Megatherm Induction Limited — Q4 FY25 earnings call

Call held 3 Jun 2025

Management summary

Megatherm Induction Limited reported on its H2 & FY25 performance, highlighting completed capacity expansion and a strategic joint venture for US market entry. The company aims for ₹500 crores revenue and a 9% bottom line within two years, driven by new transformer capacity and increased exports. While FY25 revenue growth was modest due to capacity limits, the order book shows healthy growth, and all term loans have been repaid.

Highlights

  • Capacity expansion completed, enabling target revenue growth to ₹500 crores.

  • Targeting 9% bottom line within two years, driven by backward integration and increased turnover.

  • New transformer manufacturing facility commissioned, expecting significant contribution.

  • Order book increased to ₹350 crores from ₹300 crores last year, providing good revenue visibility.

  • Established a joint venture with Cyprium Induction USA for market entry into North America.

  • Paid off all term loans, eliminating interest costs.

Concerns

  • Revenue growth for FY25 was not significant due to capacity constraints, though bottom line improved.

  • Working capital requirement is expected to increase with planned expansion and growth.

  • Potential impact of US tariffs (27-35%) on products sold through the JV, though management believes it's manageable.

Key financials

2 periods

Headline

  • Current Bottom Line
    6%
  • Current ROCE
    20%
  • Spares Sales
    ₹65 Cr
  • Last FY Export Mix
    11%

FY25

  • Revenue
    ₹300 Cr

What they filed

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

₹ Cr · quarterly
Line itemQ4 FY23Q2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue135 147 159 148 173 +28%159 +8%187 +18%
EBITDA13 14 22 15 21 +62%16 +14%18 −18%
Net profit6 8 13 9 12 +100%12 +50%12 −8%
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.

Order book

high confidence

Total value

₹350 Cr

as of 2025-06-03 quantified

16.7% YoY

Execution

whatever order book is there, it should be executed within one year.

Composition

  • Export (geography) 11%

Pipeline

deal pipeline tcv

Some large bulk orders are being discussed, and bid pipeline is active.

The order book has grown year-on-year and provides good visibility for the next 12 months, with significant pipeline activity for future growth.

Source: Q&A

Capital allocation

high confidence
  • Capex Capex disclosed
    So the CapEx has been completed. And now we are working on building our teams, joint ventures, agencies, etc to tap the export markets.
  • Debt Debt disclosed
    • Repayment Paid off all term loans
    And also we are not increasing any, we have just paid off our term loans, whatever was there. So we don't have a term loan.
  • M&A Cyprium Induction USA Joint venture · Announced

    To pitch all products to the North American market and capture growth in the industrial segment.

    Megatherm will have a 49.99% profit share from the JV, leveraging price advantage from Indian manufacturing.

    So this is a new information that we wanted to declare that we have done a joint venture with Cyprium Induction USA. We will be pitching all our products to the North American market. So Cyprium Induction also is a induction company. So they have experience in handling these products, and it will be a mix.
  • Liquidity Liquidity disclosed IPO proceeds allocated for working capital are largely unutilized and reserved for future requirements, indicating sufficient liquidity for growth.
    But we have not utilised the working capital as of yet. Much of that is still left. And the corporate general expense that budget is also left.

Guidance & targets

Revenue

  • Total Revenue Revenue · within two years · High confidence ₹500 crores
    And, way forward, we have targeted ₹500 crores revenue with 8% to 9% bottom line within two years, and that has certain drivers.

    — Satadri Chanda, CFO & Whole time Director

  • Next FY Additional Revenue Revenue · current financial year (FY26) · Medium confidence ₹60 to ₹80 odd crores
    Current year, like I mentioned, based on the order book that we have, we can expect approximately you can say anywhere between ₹60 to ₹80 odd crores additional compared to the current financial year.

    — Satadri Chanda, CFO & Whole time Director

  • Long-term Revenue Target Revenue · next phase of growth · Low confidence ₹1,000 crores
    But, our next phase of growth to get to ₹1,000 crores that will require one phase of expansion.

