Diffusion Engineers Q2 FY27 revenue rises 50.7%, margin narrows

Diffusion Engineers Limited reported consolidated revenue of Rs 12.59 crore in Q2 FY27, up 50.70% year on year, while earnings before interest, tax, depreciation and amortisation (EBITDA) margin declined 159 basis points to 13.21% as raw-material, energy and logistics costs rose. EBITDA still increased 34.51% to Rs 1.66 crore.

How did Diffusion Engineers perform in Q2 FY27?

Diffusion Engineers increased consolidated revenue, EBITDA and profit after tax in Q2 FY27, but profit growth was slower than revenue growth. Total income from operations rose from Rs 8.36 crore in Q2 FY26 to Rs 12.59 crore, while EBITDA excluding other income rose from Rs 1.24 crore to Rs 1.66 crore. Profit after tax (PAT) increased 25.46% to Rs 1.28 crore from Rs 1.02 crore.

The increase in costs accompanied the higher level of execution. Raw-material expense rose to Rs 8.82 crore in Q2 FY27 from Rs 5.27 crore in Q2 FY26, and total expenditure increased to Rs 10.93 crore from Rs 7.12 crore. Management attributed the 50.70% revenue increase to demand across core industrial segments, higher execution levels and a healthy order book.

Diffusion Engineers reported profit before tax of Rs 1.52 crore, up 20.30% from Rs 1.27 crore a year earlier. Earnings per share rose to Rs 3.39 from Rs 2.69. Management said the slower growth in profit before tax than EBITDA reflected lower other income and higher depreciation and finance charges.

Why did Diffusion Engineers' EBITDA margin decline in Q2 FY27?

Diffusion Engineers' EBITDA margin declined to 13.21% in Q2 FY27 from 14.80% in Q2 FY26, a reduction of 159 basis points, where 100 basis points equal one percentage point. Management identified higher raw-material, logistics and energy costs, mainly related to macroeconomic and geopolitical issues, as the cause of the year-on-year margin movement.

Raw-material costs rose by Rs 3.56 crore to Rs 8.82 crore between the two quarters, while employee costs increased to Rs 1.28 crore from Rs 1.21 crore. Other expenses rose to Rs 82.65 lakh from Rs 64.52 lakh. The resulting increase in expenditure was greater than the increase in operating profit relative to revenue, reducing EBITDA margin despite sales growth.

Management said higher volumes, execution efficiency and better fixed-cost absorption supported the 34.51% rise in EBITDA to Rs 1.66 crore. The distinction is that operating profit rose by Rs 42.68 lakh in absolute terms, but its share of revenue was lower than the 14.80% reported in Q2 FY26.

PAT margin also fell, declining 203 basis points to 10.13% from 12.16%. Other income decreased to Rs 1.87 crore in Q2 FY27 from Rs 3.04 crore a year earlier, while depreciation rose to Rs 1.85 crore from Rs 1.63 crore and interest expense rose to Rs 83.5 lakh from Rs 53 lakh.

How did Diffusion Engineers' Q2 FY27 compare with Q1 FY27?

Diffusion Engineers improved sequential operating margin in Q2 FY27, with EBITDA margin increasing to 13.21% from 12.85% in Q1 FY27. Revenue rose by Rs 1.58 crore from Rs 11.01 crore in Q1 FY27 to Rs 12.59 crore, while EBITDA increased by Rs 24.81 lakh from Rs 1.42 crore to Rs 1.66 crore.

The operating improvement did not extend to PAT. PAT declined by Rs 3.92 crore from Rs 1.67 crore in Q1 FY27 to Rs 1.28 crore in Q2 FY27, and PAT margin reduced from 15.15% to 10.13%. Management attributed the sequential fall in PAT to lower treasury income and a lower contribution from associates.

Other income declined from Rs 4.10 crore in Q1 FY27 to Rs 1.87 crore in Q2 FY27. Diffusion Engineers also recorded a Rs 60.2 lakh share of loss from associates in Q2, compared with a Rs 4.46 crore share of profit in Q1. Interest expense rose to Rs 83.5 lakh from Rs 69.7 lakh, while depreciation was Rs 1.85 crore compared with Rs 1.88 crore.

What does Diffusion Engineers' H1 FY27 performance show?

Diffusion Engineers reported consolidated revenue of Rs 23.60 crore for H1 FY27, up 43.73% from Rs 16.42 crore in H1 FY26. EBITDA increased 34.16% to Rs 3.08 crore, while PAT rose 31.21% to Rs 2.94 crore. Management cited demand, engineering-order execution, overseas operations, associates and higher order inflows.

H1 operating profitability grew more slowly than revenue. EBITDA margin fell 93 basis points to 13.04% from 13.97%, while PAT margin declined 119 basis points to 12.47% from 13.66%. Management attributed both margin reductions to higher raw-material, energy and logistics costs.

Other income fell to Rs 5.97 crore in H1 FY27 from Rs 8.53 crore in H1 FY26, while interest expense increased to Rs 1.53 crore from Rs 85 lakh. Share of profit from associates rose to Rs 3.86 crore from Rs 78.4 lakh, contributing to the 25.57% increase in profit before tax to Rs 3.54 crore.

What could support Diffusion Engineers' next phase of execution?

Diffusion Engineers disclosed an order book of Rs 22.68 crore at September 2026, compared with Rs 17.41 crore at March 2026. Heavy engineering was the largest category at Rs 17.79 crore, followed by welding consumables at Rs 2.50 crore and wear plates and wear parts at Rs 2.40 crore.

Welding consumables recorded the largest disclosed category increase over the six months, rising from Rs 99.37 lakh in March 2026 to Rs 2.50 crore in September 2026. Heavy engineering increased from Rs 14.22 crore, while wear plates and wear parts increased from Rs 2.20 crore. These changes provide the order backdrop to the higher execution cited in Q2 FY27.

Management said its major capital expenditure programme was nearing completion and expected it to progressively add manufacturing capacity, operational efficiencies and execution capability. It also said product development and technology upgrades remained priorities, while input-cost volatility, energy prices and geopolitical developments remained areas of focus.

Conclusion

Diffusion Engineers combined 50.70% year-on-year Q2 FY27 revenue growth with a 159-basis-point EBITDA-margin decline, showing that higher execution and demand increased operating profit while costs constrained margin conversion. The same pattern appeared in H1 FY27, when revenue rose 43.73% but EBITDA margin declined 93 basis points to 13.04%.

The next disclosure to watch is the progressive contribution from the capital expenditure programme that management says is nearing completion, alongside execution of the Rs 22.68 crore September 2026 order book. Management's stated focus on cost optimisation, capacity expansion and product development will be relevant as raw-material, logistics and energy costs change.