ISGEC Heavy — Q2 FY26 earnings call

Call held 14 Nov 2025

Management summary

ISGEC Heavy reported a mixed Q2 FY26 with consolidated total income growing 3% YoY to ₹1,725 crores and PBT from continuing operations up 16% to ₹136 crores. The consolidated order book saw robust growth, increasing 24.5% YoY to ₹8,789 crores, providing strong revenue visibility. However, consolidated PAT was impacted by losses from discontinued operations, and the planned divestment of the Philippines subsidiary remains pending.

Highlights

  • Consolidated Total Income increased 3% YoY to ₹1,725 crores, driven by standalone revenue and Saraswati Sugar Mills.

  • Consolidated PBT from continuing operations grew 16% YoY to ₹136 crores, primarily due to better profits in ISGEC Hitachi Zosen Limited.

  • Consolidated order book as of Sep 30, 2025, stood at ₹8,789 crores, a 24.5% increase YoY, indicating strong future revenue visibility.

  • New orders booked this quarter (consolidated) were ₹1,461 crores, up significantly from ₹889 crores YoY.

  • Strategic investments in manufacturing capacity (Bhartoli, Dahej) are expected to add ₹400 crores to annual manufacturing revenue, targeting ₹3,200-3,300 crores annually from ₹2,500 crores (FY25).

  • Net external borrowings reduced by ₹180 crores over the last 6 months, improving the balance sheet.

Concerns

  • Consolidated PAT (including discontinued operations) declined to ₹56 crores from ₹96 crores YoY, mainly due to losses in discontinued operations.

  • The attempted sale of the Philippines subsidiary (Cavite Biofuel Producers Inc.) failed, and the company continues to incur quarterly losses of ₹10-11 crores from these discontinued operations.

  • Project business margins remain in the 5-7% range, with competitive pressure noted in process equipment, though expected to be temporary.

Key financials

  1. Consolidated Total Income ₹1,725 Cr +3%YoY
  2. Consolidated PBT (Continuing Ops) ₹136 Cr +16%YoY
  3. Consolidated PAT (Incl. Discontinued Ops) ₹56 Cr -41.6%YoY
  4. Standalone Total Income ₹1,293 Cr +3%YoY
  5. Standalone PBT ₹111 Cr +2%YoY

What they filed

Q1 FY27: revenue up 46.0%, net profit up 38.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,644 1,495 1,744 1,356 1,691 +3%1,739 +16%2,048 +17%1,980 +46%
EBITDA127 132 152 124 147 +16%194 +47%156 +3%124 +0%
Net profit96 23 98 13 56 −42%84 +265%85 −13%18 +38%
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

₹8,789 Cr

as of 2025-09-30 quantified

24.5% YoY

Inflow this quarter

₹1,461 Cr

Execution

Varies by product: 3 months (shortest), 12 months (process plant equipment/presses), 14 months (sugar plant/distillery), 20-21 months (boiler), up to 27-28 months (multiple boilers). Isgec Hitachi Zosen: 12-18 months.

Composition

Mix 3 products
  • Projects Business 68.3%
  • Manufacturing Business 31.7%
  • Isgec Hitachi Zosen 10.6%

Share of order book by product· categories overlap, and sum to 110.6%

The order book is strong and well diversified across various sectors and customers, with overall demand trends encouraging and export inquiries picking up.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹230 Cr
    • New manufacturing facility at Bhartoli for Machine Building division
    • New facility for manufacturing skids and modules at Dahej SEZ (Phase 1) ₹65 Cr
    • New facility for manufacturing skids and modules at Dahej SEZ (Phase 2) ₹22 Cr
    So it is about INR230 crores. That is now already under implementation. ... Presently, the shops being set up at Bhartoli are for expanding manufacturing capacity in the Machine Building division. This is expected to be completed by July 2026 and when completed, we expect an additional annual revenue of INR225 crores. ... Our Board has yesterday approved an investment of INR87 crores in setting up a new facility for manufacturing of skids and modules at our existing land within the plot at SEZ in Dahej. The investment will be done in 2 phases, involving investment of INR65 crores in the first phase and INR22 crores in the second phase.
  • Debt Gross ₹598 Cr · Net ₹429 Cr
    On a standalone basis, we closed the September 2025 quarter with a total borrowing of INR598 crores and net borrowings after deducting investments and funds in banks of INR429 crores compared to a net borrowing of INR96 crores as on 31st March 2025. The higher borrowings are mainly due to INR462 crores borrowed as ECB loan for lending to our wholly owned subsidiary company, ISGEC Investments Pte. Limited, Singapore, who has in turn lent it to a subsidiary company, Cavite Biofuel Producers Inc. Philippines, enabling it to repay all its lenders. ... On a consolidated basis, the net external borrowing is INR656 crores as on 30th September 2025 compared to INR836 crores as on 31st March 2025. The consolidated net external borrowings have reduced by about INR180 crores over the last 6 months.
  • M&A Bioeq Energy Holdings One (Cayman Islands) and subsidiaries including Cavite Biofuel Producers Inc. (Philippines) Divestment · Abandoned

    Buyer failed to make required payments for the sale of subsidiary companies and assets.

