged by an exceptional 40% year-on-year to INR 46 crores. For the first half of FY26, the company reported significant sequential growth, with top-line expanding by 39% and bottom-line by 54%.
Strategic Gavasad Expansion for 220 kV Class Transformers
A significant milestone for the quarter was the announcement of the Gavasad Expansion 3 project, the largest capacity addition in the company's history. This expansion will add 6,500 MVA, bringing the total capacity to 14,000 MVA by April 2027. The project, funded entirely through internal accruals, involves a capital outlay of approximately INR 90 crores. This new facility will enable the manufacturing of 100 MVA, 220 kV class transformers, marking a strategic entry into higher voltage segments.
Order Book and Revenue Outlook for FY26 and FY27
The company currently holds an order book of INR 300 crores. Management is confident in achieving its revised FY26 revenue target of INR 700 crores to INR 800 crores. For FY27, Shilchar Technologies is targeting revenue between INR 800 crores and INR 850 crores, representing a projected growth. The company also aims for 90-95% capacity utilization in FY26 and expects to achieve 60-70% utilization at the new 220 kV facility in its first year of operation (FY28).
US Export Business and Tariff Impact
The export business, particularly to the United States, has seen new tariff measures of 50% implemented from August 27. However, management confirmed that customers are bearing the full brunt of these duties, indicating strong underlying demand and limited competitive alternatives. Exports currently constitute about 12-15% of revenue, with the company expecting to maintain a 50% export-domestic mix for the full year FY26. Other international markets, including the Middle East, Africa, and recently Europe, remain encouraging.
Industry Demand Drivers and Sustainable Growth
Management highlighted robust demand tailwinds from the domestic power and renewable energy sector, driven by government initiatives for 100% electrification and significant solar capacity additions (21.7 GW in H1 FY26). In the US, demand is boosted by data centers and artificial intelligence. These structural drivers are expected to extend the current industry upcycle for another five to seven years, moving beyond traditional cyclical patterns. The company emphasized its focus on quality and customer relationships, which allows it to command a premium.
Capacity Expansion Strategy and Timelines
The new 220 kV class transformer facility is slated to begin taking orders in January 2027 and commence manufacturing in April 2027, with an estimated order-to-dispatch lead time of 22 weeks. Management clarified that the timing of the expansion was deliberate, aiming for sustainable growth funded by internal accruals rather than aggressive, debt-fueled expansion. They do not believe they have missed any opportunity by not expanding earlier, preferring a measured approach.