Elgi Equipments Limited — Q3 FY26 earnings call

Call held 26 Feb 2026

Management summary

Elgi Equipments reported a robust 11% growth for FY26, achieving USD 440 million in revenue with strong profitability metrics. Key drivers included recovery in North America and successful product innovations like Demand=Match. While Europe achieved breakeven, challenges from tariffs and market inertia persist, prompting the company to seek new strategies for accelerated market share gains and future growth.

Highlights

  • Overall growth of 11% for FY26, with revenue reaching approximately USD 440 million at floating exchange rates.

  • EBITDA margin for FY26 closed at 15%, and Return on Capital Employed at 35%.

  • North America business is back to FY23 levels, with strong performance in industrial, medical, and portable segments.

  • Europe achieved breakeven status due to successful cost restructuring efforts.

  • Demand=Match technology launched, improving price realization and delivering 6-17% customer savings.

Concerns

  • Portable business in North America faced challenges due to tariffs from Italy, impacting profitability.

  • Europe market growth was minimal, constrained by macroeconomic conditions and tariffs.

  • Distribution operations in North America and Australia require continued focus and improvement.

  • Market inertia and competition from larger players necessitate new strategies for faster market share gains.

Key financials

  1. Revenue 440 Mn +11%YoY
  2. EBITDA Margin 15%
  3. Return on Capital Employed 35%
  4. India Revenue Share 47%
  5. India EBITDA Share 82%

What they filed

Q1 FY27: revenue up 28.2%, net profit up 9.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue531 498 580 503 568 +7%606 +22%666 +15%645 +28%
EBITDA114 102 125 97 108 −5%127 +25%101 −19%115 +19%
Net profit98 80 99 82 91 −7%90 +13%83 −16%90 +10%
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

  • ISAAME
    strong double-digit qualitative Growth
  • North America
    back to FY23 levels qualitative Performance
  • Europe
    more break-even qualitative Performance
  • Australia
    grew well qualitative Industrial Business Growth

Order book

low confidence
The transcript does not provide specific quantified order book figures or order inflow numbers for the reported period. Management discusses sales performance and market share gains.

Source: Inferred

Capital allocation

medium confidence
  • Capex ₹500 Cr New plan — moving current campus to new campus · well within depreciation for incremental growth
    • Moving current campus to new campus ₹500 Cr
    Now we have already announced that we are going to be spending between INR 500 to 600 crores for moving our current campus to our new campus. That's really that breakthrough kind of investment that we need to do. Otherwise, we don't have space. I mean building, we don't like buildings, but we don't have a choice. We need buildings. Every year our capex required for incremental growth will be well within our depreciation.
  • Debt Debt disclosed
    generated more cash in our overseas subsidiaries, helped us pare down some of our loans
  • Liquidity Liquidity disclosed Company reduced working capital levels through better management.
    better working capital management, we also kind of reduced our working capital levels.

Guidance & targets

Revenue

  • Revenue Target Revenue · FY31 · High confidence USD 750 million
    This USD 750 mn is a target that we are setting for FY31.

    — Premendra

  • CAGR Revenue · FY26-FY31 · High confidence 11.3%
    For us to grow at 11.3% CAGR is quite realistic

    — Premendra

Profitability

  • EBITDA Margin Target Profitability · FY31 · High confidence 18%
    This USD 750 mn would be at 18% of EBITDA margin

    — Premendra

  • Return on Capital Employed Target Profitability · FY31 · High confidence 35%
    and around 35% of return on capital employed.

    — Premendra

Market Share

  • India Growth Market Share · next 5 years · High confidence 11%
    India market for compressors is growing at around 4%. We will be growing at 11% which means that we are gaining share.

    — Jairam Varadaraj

  • Europe Growth Market Share · next 5 years · High confidence 10%
    The European market is actually flat, and we are planning to grow 10% which means we are gaining share.

    — Jairam Varadaraj

  • American Market Growth Market Share · next 5 years · High confidence 12%
    The American market is expected to grow at 1.5% and we are growing at around 12%.

    — Jairam Varadaraj

Product Launch

  • New Product (Chinese Competition) India Launch Product Launch · Q2 FY27 · High confidence End of second quarter of this year
    The product is going through validation even as we speak. The launch plan in India is end of second quarter of this year.

