Everest Kanto Cylinder Limited — Q1 FY26 earnings call

Call held 19 Aug 2025

Management summary

Everest Kanto Cylinder Limited reported a strong Q1 FY26, marked by robust revenue and profit growth across both domestic and international segments. The company is actively progressing with capacity expansions in Mundra and Egypt, expected to contribute from FY27, and is exploring new opportunities in biogas and semiconductors. While the financial performance was strong, management maintained a conservative outlook on future margin sustainability and addressed an ongoing significant GST liability dispute.

Highlights

  • Consolidated revenue of Rs. 386.9 crore, up 12.9% YoY, driven by healthy demand.

  • Consolidated EBITDA of Rs. 61.3 crore, up 47.8% YoY, with margin at 15.8%.

  • Consolidated PAT of Rs. 51.6 crore, up 84.9% YoY, including an exceptional gain of Rs. 12.6 crore.

  • Indian operations standalone revenue of Rs. 237 crores, up 20.9% YoY, with margins improving to 17.2% from 9.4% in Q1 FY25.

  • US business revenue of Rs. 109 crores, up 21% YoY, with management expecting exceptional performance for the year.

Concerns

  • Management guided for a conservative India business margin of 13-14%, despite achieving 17.2% in Q1, and was evasive about the drivers of the higher Q1 margin.

  • The UAE business is expected to remain moderate due to ongoing headwinds.

  • A contingent GST liability of Rs. 352 crores (30% of net worth) remains under dispute.

Key financials

  1. Consolidated Revenue ₹386.9 Cr +12.9%YoY
  2. Consolidated EBITDA ₹61.3 Cr +47.8%YoY
  3. Consolidated EBITDA Margin 15.8%
  4. Consolidated PAT ₹51.6 Cr +84.9%YoY
  5. Exceptional Gain (ERC) ₹12.6 Cr

What they filed

Q1 FY27: revenue down 10.6%, net profit down 42.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue367 367 422 387 360 −2%365 −1%358 −15%346 −11%
EBITDA53 40 38 61 43 −19%59 +48%40 +5%47 −23%
Net profit39 18 13 52 14 −64%36 +100%46 +254%30 −42%
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

Share of Revenue
₹346 Cr Total
  • India Operations (Standalone) ₹237 Cr 68.5%
  • US Business ₹109 Cr 31.5%

Order book

high confidence

Total value

$70 Mn

as of 2025-06-30 quantified

Execution

1.5 - 2 years of product which is already planned

The US order book provides strong visibility for 1.5-2 years, with continuous new orders being secured. The India business also sees continuous order inflows and execution, maintaining an order book of around Rs. 60 crore.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹160 Cr this quarter · ₹245 Cr (FY26) planned Internal accruals as well as borrowings
    • New facility in Egypt (first phase) ₹120 Cr
    • New facility in Mundra, India ₹125 Cr
    • Capacity addition in Egypt 1,20,000 units
    • Capacity addition in Mundra 2,00,000 units
    Yes. We are solving this CAPEX through internal accrual as well as the borrowings.
  • Debt Gross ₹140 Cr · Net ₹0 Cr Cost 9%
    Net debt is close to zero only. Gross debt is Rs. 140 crores, on a consolidated basis. What is the interest rate on that? Interest rate is around 9%.

Guidance & targets

Profitability

  • India Business Margins Profitability · Ongoing · High confidence 13-14%
    I would rather say that margins between 13% - 14% would be most ideal.

    — Sanjiv Kapur

Revenue

  • India Business Growth Revenue · Ongoing · High confidence 10-15%
    Growth, 10% - 15% is what we are sure that it will happen.

    — Sanjiv Kapur

Capacity

  • Egypt Plant Commissioning Capacity · FY26 / early FY27 · High confidence Trial production Oct-Nov, commercial production 2-3 months after
    For Egypt, we are having October to November as the start of trial production and maybe in the next 2-3 months after that, we will have commercial production. The impact would obviously be visible more in FY27.

