Harsha Engg Intl

Harsha Engineers reported a consolidated Engineering business top line of INR349 crores in Q1 FY26, marking a 6.73% YoY growth from INR327 crores in Q1 FY25 and a 5.76% QoQ growth from INR330 crores in Q4 FY25. Consolidated EBITDA for the Engineering business stood at INR65.2 crores, up 4.48% YoY from INR62.4 crores in Q1 FY25. Management noted positive signs of industrial demand improvement in Europe and India, leading to higher sales in Harsha Romania and good order inflow for large-sized cages, although the auto sector in India remains sluggish.

The new greenfield facility, Harsha Advantek, commissioned in May 2025, contributed INR1.65 crores in Q1 FY26 sales, with initial sales of INR2 lakh from the new site. The facility is currently operating at a negative bottom line due to higher overheads, depreciation, and interest charges during its ramp-up phase, but management expects a positive turnaround by the end of the current financial year. The company incurred INR44 crores in capex during Q1 FY26, primarily for the Bhayla site, as part of a larger INR300 crore investment plan over 2.5-3 years, with approximately INR100 crores remaining to be invested over the next 1.5 years.

The Bushing business is experiencing strong traction, with FY25 revenue of INR100 crores expected to grow at least 30% in FY26. A new long-term contract for bushings has been secured, projected to achieve peak annual sales of around INR117 crores over 2-3 years, with incremental revenues starting in Q4 FY26. Overall, the Bushing segment is targeted to reach at least INR200 crores in revenue within the next 2-3 years, driven by significant growth and the need for additional capacity.

Harsha Romania showed good top-line growth in Q1 FY26, driven by overall industrial demand improvement in Europe, though the sales mix has not yet shifted significantly towards cages (currently 20% cages, 80% semi-finished casting). The combined loss for Romania and China, which stood at INR17 crores in FY25, is targeted to reduce considerably, potentially by 50%, in FY26. Management is actively working on restructuring and cost savings initiatives in Romania, expected to yield full results in 6-8 months.

Overall capacity utilization in India facilities was estimated at 65-70% in Q1, with Romania at very low utilization and China around 60%. Management explained that the greenfield expansion was necessary despite existing capacity due to product-specific growth in Bushings and large-size cages, which required additional space and capacity beyond what existing facilities could optimally provide. The new Bhayla site offers significant room for future expansion, with 55-60% land free and 20% building space available for new products without additional infrastructure spend.

For FY26, Harsha Engineers targets low-teens top-line growth for its India Engineering business and higher single-digit consolidated top-line growth, with better profitability growth compared to FY25. The company expects H2 FY26 sales to be stronger than H1. Efforts to increase sales to Japan-based customers continue, and while revenue from a new major sourcing contract for cages may be delayed to FY27, management remains confident in the long-term growth trajectory of its core product lines.