Elecon at 75: A strong order book, but a Gear division timing hiccup in Q4FY26

Elecon Engineering Company Limited closed Q4FY26 with consolidated revenue of INR 746 crores, down 6.5% year on year, as the Gear division faced delayed dispatches and customer-led deferments. Consolidated EBITDA for the quarter was INR 158 crores with a margin of 21.2%, while management highlighted that profitability was affected by operating deleverage, a change in product mix, and higher employee costs.

For FY26, consolidated revenue rose to INR 2,366 crores, up 6.2% year on year. However, margins softened: FY26 EBITDA margin was 22.1% versus 24.6% in FY25, and FY26 PAT margin was 14.4% versus 18.6% in FY25. FY26 also included one-time items such as arbitration settlement income in the MHE division and an exceptional goodwill impairment charge.

The key positive through the quarter was order momentum. FY26 consolidated order intake was INR 2,660 crores, up 11.8% year on year, and the consolidated open order book at March 31, 2026 stood at INR 1,292 crores, up 36.3% year on year.

Q4 and FY26 performance: uneven execution, but demand visibility intact

Management attributed the Q4 slowdown mainly to timing issues rather than demand destruction. The Gear division saw deliveries deferred in a volatile macro environment, including specific mentions of steel sector deferments on the concall. Despite this, the inquiry pipeline was described as healthy and the company expects normalization as execution timelines stabilize.

MHE remained the growth engine in Q4FY26. The company emphasized its strategic shift away from EPC projects toward profitable product business and aftermarket services, which helped support division-level profitability even as order intake in the quarter was lower due to timing.

Metric	Q4FY26	Q4FY25	YoY	FY26	FY25	YoY
Revenue	746	798	-6.5%	2,366	2,227	6.2%
EBITDA	158	195	-19.1%	523	548	-4.5%
EBITDA margin	21.2%	24.5%	-330 bps	22.1%	24.6%	-250 bps
Order intake	657	645	1.9%	2,660	2,380	11.8%
Open order book (period end)	1,292	948	36.3%	1,292	948	36.3%

Note: FY26 revenue and EBITDA included INR 25 crores of one-time arbitration settlement income in the MHE division.

Segment lens: Gear softness, MHE resilience

The quarter’s revenue mix shifted materially as Gears slowed and MHE accelerated.

Segment	Q4FY26 revenue	Q4FY25 revenue	YoY	FY26 revenue	FY25 revenue	YoY
Gears	472	597	-21.0%	1,699	1,763	-3.6%
MHE	274	200	36.8%	667	464	43.6%

In Gears, the Q4 EBIT margin declined to 19.3% (from 24.6% in Q4FY25), with management citing lower throughput, higher employee costs, and product mix. Importantly, order intake for the Gear segment rose 10.7% year on year in Q4 and 11.0% for FY26, taking the Gear open order book to INR 894 crores at March 31, 2026.

In MHE, Q4 revenue growth of 36.8% was supported by demand across sectors such as power, cement, mining, and ports. The division reported Q4 EBIT of INR 62 crores with an EBIT margin of 22.8%. Management characterized the Q4 order intake dip as timing-related and pointed to incoming orders in April.

Capital allocation, international footprint, and ESG commitments

On capital allocation, management discussed a capex plan of INR 400 crores over FY26 to FY28, with about INR 95 crores already spent in FY26. Roughly 80% of FY26 capex spend was directed toward the Gear division. The CFO linked the decline in ROCE (20.4% in FY26 vs 26.8% in FY25) to a higher capital employed base and substantial cash and investments on the balance sheet.

Internationally, the company discussed establishing a step-down subsidiary in Mexico to strengthen its Latin America presence. On the call, management also flagged a 50% tariff affecting exports from India into the USA and suggested the Mexico initiative is geared toward Latin America where this tariff is not applicable.

On ESG, the company reiterated its Science Based Targets initiative validation (approved January 6, 2025). Elecon committed to reduce absolute scope 1 and 2 GHG emissions 54.6% by FY2033 from an FY2023 base year, and to have 81.4% of suppliers by emissions coverage adopt science-based targets by FY2028.

Takeaways

Elecon’s FY26 reflected a clear split: strong end-market demand and order intake, but a Q4 execution and dispatch timing issue in the Gear division that compressed margins. The company exited the year with a stronger order book, continued momentum in MHE, and a stated intent to remain cautious on near-term guidance due to macro uncertainty.

While management withheld FY27 guidance, it stated it does not expect degrowth versus FY26. For investors, the next few quarters are likely to hinge on whether Gear dispatches normalize and whether the higher order book converts into revenue without further customer-led deferrals.