    — Sanjiv Kapur

  • Mundra Plant Commissioning Capacity · Q4 FY26 · High confidence Commercial production before year closes
    Mundra also is, being ready for the last quarter and we expect that we can have commercial production just before the quarter closes or rather the year closes.

    — Sanjiv Kapur

Supply Capabilities

  • Overall Supply Capabilities Supply Capabilities · FY27 onwards · High confidence Step-up from FY27 onwards
    We expect both facilities to come onstream during the current fiscal, enabling us to step-up in supply capabilities from year FY27 onwards.

    — Puneet Khurana

What to watch in Q2 FY26

New Capacity Commissioning (Mundra & Egypt)

Q4 FY26 / early FY27
Current Mundra plant ready for Q4 FY26, Egypt trial production Oct-Nov 2025
Target Commercial production at Mundra by Q4 FY26 and Egypt by early FY27

Why it matters

Successful commissioning of new plants is crucial for future revenue growth and increased supply capabilities from FY27.

Mundra also is, being ready for the last quarter and we expect that we can have commercial production just before the quarter closes or rather the year closes. For Egypt, we are having October to November as the start of trial production and maybe in the next 2-3 months after that, we will have commercial production.

Risks & concerns

  • Contingent GST Liability

    medium

    A GST liability of Rs. 352 crores, representing 30% of net worth, is under High Court appeal, with resolution expected by Diwali.

    Analyst acknowledged

  • Margin Sustainability in India Business

    medium

    Despite Q1 FY26 standalone margins of 17.2%, management guided for a conservative 13-14% as 'most ideal', suggesting potential for future compression or one-off factors in Q1.

    Analyst downplayed

  • Underperformance of UAE Business

    low

    The UAE business is facing headwinds and is expected to remain moderate, impacting overall geographical diversification.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
GST Liability Dispute Partial
I believe that very recently government has announced that they'll be having classification matters which will get resolved. Ours is also a classification matter which we believe we have put it strongly and we should get a favourable reply.

Addresses a significant contingent liability of Rs. 352 crores, with management expressing confidence in a favorable resolution.

Asked by Reet Jain

Strategic Focus and Diversification Direct
We continue to be strong in the cylinder business and product development in cylinder. ... We continue to have a roadmap focusing on new products in the cylinder business only at the present. We are not doing anything outside the product line of the company and the core business of the company at the moment.

Clarifies that the company's immediate strategy is to remain focused on its core cylinder business and product development within it, rather than expanding into broader clean energy infrastructure or AI-led safety features.

Asked by Sucrit Patil

India Business Margin Sustainability Evasive
No, we will take it as it comes. I mean, I am sure we will wait for the next quarter to happen.

Management was evasive about the specific drivers of the high 17.2% standalone margin in Q1, and reiterated a conservative long-term guidance of 13-14%, raising questions about the sustainability of current profitability.

Asked by Deepan S. Narayanan

Capex Funding and Net Debt Outlook Direct
Yes. We are solving this CAPEX through internal accrual as well as the borrowings. Yes, we may continue to be net debt free. ... There'll be some borrowings, but obviously, there'll be earnings also. So, it'll match.

Provides clarity on how the significant capex for new plants will be funded, indicating a mix of internal accruals and borrowings while aiming to maintain a net debt-free or minimal debt position.

Asked by Anil Jain

US Order Book Visibility Direct
We've got more than a year, 1.5 - 2 years of product which is already planned. Yes, I mean, it keeps coming, it's like we execute and we keep getting new orders.

Highlights strong revenue visibility for the US business, with a confirmed order book providing 1.5-2 years of planned product and continuous new order inflows.

