Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Diffusion Engineers Ltd (NSE: DIFFNKG) Q4 2026 Earnings Call dated May. 18, 2026
Corporate Participants:
Prashant Garg — Chairman and Managing Director
Abhishek Mehta — Chief Financial Officier
Sanchal Jaiswal — Company Secretary and Compliance Officer
Analysts:
Unidentified Participant
Sunil Jain — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4FY26 conference call hosted by Diffusion Engineers Limited. This conference call may contain certain forward looking statements based on the beliefs, opinions and expectations as on date of this call. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during this conference call, please signal an operator by pressing STAR and then zero on your touchstone phone. I now hand the conference over to Mr. Prashant Garg, Chairman and Managing Director from Diffusion Engineers Limited. Thank you and over to you sir.
Prashant Garg — Chairman and Managing Director
Good afternoon everyone and welcome to Diffusion Engineers Limited earnings call for the fourth quarter and year ended 31st March 2026. We are delighted to have you join us today. I’m joined by Mr. Abhishek Mehta, our CFO, Ms. Sanchal Jaiswal, our Company Secretary and Compliance Officer and our Investors Relation team from ACT Factors pr. The investor presentation and media release have been uploaded to the stock exchanges and are available on our website. I will share some key highlights which recent developments and our outlook for the future before we open the floor for questions.
FY26 has been an important year for Diffusion Engineers as we continue to strengthen our position across welding, consumables, wear solutions and heavy engineering products while simultaneously laying the foundation for the next phase of growth through significant capacity expansion and strategic investment. Despite continued volatility in key raw material prices such as tungsten, nickel, cobalt, molybdenum and chromium, the company delivered resilient operational performance supported by our integrated manufacturing facilities, diversified customer base and strong execution across segments.
During the year we witnessed healthy demand momentum from core industries including cement, steel, power, mining and engineering. The ongoing industrial capex cycle, government led infrastructure investments and increasing focus on domestic manufacturing initiatives such as make in India continue to create long term opportunities for the company. Our order book remains healthy at approximately 200 crores as of 30th April 2026 providing strong visibility for the coming quarters. We continue to derive over 80% of our revenues from repeat customers which reflects the trust placed in our product quality, engineering capabilities and long standing customer relationships.
One of the major milestones during the year was the progress of our expansion projects funded through IPO proceeds, we successfully commissioned a new 10 ton per day electrode plant, expanded wear bed capacity by approximately 25% and installed an in house strip slitting line for manufacturing transport wires. These initiatives will support both margin improvement and better supply chain control over the medium term. In addition to our new vehicle manufacturing and heavy engineering facility is progressing well and as planned and is expected to be commissioned by the end of Q1 2027.
This expansion significantly enhances our ability to cater to large and more complex engineering solutions and products especially for steel, cement and power sector. As these capacities stabilizes and utilization improves over the next 24 to 36 months, we believe that the company is well positioned to achieve a substantially higher revenue base while improving operational efficiencies. Our long term aspiration remains to build a 650 crore plus revenue platform with sustainable EBITDA margins in the range of 15 to 16%.
Coming to segmented developments, our heavy engineering business continues to perform strongly particularly in rollerfresh roads and other specialized applications. This segment has seen strong momentum driven by increased industrial capex and replacement demand and we expect this business to continue growing in FY27 as well. On the railways front, we’ve achieved encouraging progress in developmental orders linked to Vande Bharat supply chain ecosystem. We’re currently L1 in multiple contracts and we have received some letter of intent in select projects, completed inspections through rights.
While this business may initially carry lower margins due to developmental cost, we believe it is strategically important and can open up long term opportunities in the railway sector. Another important strategic initiative during the year was our investments in Tailorup Sunbai Systems Private Limited in the defense sector. Through this investment diffusion, engineers aim to participate in the manufacturing and integration of advanced Vishwara systems subject to prototype approvals. While this opportunity may have a slightly longer gestation period, we believe it provides strong strategic optionality and aligns with the broader indigenization opportunity in the Indian defence ecosystem.
