Shilchar Tech. — Q4 FY25 earnings call

Call held 22 Apr 2025

Management summary

Shilchar Technologies delivered its strongest quarterly and annual performance in Q4 FY25, reaching full capacity utilization ahead of schedule. The company announced a final dividend and a bonus issue, which will also enable its NSE listing. Management is optimistic about FY26, targeting ₹750 crores in sales, and is actively planning further capacity expansion while navigating potential industry-wide competition and geopolitical trade dynamics.

Highlights

  • Reported highest-ever top line and bottom-line performance for Q4 and FY25.

  • Achieved full capacity utilization in Q4 FY25, well ahead of the original FY26 target.

  • Maintained healthy gross margins, leading to improved EBITDA and net profits.

  • Recommended a final dividend of ₹12.5 per equity share and approved a 1:2 equity bonus issue.

  • Targeting ₹750 crores in sales for FY26, representing 20-25% growth.

Concerns

  • Potential impact of new US administration's reciprocal tariffs, though management expects minimal impact due to diversification.

  • Risk of oversupply and pricing erosion in the transformer industry due to widespread capacity expansion by peers.

  • High trade receivables, though management clarifies it's LC-backed and earning interest, not a liquidity concern.

Key financials

  1. Revenue ₹230 Cr
  2. EBITDA Margin 31%
  3. Dividend per Share ₹12.5

What they filed

Q1 FY27: revenue down 15.1%, net profit down 48.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue131 154 232 159 171 +31%170 +10%152 −34%135 −15%
EBITDA41 43 71 52 54 +32%52 +21%32 −55%22 −58%
Net profit33 35 55 41 46 +39%42 +20%28 −49%21 −49%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹400 Cr

as of 2025-03-31 quantified

Execution

Company aims for shorter lead times than industry average due to efficiency.

Composition

Mix 4 geographies
  • Export 44%
  • Domestic 56%
  • North America (Export) 8.8%
  • Middle East and North Africa (Export) 35.2%

Share of order book by geography· categories overlap, and sum to 144%

Order book is healthy and provides good visibility, with strong demand from both domestic and export markets.

Source: Q&A

Capital allocation

high confidence
  • Capex Capex disclosed
    • Capacity expansion from 4,000 MVA to 7,500 MVA, commissioned in FY25
    • Future capacity expansion, currently in planning stages for higher MVA and kV class transformers
    we did increase our capacity from 4,000 MVA to 7,500 MVA and that was only in this year. So, further expansion we will be doing it.
  • Debt Gross ₹0 Cr · Net ₹0 Cr · 0.0× EBITDA
    our cash flow situation is very good and we are totally a debt-free company, we have surplus funds.
  • Dividend ₹12.5/share (final)
    The Board has recommended a final dividend of Rs. 12.5 per equity share, subject to shareholders’ approval.
  • Liquidity Liquidity disclosed Company has surplus funds and good cash flow, allowing it to hold LC-backed receivables for interest income.
    Because we have surplus fund, we do not encash the LCs. So, that is why the number looks bigger, but actually it is not an outstanding, we are earning interest out of that.

Guidance & targets

Revenue

  • Sales Revenue · FY26 · High confidence ₹750 crores
    Yes, that's the plan. So, for this coming year, Year ‘25-‘26, we are targeting around Rs. 750 crores in sales in top line.

    — Alay Shah

Revenue Growth

  • Sales Growth Revenue Growth · FY26 · High confidence 20-25%
    Yes, some 20%, 25%, yes.

    — Alay Shah

Profitability

  • EBITDA Margin Profitability · Ongoing · Medium confidence maintain ~31% or improve
    Like I said, we will try our best to maintain this, or maybe even improve it, why not.

    — Alay Shah

Capacity Utilization

  • Capacity Utilization Capacity Utilization · FY26 · High confidence full utilization
    We will try and fully utilize the capacity what we have created in last year during the entire year.

