Harsha Engineers International Limited (HARSHA) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the QGFI 26 Harsha Engineers International Limited earnings conference call. As a reminder, our principal lines will be the lesson only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator where everything starts, then zero on a dash and phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Vishal Rangwala, CEO of Harsha Engineers International Limited. Thank you, and over to you, sir.

Hello, all. Warm welcome to our Q3 FY26 investor call. As usual, I will ask Mr. Mowlik, Mr. Sani of our CAFO to take us through numbers in greater details later on. However, I'm assuming that you would have had a chance to look at that already. First and foremost, let me start with, you know, overall, I'm really happy to note that, you know, macro level, quite a few positive events have happened, which has definitely improved overall market sentiment. This would include India-UK FTA, followed by FTAs with a few other countries, and a very positive India-EU FTA recently concluded. And to top it all, much awaited India-US trade agreement. Again, with some strong directional push in CapEx plus long-term tax holidays announced in certain key segments in the last budget, we are all fairly confident that India can sustain a good GDP growth rate of around 7% in coming years. As you would have observed from our numbers, at the outset, I am happy to report that Quarter 3, FY26 performance is broadly in line with our expectation, except for a slight blip in the form of below-par performance in Romania. Our India engineering business comprising of our company plus our wholly-owned subsidiary Harsha Advantage has continued to show a strong performance. Both in top line as well as bottom line, notwithstanding the fact that Harsha Advante, which has commissioned its greenfield facility in current financial year, has reported losses at the pet level, primarily only to impact of higher interest and depreciation. Further, as you would have seen, we had to make a one-time provision of around 5.97 crore in quarter 3 in India for additional gratuity and leave and engagement to give effect of the changes made by the new labor code made effective by the government in quarter 3 FY26. This is a one-time exceptional provision required to be made retrospectively in Q3. Our India engineering business has reported a 17.4% revenue growth in Q3 on a YOY basis. And if we normalize the effect of one-time exceptional provision, then our India engineering business operating EBITDA margin has shown a healthy 23.8%. Though the reported EBITDA is at 21.7%. As mentioned earlier, this is after absorbing net loss of Rs. 3.7 crore in Harsha Advantech in Q3. We expect a much stronger revenue performance in Harsha Advantech subsidiary in Q4, which should increase the EBITDA and reduce the Q4 loss in Q4. Thank you. Talking of outsourcing of cages in our India engineering business, we are steadily growing in this segment going to a combination of favorable factors. If I talk of a cage demand in India, the same is on rise and we continue to have a dominant market share across variety of And we have started supplies to a lot of our customers new facility in India, which caters to various world markets. Our exports from India are also gradually going up, with EU continuing to show revival in industrial demand for cages, though wind demand is still not picking up in Europe. I believe that with the favorable FTAs, the demand should go up in Europe in the coming quarters. In this regard, large-sized kgs have continued to show a strong performance, having achieved sales of around 39 crore in 9-month period up to December 25, as against 31 crore achieved in the corresponding previous year 9 months. The pace of new product development continues to be strong at around 123 SKU up to quarter three or only in quarter three, resulting at 382 SKUs for the nine-month for the period ending December 25. Again, if you see our other growth drivers, I'm happy to report that bronze bushing business has continued its strong growth trajectory, reaching a sales revenue figure of about 92 crores in nine months, ending in December 25. Thus, as per our earlier estimate, we are on track to achieve about 30% plus growth YOY basis in this segment. In Fight Talks campaigns, while there was a blip in Q2 due to some seasonal impact on consumer goods segment, they are again catching up in Q3 and stood at the overall revenue for 9 months stood at 41 crores up to December. I expect stamping sales to further grow in coming quarter due to few new stamp components which are under development, which are likely to be commercialized in next financial year. Lastly, while sales growth to Japanese customers is low, it is still a positive direction. We are confident that though this is taking longer time, there is no dilution in our efforts, as well as the opportunity for a significant growth in our market share with our Japanese customers. Talking about overseas... Subsidities, I am glad to state that Harsha China has continued to report a consistent, steady performance, resulting in due maintaining a decent profitability in a growth trajectory. In fact, you would have seen in our disclosure made by us to the stock exchanges, we have formed up a brownfield expansion plan in China at the outlay of approximately $9.94 million for expanding cage manufacturing capacity in China with primary focus of steel cages. The logic of this expansion is that there is a good demand for steel cages in China, primarily in industrial segments. We believe that we can significantly improve our market penetration in this segment in China if we increase our cage manufacturing capacity in China as a local player, which is essential not only for our existing key MNC customer present in China, But also for local Chinese bearing manufacturers who can be serviced if we have adequate steel cage capacity in China. We will fund this expansion primarily through debt and then up to maybe 70 to 80 percent. Or rather we will fund this by borrowing locally. And the balance of it will be funded through equity contribution from Harsha India. The expansion will be implemented at our existing site as a brownfield expansion. And we intend to make this operational before end of financial year 28. In this quarter, we again saw Romania's performance coming under pressure primarily only to steep increase in copper prices globally, which could not be passed on to the customer immediately as there is a lag. This has resulted into an operating loss at Romania, and the combined net loss of our foreign subsidiaries stood at around 3.98 lakhs or 3.98 crores in quarter three, and for nine months, it stood at 6.09 crores in nine months or year to date. However, we still remain confident about Romania likely to do better in coming quarter because of our consistent and conscious shift and focus on the finished gauge business, customer diversification, as well as cost control strategies under implementation. Talking of our solar business, the solar division has reported a strong performance in quarter three, reporting a top-line revenue of around 59 crores, and EBITDA of around 9%. However, I mentioned earlier, this is an order-driven business, and the overall performance in the current financial year will be... You know, it's good and continues positive contribution. This division is continuing the positive contribution to overall business. Lastly, I feel very confident that we'll continue to perform well in quarter four in this segment as well, and we should be able to achieve overall guidance for financial year 2026. More importantly, we feel that we are on a good trajectory for next financial year and hope to continue this direction. However, we would prefer to give over overall guidance for FY27 at the time of quarter four FY26 annual result call. Now I transfer over to Maulik, who will take us through numbers in a little bit more detail.

