KIRLOSBROS Q2 FY27 Earnings Call: Order Inflows Cross Rs. 2,000 Crore, Commodity Costs Weigh On Margins

KIRLOSBROS held its Q2 FY27 earnings call on October 27, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Top Line, Margin Compression on Commodities

• Q2 FY 2026-2027 consolidated revenue grew 24% YoY to Rs.12,767 million — H1 FY 2026-2027 consolidated revenue grew 19% YoY to Rs.23,816 million, reflecting strong demand across domestic and international segments.
• Q2 consolidated EBITDA grew 16% YoY to Rs.1,432 million at an 11.2% margin — H1 FY 2026-2027 EBITDA grew 9% to Rs.2,738 million at an 11.5% margin; standalone margin declined sequentially to 10% in Q2 from 11.3% in Q1 FY 2026-2027.
• Standalone and consolidated gross margins declined ~400 bps in Q2 FY 2026-2027 on higher raw material costs (copper, gun metal, steel); Sanjay Kirloskar attributed the compression explicitly to commodity prices, not to execution of legacy orders at older prices, and expects the impact to moderate from Q3 FY 2026-2027 onward.
• Standalone domestic business delivered revenue of Rs.7,991 million (+23% YoY) in Q2 FY 2026-2027, with EBITDA up 37% YoY to Rs.937 million and PAT at Rs.544 million, up 45% YoY.
• Working capital rose ~Rs.225 crore standalone and ~Rs.250 crore consolidated in H1 FY 2026-2027 — elevated inventory (largely WIP) reflects raw material and bought-out components for large capital goods orders with 8-12 month lead times.
• Management expects margins to rise in H2 FY 2026-2027, as is seasonally usual; large consignments yet to dispatch are expected to go out in H2 FY 2026-2027, contributing to both inventory reduction and higher margins.

Record Inflow Quarter, Broad-Based Visibility

• Q2 FY 2026-2027 consolidated order intake grew 68% YoY to Rs.20,472 million — order inflows touched ~Rs.2,000 crore for the first time, and Sanjay Kirloskar clarified no single material large order drove it; the inflow comprised many smaller-sized orders.
• Domestic order book (excluding small pumps) grew 29% YoY to Rs.29,264 million as of September 2026, with good order inflows across segments.
• Overseas pending order book stood at Rs.17,013 million, up 32%, providing strong visibility for the coming quarters.
• Some orders that could have been recognized in Q1 FY 2026-2027 were carried into Q2 because KBL does not recognize orders until commercial terms and pricing are to its satisfaction.
• Sanjay Kirloskar cautioned against reading the company quarter-to-quarter — large orders sometimes get delayed and are placed when customers are ready; no sector-wise order inflow breakups are disclosed, with analysts directed to page 12 of the investor presentation.

Export-Led Growth, Services Drag, UK Structural Weakness

• International revenue grew 24% YoY in Q2 FY 2026-2027, driven by strong execution at SPP UK, SPP USA and the Dutch group; international EBITDA was Rs.233 million at a 5.3% margin, with the moderation attributed to lower contribution from the higher-margin services business.
• UK EBITDA margins fell from 12% in FY 2024-2025 to 7% in FY 2025-2026, and the UK business made ~0% profit in H1 FY 2026-2027; UK contributes 17-18% of total revenues. Drags in FY 2026-2027 include material costs up 8%, a growing lower-margin oil & gas order book, rising employee-related expenses, and lower service revenue.
• Alok Kirloskar expects UK margin recovery in FY 2026-2027 (on both KBL and UK fiscal-year bases), though not to FY 2024-2025 levels; FY 2027-2028 margins are expected to be similar to FY 2024-2025. However, percentage margins may not recover in FY 2027-2028 due to lower-margin oil & gas project intake and higher ERE, with recovery more likely in FY 2028-2029 per management's hedged projection.
• Growth is export-led, not domestic UK demand — the UK subsidiary ships to the US and other markets with a currency tailwind; key drivers are oil & gas jobs from new gas fields in Louisiana (e.g., CP2), a boom in Guyana oil & gas, and Qatar's North Field (NFPS), where KBL has pump content on all compression platforms (L&T secured Comp 4; Saipem secured Comp 2 and Comp 5).
• Management said UK domestic industrial demand is "completely finished" at electricity prices of Rs.30/unit — no petrochemicals/chemicals demand and no new North Sea drilling; management cited an open letter from Jim Ratcliffe (INEOS owner) stating "chemicals can no longer be made economically in the UK/Europe" at current power prices.
• UK AMP8 (Asset Management Program 8) has started but is not yet delivering noticeable numbers; management hopes it picks up given it is a five-year scheme. Services contracts are a delay, not a change in direction — ground assessment of assets (mostly other brands) is needed before contracts start; execution began in Q2 FY 2026-2027 with more contracts expected to kick off in Q3 and Q4 FY 2026-2027.
• Alok Kirloskar expects service to contribute up to ~40% of total business at the KBI BV level over a 3-year cycle — current contribution is ~35% at the SPP UK level as of Q2 FY 2026-2027.

