Harsha Engineers International Limited — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

Harsha Engineers International reported a mixed Q4 and FY25, marked by robust performance in India Engineering and the China subsidiary, but impacted by one-time provisions for Romania impairment and bad debt write-off in the solar division. Despite global uncertainties, the company anticipates healthy growth in its India Engineering business and specific segments like bushing, while actively addressing challenges in its Romania operations and leveraging the 'China plus One' strategy.

Highlights

  • Q4 FY25 Engineering segment top line at INR330 crores, with an adjusted EBITDA of INR66 crores.

  • FY25 Engineering segment top line grew 3.42% YoY to INR1,269 crores, with an adjusted EBITDA of INR227 crores.

  • A one-time impairment provision of INR95 crores for Romania investment (standalone) and INR28 crores (consolidated) was made.

  • The solar business reported annual revenue of INR139 crores and an EBITDA loss of INR14 crores, including a INR20 crores bad debt write-off.

  • Working capital cycle improved to 126 days in March '25 from 142 days in March '24.

  • The bushing business recorded INR102 crores turnover in FY25 and is expected to grow at least 30% in FY26.

  • Guidance for FY26 includes low teens growth for India Engineering business and a higher single-digit consolidated top line growth.

Concerns

  • Geopolitical tensions and economic turmoil

  • Weak demand in Europe and customer offtake reduction for Romania

Key financials

2 periods

Headline

  • Engineering Segment Top Line
    ₹330 Cr
  • Engineering Segment EBITDA
    ₹38.3 Cr
  • Engineering Segment Adjusted EBITDA
    ₹66 Cr
  • Working Capital Cycle
    126 days
  • Romania Impairment (Consolidated)
    ₹28 Cr

FY25

  • Engineering Segment Top Line
    ₹1,269 Cr
    YoY +3.4%
  • Engineering Segment EBITDA
    ₹199 Cr
    YoY +0.51%
  • Engineering Segment Adjusted EBITDA
    ₹227 Cr
  • Solar Business Revenue
    ₹139 Cr
  • Solar Business EBITDA Loss
    ₹14 Cr
  • Capex
    ₹209 Cr

What they filed

Q1 FY27: revenue up 25.2%, net profit down 2.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue353 339 373 365 378 +7%409 +21%474 +27%457 +25%
EBITDA42 43 35 55 54 +29%57 +33%73 +109%67 +22%
Net profit29 27 -2 38 36 +24%34 +26%47 +2450%37 −3%
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
₹265 Cr Total
  • Bushing Business (FY25) ₹102 Cr 38.5%
  • Japanese Customer (FY25) ₹65 Cr 24.5%
  • Stamping Business (FY25) ₹55 Cr 20.8%
  • LSB Business (FY25) ₹43 Cr 16.2%

Guidance & targets

Growth

  • Bushing Business Growth Growth · FY26 over FY25 · High confidence at least 30%
    I expect this business to continue to grow strongly, clocking at least about 30% growth in financial year '26 over '25.

    — Vishal Rangwala, Chief Executive Officer

  • India Engineering Business Growth Growth · coming financial year · Medium confidence low teens
    while India Engineering business should grow in low teens.

    — Vishal Rangwala, Chief Executive Officer

  • Consolidated Top Line Growth Growth · financial year '26 · Medium confidence at least a higher single-digit growth
    On a consolidated basis, we expect at least a higher single-digit growth in financial year '26 in top line

    — Vishal Rangwala, Chief Executive Officer

  • Solar Division Top Line Growth Growth · current financial year · Medium confidence healthy growth
    we are expecting a healthy growth of top line in the current financial year in this division based on orders on hand and in pipeline.

    — Vishal Rangwala, Chief Executive Officer

Profitability

  • Consolidated Bottom Line Growth Profitability · financial year '26 · Medium confidence much stronger growth
    and a much stronger growth in the bottom line.

    — Vishal Rangwala, Chief Executive Officer

Volume

  • Japanese Customer Offtake Volume · coming quarter · Medium confidence likely to increase
    we are getting signal from key Japan-based customer indicating that their offtake is likely to increase in coming quarter.

    — Vishal Rangwala, Chief Executive Officer

Risks & concerns

  • Geopolitical tensions and economic turmoil

    high

    The company operates in a 'prolonged turbulent period' due to Ukraine-Russia, Israel-Hamas wars, tariff wars, and India-Pakistan tensions.

    Management acknowledged

  • Weak demand in Europe and customer offtake reduction for Romania

    high

    Continued stress in Harsha Romania due to weak demand and a major customer indicating reduced offtake led to a significant impairment provision.

