Kirloskar Oil Engines Q4 FY26: Record Sales, Higher Profit, and a Bigger Capex Bet

Kirloskar Oil Engines Limited ended FY26 with its strongest quarter on record. On a standalone basis, Q4 FY26 net sales reached INR 1,522 crore, up 24% year on year. For the full year, standalone net sales rose 25% to INR 5,604 crore. Consolidated performance was similarly robust. Revenue from operations in Q4 FY26 increased 21% year on year to INR 2,116 crore, while profit after tax from continuing operations rose 47% to about INR 162 crore.

Management framed the year as an outcome of sustained execution across cycles, with growth not pursued at the cost of profitability. The company also emphasized its expanding presence in higher horsepower nodes, improving market share, and a deliberate strategy to build “international” businesses rather than remain an exporter.

Growth drivers: Power Gen leads, Industrial stays healthy, and B2C rebounds in Q4

Standalone growth in Q4 FY26 was broad-based across the B2B portfolio. Power Gen revenue rose to INR 708 crore (30% YoY), Industrial to INR 371 crore (24% YoY), Distribution and Aftermarket to INR 281 crore (20% YoY), and International B2B to INR 162 crore (10% YoY). Power Gen remained the largest piece of the standalone mix at 47% for the quarter.

On a consolidated basis, segment reporting shows the same structure clearly. In Q4 FY26, consolidated segment revenues were INR 1,557 crore for B2B, INR 339 crore for B2C, and INR 221 crore for Financial Services. Q4 FY26 was particularly strong for the B2C business, with revenue rising 36% quarter on quarter to INR 339 crore, aided by a recovery in domestic sales and continued export traction.

The management commentary also provided demand color. For Power Gen, the company said it grew significantly faster than the industry, noting that the overall diesel generator market grew 18% to around 1,79,000 units (including telecom) while KOEL grew 41% and sold upwards of 50,000 units in FY26. For Industrial, management highlighted Marine, Railways, Construction, and Mining, and discussed how the emission transition in construction equipment required long customer qualification cycles but still resulted in strong growth.

Financial summary (as reported)

Note: The company’s presentation also included “performance highlights” slides that cite standalone Q4 FY26 PAT of INR 118 crore and FY26 PAT of INR 464 crore, described as excluding exceptional items. The detailed P&L table separately presents PAT from continuing operations and exceptional items.

Margins, working capital discipline, and what management did not disclose

Standalone EBITDA margin in Q4 FY26 was 12.6% (vs 12.3% in Q4 FY25). For FY26, EBITDA margin was 13.1% as presented in the standalone P&L table. Management linked margin outcomes to product mix by kVA nodes and noted that there was no margin deterioration, with operating leverage visible in some nodes.

At the same time, management acknowledged a volatile raw material backdrop. In response to questions about commodity inflation and pricing, the company did not quantify specific price hikes but stated that some cost inflation may be difficult to absorb fully and could be passed on to the market.

Working capital metrics in the presentation point to tighter inventory control in the quarter. Standalone inventory days improved to 48 days in Q4 FY26 from 66 days in Q3 FY26. Receivables remained around 41 days and payables around 60 days. The company reported a net cash position of INR 552 crore as of Q4 FY26 (net of debt, including treasury investments).

However, a consistent theme through the Q&A was limited disclosure on certain growth vectors. Management declined to provide:

• volume versus price growth split for Power Gen and Industrial
• high horsepower contribution to the Power Gen segment
• data center contribution as a share of Power Gen

The company provided qualitative progress updates instead, including traction for Optiprime and sales capability in higher kVA nodes.

Strategic priorities: high horsepower, international build-out, and capex at Kagal

The most consequential forward-looking discussion was on capacity expansion. Management discussed two capex programs centered at the Kagal facility:

• an INR 700 crore program for 50,000 engines, described as adding and enhancing lines within the existing plant, and stated to come online by April of the next year
• an INR 1,400 crore program over the next two years for 20,000 engines, described as fully new capex, including a new building at the same site and new lines and equipment

Management indicated that the newer INR 1,400 crore program is linked to higher horsepower engines and the broader international opportunity. The CFO also shared an asset turn range of 4 to 5 depending on nodes and stated that using an asset turn of 4 implies a peak revenue potential of roughly INR 5,000 to 6,000 crore once the capex is capitalized and begins contributing.

Operationally, management discussed progress in high horsepower and Optiprime. The CEO said the company has sold routine units up to 3,000 kVA and sold a few hundred Optiprime units in FY26. The company also cited its nuclear power execution for Nuclear Power Corporation of India, stating it is executing 10 units and that each unit is a 6.3 megawatt genset, reflecting capability for larger applications.

Alongside capex, KOEL is also adding organizational capacity. The company incorporated Kirloskar Advanced Systems Private Limited to pursue advanced technology and systems integration opportunities, particularly for defence and other key accounts. Management positioned this as a step beyond the traditional engine business.

On international strategy, management repeatedly emphasized the difference between exporting and building an international business. The stated approach is to focus on selected regions, build fit-for-market products, channels, and service processes, and invest in local capability.

Financial services and the broader group structure

The consolidated financials include a Financial Services segment (Arka group). In Q4 FY26, segment revenue was INR 221 crore and segment result (as presented in segment results) was INR 28 crore. Management also noted that total investment in AFHPL stood at INR 1,053 crore as of March 31, 2026 and that Arka’s consolidated PAT was INR 20.9 crore in Q4 FY26 and INR 67.7 crore for FY26.

Arka’s asset quality was discussed directly in the Q&A. The CFO of Arka stated that GNPA was 1.2% and NNPA was 0.3% as of March 31, 2026, unchanged from the previous quarter, with GNPA in absolute terms coming down.

Takeaways

Kirloskar Oil Engines closed FY26 with strong top-line growth and sharper profit growth in Q4. The company’s segment disclosures show B2B remains the core earnings driver, while B2C and Financial Services add diversification. The near-term focus areas are clear in management commentary: expand high horsepower presence, build stronger international platforms, and invest aggressively in capacity at Kagal.

The key monitorables from here are execution on the large capex cycle, the pace of ramp-up in high horsepower and data center applications, and the company’s ability to protect margins in a volatile raw material environment. Management reiterated its FY30 ambition of becoming a USD 2 billion company, and FY26 performance is positioned as progress toward that goal.