Elecon Engineering Company Limited (ELECON.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Elecon Engineering Co. Limited Q3 FY '26 Earnings Conference Call, hosted by Elara Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Harshit Kapadia, from Elara Securities India Private Limited for his opening remarks. Thank you, and over to you.

Good evening, everyone. We welcome you all to the Q3 FY '26 Earnings Conference Call for Elecon Engineering Company Limited. Today, we have with us the management representing Mr. Dalwadi, Head of Gear Division; Mr. Kaushik Patel; Head of Material Handling Equipment Division; and Mr. Narasimhan Raghunathan, Chief Financial Officer, along with his team to give us the earnings outlook. Over to you sir, to give us outlook for the quarter 3 call.

Thank you, Harshit. Good evening, everyone, and a warm welcome to Elecon Engineering's Q3 and 9 Months FY '26 Earnings Conference Call. Joining me today are Mr. Deepak Dalwadi, Head Gear Division; Mr. Kaushik Patel, Head MHE division. The earnings press release and the investor presentation have been filed with the stock exchanges and are also available on our website. I trust you have had the opportunity to review them. I will begin with a brief overview of our business performance, followed by a detailed discussion on the financial results. Elecon Engineering, today, stands among Asia's leading manufacturers of industrial gear solutions and material handling equipment built on decades of engineering excellence, deep domain expertise and trusted customer relationships. Our Material Handling Equipment division is emerging as a powerful growth engine for the company. Backed by over 70 years of experience, the division has unique capabilities to design and manufacture large, complex and high-capacity equipments such as wagen tipplers, stacker reclaimers, crushers and specialized conveyor systems. These capabilities are presence the very few players in India, creating a strong competitive moat for Elecon. Serving sectors such as power, steel, cement, ports, mining and the fertilizers, the MHE business continues to deliver customized high-value solutions that enhance customer efficiency and reliability. In our Gear division, Elecon maintains the leadership position in India's organized industrial gear market. We offer one of the widest and most comprehensive gear portfolios ranging from heavy-duty gearboxes to precision engineered components, catering to industries such as steel cement, sugar, power and defense. Continuous investments in research and development and infrastructure ensure that innovation, customization and life cycle support remains central to our value proposition. With the presence across nearly 95 countries, a strong global distribution network and long-standing relationships with the customers worldwide, Elecon is well positioned to benefit from the ongoing capital expenditure cycle in India and international markets. With this, I now hand over the call to our Gear division head, Mr. Deepak Dalwadi who will walk you through the performance of the Gear division.

Yes. Thank you, Mr. Narasimhan. The Gear division, which contributed approximately 78% of consolidated revenue in Q3 delivered a largely stable performance with revenue growth of 1.3% year-on-year. Both domestic and overseas businesses demonstrated resilience during the quarter. The new sales growth was largely due to timing-related factors, including delays in order inflows during the first half of the year, followed by execution and dispensed department arising from customer-driven dispatch schedules. Importantly, the underlying demand environment remains healthy. We are witnessing strong inquiry levels and improving order inflows across domestic and international markets. Market sentiment is gradually improving, supported by ongoing investments in power, steel, cement and a visible pickup in sugar segment. With this improving visibility, the Gear division is well partitioned to return to a stronger growth trajectory. To conclude the division performance, I now hand over the call to Mr. Kaushik Patel Head of MHE Division.

Thank you, Deepak-ji. The MHE division continued its strong growth momentum, delivering 16% year-on-year given the growth during the quarter. This performance was driven by robust demand from power, cement, mining and port sector, along with steady execution. We remain confident that the MHE business will continue to perform well in Q4 FY '26 and beyond supported by healthy order book, a strong project pipeline and deep customer engagement. With this, I now hand over the call back to Mr. Narasimhan to provide further overview on Elecon's financial performance.

