Nelcast Q4 FY26: Profitability Improves as Pedapariya Ramp-up Takes Center Stage

Nelcast ended FY26 with steady top line growth and a sharper improvement in profitability, supported by better utilisation, product mix and cost control. Consolidated total income for FY26 stood at INR 1,342.4 crore, up 5.8 percent year on year. EBITDA rose 17.8 percent to INR 124.5 crore, while profit after tax increased 29.9 percent to INR 48.4 crore.

The Q4 picture was similar in direction, though not as clean on margins. Q4FY26 revenue grew 11.0 percent year on year to INR 371.2 crore and PAT rose 12.7 percent to INR 15.3 crore. However, Q4 EBITDA margin dipped to 9.4 percent from 10.3 percent, and EBITDA per kg softened to INR 13.5 from INR 14.8. Management attributed this to a lower export contribution in the quarter and an increase in raw material costs during February and March, noting that the company has a 100 percent pass-through mechanism with a one-quarter lag.

FY26 performance: modest revenue growth, meaningful operating improvement

Nelcast’s FY26 numbers show a company using operating levers more effectively. EBITDA margin expanded to 9.3 percent from 8.3 percent, and EBITDA per kg improved to INR 13.6 from INR 12.6 for the full year. Management said the year reflected structural improvement driven by better utilisation and a higher share of value-added products.

The balance sheet also improved. Net worth increased to INR 596.6 crore as of March 2026, while net debt reduced to INR 172.4 crore from INR 216.2 crore a year earlier. Return ratios moved up, with the presentation showing ROE at 8.1 percent and ROCE at 10.8 percent for FY26.

Revenue mix and demand drivers: domestic strength offsets export weakness

The investor presentation’s sector mix indicates a business still led by domestic automotive demand. For FY26, Nelcast disclosed the following sector-wise revenue mix: M and HCV at 42 percent, tractors at 29 percent, exports at 24 percent, railways at 3 percent, off-highway equipment at 1 percent and others at 0.5 percent.

In absolute terms, this implies exports contributed INR 384.9 crore in FY26 versus INR 445.2 crore in FY25. Management said export demand remained below last year levels for most of FY26 but improved towards the end of Q4, led by the U.S. market and partly supported by pre-buying ahead of emission-related changes. They added that customer schedules are normalising and sentiment has improved.

A key disclosure from the call was export concentration: management stated around 80 percent of exports come from North America. Europe is still early-stage. Nelcast said it has secured a couple of smaller European orders as a foot-in-the-door, with development ongoing and production expected in 2027. The company’s intent is to expand geography and sector diversity while continuing to deepen relationships in North America.

On the domestic side, management commentary remained constructive. They said tractor demand has stayed supportive, and commercial vehicle demand has remained strong, backed by freight movement and infrastructure activity. The presentation also highlighted that Nelcast’s share from tractors rose to 24.2 percent in FY26 from 22.6 percent in FY25, while M and HCV share rose to 41.9 percent from 36.8 percent.

Note: The presentation provides only percentage mix. Absolute values above are computed by applying the mix to FY26 total income and should be read as approximations.

Pedapariya and utilisation: the biggest swing factor for FY27

Plant utilisation disclosures were central to the Q4 call. Management said overall utilisation was about 65 percent in FY26. Ponneri operated at close to 100 percent utilisation, Gudur at about 55 percent, and Pedapariya at about 27 percent for the year. Pedapariya improved to about 35 percent utilisation in Q4, which management said was the highest achieved so far.

Management also clarified the profitability thresholds for Pedapariya. They said the plant can deliver positive EBITDA at around 35 percent utilisation, but interest and depreciation prevent full absorption at the PBT level. They believe PBT break-even requires roughly 40 to 45 percent utilisation. With new products starting early-stage ramp-ups, management expects Pedapariya utilisation to move to about 45 percent by Q4 of FY27.

The company’s product development pipeline is intended to support that ramp-up. Management stated that three large programs will move into ramp-up over the next few months, with a gradual scale-up over roughly 3 to 6 months (also referenced as 6 to 7 months). Two programs are in tractors and one in commercial vehicles, with two being export programs.

A differentiator repeatedly highlighted was Pedapariya’s capability for large castings. Management said the facility can produce parts up to about 1.8 to 1.9 meters long productively, compared to around 1.1 meters for the closest productive capability in India, and that only a handful of global foundries can match this. They also reiterated an ambition to move large castings to about 10 percent of revenue, though they said this could take a couple of years.

Guidance and capital allocation: steady capex, focus on mix and EBITDA per kg

Management’s forward-looking statements were more specific than typical quarter commentary. They indicated a minimum 10 percent revenue CAGR expectation over the next three years (stated as FY26 to FY29). On profitability, they said they are targeting EBITDA per kg of about INR 18 over the same period, while describing INR 15 as a reasonable steady-state level in a normal raw material environment.

Capex guidance remained conservative. Management said annual capex should be around INR 30 crore (also indicated as INR 30 to 35 crore), focused on maintenance, automation and efficiency improvements, with no major new line capex planned in the current year.

The company also discussed energy optimisation. Management stated that around 70 percent of power requirements are met through renewable sources and estimated minimum about 10 percent energy savings versus a comparable grid-powered foundry, while noting regulatory changes may affect the attractiveness of incremental renewable investments. They indicated a longer-term target of around 80 percent renewable power.

What to watch next

Nelcast’s FY26 outcome reflects a company improving profitability even without high revenue growth. The most important variables for FY27, based on management commentary, are the pace of Pedapariya ramp-up, the execution of the three large program launches, and the recovery path for exports.

There are clear risks embedded in the same narrative. Exports remain concentrated in North America, raw material volatility can create quarterly margin swings despite pass-through mechanisms, and labour availability issues can disrupt near-term operations. But the operating levers are also visible: higher utilisation, a larger share of complex products, and disciplined capex.

If Pedapariya moves toward management’s targeted utilisation levels and export schedules continue normalising, the company’s stated goal of INR 18 EBITDA per kg over the next three years becomes the key operational benchmark to track.