Shilchar Technologies Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Demand cycle has multi-year visibility: Revenue grew 31% YoY to INR171 crores, and management sees the domestic electrification and renewables tailwind lasting at least five to six years.
• Tariffs are a customer problem, not a Shilchar problem: US customers are absorbing the full duty impact because competitors in other countries also face tariffs, and Shilchar's quality premium makes substitution hard.
• The largest expansion ever is fully self-funded: The Gavasad 3 plant adds 6,500 MVA for INR90 crores from internal accruals, taking total capacity to 14,000 MVA by April 2027 and unlocking the 220 kV class.
• Margins are stable and defended: EBITDA margin held at 31% with net profit up 40% YoY; management expects to maintain margins through the expansion cycle.
• What to watch next quarter: Whether the 220 kV certification completes on time, the pace of order booking for the new 220 kV class starting January 2027, and any change in US customer behaviour as tariff costs compound.

Demand Environment

• Domestic solar is the engine: Solar and wind generation accounts for roughly 80% of domestic revenue, and India commissioned approximately 21.7 GW of solar capacity in H1 FY26 alone, creating sustained order inflows.
• The electrification runway is long: Management believes the government's push for 100% electrification and renewable energy will take at least five to six years to play out, providing demand visibility well beyond the current expansion cycle.
• US data centres are a new pull: AI-driven data centre demand in the US has "really shot up," adding a structural demand layer on top of the existing utility and renewable order book.
• Customers are not flinching: No customer has placed orders on hold, cancelled orders, or pushed back deliveries despite the August 27 US tariff measures.
• Export geography is diversifying: The US represents only about 12% of total revenue; the rest of exports go to the Middle East, Africa, and recently started Europe and Far East markets, all with encouraging outlooks.

Shah: "Yes, but we don't see that happening for next at least three, four years. I mean next three, four years, it should be good. And like I said, most of our domestic customers, they prefer buying from us and they don't mind paying a premium to us as well."

Tariffs & Competitive Position

• The tariff pass-through is working: US customers are taking the full brunt of the duty because Shilchar's competitors operate from different countries that also face tariffs, leaving buyers with no duty-free alternative.
• Quality creates pricing power: Most domestic customers are repeat buyers over 10 to 15 years; the product gives very little trouble at site and the service team responds quickly, so customers do not mind paying a premium.
• US manufacturing is off the table: Management ruled out setting up in the US because transformer manufacturing is very labour-intensive and would be too expensive to operate there.

Shah: "The customers are ready to pay for it as of now because our competitors for these markets, they are in different countries, which also have tariffs."

Capacity Expansion: Gavasad 3

• The numbers: The third Gavasad plant is the largest capacity addition in company history, adding 6,500 MVA to reach a total of 14,000 MVA by April 2027, with a capital outlay of approximately INR90 crores funded entirely through internal accruals.
• New product class unlocked: The facility will enable manufacturing of up to 100 MVA, 220 kV class transformers, a step up from the current product range that opens both the transmission segment and export markets.
• The ramp-up path: Management targets 60% to 70% capacity utilisation in the first year at the new plant, with full capacity eventually supporting turnover of INR1,400 crores to INR1,500 crores.
• Why not earlier: Management pushed back on the idea that the expansion was a year late, arguing that waiting allowed the company to accrue surplus and avoid taking a loan, consistent with a philosophy of sustainable, debt-free growth.
• No outsourcing, no quality compromise: The company will not outsource any production because controlling quality in-house is what built its market reputation.

Shah: "No, we don't plan to do that as well because we want to have control on our quality. And because of that only we have built a good reputation in the market."

220 kV Strategy

• Certification underway: The 220 kV class transformer is currently in the certification and testing process, a prerequisite before commercial orders can be booked.
• Domestic first, then exports: The initial strategy is to offer 220 kV transformers as a package alongside inverter duty transformers for solar parks in the domestic market; once reference installations are established, the company will move to export markets.
• Timeline is specific: Order booking for 220 kV class transformers will start in January 2027, with manufacturing beginning in April 2027, and a lead time of approximately 22 weeks from order to dispatch.
• Revenue impact: The 220 kV class will increase both top line and bottom line, with existing customers already expressing interest.

Financial Outlook & Order Book

• FY26 on track: Management is confident of achieving INR750 crores to INR800 crores in revenue for FY26, with an on-hand order book of approximately INR300 crores plus, split INR175 crores domestic and INR125 crores export.
• FY27 growth path: Revenue is targeted at INR850 crores, representing roughly 10% to 20% growth, with H1 FY27 alone targeted at about INR400 crores.
• Margin stability expected: EBITDA margins are expected to remain at current levels for the next year or so, with no issue maintaining them through the expansion.
• Capacity utilisation running hot: The company operated at approximately 95% capacity utilisation in Q2 and expects the same for the rest of FY26.
• Export mix steady: The export-to-domestic split is expected to hold at 50:50 by year-end.
• No diversification planned: Management explicitly declined to consider any product beyond transformers, focusing entirely on executing the current expansion.

Guidance & Commitments

Key Metrics