Shakti Pumps says cost controls held EBITDA impact to 1%

Shakti Pumps (India) Limited said a roughly 3% quarter-on-quarter increase in raw-material costs had a net effect of only 1 percentage point on earnings before interest, tax, depreciation and amortisation (EBITDA), after it cut expenses by 2%. Management said solar selling-price flexibility remains limited while tender activity is concentrated.

Why did Shakti Pumps' EBITDA face pressure in Q2 FY27?

Shakti Pumps said raw-material prices increased by about 3% quarter on quarter in Q2 FY27, creating the principal direct pressure on EBITDA. Chairman Dinesh Patidar identified material costs and selling prices as the two main drivers of margins, while noting that the company does not control commodity prices. He later cited increases in mild steel, steel and copper during the quarter, which management had not expected.

Pricing did not provide an immediate offset because Shakti Pumps said its solar business accounts for the majority of sales and has limited pricing flexibility. Management described only one active tender, with execution concentrated in Maharashtra under the Magel Tyala scheme. It said participants from across India were focused on that same opportunity, an environment that limited the company’s ability to raise selling prices.

Sales realisation was broadly stable in Q2 FY27, according to Chief Financial Officer Dinesh Patel, with an approximately 1% impact from product mix. Management did not provide a numerical EBITDA margin for the quarter or a formal forecast for the next one. It said it could comment more specifically when tender prices and the price list under PM-KUSUM 2.0 become clearer.

How did Shakti Pumps offset the raw-material increase?

Shakti Pumps offset approximately 2% of the 3% raw-material increase through advertising-expense optimisation, Kaizen initiatives and tighter cost management, management said. Kaizen refers to continuous operational-improvement practices. The arithmetic left a net EBITDA impact of about 1 percentage point, according to the chairman’s response to an analyst’s question on margin stability.

The cost-control effort came as Q2 FY27 solar engineering, procurement and construction, or EPC, revenue reached about Rs 543 crore from 23,865 units. That installation volume was approximately 7% higher than the same quarter a year earlier. The company said operational efficiency was a focus while handling higher installation volumes and regional operating challenges.

Shakti Pumps also reported about Rs 95 crore of export revenue in Q2 FY27 and roughly Rs 40 crore from combined domestic, industrial and other segments. The solar EPC business was therefore the largest disclosed revenue stream, compared with exports and the combined non-EPC categories. In H1 FY27, solar EPC revenue was about Rs 1,230 crore and export sales were about Rs 177 crore, including Uganda project sales.

What limits Shakti Pumps' ability to raise solar prices?

Shakti Pumps said tender economics, rather than a stated reduction in its own headline selling price, constrain pricing flexibility. Under market-mode tenders, management said the rate determined through bidding applies to all bidders, while the farmer chooses which pump to buy. The company said being the lowest, or L1, bidder therefore does not by itself guarantee sales volumes.

Management said excessively low tender bids offer no additional advantage under this mechanism and that bidders were gradually recognising this. It added that rates did not decline in the most recent tender and said it expects some rate improvement. That is an expectation from management, not a disclosed change in current tender pricing.

The Magel Tyala tender also carried an Asian Development Bank condition that limited a single bidder to 25% of allocations, Shakti Pumps said. Management said this restricted its award to 25,000 pumps even though it believed it could have secured more. The company nevertheless cited the scheme’s orders and a later tender for 100,000 pumps as sources of business visibility for coming quarters.

Which levers could improve Shakti Pumps' margins?

Shakti Pumps identified stabilising raw-material prices, improved tender rates, continuing cost optimisation and internal solar-panel production as potential margin levers. Management said it expects war-related disruptions around the Strait of Hormuz to ease and material prices to stabilise, but this was an expectation rather than a forecast backed by a specific date or price level.

The company has begun trial production at a 500 megawatt solar-panel facility and expects commercial production within one to one-and-a-half months of the October 26, 2026 call. Management said it would gradually substitute internally made panels for externally sourced panels. It said the facility was established with the objective of expanding margins, although approvals, licences, testing and operational stabilisation meant benefits would not be immediate.

Shakti Pumps said results from the panel plant could begin to become visible in the following quarter, but it was too early to quantify the margin effect. The company also said its in-house manufacturing of variable-frequency drives, structures, pumps, motors and controllers could provide a cost advantage versus businesses that outsource components. Its pump and motor capacity utilisation was approximately 68% in H1 FY27.

What does PM-KUSUM 2.0 mean for Shakti Pumps' outlook?

Shakti Pumps said PM-KUSUM 2.0 could affect both order execution and pricing clarity, but its rollout timing remains unresolved. The chairman initially said he was fully confident the scheme would arrive in the ongoing quarter, with results expected in the following quarter. Later in the call, he said the centrally run scheme was undergoing revisions and that the company could not predict its launch date.

Management said the business had continued to operate without the scheme’s rollout, using Magel Tyala orders and existing export and domestic orders. It said its order book could cover the ongoing quarter and that it held an order book of about Rs 750 crore that needed to be executed within 90 days. Those comments show that the company’s near-term activity is not presented as dependent solely on PM-KUSUM 2.0.

For a delayed-scheme scenario, Shakti Pumps said it would seek greater cash sales in the open market, supplying domestic customers requiring solar pumps. It also pointed to diversification: rooftop, solar domestic and industrial business grew approximately 70%, while management said rooftop revenue grew 58% year on year in Q2 FY27. The company did not disclose the absolute rooftop revenue figure.

Conclusion

Shakti Pumps' account of Q2 FY27 margin pressure is specific: a 3% raw-material increase was reduced to a 1-percentage-point EBITDA impact through 2% savings from expense optimisation, Kaizen and cost controls. The company’s ability to sustain or improve margins remains linked to tender-based pricing, commodity costs and the execution mix of its solar EPC, export, domestic and rooftop operations.

The next disclosed milestones are the commercial start of the 500 MW panel facility, which management expected within one to one-and-a-half months of the October 26, 2026 call, and whether benefits appear in the following quarter. Other unresolved factors are PM-KUSUM 2.0 timing, tender rates and raw-material-price stability; management said it could not yet quantify their eventual EBITDA effect.