Aaron Industries Limited — Q2 FY26 earnings call

Call held 19 Nov 2025

Management summary

Aaron Industries reported healthy operational performance in Q2 and H1 FY26, with strong YoY revenue and EBITDA growth driven by improved volumes and demand. However, profitability was impacted by higher finance costs, depreciation from recent capacity enhancements, and increased tax outflow. The company attributes H1 project delays to an extended monsoon but expects a stronger H2, focusing on sales expansion, operational efficiency, and new market exploration to leverage its increased capacity.

Highlights

  • Q2 FY26 Revenue from operations grew by 15.60% QoQ and 21.59% YoY, supported by improved volumes and continued demand.

  • Q2 FY26 EBITDA stood at ₹4.18 crore, reflecting an improvement of 12.97% QoQ and 27.80% YoY.

  • H1 FY26 Revenue from operations increased to ₹41.48 crore, a growth of 16.90% YoY.

  • H1 FY26 EBITDA for the period stood at ₹7.88 crore, higher by 19.02%, with EBITDA margin improving to 18.98%.

  • Q2 FY26 PAT came in at ₹1.39 crore, showing a strong 31.70% QoQ improvement.

Concerns

  • H1 FY26 PBT was ₹4.57 crore, lower by 10.61% YoY, primarily due to higher interest and depreciation costs.

  • H1 FY26 PAT stood at ₹2.45 crore, compared to ₹3.69 crore in the previous year, impacted by higher tax and finance costs.

  • Q2 FY26 PBT was marginally lower YoY due to higher finance costs.

  • Project execution in H1 FY26 was delayed due to an unexpected long monsoon season.

Key financials

2 periods

Q2

  • Revenue Growth QoQ
    —
    QoQ +15.6%
  • Revenue Growth YoY
    —
    YoY +21.6%
  • EBITDA
    ₹4.18 Cr
    YoY +27.8% QoQ +13%
  • EBITDA Margin
    18.8%
  • PBT
    ₹2.49 Cr
    QoQ +20.1%
  • PAT
    ₹1.39 Cr
    QoQ +31.7%

H1

  • Revenue
    ₹41.48 Cr
    YoY +16.9%
  • EBITDA
    ₹7.88 Cr
    YoY +19%
  • EBITDA Margin
    19%
  • PBT
    ₹4.57 Cr
    YoY -10.6%
  • PAT
    ₹2.45 Cr

What they filed

Q1 FY27: revenue up 27.0%, net profit up 141.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue18 18 24 19 22 +22%23 +27%27 +13%24 +27%
EBITDA3 3 5 4 4 +28%5 +48%5 +1%5 +35%
Net profit2 2 3 1 1 −24%2 +12%2 −16%3 +142%
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.

Capital allocation

high confidence
  • Capex Capex disclosed
    • Capacity enhancements and new facility (Unit 3 Kosamba plant) ₹35 Cr
    Actually, considering the first half of the performance of the company is really not very encouraging, because if I see the presentation, even the last presentation, the market size and our company size, you know that it is very small, correct? And we have done the CAPEX of around 35 Cr.
  • Debt Debt disclosed
    PBT remained marginally lower due to higher finance costs.

Guidance & targets

Revenue

  • FY26 Revenue Growth Revenue · FY26 · Medium confidence at least 25%
    I think in the last meeting, you have added that this year we will be able to achieve at least a 25% growth. However, if I compare this H1 from the previous H1, the growth is only 17%, and that's why the elevated cost deteriorated our bottom line. So, can you explain that going forward, H2 will be much better than H1, or how, the company is scaling up? ... No, no, definitely, we are having a hope for this, and in the next half year, we'll be able to see a better progress than this.

    — Monish Doshi

Sales Volume

  • Doors per month sales Sales Volume · by end of FY27 · High confidence 3,500

    From 1,500 today

    our target is that within, like, 1 or 2 years, by the end of financial year 27, we'll be reaching around 3,500 doors per month in sales.

    — Monish Doshi

Margin

  • EBITDA Margin Margin · as utilization increases · Medium confidence 22-23%

    From 18.78% today

    we can see our EBITDA margin increase to even 22-23% as our utilization increases in the new capacity, right? ... Yeah, definitely. Our focus is on that only. By increasing the productivity and also by implementing automization, we want to achieve higher margins on that only.

    — Monish Doshi

Profitability

  • Unit 3 Break-even (clearing interest costs) Profitability · from Q2 FY26 · High confidence 3 to 4 years
    for the break-even point, I think it will take around 3 to 4 years for us to completely clear of the Interest costs and everything

    — Monish Doshi

Debt

  • Clear interest costs (Unit 3) Debt · by 2029 · High confidence by 2029
    for the interest part, we are targeting that we'll be able to clear it by 2029.

