Isgec Heavy Engineering Limited (ISGEC) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the ISG EC Heavy Engineering Limited Q4F26 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Mahesh Patil from ICIC Securities. Thank you, and over to you, sir.

Yeah. Good evening, everyone. On behalf of ICICI Securities, I would like to welcome you all to the Q4FR26 earnings conference call of ISGC Heavy Engineering Limited. Before we proceed, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with its business risk that could cause future results, performance, or achievements to differ significantly from what is expressed or implied by its forward-looking statements. From the management, today we have with us Mr. Aditya Puri, Managing Director, Mr. Kishore Chathnani, Joint Managing Director and CFO, and Mr. Sanjay Gulati, Joint Managing Director and Head of Manufacturing Unit. Without further delay, I will hand over the call to the management for brief opening remarks, which will be followed by Q&A. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us today. We appreciate your time, your continued interest in our company, and the trust you place in us as we continue to build for the long term. We value these conversations because they allow us not only to discuss our performance, but also to explain how we are executing our strategy, responding to the market environment, and positioning the business for sustainable growth. FY 2026 performance. Q4 standalone revenue grew 16%, and PBT grew 48% year-on-year. The full-year performance requires additional context, and I would like to highlight a few points before we move to the question-and-answer session. On a standard-dose basis, revenue grew by 4.2% to Rs. 5,229 crores. We acknowledge that this is below our 7-8% guidance given in one of our earlier calls. Q4 recovered strongly. Stand-alone PBT of 455 crores grew 17%. I want to be transparent about its composition. About rupees 80 crores of the PDT is from items related to the Philippines business. These are real PNL items, but they are not operational earnings from our core business. Adjusting for these items, the underlying operational PBT was approximately 375 crores, broadly in line with the prior year on an operational basis. On the margin track, manufacturing EBIT margins for the financial year are 12.46%. Within the 12% to 13% range, we have guided for three consecutive years. The project business's EBIT margin for the financial year is 4.58%. Export revenue during FY26 has increased to Rs. 769 crores, which is about 22% of the total revenue, up from Rs. 532 crores in the previous year. Export revenue more than doubled year-on-year, and we expect this increased level of exports to continue. The dividend for the year is Rs.6 per share, up 20% from last year, reflecting our confidence in the strength of the standalone business. Consolidated financial highlights. There is a change to be noted in the accounting for the Philippines business in our consolidated financials. Earlier, this business was classified as assets held for sale. Given the uncertain international business scenario, it is difficult to estimate when the business can be sold. Accordingly, this business is no longer classified as assets held for sale, and in the consolidated profit in law statement, it's shown as part of continuing operations. Consolidated EBITDA is Rs. 671 crores. About 19% higher than last year's, Rs. 566 crores. Consolidated PAT for FY2026 is Rs. 154 crores, about 25% lower than last year's, Rs. 204 crores. Let me briefly outline the key reason for the reduction in consolidated PBT. The consolidated depreciation of Rs. 278 crores includes catch-up charge on Philippine's assets reclassified from health for sale to continuing operations. The year-on-year increase in depreciation alone was Rs. 104 crores. The ethanol plant in the Philippines has started trial production in 2024. Commercial production for the current sugarcane season commenced on 17th December 2025, using sugarcane as feedstock, and concluded on 20th April 2026. Thereafter, the plant has been operating on purchase molasses as feedstock. The ethanol phase started on the 25th of March and is running smoothly. The commercial operation of the ethanol plant in the Philippines marks an important milestone and that we had committed to delivering, although after significant delays. Let me come back to the consolidated financial highlights. The consolidated net borrowing position has improved substantially during the year. Net borrowings as on 31st March 2026 are Rs. 476 crores compared to Rs. 836 crores last year. I will now talk about the ongoing expansion of capacity at our manufacturing plants. We are investing in capacity additions across most of our manufacturing product lines. Progress remains on schedule with only minor adjustments. In addition, the board, as it is meeting the day before yesterday, approved a further investment of Rs. 25 crores to expand capacity at our Mozaffar Nagar steel casting plant. Capital expenditure during the year is Rs 153 crores. With this capacity build-up underway, let me now turn to our expectation for FY25. FY25 outlook standalone. Looking ahead on a standalone basis, we expect FY2027 revenue to increase 10 to 12%. The opening order book for the year is about 57,000 crores, after excluding two orders worth about 5550 crores that were cancelled during the year. In the first two months of the current quarter, we have booked new orders totaling Rs. 1,400 crores. Order execution is progressing well. Some of the new product production capacity will also come online this year and contribute to this year's revenue. Current geopolitical developments have not affected existing order bookings. However, we are seeing increases in several input costs, including steel, forging, castings, chemicals, and certain imported materials. Gas shortages have raised fuel costs. However, there has been no disruption to manufacturing operations. Export and import logistics have increased, and transit times have also lengthened. As of now, most of the increased costs are expected to be absorbed through normal contingency provisions. Looking ahead, the inquiry pipeline and order booking outfills remain strong in both domestic and export markets. The weaker Indian rupee should support improved realizations on further export orders. We recognize that the Gorda environment may continue to prevent both uncertainties and opportunities. We are taking steps to mitigate the risks and convert the opportunities into tangible benefits. Thank you again for joining us. Let us now begin with the question and answer session.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Tekandhariya from Green Wedge Wealth. Please go ahead.

