Ador Welding Limited — Q2 FY26 earnings call

Call held 17 Oct 2025

Management summary

Ador Welding reported a strong Q2 FY26 with sales growing approximately 5% sequentially, driven by improved gross margins of 32.7% and EBITDA reaching 12.5%. The company launched new welding equipment and consumables, and rolled out an ESOP plan. However, half-yearly revenues remained soft, and the project segment recorded a loss of INR 2.5 crores, while consumables volumes were flat. Management expressed confidence in margin sustainability and continued focus on high-margin products and strategic segments like defense and shipbuilding.

Highlights

  • Q2 sales grew approximately 5% on a quarterly basis.

  • Gross margins improved to 32.7%.

  • EBITDA improved to 12.5%, up approximately 500 basis points.

  • PBT margins ended closer to 12.2%.

  • Employee Stock Option Plan (ESOP) was rolled out towards the end of September.

  • Successfully launched three new welding equipment products and new consumables.

Concerns

  • Half-yearly revenues were 'a little bit soft'.

  • Consumables volume growth was 'fairly flat' in Q2.

  • Project segment (FPED) incurred an operating loss of INR 2.5 crores in Q2.

  • US export market impacted by tariffs.

Key financials

3 periods

Headline

  • Sales Growth (QoQ)
    5%
    QoQ +5%

Q2

  • Gross Margins
    32.7%
  • EBITDA
    12.5%
  • PBT Margins
    12.2%

H1

  • Gross Margins
    31%
  • EBITDA Margins
    11%
  • PBT
    ₹58 Cr
  • PBT Margins
    11%

What they filed

Q1 FY27: revenue up 22.6%, net profit up 800.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue269 274 310 252 281 +4%288 +5%319 +3%309 +23%
EBITDA20 23 31 -4 35 +75%44 +91%47 +52%36 +1000%
Net profit7 15 18 -4 25 +257%27 +80%34 +89%28 +800%
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.

Segment breakdown

  • Project Segment (FPED)
    ₹2.5 Cr Operating Loss (Q2)
  • Welding Segment (Consumables + M&R)
    4.5% Domestic Volume Growth (H1)0% Volume Growth (Q2)

Order book

medium confidence

Pipeline

other

Interesting order book positions in defense and shipbuilding

Management noted encouraging order books, particularly in the equipment front and new segments like defense and shipbuilding, but did not quantify the total order book or inflow.

Source: Q&A

Capital allocation

high confidence
  • M&A Ador Fontech Merger · Integrated

    Strategic merger to enhance capabilities and market position

    Integration going well, seeing benefits in management structures and distribution, on the right path.

    So it's going well post-merger. In fact, it's good you asked that question. I think I'm getting a lot more comfort in terms of finally the merger integration. We've had a lot of changes, in fact, in that division and we're very encouraged by the results we've had over the last four, five months. It's definitely on the right path. So the right path, it's exactly what we were in my head, what we explained to the board, the reasons for the merger are now starting to come in.

Guidance & targets

Profitability

  • Margin Sustainability Profitability · throughout · High confidence sustainable throughout
    I think whatever margin level you're seeing this quarter is sustainable throughout.

    — Aditya Malkani

  • Margin Improvement Profitability · continuously · High confidence steady state level
    I think this is pretty much in line with what we've been talking about for a few quarters or for some time that this is the steady state level we need to be working ourselves towards with an increased better product mix, better maintenance of margins, improving and demonstrating strength in the welding business which is what we are seeing and that's being played out luckily and we're very fortunate to that we hope that this is a start of showing these kind of margins going forward continuously.

    — Aditya Malkani

Product Mix

  • Higher Margin Products Share Product Mix · going forward · Medium confidence more share
    We expect to introduce more share of our basket should be with higher margin products or higher better products as we keep going forward but it's a month-on-month process that we keep seeing improve.

    — Aditya Malkani

Projects

  • Project Completion Projects · this quarter · High confidence on track to complete it
    The project status has not changed much since the last 3 or 4 months, since last board meeting. We are on track to complete it in this quarter which is where we were expecting it to be.

    — Aditya Malkani

  • Strategy for Large Exposure Projects Projects · until the end of this year · High confidence not take on large exposure products
    We will not take on large exposure products at all, large exposure projects at all. We will remain very focused on key segments for some time and ensure that it remains within a manageable portion until the end of this year and then we'll keep re-evaluating it.