Internationally, our exports continue to remain stable with presence in more than 35 plus countries including Southeast Asia, Middle east and Africa. We remain focused on increasing the share of exports and high value engineering products in our overall business mix. From a financial perspective, we are pleased with the steady growth delivered during the year. Despite industry wide cost pressures, our focus remains on disciplined execution, working capital management and maintaining a healthy balance sheet.
The company continues to maintain a strong liquidity position which provides us with the flexibility to future growth opportunities. Confidently looking ahead to FY27, we remain optimistic about the demand environment across key industry user base. We expect revenue to grow by more than 20 plus supported by capacity additions and strong order inflows and increased contribution from high margin engineered products. We also expect gradual improvement in EBITDA margins driven by operating leverage, backward integration benefits and a richer product mix.
Overall, we believe Diffusion Engineers is entering a multi year growth pays backed by expanding manufacturing capabilities, stronger industrial demand, healthy order visibility, diversified customer relationships, increasing engineering complexity in products and strategic entry into new opportunities such as defense and railways. With that now I invite our CFO Abhishek Mehta to take you through Q4 and FY26 financial performance.
Abhishek Mehta — Chief Financial Officier
Thank you Prashant sir. I will now walk you through our standalone and consolidated financial performance for Q4 and FY27. FY26 consolidated financial performance highlights Quarter ended 31st March 2026 Revenue from operations was 15.74 million in Q4FY26 as against 1025.28 million in Q4FY25 yoy increase of 38.08%. EBITDA excluding other income was at Rupees 206.89 million in Q4FY26 as Against 147.81 million in Q4FY25 increase of 39.96%. EBITDA margin excluding other income for the quarter stood at 14.61%.
Profit after tax stood at 159.7 million in Q4FY26 compared to 130.1 million in Q4FY25 yuy increase of 22.74%. Now consolidated performance highlights Year ended 31st March 2026. Revenue from operations was Rupees 4066.28 million in FY26 as Against 365.2.76 million in FY25 yoy increase of 21.28%. EBITDA excluding other income Was at 571.42 million in FY26 as Against 471.56 million in FY25 increase of 21.18 million. EBITDA margin excluding other income For FY26 stood at 14.05%. Profit after tax stood at 504.1 million in FY26 compared to 360.41 million in FY25 y increase of 39.87%.
Now coming to standalone performance highlights for quarter ended 31st March 2026 Revenue from operations was 1,132.7 million in Q4FY 26 as Against 1009.69 million in Q4FY25 in increase of 12.18%. EBITDA excluding other income WAS at 154.13 million in Q4FY 26 as against 135.82 million in Q4FY 25 increase of 13.49%. EBITDA margin excluding other income for the quarter stood at 13.61%. Profit after tax stood at 116.72 million in Q4FY26 compared to 120.4 million in Q4FY25 y o y decrease of 3.05%. Standalone performance highlights for the year ended 31 March 2026, revenue from operations was 3542.03 million in FY26 as against 3160.87 million in FY25 y oi increase of 12.06%.
EBITDA excluding other income was at 469.29 million in FY26 as against 409.62 million in FY25 increase of 14.5%. EBITDA margin excluding other income for the year ended stood at 13.25%. Profit after tax stood at 446.43 million in FY26 compared to 337.53 million in FY25. My o y increase of 32.27%. With that, I now open the floor to any questions you may have. Thank you for your time and continued support.
Questions and Answers:
Operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press STAR and then one on their Touchstone phone. If you wish to remove yourself from the question queue, you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles again. To register for a question, please press STAR and then one.
Unidentified Participant
Participants, you may press STAR and then one to ask a question.
Operator
Your first question comes from the line of Sukhrit D. Patil from Eyesight Fin Trade Private Limited. Please go ahead.
Unidentified Participant
Good afternoon to the team. I have two questions. My first question to Mr. Garg is in your point of view, how is diffusion engineers preparing to capture future opportunities in the welding, consumable products and industrial solutions while thoroughly addressing challenges such as raw material volatility, global competition and technological disruptions? What strategic levers are in place to help you sustain the growth and maintain your leadership position in the coming quarters. That’s the first question.
