Hind Rectifiers Q1 FY27 earnings call

Hirect Limited is undergoing a strategic transformation from a component supplier to an integrated systems and solutions company, aiming to increase its participation in the value chain and build deeper technology capabilities. This transition is supported by strong Indian technology, efficient operations, and a focus on global expansion. The Chairman and MD, Mr. Suramya Nevatia, continues to oversee R&D, technology developments, and M&A, while the new Global Chief Executive Officer, Mr. Anand Chidambaram, leads international breakthroughs. The company's long-term ambition is to become a INR 1 billion revenue company in the next five years.

For Q1 FY27, Hirect reported consolidated revenue growth of 20.3% YoY to INR 258.4 crores, driven by healthy business momentum. However, consolidated EBITDA de-grew 45.4% YoY to INR 13.2 crores, with a margin of 5.4%, primarily due to the integration of Elventive France. Standalone revenue grew 10.1% YoY to INR 236.4 crores, with EBITDA increasing 3.2% YoY to INR 25.1 crores (10.6% margin) and PAT growing 17.8% YoY to INR 15.1 crores, despite raw material cost volatility from the West Asia crisis.

Q1 order intake was described as flattish, with several tenders in the pipeline, including those where Hirect is in leadership positions (L1, L2, or L3), expected to finalize by the end of Q2 FY27. These tender finalizations were delayed due to global geopolitical factors. Hirect secured its first MEMU trainset development order valued at approximately INR 60 crores and initial prototype orders for IGBT converters for the US mining industry, marking significant new market entries. The company is also pursuing its first Vande Metro trainset tender, indicating a strategic shift towards higher-value integrated systems.

The integration of Elventive France, acquired for its EMS and embedded systems expertise, is currently impacting Hirect's consolidated margins. This margin pressure is expected to persist for another 3 to 5 quarters as Elventive works towards breakeven, after which margins are projected to improve. Management is actively contemplating restructuring measures at Elventive France and is in discussions with marquee German automakers for significant projects, which, if successful, will position the company to execute large orders.

The indigenous propulsion platform is a core element of Hirect's transformation strategy. Field trials for this system are progressing, having covered 9,000 to 10,000 kilometers. Despite recent delays caused by flooding in Gujarat, the trials are expected to be completed in the next few months^⏳. Successful completion will enable Hirect to move from a development source to a main vendor, making it eligible for 20% of tender quantities under UVAM guidelines.

Hirect achieved its initial entry into the US rail market by securing its first order for traction motor assemblies and also obtained initial prototype orders for IGBT converters for the US mining industry. These international breakthroughs validate the company's engineering and manufacturing capabilities. This expansion is part of a broader strategy to diversify beyond traditional markets, leveraging power electronics capabilities into new products, customers, and geographies, including mining, defense, marine, and data centers.

To enhance control over critical inputs and improve margins, Hirect is vertically integrating by manufacturing highly critical copper conductors in-house. This initiative has already resulted in approximately 2% savings on material costs, with further margin improvements anticipated. The company has also increased traction transformer capacity by 20% at its Satpur facility and developed comprehensive capabilities at its Sinnar facility, aiming to improve product quality, localization, and time to market.