Abha Power and Steel Ltd — Q2 FY26 earnings call

Call held 28 Nov 2025

Management summary

Abha Power and Steel reported H1 FY26 revenue of ₹34.56 crores with an EBITDA margin of 10.3% and PAT margin of 5.9%. The company maintained a healthy order book of over ₹20 crores and is progressing with capacity expansion and modernization, particularly for its steel plant. While margins saw a temporary dip due to one-time expenses and new project costs, management expects improvement from H2 FY26 onwards, driven by new capacities and increased utilization.

Highlights

  • Revenue from operations for H1 FY26 stood at ₹34.56 crores.

  • Healthy order book maintained at over ₹20 crores, providing near-term revenue visibility.

  • 3 MW captive solar plant continues to lower energy costs and support operational margins.

  • Development of a key OEM part for Indian Railways is complete and production is ramping up.

  • Post-IPO CapEx of ~₹19 crores committed for FY26, with an additional <₹5 crores from own funds, focused on steel plant modernization.

Concerns

  • EBITDA margin dropped to 10.3% due to excess expenses for new projects, consultants, one-time charges for name change, land lease upgrade, and electricity duty for solar plant.

  • Steel plant capacity utilization is low at 20-30%, though modernization aims to address this.

  • Commissioning of new plant machinery, initially expected by September, is now delayed to November-December.

Key financials

  1. Revenue from Operations ₹34.56 Cr
  2. EBITDA ₹3.57 Cr
  3. EBITDA Margin 10.3%
  4. Profit After Tax ₹2.03 Cr
  5. PAT Margin 5.9%

What they filed

Q4 FY26: revenue down 9.8%, net profit down 81.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue31 34 36 35 28 −10%
EBITDA5 5 5 4 2 −61%
Net profit2 3 3 2 0 −82%
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

₹20 Cr

as of 2025-09-30 quantified

Execution

providing near-term revenue visibility

Composition

  • Indian Railways (direct/indirect via OEM) (client type) 75%

Pipeline

qualified rfp

RDSO approval process underway for new parts, new OEM parts on production side.

Order book is healthy and above ₹20 crores, with new product developments and railway segment opportunities expected to drive future growth.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹24 Cr New plan · IPO proceeds and own funds
    • Modernization and upgradation of steel plant to improve capacity utilization and correct facility mismatch ₹24 Cr
    Okay, so as per our IPO mandate, we have committed around 18.5 or 19 CR of our CapEx for this financial year to be done. We have already, made that kind of investment. Further on, we are expecting, this project to a bit, overshoot, so we'll incur, approximately less than 5 Cr from our own funds, and we'll see this project completed by end of this year, and we'll see revenues coming on from this upgradation from the next financial year onwards. ... So, our total capacity would remain almost the same, but our utilization would increase. Actually, there has been some mismatch in our facilities. For the whole set of operations, we have higher capacity from our furnaces, and not so high capacity of the downstream aspects. So, there was some mismatch, and with this upgradation and modernization, we are correcting it so that we can produce whatever we can melt.

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · future · Medium confidence double-digit growth
    I have been advised not to give any forward-looking statements, but as per the industrial norms and whatever the targets we have set internally, it would be, better than the single-digit growth. We'll try to go with the double-digit growth, at least.

    — Mr. Atish Agrawal, Managing Director

  • Revenue from 100% capacity utilization Revenue · future · Medium confidence cross 300 plus
    But, just to give you a ballpark figure, when our... both our foundries would go at around 100% capacity, we will easily cross the turnover for around 300 plus. So, it could go from 300 to 500 also, but... anything above 300 should be there.

    — Mr. Atish Agrawal, Managing Director

  • H2 FY26 Revenue Growth Revenue · H2 FY26 · High confidence flattish or some growth
    So there would be, flattish, or some growth would be there for the next... in this, coming, H2.

    — Mr. Atish Agrawal, Managing Director

  • Major Progress in Revenue Revenue · H1 FY27 · High confidence major progress
    But yes, the major, progress, could be seen in the next year financial H1 only.