Thank you, Vishal Bhai, for the overall business overview. Good afternoon, everyone. As you would have noticed, for the quarter ended December 25, our engineering business at consolidated level have achieved a top line of Rs. 350 crore against the 363 crore top line in the immediate previous quarter and 302 crore top line in the same quarter last year. We have achieved consolidated EBITDA for engineering segment of Rs. 58.6 crore against the reported EBITDA of 63 crore in the last quarter and 48.2 crore in the previous quarter. However, adjusted EBITDA is of Rs. 64.3 crore in this quarter after adjusting the one-time provision impact of the new labour code. Increasing trend in metal prices, especially copper, and lag in raw material pass-through has impacted our EBITDA margin and PAT compared to last quarter, and also our new greenfield sites, Baila, at Baila has reported a net loss, as we saw as mentioned, due to the first-year operations, and we have also capitalized the second building in our Baila sites in the last quarter. Both foreign subsidiaries have jointly contributed EBITDA loss also of around which is 51 lakhs at a total level of both foreign subsidiaries. Solar business as mentioned has achieved a revenue of 59.7 crore with a EBITDA of 5.5 crore. Overall working capital cycle at consolidated level is around 140 days against 146 days in the previous quarter and 145 days in the last year same quarter. We have incurred capex of Rs.32 crore in the last quarter and cumulative capex of around Rs.100 crore in the last three quarters in the current financial year. With this brief note on the financial numbers, I request operator to take the Q&A from the participants. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press the bell and run on the touchstone telephone. If you wish to remove yourself from question queue, you may press star in two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Harshit Patil from Equator Securities. Please go ahead.

Thank you very much for the opportunity, sir. Firstly, on the India engineering business, this was the second consecutive quarter of a very strong growth, wherein we have done a mid-double-digit to a high-double-digit kind of a growth in this business. Could you highlight which are the factors, some of the end user industries which have drove this performance. Also, if you could give us a flavor on pricing versus volume growth links within this 17% growth that we have posted in this quarter, that will be very helpful.

So, one, Arshit, from our point of view, for us, the geography point of view, India is doing very well, as well as Europe, as I mentioned earlier, and both are driving overall growth for us, being a very big segment for us. This growth is primarily, we are seeing purely quantity-driven growth, and we are seeing a volume growth. As yet, I think in the last, I mean, quarter three, we don't see any, you know, material impact or pass-through which has materialized, which will happen in the current quarter. And overall, we are seeing India, we are seeing strong demand across all segments, industrial as well as automotive. And overall, globally, we are seeing industrial segment slowly improving, which was in a negative cycle over the last year and a half group. So which is recovering is how we look at it, and so that's how we are seeing it. And for us, also positive is bushing growth and stamping business growth, which are largely domestic focus. So, that also supports India growing overall very well. So, that is also supporting.