Thank you. I will now be walking you through the financial performance for Q3 and 9 months FY '26. Financial performance, Q3 FY '26. We are pleased to report a resilient and encouraging performance in Q3 FY '26 despite certain short-term challenges. For the quarter ended December 2025, our consolidated revenue from operations stood at INR 552 crores compared to INR 529 crores in Q3 FY '25, reflecting a year-on-year growth of 4.3%. The Gear business reported a largely flat performance during the quarter primarily impacted by timing-related delays in order receipt and execution as well as customer-driven dispatch deferments. However, the underlying demand environment remains healthy. We witnessed robust order inflows across both domestic and international markets, supported by sustained inquiry levels, which gives us confidence in future order inflows. The domestic market contributed 76% of the consolidated revenue, while overseas markets accounted for the remaining 24%. The consolidated order intake during Q3 FY '26 stood at INR 701 crores, representing a 7% year-on-year growth. The order inflow combined with a healthy inquiry pipeline keeps us optimistic about growth prospects going forward. Consolidated EBITDA for the quarter was INR 109 crores compared to INR 143 crores in Q3 FY '25, translating into an EBITDA margin of 19.8%. Margins were temporarily impacted due to flat revenue performance, higher employee cost and a change in product mix. We expect margins to normalize as volumes pick up. Operating leverage plays out and the order book converts more rapidly into revenue. Profit after tax for the quarter stood at INR 72 crores, representing a PAT margin of 13%. Performance for 9 months ended December 2025. For the 9 months ended December 2025, after adjusting for the onetime arbitration of income of INR 25 crores recognized in Q1 FY '26 in the MHE division. Adjusted consolidated revenue stood at INR 1,585 crores compared to INR 1,429 crores in 9 months FY '25. Adjusted EBITDA for the period was INR 340 crores with an EBITDA margin of 21.3%. In addition to the INR 25 crores recognized in revenue in Q1 FY '26 an additional INR 10 crores was recorded under other income as part of arbitration settlement. Furthermore, INR 80 crores was recognized as exceptional income below PVT representing unrealized mark-to-market gains from investment reclassification. As a result, Profit after tax for 9 months FY '26, including these onetime items stood at INR 335 crores. Segment-based performance Gear division. The Gear division contributed 78% of total revenue in Q3 FY '26. Revenue for the quarter stood at INR 429 crores compared to INR 423 crores in Q3 FY '25, reflecting a flat year-on-year performance due to the opposite -- of course mentioned reasons. We expect a faster execution of orders to convert into revenue in Q4, which should support improved performance going forward. EBITDA for the Gear division stood at INR 78 crores in Q3 FY '26 compared to INR 118 crores in Q3 FY '25. The EBIT margin declined to 18.2% compared to 27.8% in the same quarter last year, primarily due to higher employee cost and product mix. As revenues scale up, we are confident that margins will require with operating leverage coming into play. Order intake for the quarter was INR 464 crores, and the open order book stood at INR 811 crores as of 31st December 2025, providing strong revenue visibility for the coming quarters. Material Handling Equipment division. The MHE division continued its strong growth momentum during Q3 FY '26. Quarterly revenue stood at INR 123 crores compared to INR 105 crores in Q3 FY '25, registering a 16% year-on-year growth. Growth was driven by strong demand in the product supply and aftermarket segments, particularly from the power, cement, fertilizer and port sectors. EBIT for the division stood at INR 25 crores compared to INR 33 crores in Q3 FY '25. EBIT margins during the quarter were impacted by product base. Order intake during the quarter was INR 227 crores compared to INR 185 crores Q3 FY '25. The open order book stood at INR 561 crores as of 31st December 2025, reflecting strong growth prospects ahead. While there has been short-term execution delays in the Gear business, the fundamentals of both the divisions remain strong. The temporary mismatch between order intake and execution has impacted near-term revenue recognition. However, our solid order book and execution pipeline provides clear visibility for growth in the coming quarters. On the balance sheet front, we continue to maintain a robust financial position with a strong net cash balance of approximately INR 600 crores, providing significant flexibility to growth opportunities, execute our CapEx plans and navigate macroeconomic uncertainties. Our CapEx outlay for FY '26 to 2028 is estimated at INR 400 crores aligned with our long-term strategic priorities. Though our financial 9 months performance remains strong and demonstrate the underlying strength of the business. Given the near-term softness, we believe it is prudent to rebase our outlook for FY '26. On a consolidated basis, FY '26 revenue maybe lower by up to approximately 5% and adjusted EBITDA margins may be lower by up to approximately 2% compared to our earlier guidance. That said, we remain confident about an improvement beyond the near term, supported by a healthy order book, a robust inquiry pipeline and improving execution momentum. With that, I would now like to open the floor for questions. Thank you.