Yeah. Hi. Thank you for the opportunity. Two questions. The first is, you know, you gave the guidance of, you know, 10 to 12% for the current financial year. So would it be like, you know, the EP, the project division grows at 5% and product division grows at 15% or, you know, you just want to split it up into the division?

So, the major increase is going to come from the manufacturing segment. So, 10%, as you can see, from 50 to 100. 10%, about 500 crores or around that much is going to come from the manufacturing segment. And there will be some growth as well, maybe 3-4% for the project business.

And then my second question is, see, because of this whole supply chain disruption and raw material volatility, like, do you think that this 4.5% margins in the EPC and around 12-13% in the product division, is that at a significant risk, moderate risk, you know, any assessment you would want to give? I know it's too early, but still, you know, based on orders, do we have price variation clause in some orders or not, you know, any such color?

So, we are reasonably confident that 12% to 13% is going to be maintained. Obviously, it is EBIT margins that we are talking about. There is some new capacity which is being added. It will lead to some depreciation. But there is significant increase in prices of steel, castings, forging. And many of the imported items, as Mr. Puri mentioned in his opening remarks, but we always carry some amount. So we are probably hedged by way of back-to-back orders on our suppliers, which we place reasonably soon after we book our orders from our customers. Also, we carry some amount of contingency margins. In the manufacturing business, today we are confident on 12-15%. In the case of the project business, we know the situation is uncertain. We know what's happened up to now, and we really don't know when the war will end and when the situations will go back to what they were pre-war, but we still think that We will actually be improving over that 4.5%. We should be closer to 5.5% for this FY27. And that's based on the older orders close to completion, newer orders being booked at better margins, and keeping enough contingencies for the newer orders that we are booking.

Okay, okay. Perfect, perfect. One question to Mr. Puri is that, you know, on all these new developments which are taking place, you know, this coal gasification and, you know, this polysilicon to wafer, you know, the solar technologies coming in India, like, does Egypt have played in any of these new technologies which India will need over the next three, four, five years?

So ISJEC has a play in some part of the value chain. It certainly has a play, and we are keeping abreast of it, and we are doing some work in some part of that value chain.

Have we won any orders yet, or it's too early to say?

We have got orders for equipment which are used in these processes, or these new technologies.

Okay, fine sir. Thank you so much. I'll come back.

Thank you. The next question is from the line of Kaushik Doshi from ICICI Securities. Please go ahead.

Thank you for the opportunity, sir. Am I audible?

Yes, yes.

Sir, my first question is, regarding the margin of the manufacturing business, sir, in Q3 margins were exceptionally strong, while Q4 saw some moderation. Was this purely project mix-driven, or are there any cost pressures emerging in this business? No, it's a question of which orders actually got dispatched. In the case of manufacturing, as you know, our revenue is booked based on actual dispatches, you know, on the sale of goods method. So, it's a question of which orders got dispatched in which quarter, and we should actually look at not on a quarter-to-quarter basis, but on an annual basis, and we are reasonably certain that 12% to 13% is what we have been doing for the past few years, and we will maintain that. Okay, sir. Got it. And, sir, my next question is regarding the export. Sir, the export revenue increased from 14% to 23%. So, is this a large jump due to the exhibition of the existing export orders, or are they structurally gaining market share overseas?

So, the beginning is out of the existing order and new order. So, we are, I think, increasing our market share. We are increasing our market share.