Just to quickly add one thing. This year, if you see, there is also growth in exports. So, for the last couple of years, that India was growing domestically, but exports were pulling us down a bit. Now, export is also showing about 10% growth. So, that is helping us, you know, showing a much better growth number at India.

Understood. Secondly, on the KPEX that you have announced in China, we have announced the KPEX worth about $10 million. It is a pretty significant number. Now, given that we are still operating at about 55% capacity utilization over there, do you see that the demand is going to be very strong in the near term? And that is why we are expanding. We are sort of trying to preempt the demand over here. So also, if you could give some flavor on when we would have expanded this capacity. So on that new scale and size of the plant, what would be the maximum revenues we can do at the China level? Maybe in FI 29, because FI 2080 is where your expansion will get completed. So, at that scale, what kind of revenues and EBITDA margins we are willing to do? Slightly longer term, broader questions, but any outlook on that will be very helpful.

Yeah. So, again, we are in China. There are a couple of things happening, as I mentioned. We have a significant brass capacity located locally in China. However, when it comes to industrial steel cages, we don't have any local capacity. And we are seeing industrial segment grow, and our ability to participate and get some share of business significantly changes when we are a local manufacturer there. So that's what is primarily driving this capacity expansion. Within China, what we are doing is, so there is some amount of brass capacity also expansion part of this expansion plan. Now... In this investment, a big chunk, about 40% plus, is infrastructure, which includes building and a few basic infrastructure we need to build to actually house a lot of our dedicated capacity there. So that is a big chunk of this investment. And then we are adding, you know, cage capacity, as I mentioned, primarily in the steel industrial side, where we are seeing a good demand and growth and opportunity to penetrate local markets. So that's the rationale. From a number point of view, it will be very difficult to give you a very precise number. Having said that, we are looking at... For the piece, for the equipment, which we are going to install, we are expecting at full maturity, it should give...

Round 2X.

Yeah.

Round 2X turnover. Current revenues will be double. India.

So, we are looking at the 2x overall revenue in China when the full maturity of all this capacity takes place. Now, that still leaves us with additional infrastructure for further expansion because we are doing a full infrastructure expansion right now. And we are kind of keeping space. To accommodate any growth opportunity comes our way in a different segment and so on.

That's good, sir. Thank you very much for answering my question. I'll come back in the beginning.

Thank you.

The next question is from the line of Amit from PL Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. Sir, my question again on China, what is the kind of understanding, the rationale to expand? So, will it be penetrating completely local, this 2x sales which are trying to achieve by F29 and F30?

So, it's a combination of our existing customer as well as local. We are seeing opportunity to get better market share through localization, even in our existing customer base. As well as some of the access to customer is not available if we are, you know, supplying out of India. So we are kind of creating that. So it's a combination of both local customer as well as our global MNC customer increasing the wallet share with them.

And just to add there, Amit, in the specific industrial segments, there are areas where in China there is only one or two local suppliers, and there is no major suppliers available, and hence even the local bearing manufacturers need reliable and consistent suppliers as alternate suppliers, and thereby we have a great opportunity to even capture the local manufacturing bearing companies. In the industrial segment of the steel cages.

Right, but is there anything like with the existing customer, you'll be able to utilize maybe 50-60% of what you're installing? Any ballpark or it is still open that once the...

Yeah, there is definitely great dialogue.

No, we don't have a clear commitment. However, we have a good engagement and discussion going on and some portion of capacity will definitely go towards supporting our existing customer in a bigger wallet share of their demand.

Right. And are we kind of confident of margins from the past experience in China? So what are you looking for in terms of margins or something with this expansion? Probably looking at the past, we have seen challenges with our international subsidiaries anyway.

Yeah, so we... We will definitely, we are confident that at the right revenue level, we will improve our existing EBITDA in China. We definitely, we are definitely trying to, we see a better margins possibility here. And that's also one of the incentives for us to go there. Also, there is a need of scale at China level. Which will also help us create operating leverage, improve our margins, even on the existing portfolio as well.

Right. Sir, again on this thing, you said somewhere in the commentary when demand is not picking up in Europe. So, I think, is there any implication for bushings business? There might be some challenge, because I think you have written, it is growing strong, but I am just trying to understand from what you mean to say by Wendemar. Yeah, so...