    — Alay Shah

Corporate Action

  • NSE Listing Corporate Action · after bonus issue · High confidence apply for listing
    So, that plan is already, for NSE listing we need to have a minimum Rs. 10 crores of paid up capital, which we will be eligible by giving this bonus share. So, once the bonus shares are issued, our authorized capital will be to Rs. 11.44 crores. And after that, we will be applying to NSE for the listing.

    — Alay Shah

What to watch in Q1 FY26

NSE Listing Application

next quarter
Current Bonus issue approved, authorized capital to be increased to Rs. 11.44 crores.
Target Application submitted to NSE.

Why it matters

Fulfils a long-standing investor request and could improve liquidity and visibility for the stock.

So, that plan is already, for NSE listing we need to have a minimum Rs. 10 crores of paid up capital, which we will be eligible by giving this bonus share. So, once the bonus shares are issued, our authorized capital will be to Rs. 11.44 crores. And after that, we will be applying to NSE for the listing.

Risks & concerns

  • US Tariffs on Transformers

    medium

    New US administration's reciprocal tariffs could impact exports, but management notes North American sales are less than 20% of total revenue and they are diversified.

    Analyst downplayed

  • Oversupply and Pricing Erosion due to Industry Capacity Expansion

    medium

    Many peers are expanding capacity, potentially leading to oversupply and competitive intensity in 2-3 years, though management is confident in maintaining margins through efficiency.

    Analyst acknowledged

  • Delay in Capacity Expansion leading to Loss of Revenue/Orders

    low

    Expansion plans are still being finalized, which could take 12-18 months to go live, but management believes they can market and acquire orders before the plant is ready, preventing revenue loss.

    Analyst not addressed

Q&A highlights

7 direct
NSE Listing timeline and prerequisites Direct
So, that plan is already, for NSE listing we need to have a minimum Rs. 10 crores of paid up capital, which we will be eligible by giving this bonus share. So, once the bonus shares are issued, our authorized capital will be to Rs. 11.44 crores. And after that, we will be applying to NSE for the listing.

Clarifies the company's plan for NSE listing, linking it to the recently approved bonus issue and increased authorized capital.

Asked by Abhi Jain

Risk mitigation for US tariffs and reliance on US market Direct
we are very confident that our business will not be that much affected with those tariffs. I mean, we are very well placed in terms of our product, our quality, our service with our customers. Also, the North American sales is only like less than 20% of our total revenue, so rest is all other countries and domestic market. So, there will not be any significant impact.

Addresses a key geopolitical risk, with management highlighting market diversification and confidence in their competitive position.

Asked by Abhi Jain

Probabilistic capacity expansion plans for the next 12-18 months Partial
So, we have still not finalized the concrete plan, but we are already working on the expansion that how we would like to do it, until what capacity we want to do it, and what is the maximum rating which we would like to have with this new capacity. Everything is going on in detail and we are also working on the budgeting, what will be the cost, what will be the land area which will be required and all those things. Once everything gets finalized and once we are ready to start the expansion project, we will definitely come back to all our shareholders and give presentation with complete details.

Indicates active planning for future growth drivers, but specifics are not yet ready, suggesting a potential delay from previous expectations.

Asked by Abhi Jain

Backward integration strategy (CRGO lamination) Direct
So, personally I feel that this backward integration is not required at all because there are enough suppliers of laminations very close to our city, Vadodara. And we are able to get, we never face any shortage or any problems of lamination from any of them. So, personally, I feel that we should concentrate on our product consumer and not its raw material (Inaudible) 22:57 in house where our model is only to manufacture transformer and get everything from outside.

Clarifies the company's strategic focus away from raw material integration, contrasting with some peers and emphasizing core manufacturing.

Asked by Prolin Nandu

Sustainability of Q4 revenue (Rs. 220 crores) and impact of tariffs Direct
So, first of all, I mean, that tariff issue started only from first week of April and we cannot pull up numbers in anticipation of tariffs in last year. So, that is an assumption on your side. But I mean, if you look at our track record, I mean, since last 11 quarters we have been performing very consistently as far as our margins are concerned. And I am sure that we will continue to do that. That will be our goal to maintain this profitability and also improve it.