[Operator Instructions] We take the first question from the line of [ Sanjay Ladha from Bastian Research ].

So my first question would be, sir, we have seen order intake was lowest in the last 8 quarters. How are you seeing this and what your view going forward?

Hello. Can you hear me?

Yes.

See, now in near future is coming quarters, there is a good expecting business in the power sector. There is a substantial capacity increase going on in this segment. So we are hoping good orders from the power sector, then even steel sectors are also now growing and overall trend for the steel sector is also showing in the growth. So we are also hoping good orders from the steel segment. And as the sugarcane grow very well in the last quarter. So we are also hoping the good business in the sugar sector -- sugar industry also.

Sir, can you throw some light on the inquiries which you are talking about. So what I want to understand is when you say we have good inquiries and we have a good bid pipeline. So can you throw some light on how much is the bid pipeline we have and how much is going to be converted into the order book so that we get to know that how much percentage it is going to accrue on you because from the last 3, 4 quarters, we are mentioning that, but the order intake and the order flow has been quite a lower side on that trend. I understand the business dynamics, but just wanted to have your views on that.

See, whatever orders we -- actually, now the power investment has started and they are releasing the orders. So we also received very good orders from the, say, L&T, MHI and QLR and all. So we are getting the orders from the power industry and -- but at the later stage, they want their requirements. So that's why it is to be executed in the next financial year. And also, there are many inquiries floating from the power industries and they are in pipeline, and we are hoping that all inquiries to be converted into the orders so we have a very full confidence for achieving the good inquiries and all -- whatever in the pipeline, it will be converted into orders, which will be useful in the next coming quarters.

Sir, my another question, we are seeing competitively better demand for the domestic market for quite some time. While -- when we communicate to the -- in our investor presentation, we said that export revenue should be over 50% going forward in FY '30. So how do you see this divergence because how do you see export market will pick up? What is the growth strategy for export? Any inorganic acquisition we are evaluating on that space?

Yes. At the moment, we are not looking at any inorganic acquisitions. At the same time, how we look at the export business as such, we are explaining many investors conference call earlier that we are putting a lot of efforts, a lot of activities has been ongoing for the past 3, 4 years. We also backed lined up OEMs, and we have made the revenue targets of what we were looking for. And this on the OEMs, you are aware that they are going to give us a sustained business in forthcoming years. So overall, the long-term export growth or prospects, what we are looking at, and they're considering how we are -- at present, the market share and there is a huge potential. So all those aspects and the internal water the efforts which we are doing, all are in place. At the same time, we are aware that certain geopolitical situations and certain regions, economic growth and other things. These are all the external factors, which is presently impacting us. Having said that, for the efforts, all the activities, which we have been doing for 4 to 5 years now and all the orders which we executed and how the customers are looking at presently based on the experiences which they had with us for 3, 4 years. We are confident that in coming years, we'll be able to reach our milestone of 50% revenue coming from the exports.

Sir, can you also throw some growth guidance. I'm not talking about a year perspective from that point of view. I'm talking what the longer 3-year time frame, what the growth we are targeting. So last time we say that it's 20% growth guidance, we have lowered down that okay, that's the business part of that. But if I see 3-year time frame, what are the growth prospects we are looking for?

It's around 20% to 25% what we are looking at as the guidance overseas.

[Operator Instructions] We take the next question from the line of CA Garvit Goyal from [ Carin ] Alpha.

Sir, in continuation to the earlier participant only. Over the last 1.5 years or 2 years, we are continuously speaking or putting some emphasis on the export side. While we also received a few orders that were announced earlier, these have not been yet translated into materials in the larger volumes. So as a result, if we benchmark export against FY '23, the business has delivered only a marginal annual growth of around 4% to 5% despite a consistent effort and focus that we are putting into. But at the same time, if we look at the domestic market, it appears to be in a strong CapEx cycle, particularly expose sectors that we talk to. We have not heard from management a clear articulation around the incremental market share gains in India and maybe targeting at 25%, 30% kind of growth in equity and the domestic market, while exports are muted. We are -- in Indian market -- even in the Indian market, we are currently going at 15% to 20% kind of number. So I agree that the margins can be seen you as a management try to protect. But anyways, if we look at last 2 quarters, margins have also started falling. So I just wanted to understand from you, like why we are not aggressive on the domestic side? And number two, despite the cautious stake that we are taking on the domestic market, why are we facing a fall in the margins? Is it because even within the existing market share that we are speaking about continuously around 40%, we have started facing the competitive prices?

