Everest Kanto Cylinder Limited — Q2 FY26 earnings call

Call held 18 Nov 2025

Management summary

Everest Kanto Cylinder Limited reported a steady Q2 FY26 with consolidated revenue of ₹360.4 crores and PAT of ₹13.7 crores. The company is making significant progress on its new facilities in Mundra and Egypt, with commercialization expected by March and January respectively. While the CNG segment faced short-term softness and US margins were impacted by higher costs, management expressed confidence in future growth driven by strong order book visibility, clean energy, and industrial applications. A one-time penalty of ₹11 crores was incurred for non-compliance with SEZ foreign exchange earnings.

Highlights

  • Consolidated revenue of ₹360.4 crores and PAT of ₹13.7 crores indicate steady performance.

  • Standalone EBITDA margin improved to 11.2% compared to 9.3% in the same period last year.

  • Significant progress on new facilities in Mundra (₹130 crores spent) and Egypt (₹86 crores spent), which will enhance manufacturing capabilities.

  • Strong order book visibility, with the US business having an $80 million order book and overall order book of approximately ₹1,000 crores.

  • Growing opportunities in clean energy (hydrogen) and industrial applications, with defence sector also showing growth.

Concerns

  • Consolidated EBITDA margin of 11.9% is lower than the guided range of 12-14%.

  • Short-term softness in CNG segment volumes in India due to GST transition in the end-user automotive industry.

  • US margins were affected by higher operating costs during the quarter.

  • A one-time penalty of ₹11 crores was paid for not completing net foreign exchange earnings in the SEZ plant.

  • Employee costs rose from ₹36 crores to ₹43 crores YoY due to expansion and increments.

Key financials

  1. Consolidated Revenue ₹360.4 Cr
  2. Consolidated EBITDA ₹42.9 Cr
  3. Consolidated EBITDA Margin 11.9%
  4. Consolidated PAT ₹13.7 Cr
  5. Standalone Revenue ₹232.4 Cr
  6. Standalone EBITDA Margin 11.2% +20.4%YoY
  7. Employee Costs ₹43 Cr +19.4%YoY

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.

Order book

high confidence

Total value

₹1,000 Cr

as of 2025-09-30 range

Execution

executable over the next 1 year

Composition

  • USA (geography) $80 Mn
The company has good visibility in its order pipeline, supporting future growth.

Source: Q&A

Capital allocation

medium confidence
  • Capex Capex disclosed
    • Mundra new facility ₹130 Cr
    • Egypt new facility ₹86 Cr
    Mundra, we have spent around ₹130 crores, and we have a balance of ₹30 crores. And Egypt, we have spent around ₹86 crores, and the balance is around ₹40 crores.
  • Liquidity Liquidity disclosed Adequate limits for working capital requirements.
    I think we have adequate limits.

Guidance & targets

Margin

  • EBITDA Margin Margin · Full Year · High confidence 12% to 14%
    The margin guidance would be 12% to 14%.

    — Puneet Khurana

Revenue

  • Standalone Revenue Revenue · Full Year · High confidence ₹900 crores to ₹1,000 crores
    ₹900 crores to ₹1,000 crores in standalone.

    — Puneet Khurana

Capacity

  • Egypt Plant Commercialization Capacity · Q3 FY26 · High confidence January 2026
    Egypt will be happening very soon, maybe by January.

    — Puneet Khurana

  • Mundra Plant Commercialization Capacity · Q4 FY26 · High confidence March 2026
    Maybe by March.

    — Puneet Khurana

Market context

  • Overall Growth Outlook Outlook · Next 2 years · High confidence Positive
    Okay. And we have positive outlook for the coming 2 years, right? Yes. Of course, yes.

    — Puneet Khurana

What to watch in Q3 FY26

Egypt Plant Commercialization

next quarter (by January)
Current Preparing for trial production
Target Commercial operations commenced

Why it matters

Successful commercialization of the Egypt plant is key to expanding manufacturing capabilities and serving international opportunities.

Egypt will be happening very soon, maybe by January.

Risks & concerns

  • GST case outcome

    medium

    Ongoing GST case with representations made to government; management is hopeful for a positive outcome, but it affects the entire industry.

    Both acknowledged

  • Recurrence of penalty for not meeting SEZ foreign exchange earnings

    medium

    A ₹11 crore penalty was paid for past non-compliance; recurrence is possible if SEZ rules are not amended or exports do not increase.

    Both acknowledged

  • Margin pressure due to product mix and operating costs

    medium

    Margins were impacted by a less favorable product mix (drop in high-value products) and higher operating costs in the US, though management expects improvement.

    Management acknowledged

Q&A highlights

7 direct
Hydrogen as a future fuel and impact on CNG business Direct
Hydrogen development in India has already started. Government is giving a lot of push on hydrogen... it will be coming as a mobility fuel in the future. But this future will take time because the entire ecosystem needs to be set up... But it is looking good, and hydrogen will be complementary to us. The faster it comes better because, again, hydrogen storage is at very high pressure and cylinders are required there.

Clarifies the company's long-term view on hydrogen, its complementary nature to their core business, and the timeline for its impact, while reaffirming CNG as a current growth driver.

