Shakti Pumps (India) Limited (531431) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '26 Earnings Conference Call hosted by Shakti Pumps (India) Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Verma from Ernst & Young Limited Liability Partnership. Thank you, and over to you, sir.

Good afternoon, everyone. 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 our business risk that could cause future result performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the Financial Results and Developments and to answer your questions today, we have the senior management of Shakti Pumps (India) Ltd. represented by Mr. Dinesh Patidar - Chairman; Mr. Ramesh Patidar - Managing Director; Mr. Ramakrishna Sataluri - CEO, Shakti Energy Solutions Ltd.; Mr. Dinesh Patel - Group CFO and Mr. Ravi Patidar - CS and Compliance Officer. We will start the call with brief overview of past quarter by Mr. Dinesh Patel. I will now hand over the call to Mr. Patel, our CFO. Over to you, sir.

Thank you, Vikash. Good afternoon, everyone, and thank you for joining us on the call today. Despite a challenging environment, largely led by extended monsoon, we continued to display strong execution capabilities. We delivered a consolidated revenue of INR 666 crores in Q2 FY '26, among the highest in our history, and INR 1,289 crores for H1 FY '26, up 7% Y-o-Y. Our solar pumps business remains a cornerstone with 39,861 installations in H1 and 22,304 in Q2, growing by 19% and 21%, respectively. While weather and GST 2.0 reforms moderated the execution pace in some states, our order book of INR 1,300 crores as on 7th November 2025 and a strong pipeline across Maharashtra, Madhya Pradesh, Rajasthan and other states positioned us for sustained growth. Beyond solar pumps, emerging businesses are gaining momentum. Retail sales surged 67% Y-o-Y to INR 43 crores, supported by over 100 exclusive outlets nationwide. Our solar rooftop segment expanded into Rajasthan, Uttar Pradesh and Maharashtra, leveraging government initiatives like PM Surya Ghar Muft Bijli Yojana. Early feedback from dealer engagements has been encouraging, and we see this as a significant growth lever over the next 12 months. Our CapEx plan remains firmly on track, including doubling pump and motor capacity and stabilizing at 2.2 gigawatts solar DCR cell and PV module plant. Receivables looks impacted by extended monsoon and RMS-linked collection cycles stood at INR 1,639 crores as of 30th September 2025. [Technical Difficulty] Out of the current Receivables, around INR 7,220 million i.e., 44% of the company's total receivables are not yet due, while around 38% of receivables are less than 90 to 180 days. Due to the prolonged and excess monsoon, there was less urgency from farmers in running the pumps, which impacted the Receivables. However, the urgency for pump installations has returned and substantial portion of Receivables is expected to be released this quarter. The payment schedules and cash flow outlook remain aligned with our year-end guidance of 120 days of Receivable cycles. We are proud to share that Shakti Pumps received an ESG rating of 75 - "Good" by ICRA and industry recognition as Best Strategy Organization of the Year and Best Employer also. These accolades reflect our commitment to sustainability, governance and people. Our diversified order pipeline, operational agility and strategic investments give us confidence in meeting our '26 guidance and sustain growth beyond. Let me now quickly take you all through the financial performance for Q2 FY '26, followed by H1 FY '26. Revenue for the Q2 FY '26 stood at INR 666 crores, marking our highest ever quarterly revenue, reflecting a year-on-year growth of 5% compared to INR 635 crores in Q2 FY '25. EBITDA came in at INR 136 crores with an EBITDA margin of 20.4%. During the quarter, prices of key raw materials such as copper, steel and solar panels increased by around 3% to 4% on account of volatile market condition, thereby impacting the EBITDA margins. Profit After Tax for the quarter was INR 91 crores with a PAT margin of 13.6% in Q2 FY '26. For H1 FY '26, revenue came in at INR 1,289 crores as compared to INR 1,202 crores in H1 FY '25, a year-on-year growth of 7%. EBITDA for the period was at INR 280 crores with an EBITDA margin of 21.7%. PAT for H1 FY '26 stood at INR 188 crores. Export business continues to gain momentum with the company recording a revenue of INR 103 crores in Q2 FY '26 and achieving a revenue of INR 200 crores in FY '26. Now I would like to request Mr. Ramakrishnan Sataluri ji to share the developments and outlook for the Solar Rooftop business. Thank you.

