Pennar Industrie

Pennar Industries delivered a strong performance in Q3 FY25, with net sales rising 12.75% YoY to ₹839.7 crores and total income reaching ₹846.45 crores. Profitability saw a significant uptick, as PBT grew 20.29% to ₹39.78 crores, expanding PBT margins by 30 basis points to 4.74%. The growth was broad-based, with the Diversified Engineering segment growing 9.2% to ₹415.6 crores and the Custom Design Building Solutions segment growing 13.8% to ₹441.29 crores.

A key strategic development is the formation of a joint venture with Zetwerk for the solar business. Pennar will invest only ₹18 crores as a minority partner, effectively transferring its know-how, assets, and order backlog to the JV. This move is part of a broader strategy to realize value from non-prioritized, legacy businesses (which currently form 35% of revenue) without further capital allocation, rather than simply shutting them down. The company's share of profit from the JV will be reflected as minority interest, which is expected to be margin-accretive.

Management reiterated its focus on six core growth verticals: PEB (India & US), Body in White (BIW), process equipment, engineering services, and hydraulics. The core strategy is to leverage their low market share (e.g., #4 in India PEB, #10 in US PEB) to drive growth faster than the overall market. The BIW business, in particular, is scaling rapidly, with revenue already above ₹100 crores and a potential to reach ₹1,000 crores in the next few years as the customer base expands.

The company's new PEB plant in Raebareli is now operational and contributed ₹20-25 crores to Q3 revenue, with expectations to reach peak capacity by Q1 FY26. Further expansion is underway, with plans to initiate a new PEB plant in Gujarat in the next financial year and a new greenfield plant for its US subsidiary, Ascent Buildings, in the next year. This continuous addition of capacity is central to achieving the guided quarter-on-quarter growth.

Management acknowledged that its PEB margins of 4.5-5% lag competitors who are at 7-8%. They have a stated goal to reach over 7%, with a 10% target, and believe there is a clear 200-250 bps improvement potential. On the balance sheet, the focus is on improving working capital efficiency, with a target to reduce working capital days from the current 79 to 72 in the short term and 60 in the medium term. The long-term debt-to-equity ratio target is maintained at 0.7.

The company holds a healthy order book, with the PEB India business at over ₹800 crores and the US PEB business at over USD 50 million. While declining to provide specific numerical guidance for revenue growth, management committed to delivering sequential, quarter-on-quarter growth in both revenue and profit. The outlook is bullish, with expectations of sustained high growth over the next 4-5 years, driven by capacity expansion and market share gains in focused verticals.