Pennar Industries Limited — Q2 FY26 earnings call

Call held 10 Nov 2025

Management summary

Pennar Industries reported a strong quarter of top-line growth, primarily driven by its PEB segment in both India and the US. However, profitability was tempered by one-off acquisition-related expenses and labor cost pressures, which have since been resolved. Management expressed strong confidence for H2 FY26, citing a robust order book, improved execution capabilities, and the full-quarter contribution from the newly acquired Telco business. The company issued confident long-term guidance, targeting a floor of 20% PAT growth and a 7.5% PBT margin within three years.

Highlights

  • Consolidated revenue grew 21.26% YoY to ₹906.56 crores.

  • Profit After Tax (PAT) increased 20.13% YoY to ₹32.28 crores.

  • Custom Designed Building Solutions (PEB) segment revenue surged 31.9% to ₹456.72 crores, driving overall growth.

  • PAT margin was slightly muted at 3.56% due to one-off Telco acquisition costs and temporary labor issues, which management confirms are now resolved.

  • The US subsidiary's order backlog stands strong at US$51 million, bolstered by the recent Telco acquisition.

  • Management committed to a minimum 20% PAT growth annually for the next few years.

  • Working capital days stood at 76 days, slightly higher than usual.

  • Equity and reserve surplus crossed the ₹1,000 crore mark.

Key financials

  1. Total Revenue ₹906.56 Cr +21.3%YoY
  2. EBITDA ₹94.43 Cr +16.3%YoY
  3. PBT ₹40.94 Cr +13.6%YoY
  4. PAT ₹32.28 Cr +20.1%YoY
  5. PAT Margin 3.6%
  6. Working Capital Days 76 days

What they filed

Q1 FY27: revenue up 2.8%, net profit up 9.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue748 840 906 846 907 +21%943 +12%925 +2%870 +3%
EBITDA75 72 92 86 81 +8%83 +15%105 +14%93 +8%
Net profit27 30 36 32 32 +19%34 +13%41 +14%35 +9%
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

Share of Revenue
₹924.98 Cr Total
  • Diversified Engineering ₹468.26 Cr 50.6%
  • Custom Designed Building Solutions ₹456.72 Cr 49.4%

Guidance & targets

Profitability

  • PAT Growth (Minimum) Profitability · next few years · High confidence floor of 20%
    From my side, I think what we can commit to is that a floor of 20% is what you can expect. That is what we have discussed at the Board that we would want to communicate to our investors. On a profit basis, we are quite confident that that we will be able to bring in sustainably over quarter-on-quarter for the next few years.

    — Aditya Rao, Vice Chairman & Managing Director

Margin

  • PBT Margin Margin · next 3 years · Medium confidence 7.5%
    Over the longer term, as these margins get expanded, I think 7.5% is what we have guided to as, call it a terminal velocity of our PBT margin. And the timeframe would be in the next three years.

    — Aditya Rao, Vice Chairman & Managing Director

Order Book

  • India Order Book Order Book · next few months · High confidence ₹1,000 crores
    Our India order book now stands at around Rs. 880 crores and we expect it to hit Rs. 900 crores by December and cross Rs. 1,000 crores in the next few months.

    — Aditya Rao, Vice Chairman & Managing Director

Revenue

  • Telco Annual Revenue Contribution Revenue · per annum · High confidence over ₹100 crores
    Conservatively, you can take over Rs. 100 crores per annum from Telco, just from Telco.

    — Aditya Rao, Vice Chairman & Managing Director

Debt

  • Debt-to-Equity Ratio Debt · Not Specified · Medium confidence 0.7

    Previously 0.8 → 0.7

    Our debt equity is right now 0.8, and we intend to bring that down... think of a number 0.7 and that is fine.

    — Aditya Rao, Vice Chairman & Managing Director

Other

  • Consolidated Tax Rate Other · Ongoing · High confidence 25% to 26%
    We continue to get to consider the consolidated rate of 25% to 26%.

    — Shrikant Bhakkad, Chief Financial Officer

Risks & concerns

  • Margin Pressure from Execution & Costs

    medium

    Q2 margins were impacted by labor cost hikes (~30-40 bps) and unquantified acquisition costs. Analysts noted the gap with peers, which management acknowledged as a ~300 bps operating margin difference they are working to close.

    Both acknowledged

  • Execution Capability

    medium

    Management stated that labor shortages constrained revenue growth in Q2. While they claim the issue is now 'fully addressed', any recurrence could hamper their ability to convert the strong order book into revenue.

