Concall AI

Megatherm Induction Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

Megatherm reported H1 FY26 revenue from operations of approximately ₹159 crores, with EBITDA and EPS showing natural increases. The company holds a robust order book of ₹430 crores, with a significant portion carried over to FY27, indicating future growth. Strategic investments in export markets and the transformer segment, including JVs, are key drivers for the ambitious target of ₹950-1,000 crores turnover in 4-5 years, though execution delays due to external factors and lengthy approval processes remain a concern.

Highlights

Revenue from operations for H1 FY26 was approximately ₹159 crores, with an additional ₹5 crores in other operating income.
EBITDA and earnings per share have increased naturally, indicating an upward trajectory despite higher overheads.
Current order book of roughly ₹430 crores provides good visibility, with ₹260 crores carrying over to FY27, signaling strong growth for the next fiscal year.
Significant focus and investment in export markets, including a new JV in the U.S. and tie-ups in South America, are expected to drive high growth.
The company is actively participating in bids worth ₹230 crores, with ₹100 crores expected to finalize by Dec/Jan and another ₹133 crores by March.

Concerns

The steel segment is experiencing some sluggishness due to monsoon and high inventory levels across companies.
Project execution has seen carryovers due to intense monsoon, Diwali, and festive seasons, delaying civil work on many projects.
Initial phases of new market entry, such as transformer approvals and export certifications, are time-consuming, posing a risk to rapid growth in the short term.

Key financials

01 Revenue from Operations ₹159 Cr
02 Other Operating Income ₹5 Cr

What they filed

Q4 FY26: revenue up 17.6%, net profit down 7.7% against the same quarter last year.

₹ Cr · quarterly

Line item	Q4 FY23	Q2 FY24	Q4 FY24	Q2 FY25	Q4 FY25	Q2 FY26	Q4 FY26
Revenue	135	147	159	148	173 +28%	159 +8%	187 +18%
Expenses	122	133	137	133	152	143	170
EBITDA	13	14	22	15	21 +62%	16 +14%	18 −18%
Margin	10%	9%	14%	10%	12%	10%	9%
Other income	0	0	1	2	1	5	1
Interest	4	2	4	2	4	2	2
Depreciation	1	2	2	2	2	2	2
Profit before tax	8	10	18	13	16 +100%	16 +60%	14 −22%
Tax rate	24%	25%	25%	26%	27%	25%	20%
Net profit	6	8	13	9	12 +100%	12 +50%	12 −8%
EPS	—	5.48	6.97	4.94	6.37	6.39	6.18

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Transformer Sales
10% Share of Total Turnover
Spares
20% Share of Total Turnover
Forging and Foundry
7% Share of Total Turnover

Order book

high confidence

Total value

₹430 Cr

as of 2025-09-30 quantified

Execution

₹170 crores plus spares from current order book to be executed in H2 FY26; ₹260 crores carryover to FY27

Pipeline

qualified rfp

Bids worth ₹230 crores, with ₹100 crores to be finalized by Dec/Jan and another ₹133 crores by March.

Cancellations & deferrals

deferred: Order carryover due to intense monsoon and festive seasons delaying civil work on projects.

The order book provides good visibility, with a significant portion deferred to the next fiscal year due to external factors, ensuring future growth.

Source: Prepared remarks

Capital allocation

high confidence

Capex ₹25 Cr partially through equity, partially through debt
- Next phase of growth for capacity utilization, primarily for transformers and induction. ₹25 Cr
- CapEx for achieving ₹950-1,000 crores turnover target (₹30 crores for transformers, ₹10 crores for induction). ₹40 Cr
It will be around ₹25 odd crores more. ₹25 crores, ₹30 odd crores more. ... there ₹25 crores, ₹30 crores, 40 odd crores will be needed. ₹30 crores will be needed for transformers, and maybe a small amount, maybe, ₹10 odd crores will be needed for induction. But that will be funded partially through equity, partially through debt.
Debt Debt disclosed

