Kirl. Brothers

Kirloskar Brothers reported a stable Q2 FY26 with consolidated revenue at ₹1,028 crores. However, for the first half of the year, revenue saw a modest 3% YoY decline to ₹2,007 crores. Q2 EBITDA stood at ₹124 crores, translating to a 12% margin. Management attributed the year-on-year margin moderation primarily to changes in product mix and a significant forex revaluation impact, while emphasizing that underlying business fundamentals and volumes remain robust.

The standalone performance was notably affected by funding delays at the state level for the Jal Jeevan Mission. Despite the central government releasing funds, KBL has withheld dispatches to mitigate credit risk, which deferred revenue recognition. Management reiterated its strict commercial policy, ensuring zero receivable exposure from JJM. Despite this headwind, the standalone order book (excluding small pumps) remains healthy, growing 13% YoY to ₹2,127 crores.

The international business was a key growth driver, with its order book expanding 25% YoY to ₹1,289 crores. Performance was particularly strong in the US and Thailand, which grew 21% and 158% respectively in constant currency, largely due to the execution of orders deferred from previous quarters. South Africa also continued its strong run with 27% growth. This global diversification helped cushion the softness in the domestic standalone segment.

The UK operations faced headwinds from high energy prices (GBP 280/MWh), which has led to deindustrialization, particularly in the North. Key service contract customers in the chemical and petrochemical sectors are idling plants, reducing service revenue and impacting margins. While management is winning new contracts in the water and power sectors to compensate, they have guided for a margin recovery to double-digits to be a 'medium-term' prospect.

Reported profitability was significantly impacted by forex volatility. Management quantified a mark-to-market loss of approximately GBP 1.8 million (around ₹20 crores) from currency movements, primarily the dollar's depreciation against the pound. An additional translation loss of $0.5 million was booked on dollar deposits held in its Euro-reporting Dutch subsidiary. Management clarified that on an operational level, the international business profit was stronger than the prior year.

Management highlighted data centers in the US as a key growth area, where KBL supplies modular fire and cooling systems, having executed 25-30 projects. Domestically, the company secured a breakthrough order for PetroTurbo pumps from IOC, entering a market dominated by two American players. With an estimated total addressable market of 25,000-30,000 pumps per year, this represents a significant long-term opportunity for import substitution.

Despite the muted H1, management expressed confidence in meeting its full-year double-digit growth aspirations. This optimism is rooted in a strong combined order book and the company's historical seasonality, where the second half typically accounts for 60-62% of annual revenue. The focus for the upcoming quarters will be on executing the robust order pipeline across both domestic and international markets.