Azad Engineering

Azad Engineering delivered its best-ever quarterly and half-yearly performance in Q2 and H1 FY26. Q2 FY26 revenue reached INR 143 crores, marking a 28.1% year-on-year increase. The reported EBITDA margin improved to 36.0% from 35.7% in Q2 FY25, while PAT margin increased significantly from 18.9% to 23.1%. For H1 FY26, revenue stood at INR 277 crores, a 32.1% increase over H1 FY25, with an EBITDA margin of 36.0% and PAT growth of 65%.

The company achieved several important milestones, including securing Phase 2 of the Mitsubishi contract, which increased the combined contract value to INR 1,387 crores for highly engineered airfoils. A new lean manufacturing facility for Siemens was inaugurated in Hyderabad, dedicated to producing complex rotating and stationary airfoils. Additionally, Azad Engineering signed a Memorandum of Understanding (MOU) with Safran Aircraft Engines for long-term collaboration on critical rotating engine components for strategic defence platforms, marking its first partnership with this global leader.

Azad Engineering is steadily advancing with its capex plans, including the inauguration of three dedicated lean factories. The company aims to meet Siemens Energy's global demand and is building an upcoming center of excellence to support future innovation. Management anticipates a significantly stronger performance in the second half of FY26 and remains confident in achieving a 25% to 30% top-line growth for the full year, driven by robust order books and ramping up production at new facilities.

Efforts to indigenize the raw material supply chain in India are progressing, with Sunflag and Star Wire approved for certain grades, contributing to reduced raw material consumption. This initiative is expected to sustain cost efficiencies and improve supply chain control. The company is also establishing a robust supply chain via a distribution network to resolve minimum order quantity challenges and enhance procurement agility, with this initiative expected to commence in Q4 FY26.

To mitigate raw material price volatility, Azad Engineering's long-term contracts include a clause where the company bears up to 5% fluctuation in raw material prices, beyond which price adjustments are discussed with OEMs. For foreign exchange fluctuations, the company benefits from a natural hedge, with 93.9% of its revenue coming from exports, balancing inflows and outflows and covering associated risks.

FY26 is viewed as a year for stabilization, focusing on integrating new facilities, machines, and manpower. The company is building infrastructure, including a housing colony for employees, with the goal of completing construction and stabilizing operations within approximately 12 months. Azad VTC Private Limited, a subsidiary, achieved NADCAP accreditation for coatings, validating its commitment to stringent quality standards in the aerospace and defence industry.