ISGEC Heavy — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

ISGEC Heavy Engineering reported a strong Q3 FY26 with consolidated total income growing 17% and PBT from continuing operations up 72%. The company's consolidated order book expanded by 18.7% YoY to INR8,709 crores, providing robust revenue visibility. Significant capital investments were approved for capacity expansion, and net external borrowing saw a substantial reduction. The divestment of Cavite Biofuel, however, faced a setback.

Highlights

  • Consolidated total income increased 17% to INR1,765 crores in Q3 FY26 compared to INR1,500 crores in Q3 FY25.

  • Consolidated profit before tax from continuing operations surged 72% to INR150 crores in Q3 FY26 from INR87 crores in Q3 FY25.

  • Consolidated order book grew 18.7% YoY to INR8,709 crores as of December 31, 2025, indicating strong future revenue visibility.

  • Net external borrowing on a consolidated basis decreased by INR340 crores during the quarter, reaching INR317 crores as of December 31, 2025.

  • Cavite Biofuel plant is running at 70-75% crushing capacity, with good operating parameters, despite the failed divestment.

Concerns

  • The planned sale of Cavite Biofuel Producers Inc. could not be completed as the buyer failed to make required payments, classifying assets as held for sale.

  • Commodity price increases could potentially impact margins on fixed-price contracts, although management states current impact is not adverse.

  • Working capital tied up in FGD projects, though most are nearing completion and expected to be resolved by March quarter.

Key financials

  1. Consolidated Total Income ₹1,765 Cr +17%YoY
  2. Consolidated PBT (Continuing Ops) ₹150 Cr +72%YoY
  3. Consolidated PAT (Incl. Discontinued Ops) ₹84 Cr +265%YoY
  4. Stand-alone Total Income ₹1,365 Cr +21%YoY
  5. Stand-alone PBT ₹99 Cr +27%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

₹8,709 Cr

as of 2025-12-31 quantified

18.7% YoY

Inflow this quarter

₹1,733 Cr

Composition

Mix 2 client types
  • Private Sector 85%
  • PSU and Government 15%

Share of order book by client type

The order position is strong and well diversified across various sectors and customers, with robust demand and increasing export inquiries.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed financed through internal accruals
    • Machine Building division capacity expansion (initial phase)
    • Machine Building division capacity expansion (further investment) ₹218 Cr
    • New machining facility for iron castings ₹22.6 Cr
    • New skids and modules facility at Dahej ₹110 Cr
    It may be noted that during the nine-month period, a capital expenditure of about INR86 crores was financed through internal accruals. (Standalone) / It may be noted that during the nine-month period on a consolidated basis, a capital expenditure of about INR100 crores has been financed through internal accruals.
  • Debt Gross ₹670 Cr · Net ₹317 Cr
    • Repayment Consolidated net external borrowing reduced by INR340 crores during the quarter. ₹340 Cr
    On a consolidated basis, the net external borrowing is INR317 crores as on 31st December 2025 compared to INR656 crores as on 30th September 2025.
  • M&A Cavite Biofuel Producers Inc. Divestment · Abandoned

    Buyer failed to make required payments for the sale of its wholly owned subsidiary, Bioeq Energy Holdings One, Cayman Islands, along with its subsidiary companies and associate company, including Cavite Biofuels Producers Inc.

    Financial results of the subsidiary company are classified as discontinued operations and related assets as held for sale (INR1,098 crores assets, INR26.5 crores liabilities).

    The sale transaction, however, could not be completed as the buyer failed to make the required payments. We presently continue to work to sell the subsidiary companies along with the assets. The financial results of the subsidiary company of Isgec Investments PTE Limited are classified as discontinued operations and the related assets are classified as held for sale.

Guidance & targets

Revenue

  • Manufacturing business peak revenue Revenue · after capex completion · Medium confidence INR3,600-3,700 crores

    Previously INR3,200 crores → INR3,600-3,700 crores

    So, the peak could be something like INR3,600 crores - INR3,700 crores. As Mr. Puri just mentioned, there is a timeline in which this investment and this capacity will come online. He has mentioned two dates, July 27th as well as a date in March, 2028. So yes, but our manufacturing business should reach INR3,700 crores or so.

    — Kishore Chatnani

  • Machine Building Division annual revenue Revenue · after both investments · High confidence INR1,000 crores

    Previously INR400 crores → INR1,000 crores

    With both these investments, we hope to increase the revenue for the Machine Building Division from the present INR400 crores per year to about INR1,000 crores per year.

    — Aditya Puri

  • Company revenue growth Revenue · current year · High confidence 7-8%
    We'll stick with the guidance we have given earlier. (referring to 7-8% revenue growth)

    — Kishore Chatnani

  • Stand-alone revenue growth Revenue · next year (FY27) · High confidence 8-9%
    On a standalone basis, we should be able to grow 8% - 9% in terms of revenue.

    — Kishore Chatnani

Margin

  • Project business margins Margin · ongoing · High confidence 8-9%
    No, I think what you're saying 8%- 9% is a fair, fair thing to expect.