Yes. I'll address it. So while we continue to focus on our export market. We have been very strong in the domestic market. As you know, that nearly 40% of the organized market share is what we hold. That still continues, we continue to be the leadership -- leading the market in the Indian scenario. And we are taking all the efforts to -- while we may not go for an aggressive market increase from now on, which comes with an additional competitive scenario and compromising on the margins, et cetera. At the same time, we continuously look at how we could enhance the product, upgrade our products, reduce our cost, all those aspects and how to retain the current market, like you see that whatever the incremental business segments like power sector and things like that, which is happening, we are able to continuously improve our revenue on account of debt. So therefore, our domestic approach is -- continues to remain robust. We bought a separate team who are continuously bagging those orders and approaching the market. So all those efforts are always there. And in terms of margins, we see more that it is a scenario which is playing out due to the lower turnover in the first 3 quarters. Once we see in the fourth quarter, while, of course, turnover from a point of view is what we have doing the guidance, there has been a little bit of a lower outlook in the current year. In terms of margins, overall, margins is how we see, it gets normalized when we approach the Q4. So we remain on the same -- more or less same decision, of course, considering the market in the current year. Our marketing team generally uses its flexibility to increase and decrease the price at which we sell the products. So at the same time, overall, our approach to its margins remains the same in the domestic market.

So now you are saying going ahead also, we will be focusing on maintaining the market share instead of focusing on increasing the market share in domestic markets. Is that understanding correct?

Yes, your understanding is correct. We would recently tried to increase the market share, but if it comes it in a very aggressive competitive scenario, then we would like to look at maintaining the margins.

But in that case, how we will be able to close -- it's just a follow-up. In this particular case, like I'm not understanding, yes, at the same time, we are seeing about 20% to 25% growth, right? And we are aware, like geopolitical tensions are there to export is become tough right now for us. So if we are not looking to grow in Indian market, maybe at more than 25%, then how we will be able to achieve that guided number? That I'm not able to understand?

Yes. See, the growth what -- the export growth, what we had indicated to be around 20% to 25% is how we see it. At the same time, we will have to factor in the geopolitical situations which are beyond our control. At the same time, our efforts definitely would be there to reach our milestones subject to the geopolitical concessions. At the same time, our approach to the export market in terms of adding new clients, identifying growth opportunities in different markets, approaching different markets with the different approaches connecting with the OEMs, consultants and distributors in different regions. all those efforts and expanding our network of branches and wherever required, if there is assembly centers sort of thing, we'll have to establish, we are keenly looking at. So therefore, all the efforts are on to improve that -- to reach that milestone of export projections.

We take the next question from the line of Sunil [indiscernible] Kothari from Unique PMS.

My question is to copy that. Basically, looking at the power sector opportunity, which is seems to be materializing thermal power mainly. So just wanted to understand your thought for next 2, 3 years, how you see MHE divisions opportunity, how prepared we are? Because I think some year, 4 some years, we were not investing much in materials. So in terms of team, technical capability or investment in machines, a little bit been thought process on MHE's preparedness to capture the growth and possibility your growth will be very helpful.

Okay. First of all, I will give you the update on the market. Yes, presently, as you mentioned, there is a good opportunity for us as MHE to grow and to capture the business in the power sector because there are many projects that have already been announced by the various end users like NTPC and other state government body. So I think a few orders have been finalized. And out of it, we got the good business in current year. So in a couple of years, yes, there is a good visibility for us to grow further. And apart from the power, of course, other sector is also helping us to grow because most of the end user has already announced their CapEx investment and, of course, some capital investment also that to upgrade their existing equipment. So we are hoping good growth in next 2, 3 years.

And regarding our preciseness, how much...