I’ll ask my second question after this. Thank you.
Prashant Garg
So you mentioned about challenges such as raw material price, volatility, technology disruption and competition from global players. So we have certain competitive advantages which we believe will help us keep growing in welding consumables and warehoused products. Category one is that we are one of the most integrated manufacturers of these products and solutions. So we make our own electrodes, we make our own trust coal wires followed by bare plates and then bare parts. So we do all of this in house and we have most of the capabilities in house which help us control cost as well as quality and delivery which is the most important thing when it comes to serving customers in this sector.
Because these are many times replacement items which have to be delivered on time because the customers have limited shutdown time to stop their plant, replace these spare parts and then bring the plant back in operation. So because we have these in house capabilities we are, you know, having this competitive advantage. Second point is as far as technological development or disruptions which are happening, so we are constantly developing new products to increase equipment lifetime based on continuous feedback from customers in terms of how much wear and tear they are facing and what sort of new challenges they are coming across and the kind of equipment availability that they need.
So some of the examples are rollerpress roles that we supply in the market. We have pioneered and developed new solutions because of which customers are able to run their roles as long as five or six years continuously without taking them out of the mill. So we are continuously developing new solutions based on what’s happening in the industry and industry requirements.
Unidentified Participant
Thank you. My second question is to Mrs. Jayaswal. How do you see governance and compliance evolving to support diffusion engineers growth story? What initiatives are being taken to strengthen regulatory compliance, Corporate disc, corporate disclosures and stakeholders confidence in line with global best practices. Thank you.
Sanchal Jaiswal
Okay sir. So to keep the check on the compliances, firstly we prepared the checklist for the annual and the quarterly compliances. We have a team of practicing company secretaries who guide us through all these things on a regular interval. And if you’ll see our website, we are very much prominent about making all the disclosures as required under the Sebi Regulations and more particularly Regulation 46. We are very prompt in disclosing all our corporate governance practices. Even if you’ll see on our website we have annual secretarial compliance report issued by the practicing company secretary.
Recently we have uploaded it and it does not contain any adverse remark or qualifications. So we are very prompt in our corporate governance and compliance practices.
Sunil Jain
Thank you and best wishes.
Sanchal Jaiswal
Yeah, thank you so much.
Operator
Thank you. Your next question comes from the line of. Sorry, before we take the next question, a reminder to all the participants. You may press star and then one to ask a question. Your next question comes from the line of. Neil Baha with me, Gen Capital. Please go ahead.
Unidentified Participant
Hi Prashant. Congratulations on a good set of numbers. Just wanted to check with you as to how is the current situation in the industry. You know, we keep hearing this West Asia crisis is, you know, bubbling every day. Are you seeing currently any issues?
Prashant Garg
Thank you, Neil. See, the West Asia crisis has directly impacted us in terms of the volatility it has caused in raw materials because of disruption of supply chains and also energy costs going up across the world. So that has sort of directly impacted us in terms of a supply chain but in terms of demand from the industries, that is what you’re referring to. We don’t see any slowdown happening as of now. So none of the projects have gone under hold. There are major coal based power plants coming up in India so we’ve got orders coming in from there.
Lot of expansion happening in steel and cement sector. So we haven’t come across a single incident where any of these customers have said that, listen, you need to go slow or delay deliveries of the projects ordered. So so far so good. We don’t see anything in the demand side changing as of now.
Unidentified Participant
Okay, so whatever. There could be some volatility in raw materials. Let’s say you’re saying all of this should be temporary provided things stabilize in the coming months or quarters. Yes,
Prashant Garg
Yes. Also the volatility in the raw material prices, we are able to pass it on to the customers for all the subsequent contracts that we are executing for them. So there is of course some time lag between the volatility that we have to absorb and that we can transfer to the customers. But as the prices start increasing, our prices start changing for the customers, barring the contract that we already have in hand. That is there, of course we do a lot of sales related to existing installed base in the industry.
