Classic Electrodes H2 FY26: Growth, margin pressure, and product mix upgrades

Classic Electrodes (India) Limited closed H2 FY26 with strong topline momentum but a more muted expansion in operating profit. In the half-year ended March 31, 2026, total revenue rose to 121.18 crore from 100.41 crore in H2 FY25, a year-on-year increase of 20.68 percent. EBITDA was 11.94 crore versus 11.62 crore, up 2.71 percent, while profit after tax increased 13.00 percent to 6.20 crore.

Management positioned FY26 as a year of execution and product mix upgrades. The investor presentation pointed to commercialization of flux-cored wires, automation and debottlenecking initiatives, and a new entry into railway infrastructure components through the ERC Mk-V product line. On the earnings call, management reiterated that demand held up across electrodes and MIG wires, but acknowledged margin pressure due to raw material volatility and customer resistance during price increases.

H2 FY26 numbers: revenue acceleration, steadier EBITDA

The H2 profit and loss statement highlights the operating leverage challenge. While total revenue climbed sharply, costs of materials consumed rose in tandem, keeping EBITDA growth modest. Depreciation increased year-on-year, reflecting higher asset intensity, while finance costs fell meaningfully in H2 FY26 versus H2 FY25.

Two points stood out in management commentary on the call. First, the company described a noticeable slowdown in the last part of March, attributing it to war-driven uncertainty and softer buying sentiment. Second, management explained that in periods of rising metal prices, customers often delay purchases, creating temporary pressure on volume and margins even if price pass-through mechanisms exist.

FY26 performance: revenue up, margins softer, leverage improves

On a full-year basis, FY26 revenue from operations rose to 242.97 crore from 205.78 crore in FY25, representing 18.06 percent growth. EBITDA increased to 23.87 crore (from 22.28 crore), while EBITDA margin declined to 9.78 percent (from 10.81 percent). PAT increased to 12.64 crore from 11.62 crore.

The presentation also emphasized balance sheet strengthening. Debt-equity fell to 0.36 times in FY26 compared with 1.20 times in FY25. The company’s current ratio improved to 2.25 times, up from 1.45 times in FY25. Management explicitly highlighted a significant reduction in short-term borrowings during FY26 as an important liquidity improvement.

Despite improved profitability in absolute terms, return ratios trended down in FY26. RoCE declined to 17.23 percent from 20.07 percent in FY25, and return on net worth reduced to 14.32 percent from 25.70 percent. The documents do not provide a detailed bridge for these shifts, but the higher equity base and increased asset intensity are visible from the balance sheet and capital work-in-progress.

Strategy updates: product mix, capacity utilisation, and new verticals

The company’s FY26 narrative is anchored in a shift toward higher-value manufacturing contribution. In the earnings call, management stated that the mix between manufacturing and trading moved to about 73 percent manufacturing and 27 percent trading in FY26, compared with 67 percent and 33 percent in the prior year. Management also described trading as a low-margin activity, pursued opportunistically through bulk procurement.

Flux-cored wire: a new high-margin lever

Flux-cored wire was repeatedly highlighted as a margin-accretive category. The investor presentation claimed an annual revenue potential of 25 to 30 crore with 20 to 25 percent EBITDA margins. In the call, management stated that flux-cored wire contributed a little over 4 crore in FY26 and operated at around 15 percent utilisation. They also said initial operational challenges have been addressed and market acceptance is improving.

ERC Mk-V / Elastic Rail Clips: July start, higher gross margins indicated

The second major initiative is the entry into railway infrastructure components through ERC Mk-V (Elastic Rail Clips). The presentation indicated 50 crore plus initial annual revenue potential. On the call, management said commercial production for ERC is expected to start around July. They also stated that ERC gross margins could be about 25 to 28 percent, a meaningful differential versus the company’s blended margin profile.

Capacity and utilisation: electrodes strong, MIG improving, flux-cored early

The deck provides plant-wise utilisation data for the West Bengal unit, showing electrodes operating at 86.24 percent utilisation in FY26. MIG wire capacity in West Bengal increased to 7,000 MT in FY26 with utilisation of 74.38 percent. Flux-cored wire capacity was shown at 2,500 MT with utilisation of 13.98 percent, consistent with management’s description of an early-stage ramp.

In Haryana, the presentation states that manufacturing of electrodes is not undertaken at the Hjjair unit and only MIG wires are produced there. It also notes the Bahadurgarh unit has been closed since FY 2023 to 2024.

What management guided, and what remains uncertain

Management commentary in the call offered directional guidance but with clear caveats. They said it is difficult in May to assess how margins will evolve due to global uncertainty, but they are aiming for gross margins to improve from around 12 percent to at least 15 percent. They also indicated that the trading share could drop below 20 percent in FY27 as growth is expected to come from manufacturing.

The documents also show investors pressing on governance and transparency. A participant questioned related party investments, and management responded that Classic invested about 1.8 to 1.9 crore in an associate company, HMPower, owning around 14 to 15 percent. Management stated the associate commenced commercial production from April 1 and they expect it to generate about 200 crore revenue in the current year, while also acknowledging that profitability is uncertain in the first year.

Separately, investors raised concerns about low stock liquidity on the SME platform and requested more frequent business updates. Management stated they would start sharing quarterly revenue updates and would publish developments more regularly.

Takeaways from H2 FY26

Classic Electrodes ended FY26 with strong revenue growth and improving balance sheet leverage, but with margin pressure driven by raw material volatility and demand sensitivity to price increases. The company’s strategic priorities are clear in the documents: increase manufacturing share, ramp higher-margin flux-cored wire, and start ERC production around July to add a new railway-linked revenue stream. Execution on these initiatives, and the extent to which the margin improvement aspiration materializes, will be the key items to track through FY27.