    The subsidiary companies are classified as discontinued operations, and the related assets are classified as held for sale. They incur a quarterly loss of approximately INR 10-11 crores, plus interest and forex fluctuation.

    As you know, our wholly-owned subsidiary company, ISGEC Investments Pte. Limited, Singapore, had entered into a transaction for sale of its wholly-owned subsidiary, Bioeq Energy Holdings One, Cayman Islands, along with its subsidiary companies and associated company, including Cavite Biofuel Producers Inc. in Philippines. The sale transaction, however, could not be completed as the buyer failed to make the required payments. We presently continue to work to sell these subsidiary companies along with the assets. The financial results of the subsidiary companies of ISGEC Investment Pte. Limited are classified as discontinued operations and the related assets are classified as held for sale. ... So that loss is being accounted, as you may have seen in the results. Particularly in our consolidated results, there is a line on discontinued operations. There is a separate breakup for discontinued operations that whatever loss is there's already being accounted. So today, the costs are the running costs or maintaining the salaries, the insurance, the plant maintenance, etcetera, which is roughly about INR10 crores, INR11 crores a quarter. There is interest cost. Now that interest is largely to Isgec. And there is foreign exchange fluctuation. So those are the 3 items.

Guidance & targets

Revenue

  • Revenue growth Revenue · FY26 · High confidence 7% to 8%
    Yes. So you've seen the half year pass. And for the full year, we do expect an increase in revenue and profits in the range of about 7% to 8%.

    — Kishore Chatnani

  • Additional annual revenue from Bhartoli facility Revenue · Post-July 2026 · High confidence ₹225 crores
    This is expected to be completed by July 2026 and when completed, we expect an additional annual revenue of INR225 crores.

    — Aditya Puri

  • Additional annual revenue from Dahej Phase 1 (skids/modules) Revenue · Post-Phase 1 completion · High confidence ₹160 crores
    The expansion when completed is expected to give an annual revenue of INR160 crores once the first phase is completed, which will increase to INR275 crores when the second phase is completed.

    — Aditya Puri

  • Additional annual revenue from Dahej Phase 2 (skids/modules) Revenue · Post-Phase 2 completion · High confidence ₹275 crores

    — Aditya Puri

  • Total manufacturing revenue target Revenue · Post-expansions · High confidence ₹3,200-3,300 crores

    From ₹2,500 crores (FY25) today

    Actually, a little more than that. So if you notice from our consolidated results, our manufacturing revenue for the past year, 31st March '25 year end is about INR2,500 crores. So I would expect that once all these expansions and the capacity is done, so we should be reaching close to INR3,200 crores, INR3,300 crores a year.

    — Kishore Chatnani

Profitability

  • Profit growth Profitability · FY26 · High confidence 7% to 8%
    Yes. So you've seen the half year pass. And for the full year, we do expect an increase in revenue and profits in the range of about 7% to 8%.

    — Kishore Chatnani

  • Project business margins Profitability · Ongoing · Medium confidence 5% to 7%
    The margins in this segment continue to be unless you continue to be around 5% to 6% to 7%. That's how the project business seems to be for us as well as for other companies, other competitors.

    — Kishore Chatnani

Capex

  • Total Capex Capex · FY26 · High confidence ₹230 crores
    So it is about INR230 crores. That is now already under implementation.

    — Kishore Chatnani

Capacity

  • Bhartoli facility completion Capacity · July 2026 · High confidence July 2026
    This is expected to be completed by July 2026 and when completed, we expect an additional annual revenue of INR225 crores.

    — Aditya Puri

Discontinued Operations

  • Cavite Biofuel Producers Inc. (CBPI) full year revenue Discontinued Operations · Full year (post-Dec 2025 operations) · High confidence ₹470-480 crores
    So I have the revenue figures for the full year basis. And I'm expecting some close to something like INR470 crores, INR480 crores of revenue for the full year.

    — Kishore Chatnani

  • Cavite Biofuel Producers Inc. (CBPI) full year profit Discontinued Operations · Full year (post-Dec 2025 operations) · High confidence ₹30-40 crores
    It will generate some profits of INR30 crores, INR40 crores besides that.

