Azad Engineering revenue rises 31% while profit falls 5%

Azad Engineering Limited reported revenue from operations of Rs 190.935 crore for the quarter ended September 30, 2026, up 31% year on year, while consolidated profit fell 5% to Rs 30.927 crore. Total expenses increased 38% to Rs 153.613 crore, exceeding the increase in total income.

Why did Azad Engineering’s profit fall despite higher quarterly revenue?

Azad Engineering’s quarterly profit fell because total expenses rose faster than total income during the September 2026 quarter. Total expenses increased to Rs 153.613 crore from Rs 111.443 crore a year earlier, while total income rose to Rs 195.105 crore from Rs 157.871 crore, resulting in an 11% decline in profit before tax to Rs 41.492 crore.

The main expense lines all increased year on year. Cost of materials consumed rose to Rs 39.345 crore from Rs 17.918 crore, employee benefits expense increased to Rs 51.705 crore from Rs 33.677 crore, and depreciation reached Rs 22.508 crore from Rs 11.656 crore. Finance costs rose to Rs 12.443 crore from Rs 6.708 crore, while other expenses increased to Rs 58.530 crore from Rs 42.222 crore.

A negative change in inventories of finished goods, work-in-progress and scrap inventory partly offset the higher costs. This line was negative Rs 30.918 crore in the September 2026 quarter, compared with negative Rs 73.8 lakh a year earlier. The offset did not prevent the decline in pre-tax profit because the increases in materials, employee, finance, depreciation and other expenses were larger.

Tax expense declined to Rs 10.565 crore from Rs 13.819 crore, limiting the fall in profit for the period to Rs 1.682 crore. Profit for the period was Rs 30.927 crore, against Rs 32.609 crore in the corresponding quarter of 2025, while profit attributable to owners was Rs 30.875 crore compared with Rs 32.736 crore.

How did Azad Engineering’s September-quarter margins change?

Azad Engineering’s profit for the period was about 16% of revenue in the September 2026 quarter, compared with about 22% in the corresponding 2025 quarter. The change reflects the fall in pre-tax profit despite revenue growth, rather than only the lower tax charge recorded in the latest quarter.

Total expenses were about 79% of total income in the latest quarter, compared with about 71% a year earlier. Material costs were about 21% of revenue, versus about 12% in the prior-year quarter, while employee benefits expense was about 27%, compared with about 23%. The filing identifies manufacture and sale of high-precision original equipment manufacturer, or OEM, components as Azad Engineering’s single primary reportable segment.

Revenue rose sequentially by 11% from Rs 172.599 crore in the quarter ended June 30, 2026. However, profit for the period fell 12% from Rs 35.160 crore, while profit before tax decreased 6% from Rs 38.965 crore. Total tax expense was Rs 10.565 crore in the September quarter, compared with Rs 3.805 crore in the preceding quarter.

Basic and diluted earnings per share were Rs 4.79 in the September 2026 quarter, compared with Rs 5.05 a year earlier. Azad Engineering states that these quarterly earnings-per-share figures are not annualised. Non-controlling interest contributed Rs 5.2 lakh to quarterly profit, compared with a loss of Rs 1.27 crore in the corresponding quarter of 2025.

What did Azad Engineering report for the six months ended September 2026?

Azad Engineering reported six-month revenue from operations of Rs 363.534 crore for the period ended September 30, 2026, up 29% from Rs 282.717 crore in the prior-year period. Profit for the period increased 7% to Rs 66.087 crore from Rs 62.041 crore, unlike the year-on-year decline in the September quarter alone.

The half-year improvement in profit followed a lower tax expense despite a decline in pre-tax profit. Total income increased to Rs 371.253 crore from Rs 303.653 crore and total expenses rose to Rs 290.796 crore from Rs 215.358 crore. Profit before tax declined to Rs 80.457 crore from Rs 88.295 crore, but total tax expense fell to Rs 14.370 crore from Rs 26.254 crore.

The six-month cost base rose across major lines. Materials consumed were Rs 82.593 crore against Rs 59.881 crore, employee benefits expense was Rs 93.448 crore against Rs 62.987 crore, and finance costs were Rs 22.766 crore against Rs 12.619 crore. Depreciation rose to Rs 41.131 crore from Rs 21.797 crore, while other expenses increased to Rs 115.342 crore from Rs 83.998 crore.

Net cash used in operating activities was Rs 43.624 crore during the six months, compared with Rs 75.890 crore used a year earlier. Trade receivables used Rs 83.745 crore of cash and inventories used Rs 98.241 crore, while operating profit before working-capital changes was Rs 132.729 crore. Cash and cash equivalents were Rs 11.557 crore at September 30, 2026, down from Rs 24.592 crore at March 31, 2026.

How did Azad Engineering’s balance sheet and QIP use change?

Azad Engineering’s total assets were Rs 2,404.659 crore at September 30, 2026, compared with Rs 2,200.042 crore at March 31, 2026. Property, plant and equipment increased to Rs 974.798 crore from Rs 763.231 crore, while capital work-in-progress decreased to Rs 212.490 crore from Rs 256.682 crore.

Working-capital balances increased over the six months. Inventories rose to Rs 427.354 crore from Rs 329.113 crore, and trade receivables increased to Rs 404.130 crore from Rs 311.661 crore. Current borrowings increased to Rs 274.658 crore from Rs 175.692 crore, while non-current borrowings rose to Rs 286.967 crore from Rs 280.947 crore.

Azad Engineering raised Rs 700 crore through a qualified institutional placement, or QIP, during the quarter ended March 31, 2025. By September 30, 2026, it had used Rs 621.760 crore of those proceeds, including Rs 449.460 crore for funding and part-funding capital expenditure and Rs 156.210 crore for general corporate purposes.

Unutilised QIP proceeds were Rs 78.240 crore at September 30, 2026. This included Rs 75.540 crore allocated to capital expenditure and Rs 2.700 crore for issue expenses, while Rs 2.426 crore of QIP expenses paid from Azad Engineering’s current account were yet to be reimbursed from the monitoring agency account. The filing states that net unutilised QIP proceeds were temporarily invested in deposits with commercial banks.

Azad Engineering also disclosed that it granted 80,000 employee stock options on May 12, 2026. The consolidated results include two subsidiaries, Azad VTC Private Limited and Azad Prime Private Limited. The statutory auditors issued an unmodified limited-review conclusion on the consolidated results.

Conclusion

Azad Engineering’s September 2026 quarter showed that revenue growth did not translate into higher reported profit, as total expenses rose 38% while total income increased 24%. The six-month result was different: revenue increased 29% and profit rose 7%, supported by a lower tax expense even though profit before tax declined.

The disclosed items to watch next are the deployment of Rs 78.240 crore of unutilised QIP proceeds, including Rs 75.540 crore earmarked for capital expenditure, and the movement in inventories and trade receivables. These balances stood at Rs 427.354 crore and Rs 404.130 crore, respectively, at September 30, 2026.