    — Aditya Malkani

  • Breakeven Revenue Projects · after project completion · Medium confidence INR 15 crores-INR 20 crores
    Then after you would require anywhere in the region of approximately INR15 crores-INR20 crores of revenue to be able to breakeven on that business or just about have your head above water.

    — Aditya Malkani

Volume

  • Volume Growth Volume · Q3 and Q4 · Low confidence slightly moving upwards
    So potentially going to Q3 and Q4 you could look at volumes slightly moving upwards.

    — Aditya Malkani

  • Growth over HY2 last year Volume · going ahead · Medium confidence growth over last year HY2
    But I think growth over last year HY2 is something that we are definitely working hard to do. And we will see growth over that point.

    — Aditya Malkani

What to watch in Q3 FY26

Project segment profitability

Next quarter
Current Operating loss of INR 2.5 crores in Q2 FY26
Target Completion of current project, moving towards breakeven

Why it matters

To confirm the segment moves out of losses and validates the new strategy of avoiding large exposure projects.

The project status has not changed much since the last 3 or 4 months, since last board meeting. We are on track to complete it in this quarter which is where we were expecting it to be. We took the onerous loss at that point in time. We're going to make maximum efforts to try to ensure that this is the end of it all within the next few months and it seems to be on track from there.

Risks & concerns

  • Large exposure projects leading to losses

    high

    The company has revised its strategy to avoid large exposure projects due to past losses, focusing on smaller, manageable projects.

    Management acknowledged

  • Welder shortage

    medium

    Skilled welders being a shortage is a local, sectoral and global problem, which the company is addressing through training and automation.

    Analyst acknowledged

  • Tariffs impacting US export market

    medium

    The US market was impacted by tariffs, which management hopes will settle soon.

    Management acknowledged

  • BIS penalty High Court matter

    medium

    An ongoing High Court matter regarding a BIS penalty, which management believes is absurd and is contesting with a strong case.

    Analyst contesting the penalty, optimistic about the outcome

Q&A highlights

6 direct
Project segment profitability and outlook Direct
The project status has not changed much since the last 3 or 4 months, since last board meeting. We are on track to complete it in this quarter which is where we were expecting it to be. We took the onerous loss at that point in time. We're going to make maximum efforts to try to ensure that this is the end of it all within the next few months and it seems to be on track from there.

Addresses a key concern about the project segment's losses and provides a timeline for resolution and future strategy.

Asked by Pritesh Chheda

Sustainability of current margins Direct
I think it's just a question of the pricing being corrected. I kept talking about the fact that we were letting our prices go for some time and we've just been a little more particular about holding it. So I think the current pricing structure on that front is now pretty much falling in line a little stronger.

Clarifies that margin expansion is due to pricing discipline and product mix, not just raw material price dips, suggesting sustainability.

Asked by Pritesh Chheda

New products and segment initiatives (gas cutting, defense, nuclear) Partial
On the gas cutting front, there are many products that our distribution system can take on more, which we are doing, and we are introducing those and coming, but the impact of that is not yet felt. It'll keep being felt step-by-step over the months and the quarters. ... On the new segments, we're doing a lot more work on being aggressive on the ground with defense, on the shipbuilding front, a few of the DSUs that work in that space, they seem to be having very interesting order book positions.

Provides an update on strategic growth areas, indicating progress in order book positions for defense/shipbuilding but slower impact from gas cutting products.

Asked by Rajas Joshi

Volume growth outlook and drivers Partial
Growth is very related to steel consumption, right? At the end of the day, I think the core sector industries will have to grow accordingly. And we'll be able to see that growth. But like we keep saying for us, we're an undersold -- internally, we keep saying we're undersold, which doesn't mean you take necessarily a market share strategy only, but you also just be more aggressive in reaching certain customers and all that to get some benefit. I don't have a number to give you. I can't -- it's increasingly hard to see beyond five, six months at a time.

Management acknowledges the link to steel consumption and its 'undersold' position but refrains from giving specific volume growth numbers due to market uncertainty.

Asked by Rajas Joshi

BIS penalty High Court matter Direct
So the matter goes to, this is a High Court matter that we have basically on BIS, right, you are talking about. So that matter is basically under we filed a written petition, it goes back into the court proceedings. I think we have a very strong case that the penalty that was given to us was absolutely absurd.

