Oswal Pumps: Navigating Growth and Margins in India's Expanding Solar Pump Market

Oswal Pumps Ltd., a prominent player in India's solar pump manufacturing sector, has reported a robust performance for Q2 FY26 and H1 FY26, demonstrating significant growth amidst evolving market dynamics. The company's operating revenue for Q2 FY26 stood at ₹539.6 crore, marking an impressive 73.9% year-on-year increase and a 5.0% sequential growth. This strong top-line performance was primarily driven by the continued execution of orders under the PM KUSUM and Magel Tyala schemes, underscoring the company's deep engagement with government initiatives.

Despite the commendable revenue growth, Oswal Pumps experienced some margin compression during the quarter. The operating EBITDA margin for Q2 FY26 was 23.7%, a quarter-on-quarter decline of 368 basis points. This was largely attributed to a 7.5% reduction in L1 tender prices for PM KUSUM and Magel Tyala, which impacted over 80% of the company's core revenue. Additionally, one-time factors, including ₹40 crore in module sales at lower margins and a ₹2.5 crore expense for increasing a subsidiary's authorized capital, contributed to an estimated 1.8% decline in operating EBITDA margins. However, management has expressed confidence in recovering these margins in Q3 FY26, supported by proactive value engineering initiatives and operational efficiencies that mitigated the overall impact by 285 basis points.

Strategic Initiatives and Market Positioning

Oswal Pumps' strategic focus on vertical integration and capacity expansion remains a cornerstone of its growth strategy. The company is relocating its solar module expansion project to a larger, adjacent land parcel, which is expected to enhance operational efficiencies, reduce costs, and leverage existing R&D and administrative infrastructure. This move will significantly increase the available area from 13,983 sq m to 28,000 sq m, allowing for optimized plant layout and future scalability. The company plans to invest ₹153.66 crore from its net IPO proceeds to increase solar module installed capacity by 1,500 MW, alongside integrating aluminium extrusion and EVA manufacturing processes.

Furthermore, Oswal Pumps is committed to strengthening its pump manufacturing capabilities, with an investment of ₹89.86 crore from IPO proceeds towards plant and machinery, automation, and capacity expansion. The goal is to achieve a capacity of 5 lakh pumps by H1 FY27, ensuring the company is well-prepared to meet the growing demand. As of October 31, 2025, Oswal Pumps has successfully executed over 80,000 solar pumping systems and boasts a strong order book exceeding 18,800 pumps, complemented by a near-term pipeline of over 30,000 pumps across key states like Maharashtra, Haryana, Karnataka, and Madhya Pradesh.

Leveraging Government Schemes and Market Tailwinds

The Indian solar pump market presents a vast opportunity, with a combined market potential estimated at INR 360,000 crore (US$43.6 billion). This includes a US$ 14.5 billion opportunity for replacing existing diesel pumps and a US$ 29.1 billion untapped market for farmers currently without pumps. Oswal Pumps is strategically positioned to capitalize on these tailwinds, particularly through its strong participation in the PM KUSUM scheme. The company anticipates the launch of PM KUSUM 2.0 before the end of the current fiscal year, which is expected to address previous implementation challenges such as receivable cycles and documentation, aiming for an annual installation target of 1 million pumps across the industry.

Oswal Pumps' extensive distribution network, comprising 1,235 distributors and 370 'Oswal Shoppes' launched in March 2024, further enhances its market reach and brand recognition. The company's revenue split highlights its strong presence in the agricultural sector, with 83.8% of H1 FY26 revenue coming from agriculture, 15.2% from residential, and 0.97% from industrial segments. Geographically, Maharashtra and Haryana are significant contributors, accounting for 51.3% and 29.7% of H1 FY26 revenue, respectively.

Financial Health and Outlook

Despite the capital infusions, Oswal Pumps maintains a healthy financial position. As of September 30, 2025, the company reported a net worth of ₹1477.8 crore and total borrowings of ₹115.8 crore. Its net debt stood at a modest ₹38.2 crore, resulting in a low Net Debt/Equity ratio of 0.03 and a Net Debt/Operating EBITDA ratio of 0.07. The return on net worth (RONW) was 40.0%, and return on capital employed (ROCE) was 45.9% for H1 FY26, reflecting efficient capital utilization.

Management has provided a positive outlook for FY26, targeting a revenue growth of 50-60% and aiming for a medium-term CAGR of 30-35%. They expect operating EBITDA margins to stabilize at 25.5-26% in Q3 FY26 and further improve to 26.25-26.75% in Q4 FY26, with PAT margins projected between 17.5% and 19%. The company's focus on backward integration, value engineering, and strategic market expansion positions it well for sustained growth and profitability in the dynamic Indian solar pump market.

Conclusion: Strategic Clarity for Sustained Growth

Oswal Pumps Ltd. is demonstrating strategic clarity and disciplined execution in a competitive environment. By leveraging its vertically integrated model, expanding manufacturing capabilities, and actively participating in government-backed initiatives, the company is not only mitigating short-term margin pressures but also building a robust foundation for long-term growth. The anticipated launch of PM KUSUM 2.0 and the vast untapped market potential provide significant tailwinds, reinforcing Oswal Pumps' position as a key player poised for continued success in India's evolving energy landscape.