Kirloskar Oil

Kirloskar Oil Engines reported its highest ever third-quarter sales, with standalone revenue reaching ₹1,371 crores, marking a 35% year-on-year growth. Year-to-date sales also grew by 25%. This robust performance was supported by strong growth across all business units, including Power Generation (up 44% YoY to ₹603 crores), Industrial (up 41% YoY to ₹390 crores), and International B2B (up 26% YoY to ₹140 crores). Consolidated revenue from operations increased by 29% YoY to ₹1,873 crores, with net profit (excluding exceptional item^📎s) surging 90% YoY to ₹126 crores.

The company demonstrated robust operational efficiency, leading to a significant improvement in profitability. Standalone EBITDA for Q3 FY26 stood at ₹169 crores, a 59% increase year-on-year, with the EBITDA margin expanding by 190 basis points to 12.2% from 10.3% in Q3 FY25. Furthermore, disciplined working capital management, characterized by payables at approximately 59 days, receivables at 44 days, and inventory at 66 days, contributed to a strengthened cash conversion cycle compared to the prior year.

The High Horsepower (HHP) segment was a standout performer, recording substantial growth of 235% year-on-year for the quarter and 132% on a nine-month basis. This growth is primarily driven by demand from infrastructure projects, including commercial and residential developments, and data centers. While the gross margin for HHP is currently flat at 35%, management anticipates future improvements as the proportion of HHP sales increases, leveraging its higher-margin profile.

Kirloskar Oil Engines completed the integration of its B2C Fluid Dynamics business into LGM, aiming for focused growth and unlocking synergies. Additionally, the company announced the incorporation of Kirloskar Advanced Systems Limited, a new entity dedicated to specialized work with government customers, particularly in Defence and Railways. This move allows for focused system integration and contracting work, distinct from the core engines business, with plans for potential expansion into areas like unmanned systems, though details remain proprietary.

The company has a planned capital expenditure of ₹700 crores for FY26, primarily aimed at ramping up operations. In terms of international strategy, Kirloskar Oil Engines continues to focus on the Middle East and African markets, while also investing in the US market through its subsidiary, Kirloskar Americas. The company also invested approximately ₹8 crores in a Middle East entity for the acquisition of a South African entity, aligning with its strategy to build in-house capabilities and structure operations in key international markets.

The financial services arm, Arka, reported a 7% year-on-year growth in revenue to ₹227 crores, with Net Interest Margin growing 28% YoY to ₹107 crores. Arka is actively granularizing its book by building a retail portfolio focused on used wheels and small ticket loans against property. The company reported a healthy asset quality with a Gross Non-Performing Asset (GNPA) of approximately 1.2% and Net Non-Performing Asset (NNPA) of 0.3% as of December 31, 2025, indicating effective risk management.