    — Kishore Chatnani

Receivables

  • FGD order receivables Receivables · Current year (FY26) · High confidence ₹400 crores
    We do expect for this particular FGD orders, about INR400 crores to come out by, let's say, largely within the current year, but maybe INR40 crores, INR50 crores will spill into the next financial year. So about INR400 crores should come out of these.

    — Kishore Chatnani

What to watch in Q3 FY26

Cavite Biofuel Producers Inc. (CBPI) operational status

Next quarter (Q3 FY26)
Current Expected to start manufacturing operations mid-December 2025
Target Confirmation of commercial operations and initial revenue contribution

Why it matters

The operational status and initial performance of CBPI will determine if it starts contributing positively to the company's financials as guided, reducing the drag from discontinued operations.

Meanwhile, the plant will start manufacturing operations for the season on sugarcane feedstock when sugarcane season starts there in the middle of December 2025.

Risks & concerns

  • Losses from discontinued operations (Philippines subsidiary)

    medium

    The failed sale of Bioeq Energy Holdings One and its subsidiaries leads to ongoing quarterly losses of ₹10-11 crores, plus interest and forex fluctuations, impacting consolidated PAT.

    Management acknowledged

  • Customer site readiness delaying revenue recognition

    low

    Approximately ₹80-90 crores worth of manufactured items are ready for dispatch but cannot be recognized as revenue because customer sites are not ready, though 95% payment has been received.

    Management acknowledged

  • Competitive pressure in process equipment margins

    low

    Margins in process equipment are not as great as they used to be due to competitive pressure, though management believes this phase is temporary.

    Management acknowledged

Q&A highlights

6 direct
Execution timeline for current order book and legacy projects Direct
So legacy orders, you're probably referring to the FGD orders and those kind of things. So we do expect that they will all be completed within June 2026.

Clarifies the timeline for completing older, potentially lower-margin FGD projects and provides a specific amount of pending legacy orders.

Asked by Amber Singhania

Status and financial impact of the Philippines plant (Bioeq) sale and operations Partial
We have continued to make efforts to arrive at a sale if possible. Of course, we are preparing to run the thing, run the assets and the plant professionally and with full due diligence. ... So today, the costs are the running costs or maintaining the salaries, the insurance, the plant maintenance, etcetera, which is roughly about INR10 crores, INR11 crores a quarter. There is interest cost. Now that interest is largely to Isgec. And there is foreign exchange fluctuation. So those are the 3 items.

Reveals that the sale is still being pursued but the plant will operate, incurring ongoing quarterly losses, and the company is actively managing it to attract buyers. The specific quarterly loss figure is crucial.

Asked by Amber Singhania

Reasons for muted revenue growth despite strong order book and promising sectors Direct
So there are no orders where we have any concerns about the orders. I mean there is nothing which is on hold. In the manufactured items, we do have certain clients and some equipment that are ready for dispatch worth about maybe INR80 crores or INR90 crores, which the customer is not able to lift because the site is not ready. So obviously, when we account for those sales, it's only when they are dispatched to the customer, that is the time you can accrue the revenue and the profits.

Explains that revenue recognition is delayed due to customer site readiness issues, not execution bottlenecks, and quantifies the value of goods awaiting dispatch.

Asked by Amber Singhania

Revenue potential from current capacity and planned capex Direct
So I would expect that once all these expansions and the capacity is done, so we should be reaching close to INR3,200 crores, INR3,300 crores a year. And there are others that we are also evaluating.

Provides a clear target for manufacturing revenue post-expansion, indicating significant growth potential from current levels.

Asked by Amber Singhania

Breakup of the order book into EPC and Manufacturing Direct
So in that, the projects business is INR6,004 crores and manufacturing is INR2,785 crores. ... On a standalone basis, the manufacturing domestic orders is INR1,125 crores and manufacturing export is INR692 crores. So about INR1,817 crores is manufacturing out of the stand-alone order book of INR7,700 crores, and the balance is projects.

Gives a precise split of the consolidated and standalone order books, which is critical for understanding business mix and margin profiles.

Asked by Dikshit Mittal

Margin profile improvement in the project business Direct
It will be better. That's something when we budget, when we bid for orders, we are trying to build in certainly a higher margin profile. And as we have been saying earlier that we are no longer taking orders with any significant amount of site work. We obviously have to erect the equipment that we supply. We are not taking any significant amount of civil construction or anything, and we are not taking orders which are really long duration.

Explains the strategy to improve project margins by focusing on higher-value equipment supply and reducing exposure to low-margin site work and long-duration projects.