Right now, we don't have any term loans. Whatever we have is the working capital, and we are not utilising the entire working capital, but we have kept the limits in place so that whenever a bulk order comes, because we are pitching everywhere across products. So whenever a bulk order comes, we should be able to execute it. So we are not planning any significant debt as such, only working capital as and when needed, our working capital cycle is typically three to four months.
M&A US Joint Venture (Cyprium) Joint venture · Set up

To cater to the export market, manufacturing in India and selling in the U.S. with a 50-50% profit split.
50% of the profit from the US JV will be with Megatherm, with products sold at export pricing to protect Megatherm Induction's bottom line.

we have created a joint venture in the U.S. We are just ironing out the legal aspects before we make the investments. The company has been set up. ... And 50% of the profit, will be with us. So that's more or less the broad plan that we have going forward.
M&A Spanish Company Joint Venture Joint venture · Announced

To enter the high-frequency pipe welders market, manufacturing in India with Megatherm brand and modules branded jointly.

So for example, high frequency pipe welders, that is something that we are just getting into. That's an enormous market globally. So that is where we are tying up with a Spanish company, and we'll be making the product in India with Megatherm brand, and the modules will be branded in both names in the JV company, and we'll sell that.

Guidance & targets

Profitability

Bottom Line Margin Profitability · long-term (after ₹400 crores turnover) · High confidence 9-10%

So once that is achieved, a bottom line of about 9%, 10% will not be a challenge for us.

— Satadri Chanda

Revenue

Turnover Revenue · with current capacity · High confidence ₹450-550 crores

whatever capacity we have added now, that ₹450 crores, ₹500 crores, ₹550 crores, it can be achieved. We will not need any more funding or CapEx for that.

— Satadri Chanda
Top Line Revenue · 24-30 months · High confidence ₹600 crores

And within about 24, 30 months, we are targeting around ₹600 crores of top line

— Satadri Chanda
Bottom Line (Turnover) Revenue · 48-54 months · High confidence ₹950 crores

and within 48 to 54 months, we are targeting ₹950 crores of bottom line.

— Satadri Chanda
Total Turnover Revenue · 4-5 years · High confidence ₹950-1,000 crores

About four to five years, we are targeting ₹950 crores to ₹1,000 crores, yeah.

— Satadri Chanda
Transformer Contribution to Turnover Revenue · within 48-54 months (part of ₹950 crores target) · High confidence ₹300 crores

And over here, out of this ₹950 crores, you will see about ₹300 crores of transformers

— Satadri Chanda
Yearly Revenue Target Revenue · FY26 · Medium confidence ₹330 crores

So the yearly revenue target would be around ₹330 odd crores, he's asking. ... So, yeah, we are left with ₹170 crores plus spares. Spare orders will come. Right now, we have ₹10 crores in hand roughly, but it's fast moving. So they will come. So this order book and the additional that comes from spares, should be executed in this year.

— Satadri Chanda

What to watch in Q3 FY26

FY26 Revenue Target Achievement

next quarter

Current ₹159 crores (H1 FY26)

Target ₹330 crores (FY26)

Why it matters

To assess if the company can meet its full-year revenue guidance based on H2 execution.

So the yearly revenue target would be around ₹330 odd crores, he's asking. ... So, yeah, we are left with ₹170 crores plus spares. Spare orders will come. Right now, we have ₹10 crores in hand roughly, but it's fast moving. So they will come. So this order book and the additional that comes from spares, should be executed in this year.

Risks & concerns

Sluggishness in the steel segment
medium

The steel segment is facing sluggishness due to monsoon and high inventory levels across companies.

While the steel segment is facing some sluggishness due to the monsoon as well as there's a lot of inventory. So most of the companies are carrying a lot of inventory.

Management acknowledged
Project execution delays due to monsoon and festive seasons
medium

Intense monsoon and festive seasons have led to carryovers in projects, with civil work just starting.

So the civil work on most of these projects have just started because the monsoons have ended, Diwali and all the festive seasons have ended. So most of these projects have just started.