    Management acknowledged

  • Working Capital Management

    low

    Working capital days increased to 76. The CFO stated they are 'hard at work to get this back on track', indicating it's an area requiring management attention.

    Management acknowledged

Areas of evasion (2)

  • Quantifying the exact P&L impact of Telco acquisition costs in Q2.
  • Committing to a timeline for improved segmental financial disclosure.

Q&A highlights

1 direct, 1 evasive
Quantification of one-off acquisition costs impacting Q2 margins Partial
There was a substantial impact of that acquisition cost. It straddled two quarters... It's all been completely accounted for in Q2... We will try to get you an overall thing... Right now, I don't have it.

Explains the temporary margin dip but management avoided providing a specific number for the Q2 impact, reducing transparency on the underlying profitability.

Asked by Deepak Poddar

Lack of detailed segmental reporting compared to peers Evasive
That is a good point... if we were to go to the extent of providing the breakup from a segmental point of view, we would need to break our revenue and P&L into many more components... So, while this is something we are exploring, we need to find a better way to do it.

This is a key investor concern for better analysis, and management acknowledged the validity but did not commit to a timeline or format for improved disclosure.

Asked by Shubhankar Gupta

Specific cost impact from labor issues Direct
We have had to increase our labor cost by about Rs. 500 per ton. Now from a basis point, operating margin point of view, that is about 0.4% of operating margin potentially getting reduced... the overall impact on our margins per se might seem substantial at 30-40 basis points.

Provided excellent, granular detail on a key operational challenge, quantifying the financial impact and demonstrating transparency on this specific issue.

Asked by Harsh Shah

3 min read 6 chapters

Detailed narrative

Q2 Performance: Strong Top-line Growth Meets Margin Headwinds

Pennar Industries reported a robust 21.3% YoY revenue growth to ₹906.56 crores for Q2 FY26. PAT followed suit with a 20.1% increase to ₹32.28 crores. However, profitability was constrained by two key factors: unquantified but 'substantial' one-off costs related to the Telco acquisition in the US, and a temporary labor shortage that increased costs by approximately ₹500 per ton, impacting operating margins by 30-40 basis points. Management has assured that both issues are fully resolved and accounted for in Q2, setting the stage for margin recovery from Q3 onwards.

PEB Segment Remains the Primary Growth Engine

The Custom Designed Building Solutions (PEB) segment was the standout performer, with revenue surging 31.9% YoY to ₹456.72 crores, accounting for over 50% of total revenue. This growth was driven by both the Indian operations, benefiting from capacity additions at the Raebareli unit, and the US subsidiary, Ascent. The recent acquisition of Telco is set to further bolster this segment, with management guiding for an incremental annual revenue of over ₹100 crores.

Robust Order Book and Execution Outlook for H2

The company's forward visibility is strong, supported by a healthy order book. The US subsidiary holds an order backlog of $51 million. In India, the order book stands at ₹880 crores and is expected to cross the ₹1,000 crore mark in the coming months. The Boilers and Process Equipment division also has a significant backlog of ₹126 crores. With the labor issues now behind them, management is confident in improving capacity utilization from the 60-65% level in Q2 to over 75% in the upcoming quarters, which should accelerate revenue conversion.

US Strategy: Scaling Up via Acquisition

The acquisition of Telco for an enterprise value of approximately $14 million is a strategic move to scale the US business. Telco operates in the structural steel market, which is distinct from Ascent's pre-engineered buildings market, providing diversification. Management sees a massive opportunity in the $80-85 billion US market where Pennar has a low market share. The focus is on building capacity and execution capabilities to capture this growth, with the combined entity (PGI) expected to show strong performance.

Balance Sheet and Capital Allocation

The company's balance sheet expanded, with equity and reserves crossing the ₹1,000 crore milestone. However, borrowings also increased to fund the Telco acquisition and support working capital for growth. Long-term borrowings saw a net increase, driven by ₹62 crores in the subsidiary for the acquisition. Management aims to reduce the debt-to-equity ratio from the current 0.8 to 0.7. Working capital days increased to 76, an area management is focused on improving.

Confident Long-Term Guidance Signals Strong Conviction

Management issued a notably strong set of forward-looking targets. They committed to a minimum or 'floor' of 20% PAT growth annually for the next few years, a significant commitment to sustained profitability. Furthermore, they have a long-term goal to achieve a 7.5% PBT margin within the next three years, indicating a clear path for margin expansion from the current ~4.5% PBT margin level. This guidance reflects high confidence in their growth levers, including PEB, engineering services, and the US business.

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

More Capital Goods earnings calls