Pennar Industries Limited — Q4 FY25 earnings call

Call held 2 Jun 2025

Management summary

Pennar Industries reported a strong quarter, closing FY25 with record profitability. Management highlighted a clear strategy focused on growing high-margin businesses like PEB, the U.S. subsidiary (Ascent), and Engineering Services, while de-emphasizing lower-margin segments. The key focus for investors remains on the company's ability to improve capital efficiency by reducing working capital days and deleveraging the balance sheet, for which management has laid out specific targets.

Highlights

  • Q4 FY25 Revenue rose 10.1% YoY to ₹905.8 crores.

  • Q4 FY25 Profit Before Tax (PBT) climbed 20.35% YoY to ₹47 crores, with PBT margin at 5.2%.

  • Full Year FY25 PBT reached a record high of ₹158.4 crores, up 20.5% YoY.

  • Working Capital stood at 76 days, with a long-term target to reduce it to 60 days.

  • Return on Capital Employed (ROCE) was 21.5%, with a long-term goal of 30%.

  • PEB India order book stands at ₹780 crores and PEB U.S. at $53.1 million.

  • Management guided for continued double-digit revenue and strong double-digit profit growth in FY26.

  • Announced acquisition of Telco Enterprises in the U.S. to expand into the structural steel fabrication market.

Key financials

  1. Revenue ₹905.8 Cr +10.1%YoY
  2. PBT ₹47 Cr +20.3%YoY
  3. PBT Margin 5.2%
  4. ROCE 21.5%
  5. Working Capital Days 76 days
  6. Debt to Equity 0.83

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

  • Customized Design Building Solutions
    ₹460 Cr Revenue
  • PEB India
    ₹780 Cr Order Book
  • PEB U.S. (Ascent)
    $53.1 Mn Order Book

Guidance & targets

Profitability

  • PBT Improvement Profitability · next 3 years · High confidence 200 bps
    But I can say that long term, we believe 200 basis point improvements in our PBT is very achievable. But by long term, I mean in the next 3 years.

    — Shrikant Bhakkad, CFO

  • Profit Growth Profitability · FY26 · High confidence strong double-digit
    We will not guide towards profit, sir, but we do expect strong double-digit profit growth this fiscal. And we are very, very confident of that.

    — Aditya Rao, Vice Chairman and Managing Director

Capital Efficiency

  • ROCE Capital Efficiency · medium term · High confidence 30%
    Our long-term goal for ROCE is to reach about 30%.

    — Aditya Rao, Vice Chairman and Managing Director

Working Capital

  • Working Capital Days Working Capital · long-term · High confidence 60 days
    Very, very short term, we should reach 72 days and a long-term target of 60 days.

    — Aditya Rao, Vice Chairman and Managing Director

Debt

  • Debt to Equity Ratio Debt · medium term · Medium confidence 0.7
    From a debt equity point of view, I believe including long term, short term, all kinds of debt, I mean, LCs, bank guarantees, all of that, I think getting to 0.7 is what we are targeting. We are at 0.8 right now.

    — Aditya Rao, Vice Chairman and Managing Director

  • Interest Cost as % of Net Sales Debt · ongoing · High confidence <4%
    Yes. Overall, we should guide you towards 4% interest on the net sales... you would see the range bound at 4%, while our target is to get below 4%.

    — Shrikant Bhakkad, CFO

Capex

  • Capex Capex · FY26 · High confidence >₹100 crores
    We can tell you we've come -- there's well over INR100 crores this financial year that -- for this financial year, which we have already greenlit.

    — Aditya Rao, Vice Chairman and Managing Director

Capacity

  • Raebareli Plant Peak Revenue Capacity · peak capacity · High confidence ₹38 crores per month
    Peak revenue Okay. So peak revenue at 36,000 tons, Rae Bareli would be about INR38 crores... per month peak revenue.

    — Aditya Rao, Vice Chairman and Managing Director

Market context

  • Revenue Growth Revenue · FY26 · High confidence double-digit
    But in spite of this process, you will see double-digit growth in our revenue on a financial year basis.