Yeah, so I think our bushing business is focused on replacement-driven contracts. So that's why that is continuing to grow in spite of, you know, Europe wind not doing as well as we expect. However, we are some significant portion of our... Romania facility is supporting wind market. So, wind market overall in Europe is not doing that great, and that's the reference I was kind of mentioning there. So, we don't see that as correlated. At a full conversion maturity, the bushing business will follow the… Wind market, what is going on in the wind market, but having said that right now we are in a very different phase when it comes to bush, where the focus is on whatever is the existing wind application converting into bushing and that will drive the bush.

So lastly, on Romania, you said this quarter was impacted by commodity prices, and probably that might continue in focus. So what is that we are looking at now, Romania? Last time, I think there was some recovery there, and you highlighted that time. So now with this challenge, what's the outlook for next one or two quarters in Romania?

So, uh... I think I will not be able to exactly say how it's going. There is a lot of volatility in the commodity market. We do have a path through mechanism. So we have a quarter to quarter impact and correction. But as I mean, not knowing future, but what we have seen, so there is significant volatility. So that there is a risk and a concern remains. Having said that, as I mentioned earlier, that our improvement program is going on. We are improving the revenue and the product portfolio, doing more pages and so on. Which is taking traction. So, apart from this specific challenge, I think if you look at comparison on the revenue side over last year's similar quarter, we have grown and we have improved our product portfolio. We are not at all where we need to be. So, we are continuing to work on that and evaluate the situation, engage with customer. And see what's the right path going forward.

Thank you.

Thank you. The next question is from the line of Sakeh Kapoor from Kapoor and Company. Please go ahead.

Yeah, Namaskar, sir. Hope I am audible.

Namaskar.

Yes, sir.

Yeah, thank you, sir. Sir, firstly, if you could just reiterate for the sake of repetition also, on the guidance front on what is the likelihood for us to exit FY26, firstly.

So, we had Taket said that we will be, in terms of growth, a little over 10% overall. So, this Q4 should also continue the same run rate with maybe a little bit marginal improvement. So, let's see. So, that's what the guidance was. So, we are writing on track. We should be okay.

And on the margin front also, on the standalone business, the reported 23%.

Margin will be better and we should, we are aiming at, you know, in the EBITDA range as we had talked about and the fat range reaching, taking the last Q3 run rate and then slightly improving your Q4, we should have a much better bottom line growth in FY26 as compared to FY25.

No, sir, the EBITDA margin we have for the standalone business part is 23%, 23.4%. That is what we have reported. So, we are confident on maintaining.

No, no, see what happens. There is always a quarterly lag between the commodity prices and the selling prices. We have said that at India level, consistently, we should be in the range of 22, 23, 22, 23, the range is going to go. And then, a little bit of impact of Advantech will be little lower as compared to Q3 this year in terms of loss. So, it will not completely break even. It should break even from next year. So, the turnover is steadily increasing. Advantech, as Vishal said, there are quite a bit of moving pieces. But I think that we should be... Reaching the targeted fat level in the range of around, say, maybe 145 or so. Let us see.

Okay. Sir, if you could just give the nine-monthly performance for sales and profitability for Romania, China, as well as Advantec separately, just if you could give the number. And then, sir, on the Romania part of the story, if I remember correctly, we were about to discuss and articulate the strategy or restructuring for the unit, wherein better deliverables from the same can be derived. So where are we, sir, in terms of that?

On the numbers, we have already given numbers in our investor presentation for Indian engineering business and foreign subsidiaries' performance. So you may refer our investor presentations, there you will find the numbers. And on the Romania story, yes, our focus is still on the same side, on enhancing our cage proportions compared to our current casting proportions, and the dialogues is already on with the customer.

Sir, I was looking for the split between the China and the Romania business separately and the advantage. Can you add that all three separate numbers?

So, I tell you, as a matter of strategy, in the past, we are always giving a combined number at the foreign subsidiary level. So, you will see that the loss was about 6 crores in the 9-month period at the foreign subsidiary level. I think there could be a little reduction in Q4 in terms of combined loss, but you may take a combined loss in the range of maybe around 8 crores for the year-end. For the foreign subsidiaries, Advantech, I have told you that Advantech loss figure we have already given. It was 370 lakhs in the Q3. It should reduce in Q4, but it will still be at a loss level. So, I think exact number we will not be able to give, but this is already given, the way we have explained, actually.