Let me add to that, both for our manufactured items, we have new markets, particularly for our prices in Southeast Asia, countries like Vietnam, Thailand, Indonesia. We have expanded our markets there, and we are getting good success. In the projects business, as you know, we work largely in developing countries. And we have been booking orders in recent times in Africa as well as Latin America. And from what we can see today, the number of orders that we have bid for and where we think that we have a high chance of success. I mean, our order book today is also about 1,450 crores. Today means 31st of March. Export order book, 1,450 crores. Mr. Putty mentioned that we have booked some orders during April and May. There also there are some amount of export orders. But as far as we can see, firstly, our effort, as you know, we had been mentioning earlier, that after COVID, there was a lull. But now our effort on booking more and more export orders has substantially increased. And we are getting good success. So, I would expect the order book to, export order book to go up in terms of percentage over the course of this year. The revenue, all export revenue of this 1100-1200 rows, I am sure it is going to be a little more than that during the current year. Got it, sir. And sir, if you could highlight which of the fees are contributing to the most revenue? Pardon me, which, I didn't understand your question, which geographies are contributing most to this jump, which geographies?

So, Southeast Asia and, Southeast Asia, Africa, and basically Southeast Asia and Africa.

Okay, sir, got it. Thank you very much.

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

Yeah, thank you so much. I have a few questions. First on the consolidated results, can you provide what is the expected credit loss number? In other expenses, because we have seen other expenses increasing significantly, if you can give that number for consolidated. And as well as other income is also much higher. So what is the nature of that? That was our question. Second is on the segmental results, if we look at... Philippine unit revenue, despite being the peak season, the revenue seems to be very low and the losses are much higher. So if you can give us more insights into the last quarter number and how do we expect in FY27? And can you provide numbers for Hitachi, Josh, and Jiri? What are the revenue and PIGBT numbers as well as the order book for Hitachi and order inflow? Thank you.

Thank you, Manish. I'll try to answer as many as I can remember and then you can remind me about the rest. So, is it Hitachi, Jiri, the PIGBT, the order book first? So, the orders in hand, as in 31st March 226, are 763 tours. So, their execution this year was very good, and I believe that their execution the next year is also going to be very good. In terms of the revenue and margins, the revenue on TBT of Isdra Kutazi Wilson, for the full year, they have a revenue of 672 crores. That's the total income. Total income is 672 crores, and the profit before tax is 103 crores. Was there any other question about ISDP?

And how do we expect for FY27?

We are expected to do slightly better than this. So we are hoping that revenue could be closer to 700 crores. And the process should be in the range of 100 crores plus.

Okay. Okay. Thank you, sir. And on the first question, on the consolidated results, if you can give us expected credit loss number.

The other income has three parts. One part is interest income and net gain on current investments. The second part is certain government grants related to service issues and needs. The third part is certain foreign exchange vacuations related to e-mail press and also to the Singapore subsidiaries. Now, some of these are actually, so, to the product case, the situation is 103 crores, right about 50 crores of that should have been, could have been, I mean, accounting standards require us to qualify where they are. But, correspondingly, there is some 50 crores plus, which is in the other expenses. That is how the notification is required as per this standard.

Sorry, sir, please you have mentioned. Sorry, are you referring to consolidated, sir?

I am referring to consolidated.

Okay, so sorry, the voice was not clear. You mentioned 103 crores was pertaining to what, sir?

Forex situation.

Okay.

Forex situation.

And out of that, 50 crores was pertaining to?

So pertaining to basic investments in Singapore, which is actually classified in other expenses. So there is a corresponding entry. It could have been meted off at the accounting standards, so it allows us to do that.

And, sir, about performance of carrier biofuel in Q4, why the losses are so high in a peak season and how should we expect to improve it? Okay.

So, Dr. Bifuze started production, as Mr. Puri mentioned in his opening remarks, on the 17th of December. So, we were running on Shizuken. So, from the local area around us, and this was the first year when we were in full commercial production. Our capacity utilization was not really at the peak at the time, but that is not the reason at all. The reason is that we were making the ethanol and we were storing the ethanol because We were required to have a government department of energy allocation of biocanol for us to sell. So the allocations that we got are for April to June quarter and July to September quarter. So, while we were making the first dispatches, We started, actually, we were supposed to dispatch from 1st of April, but one of the customers actually picked it up from us from the 25th of March. So, actual dispatches during that quarter were very little. So, therefore, in terms of sales, there wasn't much sales in that quarter or in the financial year. Now, if you look at the profit for the full year. Profit or loss for the full year, as you can see, it's reported as 295 crores. Out of that 295 crores, 170 crores is depreciation alone. And 95 crores is forex variation, which gets netted off with ISJEC, because now we do not have any, Cavity Byfus doesn't have any loans from any outside party. The third is the interest cost. So we are accruing the interest on our investments, which is about 70 crores. And that leaves us with about 26 crores, which was the operational loss for the year. In the 10th, the factory operated only for three and a half months. And for the rest of the year we had all kinds of expenses including salaries, insurance, plant maintenance, etc.

