Kirloskar Oil

Kirloskar Oil Engines reported a 4% YoY increase in consolidated revenue from operations, reaching ₹1,454 crores for Q3 FY25. However, consolidated net profit saw a significant 37% YoY decline to ₹58 crores. On a standalone basis, net sales grew 3% YoY to ₹1,154 crores, but EBITDA decreased 9% YoY to ₹117 crores, resulting in an EBITDA margin of 10.1% compared to 11.3% in Q3 FY24. The company achieved its highest-ever Q3 standalone numbers, with year-to-date sales for 9M FY25 at ₹3,672 crores, a 7% growth, and standalone net profit at ₹280 crores, up 10% YoY.

The Power Gen business experienced subdued results in Q3, with sales decreasing 2% YoY to ₹418 crores. This was primarily attributed to the CPCB IV transition and pre-buy effects, leading to a market contraction of around 40% in the low and medium horsepower (LMHP) segments where the company is strong. Management expects LMHP demand to pick up in coming quarters, returning to pre-emission norm levels. The industry's overall volumes are anticipated to improve from 32,000 units in Q3 to 36,000-38,000 units in Q4 FY25. The high horsepower (HHP) segment, however, showed strong demand, and the company is making progress in improving its market share here.

In contrast to Power Gen, the Industrial segment demonstrated strong performance, registering a 16% YoY growth with sales of ₹268 crores. This growth is supported by strong demand from the infrastructure sector, especially with CEV BS-V norms going live. The Distribution and Aftermarket business also performed well, growing 15% for the quarter to ₹208 crores, highlighting the company's focus on service penetration and dealer capabilities. These segments were key contributors to the overall B2B growth of 3% YoY, reaching ₹1,006 crores in standalone sales and ₹1,018 crores in consolidated revenue.

The B2C segment faced challenges, with consolidated revenue declining 14% YoY to ₹224 crores and registering a loss of approximately ₹21 crores before interest and tax. This was largely due to a complex transition involving the consolidation of five manufacturing units into a single plant at Sanand, which impacted production levels. The Farm Mechanization business, a part of B2C, saw a significant 55% decline in sales to ₹9 crores, as the company is re-evaluating its business model due to profitability concerns. Management expects performance improvement in the B2C segment in the coming quarter as the new plant stabilizes and EBITDA profile recovers to pre-consolidation levels.

The Financial Services business, Arka Fincap Limited, delivered robust growth, with quarterly revenue increasing 43% YoY to ₹212 crores. As of December 31, 2024, Arka's assets under management (AUM) stood at ₹6,740 crores. Despite strong revenue growth, the segment's EBIT declined 23% YoY to ₹29 crores. The Board of Directors approved an interim dividend of 125%, or ₹2.50 per share.

International B2B sales declined 17% YoY to ₹112 crores, primarily because the prior year's Q3 included large one-time^📎 orders that did not recur. International B2C, however, grew 18% to ₹10 crores, driven by agri engines and pump exports. The company's focus remains on building sustainable international operations across channels and geographies. Working capital levels remain comfortable with payables at 70 days and receivables at 43 days, but inventory levels are higher at 77 days due to CPCB norm changes and upcoming BSI upgradation, which the company is working to reduce.