Two small points. In your presentation, you had mentioned about and earlier also about this lower offtake from your Japanese customer. So, if you could just allude to us, where are we in terms of the deliverables and the order booking from the Japanese content? And then, sir, when we, in the slide, we have mentioned about this diversification in precision stamps and brushing components. So this stamping is also attributed to the brushing part of the story, or we are separately doing stamping of other tools also.

So, yeah, we are doing beyond bearing cages and bushing, we also supply stamping components to our customers, which are automotive, as well as consumer goods, and some industrial goods, and so on. And it was about So, ramping is separate than bushing.

Yeah, stamping is a very different, yeah, it is an extension of our capability for manufacturing steel cages, which is a stamping process, but we have developed some very special components like, you know, railway, seals, or compressor, special type of compression, stampings, etc., which is extension of our technology skill set into a little diversified field, But keeping the same value addition in mind can be Tiktis Taka se Nietzsche. So we are not doing me too kind of a situation. But bushing is a replacement for bearings in the gearbox, windmill gearbox. So it's a very different application.

Okay, sir. Just to happen about the stamping parts, this will be in the Advantex unit we are doing or it is in the older plants on this?

Both, both. We have existing maybe here or Advantex maybe we have created additional capacity for bushings and large-sized cages.

And lastly, sir, lastly, if you could just give us your message for your investors. We got listed in 2022. So we were scared from what happened in COVID in terms of valuation. But even if it had taken into account the disease of the market, the business environment, geopolitical issues. Every aspect, shareholder have no, valuation has not happened for your investors. That is including the promoters who hold three-fourths of the equity. So, we have seen on the deliverable front what else and how quickly would this translate into value creation for us in terms of consistent, profitable, predictable growth for the organization. So, if Mr. would just throw some insight on the same.

Yes, I can see you are right in what you have observed, but also please appreciate that. The macro-level factors are beyond our control. At every single point in time, we have been very transparently communicating with the shareholders and investors that what is the current status. With 35% of my business coming from Europe globally and Europe going down, and then the geopolitical tensions, with all this, I think we have done very well in terms of... Quickly, you know, going to the drawing board, reworking our strategies, and trying to grow and trying to maintain a decent growth. I think I don't want to speak more, but it seems that this year was much better than last year, and now next year will still be better. Our job is to... Be transparent about what the current state of affairs is, what is our strategy, and how we want to keep the company on the growth path. Market is something which nobody knows, and we can't control. That's all. We will do the work, and we will be very communicative about what we want to always transparently feel as correct.

Right, sir. I joined the queue, sir. Yeah, thank you. Yeah, I'm joining the queue, man. Thank you. Thank you, thank you.

The next question is from the line of Manish Goyal from Thinkwise Wealth Managers. Please go ahead.

Thank you so much, and congratulations on a very good set of numbers, sir.

Sir, a couple of questions.

First, if you can give us the revenue break-up for your new businesses, bronze bushing, stamping, card size, and Japan-based customers for nine months current year and comparable numbers of last year.

Yeah, I think Amani, that was covered in Vishal's commentary. Let me repeat it for your easy reference. Last week, KGs, we did 9 months, 39 crore around, versus last year, same 9 months, it was around 31 crore. Japanese customers is around 51.5 crore, or 50, against 50 crore, rough in the last year, so almost stagnant. Stamping we did around 39 crore and 41.2 crore in this year, while boosting around 74-75 crore last year versus 92 crore this year for nine months.

Okay. And so, related question is that roughly, if I do the math, it is contributing 21% of your revenue, all these three, four categories. So, how do we see this going forward over a period of next two years and three years? Maybe what kind of visibility we have? Can it probably this business can develop in two years? That was first question. And second also question is on the KG's business that independently, how do we see growth rate in the KG's business?

I don't have a very precise double-up number like that, but these are our focused growth drivers where we see good opportunity, and that's why we keep on mentioning the numbers, and sometimes we don't do as well as we expect. Having said that, we expect a very good growth in all this segment. It may happen that one segment may kind of falter for a while or something like that, but across all this segment, we have signed a lot of new supply agreements with our customers, and we feel that they are on a good growth trajectory. Realization will happen soon. And on the case side, we see that as a product, very strong growth, continuing. It's basically what we offer to our customer in terms of KJL. It's a very unique proposition and we are fairly confident that what we bring to the table will bring us that additional growth.

We are seeing also that is also driven by...