Okay, okay. So, sir, how should we expect it for FY27, sir?

So, the plant is running. The season has ended on the 20th of April. We had obviously procured molasses from other sugar factories. And the plant is running, I think, even today, it is running at 70-75% capacity, and we are expecting the capacity to be running at close to 85-90% for the rest of the year, except for maybe one, one-and-a-half months when the rains are really excessive. These depreciation... Cost, foreign exchange fluctuations, we really don't know for CBPI as a standalone unit, but depreciation, this year was $170, next year we expect it is going to be around $150 crores, so it will show, to that extent, depreciation as an expense. On an operating basis, it is cash policy. It is, there is no operational loss to be funded. We don't expect to be needing to fund anything more there. And operationally, it's going to be, I don't have a number to do, but it's self-sustaining now. And I think that's what we would say.

Okay, sir. Okay. And interest cost of 70 crore is reflected in standard loan, right, sir? Because the loans are now residing in the standard.

I was talking about the standard balance sheet of cavity biofuels.

Oh, okay, okay, okay, okay. No, so going forward, as you said, there are no third-party loans in Cabot Biofuel. So the interest of 70 goals, what we saw in FY26, will not largely repeat in FY27?

It will repeat, because it is now, the funding is from SJ Treveneering.

Oh, okay, okay, okay, okay. Thank you so much, sir, for all that, sir. I will come back.

Thank you. Before we take the next question, we would like to remind participants that you may press char and want to ask a question. The next question is from the line of Shubham from ICICI Securities. Please go ahead.

Thank you for taking my question. And my question is, in the previous quarter, management had indicated that around 300 crores of FHG-related retention money was expected to be released in Q4. So could you please help us understand how much of this has been realized so far,

and what is the outstanding amount, as of today?

So more than 200 crores has actually been realized. And you can actually look at that in our cash position as well. You will note that at the end of the year, though we have, we certainly have some borrowings. We don't have any working capital borrowings, as you know. We have borrowings which are on length to capital biofuels, but as of 31st of March, 2026. That is 241 crores of cash, cash and cash equivalents in the banks and current investments, which we have. So, and this is after funding about 150 crores of capital expenditures during the year from our internal approvals. What remains out of those FGB projects is, I think, 160 crores, 165 crores, which is still remaining. We are expecting to collect some, maybe one-third of that in June, and the rest by August.

Thank you. The next question is from the line of Ahmed from Motila Losswald. Please go ahead.

Yeah, hi. Am I audible? Yes. Yeah, my question is regarding to subsidiaries, investment PTE limited and bioenergy holding. So, there are huge losses in the first one and second one also there is a capital deficiency.

So, could you just elaborate on that? Thank you.

Yes, you're right. So, what they call capital deficiency is a negative net worth, I think. That's what their auditor has written, whichever auditor has picked up in the report. Now, if this company had external borrowings or money owed externally, it would have difficulty. But now, this is all part of the group. Whatever boardings it has are given by us, you can think of it as shareholders' loans. So, to that extent, there is no difficulty for that company or for the group as a whole.

Thank you.

Thank you. The next question is from the line of Tikantharya from GreenEdgeWealth. Please go ahead.

Yeah, I thank again for the opportunity. On this, you know, if you could just elaborate, like, which sectors, you know, are seeing good demand or, you know, good traction, because we operate in around, you know, 15, 16 different sectors. If you can just give us, like, you know, where does the outlook look really promising, and, you know, and especially, like, you know, how do you see India ethanol also, because, you know, it had a very bad year last year, and, you know, how do you see this year going, given the crude oil price rise, and, you know.

So, we have orders from the sugar industry. We have orders from power, oil and gas, and automobiles. All these sectors are doing well. All these sectors are doing well. Fertilizers, skiing. We cater to a very diverse group of industries, and at this point of time, except for maybe something like paper, which is not doing too well, and also new ethanol plants, not too many of them are coming up. So, besides these two sectors, we have from a very wide range of industries, and we have a good, healthy order book across industries. Oh, okay.

One question is that say around one and a half to two years back, we started pivoting from long gestation projects to shorter gestation. This is our project division. So now, whatever goals you would have started that it will improve our working capital, it will help us churn the order book much faster, you feel that we have achieved that. And we will continue this way of working in the project division. And that will lead to that 5.5% kind of margin, which we are thinking that, you know, what FY27 can probably give.