The capability, we have been in this business for more than 75 years. We have our own manufacturing setup over here. We have a design -- dedicated design team for our equipment. In fact, we have upgraded our equipment considering the present market requirement and customer mix. And as far as the manufacturing is concerned, if you see most of the products require the fabrication activity. Although we have an internal setup for the fabrication -- but for fabrication, we have been now outsourcing to get the things done. Only to get it machining, we have an internal process. And apart from the upgrading our existing machines, we have a CapEx plan near to INR 35 crores to INR 40 crores. And out of the few machines, since we are expecting to get it in next quarter, next quarter means Q1 of next financial year. So we are also investing in our machinery as well as the expanding our capacity to meet the near future opportunity or get the opportunity to that.

Yes. My second question is, sir, on the competition. I mean, compared to the previous cycle for 2007, how do you see the competition competitor pricing? And what any ability we have added in terms of in product? Or are we again planning or thinking about entering some maybe EPC or something. What's your thought process for future growth that we might happen.

Okay. Let me make it clear, we have adopted the strategy that we should focus on equipment supply and providing the after sale service and that will continue over the next 2 years. We don't have a thought to enter into EPC business. But looking to the present market needs, I think for us, we have ample opportunity to put our equipment in the new projects, which is being announced by the end user. Reason is only that many end user has changed their strategy for closing the tender. And those strategies are favorable to MHE, in fact, favorable to Elecon to supply the equipment in the market or for particular projects. As far as the competitor is concerned, you must be aware about the market scenario that few player that [indiscernible] Engineering than the [ PRM ], they are technically become bankrupt. PRM has already announced to shut down their material lending operation. So only a few competitors are there like [indiscernible]. But again, if you see the business strategy of [indiscernible], they are more focusing on the EPC projects. Of course, we have a competition with them, but not to the extent at every sector and Elecon being the first equipment manufacturer for material and drilling equipment, most of the PSUs preferences with Elecon.

[Operator Instructions] We take the next question from the line of [ Gaurav Nigam from Tunda ] Investment.

Sir, I have one question on the Gear division. What was the mix of engineered gears in this quarter's revenue and you -- on the gear specifically, you mentioned about the revenue difference which has [indiscernible]. Would you to quantify how much was this revenue deferral that we are talking about that?

Yes, that's -- just a minute.

So in terms of revenue deferral, it is around INR 30 crores to INR 40 crores, where some of the dispatches what is -- where we try to squeeze before December, that is getting extended to January or February. So the revenue mix in the AP and CP. So the CP is 52% this quarter, and the remaining is 48% if we -- for this quarter.

Understood, sir. So that was question one. Just a quick second question on the export side. I mean we had indicated about OEM count that we had acquired had tied up. Can you update on that business? What is the status and how much business did we do with them in this quarter? Or in 9 months, whatever you -- competitor?

Yes. It is around 18 OEMs, where we are tied up with. Having tied up with the 18 OEMs, the revenue what we got during this 9 months is around INR 31 crores and what we look forward in future, is that a repetitive business, which could come in the future.

We take the next question from the line of Raj Shah from Enam AMC.

Sir, my first question is regarding the gross margins. So if you see the gross margin of 43% that we reported in this quarter is lowest in the last 5 years. I know you cited some reasons, customer deferments and product mix. Can you throw some light on exactly where which customers will do it international or domestic. And the product mix changes, as you mentioned, engineered products in U.S. business of 52%. I'm trying to understand why the December fall in gross margins according this quarter?

Yes. The gross margin -- see, the product mix is around 52% from catalog products and 48% from engineered products. The gross margin largely while in certain things like, for example, exports during this quarter, we are a little bit low, where the margins are better off. Then the product mix sometimes keeps fluctuating between the catalog products and engineered products. So that's also one of the other, we would say that it's more of a timing thing. And specifically, we are also a few orders, specific orders, which we are executing presently. This is for sort of indigenously developed the product for the Indian Navy which is -- though it is of a smaller order value, since it is being done for the first time by us, it has got higher sort of manufacturing costs, which is more towards learning and understanding and designing and things like that. So that's once again from a onetime point of view. At the same time, overall, there is no significant gross margin in long term, it is impacting us. Only thing is that probably 0.5 or 1 percentage as what we had explained on seeing the competitive scenario, our marketing team how we are viewed -- how our approach to it that we look at the pricing of the products and accordingly factor those things. But otherwise, gross margin per se in the Gear division as well as, of course, our MHE division is strong. the Gear division, the overall gross margin levels remains the same, except for during this year, it has been on the lowest side.

