Kirloskar Oil

Kirloskar Oil Engines reported a robust Q4 FY26, with consolidated revenue growing 21% YoY to INR2,116 crores. For the full fiscal year, standalone net sales increased 25% YoY to INR5,604 crores. The company achieved its highest-ever quarterly sales in Q4, reaching INR1,522 crores, a 24% YoY growth. Standalone EBITDA margin for FY26 improved by 90 basis points to 13.1%, demonstrating strong operational efficiency.

The company made substantial strides in market share, particularly in the high horsepower segment, now approaching double digits from a negligible base a few years ago. KOEL's diesel generator sales grew 41% in FY26, selling upwards of 50,000 units, significantly outpacing the overall annual diesel generator market growth of 18%. The construction segment also exhibited strong performance, growing 44% YoY annually and 24% in Q4, validating the strength of products under new emission standards.

Kirloskar Oil Engines announced a new capital allocation of INR1,400 crores over the next two years for a 20,000-engine capacity expansion. This investment is for a new building and completely new lines, primarily focused on enhancing HHP capacity and supporting international markets. This is in addition to an earlier INR700 crores capex for 50,000 engines, expected to be operational by April next year, aimed at enhancing existing plant lines.

The international business demonstrated strong growth, increasing 37% in group sales for FY26 and crossing INR1,000 crores in gross sales. To further leverage engineering capabilities and advanced technology, particularly in defense, the company incorporated a new subsidiary, Kirloskar Advanced Systems Private Limited. The company is also actively pursuing opportunities in the data center segment, having seen successes in the last year and aiming for a double-digit contribution.

Arka Fincap Limited significantly expanded its reach, growing its branch network from 34 to 137 in FY26. Assets Under Management (AUM) increased by 10% to INR7,947 crores, and Net Interest Income rose 11% to INR266 crores. Despite these investments, Arka's profit after tax remained stable at INR69 crores for FY26. Asset quality remained robust, with GNPA at 1.2% and NNPA at 0.3% as of March 31, 2026, consistent with prior periods.

Management emphasized its commitment to sustainable growth, ensuring it does not come at the cost of profitability. While significant investments have been made, the company anticipates larger operating leverage gains to materialize, potentially from FY27 onwards. R&D expenditure is consistently maintained at approximately 2-2.5% of revenue and capex, supporting the development of products compatible with various alternative fuels like gas, ethanol, and hydrogen.

The execution of the NPCIL order, which includes 10 units of 6.3 megawatt gensets, is progressing as per plan and is expected to be completed by 2029. Revenue recognition for this long-term project will occur as billing happens, and has not yet commenced. Management projects that the new INR1,400 crores capex, with an estimated asset turn of 4, has the potential to generate an additional INR5,000-6,000 crores in revenue once fully capitalized and operational.