    — Monish Doshi

Other

  • Export Business Establishment Other · within 6 or 7 months · High confidence continuous business
    Our products have gone there, so... and we are even participating in one of the exhibitions in Kenya. So, that should take at least 6 or 7 months more for us to get continuous business from there.

    — Paresh Naik

What to watch in Q3 FY26

FY26 Revenue Growth

Next quarter (Q3 FY26) and H2 FY26
Current H1 growth 16.90% YoY
Target Achieve 25% growth for FY26

Why it matters

Key indicator of whether the company can recover from H1 project delays and meet its annual guidance.

However, if I compare this H1 from the previous H1, the growth is only 17%, and that's why the elevated cost deteriorated our bottom line. So, can you explain that going forward, H2 will be much better than H1, or how, the company is scaling up? ... No, no, definitely, we are having a hope for this, and in the next half year, we'll be able to see a better progress than this.

Risks & concerns

  • Project execution delays due to monsoon

    medium

    An unexpected long monsoon season in H1 FY26 delayed execution of many projects, impacting H1 growth.

    Management acknowledged

  • Higher finance costs impacting profitability

    medium

    Higher finance costs, linked to recent capacity enhancements, led to lower PBT and PAT in H1 FY26.

    Management acknowledged

  • Higher tax outflow impacting PAT

    medium

    A significantly higher tax outflow during Q2 FY26 contributed to lower YoY PAT.

    Management acknowledged

  • Margin pressure from Tier 1 customers

    medium

    Tier 1 customers typically squeeze suppliers, potentially impacting margins, though management expects to maintain blended margins through volume and specialized products.

    Analyst acknowledged

Q&A highlights

6 direct
Achieving FY26 25% growth guidance despite H1 underperformance Partial
always our Q3 and Q4 have been the strongest because of the industry structure in which it is operating. So, definitely the second half year will be more better than this one. Additionally, I would like to highlight that this year, we faced an unexpected issue due to the long season of monsoon... many of our projects got delayed in execution. So, because of that also, we were not able to achieve the 25% which we were focusing, but definitely, all those projects will be executed in this coming half year.

Management explains the reasons for H1 growth falling short of the 25% annual guidance and reiterates confidence in achieving it through a stronger H2.

Asked by Shanki Bansal

Elevated employee costs and future optimization plans Direct
for the employee cost, currently, as you know that we have recently shifted our major production from Udhana facility to Kosamba facility, and due to that we have to maintain labor force on both the units right now because of ease of execution. Once that is done, and once the Unit 3 is into full-fledged production, we'll be able to reduce the cost on Udhana unit, and simultaneously, we are also working on our ERP system to enhance automation in each area of that department for the Unit 3. So, eventually, that will also help us to reduce the employee cost in a proportional manner.

Provides a clear explanation for current high employee costs and outlines a strategy for future reduction through facility consolidation and automation.

Asked by Shanki Bansal

Capacity utilization ramp-up and sales targets post-CAPEX Direct
previously, when we were doing 1500 auto doors, at that time, our main constraint was of the production capacity, and because of that, we had to go for the CAPEX, and we went with Salvagnini. With that the capacity has increased exponentially, but simultaneously, we are now exploring the sales market. Like, we are exploring the market to increase the sales. So, for last 3 months, we have been continuously increasing our production output, as well as the sales market and our target is that within, like, 1 or 2 years, by the end of financial year 27, we'll be reaching around 3,500 doors per month in sales.

Clarifies the company's strategy to leverage new capacity by aggressively expanding sales and provides a specific sales volume target for FY27.

Asked by Dhiraj Kaswan

Progress on onboarding Tier 1 customers Direct
For Tier 1 customer the process of enlisting is now completed, so now we will be going through the product testing and all the other stages. So, we are pursuing it consistently, and this will happen in, next few months, because, the whole process over there for registration itself is very long. So that, we are doing it. So, rest assured, that business also will grab shortly.

Indicates significant progress in securing business from larger, more established clients, which could be a major growth driver.

Asked by Dhiraj Kaswan

Break-even timeline for the new Unit 3 Kosamba plant Direct
So right now, the utilization would be, I would say, as per the production capacity, we are close to around 35-40% right now And, basically, for the break-even point, I think it will take around 3 to 4 years for us to completely clear of the Interest costs and everything, and we'll be Like, for the capital utilization, and then based on the capacity and based on the market reach, we'll be able to, cater it more.