So even when the utilization levels of the existing industrial base remains high, there’s a lot of replacement requirement coming in from the industry and that remains strong in spite of the war which is going on. So therefore our order book is still healthy and you know, the demand for the products and services are high in spite of the war going on.
Unidentified Participant
Noted moderator. Can I ask one More question.
Prashant Garg
Yes, Neil, go ahead please.
Operator
Go ahead.
Unidentified Participant
Yeah, so while you’re, I saw the numbers print while your Q4 on a consolidated basis looked amazing. You know, I think it’s, it’s very robust. But when I see standalone, you know, it seems as if we’ve had a kind of a flattish year. So is there any part of the business which last year was, you know, or any part of the industry which you thought performed lesser than your expectation and you think FY27 and FY28, these two normalizes?
Prashant Garg
Yes. So if you remember, we’ve been saying that we are already at a capacity utilization of 85% in our, you know, manufacturing of wear plates, heavy engineering and wear part. So the predominant. So what has happened in this year is in our standalone basis because we were already at max capacity utilization, the growth in terms of execution would have happened more if we had more capacity in wear plates and heavy engineering which we expect to get corrected after this new facility goes live. So as the expansion gets over and the new capacities go live from Q1 this year, we will start seeing growth, more growth in terms of execution coming in for wear plates, wear parts and heavy engineering.
And I think in this year the standalone numbers will go up in consistency with the consolidated numbers also.
Unidentified Participant
Perfect. Perfect. I’ll go back in line in case anybody else has any other questions. I’ll come back if I get a chance. Thanks so much. Thanks.
Operator
Thank you. Your next question comes from the line of Sunil Jain with Nirmal Bank Securities Private Limited. Please go ahead.
Sunil Jain
Yeah, thanks for taking my question and congratulation on good numbers. Prasanth, first of all would like to know status of your the expansion of unit four when we will start seeing good benefit or revenues from this particular expansion. Hello.
Prashant Garg
So the unit for expansion is in final stages right now and basically it’s a plant which is close to 170,000, 180,000 square feet. So from this month onward some part of that floor area will start getting utilized already. And we expect by Q1 this year all of it will be the plant and building will be ready and also new machines will start getting installed. So this is the current status and we think that you know, starting from this month slowly the capacities will start going live and probably the end of this quarter most of it will be up and running.
As far as there was one more unit where we have done expansion. So that is already up and running where we have set up a new electrode manufacturing plant and in house slitting line. So that went Live from November end of December 1st week 26.
Sunil Jain
Yeah. So you had guided for around 20% growth for the current year looking at the expansion and are you going a bit conservative on that or you’re looking at the environment which is creating some uncertainty?
Prashant Garg
Sir, we believe in you know, being, you know, being sort of prudent in terms of giving indication. Our intention is always to sort of, you know, over perform the commit over the commitment that we are or the indication that we are giving.
Sunil Jain
Okay. And sir, last question related to your railway project development wherein you got some initial orders. So what will be the timeline when we will start getting a reasonable chunk of orders from the railway post these executions?
Prashant Garg
So we expect the execution to take anywhere between since they are developmental order, we expect the execution to take anywhere between six to nine months and post they are delivered then we will become or we will come in the approved vendor list for those particular components. And by the end of the year we can start seeing some substantial orders coming in for from these initiatives.
Sunil Jain
Okay, so the revenue from these railway we can expect next year. Correct, but substantial
Prashant Garg
Revenue will come, significant revenue can start coming from next year.
Sunil Jain
And so one more questions just related to total international revenue. If you can say how much is total international revenue and in say next two to three year where we are likely to see that.
Prashant Garg
So right now we think as the revenues and as we are growing at 20 plus percent year on year, we expect the international revenue to go up to 15% in the next say in this year and the next year.
Sunil Jain
So internationally also we are growing at 20%. You said. Hello?
Unidentified Participant
Yeah,
Prashant Garg
We expect international sales to also grow at 20%, a little higher because now our investment in Turkey has started getting more mature in terms of the time that we’ve been present there. We have increased our sales representatives outside of India, for example in Saudi Arabia. So we expect that sales will start percolating from these areas where right now these are all Greenfield or new territories for us which does not contribute much in sales. So we expect that the international sales will grow at higher than 20% year on year basis.