Addresses an ongoing legal matter that could have financial implications, with management expressing optimism about contesting the penalty.

Asked by Devang Shah

Welder shortage and automation strategy Direct
So there are two parts to what we can do here. One is we do training and stuff like that, which is not really a business vertical is just a focus for certain customers to train welders. And we certify welders and all that we do that. But the second part that is more important is automation is going to keep coming in more and more. And that's a reality, which is why I showed you things like the cohorts and stuff like that, which is what we have to work on.

Highlights a sector-wide challenge and the company's dual strategy of training and increasing automation to address it.

Asked by Dhaval Shah

Performance of erstwhile Ador Fontech business post-merger Direct
So it's going well post-merger. In fact, it's good you asked that question. I think I'm getting a lot more comfort in terms of finally the merger integration. We've had a lot of changes, in fact, in that division and we're very encouraged by the results we've had over the last four, five months. It's definitely on the right path.

Provides positive feedback on the integration and performance of a key acquired business, indicating successful synergy realization.

Asked by Anubhav Mukherjee

Strategy for large exposure projects and past losses Direct
I think let's just get there step-by-step. Let's execute the unit project first. I think our issue is the losses that we have had are around larger projects always. In fact, we still do. It's just that it's not visible to you guys, but we still do small projects that are continuing and we are making money in those projects. We may not be making margins in line with the welding business, but we're definitely not losing money per se.

Addresses the strategic shift away from large, loss-making projects and clarifies the focus on smaller, profitable projects within the segment.

Asked by Samarth

2 min read 7 chapters

Detailed narrative

Q2 FY26 Performance Overview

Ador Welding reported a robust Q2 FY26 with sales growing approximately 5% on a quarterly basis. Gross margins improved to 32.7%, and EBITDA reached 12.5%, marking an improvement of about 500 basis points. PBT margins also aligned with target levels at approximately 12.2%. On a half-yearly basis, gross margins stood at 31%, EBITDA margins at 11%, and PBT at INR 58 crores, representing an 11% margin.

Product Mix and Margin Improvement

The company's improved margins are attributed to pricing discipline and a better product mix, rather than solely steel price fluctuations. Management emphasized that the current pricing structure is stronger and that the focus on higher-margin products is a continuous, month-on-month process aimed at sustaining these improved profitability levels. The product mix is improving, which is helping to maintain margins at a steady-state level.

New Product Launches and R&D

Ador Welding launched three new welding equipment products, including one for data reading and mapping, an electric battery welder (Rhino E) with a complementary solar product, and the CHAMPTIG AC/DC product. New fluxes for wind applications and drum packaging for MIG were also introduced, alongside new stainless steel products. These launches are part of the strategy to improve product mix and drive efficiency.

Strategic Segment Focus (Defense, Shipbuilding, Projects)

The company is actively pursuing opportunities in strategic segments like defense and shipbuilding, where it sees 'interesting order book positions' and is working on approvals. For the project segment (FPED), which incurred a Q2 operating loss of INR 2.5 crores, the strategy has shifted to avoid large exposure projects, focusing instead on smaller projects and aiming for breakeven at INR 15-20 crores revenue. The current project is on track for completion this quarter.

Export Market Dynamics

While domestic volumes saw a 4-5% growth in H1, the export market experienced mixed results. The US market was impacted by tariffs, which management hopes will settle soon. Saudi Arabia has been tight, but markets like UAE and Oman showed growth. The company is also exploring expansion into Indonesia, South America, and Russia, with a focus on building traction step-by-step, though exports are expected to be flattish compared to previous years due to market conditions.

Ador Fontech Merger Integration

The integration of the erstwhile Ador Fontech business is progressing well, with management expressing increased comfort and positive results over the last four to five months. The merger is now showing signs of delivering the intended benefits, particularly in management structures and distribution, contributing to the company's overall performance. This integration is seen as being on the 'right path' and meeting expectations.

Addressing Welder Shortage

Acknowledging the industry-wide shortage of skilled welders, Ador Welding is addressing this through two main approaches: providing training and certification for customers, and focusing on automation and robotic solutions. This dual strategy aims to mitigate the impact of labor shortages, improve efficiency in manufacturing, and support customers' needs for skilled labor.

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