Management acknowledged
Time-consuming initial approval and order processes for new segments/markets
medium

The initial phase of gaining approvals and securing first orders, especially in new markets like transformers and exports, is time-intensive.

the risk can only be associated with time because as we have seen the entire process, the initial part is a little time taking. But once the approvals are there, once we are bidding for the orders, or once we have already sold some equipment to certain countries, the reference is created, then exponential growth is going to be very fast.

Management acknowledged

Q&A highlights

7 direct

Segmental revenue splits for different products/segments Partial

So, these segmental reporting, till now we have not done the segmental reporting, but we are planning to have that segmental reporting very soon. At least the split between transformers and induction. ... just to give you an idea that the transformer sales is roughly 10% of our total turnover and spares is about I think 20 odd percent of our total turnover, 20% to 22%. ... The Forging and Foundry segment... it is somewhere around 7%, 8%.

Analyst sought clarity on revenue contribution from different business lines, which management partially provided while committing to more detailed reporting soon.

Asked by Shyam Sampath

CapEx roadmap and funding for future growth targets Direct

So what we are planning is that once we see a visibility that roughly we have about ₹70 crores, ₹80 crores of transformers and we are doing all, we are projecting that capacity is going to be fully utilised. So that's when we'll make the CapEx for the next phase of growth. ... It will be around ₹25 odd crores more. ₹25 crores, ₹30 odd crores more. ... if we have to achieve that ₹950 crores, ₹1,000 crores range, there ₹25 crores, ₹30 crores, 40 odd crores will be needed. ... But that will be funded partially through equity, partially through debt. Right now, we don't have any term loans.

Management clarified the CapEx required for both immediate capacity utilization and long-term growth targets, along with the funding strategy.

Asked by Shyam Sampath

Export strategy and capabilities for new geographies like US, Europe, South America Direct

So what we have rather done now is we are trying to do, agency model, like collaboration model, whereas existing companies in those regions, we'll partner with them, and they will sell the products on our behalf. ... we have created a joint venture in the U.S. ... We have also tied up with companies in Brazil, Mexico, Argentina to cater to the South American market. We are creating an office representation in U.K.

Highlights the company's strategic shift from direct sales to a partnership/agency model for international expansion, including specific regional initiatives and JVs.

Asked by Aditya Pal Singh Jaggi

Competitive edge against players like Electrotherm and Inductotherm Direct

the induction furnace for steel making is where we have taken a lot of their clients, larger clients. And that is primarily driven by the performance of our equipment. ... we have the most efficient furnace. ... one is energy efficiency. ... Another is service being a larger and their service culture is more formal. ... Our response time for spares is very fast since we have backward integrated to a great extent in the induction products.

Management detailed their key differentiators, focusing on equipment performance, energy efficiency, and superior service, which are crucial for gaining market share.

Asked by Sonia Keswani

Order book carryover and implied FY26 revenue target Direct

Yes. So we have about, not ₹360 crores, about ₹260 odd crores. I can see that it's going to get spilt over. ... So, yeah, we are left with ₹170 crores plus spares. Spare orders will come. Right now, we have ₹10 crores in hand roughly, but it's fast moving. So they will come. So this order book and the additional that comes from spares, should be executed in this year. ... So the yearly revenue target would be around ₹330 odd crores, he's asking.

Clarified the portion of the order book to be executed in the current fiscal year and confirmed the implied FY26 revenue target based on this execution.

Asked by Mukesh Poonia

Utilization of IPO proceeds and working capital management Direct

So the CapEx fund is exhausted. I think only 2 crores is left for some machinery. That is exhausted. Some portion of the working capital has been exhausted, but most of the fund that is left now is essentially working capital. So that working capital fund, we have actually kept for the transformers because transformer is a working capital intensive line.

Provided transparency on how IPO funds have been deployed, particularly highlighting the allocation of remaining working capital for the transformer business.

Asked by Rajashekhar Savadi

Profit sharing mechanism for the Cyprium JV in the US Direct

So 50% of the profit of that company, so how it works is that, in abroad, the products which are sold in India are sold at a higher price. So what we have planned is that we will sell from Megatherm Induction to Cyprium. It will go Megatherm Cyprium. It will go at the export pricing so that the bottom line of Megatherm Induction is protected. And the markup which is going to happen over there, that markup basically is going to be split with half and half.