Also we are increasing our presence in West Africa. We’ve just identified a new, you know, partner in West Africa so that sales will also start growing. And Singapore sales have increased significantly this year which we expect to grow, you know, or remain stable and grow steadily over the years.
Sunil Jain
Okay, thank you. Thank you. Answering question.
Operator
Thank you. Participants, you may Press Star and then 1, 2 Ask a Question. Your next question comes from the line of Madhurati from counter cyclical investments Please go ahead.
Unidentified Participant
So Prajant wanted to understand if you could provide a rough breakup of our 400 crore revenue in terms of different segments. So that would be great.
Prashant Garg
So we, so you know we have always indicated that it’s roughly 30% products, 30% wear plates and wear parts and 30% heavy engineering and 10% of services. So this is how the makeup is
Unidentified Participant
Understood and
Prashant Garg
Services.
Unidentified Participant
Okay. And and this mix is expected to continue going forward.
Prashant Garg
We think that you know, wear plates, wear parts and heavy engineering will slightly over increase at a faster growth rate in comparison to building consumables. Purely because that is where the industry is headed. You know customers want now ready to fit parts and complete components rather than buying consumables. Also order sizes in these two areas are much bigger than consumable order values. So you know, percentage of heavy engineering and wareface and ware parts will grow faster in comparison to building.
Unidentified Participant
Understood. And Prajan, this heavy engineering is basically what we are doing the fabrication ourselves or basically we are making the product and giving to third party.
Prashant Garg
No, no, we have our in house capabilities completely. So we build the entire equipment from scratch which involves assembly, which involves fabrication, assembly, machining, heat treatment, surface cladding. So it’s a combination of these operations primarily to manufacture the entire industrial equipment which gets fitted into these four sectors.
Unidentified Participant
Okay, how is happens?
Prashant Garg
That is also when there are specific or new operations which we’ve not done before, only then outsourcing happens. But we believe in doing everything in house.
Unidentified Participant
So Priyan, how is this different from the service business that we are doing?
Prashant Garg
So service business is when we go on site in the customer’s premises and carry out repair and maintenance on site. And some of these services, the example of such services are breakdown services. So if there is a large grinding mill or a rotary kiln or a crusher which is installed in customers premises, when they break down, if they crack or any breakdown happens then we go on site and repair it. You can’t bring those equipment in our workshop. So this is one kind of service we do. Second is we do hot kin alignment for rotary kilns and sponge iron and steel industry.
So these rotary kilns are basically rotating equipments which go out of alignment in due course of time. So while these kilns are in operation without taking a breakdown, we repair them, bring them back in alignment and we also carry out some specialized services with respect to this equipment. Third is we also do lot of bulk deposition. So when grinding equipment, grinding mills wear out or their grinding rollers or grinding tables wear out we go on site and repair them. So these are the services that we are talking about when we basket them in industrial services.
Unidentified Participant
Understood. And Prashant, do we do overlay work?
Prashant Garg
Yes, that is our main business of cladding and overlaying. And we manufacture the consumables to do the overlay ourselves. And we also have our in house service team comprising of around 50 to 60 welding technicians who work on different sites simultaneously depending upon customer requirements and orders who go on site and carry out this overlay work.
Unidentified Participant
So this overlay business comes under the welding electrode segment?
Prashant Garg
No. So when the customer buys these consumables themselves and they just buy the electrode or the wire from us, it gets basketed into welding consumable business as you mentioned. But when the customer entrusts us with carrying out the complete over labor which includes the supply of consumables as well as carrying out the service, then it will come under service business.
Unidentified Participant
Understood. Prashant, how much of the welding consumable business is the conventional in which like the, the. The. The purely the. I mean the. The traditional. Like what adore and ISAB etc. Are doing and how much is the refurbishment part of the business?
