Detailed Narrative
Q4 FY26 Performance and Full Year Overview
Shilchar Technologies reported a full year FY26 revenue from operations of INR652 crores, marking a 5% year-on-year growth. EBITDA for the year stood at INR190 crores with a 29% margin, and Profit After Tax (PAT) was INR158 crores, an 8% increase year-on-year, leading to an EPS of INR138. However, Q4 FY26 saw a dip with revenue at INR152 crores, EBITDA margin at 21%, and PAT at INR28 crores, primarily due to external factors.
Impact of External Factors: Middle East Crisis and US Tariffs
The Q4 performance was significantly affected by two external factors. Firstly, the crisis in West Asia led to logistics disruptions, deferring approximately INR35-40 crores of shipments to Middle East customers from March '26. These shipments have since resumed in April '27. Secondly, uncertainty around US tariff policy in preceding quarters moderated order intake from US customers. While tariffs were 50% last year, they have now reduced to 10%, allowing the company to regain competitiveness and secure new orders from the US market.
Capacity Expansion and Capex Plans
The company's Gavasad expansion (number three) is progressing as planned, aiming to add 6,500 MVA, increasing the total installed capacity to 14,000 MVA. This INR120 crore capital expenditure is entirely funded through internal accruals and is on track for commissioning in April '27. This new facility is expected to drive the next phase of growth from FY27-28 onwards, with the current 7,500 MVA capacity operating at almost full utilization.
Order Book and Business Outlook
Shilchar Technologies maintains a strong order book of INR452 crores as of the call date. The company has robust order visibility for FY27, targeting approximately INR800-850 crores in revenue, supported by strong inquiries from both domestic and export markets. Management expressed confidence in achieving this target, noting that the global transformer demand remains favorable, driven by investments in grid infrastructure, T&D capacity, and renewable energy build-out.
Raw Material Price Volatility and Margin Management
Gross margin compression in Q4 was attributed to a less favorable export mix and a sharp increase in raw material prices, particularly oil, which doubled in March '26, while other commodities rose by 10-25%. The company is actively engaging with customers for price revisions, with some already agreeing to the increases. Management expects margins to stabilize as new orders are quoted at higher prices reflecting current raw material costs and negotiations on existing contracts progress.
US Market Opportunity and Product Development
US exports contributed 18-19% of the company's revenue. Despite past challenges from a 50% US tariff on Indian goods, the tariff has now reduced to 10%, enabling Shilchar to compete effectively and secure new orders. The company anticipates significant growth in US exports over the next three years. Furthermore, the new facility will enable the production of higher voltage class transformers, up to 160 MVA 220 kV, expanding product offerings beyond the current 132 kV class.