Key Financial Performance

Q2 FY27 Financial Results

  • Revenue from operations: ₹1,344.55 million (compared to ₹1,248.4 million in Q2 FY26, representing 7.7% YoY growth)
  • Gross profit: ₹772.67 million (compared to ₹629.93 million in Q2 FY26)
  • Gross profit margin: 57.5% (compared to 50.5% in Q2 FY26)
  • EBITDA: ₹77.79 million (compared to ₹76.57 million in Q2 FY26, representing 1.6% YoY growth)
  • EBITDA margin: 5.8% (compared to 6.1% in Q2 FY26)

The marginal dip in EBITDA margin was attributed to foreign exchange losses due to Mexican peso versus dollar movement.

Geographic Revenue Mix

  • Domestic revenue contribution: 68% of Q2 FY27 revenue
  • International revenue contribution: 32% of Q2 FY27 revenue

Business Overview and Operational Highlights

The broader demand for environmental and industrial water and wastewater treatment solutions remains encouraging, driven by:

  • Increasing concerns around industrial water availability
  • Tighter environmental compliance requirements
  • Growing focus on water recycling

Key sectors showing healthy opportunities include steel, solar manufacturing, chemicals, pharmaceuticals, food and beverage, and industrial wastewater recycling.

Order Book Position

  • Order book as of September 30, 2026: ₹7,164 million
  • Year-on-year growth: 34%
  • Sequential growth: Strong momentum maintained
  • Domestic order inflows during H1 FY27: Increased by 55% compared to H1 FY26

Significant Order Wins

Mexico Plant Order

Secured a significant order from a leading global alco-bev player for its Mexico plant.

Solar Photovoltaic Order (Post-Q2)

On October 1, 2027, wholly owned subsidiary Rochem Separation Systems (India) Private Limited received orders aggregating ₹14.25 crores from a leading solar photovoltaic module manufacturer for their Hyderabad facility.

Order Scope: Supply, installation, testing, and commissioning of advanced water and wastewater treatment systems including pretreatment, reverse osmosis, and evaporation systems.

Execution Timeline: Equipment delivery scheduled for end of November and early December 2026, with overall completion targeted by mid-January 2027.

New Business Initiatives and Growth Avenues

H-Xtreme Heat Exchanger

  • Continues to gain traction with received orders
  • Corrosion-resistant design applicable across demanding industrial environments
  • Expands addressable market beyond conventional water treatment

Compressed Biogas (CBG)

  • Progressing from development into execution
  • Supported by orders received in the CBG segment
  • Leverages capabilities in anaerobic digestion
  • Enables customers to convert organic waste into renewable energy

Industrial Dehumidification

  • Partnership with WaHa now in motion
  • Broadens portfolio into humidity control and industrial product drying
  • Creates cross-selling opportunities across pharmaceuticals, food and beverages, battery manufacturing, solar manufacturing, and semiconductors

Membrane Technology Portfolio

  • Chlorine-resistant membrane technology being commercialized for treated sewage applications
  • New membrane products positioned for data centers, semiconductors, industrial water recycling, and treated sewage markets in GCC region
  • Evaluating partnerships and licensing agreements to scale technologies across international markets

Roserve Water-as-a-Service Platform

  • Important pillar of growth strategy through asset-light water management model
  • Helps customers address water treatment and sustainability requirements
  • Enables building recurring and annuity-style revenue streams

Desalination Business

  • More than three decades of experience
  • Well positioned to address demand from industrial desalination, coastal areas, offshore and marine applications, and Indian Navy's modernization programs
  • Established capabilities in naval desalination provide strong platform for future opportunities

Operational Challenges and Response

Supply Chain Disruption

Geopolitical developments in the Middle East affected operations in the GCC region and created supply chain and logistics constraints, including delays in movement of membranes and other critical components from UAE. These factors delayed project execution and shipments in Q1 FY27.

Recovery in Q2

During Q2, execution improved and the business returned to year-on-year revenue growth. The company maintains adequate inventory and critical stocks to support both domestic execution and future export requirements.

Sharjah Facility Operations

  • Sharjah remains main production center for membrane products
  • Operating at 50-60% capacity currently
  • Export projects previously assembled in Sharjah now being assembled in India and shipped directly to clients
  • Investment review for Sharjah facility scale-up planned for Q4 FY27

Financial Guidance and Outlook

FY27 Guidance

  • Revenue growth: 15-20% for FY27
  • EBITDA margins: Expected to reach low double-digits (10-12%)
  • Target: Return to FY25 margin levels

Long-term Targets

  • Annual growth rate: 20-25% per annum targeted
  • EBITDA margins: 14-16% expected by FY28
  • Steady-state EBITDA margin: 14-15% considered achievable long-term

Capital Expenditure

FY27 Capex

  • Vasai facility improvements: ₹15 crores (funded majorly from IPO proceeds)
  • Maintenance capex: ₹15-20 crores
  • Total capex: ₹30-35 crores

FY28 Capex Outlook

  • Estimated: ₹50-60 crores range
  • Includes Sharjah facility capex and potential expansion planning for another manufacturing unit

Working Capital Management

  • Debtor days: 110-120 days
  • Working capital cycle: 140-150 days
  • Actively working to reduce working capital cycle
  • Good support from working capital bankers
  • Non-fund based limits requirement higher for bank guarantees and letters of credit
  • Debt-equity ratios healthy with adequate appetite for debt

Market Position and Competitive Advantages

Technology Differentiation

  • Lowest operating cost for zero liquid discharge
  • Superior lifecycle cost analysis positions company for L1 status
  • Membrane manufacturing capabilities from raw fabric to finished product
  • Ability to command premium over Chinese products due to longevity and value-add

Growth Levers Identified

1. Common effluent treatment plants conversion to zero liquid discharge

2. Dehumidification business

3. Export market expansion into Europe and North America

Revenue Business Mix

  • 40% from steady-state business (O&M and spares/consumables sales)
  • 60% from projects business (S&P sales) which shows quarter-to-quarter volatility
  • Expect greater stability when after-sales business becomes more significant (estimated 2-3 years)

O&M Business Details

  • Order book: ₹160 crores (12-month forward visibility)
  • H1 FY27 execution: ₹57 crores
  • Expected H2 FY27 run rate: ₹110 crores
  • EBITDA margins: Low 20s percentage range
  • More profitable compared to S&P business

Analyst Q&A Key Points

Margin Volatility Explanation

  • Business is H2 heavy with Q3 and Q4 typically showing maximum revenue growth
  • Mix of normal orders (₹5-15 crores) and large orders (above ₹50 crores)
  • Export orders particularly lumpy
  • Larger projects execution timing causes quarter-to-quarter variations

Middle East Operations Update

  • Facility never shut down during conflict
  • Bottleneck remains in materials coming into and out of UAE via sea
  • Air freight operations back to pre-war levels
  • Logistics planning required for bulk manufacturing requirements

Investor Update

  • AF Holdings (PE investor) exiting due to fund life limitations