    — Kishore Chatnani

Market context

  • Double-digit margins Margin · ongoing · Medium confidence double-digit
    So, so the margins keep going up and down. So, 15.5% to 15% is not a sacrosanct figure, but we hope to maintain double-digit margins.

    — Aditya Puri

What to watch in Q4 FY26

Completion of Machine Building division expansion (initial phase)

July 2026
Current In progress
Target Completed

Why it matters

This expansion is expected to yield an additional annual revenue of INR225 crores.

This ongoing expansion is expected to be completed by July 2026. And when completed, it can give an additional annual revenue of INR225 crores.

Risks & concerns

  • Failed divestment of Cavite Biofuel Producers Inc.

    medium

    The sale transaction could not be completed as the buyer failed to make the required payments, leading to assets being classified as held for sale.

    Management acknowledged

  • Commodity price escalation impact on fixed-price contracts

    medium

    While currently not seeing adverse impact, significant future increases in commodity prices could affect margins on fixed-price contracts.

    Analyst acknowledged

  • Working capital tied up in FGD projects

    low

    Most FGD project milestones are expected to be achieved by the March quarter, leading to the release of tied-up working capital.

    Analyst acknowledged

Q&A highlights

7 direct
Industrial Machinery & Manufacturing division margins Direct
So, so the margins keep going up and down. So, 15.5% to 15% is not a sacrosanct figure, but we hope to maintain double-digit margins. ... And margins, yes, in Hitachi Zosen have improved significantly, but I can't confirm that the same level will be maintained from quarter-to-quarter.

Analyst questioned the sustainability of high margins (15.5%) in the manufacturing division, and management confirmed aiming for double-digit but not necessarily the current peak.

Asked by Digant Haria

Peak revenue potential after capex Direct
So, the peak could be something like INR3,600 crores - INR3,700 crores. ... but our manufacturing business should reach INR3,700 crores or so.

Management provided an updated and higher peak revenue potential for the manufacturing division (INR3,600-3,700 crores) after the planned capital expenditures, up from a previous estimate of INR3,200 crores.

Asked by Digant Haria

Cavite Biofuel investment and operational status Direct
So, the plant is running. The plant operation is very good. ... We have now reached about 70%- 75% crushing capacity on a daily basis. ... The plant is capable of using sugarcane as well as molasses at the same time. So the season will still run for another two months at least. And of course, thereafter, the plant will continue to run on molasses.

Despite the failed divestment, management confirmed that the Cavite Biofuel plant is operating efficiently at 70-75% capacity and expects it to be self-sufficient operationally.

Asked by Manish Goyal

Commodity price risk and impact on fixed-price contracts Partial
So as of now, we are not seeing too much adverse impact on our costing. But if commodity prices were to rise any further, significantly rise any further, it might have happen. Obviously, it's not good that for us if commodity prices have risen, but some of this is factored in.

Analyst inquired about the impact of rising commodity prices on fixed-price contracts, and management acknowledged potential risk if prices rise significantly, but currently, the impact is limited.

Asked by Renjith Sivaram

FGD project completion and working capital release Direct
So those orders are almost completed. In fact, 99% of our work was done. ... So most of the milestones will get achieved during this March quarter.

Management provided clarity on the near completion of FGD projects and the expected release of associated working capital by the March quarter, addressing a key liquidity concern.

Asked by Nidhi Shah

Shift in order book composition (private vs PSU, international vs domestic) Direct
So, the private sector order book is now 85% and the PSU and government is 15%. ... So, we have been consciously trying to have a better balance, a higher proportion of private sector orders where typically the order cycle times are shorter, and the payment terms are linked to supplies rather than to milestones.

Management explained the strategic shift towards a higher proportion of private sector and international orders due to better margins, shorter cycle times, and improved payment terms compared to PSU orders.

Asked by Rabindra Nath Nayak

Company standalone revenue growth guidance for next year (FY27) Direct
On a standalone basis, we should be able to grow 8% - 9% in terms of revenue.

Management provided specific standalone revenue growth guidance of 8-9% for the next fiscal year (FY27), indicating confidence in future performance.

Asked by Manish Goyal

Driving factors for export order book Direct
So, the projects business is booking orders for boilers, small power plants, sugar machinery, those kind of equipment. I mean, obviously, the manufacturing business is booking orders for presses, but they had been booking that earlier as well. ... But we are making a lot of efforts to grow the export order book in both the segments.

Management clarified that export order growth is broad-based across projects (boilers, sugar machinery) and manufacturing (presses), driven by conscious efforts to expand international presence.

Asked by Manish Goyal

3 min read 7 chapters

Detailed narrative

Strong Financial Performance in Q3 FY26

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.

Robust Order Book and Inflow

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.

Strategic Capacity Expansion Initiatives

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.

Update on Cavite Biofuel Divestment

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.

Borrowing Profile and Capital Efficiency

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.

Market Outlook and Order Book Composition

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.

Margin Outlook and Risk Management

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.

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