Standard Engineering Technology Q1 FY27 earnings call

Standard Engineering Technology Limited delivered a strong Q1 FY27, achieving a total income of INR 250 crores, marking a 41% year-on-year growth. EBITDA stood at INR 44 crores, up 27% year-on-year, with EBITDA margins maintained at 17.5%. Profit after tax also saw a significant increase of 26% year-on-year, reaching INR 26 crores, demonstrating robust operational efficiency and growth across its businesses.

The company made a pivotal move by acquiring up to a 51% stake in GScale Energy, marking its entry into the AI data center infrastructure market. This new segment is projected to contribute approximately INR 250 crores in revenue this year. GScale will focus on providing power systems, cooling solutions, and strong engineering for gigawatt-scale AI data centers, leveraging SETL's existing high-precision engineering capabilities. The manufacturing facility for GScale is rapidly progressing, with 2,00,000 sq ft already in full execution and operations expected to commence by November 2026, with an additional 2,00,000 sq ft to be added by December.

SETL strengthened its technological prowess by investing approximately INR 71 crores for a 19% stake in GL Hakko, Japan, with an option to increase ownership to 51% in the next two to three years. This partnership grants access to 70 years of Japanese glass-lining technology and new products, including conductivity glass and semiconductor-grade equipment. The strategy involves manufacturing critical components in Japan to protect technology secrecy, while assembling and selling products like shell and tube glass-lining heat exchangers in India, targeting a revenue increase for GL Hakko from INR 200 crores to INR 400 crores in 2-3 years.

The core engineering business, primarily in pharma and chemical engineering, continues to be a strong growth engine, with an unexecuted order book of INR 1400 crores. Management expects this segment to grow by 40-50% this year, reaching INR 1200 crores in revenue. The company is actively recruiting to support the increased order book and opportunities, indicating sustained demand and expansion in its traditional markets.

While working capital days were high at 320 days last year, management anticipates an improvement to below 200 days by September FY27, driven by stable inventory, increasing revenue, customer advances, and better receivables collection. The company aims to maintain overall EBITDA margins at 17-18% in the future, with the GScale business specifically projected to achieve EBITDA margins of 23-25%.

GScale Energy is positioned to offer a complete turnkey and design-and-build solution for data centers, integrating products manufactured in-house with components from global OEMs like Schneider and ABB. This approach aims to significantly reduce project timelines from the traditional 3-4 years to 18-20 months, providing a unique value proposition to customers. The company is actively engaged with major global hyper-scalers and Indian data center players, who are showing strong interest in this integrated solution model.