ISGEC Heavy

ISGEC Heavy Engineering delivered robust financial results for Q3 FY26. Consolidated total income increased by 17% year-over-year to INR1,765 crores, up from INR1,500 crores in Q3 FY25. Consolidated profit before tax from continuing operations saw a significant surge of 72%, reaching INR150 crores compared to INR87 crores in the prior year. Stand-alone total income also grew by 21% to INR1,365 crores, with stand-alone PBT rising 27% to INR99 crores.

The company reported a strong consolidated order book of INR8,709 crores as of December 31, 2025, marking an 18.7% increase from INR7,334 crores a year ago. Consolidated order inflow for the quarter was INR1,733 crores, up from INR1,510 crores in Q3 FY25. Export orders constitute a significant portion, with stand-alone export orders in hand at INR1,629 crores, representing 21% of the total stand-alone order book. The order book is well-diversified across sectors and customers, with 85% from the private sector.

ISGEC is undertaking several strategic capital investments to expand its capacity. The Machine Building division's ongoing expansion, expected by July 2026, is projected to add INR225 crores in annual revenue. A further investment of INR218 crores has been approved for this division, aiming for completion by July 2027, which could add INR375 crores annually. Collectively, these investments are expected to boost the Machine Building division's revenue from INR400 crores to INR1,000 crores per year. Additionally, INR22.6 crores is being invested in a new machining facility for iron castings, and the Dahej skids and modules facility investment has been revised to INR110 crores, with Phase 1 completion by March 2027.

The planned divestment of Cavite Biofuel Producers Inc. in the Philippines faced a setback as the buyer failed to make the required payments. Consequently, the assets of this subsidiary are now classified as held for sale, totaling INR1,098 crores with associated liabilities of INR26.5 crores. Despite the failed sale, the plant is currently operational and running efficiently at 70-75% crushing capacity, utilizing both sugarcane and molasses as feedstocks. Management continues to seek buyers for this business.

The company demonstrated improved capital efficiency, with consolidated net external borrowing significantly reduced by INR340 crores during the quarter, bringing the total to INR317 crores as of December 31, 2025, down from INR656 crores in September 2025. On a stand-alone basis, net borrowing stood at INR433 crores. Capital expenditures during the nine-month period, amounting to INR86 crores (standalone) and INR100 crores (consolidated), were entirely financed through internal accruals, reflecting prudent financial management.

The overall market demand remains encouraging, with robust inquiry levels and increasing export inquiries. The company has consciously shifted its order book composition, with 85% now coming from the private sector and 15% from PSUs/government. This strategic shift is driven by better margins, shorter cycle times, and improved payment terms linked to supplies rather than milestones, especially for international orders.

Management aims to maintain double-digit margins for the manufacturing division, acknowledging that quarter-to-quarter variations occur. For the project business, an 8-9% margin is considered a fair expectation. Regarding commodity price risk, the company currently sees no significant adverse impact on costing. For fixed-price contracts, a robust risk management strategy involves securing back-to-back offers from suppliers and hedging against price fluctuations for critical materials like steel, copper, and aluminum, especially for longer-duration projects.