Mahindra EPC Irrigation Q4 FY25 earnings call

Mahindra EPC reported a strong Q4 FY25 with revenue growing 32% YoY to ₹97.43 crores, marking its highest ever Q4 revenue. Full-year FY25 revenue increased by 3.6% to ₹275.1 crores from ₹265.5 crores in FY24, outperforming an industry that was largely flat or saw slight degrowth. PBT for FY25 significantly improved to ₹10.71 crores from ₹2.43 crores in FY24, reflecting enhanced profitability.

The improved profitability was attributed to a 2.6% material cost saving from favorable raw material prices and a 4.8% mix impact from a shift towards higher-margin states and products. The company also saw a higher share of project sales, which, while having lower material costs, incurred higher onsite expenses. Management aims to return to a stable operating margin range of 6-8% seen in FY15-FY20, emphasizing consistency.

A key strategic focus is the growth of the non-subsidy business, which contributed 33.4% to total revenue in FY25, a substantial increase from just 3% in FY20. This diversification helps reduce reliance on the cyclical and often unpredictable subsidy market. The company is exploring export markets and strengthening capabilities in thin-wall business, institutional sales, and mid-sized irrigation projects to drive this growth and improve margins.

The micro-irrigation industry is nearing an inflection point, supported by stable raw material prices, good monsoon predictions, and increasing farmer awareness. Government initiatives like the PM's target to cover 1 crore hectares in five years and state-specific ambitions, such as Andhra Pradesh's plan for 3,00,000 hectares annually, provide significant tailwinds. Smooth synchronization between central and state governments is crucial for efficient scheme implementation and unlocking market opportunities.

The company maintained tight control over manpower costs, which grew only single-digit to ₹31.8 crores compared to FY20 levels, and achieved manufacturing rejection rates below 2%. While debtors increased at FY25 end due to revenue skew and longer collection cycles in certain states, the impact on working capital was largely mitigated through efficient inventory and payables management, ensuring financial prudence.

Mahindra EPC leverages its parentage with Mahindra & Mahindra, particularly through synergies with the Farm Equipment Sector, including an extensive dealer network for demand generation. The company is actively reviewing its supply chain and satellite unit locations to optimize cost-effectiveness for servicing emerging states like UP, Rajasthan, and MP. Innovation in products like gravity-feed systems and QPC Lite is also a focus for expanding market appeal and driving demand.