Kirloskar Oil Engines Q2 sales rise 19%, EBITDA falls 6%

Kirloskar Oil Engines (KOEL) recorded standalone net-sales growth of 19% to Rs 1,722.5 crore in Q2 FY27, the second quarter of financial year 2027, but earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6% to Rs 191.1 crore as its margin declined to 11.0% from 14.0% a year earlier.

Why did KOEL’s EBITDA fall despite higher Q2 sales?

KOEL’s EBITDA fell because its three main operating cost lines increased faster than revenue in Q2 FY27. Revenue from operations increased 19% year on year to Rs 1,739.0 crore, including Rs 16.5 crore of other operating income. Raw-material costs rose 22% to Rs 1,150.2 crore, employee costs increased 28% to Rs 115.0 crore, and other expenses rose 27% to Rs 282.7 crore.

The combined rise in raw-material, employee and other costs was Rs 285.4 crore, exceeding the Rs 279.5 crore increase in revenue from operations. As a result, EBITDA declined to Rs 191.1 crore from Rs 204.0 crore in Q2 FY26, although net sales increased from Rs 1,449.3 crore. The presentation reports these figures from continuing operations and excludes exceptional items where applicable.

How did KOEL’s Q2 margins compare with last year and Q1?

KOEL’s EBITDA margin was 11.0% in Q2 FY27, down 3.0 percentage points from 14.0% in Q2 FY26 and marginally below 11.2% in Q1 FY27. EBITDA rose 15% sequentially from Rs 165.5 crore in Q1 FY27 to Rs 191.1 crore, while revenue from operations rose 18% from Rs 1,471.3 crore.

The year-on-year comparison differed from the sequential recovery. Q2 FY27 net sales of Rs 1,722.5 crore were Rs 261.1 crore above Q1 FY27 and Rs 273.2 crore above Q2 FY26, but EBITDA remained Rs 12.9 crore below the prior-year quarter. Other operating income increased 62% year on year to Rs 16.5 crore, but did not offset the faster increase in operating costs.

What happened to KOEL’s profit after tax in Q2 FY27?

KOEL’s profit after tax (PAT) from continuing operations declined 14% year on year to Rs 115.2 crore in Q2 FY27, and its PAT margin fell to 6.6% from 9.2%. Profit before tax (PBT) before exceptional items declined 13% to Rs 154.5 crore from Rs 178.0 crore, following the decline in EBITDA and higher depreciation.

Depreciation increased 23% to Rs 42.9 crore, interest expense increased 27% to Rs 3.5 crore, and other income declined 16% to Rs 9.8 crore. Tax fell 12% to Rs 39.3 crore from Rs 44.5 crore, but this was not sufficient to prevent the decline in PAT. KOEL reported no exceptional items in its standalone profit-and-loss statement for the quarter.

The discontinued-operations comparison also affected the total reported bottom line. PAT from discontinued operations was nil in Q2 FY27, compared with Rs 7.3 crore in Q2 FY26. KOEL transferred its standalone business-to-consumer business to KFD, its wholly owned subsidiary, effective 11 October 2025; the earlier standalone business-to-consumer results are presented as discontinued operations and the comparative figures have been regrouped.

What does KOEL’s first-half performance show?

KOEL’s H1 FY27 sales growth also did not translate into higher operating or net profit. Net sales increased 17% year on year to Rs 3,183.9 crore, while EBITDA declined 5% to Rs 356.6 crore and EBITDA margin fell to 11.1% from 13.8% in H1 FY26.

Raw-material costs in H1 FY27 increased 20% to Rs 2,116.2 crore, employee costs rose 33% to Rs 226.0 crore, and other expenses increased 23% to Rs 511.5 crore. Revenue from operations rose 18% to Rs 3,210.3 crore. The faster growth in employee and other expenses than revenue was reflected in the 2.7-percentage-point reduction in the first-half EBITDA margin.

PAT from continuing operations for H1 FY27 declined 12% to Rs 214.5 crore and PAT margin was 6.7%, compared with 8.9% in H1 FY26. PBT before exceptional items was down 11% to Rs 288.3 crore, while depreciation rose 22% to Rs 83.3 crore and other income declined 14% to Rs 20.5 crore.

How did KOEL’s working-capital position change in Q2?

KOEL’s reported net cash position declined to Rs 309 crore in Q2 FY27 from Rs 475 crore in Q2 FY26 and Rs 485 crore in Q1 FY27. The presentation defines this measure as net debt including treasury investments and excluding unclaimed dividends, and it excludes the standalone business-to-consumer operation transferred to KFD.

Inventory increased to Rs 938 crore in Q2 FY27 from Rs 675 crore a year earlier, although inventory days declined to 63 from 64. Receivables rose to Rs 928 crore from Rs 704 crore, with receivable days increasing to 43 from 40. Payables increased to Rs 1,066 crore from Rs 845 crore, while payable days rose to 75 from 72.

Sequentially, inventory rose from Rs 820 crore in Q1 FY27 to Rs 938 crore and receivables increased from Rs 764 crore to Rs 928 crore. Payables rose from Rs 950 crore to Rs 1,066 crore, though payable days fell from 81 to 75. KOEL calculates these days using average values and the trailing three months method rather than simple period-end balances.

Conclusion

KOEL’s Q2 FY27 standalone result showed higher sales alongside lower operating and net profit. Revenue from operations increased 19% to Rs 1,739.0 crore, while EBITDA declined 6% to Rs 191.1 crore and PAT from continuing operations declined 14% to Rs 115.2 crore, as raw-material, employee and other expenses rose 22%, 28% and 27%, respectively.

The unresolved matter for subsequent results is whether operating-cost growth moves closer to revenue growth after the Q2 margin decline. Working-capital movements also remain relevant: inventory and receivables were Rs 938 crore and Rs 928 crore in Q2 FY27, respectively, while the reported net cash position was Rs 309 crore; comparability continues to reflect the 11 October 2025 transfer of the standalone business-to-consumer operation to KFD.