    — Satadri Chanda, CFO & Whole time Director

Profitability

  • Bottom Line (PAT Margin) Profitability · within a couple of years · High confidence 9%

    From 6-7% today

    Our bottom line currently is hovering around 6%, 7% odd. That we want to increase it to 9% within a couple of years, driven primarily by all the backward integration that we have done.

    — Satadri Chanda, CFO & Whole time Director

Sales

  • Transformer Sales Sales · next financial year · High confidence ₹150 odd crores
    Out of the ₹500 crores for the next financial year, we have targeted approximately ₹150 odd crores of transformers.

    — Satadri Chanda, CFO & Whole time Director

  • Induction Sales Sales · next financial year · High confidence ₹350 crores
    And in the ₹500 crores target, we are looking at ₹150 crores of transformer and ₹350 crores of furnace.

    — Satadri Chanda, CFO & Whole time Director

Market Share

  • Export Revenue Mix (Induction) Market Share · next two years · Medium confidence 30%

    From 10-12% today

    We wanted to get it to around 30%.

    — Satadri Chanda, CFO & Whole time Director

What to watch in Q1 FY26

CPRI Testing Completion for Transformers

Next quarter
Current Scheduled for June 2025
Target Completed and approvals secured

Why it matters

Completion of CPRI testing is crucial for securing bulk orders and fully utilizing the new transformer capacity.

That was scheduled actually for the last month, but we have to get a date also. So we are expecting to get the date, this month itself. And once that is done, the last you could say, the tick for most of the companies will be done.

Risks & concerns

  • Raw material price volatility

    medium

    Management assumes slightly higher raw material prices in costing to cater for fluctuations within six months.

    Management acknowledged

  • US tariffs on imported products

    medium

    Potential tariffs of 27-35% in the US market, though management believes the lower engineering cost from India can absorb this.

    Management acknowledged

  • Increased working capital requirement

    medium

    Working capital needs will increase with business expansion, but IPO funds are reserved for this purpose.

    Management acknowledged

Q&A highlights

8 direct
Market size, competition, and optimism for ₹500 crore target Direct
So Electrotherm is primarily into the Steel segment. They sell their induction and other products into the Steel segment. So that is one area where we compete with them. But even there, most of the larger companies... now we are getting bulk orders from them.

Clarifies competitive positioning against major players and quantifies the addressable market for Megatherm's products in India.

Asked by Sanjay Shah

Joint Venture with Cyprium Induction USA and its benefits Direct
So, basically, we have tried pitching our products into the U.S. market, but the U.S. market people over there are more comfortable, if the servicing or if the manufacturing facility or at least some backup is there, which is American. So that was our rationale behind having a joint venture.

Explains the strategic rationale for the JV, how it addresses market entry challenges in the US, and the financial structure of the partnership.

Asked by Sanjay Shah

Capex requirements for achieving the ₹500 crore revenue target Direct
Right. So I'll take the second question first. For, achieving ₹500 crores, we don't need any more CapEx. We've already done that. So now it is essentially utilising that the capacity that we have added.

Confirms that the necessary capacity for the ₹500 crore target is already in place, implying no further significant CapEx is needed for this phase of growth.

Asked by Saurabh Poddar

EBITDA margin targets for different product segments Direct
See furnace, transformer, the industrial equipment, it's more or less the same. Our bottom line currently is hovering around 6%, 7% odd. That we want to increase it to 9% within a couple of years, driven primarily by all the backward integration that we have done.

Provides specific margin targets and the key drivers (backward integration, increased turnover) for achieving them.

Asked by Viswanath K

Status of approvals and expected order flow for the new transformer facility Direct
So the once the CPRI testing is done, then within a few months, we'll start to see the orders. Initially, the companies, like Renew or Tata Solar, Adani, etc, they will give small orders initially.

Gives a clear timeline for critical approvals (CPRI testing) and the expected commencement of orders for the new transformer business, including specific customer names.

Asked by Prasad

Impact of 'Made in USA' focus and tariffs on the US JV strategy Direct
Even if tariffs are there, the tariffs are roughly at the, I think around 27% plus, around 35 odd percent for this particular product. We did a sample case with one of the clients over there. So that 30% also can be absorbed, because the primary differential between selling a product there and here is the engineering cost.