Thank you. Thank you very much, Mr. Dinesh Patel. Good afternoon, everyone. The last 90 days was nothing less than very exciting. So on the rooftop business, we focused on getting the basics right because this is going to be the trigger for huge growth as we move forward. We worked basically on three things in the last 90 days, and I'm very happy to share the following. First, we worked on the product. We wanted to give the best-in-class product. The second, we worked on the infrastructure and processes. And third, we looked at exciting customer offerings in the form of a good EMI scheme. On point number one, that is on the product, very proud to share that our inverter right now, which is a complete Made in Bharat, a Swadeshi inverter is the top-plus inverter that is there. We have, in our test run seen that we are giving more than 10% generation than what our competitors are doing, which makes this a very, very attractive proposition to the customer. I repeat that this is conceptualized and manufactured by Shakti Energy Solutions Limited. So therefore, kudos to the entire team, which got this off the block. On the second point of infrastructure and processes, we had a detailed plan. We got our manpower on board at the three states that Dinesh spoke of. We went across to the length and breadth of all the states, and we have already set up 57 channel partners. We have exclusive agreements with channel partners, 57 channel partners. And we have also trained in the process over 400 installers so that we have the differentiation of quality installation when our consumers come on board. We also set the processes right as far as our call center is concerned, how the lead management happens, what are the various IT processes that are involved. We got all of that updated and it is up and running right now. On the third point, we realized after our research from the market that the consumers are also looking at good EMI options. So we have a tie-up with an organization called Ecofy, which is in this space, doing good business. So we have a tie-up with them and come up with a very exciting EMI offer as well for our customers. So we got all the basics right. And now we continue to ensure that the training is top of the door, and the customer gets a very differentiated experience when the customer deals with Shakti. So these are the inputs. We are going to work on the basics absolutely right so that once we take off, it's going to be a very, very good takeoff. That's all from my side as an update on the Rooftop business. Now ladies and gentlemen, I open the floor for questions.

[Operator Instructions] The first question comes from the line of Aashish from InvesQ PMS.

A few questions based on the presentation that you have provided. I can see your Receivables aging pie chart there. So just wanted to understand, there is a whole lot of percentage of Receivables more than even six months. I think 20%-odd 8% is more than 365 days and 11% is given us more than 180 days. So can you clarify what is it, I mean this is pretty stretched. So if you could give some update on this one, that will be great to understand.

Yes. We have given all the aging of the receivables, and we are expecting that in the next quarter, we will realize more of them.

But more than six months is 20%. So is this really receivables or retention money? Or what is it?

There is some portion of retention money. Actually, the tender condition is there. We will realize our 10% amount based on 90 days RMS. So we can say that more of the 10% amount is there stuck. But yes, remaining 90%, we are hopeful we will get on time.

Okay. And I didn't understand your comment on the, this thing; you said that the rains were heavy, and that's why the realizations were affected, receivables were affected. Can you make us understand how the entire thing works?

Yes. Because [Foreign Language]

[Foreign Language]

120 days is our target, and we are hopeful we will achieve it. [Foreign Language]

[Foreign Language]

[Operator Instructions] The next question comes from the line of Aditya Vora from Soham Asset Manager.

[Foreign Language] I had two questions. I wanted to understand that from March'24 [Foreign Language]. You've consistently been doing 23%, 25% margins. And now the margins have come down to 20% in this quarter. [Foreign Language]. What will be the structure? That was one thing. And also we've heard [Foreign Language], has been doing a lot in terms of execution [Foreign Language]. So there has been a lot of pricing pressure in that, which is obviously evident in your realization also. So my question, could we see this 20%, 21% as the sustainable new margins? Or how do we look at it that way?

So like for this, we have already mentioned that some raw material price gone up in this quarter, and we are seeing that it will get reduced in the next upcoming quarter. So we will maintain the margin guideline and this revenue guideline. There is no change in the guideline.

So [Foreign Language] what you are saying is that this 20% is a one-off, right? This is not going to be a structural fall in margin?

Yes, yes, because we are seeing that operational leverage will give us some extra margin to maintain this guideline due to our execution. We have executed too many pumps in this H1, and we will continue this execution. So it will help us to maintain the margin.

Okay. Right. And secondly, in terms of receivables, of INR1,600 crores  [Foreign Language] you alluded to the fact that [Foreign Language], it is for the month of September, obviously things have improved in October and November. [Foreign Language] Just to understand how the cash flow is.