Detailed the financial structure and profit-sharing model for the crucial US joint venture, ensuring Megatherm's profitability.

Asked by Pradip Burman

Transformer business growth catalysts, specifically large projects in Eastern India by Tata and Adani Direct

So Tata Power, we have already just received the make. So we have started receiving their inquiries. We are hoping to close one, two orders. ... And Adani is coming up with lots of projects. ... So we're just waiting on that, and then we'll give them the green signal that you give us approval. ... So Tata, Adani, even Reliance is planning a lot of investment. Not just Bengal, we have already supplied our transformers to Odisha board.

Confirmed engagement with major industrial players like Tata and Adani for transformer orders, indicating strong potential for growth in the Eastern India market.

Asked by Mayank Gupta

3 min read 7 chapters

Detailed narrative

H1 FY26 Performance Overview and Market Dynamics

Megatherm Induction Limited reported approximately ₹159 crores in revenue from operations for H1 FY26, complemented by ₹5 crores in other operating income. Despite this, the steel segment experienced sluggishness due to monsoon and high inventory levels. However, the engineering segments like foundry, heating, hardening, and castings showed a pickup, leading to a differential in performance. The company noted a natural increase in EBITDA and EPS, maintaining an upward trajectory despite higher overheads.

Order Book and Future Outlook

The company's current order book stands at roughly ₹430 crores. A significant portion, about ₹260 crores, is expected to carry over to FY27 due to project delays caused by intense monsoon and festive seasons, which impacted civil work. For the remaining H2 FY26, Megatherm aims to execute ₹170 crores from the existing order book, plus an additional ₹10 crores from spare orders. The company is also actively bidding on projects worth ₹230 crores, with ₹100 crores expected to be finalized by December/January and another ₹133 crores by March.

Transformer Business Expansion

Megatherm is projecting significant growth in its transformer business, targeting ₹300 crores out of a total ₹950 crores bottom line in 48-54 months. The company has received 'make' approval from Tata Power and is engaging with other major players like Adani and Reliance for projects in Eastern India, including Odisha. The strategy involves securing initial bulk orders, even at lower prices, to establish market presence and build a strong sales team for industrial power and distribution transformers.

Export Strategy and International Joint Ventures

A key growth driver is the export market for induction products. Megatherm has established a joint venture in the U.S. (Cyprium) to manufacture in India and sell at American pricing, with a 50-50% profit split. The company is also tying up with a Spanish firm to produce high-frequency pipe welders in India under a dual brand. Additionally, Megatherm is building partnerships and office representations in Brazil, Mexico, Argentina, and the U.K. to leverage free trade agreements and become a global alternative to competitors like Inductotherm.

Capacity and Capex Plans

Megatherm's current capacity can support a turnover of ₹450-550 crores without additional funding. For the next phase of growth, an incremental CapEx of ₹25-30 crores is planned, primarily for capacity utilization. To achieve the ambitious ₹950-1,000 crores turnover target in 4-5 years, a total CapEx of ₹25-40 crores will be needed, with ₹30 crores allocated to transformers and ₹10 crores to induction. This CapEx will be funded partially through equity and partially through debt, with no current term loans.

Competitive Landscape and Differentiators

Megatherm competes effectively in the capital goods industry, particularly against players like Electrotherm, by focusing on superior equipment performance, energy efficiency, and robust service. The company claims to have the 'most efficient furnace' and emphasizes quick response times for spares due to backward integration. In the transformer segment, they aim to dominate Eastern India by leveraging their large facility and fast service, especially for solar transformer projects ranging from 7 MVA to 25 MVA.

Working Capital Management and IPO Proceeds

The CapEx fund from the IPO is largely exhausted, with only ₹2 crores remaining for machinery. The majority of the remaining IPO funds are allocated to working capital, particularly for the transformer business, which is working capital intensive. The company maintains working capital limits to support bulk orders, with a typical working capital cycle of three to four months, and is not planning significant debt beyond working capital needs.

This is an AI-generated summary of a publicly available earnings call transcript.

View original transcript