Asked by Reet Jain

New Opportunities in Biogas and Semiconductors Direct
Biogas in India, a lot of activity is going on by government incentives to set up more and more biogas plants for waste management. This is a sector that is growing quite aggressively from the last 2-3 years. ... And semiconductor is a completely new segment, you know, we have introduced some products in the semiconductor industry.

Identifies new, albeit currently small, growth avenues in biogas and semiconductors, which management views as having significant future potential.

Asked by Reet Jain

UAE Business Performance Direct
UAE will still be moderate. We are not saying much about UAE. They are facing certain headwinds around them and yes, they are also working hard to achieve their goals.

Acknowledges ongoing challenges and headwinds in the UAE business, indicating that this segment is expected to remain moderate.

Asked by Anil Jain

3 min read 6 chapters

Detailed narrative

Strong Q1 FY26 Performance Driven by Domestic and International Demand

Everest Kanto Cylinder Limited reported a robust Q1 FY26, with consolidated revenue growing 12.9% YoY to Rs. 386.9 crore. This strong performance was fueled by healthy demand across both domestic and international businesses. Consolidated EBITDA saw a significant increase of 47.8% YoY, reaching Rs. 61.3 crore with a margin of 15.8%. The company's consolidated PAT surged 84.9% YoY to Rs. 51.6 crore, which included an exceptional gain of Rs. 12.6 crore from an Employee Retention Credit (ERC) received by its US subsidiary.

Segmental Highlights: India Operations and US Business Excel

Indian operations delivered strong standalone growth, with revenue at Rs. 237 crores, up 20.9% YoY. Margins for the India business improved significantly to 17.2% in Q1 FY26, compared to 9.4% in Q1 FY25, and standalone PAT grew 122.8% YoY to Rs. 26.1 crore. The US business also performed remarkably well, contributing Rs. 109 crores in revenue, a 21% YoY increase, and EBIT of Rs. 27 crores, up 83% YoY. Management expects the US region to perform exceptionally well for the full year, highlighting the strength and balance of the company's geographical portfolio.

Progress on Capacity Expansion in Mundra and Egypt

The company is actively progressing with its capacity expansion plans, with new facilities in Mundra, India, and Egypt. The Egypt plant is expected to commence trial production between October and November 2025, with commercial production following 2-3 months later, and its impact becoming visible in FY27. The Mundra facility is anticipated to be ready for commercial production by the end of the current fiscal year (Q4 FY26). These expansions will add 120,000 units of capacity in Egypt and 200,000 units in Mundra, enabling a step-up in supply capabilities from FY27 onwards.

Conservative Margin Outlook and Capital Allocation Strategy

Despite achieving a strong 17.2% standalone margin in India during Q1, management provided a conservative outlook, stating that margins between 13% and 14% would be 'most ideal' for the India business. The total planned capex for these new facilities is approximately Rs. 245 crores (Rs. 120 crore for Egypt and Rs. 125 crore for Mundra), with Rs. 160 crores already spent. The company plans to fund this capex through a mix of internal accruals and borrowings, aiming to remain net debt-free or with minimal borrowings, with gross debt at Rs. 140 crores and a cost of debt around 9%.

Strategic Focus on Core Business and Emerging Opportunities

Everest Kanto Cylinder Limited reiterated its commitment to strengthening its core cylinder business and product development within this segment, rather than venturing into broader clean energy infrastructure or smart gas storage solutions at present. However, the company is actively exploring and supplying products for emerging applications in compressed biogas, semiconductors, and green hydrogen, viewing these new sectors as having significant future potential for growth, even if currently small.

Contingent GST Liability and Order Book Visibility

The company is managing a contingent GST liability of Rs. 352 crores, which represents approximately 30% of its net worth. This matter is currently under High Court appeal, and management expressed confidence in a favorable resolution, with updates expected around Diwali. The US business maintains a robust order book of USD 70 million, providing 1.5-2 years of revenue visibility, while the India business has an order book of approximately Rs. 60 crore, characterized by continuous execution and new order inflows.

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