    — Mr. Atish Agrawal, Managing Director

Capacity

  • Steel Plant Capacity Utilization Capacity · future · High confidence above 80%

    From 20-30% today

    So that is our major focus area to improve this capacity utilization of steel plant from 2030 to make it above 80.

    — Mr. Atish Agrawal, Managing Director

  • SG Iron Plant Capacity Utilization Capacity · future · High confidence about 95%

    From above 80% today

    Of course, this upgradation will support our SG Iron unit also, because we have a lot of facilities in common, and SG Iron plant also will try to get our utilization about 95%.

    — Mr. Atish Agrawal, Managing Director

Profitability

  • Margin Growth Profitability · future · Medium confidence double-digit growth
    But still, I'm seeing that our margin should grow by... at least, double-digit growth should be there on the margins as well.

    — Mr. Atish Agrawal, Managing Director

Railway Segment

  • RDSO Accreditation Process Completion Railway Segment · Jan-Mar quarter · High confidence complete
    And... what we believe is in the coming quarter, let's say January, February, March, in this quarter, our... this accreditation process would be complete.

    — Mr. Atish Agrawal, Managing Director

  • Revenues from new RDSO approvals Railway Segment · next financial years · Medium confidence some revenues
    Our registration part would be complete in this coming quarter and then, from the next financial years, we should expect, some revenues coming out of it.

    — Mr. Atish Agrawal, Managing Director

What to watch in Q3 FY26

Completion of plant modernization project

next quarter
Current Underway, expected Nov-Dec 2025
Target Project completed and ready for commercial operation

Why it matters

This project is key to improving capacity utilization and driving future revenue and margin growth.

Ye November-December mein complete ho raha hai. Jaise hi humara machine installation complete hota hai, uske baad 2-3 mahine ka time hame aur lagta hai railway RDSO seh permission or approvals mein. Vo wala process bhi hamne abhi se start kart dia hai. Uske baad fir jab naye orders aate hai, ya hamare pass ek baar approval aa jaye. Uske baad jab naye tenders aate hai, toh hum uss me participate karne ke liye eligible hote hai. Toh thoda time lag raha hai but, eventually, jese hi ye naye plant and machinery ka effect ana shuru hoga, aapko definitely aur better results hum log push karte hue dikhege.

Risks & concerns

  • EBITDA margin pressure due to one-time expenses and new project costs

    medium

    EBITDA margin dropped to 10.3% in H1 FY26 due to costs associated with new project work, consultants, name change, land lease upgrade, and electricity duty.

    Management acknowledged

  • Long lead times and dependence on external agencies for critical parts

    medium

    Turnaround times in the foundry can be very high (up to 6-7 months for critical parts) due to inspection delays and reliance on external vendors, impacting CWIP and balance sheet.

    Management acknowledged

  • Delay in commissioning of new plant machinery

    low

    New plant machinery commissioning, initially expected by September, is now anticipated in November-December, slightly delaying its positive impact on performance.

    Management acknowledged

Q&A highlights

7 direct
Reasons for margin drop in H1 FY26 Direct
There have been many reasons. Basically, what we can see from this year's results is that our EBITDA has gone down. Our gross margin is okay. If we compare it with the last year's 6 months, this year's 6 months, our gross profit on the gross margin is almost identical, along with all the top-line things. But our EBITDA has fallen a bit. That is mainly because of some excess expenses that we have done in this year, in this 6 months. Like, we have some new employees to see out the new project work, and we have some consultants to help us for this, expansion project. Also, there have been a lot of increase in our traveling and other small expenses. So, overall, there is nothing substantial that can... we can contribute to one single thing, but it has been an accumulation of various other factors that has led to this kind of, drop. Some reasons are also due to one-time charges of our name change and legal expenses that we have incurred, incurred post this IPO, our, pre-IPO, our name was changed from Private Limited to Limited, so we had to get this, upgradation done at all, government, departments and that has led to some of the expenses in our part. Our land lease was recently upgraded, or it was redrawn. We had... we were enjoying a very low, land rate earlier, and now it has increased substantially due to a new land agreement that we had to done because of this name change. Other than this, there was a one-time demand of electricity duty for our solar plant. So, that has incurred us around 12-13 lakh rupees extra for, in this 6 months.