Asked by Dikshit Mittal

Overall profitability of the Philippines company (Bioeq) for the full year Direct
So I have the revenue figures for the full year basis. And I'm expecting some close to something like INR470 crores, INR480 crores of revenue for the full year. It will obviously pay for all its expenses. It will also pay for its working capital interest. It will generate some profits of INR30 crores, INR40 crores besides that.

Provides specific revenue and profit expectations for the discontinued operations once they become operational, indicating a positive contribution despite the failed sale.

Asked by Dikshit Mittal

Pricing pressure in boilers and process equipment tenders Partial
Boilers, the demand is good. Boilers also is our largest product line. There is always competition, but I wouldn't describe it as pricing pressure. ... You're talking about process equipment, yes, there is competitive pressure. Margins are not as great as they used to be, but we do believe that it's a temporary phase.

Distinguishes between boilers (no pricing pressure) and process equipment (competitive pressure, but temporary), providing nuance on margin trends across product lines.

Asked by Palash Jain

3 min read 6 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

ISGEC Heavy Engineering reported a consolidated total income of ₹1,725 crores for Q2 FY26, marking a 3% year-on-year increase, primarily driven by growth in standalone revenue and Saraswati Sugar Mills. Consolidated Profit Before Tax (PBT) from continuing operations saw a significant 16% rise to ₹136 crores, compared to ₹117 crores in Q2 FY25, largely due to improved profitability from ISGEC Hitachi Zosen Limited. However, consolidated Profit After Tax (PAT), including discontinued operations, decreased to ₹56 crores from ₹96 crores in Q2 FY25, mainly attributable to losses from the discontinued Philippines operations.

Robust Order Book Growth and Future Visibility

The company demonstrated strong order book growth, with consolidated orders booked during Q2 FY26 reaching ₹1,461 crores, up from ₹889 crores in the previous year. As of September 30, 2025, the consolidated order book stood at ₹8,789 crores, a substantial 24.5% increase from ₹7,066 crores a year ago. This robust order book is well-diversified across various sectors and customers, with projects business accounting for ₹6,004 crores and manufacturing for ₹2,785 crores. Export orders constitute approximately 26% of the consolidated order book, indicating growing international demand.

Strategic Capacity Expansion Initiatives

ISGEC is actively pursuing capacity expansion to support future growth. A new manufacturing facility at Bhartoli, located 25 kilometers from Yamunanagar, is being set up for the Machine Building division, expected to be completed by July 2026 and projected to add ₹225 crores to annual revenue. Additionally, the Board approved an investment of ₹87 crores in two phases (₹65 crores and ₹22 crores) for a new facility at Dahej SEZ to manufacture skids and modules, targeting ₹160 crores annual revenue after Phase 1 and ₹275 crores after Phase 2. These expansions are anticipated to increase total manufacturing revenue from ₹2,500 crores (FY25) to ₹3,200-3,300 crores annually.

Discontinued Operations: Philippines Subsidiary Update

The attempted sale of Bioeq Energy Holdings One and its subsidiaries, including Cavite Biofuel Producers Inc. (CBPI) in the Philippines, could not be completed due to the buyer's failure to make payments. The company continues efforts to sell these assets. Meanwhile, CBPI is expected to commence manufacturing operations in mid-December 2025. These discontinued operations currently incur a quarterly loss of approximately ₹10-11 crores, plus interest and foreign exchange fluctuations. Once operational, CBPI is projected to generate ₹470-480 crores in annual revenue and ₹30-40 crores in profit, which would help offset the ongoing losses.

Debt Management and Working Capital

On a standalone basis, net borrowings increased to ₹429 crores as of September 30, 2025, from ₹96 crores on March 31, 2025, primarily due to an ECB loan of ₹462 crores extended to its Singapore subsidiary for onward lending to CBPI to repay its lenders. However, on a consolidated basis, net external borrowings reduced by ₹180 crores over the last six months, from ₹836 crores to ₹656 crores. The company expects to recover approximately ₹400 crores in receivables from FGD orders largely within the current fiscal year, with a small portion potentially spilling into the next financial year, which will aid working capital.

Market Outlook and Margin Strategy

Management noted encouraging overall demand trends and robust inquiry positions, with export inquiries also picking up. While the sugar sector might see a muted demand, other industries like metals, oil & gas, automobiles, cement, and core infrastructure sectors are healthy. The company is focusing on improving project business margins by selectively bidding for orders with higher margin profiles, avoiding extensive site work, civil construction, and very long-duration projects. Competitive pressure in process equipment is acknowledged but considered a temporary phase.

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