Okay. So just to follow up to that, you said 1% intended towards competitive scenario. Now the amount that you told regarding the AM maybe onwards, if you can intrigue some percentage of that? And whether this will be beneficial for us in the future orders of India?

Yes. It is around 0.5%. Definitely, that is a thought process that by bagging those orders, which is of a significant for us. In the first time when we execute, we are testing. But once we establish our credentials then there is a potential that such orders could come in the future. And whatever the learning costs which we incur in the first year, obviously, we will not be incurring it for a similar product in future years. And we are eager to back those orders and while in the initial years, it could be a little bit on lower sale on the margins. Definitely, there is a huge prospects for such orders.

Sir, a follow-up question, there is a second question. So any update on the INR 200 crores aircraft carrier order that was expected in Q4 and the next-generation miss order in defense?

Yes. So one is that it is getting bid a longer time. So probably Mr. Deepak Dalwadi, you can explain.

That new generation [indiscernible]. That is we are expecting the GSL and GRSE are expecting the orders anytime, and we are expecting RFP by the Q3 of next financial year. Yes. And regarding this indigenous aircraft carrier, the [ Talon ] project is expected to be given to the shipyards in coming to the future. And for that, we can get the RFP in the Q1 of financial year '27.

Okay, sir. So not a question, but if you can just give more detail and guidance regarding the segment guidelines. Last quarter, it was INR 660 crores in MHE [indiscernible].

Yes, It's broadly around INR 700 crores from MHE and the balance is towards the Gears Division.

Thank you. We take the next question from the line of Niraj Mansingka from White Pine Investment Management Private Limited.

Sir, 2 questions. One is on the margin front, I think you have discussed that. But if you remove the Indian Navy margins, how much would the margins for the Gears division come back to?

Sorry, can you repeat again?

If you remove the exceptional lower margins in the Indian Navy, how much would the margins come back to on the Gears side?

You're looking at gross margin or net margin?

EBIT margin.

EBIT margin if you remove that.

If you lower margin at the Indian Navy, how much would the adjusted margin for the Gears division will be?

Yes. So specifically, probably we will come back to you and clarify to you specifically.

But sir, it would be useful if you discuss here because how will the public know because public forum or you can just tell us some broad range because the margins fall has been quite large in the last 5 quarters in the company. So that's the reason I was asking you.

It is around 2% to 3%.

Okay. The other question is, in the last few quarters, orders for the order intake has been good in the Gears division right? But the revenue reported for the Gears has not increased. So our cumulative order book from March is increased from INR 583 crores to INR 811 crores. But our run rate of Gear revenue has slowed down. What might be the reason? And can we also correlate that the margin will be lower in the existing orders because there is, as you said, employee costs and other cost increase or those have been taken care of?

See, for the question to your first -- answer to your first question, the whatever orders we have booked in Q3, they are major for the power industries and their requirements are at the later stage. So all these orders will be executed in the next -- I mean, next financial year. So that's why the order books are showing high but the order execution, they have been deferred by the customers in the next financial year.

I got it. Any time line you have a thought on when you will start those revenues because the run rates have gone quite low.

From Q1 itself.

Okay. And sir, last question on the U.S. tariffs. On the export, how are you managing it? Like would you be impacted if the tariff status quo maintains?

You're asking of the tariff and impact to us?

Yes, sir.

Yes. Broadly, you know that as the economy -- U.S. economy per se is not growing well. At the same time, we are not -- while we are looking at more growth opportunities, the present revenue is not that much impacted. We are able to manage that due to the tariff implications.

Okay. Sir, and the question you -- the question was not answered. Just 1 second. Sir, the question was that the orders that you have in hand, do they have higher margins or do they have lower margins? The orders of INR 811 crores on the Gears side.

We will work on that and clarify a little later.

[Operator Instructions] We take the next question from the line of Saket Kapoor from Kapoor & Company.

I hope I'm audible.

Yes.