Nuclear Pipeline Builds; SMR Reality Check

• NPCIL has floated tenders for 32 primary coolant pumps (PCPs) across 3 plants (per the analyst citing NPCIL-uploaded documents, as of Q2 FY 2026-2027); KBL is technically approved, has completed the material test, and hopes to win the order — bids are scheduled to open on 21st January 2027 (Q4 FY 2026-2027) per the tender documents.
• Q2 FY 2026-2027 nuclear orders comprised 10 primary circuit pumps and 57 can motor pumps, with the combined value of the can motor pump and primary-side safety packages estimated by Sanjay Kirloskar at ~Rs.60-70 crore (approximate); the power order book rose from ~Rs.600 crore to ~Rs.700 crore sequentially (Q1 to Q2 FY 2026-2027, per the analyst).
• The large-casting sourcing hurdle for PCPs has been crossed — capable foundries have been identified; however, NPCIL's first PCP has still not been tested, and management hopes this does not come in the way of deliveries under the new tender. Management did not quantify how many of the 32 PCP orders KBL expects to win.
• Domestic capital goods demand over the next 12 months is driven by thermal power, with nuclear power expected to drive growth "into the future"; oil & gas and infrastructure-linked segments (water, building boom) also drive demand — scope is domestic India. Oil & gas sales jumped ~5x per the Q2 FY 2026-2027 press release (cited by the analyst).
• Sanjay Kirloskar gave an SMR reality check: only two SMRs are operating worldwide — one on a barge in the Arctic Ocean (Russia) and one China just commissioned; GE Westinghouse units are not expected to be available till 2033, and DAE's own SMR is expected ready in the same time frame (~2033).
• Data centers in India are "just about starting"; management stated KBL's overseas presence should enable it to offer the best products in India for this segment.

US Data Center Framework, Water Demand, Small Pumps

• KBL is in the process of signing a framework agreement with a large US data center operator (identity undisclosed until signing) — once signed, the company would be the primary supplier to the operator for all of its data centers, and management expects this to translate into multiple orders rather than a single job.
• No timeline committed for signing the framework agreement — Alok Kirloskar declined to share a date, stating the timeline is not fully in the company's control because the very large operator has imposed stringent conditions still under negotiation; while the potential business is "quite large," management wants to avoid doing anything "too risky" in the terms.
• Drought has been declared in districts of Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Rajasthan — Sanjay Kirloskar noted state action will take time and "water has to be there in order to be pumped"; KBL historically does not take orders directly from state governments but will be ready to quote to EPC contractors when they tender.
• Small/retail pumps are expected to move going forward — Q3 is historically a good quarter, and drought-like conditions could support demand for small retail pumps in Q3 FY 2026-2027; small pumps grew 12% in H1 FY 2026-2027 (vs ~20-23% standalone revenue growth), with ~50% of that growth from value (price) per Rama Kirloskar.
• The 10% price hike was taken in January (Q4 FY 2025-2026) — management believes KBL is enhancing market share as competitors face foundry shutdowns, LPG shortage and wage code changes.
• Fire pump market worldwide is currently estimated at ~$0.5 billion — commoditization risk at the bottom end as Chinese companies obtain FMUL accreditation; KBL has been urging FMUL to audit not just plants but also installed sites.

Double-Digit Growth Guidance Held; Margin Guidance Withheld

• Management remains confident of delivering double-digit revenue growth in FY27 over FY26 for the standalone businesses — when asked whether strong H2 FY 2026-2027 execution momentum would beat this guidance, management pointed to large capital goods order booking but did not update guidance.
• SPP margins: Alok Kirloskar said H2 FY 2026-2027 should be noticeably better than H1 FY 2026-2027 — he did not commit to a "material" improvement when asked whether the earlier H2 FY 2026-2027 normalization guidance had been delayed by a couple of quarters or pushed to FY 2027-2028.
• Margin guidance declined — asked whether a 15% margin is a reasonable aspiration over the next 1-3 years (FY 2027-2028 to FY 2029-2030), management said "your guess is as good as mine," expecting enough competition as all players chase these orders; KBL is "not in business to make a loss" but cannot say what margins will be right now.
• For FY 2027-2028, UK/SPP absolute (physical) numbers are expected to be comparable to CY2024 / FY 2024-25 as the pipeline builds, but percentage margins may not recover in FY 2027-2028; recovery is more likely in FY 2028-2029 per management's hedged forward projection.
• Management finds an exact margin projection difficult right now given many upcoming petrochemical, midstream and upstream jobs, which it wants to win for the future spare parts revenue they generate; margins will depend on how tight operations are and on material costs.
• Outlook is optimistic, backed by a healthy mix of domestic and international business, a robust order pipeline, and continued focus on operational excellence — with the company expected to grow with India's economic growth.