Mahindra EPC Irrigation Limited

Agriculture remains India's backbone, contributing 18% to GVA and employing 65% of the population. Despite being a net exporter of agri-products ($48-53 billion annually), India faces severe water scarcity, with only 4% of global freshwater resources for 18% of the world's population. Agriculture consumes over 80% of India's freshwater withdrawals, and per capita water availability is projected to drop from 1,545 cubic meters in 2011 to 1,140 cubic meters by 2050. Micro irrigation is crucial for water use efficiency, productivity improvement, and doubling farmer income, offering 20-30% cost savings and 30-40% productivity improvement.

Mahindra EPC reported a 17% revenue growth in H1 FY26, reaching Rs. 111.6 crores compared to Rs. 95.3 crores in H1 FY25, outperforming an industry that saw de-growth or flat performance. The company achieved a PBT of Rs. 1.9 crores in H1 FY26, a significant turnaround from a loss of Rs. 7.3 crores in H1 FY25. However, Q2 FY26 revenue remained flat at Rs. 50 crores compared to Q2 FY25, primarily due to incessant rains from May to October impacting micro irrigation demand and installation.

The positive PBT swing of over Rs. 9 crores in H1 FY26 was attributed to several factors: growth in the irrigation projects business, improved performance in key opportunity states, a better product mix, good commercial discipline, and effective cost controls. Raw material prices remained stable, contributing to a 0.4% material cost saving versus H1 FY25, with an additional 1.7% saving from an improved business and product mix. The non-subsidy business significantly increased its contribution to total revenue, reaching 37.8% in H1 FY26, up from just 3% in FY20.

Receivables in H1 FY26 increased by Rs. 9.4 crores compared to FY25, driven by higher receivables in H2 FY25, a shift towards states with longer collection cycles, and delays in fund release. Despite the absolute increase, the company managed to reduce its receivables in terms of days of sales by approximately six days compared to FY25. Management expects an improvement in cash flow during the next six months (H2 FY26) due to anticipated better subsidy releases and building momentum.

The micro irrigation industry is nearing an inflection point, with encouraging trends such as a stable raw material price environment and successive years of good monsoons. Increased farmer awareness of micro irrigation benefits and growing sustainability awareness in urban regions are expected to boost demand. The Indian government has set an ambitious target to cover 2 million hectares annually, aiming for 10 million hectares over five years, with 43% of annual fund allocations already released by May 2025 for FY26.

Mahindra EPC is actively diversifying its revenue streams beyond the subsidy business, with the non-subsidy segment contributing 37.8% to total business in H1 FY26. The company has an unrecognized work order pipeline of Rs. 76 crores for irrigation projects. It is also exploring export markets, particularly in Africa, by leveraging the existing international presence and relationships of Mahindra & Mahindra's tractor division. This strategy aims to create a more stable and consistent revenue base, improve margins, and reduce business concentration risks.