/** blogpostTitle: Behari Lal Engineering Q1 FY27: Mix Shift, Near Full Utilisation, and a Bigger Capex Play blogpostSlug: blel-q1 blogpostShortTitle: BLEL Q1 FY27 mix shift focus blogpostCoverImageDescription: Ultra realistic corporate financial cover image showing a clean desk scene with a laptop displaying three adjacent charts: (1) a bar chart of quarterly revenue rising from about 128.5 to 151.7 in INR crore, (2) a line chart of EBITDA margin moving from about 18.8% to 19.6%, and (3) a stacked bar chart of Q1 FY27 revenue mix split into alloy steel around 48%, metal rolls around 26%, and engineering castings around 20%. In the background, a subtle industrial steel plant silhouette and rooftop solar panels are visible out of focus, reflecting the companys solar initiative. No logos, no readable labels, neutral lighting, professional investor report aesthetic. */

Behari Lal Engineering Q1 FY27: Mix Shift, Near Full Utilisation, and a Bigger Capex Play

Behari Lal Engineering Limited began life as a fourth-generation steel business and entered its next phase in Q1 FY27 as a newly listed company. The June 2026 quarter captured what management wants investors to track: growth driven by volume, but defended by a steadily richer product mix.

Revenue from operations came in at INR 151.7 crore, up 18.0% year on year. Sales volumes were 22,095 metric tons, up 13.4%. The company reported EBITDA of INR 29.7 crore, translating to a 19.6% margin, and profit after tax of INR 19.2 crore at a 12.7% margin. For a manufacturing business operating close to full utilisation, the key read-through was not just growth, but margin expansion alongside a higher share of value-added products.

Management repeatedly framed the strategy around “high-value products”, largely metal rolls, engineering castings, and specialty alloy grades such as valve steel and tool and die steel. That high-value mix moved to 60.4% of revenue in Q1 FY27, up from 57.8% in FY26 and 55.7% in Q1 FY26. EBITDA per metric ton rose to INR 13,457, reinforcing the argument that mix is doing more work than raw material luck.

Q1 FY27 performance: the mix is doing the heavy lifting

The quarter’s topline growth was supported by volumes, but the more useful insight sat in unit economics. Excluding job work, revenue per metric ton increased to INR 93,487, up 9.5% year on year and 3.9% sequentially. The company also highlighted that headline volumes can be misleading because job work carries lower value add. In Q1 FY27, volumes excluding job work rose sequentially, while job work tonnage fell. The result was a 15.6% sequential increase in revenue despite a 2% sequential dip in total tonnage.

Margins improved modestly despite the company running at high utilisation. Gross margin was 48.9% in Q1 FY27 versus 47.4% a year ago. Operating EBITDA, excluding other income, was INR 27.6 crore at an 18.2% margin. The CFO clarified that Q4 FY26 had elevated other income due to state incentives being sanctioned in that quarter, which inflated reported margins and profits in Q4 versus Q1.

A practical indicator of the company’s current operating intensity is utilisation. Q1 FY27 capacity utilisation was disclosed at 90.5%, with the melt shop at 94.0% and the rolling division at 87.5%. With the melt shop already operating in the mid-90s, the capacity expansion narrative becomes less optional and more structural.

Product mix and end markets: alloy steel still large, but rolls and castings matter most

Behari Lal’s portfolio spans alloy steel products, metal rolls, engineering castings, and smaller volumes of forging ingots and forged shafts. In Q1 FY27, alloy steel was 47.7% of revenue, metal rolls 25.8%, and engineering castings 19.8%. Forging ingots and forged shafts dropped to 1.9%, which management described as a deliberate decision to divert metal into more finished and higher value products rather than selling ingots.

This mix is important because the company is attempting to compound margins on a largely fixed asset base. From FY24 to FY26, revenue grew 9.4% on a two-year basis, while EBITDA grew 28.9% and PAT 34.4%. Management attributed that gap to mix upgrade, not to chasing tonnage.

Demand distribution across end users continued to shift. Automotive, historically the largest segment, was 33.0% of revenue in Q1 FY27 versus 38.7% in FY26. Infrastructure increased to 26.4% from 20.7%, while thermal power plants rose to 10.5%. In the concall, management described this as a planned reduction in lower margin automotive-linked commodity alloy bars, while growing higher value demand in infrastructure, industrial equipment, and power.

Geographically, the business remains predominantly domestic. Domestic revenue was 94.3% in Q1 FY27, with exports at 5.7%. Export revenue was INR 8.59 crore versus INR 11.54 crore in Q1 FY26. Management attributed the decline to shipment timing and order phasing, especially for engineering castings.

Capex and growth projects: IPO proceeds, Unit 3, and import substitution in rolls

The company’s listing in August 2026 brought in fresh issue proceeds of INR 93 crore within a larger IPO issue size of INR 301.62 crore. The stated use of fresh issue proceeds includes equipment and civil work at both manufacturing facilities, rooftop solar at both units, a small amount of debt repayment or prepayment, and general corporate purposes. The company said utilisation of proceeds will be reported quarterly.

Alongside IPO-funded projects, Unit 3 is under construction. Management did not disclose the final capex number or capacity additions for Unit 3 in the call, citing that details would be shared through exchange filings once finalised. However, they did provide two operational signals.

First, the expected commencement is in the first quarter of the next financial year. Second, Unit 3 is positioned as a foundry-led expansion focused on metal rolls, including higher grades such as indefinite chilled double poured (ICDP) and high speed steel (HSS) rolls. Management stated that these grades are largely imported and positioned the move as an import substitution opportunity. They also discussed adding vertical and horizontal centrifugal casting capability as part of Unit 3.

For FY27, management guided to INR 80 crore of capex, with INR 5 crore already spent in Q1 and the remainder targeted in the next three quarters. The company also mentioned that Unit 3 is being funded through internal accruals, while other projects include capex from IPO proceeds.

Beyond core capacity, the company is continuing to invest in capabilities that can help shorten qualification cycles and reduce operating cost. Management highlighted plans for a National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited laboratory and additional rooftop and ground-mounted solar capacity, after already having 1,862 kilowatt-peak of rooftop solar across the two units.

Balance sheet and visibility: low leverage, but working capital stays important

As of June 30, 2026, the company disclosed net worth of INR 325 crore, debt to equity of 0.03x, and cash and bank balances of INR 52 crore, largely in fixed deposits. This position was before the INR 93 crore fresh issue proceeds received in August 2026, indicating substantial liquidity headroom.

Revenue visibility was supported by an order book of INR 162 crore (13,138 metric tons) as of June 30, 2026. Management indicated the order book is skewed toward higher value products, and even pointed out that the implied value per ton in the order book was higher than the quarter’s average realisation excluding job work.

The area that needs continued attention is cash conversion. The cash conversion cycle was 93 days in FY26 and 94 days as of June 30, 2026. Management attributed the higher cycle to inventory and work in progress rising as the mix shifts toward rolls and castings, which carry longer production cycles.

Takeaways

Behari Lal Engineering’s Q1 FY27 was a clean first quarter as a listed entity: double-digit growth, slightly higher margins, high utilisation, and a business narrative centred on value addition rather than commodity volume. What stands out is the consistency of the strategy across FY24 to FY26 and into Q1 FY27: push high-value share upward and defend unit economics.

The next set of investor checkpoints are clearer now. Execution on Unit 3 and the move into ICDP and HSS rolls is likely to determine whether mix can move toward the company’s stated 70% high-value target. At the same time, strong utilisation means incremental growth will increasingly depend on commissioning new capacity without losing operating discipline, particularly on working capital.