Which was supplied into Europe or U.S. or other locations, how those, you know, agents are doing. However, in India, it is doing very well, continues to grow, and we feel fairly confident overall about cage business as well.

So just to add, large-size cage actually is a... Subset of our Kate outsourcing for a simple reason. It's carved out separately because it was a relatively low wallet share before five years, just through half a percent, one percent. Now we are targeting at maybe at least five to seven percent, and that's one area which is growing very well. So that's very much a part of outsourcing. And I think overall, all these Japanese customers are seeing our wallet share with them. One or two percent. We are targeting at least five to ten percent in next two, three years. So, you know, these are within.

New product development is gaining pace, so I would like to get a perspective as to are we gaining market share with your customers and the resourcing, like you said, started supplies to the customers' new facilities in India. So how should we look at it that probably next year we can look for a double-digit growth overall for the company?

So, for us, product under development or development is a leading indicator. What that means is that customer is continuing to give us a product which we will develop, and commercialization of such product may take anywhere between Six months to two to three years, depending on how customer is approaching. In case, customer will decide sometimes that only when you complete the complete portfolio that we will start commercialization and so on. So, basically, we mentioned that as kind of an indicator that, you know, our pipeline is strong. And that's the case. Now, in terms of doubling the growth, I think it depends on a variety of factors. It depends on how the industry is doing as well as how the new projects come online. And we are very hopeful and confident that good revenue growth is in pipeline. But it depends on all those factors. So it's difficult to exactly put a number to all that.

Thank you, sir. So, as I said, definitely that is the target, but we want to give you a little more precise guidance based on certain new developments.

We will come back to you at the end of Q4. And sir, particularly on the margins, like what India, the standalone engineering margins, what we have seen for engineering business at roughly 25% for this quarter. Is this sustainable going forward? Also in context with now that steel prices have started inching up, proper prices are inching up. So how should we look into it?

So, usually, Jamin, sorry, Manish, we have said that our margin should be tracked on the absolute front, considering there is a material path to impact, impacting the percentage, either on the upward side or downward side, as the case may be, or according to in which cycles we are going into. So, our suggestion is the same, please track our absolute margin improvement, and we have confidence to improve that margin, definitely year over year, as well as quarter over quarter.

So monitor, like what is the time like for you to pass on the cost? Is it on monthly revising or the cost?

We decided that three months is the period and with a one month as a lagging. So four months total lag. But again customer to customer it varies. So an average you can consider as a four month.

And are we seeing any immediate benefits from the FTAs, what India has signed with the UK and EU, and also now with data coming down in US, how should we see the prospects going forward?

Obviously, the export demand will pick up, that's our expectations. There is no direct linkages, but definitely there is a linkages, and considering that our product is a multi-usage product and multi-industry usage product, we can't identify exit end-to-end benefit, but yes, we see that as a positive outcome for our business life.

Okay, and last question on... The share was not very big anyway in US, around 8-9%. So to that extent, we were other, you know, sort of neutral or agnostic to that.

Sure. Last question, sir, on the new facility, now we have started the second building, we capitalized the second building as well. So what kind of ramp-up we see, what kind of utilization visibility we see from it next year? Can it revert to company-level margins next year?

All right, this phase one is to do it early, but as we have committed, any new capex usually takes two years to reach to the peak, and we are on the same track. We don't see anything lagging there.

Thank you so much for all that. Hello.

Thank you.

Yes. No, just one question. I just want a clarification. This Q3 presentation, the international revenue share has been restated for the quarter two FY26. So any reason for that? Was there a typo?

We have observed some alithmetical error.

In the last quarter, we made some arithmetical error. We have just corrected it.

Okay, because even Q1 has a very higher share of international revenue. So, maybe if you can provide that clarification.

Yeah, that's what. Q1 and Q2, there was an arithmetical error. The base number has been corrected now. And that's the reason. The previous years were correct.

Okay, fine, Monique. I get the numbers from you. Yeah, I'll get the numbers from you. Thank you so much. Yeah. Thank you.

Thank you. The next question is from Dalarino Chaymeen from AR Deco Asset Manager. Please go ahead.

Yeah, thanks for taking my question. One is, I mean, the European demand piece. How are you, I mean, how does your current inquiry about that looks like in European VM? Can you, kind of, ask you to advance into all the process?

I'm sorry to interrupt, sir. Your voice is not audible properly.

Hello, can you help me now?

Yes, sir.