Asked by Ashit R. Kothi

Reason for gross margin decline in Q2 FY26 Direct
The CNG bit of the business was a little down. So that is where the volumes have dropped.

Identifies the specific segment (CNG) and factor (volume drop) responsible for the gross margin pressure, indicating it's not a structural issue but a volume-driven one.

Asked by Garvita Jain

Status and timelines for Mundra and Egypt plant commercialization and remaining capex Direct
Mundra, we have spent around ₹130 crores, and we have a balance of ₹30 crores. And Egypt, we have spent around ₹86 crores, and the balance is around ₹40 crores. Egypt will be happening very soon, maybe by January. Maybe by March (for Mundra).

Provides concrete financial figures for capex spent and remaining for key expansion projects, along with specific commercialization timelines, which are critical for future revenue generation.

Asked by Garvita Jain

Update on the GST case and its industry-wide impact Direct
No, it is still going on. We have made representations to the government, and we have a case in High Court also. Hopefully, we are quite positive that things should be in our favour because already government has just announced revision of the GST reforms. So we are hopeful that things should be positive. Of course, they will, yes. Everybody will who has in the industry will receive it.

Confirms the ongoing nature of a significant regulatory issue, its industry-wide implications, and management's confidence in a favorable resolution, which could impact future liabilities.

Asked by Reet Jain

Performance and margin outlook for the UAE plant Direct
The UAE now, the order book is improving slowly. Hopefully, the coming quarters, the things should be better. They will improve. And once the order book is there, then Dubai margins have always been decent because, of course, they do not have a tax also there. So there is definitely better margins. But once the order book is good, then the margins will be better.

Addresses concerns about a previously underperforming international operation, indicating an improving trend in order book and a positive outlook for margin recovery due to inherent tax advantages.

Asked by Vidhi Shah

Explanation for the ₹11 crores penalty related to foreign exchange earnings Direct
This was on account of our not completing net foreign exchange earnings in our plant at - Kasez, which is in SEZ. This was based on a 5-year assessment. In fact, we were awaiting some amendments to this. However, it did not materialize. Therefore, we had to pay a little penalty since we were short on the net foreign exchange earnings. No, it may be possible, but we are represented to the government to take us out of the SEZ.

Explains a significant one-time expense, its root cause (SEZ compliance), and the potential for recurrence, highlighting a regulatory risk the company is trying to mitigate.

Asked by Bhavin Salot

Reason for current drop in margins from 16% last quarter to 12% now Direct
I think it is just a product mix. That is probably what the dropped in margins. There are margins in Industrial and CNG, but we had a product, a lot of products that were less margin because we had a drop in some of the high-value products.

Clarifies that the margin compression is primarily due to an unfavorable product mix, specifically a drop in high-value products, rather than a fundamental issue with pricing or cost structure.

Asked by Vidhi Shah

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Everest Kanto Cylinder Limited reported a steady performance in Q2 FY26. Consolidated revenue reached ₹360.4 crores, with an EBITDA of ₹42.9 crores, resulting in an EBITDA margin of 11.9%. The company posted a PAT of ₹13.7 crores for the quarter. On a standalone basis, revenue was ₹232.4 crores, and the margin improved to 11.2% compared to 9.3% in the same period last year.

Domestic and International Operations Update

The domestic CNG segment experienced short-term softness due to GST transition in the automotive industry, which has since normalized. The Industrial segment performed as expected. In international operations, the US business saw lower dispatches but healthy first-half performance, though margins were impacted by higher operating costs. The Middle East operations showed early signs of improvement, with the UAE order book slowly improving and expectations for better margins once the order book strengthens.

Capacity Expansion Progress

The company is making steady progress on its new facilities in Mundra and Egypt. Approximately ₹130 crores has been spent on the Mundra plant, with a balance of ₹30 crores remaining. For the Egypt plant, ₹86 crores has been spent, with ₹40 crores remaining. The Egypt plant is expected to begin trial production and commercialization by January 2026, while the Mundra plant is targeted for commercialization by March 2026. These expansions are set to significantly enhance manufacturing capabilities.

Strategic Growth Drivers and Outlook

Management highlighted CNG and Industrial segments as primary growth drivers, with new applications emerging in industrial gases, defence, solar, and semiconductor sectors. Hydrogen development in India is seen as a complementary long-term opportunity, as high-pressure cylinders will be required for its storage and mobility. The company maintains a positive outlook for the next two years, driven by growing opportunities and a strong order pipeline.

Regulatory and Operational Challenges

An ongoing GST case, affecting the entire industry, is being pursued with representations to the government and a High Court case, with management hopeful for a positive outcome. The company also incurred a one-time penalty of ₹11 crores for not meeting net foreign exchange earnings requirements for its SEZ plant over a five-year assessment period. While this was a one-time payment, management is seeking amendments to SEZ rules to prevent future recurrences.

Order Book and Margin Commentary

The US subsidiary has an order book of $80 million, executable over 12-18 months. The total order book across all locations is approximately ₹1,000 crores, executable over the next year. The consolidated EBITDA margin for the quarter was 11.9%, below the guided range of 12-14%. This was attributed to a product mix shift, specifically a drop in high-value products, and higher operating costs in the US. Management expects margins to improve as CNG volumes pick up and the product mix normalizes.

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