Addresses concerns about one-off revenue spikes and reinforces management's confidence in sustained performance and margins, dismissing tariff-driven pre-buying.

Asked by Arpit Shah

Increase in trade receivables and LC-backed payments Direct
The majority of the sales which has come from last quarter, and we have the terms of LC with all our customer with 180 days of payout. And we can encash this LC if we need the funds, but we do not do it and we wait for 180 days to receive the fund which we get it with interest. Because we have surplus fund, we do not encash the LCs. So, that is why the number looks bigger, but actually it is not an outstanding, we are earning interest out of that.

Explains the nature of high receivables, indicating it's a strategic choice for earning interest due to surplus funds, rather than a collection or liquidity issue.

Asked by Shantanu Basu

Forex exposure hedging strategy Direct
Yes. Because, I mean, hedging is always a bit risky and we hardly import anything. So, it is only an inflow of foreign currency for us. The outflow is very less. So, we do not hedge. And if you see last two, three years of our record, I mean, we have always gained foreign since currency, we have never lost money.

Reveals the company's forex management strategy, which relies on natural hedges and past positive experience, avoiding active hedging.

Asked by Arya Singh

Lead times in the transformer industry and competitive advantage Direct
So, I think, the lead time still remains the same in the power transformer industry. But the advantage with us is that, again, I am repeating the same thing, we have been very efficient and very on demand on the situation where we are able to deliver our transformer with shorter lead time, and that gives us an advantage with our customers.

Highlights the company's competitive advantage through efficient execution and shorter lead times, differentiating it from industry norms.

Asked by Gunjan Kabra

2 min read 6 chapters

Detailed narrative

Strong Q4 & FY25 Performance with Record Highs

Shilchar Technologies reported its highest-ever top line and bottom-line performance for Q4 and the full financial year ended March 31, 2025. The company achieved full capacity utilization in Q4, significantly ahead of its original FY26 target. This robust performance was driven by strong revenue growth and healthy gross margins, leading to improved EBITDA and net profits for the period.

Strategic Capacity Expansion and Future Growth Outlook

Following the successful commissioning of its latest capacity expansion in August, Shilchar is now operating at full utilization. Management is actively planning a further capacity expansion, considering higher MVA and kV class transformers, with details on cost, land, and specific capacity to be announced once finalized. The company aims for ₹750 crores in sales for FY26, representing a 20-25% growth, and plans to fully utilize its current capacity throughout the year.

Shareholder Returns and NSE Listing Initiative

The Board recommended a final dividend of ₹12.5 per equity share for FY25, subject to shareholder approval. Additionally, a 1:2 equity bonus issue was approved, which will increase the authorized capital to ₹11.44 crores. This bonus issue is a prerequisite for applying for listing on the National Stock Exchange (NSE), a long-standing plan for the company.

Diversified Market Presence Mitigates US Tariff Risks

Management addressed concerns regarding potential US tariffs on transformer exports, stating that North American sales constitute less than 20% of total revenue, with the majority of exports going to the Middle East and North Africa. The company expressed confidence that any tariffs would not significantly impact its overall business due to its diversified market presence and strong product quality.

Efficient Working Capital Management and Order Book Strength

The company's trade receivables increased due to a strategic decision to hold LC-backed payments for 180 days, earning interest on surplus funds rather than encashing them early. This indicates strong liquidity and a debt-free balance sheet. The current order book stands at approximately ₹400 crores, providing good revenue visibility, with management confident in sustained performance.

Operational Efficiency and Margin Sustainability

Shilchar Technologies maintains strong EBITDA margins, reaching approximately 31% in Q4 FY25, which management attributes to efficient operations and low overheads. Despite industry-wide capacity expansions by peers and potential pricing pressures, the company is confident in its ability to maintain or even improve these margins through continuous innovation and efficiency.

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