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.