Prashant Garg
So diffusion is identified with special electrodes which are used in maintenance and repair and hard pacing. Very small portion of our business is conventional I would imagine less than, less than 3% to 3% is conventional business. We don’t our identity and our brand is associated with all special hard facing repair and maintenance activities only.
Unidentified Participant
So Prashant, in each of these segments could you give us some major peer just to further our understanding of the business.
Prashant Garg
So Ador Fontech used to be a subsidy of Ador Welding which has got merged with Ador Welding which was very similar to us in these product segments. Evac Alloys used to be a subsidiary of L and T which is now I think part of ESAP Group. So they were also in the similar customer product base and offering had similar offering like us. So as far as welding consumables for special applications are concerned, these two would be near peers to us.
Unidentified Participant
And. And what about the wear plates and what about heavy engineering and the services which would be the competitors over there?
Prashant Garg
So these two players, so isa evac and ESAP also manufactures bare plates. So you can look at them as our peers and in heavy engineering of course these players are not present there. You would have to look at companies such as Engineering, Valchanagar to name few.
Unidentified Participant
Understood. And Prasanth, what is the total capex that we are planning for the current and the next year.
Prashant Garg
So total capex of the IPO we had mentioned in our objects was close to 100 crores. 70 crores going in the facility where we have our wear part, wear plate and heavy engineering capabilities. And 30 crores in our facility where the B33 facility where we have the slipping line and the electrode manufacturing capabilities.
Unidentified Participant
Understood. And lastly Prashant, have we taken any price hike in the current year or are we planning to take some?
Prashant Garg
Yes. Yes. Price hike is an ongoing activity depending upon raw material prices. The customers in the industry are also aware with the raw material situation. So as and when our input cost increases we are doing upward revision of prices. So much so that in some items which have. Which have cobalt, mictel and tungsten. The validity of some of these items are very small because they are super volatile. Right. Now these elements.
Unidentified Participant
Understood. Thanks a lot.
Sunil Jain
Thank you.
Operator
Thank you. The next question comes from the line of Nishant Gupta from Minerva Capital Research Solutions. Please go ahead.
Unidentified Participant
Hello, sir. Am I audible?
Abhishek Mehta
Yeah.
Unidentified Participant
Yes. Hello. Okay. Yes, you are. Okay. This order book of 200 crore which you have as on April, roughly what would be the execution time period of this order book?
Prashant Garg
I think most of it is in this financial year only. Barring some staggered deliveries for power projects, for LND Power. But I would assume 80%. 80 to 90% of this is in this financial year.
Unidentified Participant
Got it, sir. Got it. Sir, you mentioned at the start of a call that you are aiming for a 650 crore kind of a top line and 1516 EBITDA margin. So this top line of 650 crore, will this be like achieved in two and a half to three are going. Let’s set a 20% yearly rate. Or will we see a infection where this growth rate of 20% might just go to 25, 30%.
Prashant Garg
Sorry, I didn’t understand the second part of your question.
Unidentified Participant
Sir, I’m just wanting to ask your growth rate. Will it be like 20% year on year growth rate in a normalized manner or do we see inflection point coming let’s say next year onwards and this can probably go to 25, 30%. And 650 crore can be achieved a bit earlier.
Prashant Garg
So we think that the growth rate should increase considering the fact that new facilities will start coming live. So we expect to hit this number in you know, less than three years. Anywhere between two to three years in terms of annual run rate.
Unidentified Participant
Got it, sir. Got it. Sir, one final question. So typically like Q4 is a bit on a heavier side when it comes to the revenue. I mean typically a good chunk of revenue comes in Q4. So do we see this trend continuing going forward or do we see a normalizing like maybe spread across the entire year? How do we see it going forward?
Prashant Garg
So ideally we would like it to be spread across the year, but the trend is prevalent in the industry where Q4 typically tends to be much bigger in comparison to other quarters. And I think the trend will continue. Of course other quarters will also start contributing more as our order book remains higher across the quarters. So if you compare our order book of what it was on the 31st of March 2025, it was 100 crores and now we have an order book of 200 crores. So of course because we are starting the year with a good order book, we will see that the contribution of Q4 will be not as much in comparison to the other quarters.