Yes, sir. Just on the left and on the European demand front, any new program called RSQ has gone through to prototype on a validation stage, or any new program means for a global sourcing mandate, which provides comfort for, I mean, our sustainable double digit growth for our lifetime.

So, from a customer engagement and all those points of view, we continue to respond to RFQ, but for us, the RFQ to realization cycle is pretty long. What we see is what our customer is asking us to develop, which becomes a more better benchmark. In terms of how, you know, how growth is coming, how things look like, and that has remained strong in spite of... You know, whatever we have seen last one to two, one and a half year. That part of it has remained strong. We are engaged on a few additional RFQs, additional opportunities, but it depends on, you know, those projects get decided based on a variety of factors, and it's not just in our hand or our competitiveness. It's a macro big level, big projects, which… It depends on how our customers are approaching variety of things. But overall, I would say it remains positive without, you know, saying that, you know, that's not a very accurate indication for us.

Got it. And so on the sales to your Japanese customer, I mean, it's between a TEDMAP or a YTD business. So is it more of a, I mean, your slower program ramp up from the customer side? Or is it like a technical delay from our side?

It's a little bit of both. As I was mentioning that there were, last quarter, I mentioned that there were some programs which got delayed at our end. And then some of it was demand and delay from customer and so on. So it was a combination. And we are very hopeful that we will come back on track.

And also adding Jai, I mean, there are also the global cues I had over there. Because of the global uncertainty, customer was also delaying their long-term calls of transferring or enhancing their supply chain outside their comfort zone. So, we see that the things are settling down in the global side. These things will ramp up now.

Got it, sir. Got it. And we are looking, I mean, you know, advantage front, I mean, it will take two years to reach an optimum mix. May I just help us, I mean, how your scale-up looks like for the next year, I mean, for the next year itself? And how should we think about that? I mean, is there any delay on the customer value from front? Anything on that color front?

No, things are online, but considering this is a new plant and at an early stage, give us a quarter or two quarters more where we will be able to give you better guidelines considering the customers acceptance and approval stage over there. But yes, as we said, we see that we are on the same track of achieving the optimum level within two years or around in two years from our capitalization. And we see the ramp-up will come, and it will come faster stage once we get the approval.

Got it, sir.

Got it.

Yeah, that's it for my friend. Thank you so much.

Thanks.

Thank you. The next question is from the line of Jetson from IDBI Capital. Please go ahead.

Yeah, sir, thank you for taking my question. I'm audible, right?

Yeah, yeah. Yeah, yeah.

Yeah, sure. So, sir, first question just pertains to, you know, when I just take the console minus standalone, so you get the subsidy numbers. So, when you look at it, the loss is around 157 million. Now, I understand even this quarter, 4 crore losses from the Advantik and 4 crore losses from the overseas subsidies.

That is how it is panning out.

So, sir, just in light of the same, just wanted some color on. 26 is almost done. So 27, how should it look when you look at, you know, even you look at Advantec and you look at the OC subsidies, how do you look at it? How does this loss thing should go ahead or some profitability, just some color on these two aspects you wanted. I want it from you.

So, Jason, I think some arithmetic I want to clarify before Vishal or Nolik moves on. So, at the subsidiary level, as I said, the loss for 9 months is about 6 crores. Correct? And Advantech, as you could see, we have already given the figure that Advantech was around 9 crores. That is how you are looking at 15, right? For 9 months. 15 crores, right.

No, no, no, sir, see, when you look at the complete subsidiary loss, okay, just for, so my number what I said was 157 million was for nine months, okay, so that's a pat number I'm looking at, 157 loss. Okay. Simple console minus handle. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. So now this, this quote, now let's not confuse, but I understand it's a combination of advantage loss and the OC subsidies loss. This is what predominantly is 80, 90% of the thing. Yeah. So just wanted to know how this should go to 26 and 20, 26 is almost done. 27. How do you look at these two factors playing out? How should it, how should we look at it?

So, that's what we said, we will give a better guidance on 26 in the quarter four year end. But just to give some heads up, obviously advantage is done positive. And China continues to grow in the same territory with a better margin. And Romania, our intention is to make it break even first at EBITDA level followed by at a profit level. That's the major intent.

Okay. Okay. Sure. So, I'll look forward to the Q4 guidance. Sure. And, sir, in terms of the standalone revenue, we should be able to track, I mean, you did mention standalone engineering revenue. Just would want to know 10% revenue growth should be a fair assumption for 26-27 going ahead. We should be able to do this 10% revenue growth at least.

