Harsha Engineers International Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Romania turns the corner: The long-troubled subsidiary posted positive EBITDA after several quarters of losses, driven by demand recovery, cost cuts and a richer finished-product mix. Management is cautiously optimistic but wants 1–2 more quarters before calling it sustainable.
• India Engineering delivers volume, margin resets: Top line grew 15% QoQ and 10% H1-to-H1, but EBITDA margin fell 280 bps sequentially, partly from a ~₹5.7 crores loss at the new Harsha Advantek plant where depreciation and interest are running ahead of revenue. Management sees sustainable India margins at 21%–22%.
• New capacity is live but will be a drag for a year: The Bhayla greenfield site (bushings, large cages, stamping) began production in Q1; utilization is below 10% and the subsidiary is expected to reach breakeven only around Q1 next year, with optimal utilization 2–2.5 years out.
• Export momentum is building on new product wins: Export growth has now run for two consecutive quarters, fed by existing-customer demand uptick and new products developed over the last 2–3 years that are now commercializing.
• What to watch next quarter: Whether Romania’s positive EBITDA holds for a third quarter, the pace of Advantek’s ramp toward breakeven, and any sign that the domestic customer split-related inventory hold-off has reversed.

Romania Turnaround

• First positive EBITDA in several quarters: Strong top line growth combined with cost reduction initiatives and a shift toward higher-value finished cage products (vs semi-finished) drove the improvement.
• Demand driver is industrial, not wind: The most improved European demand is coming from industrial customers; the wind market has yet to show a significant pickup.
• Volume still well below peak: When Romania was last profitably decent, volumes were 30%–40% higher even with a larger semi-finished share, so the current recovery has considerable headroom if demand continues.
• Restructuring is ongoing and open-ended: Cost reduction work continues and is showing positive signs, but management says there is still a long way to go and declined to put a clear timeline on when restructuring will conclude.
• Finished-product share is a deliberate lever: The company is actively working with customers to increase the proportion of finished products for more value add, and the improved mix was a material contributor to the quarter.

Rangwala: "I'm delighted to inform that after several quarters, Harsha Romania has posted a strong top line growth and has reported a positive EBITDA, which further strengthens our optimism that the trend witnessed in first quarter and the improvement in the undercurrents in terms of demand and offtake in quarter 1 has also continued in quarter 2."

India Engineering & Margin Dynamics

• Top line strong, bottom line resetting: India Engineering grew 15% QoQ and 10% H1-to-H1, but EBITDA and PAT margins declined sequentially. The single largest drag was a ~₹5.7 crores loss at Harsha Advantek, where ₹4.2 crores of interest and depreciation went unabsorbed because new production started only in Q1.
• Sustainable margin band is 21%–22%: Management urged investors to evaluate margins on a 6- or 12-month basis rather than quarter-to-quarter, and stated comfort at a 21%–22% India-level range.
• Bushing vertical is a standout: Sales grew 25% H1, and management expects ~30% full-year growth with a much stronger second half. Growth is coming from better global share of business and design transitions where customers adopt bushings in larger portfolios.
• Large-sized cages back on a growth track: Revenue grew 33%+ as the company addresses the large bearing market including wind, steel mill and industrial applications. Last full-year sales were ₹43 crores, per management.
• Stamping was flat to slightly down: One major air-conditioning consumer-goods customer had an exceptionally strong H1 last year that was not repeated; management still hopes to post ~5–7% full-year growth.
• One domestic customer disruption: A customer went through a business split effective 1st October, causing an inventory hold-off that weighed on the quarter.

Rangwala: "This is an ongoing process. So a better way would be look at us at least on a 6 or a 12-month basis, and you will find that we are very comfortable at India level in the range of around 21%, 22% sustainable margins."

Harsha Advantek & Bhayla Greenfield

• New plant is live but subscale: The Bhayla greenfield site started production in Q1 FY26, housing incremental capacity for bushings (advanced technology), large-size cages and stamping. Utilization was less than 10% in the last quarter, and incremental production lines are still being added over the next few months.
• Losses are a timing issue: Full depreciation and interest costs have begun but revenue is not yet sufficient to absorb them, creating a drag on consolidated India EBITDA. The subsidiary shifted from a small leased stamping facility to this new Phase 2 site, which will handle all incremental businesses going forward.
• Breakeven expected around Q1 next year: Management expects the subsidiary to become profitable within one year as capacity utilization improves, though it declined to give a precise quarterly revenue run-rate for breakeven, citing varying product mix, order levels and phased capacity buildup.
• Optimal utilization is 2–2.5 years out: Reaching full capacity will take time, dependent on customer approvals. At full utilization of land and building, management projects asset turnover of 1.5x–1.6x.
• Revenue guidance: ~₹130 crores this year: That compares with ~₹100 crores last year, with additional business expected in the second half of the current fiscal.

Majmudar: "breakeven will be difficult to give the guideline. The reason being there is a different product mix having a different order level possibility as well as margin possibility and capacity buildup is also happening in the various phases."

Export Growth & New Product Commercialization

• Two-quarter uptick builds confidence: Export growth has now run for two consecutive quarters, driven by an uptick in demand from existing customers on existing products, plus new products developed over the last 2–3 years that are now commercializing and winning new business.
• 258 new SKUs developed H1 FY26: The company is on track with its SKU development expectations and carries a pipeline of more than 8,500 SKUs.
• New project contracts are a FY27 story: Production has started in India for major resourcing, outsourcing and new project contracts. Sales may begin to show significantly in Q4 FY26, but the bulk will land in FY27.
• Japan-based customer pipeline accelerating: Modest 7% H1 growth is expected to accelerate in coming quarters on a strong pipeline.

Segment & Vertical Round-Up

Balance Sheet & Capex

• FY26 capex plan: ₹110–120 crores: Major capex at Bhayla is largely done now that the site is operationalized; incremental lines will come this year and a few more next year. FY27 capex guidance will be provided next quarter.
• State subsidies available: Some state subsidies are available for capex, subject to application and actual realization.
• Advantek debt under moratorium: No repayment is due this year on the Advantek side. Current maturities for the rest of the group are available in the annual report.
• Solar receivables: Management did not have updated figures handy; older pending amounts were ₹10–12 crores, with the rest being operational ongoing business.

Guidance & Commitments

Key Metrics