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ISGEC FY26: EBITDA up, PAT hit by Philippines depreciation

Isgec Heavy Engineering ended FY26 with higher consolidated income and stronger operating profitability, but a lower reported profit after tax. Consolidated total income rose to Rs 6,922.3 crore in FY26 from Rs 6,464.4 crore in FY25. EBITDA increased to Rs 671.3 crore with a 9.7 percent margin, up from Rs 566.1 crore at 8.8 percent in FY25.

The headline drag was profit after tax. Consolidated PAT fell to Rs 154.0 crore from Rs 204.4 crore, despite improved EBITDA. Management attributed the decline largely to higher depreciation after a change in classification for its Philippines ethanol subsidiary, Cavite Biofuel Producers Inc.

Q4 showed sharp improvement, but FY26 tells a different story

The March quarter was strong. Q4FY26 consolidated total income rose to Rs 2,111.0 crore from Rs 1,747.4 crore in Q4FY25. PAT for the quarter increased to Rs 85.0 crore from Rs 18.4 crore, with PAT margin expanding to 4.0 percent.

However, the full year results were shaped by accounting changes tied to the Philippines business. In the earnings call, management explained that the Philippines unit was classified as assets held for sale from December 2024 to December 2025, and depreciation was not charged during that period. Given uncertainty around the timeline for a sale, the company reclassified the business back to continuing operations. That resulted in depreciation being recognized for the relevant periods.

Management emphasized that the change does not affect cash profit, cash flows, or EBITDA, but it does reduce reported profit.

Financial summary

Segment mix: manufacturing margins expanded, sugar and ethanol weakened

ISGEC reports three major segments in its consolidated disclosures: manufacturing of machinery and equipment, industrial projects, and sugar and ethanol. FY26 segment performance showed a clear divergence in margins.

Manufacturing of machinery and equipment delivered revenue of Rs 2,764.6 crore in FY26, up from Rs 2,500.3 crore in FY25. EBIT margin expanded to 13.8 percent from 11.7 percent. Management reiterated in the concall that manufacturing EBIT margins have remained within its guided 12 to 13 percent range for three consecutive years, and that quarterly volatility is largely mix-driven because revenue is booked on dispatch.

Industrial projects revenue increased to Rs 3,702.1 crore from Rs 3,487.4 crore. EBIT margin remained steady at 4.7 percent versus 4.6 percent.

Sugar and ethanol revenue was largely flat at Rs 883.6 crore, compared with Rs 884.0 crore in FY25. The key change was in profitability. EBIT margin fell sharply to 4.5 percent from 8.8 percent.

FY26 segment performance

Philippines ethanol plant: operations began, accounting caught up

A central topic in the presentation and earnings call was Cavite Biofuel Producers Inc., a step-down subsidiary in the Philippines with a 130 KLPD ethanol capacity. Management said ethanol production began on December 17, 2025 using sugarcane as feedstock, and the sugarcane crushing season ended on April 20, 2026. The plant is now operated using molasses.

In the concall, management explained why reported sales were low in Q4 despite production. The unit required a Department of Energy allocation for bioethanol sales. As a result, ethanol was produced and stored, with allocations received for Q1FY27 and Q2FY27 at 6 million litres each. Sales started on March 25, 2026, with actual dispatch volumes in Q4 being limited.

Management also quantified key loss drivers at the subsidiary level. For FY26, CBPI loss was stated at Rs 295 crore, including about Rs 170 crore of depreciation and about Rs 95 crore of forex variation. Depreciation is expected to decline to around Rs 150 crore in FY27, while forex variation remains uncertain.

The company also indicated it continues to look for buyers, noting that a running plant demonstrating performance is easier to sell.

Order book and FY27 direction: manufacturing-led growth and better project mix

ISGEC ended FY26 with a consolidated order book of Rs 7,984.0 crore, broadly stable versus Rs 8,077.0 crore at the end of FY25. The mix is tilted toward the private sector and India, but with meaningful international presence.

As of March 31, 2026, the order book was 84 percent private and 16 percent PSU and government. It was 75 percent domestic and 25 percent international. By segment, industrial projects formed 64 percent and manufacturing 36 percent.

For FY27, management guided to standalone revenue growth of 10 to 12 percent. It expects the bulk of the incremental revenue to come from manufacturing, with projects growing in the low single digits. Management also said it booked Rs 1,400 crore of new orders in the first two months of the new quarter, and disclosed that the opening order book of about Rs 7,000 crore excludes two cancelled orders of about Rs 550 crore.

Margins remain a key investor focus given input cost inflation and logistics issues mentioned in the call. Management cited rising costs in steel forgings, castings, chemicals, and certain imported materials, as well as higher fuel costs due to gas shortages and longer transit times. Despite this, it expressed confidence in maintaining 12 to 13 percent EBIT margins in manufacturing. For the projects business, management expects improvement toward 5.5 percent EBIT margin in FY27, supported by closure of older long-duration projects and a shift to shorter-duration jobs.

The export story was one of the clearer positives. Management stated standalone export revenue rose to Rs 1,169 crore in FY26, about 22 percent of revenue, up from Rs 532 crore in the prior year. It expects exports to remain elevated, with Southeast Asia and Africa highlighted as key geographies. The company said it typically uses confirmed letters of credit denominated in dollars or euros and takes forward covers.

Takeaways

FY26 reinforced ISGEC’s operational resilience in its core engineering businesses, with higher consolidated income and improved EBITDA margin. The fall in consolidated PAT was largely explained by depreciation catch-up linked to the Philippines ethanol subsidiary’s reclassification back into continuing operations.

For FY27, the company has guided to 10 to 12 percent standalone revenue growth, led by manufacturing, supported by capacity additions and a stronger export run-rate. The main swing factor remains the Philippines ethanol business, where ramp-up and accounting charges can continue to add volatility to consolidated earnings even as cash operations stabilize.