Financial Performance Summary

Profit Before Tax (PBT):

  • Q2 FY2027 (September 30, 2026): ₹290.78 lakhs
  • Q1 FY2027 (June 30, 2026): ₹704.36 lakhs (QoQ decline of 58.7%)
  • Q2 FY2026 (September 30, 2025): ₹803.96 lakhs (YoY decline of 63.8%)

PBT Margin:

  • Q2 FY2027: 9.02%
  • Q2 FY2026: 25.78% (YoY decline of 16.76 percentage points)
  • Q1 FY2027: 17.46%

Revenue:

  • Q2 FY2027: ₹3,222.17 lakhs
  • Q1 FY2027: ₹4,034.06 lakhs (QoQ decline of 20.1%)
  • Q2 FY2026: ₹3,118.39 lakhs (YoY growth of 3.3%)

Cost Structure:

  • Raw Material Cost + Conversion Costs Q2 FY2027: ₹2,237.31 lakhs
  • Raw Material Cost + Conversion Costs Q1 FY2027: ₹2,676.34 lakhs
  • Raw Material Cost + Conversion Costs Q2 FY2026: ₹1,826.47 lakhs (YoY increase of 22.5%)

Gross Profit Margin:

  • Q2 FY2027: 30.58%
  • Q1 FY2027: 33.66%
  • Q2 FY2026: 41.42% (YoY decline of 10.84 percentage points)

Drivers of Performance Decline

1. Sharp Increase in Raw Material Prices:

  • The company manufactures irrigation and sprinkler systems using HDPE and LLDPE granules as primary raw materials.
  • Raw material prices increased approximately 40% year-on-year due to geopolitical tensions driving crude oil prices higher.
  • Disruptions in global supply chains, shipping, and international trade intensified cost pressures.
  • Detailed raw material price comparisons (Aurangabad depot prices):
  • OPaL F2001S (LLDPE): +34.4% to +38.4% YoY increase across July-September 2026
  • RIL 46GP009 (HDPE PE63): +34.3% to +39.3% YoY increase across July-September 2026
  • RIL 46GP003 (HDPE PE100): +32.9% to +44.0% YoY increase across July-September 2026

2. Delayed Impact Due to Inventory Cycle:

  • The company maintains 45-60 days of raw material inventory.
  • Price increases began in Q1 FY2027 (June 2026 quarter), but the company consumed older inventory alongside new higher-priced inventory.
  • In Q2 FY2027, the company largely consumed newly procured inventory purchased at significantly higher prices, fully reflecting the cost increase.

3. Infrastructure Investments and Geopolitical Impact:

  • The company had undertaken investments to strengthen infrastructure and expand operational capabilities prior to the raw material price surge.
  • Initiatives included recruitment of experienced professionals and expansion into three additional states.
  • Geopolitical developments adversely affected expansion plans, resulting in lower-than-anticipated business volumes and capacity utilization.
  • Fixed costs (depreciation, finance costs, overheads) were allocated over lower production volumes, increasing per-unit costs.

4. Government-prescribed Selling Rates:

  • A significant portion of supplies are made under government subsidy schemes for the irrigation sector.
  • Supplies under these schemes must be made at government-prescribed rates, limiting the company's ability to revise selling prices in response to input cost increases.

5. Adverse Impact of Drought on Sales:

  • Demand for products is significantly influenced by agricultural conditions and farmers' purchasing capacity.
  • Prevailing drought conditions reduced agricultural activity and farmers' willingness to invest in irrigation systems.
  • Sales during the quarter were approximately 30% lower than targeted volumes.
  • Lower sales volumes reduced contribution toward fixed cost recovery, further impacting operating profitability.

Management Outlook and Corrective Actions

Management expects the factors affecting performance to be temporary and largely beyond its control. The following corrective measures have been identified:

1. Representation to Government Authorities: Through the Irrigation Association of India, request revision of government-prescribed rates to reflect prevailing input costs. The Irrigation Association of India has presented industry concerns and proposed a market-linked formula for price revision, which the Government of India has agreed to. Revised Unit Cost Norms are expected to be notified shortly.

2. Price Pass-through: Passing on the impact of increased raw material prices to other B2B customers outside government subsidy schemes.

3. Supply Chain Optimization: Renegotiate commercial terms with suppliers, diversify sourcing channels, and optimize procurement timing to minimize impact of raw material price fluctuations.

4. Operational Efficiency: Focus on optimum utilization of production capacity and manpower, along with process automation, to reduce conversion costs and enhance operational efficiency and market competitiveness.

Management remains confident of steady margin improvement supported by expected normalization of geopolitical conditions, softening raw material prices, revival in demand as drought conditions ease, and targeting geographical markets with better demand for the company's products.