Sir, firstly, the small point is about our existing order book. The closing order book is at INR 1,372 crores. So if you could just give us some color what is the execution cycle, I think so you mentioned about some power companies order, which is there in the order book, but they will get executed for Q1. And then, sir, you have also spoken about some product mix and absorption of cost because of the increased employee costs and others. So if you could just give us some color, the earlier participant has asked, how is the margin profile likely to be on the existing order book? And lastly, sir, on the utilization level since we have already done CapEx, and we are also advertising further addition, what is our current capacity utilization levels for both the divisions?

See, for the question to your first -- answer to your first question, the -- whatever orders we have booked in Q3, they are major for the power industries and their requirements are at the later stage. So all these orders will be executed in the next -- I mean, next financial year. So that's why the order books are showing high, but the order executions, they have been deferred by the customers in the next financial year.

We take the next question from the line of Rohan from Envision Capital.

Sir, my question was broadly on the impact of increasing commodity metal prices. So how does that impact our existing order book in terms of margins going forward?

See as such, because of the demand situation in the existing market, the price range are more or less stagnant. So there is no such increment in the commodity markets. And because of that, our raw material prices are almost stagnant. So there is not much impact because of the raw material prices for getting the orders from the market.

Sure, sir. But for our existing order book, some of the metal we purchased right in the future and at a higher price. So will we be able to pass this one to our customers?

I don't think in the near future also, there will be a price increase in the market for the metals and all the major commodity items. We don't see any increase. Because normally, we look forward for the 6 months onwards for the raw material prices for the booking the orders as well as the study of the market. And that we find that there are no -- it doesn't see any increase or I mean, major change in the raw material prices of the major category items of these commodity materials.

No, no, absolutely, sir. So I am talking about the increase in commodity price that has already happened. Metal prices that have gone up in the last 1, 2 months. I'm talking about that, sir?

Yes. If you see...

We are also managing and having a good relationship with our suppliers. So we are managing the prices.

We take the next question from the line of [ Aman Sony ] from Invest Analytics Advisory.

Sir, just a clarification on the guidance side. You mentioned most of the order book in the gear segment will be definitely attributed most here. But at the same time, we are targeting INR 1,800 CR in Gears for this year. To keep that number, we need to do around INR 575 CR in last quarter, right? So out of the adjusting order book of INR 800 CR we have to execute INR 5 CR that means we have to execute a significant portion in Q4 itself, isn't it?

Yes. So we have lined up because now we are having good orders on hand. So we have lined up all our manufacturing activities, and we are confident that we will achieve all the numbers what we have guided.

No, no, we are making, while you are saying out of the existing Gears order book, a significant portion will be executed in next year, right? Then how we will be managing like INR 57 CR to INR 5 CR [indiscernible] in Q4?

What I talked about, that was for the engineering product. But for the catalog products, we are having a late manufacturing cycle of, say, 1 month or 30 days or 60 days. So for that, we are getting the orders and we will execute orders. And there is a very good orders in pipeline. So we will definitely execute these orders in the shorter lead time.

So does that mean in Q4 also we will be particularly investing more of catalog products and that's why margins can be on a lower side because product mix is not getting things well?

No, no. It is not like this. The CP orders, which we are getting, we are executing in the same quarter. The EP product orders we get in September month in Q2, it will be delivered somehow in Q4 and some orders we received in Q3 for the EP product, it will be delivered in Q4 only. So the mix of the CP and TP would be similar in Q4. But the AP products, which we got in the December month only, that would be spillover in Q1 next year.

I would request you to join back the queue for follow-up question.

Just a follow-up only on this question on the margin side. In last 2 quarters, we have been speaking again and again about like this product mix is getting impacted. So I just wanted to understand like when this picture will get clear, like if that is going to be the case, like if we are facing any delay in execution of our engineering products, then our margin profile is going to be suffered, right?

Yes. This is the one case. The other case is that if you see the product and the service. So that also includes in the margins. So this quarter, there is the one case, the service portion from the revenue that also impacted the margin. But we have a good order in the service [indiscernible] is also. So that will be executed in Q4. So that is not the case in Q3, the margins were lower and the Q4, the EP product, CP products as a service, that will be a mix of all business. So margin, it will not like it happened in Q3.