Provides a clear financial timeline for the return on a major capital investment, including the period to cover interest costs.

Asked by Akshada Deo

Strategy and risks for entering export markets Direct
See, the expansion, on the export front is only after the due diligence. We have shortlisted partners who have the capacity, and it is all against the documents from the bank. So, we do not have... it is all LC-driven. So, we have no... none of our capital is stuck anywhere and it is against advance. So, this will only help us to increase our bottom line, because in those export orders, we are able to give very specialized products, which they are not able to get in their country, or manufacture in their country.

Addresses analyst concerns about logistics costs and payment risks in new export markets, highlighting a de-risked, LC-driven approach focused on specialized products.

Asked by Akshada Deo

Margin sustainability with Tier 1 customers and overall blended margins Direct
Tire one customers, they always squeeze their suppliers, that is the that is the model of the business... The increase in volume helps us to buy more raw material at hand and get better utilization from our machines. So, this whole business of getting contract manufacturing orders helped the overall health of the company. The margins may get squeezed, but yes, we are able to extract good margin from the specialized products that we make... On a blended basis, obviously, but yeah, that will be maintained.

Explains how the company plans to mitigate potential margin pressure from Tier 1 customers through volume benefits, better utilization, and a focus on higher-margin specialized products, ensuring overall blended margins are maintained.

Asked by Akshada Deo

3 min read 7 chapters

Detailed narrative

Q2 & H1 FY26 Financial Performance Overview

Aaron Industries reported a healthy Q2 FY26 with revenue from operations growing 21.59% YoY and 15.60% QoQ. EBITDA for Q2 stood at ₹4.18 crore, increasing 27.80% YoY and 12.97% QoQ, with an EBITDA margin of 18.78%. For H1 FY26, revenue increased 16.90% YoY to ₹41.48 crore, and EBITDA grew 19.02% to ₹7.88 crore, maintaining an EBITDA margin of 18.98%. However, H1 FY26 PBT declined 10.61% YoY to ₹4.57 crore, and PAT was ₹2.45 crore (down from ₹3.69 crore last year), primarily due to higher finance costs, depreciation from recent capacity enhancements, and increased tax outflow.

H1 Performance Challenges and H2 Outlook

The company's H1 FY26 growth of 17% fell short of its annual guidance of at least 25%, largely due to an unexpected and extended monsoon season that delayed project execution. Management noted that Q3 and Q4 are historically stronger quarters for the industry. They expressed confidence that all delayed projects would be executed in the coming half year, leading to better progress and a potential recovery towards the 25% annual growth target.

Capacity Expansion and Utilization Strategy

Aaron Industries has undertaken significant CAPEX, including approximately ₹35 crore in H1 FY26 for its new Unit 3 Kosamba plant, which has exponentially increased production capacity. Current capacity utilization is around 35-40%. The company aims to reach 3,500 auto doors per month in sales by the end of FY27, up from 1,500 last year, by focusing on sales market expansion and increasing productivity through automation.

Employee Cost Management and Automation Initiatives

Employee costs currently represent almost 10% of the quarterly top line, a temporary increase due to maintaining labor forces at both the Udhana and Kosamba facilities during the production shift. The company plans to reduce these costs proportionally once Unit 3 is in full-fledged production and by implementing an ERP system to enhance automation across all departments, thereby improving operational efficiency.

Market Expansion and Tier 1 Customer Engagement

The company is actively expanding its sales network across India, with a renewed focus on developing the North and Northeast markets, complementing its existing strong presence in the West and South. Aaron Industries has completed the enlisting process for a Tier 1 customer, with product testing and other stages expected to conclude in the next few months, potentially leading to commercial deals within 3-6 months. This move is anticipated to significantly boost the top line.

Export Market Entry and Margin Profile

Aaron Industries is exploring foreign markets like Kenya and Tanzania, having developed a base in Kenya with executed projects. Export orders are LC-driven, mitigating payment risks, and focus on specialized products that offer better margins (15-20% for steel business, 20-25% for doors). While Tier 1 customers may exert margin pressure, the company expects to maintain blended margins through increased volumes, better utilization, and its specialized product offerings. Continuous export business is expected within 6-7 months.

Stelix Brand Launch and Unit 3 Break-even Timeline

The company launched 'Stelix' as a distinct brand name for its steel business, separate from 'Aaron' (associated with elevators), to enable customers to openly promote the steel products. Regarding the new Unit 3 Kosamba plant, management estimates it will take 3 to 4 years to fully break even and clear all interest costs, with a specific target to clear interest-related costs by 2029.

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