Management provided a comprehensive explanation for the EBITDA margin decline, attributing it to various one-time and project-related expenses, clarifying that gross margin remained stable.

Asked by Swayam Rana

Capacity utilization for SG Iron and Steel plants Direct
Current... for the past 6 months, since this is for H1FY26, we are having this earnings call. During this period, our capacity utilization for SG Iron units was above 80%. And, for the steel plant, the revenue, the capacity utilization was around 30%. 20-30%, I think. So that is our major focus area to improve this capacity utilization of steel plant from 2030 to make it above 80.

Management provided specific capacity utilization figures for both segments and highlighted the steel plant as a key focus area for improvement.

Asked by Neel Chopra

CapEx plans for FY26 and beyond Direct
Okay, so as per our IPO mandate, we have committed around 18.5 or 19 CR of our CapEx for this financial year to be done. We have already, made that kind of investment. Further on, we are expecting, this project to a bit, overshoot, so we'll incur, approximately less than 5 Cr from our own funds, and we'll see this project completed by end of this year, and we'll see revenues coming on from this upgradation from the next financial year onwards.

Management detailed the CapEx amount, funding sources, and timeline for project completion and revenue generation, indicating a total CapEx of ~₹24 crores for FY26.

Asked by Yash Naik

Impact of CapEx on capacity and margins Direct
So, sir, this capex is for, not capacity addition, but for the upgradation. So, our total capacity would remain almost the same, but our utilization would increase. Actually, there has been some mismatch in our facilities. For the whole set of operations, we have higher capacity from our furnaces, and not so high capacity of the downstream aspects. So, there was some mismatch, and with this upgradation and modernization, we are correcting it so that we can produce whatever we can melt. ... It should definitely increase, sir. Traditionally, or whatever you can call it, whenever the top line grows, the bottom line grows, we are going for the higher value chain items, and that too, we're at a mass production scale. So this margin should also increase with that. So, because our expenses will also go down, and yeah, we are expecting a... better performance on the margins as well. ... But still, I'm seeing that our margin should grow by... at least, double-digit growth should be there on the margins as well.

Management clarified that CapEx is for utilization improvement and correcting facility mismatches, not capacity addition, and expects definite margin improvement, targeting double-digit growth.

Asked by Yash Naik

Railway segment focus and RDSO approval timeline Direct
Okay, so, first question regarding the railway parts is that, yes, our focus is on railways. Our 70% to 80% revenue come from Indian railways, directly or indirectly through OEM, so... that is our major focus areas, and to increase it further, we are developing newer products every day. Recently, we have developed some very critical items for Indian railways and, most of those parts goes in the wagon, wagon building, and some of those parts goes into the permanent way, that is the track link that, goes, that goes the... in the track, what do you call it? P-way, yeah, P-way fittings. So, some of the parts goes into P-way fittings, and some of those parts goes into the wagon manufacturing and, with the recent expansions that we are doing in, we'll be able to compete for even higher products that, we were unable to manufacture earlier. Already, we have filed our application with RDSO to develop those parts. We are currently the holder of A-class certification from RDSO. We are already registered with RTSO for quite a few parts, let's say 4-5 parts, but we need to further expand our product portfolio. And for that, we have, already filed applications with RDSO for, many such parts, so those are under consideration. And... what we believe is in the coming quarter, let's say January, February, March, in this quarter, our... this accreditation process would be complete. Our registration part would be complete in this coming quarter and then, from the next financial years, we should expect, some revenues coming out of it.

Management detailed their strong focus on the railway segment, the types of parts being developed, their current RDSO status, and the expected timeline for accreditation completion and revenue generation from new products.