Yeah, so as Mr. Chitani had just said a few minutes earlier, that the margin is going to be slightly higher in the EPC business, and one of the reasons contributing to this is that the old projects which had gone on for years are coming to an end, and also the fact that the new projects are of shorter duration, and the uncertainties involved over there and the risks involved over there because of the time factor are reduced considerably. Okay, okay.

So, what we can see in FY27 will be more like the new way of doing this project business, right? Because we'll have lesser working capital and probably better margins, right? Right, right. Okay, okay. And lastly, on this export part, you said that we are doing a lot more exports to Southeast Asia and Africa. But in these countries, are we taking enough care of the currency risks which may happen? Because a lot of companies in the past have faced either receivable issue or currency risks when dealing with at least some of the African countries.

So, we normally work with confirmed letters of credit. And these are denominated in dollars or euros, and we take forward covers against them. So now for exports, I know where we've taken forward covers, it may work against us, but it's a hedge and a risk that we don't want to leave exposed. We want to cover that. So we are covering up on exchange risk, and we are working to confirm better with credit.

Also, in most export orders, The way we agree with the customer on the billing breakup and the payment schedule, we are normally running a cash surplus on the project. We try to run a cash surplus on the project. So, that's a basic precaution to be taken. We appreciate what you are saying that there is a risk in working in these geographies. But we have enough experience, as you know, now over many, many years. So, we do plan for both contingencies. I don't think we have any case. Of any significant amount of money ever stuck with any customer in Africa. I don't know, I don't recall.

Got it, got it.

Okay, okay. Thank you so much for this detailed answer and really appreciate that, you know, you're doing the phone calls regularly and giving all those detailed breakups. So, thank you and I wish you will continue doing that. Thank you so much.

Thank you. Participants who wish to ask questions may press Jaran1 at this time. The next question is from the line of Mahindra Jain. From Bay to Capital, please go ahead.

Hi, thanks for the opportunity, sir. Sir, as our deal regarding this Philippines plant, as the deal was already done, So, can you share at what price it was done? And in the case now, as you have mentioned that this is now a continued asset, so are we not looking in a shorter term like a one or two year deal to be happen or are we not right now interested to do that? Can you share a little light on that, sir?

So, the deal that was done was actually we reported it in detail in our disclosures to the Stock Exchange, also in various times. I don't really want to repeat those numbers at this point of time, but that did not go through because that customer was not able to arrange their funds. And they had some problems of their own, which unfortunately impacted us because they could not pay. Now, we are running the plant. It is always understood that a running plant, which is demonstrating performance, is easier to sell and easier for anybody else to buy. So we are, even now, We are looking for buyers. We have some conversations going, but we don't have a specific party at this point of time with whom we are deeply engaged. We are engaged with certain parties, but there is no specific letter of intent or something which at this point of time, and the accounting standards require us to review the situation every time. And also because the international situation is a bit fluid, so for us to say that we are going to be doing it in the next few months, that situation is not there. For us to say it and account accordingly, while we do expect that it can happen during the next one or two years that you mentioned. But the accounting requires us to run it as a continuing operation.

Okay. Sir, as you said, from April onwards, our, I mean, ethanol stock is, I mean, we are stocking ethanol, and we will be able to sell post-April as per government policies. So, are you looking, sir, for at least 10 to 12% return on our investment, or what EBITDA we will make out of their phone 2027-28? Any idea on that, sir?

I did mention that we are running it on a cash profit at the moment. So, we have already sold between April and May 4.35 million liters of ethanol. So, I said that we started manufacturing in December, and our allocations from the government, because in Philippines, the government allocates the quantity for each factory, how much they can sell. And that's based on the assessment of how much we are producing. And then once we have that allocation, then we go out and engage with the oil companies in the Philippines. So there are a number of large oil companies in the Philippines. None of them have any refining capacities. They have basically blending capacities. They import all their petrol as well as diesel. So we have got contracts now with six of them, I think. And those contracts, the lifting is happening very nicely. The sale is happening very nicely. The payment collection is happening perfectly. So the cash flow is running very well. The profitability, as you said, EBITDA, etc. So that is going to, I did mention that capacity ramping up has also happened to about 65-70% and it's going to ramp up further. But I don't have a number to give you on the EBITDA.

Okay, great. Thank you, sir. Thank you very much.

Thank you. Participants who wish to ask questions may press star in one now.

In order to ask a question, please press start in one now.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you very much, everyone, for attending the con call and wishing you all the best. We will again talk to you soon. Thank you.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.