Detailed Narrative
Challenging H1 FY26 Performance
Kirloskar Pneumatic experienced a challenging first half of FY26, with sales at ₹650 crores, a decline from ₹706 crores in H1 FY25. This marks the first time in many years that order booking, sales, and profits were lower than the corresponding period of the previous year. The company's PAT for H1 FY26 stood at ₹71 crores, down from ₹94 crores in H1 FY25. Management attributed this to a muted domestic market, project execution delays, and structural changes in the process gas business.
Sequential Improvement in Q2 FY26
Despite the H1 challenges, Q2 FY26 showed sequential improvement, with sales reaching ₹378 crores, a 37% increase from Q1 FY26's ₹272 crores. The EBITDA margin for Q2 FY26 also improved to 17%, up from 15.7% in Q1 FY26. This sequential growth indicates some recovery, which management expects to accelerate in H2 FY26.
Order Book and Execution Challenges
The order book as of October 1, 2025, was ₹1,667 crores, a modest increase from ₹1,624 crores on April 1, 2025, and significantly below internal plans. Management expressed disappointment with the Q2 order booking. A key concern is the slowdown in project execution, with 42 out of 88 shipped Tezcatlipoca centrifugal compressors still awaiting commissioning at customer sites, indicating delays in clearances and approvals.
Strategic Focus on New Products and Market Entry
The company is successfully commercializing new IPs. The Tezcatlipoca centrifugal compressor has seen 88 units shipped out of 115 orders this year, establishing itself as an industry standard. Khione refrigeration packages are also performing well across various industries, with an expectation of 50 packages sold this year. Kirloskar Pneumatic is also entering the commercial air conditioning market with its Zephyros C system, a completely indigenous product targeting a ₹5,000 crore market, with commissioning expected within 18 months after PLI approval.
Working Capital Management and Capex
Net working capital improved significantly, reducing to ₹202 crores from ₹316 crores in the prior year period, driven by strong receivable management and customer advances. Free cash generation from operations in H1 FY26 was ₹143 crores. Capex for H1 FY26 was ₹28 crores, with a full-year plan of ₹90 crores, primarily for capacity increase and capability building. The company remains debt-free with ₹424 crores in net cash and cash equivalents as of October 1, 2025.
Outlook and Guidance for FY26
Despite the weak H1, management is confident of achieving over 15% revenue growth and 25-30% profit growth for the full year FY26, with core business operating margins maintained at 18-20%. This recovery is predicated on a strong H2, with a target to book orders significantly above ₹500-600 crores in Q3 FY26. Exports are expected to remain stable at last year's ₹124 crores, as they are not a primary growth focus currently.