Addresses a key risk (tariffs) for the US market entry and explains management's strategy to mitigate it by leveraging lower Indian engineering costs.

Asked by Amit Kumar Kochar

Working capital cycle and its stability with expansion Direct
Yes. So the working capital requirement will obviously increase. And that's why, if you look at our fund utilisation, I think it's there along with the audit report. We have kept that. We have not touched too much of the working capital as of yet. So that has been kept for our future requirements.

Acknowledges the expected increase in working capital but reassures that funds from IPO proceeds are available to manage this.

Asked by Saurabh Poddar

Current order book, comparison to last year, and execution timeline Direct
Yes. So compared to the same time last year and it was I think around ₹300 odd crores. And right now, it's around ₹350 odd crores. But some largish orders information will be uploaded very shortly. We're just waiting for the confirmation.

Provides current and historical order book figures, indicating growth, and hints at potential new large orders pending confirmation.

Asked by Anil Jain

3 min read 7 chapters

Detailed narrative

Company Overview & Product Portfolio

Megatherm Induction Limited manufactures induction melting and heating products, large transformers (5,000 KVA to 50,000 KVA), and metallurgical equipment like casting machines and various furnaces. The company caters to diverse industries including primary and secondary steel, auto ancillaries, ordinance factories, railways, and ductile iron pipe producers. Megatherm also exports its products to several countries, with a focus on increasing its international business.

Market Landscape & Competitive Edge

The Indian market for induction products (steel, foundry, and heating sectors) is estimated at ₹2,300-2,400 crores, while the transformer market is multi-billion dollar. Megatherm competes with Electrotherm in the steel segment and Inductotherm in foundry and heating. The company differentiates itself through energy-efficient equipment, product robustness, minimized downtime, and strong hands-on service, which it believes gives it an edge over larger American and Chinese competitors.

Capacity Expansion & Growth Strategy

Megatherm has completed its CapEx for capacity expansion, including a new transformer manufacturing facility, which is now commissioned. This expansion positions the company to achieve a target of ₹500 crores revenue within two years, up from the current ₹300 crores. The company aims to improve its bottom line from the current 6-7% to 9% within a couple of years, driven by backward integration initiatives such as CRNGO processing and copper drawing machines, and increased turnover.

Strategic Joint Venture in the US Market

To penetrate the North American market, Megatherm has formed a joint venture with Cyprium Induction USA. Cyprium, with current sales of $2.5 million, will primarily handle sales and marketing in the US. Megatherm will manufacture the core equipment in India, leveraging its lower engineering costs. This collaboration is designed to overcome market entry barriers and potential tariffs (estimated at 27-35%) by offering a competitive price advantage, with Megatherm holding a 49.99% profit share from the JV.

Transformer Business Outlook

The new transformer manufacturing facility is a key growth driver. Management expects CPRI testing, a crucial certification, to be completed in June 2025. Following this, initial small orders from major players like Renew, Tata Solar, and Adani are anticipated from the second half of the current financial year. The company has targeted approximately ₹150 crores from transformer sales in the next financial year, contributing significantly to the overall revenue target.

Financial Performance & Working Capital

For FY25, Megatherm's revenue was around ₹300 crores, with the bottom line hovering between 6-7%. The company has strategically increased spending on HR and marketing to support its projected growth. All term loans have been repaid, eliminating associated interest costs. While working capital requirements are expected to increase with expansion, unutilized IPO proceeds are reserved to manage these future needs. The company's Return on Capital Employed (ROCE) is currently around 20%.

Order Book & Export Focus

The current order book stands at approximately ₹350 crores, reflecting a 16.67% year-on-year growth from ₹300 crores last year. This order book is generally expected to be executed within one year. Megatherm is actively pursuing large bulk orders, with several in the pipeline. The company aims to significantly increase its export revenue mix for induction products to around 30%, up from 10-12% in the last financial year, as a key component of its growth strategy.

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