    — Shrikant Bhakkad, CFO

Risks & concerns

  • Elevated Working Capital

    medium

    Working capital at 76 days is above the ideal range. Management states it's temporary and will normalize to 72 days short-term and 60 days long-term.

    Management acknowledged

  • Increasing Debt Levels

    medium

    Analysts highlighted the rise in absolute debt. Management acknowledged this and provided a target to reduce the debt-to-equity ratio from 0.83 to 0.7.

    Analyst acknowledged

  • Execution risk on new capacity and acquisitions

    medium

    Ramping up the new Raebareli plant and integrating the U.S. acquisition (Telco) are key to achieving growth targets and carry inherent execution risks.

    Both acknowledged

Areas of evasion (1)

  • Specific capex figure for the next 2 years

Q&A highlights

3 direct
ROCE vs ROE gap, margin trajectory, and capex plans Direct
Our long-term goal for ROCE is to reach about 30%... How that's going to come about is simply through... getting that [working capital days] to 60 is something that would that is sustainable... combine that with an increase in EBIT, and that's where your ROCE growth is going to come in.

This question addressed the core investor concerns on capital efficiency and profitability, and management provided specific long-term targets for improvement.

Asked by Agastya Dave

Working capital in PEB business compared to competitors with negative working capital Direct
The way we are structured, we make use a lot of non-cash LCs... Our average advances from customers is about 15% to 20%. Some of our competitors get 40% to 50%. But they do guarantee some of that... So I think as per industry norms, we are comfortable with the 60-day working capital cycle.

It revealed key differences in Pennar's business model (lower advances, use of LCs) versus peers, explaining why their working capital structure is different and setting realistic expectations.

Asked by Venkata Subramanian

Debt-to-equity trajectory and absolute debt increase Direct
From a debt equity point of view, I believe including long term, short term, all kinds of debt... I think getting to 0.7 is what we are targeting. We are at 0.8 right now.

This directly addressed the 'only black box' concern for investors, providing a clear medium-term target for deleveraging the balance sheet.

Asked by Rehan Laljee

2 min read 5 chapters

Detailed narrative

Record Profitability and Margin Expansion Focus

Pennar Industries closed FY25 with its highest-ever Profit Before Tax (PBT) of ₹158.4 crores, a 20.5% YoY increase. The fourth quarter was particularly strong, with PBT growing 20.35% to ₹47 crores on revenue of ₹905.8 crores. Management has guided for a further 200 basis point improvement in PBT margins over the next three years, driven by a strategic shift towards higher-margin businesses and operating leverage.

Strategic Growth Drivers: PEB and U.S. Operations

The company identified Pre-Engineered Buildings (PEB) and its U.S. subsidiary, Ascent, as key growth engines. The PEB division is supported by a healthy order book of ₹780 crores in India and the ramp-up of the new Raebareli plant, which has a peak monthly revenue potential of ₹38 crores. The U.S. business, with an order book of $53.1 million, is set for further expansion through the acquisition of Telco Enterprises, which opens up the larger structural steel fabrication market.

Improving Capital Efficiency: A Core Priority

A major theme of the call was the focus on improving capital efficiency. Management has set a long-term goal to increase ROCE from the current 21.5% to 30%. This is expected to be achieved by reducing working capital from 76 days to a long-term target of 60 days and improving EBIT margins. These initiatives are central to the company's strategy to enhance shareholder returns.

Balance Sheet Management and Debt Reduction

In response to analyst concerns about rising debt, management laid out a clear path for deleveraging. The current debt-to-equity ratio stands at 0.83, with a medium-term target to bring it down to 0.7. The company also aims to cap its interest cost at or below 4% of net sales, indicating a disciplined approach to managing its financial liabilities even as it pursues growth through a planned capex of over ₹100 crores in FY26.

Emerging Verticals: BIW and Engineering Services

The Body in White (BIW) and Engineering Services verticals are positioned as future growth drivers. For BIW, the company is onboarding major automotive clients like Hyundai, Maruti, and Ashok Leyland, with a long-term ambition to scale significantly. The Engineering Services business, while smaller, is a high-margin, third-party service that contributes to overall profitability and is being expanded into the Middle East.

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