    — Jairam Varadaraj

Market context

  • Global Service Centre Go-Live Operations · Q1 FY27 · High confidence Second half of April
    Our global service centre... is on track, we expect to go live in the second half of April.

    — Ramesh Ponnuswami

  • Demand=Match Global Launch Product Launch · March 2026 · High confidence March
    this is the new one and going forward will be launching from coming March across all the globe in Europe and American product ranges.

    — Venu Madhav

What to watch in Q4 FY26

Global Service Centre Commissioning

Next quarter (Q1 FY27)
Current Under construction, on track
Target Live in second half of April

Why it matters

This facility is crucial for enhancing global support, operational efficiency, and customer service, impacting overall business performance.

Our global service centre... is on track, we expect to go live in the second half of April.

Risks & concerns

  • Tariffs and macroeconomic conditions in international markets

    medium

    US tariffs (up to 50%) impacted profits in North America, particularly the portable business. Europe's market was constrained by macroeconomic conditions and tariffs, leading to minimal growth.

    Management acknowledged

  • Market inertia and brand recognition in competitive global markets

    medium

    Customer behavior tends to stick with existing suppliers. ELGI's brand is less known globally, requiring significant investment in marketing and brand pull to compete with established players like Atlas Copco and Ingersoll Rand.

    Management acknowledged

  • Need for new strategies to accelerate market share gains

    medium

    Management recognized that current strategies, while successful, might not be sufficient to achieve significantly higher growth rates and market share gains, especially in mature markets. They are actively exploring and discovering new approaches.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Contribution of global business to EBITDA and future profitability drivers Direct
The regions that we are operating in besides India are very expensive regions to operate in. People there and the overheads there are significantly higher than the equivalent costs in India. Which means then for those regions to start contributing profitably to the same level as India, the top line required is far higher. So, as we grow our top line there, we are not going to have a proportionate increase in our overhead. So that will be one lever of contribution. The second is what you just said. Our aftermarket is a significant contributor.

Clarifies the strategy for improving global profitability, emphasizing top-line growth and aftermarket contribution in international markets.

Asked by Parag Thakkar

Impact of tariff stabilization on US installed base and aftermarket profits Direct
So yes, in our current situation, if the tariff stabilizes at 18, we have a significant margin in our favour because we have already managed that 50%. So, do we retain this 32%? Do we give some away to gain the share? These are all tactical moves.

Explains how ELGI plans to leverage potential tariff stabilization in the US to gain market share and improve profitability.

Asked by Parag Thakkar

Differentiation of Demand=Match technology compared to competitors' VSD/SFC Direct
Demand=Match is for the fixed speed. The fixed speed machines today have, like what Venu said, fixed flow, always variable. So, what happens is there is a huge amount of inefficiency, and the customer wants to save it, they have to spend 30% more by a variable frequency drive. What this technology does is varies the flow to the customer without a VSD. So, this is an electromechanical system, not an electronic system, which delivers that value.

Highlights ELGI's unique, patented technology that offers energy efficiency without the higher upfront cost of VSD, providing a competitive edge.

Asked by Parag Thakkar

Exposure to semiconductor/data center markets Partial
Anvar had presented that, we had presented six percent of our business semiconductor, but we should be very careful about this. You know, these are fashionable trends, right? Today there is semiconductor, tomorrow there is steel, day after it will be cement. The idea is not to say that we will put everything there, right? Our ability is to play across all industry, right? That's the key, yeah?

Provides insight into ELGI's current exposure to the semiconductor sector and management's diversified approach to industry segments.

Progress on centrifugal compressors and strategy for high-end market Direct
Centrifugal is one product category, just like vacuum, blowers, accessories. It's all part of our journey to play in the full suite of products. Now, having said that, do we have the technology to build centrifugals? Absolutely. Right. We've already built two frames and they're running in the field. Now, the question in our mind is you can't boil the ocean. Right. You got to pick your priorities, work on that priorities. Centrifugal market out of that 20 billion is about 2 billion.

Clarifies ELGI's progress in developing centrifugal compressors and its strategic, prioritized approach to entering this high-end market segment.

Asked by Harshit Patel

Future backward integration opportunities beyond current scope Direct
If there is a backward integration by which we can sell more compressors, we will take that also. Right. But unfortunately, we don't. But, you know, the idea of this, each of these as a there is a strategic reason. Right. This is not about trying to take away a supplier's profit. That's not the intent. Yeah. If that was the intent, there is a lot more that we buy from suppliers that we can take over.