So it will get slightly normalized. But we expect Q4 still to be the biggest quarter in comparison to the preceding quarter.
Unidentified Participant
Can I squeeze one more question or should I follow?
Prashant Garg
No, please go ahead
Unidentified Participant
Sir. On the EBITDA margins there is volatility, right? In some of the quarters you clock around 13, in some of the quarter you float around 14.8%. So is it because your raw material pricing impact gets passed down with a lag? Is that the reason? Or maybe your product segment have a different margin breakdown if you can throw some light on this.
Prashant Garg
No, predominantly it’s because of the volatility in the raw material. And we are having orders worth 200 crores. So we can’t really go back to the customer and ask increase. Only in those contracts we can ask them to increase the prices. Where we have price variation clauses built in and price variation clauses are typically built in and contracts which are long term, for example, the power plant equipment that we make for power OEMs, we have staggered deliveries over the next 12 months. There we have price variation process built in.
But those portion of orders are not very big. I think that will be less than 10% of the total order book. So the rest of the contract, these are fixed price contracts. Of course if the prices go up, we take a margin hit in these contracts. But subsequently whatever we are quoting for new contract, the prices go up. So what you said is absolutely right. There is always a lag between the price hike of raw materials and what we are able to transfer to the customers. And because of that reason, the EBITDA margin sort of fluctuates between 13 to 14%.
But you can also notice the fact that the expenses that we have below our gross margin levels may vary, but the fixed expenses or the other operational expenses that we have we have been able to consolidate then. And as the revenue has increased, our net margins have improved in spite of the fact that gross margins have sort of come down in the last quarter. And that has happened because of the scale of operation increasing and you know, keeping our cost in control.
Unidentified Participant
Got it. Thank you sir for answering your questions and all the best.
Operator
Thank you. The next question comes from the line of Suyash Bhave with Wealth Guardians. Please go ahead.
Unidentified Participant
Yeah. Am I audible?
Operator
Yes.
Unidentified Participant
Yeah. Regarding the. Our expansion at Unit four, the heavy engineering equipment that will be started, started by Q1 end. Do we have any specific different committed orders for this or would it be used for our existing order book?
Prashant Garg
We have, so it will be used for the existing order book. And as the customers are visiting our plants in due course of normal business, they are seeing our new facilities are sort of almost getting ready. So we are also getting, you know, so the business is made in such a way or the plant is made in such a way that this expansion will enable us to execute the current order book faster. And because the facilities coming live and our customers can see it, they are now starting to talk to us for more orders considering the expansion that will come live.
So it will be both where our current order book will also get executed there faster and we are beginning to get new orders considering the increase in capacity.
Unidentified Participant
All right. And sir, we are kind of seeding I think two optionalities right now. One is our UAE plant. We were, we had set up some new subsidiary last year in UAE and we also invested in Tejo in Q4 in February. What would be the update on that and how do you see those businesses going forward?
Prashant Garg
So the UA facility has been handed over to us and we’ve already sort of set it up for doing service and service repairs and overlay work in UAE and the region, not just uae. So that is up and running now and so that will start contributing in revenue from this year onwards. As far as Tejo is concerned, Pejorup is still in prototype development states and Tejarup has a project sanction order from DRDO where you know, post prototype development there is already a mention of a requirement of 200 launches and 1200 rockets.
So right now our energies are focused on achieving the prototype development ASAP so that we can get into the engineering and production of the sanction order which is already mentioned in the pso. I don’t think and I Don’t foresee any revenue coming in from Tejirup in this financial year. And also I think nothing significant coming in the next financial year. But of course if a prototype development and approval happens in the next financial year, it will open up gateways for us in the subsequent years from next financial year onwards.
Unidentified Participant
All right, thank you.
Operator
Thank you. Before we take the next question, a reminder to all the participants. You may press star and then one to ask a question. The next question comes from the line of Gunit Singh from Countercyclical pms. Please go ahead.