Asked by Swayam Rana

Future revenue growth expectations (H2 FY26 vs FY27) Direct
Yes, we can say that, but we are still hopeful, we are... it's an early day to call all the figures for this H2, because in... we are just in the second month of H2, and 4 months are standing right in front of us, and in the last 6 months that, developments that we have done, it can also come into the picture in the next 4 months. So there would be, flattish, or some growth would be there for the next... in this, coming, H2. But yes, the major, progress, could be seen in the next year financial H1 only.

Management provided a clear outlook for revenue, indicating flattish to some growth in H2 FY26, with major progress anticipated in H1 FY27, aligning expectations for investors.

Asked by Swayam Rana

Strategy for reducing CWIP and improving turnaround time Direct
Right, so that also we are working on. In fact, for the past 6 months, this has been our major focus. We want to reduce our working capital, and we want to reduce our work-in-progress items. Major effect of this was because we were developing one major part for Indian railways through an OEM. This OEM had a very limited vendors, and we were quite hopeful to developed this particular part in our system. And, very recently, month or so ago, we have, finally developed it to the satisfaction of our customer, and now we are improved... we are, increasing its production and supply. So, we'll see its effect in our balance sheet in this half year, or the next half year. But yes, there have been a major focus from our side, from the management, to reduce our CWIP, so that we can work in a better, efficient, leaner way. So, it's an ongoing process, and you'll definitely see improvement on this part in the coming quarters or so. ... We are also putting up a very good machine shop, so that we do all the processes in-house, and we are not dependent upon our external vendors, who themselves have their own problems, and they also increase our lead time. So, to give our customers a better product at a faster time, once this project execution is complete, we'll be able to solve a lot of problems.

Management outlined specific initiatives to reduce working capital and work-in-progress, including in-house production capabilities, which are critical for operational efficiency and balance sheet health.

Asked by Swayam Rana

2 min read 6 chapters

Detailed narrative

H1 FY26 Financial Performance Overview

Abha Power and Steel Limited reported a revenue from operations of ₹34.56 crores for the first half of FY26. The company achieved an EBITDA of ₹3.57 crores, translating to an EBITDA margin of 10.3%. Profit after tax (PAT) stood at ₹2.03 crores, with a PAT margin of 5.9%. While gross margins remained stable, EBITDA was impacted by increased expenses.

Operational Highlights and Strategic Initiatives

The company's operations remained stable, with a focus on production efficiency and project execution. The 3 MW captive solar plant continued to contribute significantly by lowering energy costs and cushioning cost inflation. Strategic initiatives include ramping up production of a key OEM part for Indian Railways, which is now complete, and ongoing facility expansion.

Capacity Expansion and Modernization

Abha Power is actively pursuing facility expansion, utilizing IPO proceeds for modernization. The company has committed approximately ₹19 crores for CapEx in FY26, with an additional less than ₹5 crores from own funds, totaling around ₹24 crores. This investment is primarily aimed at upgrading the steel plant to improve its capacity utilization from the current 20-30% to above 80%, and also supporting SG Iron utilization to 95%, rather than adding new capacity.

Railway Segment Focus and RDSO Approval

The railway segment remains a major focus, contributing 70-80% of revenue directly or indirectly. The company is developing critical items for wagon building and permanent way. The RDSO approval process for new parts is underway, with accreditation expected to be complete by the January-March quarter. Revenues from these new approvals are anticipated to begin from the next financial year, albeit gradually.

Margin Pressure and One-time Expenses

EBITDA margins experienced a drop in H1 FY26 due to several factors. These include excess expenses for new project work, engaging consultants for expansion, increased travel costs, one-time charges for the company's name change, an upgraded land lease agreement, and an electricity duty of ₹12-13 lakhs for the solar plant. Management expects these one-time costs to subside, leading to margin improvement in subsequent periods.

Order Book and Future Outlook

The company maintained a healthy order book of over ₹20 crores, providing good near-term revenue visibility. Management expects H2 FY26 to see flattish or some growth, with major progress and growth anticipated in H1 FY27, driven by the new capacities and improved utilization. The long-term target is to achieve double-digit growth in both revenue and margins, with a potential turnover of over ₹300 crores at 100% capacity utilization.

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