Harsha Engineers International Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Consolidated revenue jumped 27% in Q4, powered by the Solar business doubling to ₹91 crore while India Engineering grew a healthy 15.7% YoY.
• Advantek is the margin unlock story for FY27: the subsidiary turned EBITDA-positive in Q4 and management expects a 3x sales jump this year, which would sharply narrow consolidated losses.
• Export momentum is real and tariff-assisted: India exports grew 17% in FY26, US shipments are accelerating after cage tariffs dropped to zero, and European demand is slowly improving.
• The bushing thesis is playing out: a design shift in wind gearboxes from bearings to bushings drove ~25% growth to ₹127 crore, and management is targeting another 25–30% this year.
• What to watch next quarter: whether Advantek’s 3x sales ramp materializes on schedule, the pace of Romania’s loss reduction, and any firming of the “hazy” European demand picture.

The Advantek Turnaround

• The drag: Advantek posted a combined loss of ₹11.4 crore in FY26 despite positive EBITDA of ₹4 crore, weighed down by higher depreciation and interest from its ongoing fixed-asset build.
• The ramp: Management expects at least 3x sales growth in FY27, with current installed capacity reaching peak utilization in roughly two years. A Phase 2 expansion plan is being firmed up now and work will start this year.
• The bottom-line bridge: A significant reduction in consolidated subsidiary losses is promised, driven by Advantek’s improving trend, China’s already-positive and growing contribution, and further narrowing of Romania’s losses.
• Capex visibility: Maintenance capex in India runs ~₹30–40 crore annually; China’s brownfield steel-cage expansion will consume ~₹70 crore this year and ~₹20 crore next year, with operations starting H2 FY28.

Majmudar: "Exact quantification may be difficult, but definitely there'll be reduction. For sure. Significant reduction. For sure."

Export & End-Market Recovery

• India export engine: Exports from India grew ~17% in FY26, with US shipments picking up after the additional import tariff on cages was reduced to zero. Management declined to break the growth into end-market recovery, wallet share gains, and new commercialization.
• Europe: slow grind, no breakout: Demand improved slowly through the year and indications are positive, but the picture remains hazy. The real concern is turning around profitability amid massive inflationary pressure and ongoing restructuring.
• Domestic strength: India cage business grew ~11% (pure India-to-India), and the Big 3 bearing manufacturers are significantly ramping up capacity and demand, with indications of another investment round.
• Industrial leads, auto shows green shoots: Industrial has been strong for six-plus months and should continue; automotive is growing well in India with some potential green shoots globally but no clarity; wind has not picked up in Europe; railway shows positive signs in India and globally.

Rangwala: "I don't have a very clear direction or, like, an input from our customer on that demand improving to the level needed immediately, and we are continuing to work on the cost side of it. So again, a very hazy picture, but that's what we are working with right now."

Segment Growth Drivers

• Bushing thesis detail: Planets in wind gearboxes that earlier used bearings are now using bushings, driving drastic growth even as the underlying wind market is roughly flat to slightly growing in India.
• Stampings expansion: New capacity and additional product portfolio underpin a mid-term expectation of at least 15–20% growth.

Margin & Profitability

• India Engineering EBITDA came in at ~22% for FY26, described as quite satisfactory despite the Advantek drag. Margins improved on higher export sales, strong India demand, better product mix, cost control, and positive financial earnings.
• Subsidiary loss burden: Combined foreign subsidiary losses were ~₹9 crore in FY26, with Romania still running negative EBITDA. China posted positive EBITDA of ~11% and should improve further.
• Volume-led growth: The majority of growth was volume-driven; no significant material movement in the Sep–Dec quarter, though metal prices including brass moved from end-December through February/March.
• Medium-term margin ambition: Management expects EBITDA to improve marginally each year, targeting a 100–200 bps increase at the consolidated level over 2–3 years.
• Cost-side risks: The Middle East crisis has pushed up costs for oils, lubricants, and plastic cage material; the company is working on passing these through. Logistics have been unaffected as shipping routes remained clear of the immediate crisis.

Competitive Position & Wallet Share

• Structural advantage: Cage is only ~5% of total bearing cost by value, and big players stopped investing in new cage facilities or upgrades years ago. Harsha has accumulated volume, up-to-date technology, skill sets, and manufacturing capacity that customers now lack in-house.
• Consolidation tailwind: Some consolidation is underway in Europe, similar to chemicals and casting/forging sectors, which is driving Harsha’s endeavour to increase wallet share.
• Growth delayed, not lost: The last few years saw de-growth in Harsha’s biggest market of Europe, plus some in China and the US. Growth now being realized comes from new wallet share won during that period whose execution was delayed.
• Romania product mix fix: Cage proportion in Romania is only ~22%; management is pushing key customers to increase offtake and targeting a mix above 30–35%, which would improve profitability.

Rangwala: "cage is about 5% of the total bearing cost in terms of value. Now, the problem here is that the customer, the big players have stopped investing in new facilities or upgradation of their facilities over a period of last many years, whereas, we have a massive advantage of volume accumulation."

Guidance & Commitments

Key Metrics