We take the next question from the line of [ Senthil Kumar from Joint Ray ] Capital Services Limited. Since there is no response, we will move on to the next question, which is from the line of [ Sani Vishay ] from Axis Securities.

So sir, this is kind of a follow-up on the earlier question from the early participants. So at the end of Q2, also we had a very strong order book, and we were very confident about achieving good revenues in Q3 and Q4 but at this trend, there are some external factors which are beyond our control, and we could not achieve in the Q3. Now again, we have a good order book, and we are expecting confidence and a very good performance in the Q4. So what is the change that gives us the confidence that this time, it will happen? Or are there any similar risks that we will not be able to achieve this guidance?

Yes. See, what happened is like what Mr. Ashish also said for catalog products, what we -- when we project we factor in that from the time we inquiry to the execution, it takes about 1 month or so. So based on that, we -- considering the market scenario, we get the understanding of how the market is performing and accordingly factor that. And more sense for the products, there is more clarity, we are able to provide better clarity on that aspect. So therefore, depending upon how the -- for that quarter, it is fluctuating, we factor both the order on hand, how it will be executed plus the order intake, what we will be getting for catalog products which will be delivered in the quarter. So this sort of mix and match fluctuates and that is what will be factoring in when it come for revenue.

Okay. So simply to the confidence level of achieving this guidance is higher compared to the earlier quarter. Is that correct?

Yes. The guidance quarter we have spelled out with the revision, you would know what we have spelt out that is achievable definitely.

We take the next question from the line of Ashwani Sharma from Emkay Global Financial Services Limited.

My questions have been answered.

We take the next question from the line of [ Chuhi from Ariant ] Capital Markets Limited. Since there is no response, we will move on to the next question, which is from the line of Manish Gupta from Equinox Investment Advisors.

So with U.S. trade deals being delayed again in the B&L rather no clarity when it will be fine. What are the geographies where you are more optimistic about growth?

Yes. We are more expecting the Middle East and Europe.

And since China is also taking tariffs in U.S., they would be competing hard in these geographies as well. So how is our competitive competitiveness compared to China in these markets?

See, you may be knowing that China, though they are competing, but they were not very good in the aftersales service. So that's why we are not facing any competition from China in terms of the order executions and getting the traction from the Europe and Middle East because in the after-sale service, we are having operated compared to the China.

And my second question will be, sir, you moderated financial year '26 guidance. So beyond financial year '26, what will be your guidance instead of topline as well as how would you expect the margins to behave in periods after financial year '26?

Yes. Probably in another -- in the current quarter, we will have to do the budgeting expenses, wherein we get the input from all the both the divisions and different markets. And then we'll be able to spell out how we look at in the next year.

Generally, we do review our guidance in Q4 con call. So we will maintain the same and we will spell out the next year guidance in Q4 on call.

And sir, considering that private capacity is just not taking off and geopolitics is kind of very, very volatile as well as export markets are concerned. So do you feel there is a double-digit growth in coming years for you? Or do you expect things to normalize sooner than later?

The power industry has started now performing and they have now released -- I mean, investments, government is releasing investment in power. So we are hoping good tractions from the power industries. And even sugar indices are also expecting to pick up in coming months. So we are expecting good traction from the sugar industries and also from the steel industry and cement also started now showing some expansion. So we are expecting good tractions from all these segments.

Since we are also spread out fairly well in different industries across this thing, any pick on don't tick on a few industries, we are able to manage that. And that's how we are optimistic that the growth will be better.

Ladies and gentlemen, we take that as a last question and conclude the question-and-answer session. I now hand the conference over to the management for their closing comments.

In closing, I would like to thank all of you for joining us today and for your continued trust and support. While the Gear division delivered a resilient performance during the quarter, we are particularly encouraged by the strong momentum and long-term potential of the MHE division, which brings balance and incremental growth to our overall business. Even as we revise our near-term guidance, our focus remains firmly on disciplined execution, prudent capital allocation and strengthening our leadership in high-growth segments. We are confident in our ability to build on the current momentum, navigate short-term challenges and continue delivering sustainable value for our shareholders and all stakeholders. Thank you once again for your participation. Should you have any further questions, please free to reach out. Have a great evening. Thank you.

Thank you. On behalf of Elara Securities India Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.