Yes, and same answer. Wait for Q4L. Yeah, but yeah, I mean, yeah, yes, yes, yes.

Okay. Okay. And sir, just in terms of this ramp up, you mentioned Advantec will take two years. Okay. To ramp up, I understand. So peak revenue again, probably 2x is a fair assumption. So how much of investments are in Advantec? Just wanted to know. So I mean, just a calculation of peak revenue.

So, on the plant and machinery investment, yes, you can consider 2x. 2x. So, how much was that?

Infrastructure and land and building.

Yeah, yeah, correct. Currently, investment is around 210 crore plus. Okay. I don't know the precise numbers on hand. Okay. But, majority of that is also infrastructure and land and building. Okay. While machinery is around 100 crore plus, 150 crore something.

Okay, so we have to take the 2x on the machinery, right. Okay, fine. Right, sir. Okay. Okay.

And the main products are from advanced? Yes. Sorry, Jason. We will also have incremental machineries coming up and that will be still in the pipeline and we will give that also in guidelines.

Sure, sure, sure. Of course, of course. It has to be on the plant and machinery only. Other infrastructure is common in France. Get it, sir. And so the main products from Advantech you have mentioned before, but just wanted to clarify, the bushings, stampings and the large-sized cages, these are the main products from Advantech. Is that right?

You are right. The incremental growth and new businesses of these three lines.

Right, sir. Sure, sir. That's all from my side. Thank you. Thank you so much for answering my question.

Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Just a follow-up on what the participant just mentioned. So for advantage, the product profile would be skewed towards bushing and large size KAs. Correct.

Yes. And tamping a little bit.

Okay, and sir, I think for the large size kgs, you did allude earlier about the market, and there were some deterrents which we were trying to resolve correctly. What's the business environment or the demand pertaining to the large size kgs?

So, let's see a couple of quarters. Two quarters back, we did mention that, you know, market for industrial product was very sluggish, and that was the reason for very moderate or not much growth in large size. We might have mentioned that. I think we are seeing that turning around over and above the fact that we are looking at more additional product development and orders. For future in this. So, yeah, those factors are somewhat improving what we had mentioned earlier.

Okay. I think total investment for Advantage, are we done with the entire capital? And also for the commercialization part, what is any closing for capital? What in progress is there?

No, as I just said in the previous questions. I have already said in the previous question, Sakhir, the incremental plant and machinery will continue in advantage, considering that wherever there is a requirement of additional capacity, and wherever we see the incremental growth can come, we will continue to have a plant and machinery spending there.

Okay, sir. But since that we have something to commercialize, if you could give as a date, how much have we invested, including the land for this unit, or if you could give the bifurcation? Thank you.

No, to answer your question, yes, there are few working progress in capex side also, including on the building side, there are some other buildings like admin and others are under capitalization, yet to be capitalized, and some plant and machinery under installation. So around 40 crore is the rough number stop on my head.

Okay. What should be then the total investment for this unit as a whole?

As on date? At the first. So, it's an ongoing thing, but yes, we expect it to end this year around 250 crore plus.

And the peak revenue for this also will be 2x or will be different to assume today because of that, the large size cages and the bushing part. What should be the peak turnover that we may expect or the effect turnover issue?

2x of the plant and machineries, but you also have to keep in mind the incremental plant and machineries to be in pipeline. But yes, 2x of the plant and machineries, not of the full capex.

Okay, sir. Right, sir. Thank you for all the elaborate answers, sir. And all the best to the team. Thank you, sir. Thank you.

Thank you.

Thank you. Next question is from the line of Jason from IDBI Capital. Please go ahead.

Yes, sir. Thanks for taking my question again. Sir, just one last question. We just wanted to know, sir, in terms of KPEX, what we are guiding for 26 and 27 on a console level? Great.

Great for Q4, Jason. Same answer. Okay.

Okay. Sure.

Sure, sir. Okay. Okay.

Thank you. As there are no further questions from the participants, I would now hand the conference over to Mr. Michelle for closing comments. Over to you, sir.

Thank you, and today I would like to thank you all for continued confidence and support for Harsha Engineers, and then I wish you all a very good evening. Thank you very much.

Thank you.

Thank you, everyone.

Thank you. On behalf of Harsha Engineers International Limited, that concludes this conference. Thank you for joining us, and you will now disconnect your lines.