Mahindra EPC

Mahindra EPC reported its highest-ever revenue in FY26, growing 14.8% to INR 315.8 crores, significantly outperforming the industry's estimated 6-7% growth. This was achieved despite challenges like above-normal rainfall in H1 and raw material price surges in Q4. The company also saw a substantial improvement in PBT, reaching INR 16.99 crores in FY26 compared to INR 10.7 crores in FY25, even with an additional INR 2.1 crores in personnel costs. This performance was attributed to a strategic focus on shorter collection cycle revenue streams, non-subsidy business, and key subsidy states.

While FY26 saw overall PBT improvement, Q4 FY26 PBT declined to INR 6.4 crores from INR 9.4 crores in the prior Q4. This compression was primarily due to a steep surge in raw material prices, particularly for PE pipe grades which saw a 58-59% increase in February 2026, and a heavy revenue skew towards March. Despite these headwinds, the company managed to limit the full-year material cost increase to 1% of revenue through strategic sourcing and optimized product and state mix.

Mahindra EPC has successfully increased the contribution of its non-subsidy business to 35% of total revenue in FY26, a significant jump from just 3% in FY20. This strategic shift aims to reduce dependence on government subsidies and improve liquidity. The company is also strengthening its capabilities in non-subsidy segments like thin wall products, institutional sales, and small to middle-sized irrigation projects, and exploring export markets in coordination with Mahindra & Mahindra's tractor business.

The company continues to face high working capital intensity, primarily due to delayed payments from state governments, leading to a pile-up of receivables in FY26. Approximately 80-90% of the company's INR 217 crores in trade receivables are attributed to the subsidy business. Management acknowledges that negative free cash flow has been a long-standing issue, but expects collections to normalize with ongoing central and state government efforts, including potential NABARD interventions.

The micro irrigation industry is nearing an inflection point, supported by strong government initiatives. The Prime Minister's push to cover 10 million hectares in the next five years (2 million hectares annually, up from 1 million in FY25) and the reduction of GST from 12% to 5% are expected to drive demand. While FY27 may see a below-normal monsoon, improved groundwater conditions from previous good monsoons are expected to mitigate some of the impact, with strong sales typically occurring when groundwater is easily available and rainfall is uncertain.

Mahindra EPC reported an opening pipeline of INR 54 crores for the current year, with a potential upside of another INR 20 crores, providing visibility for near-term revenue. The company is also internally preparing for a 'step-up' in project sizes, moving beyond the typical INR 5-20 crore projects, which requires aligning internal capabilities and experience. This initiative, alongside continued focus on product and market mix, is expected to drive both top-line growth and improved cash flows.