    Management acknowledged

  • Volatility in global market and difficulty in forecasting demand

    medium

    It is 'difficult to project with very high confidence' due to global market volatility and varying signals from customers regarding demand sustainability.

    Management acknowledged

  • Project delays for Japanese customers

    medium

    Growth with Japanese customers did not materialize as expected in FY25 due to 'various projects delaying due to sometime technical reason'.

    Management acknowledged

Areas of evasion (2)

  • Precise quantification of export growth outlook
  • Specific names of solar bad debt clients

Q&A highlights

1 direct, 1 evasive
Romania operations and impairment rationale Direct
One of our customer has indicated that they are going to buy very less or a lot less semi-finished products from us from Romania. And that's what has triggered this impairment activity. ... Romania operations cannot continue at the current level in this form.

This question directly addressed the significant impairment charge, revealing the specific customer-related trigger and signaling a major strategic shift for the Romania subsidiary.

Asked by Amit Anwani

Export outlook and impact of global volatility on demand Evasive
It's a very difficult question to fully answer because our signals we are getting from our customers is very varying. ... our customers are cautiously telling us that this demand improvement is sustainable or not, we are not sure.

Management's difficulty in quantifying export growth and acknowledging customer uncertainty highlights potential headwinds and a lack of clear visibility for a key revenue segment.

Asked by Harshit Patel

Details on solar business bad debt clients and recovery efforts Partial
We could not be we would not be able to give the name, but yes these are very old and we are not having running business except wherever there is an O&M commitment. ... legal proceedings for recovery are going on, so we've been advised not to really diverge more.

While management provided context on the nature of the bad debt, the refusal to disclose client names or specific details on legal proceedings leaves some unanswered questions regarding the recoverability and past due diligence.

Asked by Nikunj Doshi

2 min read 6 chapters

Detailed narrative

Q4 FY25 and Full Year Performance Overview

Harsha Engineers International reported a Q4 FY25 consolidated engineering segment top line of INR330 crores, achieving an adjusted EBITDA of INR66 crores. For the full fiscal year 2025, the engineering segment's top line reached INR1,269 crores, representing a 3.42% increase from FY24's INR1,227 crores, with an adjusted EBITDA of INR227 crores. The solar business recorded an annual revenue of INR139 crores but posted an EBITDA loss of INR14 crores, primarily due to a INR20 crores bad debt write-off and a INR5 crores ECL provision.

Romania Operations Undergoing Strategic Overhaul

The company made a significant one-time impairment provision of INR95 crores for its investment in Harsha Romania in standalone books, which translated to a net INR28 crores provision in consolidated financial statements for FY25. This action was prompted by continued weak demand in Europe and a major customer's indication of reduced semi-finished product offtake from the Romania facility. Management is actively formulating a comprehensive long-term strategy, acknowledging that 'Romania operations cannot continue at the current level in this form'.

Segmental Growth and Future Outlook

The India Engineering business demonstrated robust performance in Q4 and is anticipated to grow in 'low teens' in the coming financial year. The bronze bushing business was a key highlight, achieving a turnover exceeding INR100 crores in FY25 and is projected to grow 'at least about 30%' in FY26, supported by additional capacities in new Greenfield facilities. While sales to Japanese customers were flat in FY25 due to project delays, their offtake is 'likely to increase in coming quarter'.

Working Capital Efficiency and Capex Investments

Harsha Engineers successfully improved its consolidated working capital cycle to 126 days by March '25, a notable reduction from 144 days in the previous quarter and 142 days in March '24. Capital expenditure for Q4 FY25 amounted to INR78 crores, contributing to a total of INR209 crores for the full financial year 2025. These investments include new Greenfield sites for Harsha Engineers Advantek and a 10-megawatt ground-mounted solar project.

Global Volatility and China Plus One Strategy

Management acknowledged a 'prolonged turbulent period' due to geopolitical tensions and economic turmoil, making it 'difficult to project with very high confidence' for the global market. Despite this, the 'China plus One' strategy remains a long-term focus, with expectations of direct business from various geographies, particularly the U.S. The company also anticipates indirect benefits as customers deleverage their supply chains from China and increase manufacturing capacities in India, leading to more product supply into India for export.

FY26 Consolidated Guidance

For financial year 2026, Harsha Engineers expects 'at least a higher single-digit growth' in its consolidated top line and a 'much stronger growth in the bottom line'. This outlook is provided amidst acknowledged global market volatility and varying customer signals regarding demand sustainability. The company's confidence is anchored in the robust performance and prospects of its India Engineering business and specific high-growth segments like bushing.

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