Detailed Narrative
Strong FY26 Performance Amidst Headwinds
M&B Engineering delivered robust financial results for FY26, with revenue growing 27% YoY to INR 1,259.7 crores and PAT increasing 20% to INR 92.6 crores. This performance was supported by a 28% YoY growth in order inflow, reaching INR 1,539 crores, and a 35% increase in the unexecuted order book to INR 1,083 crores as of March 31, 2026. Despite this, Q4 FY26 saw a decline in EBITDA and PAT due to macroeconomic headwinds, foreign currency volatility, and increased raw material and freight costs.
Phenix Division Drives Growth and International Expansion
The Phenix division was a significant growth driver, reporting INR 985 crores in revenue for FY26, a 29% increase YoY. Export revenue for Phenix surged by 156% to INR 165.6 crores, reflecting the company's expanding international presence, particularly in North America. The Sanand plant, which holds AISC and CWB certifications, is crucial for this strategy, and a 20,000 metric ton capacity expansion is expected to be commissioned in Q2 FY27, increasing total capacity to 92,000 metric tons per annum.
Profitability Pressures from External Factors
The company's EBITDA margins faced pressure, declining to 11.9% in Q4 FY26 from 14% in Q4 FY25, and to 12.5% for FY26 from 13.6% in FY25. This was primarily attributed to a forex loss of INR 6.04 crores for FY26 (including INR 3.83 crores unrealized loss) and a 20%+ increase in domestic steel prices. Additionally, increased export freight costs due to the war impact further squeezed margins, with management noting that 15-20% of raw material exposure cannot be hedged.
Strategic Capacity Expansion and Future Outlook
M&B Engineering is committed to expanding its capabilities, with INR 33 crores invested in capex in FY26 and an estimated INR 100 crores planned for FY27. This includes the Sanand expansion and a planned Cheyyar plant expansion by Q1 or Q2 FY28. The company guided for a 25% YoY top-line growth for FY27 and 20-25% overall volume growth, targeting INR 300 crores in export revenue. Management expects a softer H1 FY27 due to ongoing geopolitical issues, labor availability, and monsoon effects, with performance improving in H2.
Working Capital and Cash Flow Dynamics
Net working capital days increased from 33 days in FY25 to 39 days in FY26. The company reported negative operating cash flow, which management clarified was due to strategic payments to creditors and inventory building, partly funded by IPO proceeds. Of the INR 259.32 crores from the IPO, INR 137.81 crores (53%) has been utilized, with INR 7.5 crores used in Q4 FY26.
US Tariff Reduction and Export Competitiveness
A significant positive development is the 25% reduction in US import tariffs, effective April 6. Management expects this to enhance competitiveness and improve traction in the US market. While the benefit will be partially shared with customers, the company aims to leverage this to improve margins and expand its customer base, targeting 16-17% EBITDA margins on exports compared to 10-11% on domestic projects.
Robust Order Pipeline and Data Centre Opportunities
Beyond the current order book, the company has a strong bid pipeline of INR 1,000-1,100 crores, indicating continued demand. Management also highlighted the nascent but significant opportunity in data centers, noting that steel structures offer quicker execution compared to concrete. While still in early stages of design and understanding, the company is actively pursuing inquiries for large data center projects.