Harsha Engineers: Navigating Growth Amidst Operational Shifts in Q2 FY26

Harsha Engineers International Limited, a prominent player in the precision engineering sector, has reported a period of cautious optimism and strategic adjustments for the second quarter and first half of fiscal year 2026. The company's consolidated revenue from operations for Q2 FY26 stood at INR 378.34 crore, marking a 7.3% increase over Q2 FY25. For H1 FY26, consolidated revenue grew by 6.9% compared to H1 FY25, primarily driven by a resurgence in industrial demand from Europe and other key geographies. Despite this top-line growth, the company faced sequential margin pressures, largely due to the initial operational phase of its new greenfield Bhayla facility and a time lag in passing through increased material costs.

Segment-wise, the Engineering & Others consolidated business contributed INR 363.12 crore to Q2 FY26 revenue, representing approximately 95.97% of the total. The Solar - EPC and O&M segment generated INR 15.22 crore, accounting for about 4.03%. The India Engineering business (HEIL + Advantek) demonstrated robust performance, posting a 15.1% year-on-year top-line growth in Q2 FY26 and a 10.1% growth in H1 FY26. This growth was fueled by improved sales of semi-finished castings and finished kits, particularly in Europe, with India's exports to Europe growing by 27% quarter-over-quarter. However, the stamping segment experienced flat growth due to seasonality and a significant order drop from a key customer in the air conditioning sector.

Operational Dynamics and Strategic Focus

The company's new Indian wholly-owned subsidiary, Harsha Advantek, operating from the greenfield Bhayla site, is a significant part of its expansion strategy. While this technically advanced facility for incremental bush manufacturing and large-size cages is crucial for future growth, it is currently operating below break-even. The net loss of INR 5.70 crore in H1 FY26 for Advantek was primarily due to higher interest and depreciation charges that could not be absorbed by suboptimal revenue in its initial year of production. Management anticipates Advantek will achieve profitability within the next year, with optimal utilization expected in 2 to 2.5 years.

Harsha Romania, a key overseas subsidiary, has shown a remarkable turnaround. After several quarters, it reported positive EBITDA and a strong top-line growth of 38% in Q2 FY26 year-on-year. This improvement is attributed to ongoing cost reduction initiatives and an increased order book for finished cage products. Harsha China also maintained steady performance with positive EBITDA and PAT. The combined positive EBITDA from overseas subsidiaries was INR 4.62 crore in Q2 FY26, with a PAT of INR 0.64 crore.

Product Development and Capex Utilization

New product development remains a strong focus, with approximately 140 new SKUs developed in Q2 FY26, bringing the H1 FY26 total to 258. This continuous innovation supports the company's robust pipeline. The bronze bushing vertical, a key growth driver, reported a 25% sales growth in H1 FY26, with management confident of achieving 30% growth for the full financial year. This growth is driven by increased market share and a shift in design preferences towards bushing applications. The company incurred a total Capex of INR 24 crore in Q2 FY26 and INR 68 crore up to H1 FY26, fully utilizing the IPO funds for pre-payment of existing borrowings, capital expenditure for machinery, infrastructure repairs, and general corporate purposes.

Outlook and Investor Confidence

Management has reiterated its guidance for FY26, expecting a higher single-digit consolidated top-line growth, with the India Engineering business projected to grow in the low to mid-teen range. Stronger growth in profitability is also anticipated compared to FY25. The company's working capital cycle remained stable at around 146 days. Despite the sequential margin pressures and initial losses from the new Advantek plant, the overall tone reflects confidence in the long-term growth trajectory, driven by strategic expansions, product diversification, and operational efficiencies. Investors will be keenly observing the ramp-up of the Bhayla facility and the sustained performance of the international subsidiaries as key indicators of future success.