[Foreign Language]

The next question comes from the line of Punit Mittal from Ebisu Investment Advisors.

[Foreign Language] This is regarding solar rooftop.  [Foreign Language] If you can give more color on how does this scheme work? What is the credit cycle? What is the sales process like because you mentioned that you appointed channel partners, EMI, income margin [Foreign Language] So basically, just more color on potentially solar rooftop business would be very helpful.

Yes. This is largely the rooftop business is under the PM Surya Ghar Muft Bijli Yojana. So what the consumers do is they go to the portal and register themselves. And once they are registered, they have the freedom to buy any of the brands that are available to them, okay? Then after they select it, so we get to know whoever has selected it, we go to the consumer and we make a pitch about our product and services, right? So the business model is our channel partners, our dealers buy the material from us in advance, okay? And they go and install it at the customer location, and they go to the customer location, install it and collect the money from the customer, right? And the customer, after the installation is done, directly gets the subsidy amount of INR 78,000 from the government. So this is the entire cycle. But to cut it short, this business, we will do it on an advanced basis with our customers; with our dealers and dealers sell it to the customers.

So this, what is the margin profile for this business in that case and also the working capital cycle?

We are just putting this entire plan together on the margin. Obviously, it's a very competitive market. So we are putting this entire plan together. And I don't want to make any forward-looking statements on this. Once we actually hit the ground and realize it, then I will share all the details with you, if that is okay.

That's fine. But just to understand, what is the industry [Foreign Language] what is the margin that the best players are working on and the working capital cycle just on industry, average industry?

The average industry margins, and this is just out of conversations that I have, could be in the range of around 15%, 10% to 15%.

And also, do we need to empanel ourselves like we do in the solar pump because, in every state, because it's a government subsidy program?

Right. So there are two kinds of enrollments. One is at a brand level and the other is at an installer level. So at an installer level on the ground, a lot of people do enroll themselves. What we have done is we've also enrolled ourselves at a brand level. There are totally only five players who have enrolled at a brand level. So that is the enrollment process. So we will have all the partners, the 57 partners that we have, they would be enrolled on the portal and beside them, it would show Shakti.

Okay. Got it. Second question, Dinesh ji, was on the MP. So the MP CM has announced 90% subsidy for the farmers as far as the news reports there. [Foreign Language]

The next question comes from the line of Achal from Nuvama Institutional Equities.

Two questions. First, if you could provide us the update on the solar cell, where are we? What CapEx? When do we expect it to commission? How do we see the scale up?

Yes. So actually, we are planning for 2.2 gigawatts. That is for solar cell and solar module, and it will commission by March '27. So we will get the revenue from March '27 onwards. And we have a total CapEx plan of around INR 1,200 crores, which will be an implementation period is around 18 months.

And what kind of scale up can we see from this INR 1,200 crores investment? What is the potential revenue?

So after this investment, we are in the position to achieve the INR 5,000 crores revenue for this company.

No, only for this investment, sir, solar cell and module I'm saying, what would be the potential revenue out of this INR 1,200 crores of CapEx and what margins one would expect?

So actually, this 2.2 gigawatts is sufficient for around INR 4,000 crores revenue. And for 75% capacity, we can say it can generate around INR 3,000 crores. And we are expecting around 15% EBITDA level. So INR 450 crores per year, it will generate. And this INR 1,200 crores, we are expecting within three years, we will get back. So the payback period is around three years.

Understood. And how much of that will be captive?

We are first preference for captive and whatever the excess production capacity available at that time, we will take the decision for export business and domestic business.

Got it. The second question I have is if I understand you right, you said we are maintaining our 25% kind of what we had earlier indicated the revenue growth for FY '26.

Yes. So we told that whatever management has committed in the March call, we are maintaining the same guideline for this year.

And that was 25% revenue growth, right, sir?

That is 24% for EBITDA level, and that is 20% to 25% for this revenue level.

Right. So, let's say, for the sake of argument, I'm saying if you look at a 20% growth for the full year, right? In that case, the ask rate is actually 30% plus in the second half. Now given we have had a 10% and 5%, where is this significant delta going to come from? Is that from the states, particular states we should watch out for? Is that central government? Is that retail? Or is that something else?

So our historical trend is that H2 is always better than H1. So we are hoping for the same.