Explains the strategic rationale behind ELGI's backward integration efforts (safety, quality, cost) and indicates no immediate plans for further integration, but flexibility for future opportunities.

Asked by Harshit Patel

Improvement in installed base mix (domestic vs. overseas) over next five years Evasive
I don't know where you got your memory. I never would talk about that. Right. So, you know, this is very critical information, because we don't want anyone to know what is that actual number of machines. Right. Now, having said that, the percentage with which we are increasing the installed base in Europe and U.S. is far higher than the percentage at which we are increasing in India. Right. Now, when the percentage of increase is more, the percentage of contribution of aftermarket will also be right.

Management declined to provide specific numbers but indicated a strategic shift towards higher overseas aftermarket contribution due to faster installed base growth abroad.

Asked by Sudarshan Srinivasan

Reason for lower 5-year growth target (11.3% CAGR) compared to previous 5 years (13% CAGR) Direct
The reason something in the last five years, right? And like I said, our current strategy five years ago gave us a certain set of results, which were suboptimal compared to our aspiration, right? It would not be prudent to ignore it and continue to say we will do this 13%, yeah? What we have discovered is the inertia of getting in front of the customer is very high, yeah? The strategy that we followed to aspire for 13-14% growth outside the country was only good enough for around 10%.

Explains the revised, more realistic growth target based on past performance and the challenges of market inertia, indicating a need for new strategies.

Asked by Yash

3 min read 7 chapters

Detailed narrative

FY26 Performance and Strategic Overview

Elgi Equipments reported an 11% growth for FY26, achieving approximately USD 440 million in revenue at floating exchange rates. The company closed the year with an EBITDA margin of 15% and a Return on Capital Employed of 35%. India contributed 47% to revenue and 82% to EBITDA, highlighting its significant role. Management emphasized that the purpose and seven values of the company guide its behavior across all stakeholders.

Global Market Performance and Regional Dynamics

The ISAAME region remained the main revenue driver, showing strong double-digit growth. North America's performance recovered to FY23 levels, with industrial and medical segments driving record revenue, though the portable business was challenged by tariffs. Europe achieved a break-even performance due to cost restructuring, but faced constraints from macroeconomic conditions and tariffs. Distribution operations in North America and Australia were identified as areas needing further improvement.

Product Innovation and Technology Leadership

ELGI launched its patented Demand=Match system, an electromechanical solution that varies airflow without a VSD, resulting in 6-17% customer savings. This technology, already improving price realization in India, is set for a global launch in March across Europe and American product ranges. The company also expanded its Permanent Magnet Synchronous Motor (PMSM) range up to 55 KW and completed the full range of refrigerated dryers from 20 CFM to 500 CFM.

Operational Efficiency and Backward Integration

ELGI significantly reduced its motor imports from 33% in FY24 to 5% in FY26 by manufacturing motors in-house, which improved lead times and quality. The global service center, part of the MK2 project, is on track to go live in the second half of April, aiming to enhance worldwide support. The company continues strategic, selective backward integration for critical components like pressure vessels and castings to ensure safety and quality.

Human Resources and Digital Transformation Initiatives

ELGI is focused on building talent through robust campus programs and continuous development for existing employees, emphasizing well-being and a performance management system for growth. Digitally, the company is executing a three-step strategy: integrating and securing core systems, building data platforms with AI engines for predictive analytics, and developing digital business models to drive transformation and process adherence globally.

Long-term Financial Targets and Growth Strategy

ELGI has set a target of USD 750 million in revenue by FY31, implying an 11.3% CAGR from FY26, with an 18% EBITDA margin and 35% Return on Capital Employed. The company aims to gain market share, targeting 11% growth in India (vs. 4% market), 10% in Europe (vs. flat market), and 12% in America (vs. 1.5% market). Management acknowledged the need for new strategies to overcome market inertia and achieve these ambitious targets.

Capital Expenditure and Debt Management

The company plans a significant capital expenditure of INR 500-600 crores over the next 4-5 years for moving its current campus to a new location, which is considered a breakthrough investment. Annual capex for incremental growth is expected to remain within depreciation levels. ELGI has also focused on reducing its working capital levels and paring down loans, supported by increased cash generation from overseas subsidiaries.

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