Unidentified Participant
Hi sir. Thank you for this opportunity. So firstly I would like to understand what percentage of our contracts are fixed price contracts. Basically I want to understand if our margin would be impacted by the current escalation in raw material costs.
Prashant Garg
So whatever needs immediate deliveries are fixed price contracts. And you know, contracts which are staggered in terms of deliveries will have price action clauses built into them. What we also do is typically in fixed price contracts, the moment we get in the order, we book our raw materials immediately so that we can cut down on the volatility. And especially in extremely volatile raw materials such as tungsten, cobalt nickel, in which the prices change on daily basis, we submit offers with very small validity.
And as soon as we get a confirmation from the customer that they are willing to buy, we immediately place back to back orders on our supplier to, you know, come out of the problem of volatility.
Unidentified Participant
No. So basically we are mostly insulated for any price changes because fixed price contracts are booked upon purchase of raw material. Right. So majority of the raw materials are purchased as soon as the fixed price contract order is booked.
Prashant Garg
That’s right. To a large extent we try to insulate ourselves from that volatility.
Unidentified Participant
Got it. So currently our EBITDA margins are about 13, 14%. So in case of an extreme scenario, say where the like we saw in the war. So what, what kind of a variation in ebitda? Downside variation. EBITDA margins can happen in extreme cases like this.
Prashant Garg
So for this financial, we expect our EBITDA margins to go up by around 80 to 100 basis points considering the increase in our operation size. And you know, considering the consolidation of our cost for a higher revenue, our cost will not increase in the same way. Gross margins of course I think will be slightly under pressure because of volatility. So extreme volatility, you cannot really estimate when prices sort of go sometimes 2, 300% overnight. But typically we know what these materials are and we give very small validity so that we don’t have to bear the brunt in such cases.
And so we think that EBITDA margins should go up this year by 80 to 100 basis points, even considering the volatility which is there in the market right now.
Unidentified Participant
Got it. So my second question would be regarding the debtor days and the inventory days. So if we look Quantech used to have debtor days about 50, 53 and inventory days of about 70, whereas our debtor days are about 113. Invented days are about 123. So can you help me understand what are we doing differently as compared to them or are we giving better credit terms to our clients to get orders?
Prashant Garg
So see what happens is in Q4 we’ve done a sale of close to 140 crores in comparison to the preceding quarter. So therefore end of year dates are slightly higher because a major chunk of sales have happened in Q4. Some of these items, especially the heavy engineering items and the wear parts, are substantial in terms of order values. You know, two rollers which we sold for example, or each roller that we sold will be single item would be around 5 cr. And in the month of March we sold 20 crores worth of rollers, probably higher.
So because of which the debtor days look higher in comparison to the average debtor days. So as per us, the data days are right now 98 days for FY26 inventory we have worked hard. So inventory we’ve been able to keep it at 66 days which was the same as FY25. So in spite of the fact that our revenue has increased, our inventory days have remained constant. And coming back to data days, we are working now currently and bringing in more focus, trying to get back to roughly around 80 to 85 data days which was there in FY25.
And we are hopeful that we will be able to bring it down to around anywhere between 80 to 90 days which was at the same levels of FY25. As the heavy engineering business increases, I don’t think we will be able to bring it down further, at least in this year. Of course, ideally we would want it to be a lower, but our indication would be anywhere between 80 to 90 days.
Unidentified Participant
Got it. So generally what are the debtor days and payment terms? I mean for heavy engineering and weight parts and welding.
Prashant Garg
So welding consumables are cash and carry. Typically that can be payments made on delivery or to some big distributors. You can have some credit terms depending on their credit worthiness. But for web based web parts and heavy engineering, typically the Data days are 60. But some of These items are quite big in size. So you know sometimes there are few days involved in shipment of these goods and by the time the customers make their GRNs and process their payments typically they end up paying anywhere between 75 to 90 days.
You know in the industry typically 60 days gets extended to 75 to 90 days very easily. But we are bringing in systems in place where we are, we will keep a tighter control and bring it down to less than 90 days in this year.
Unidentified Participant
Got it. So basically for next year our target would be about 60 to 80 debtor days and around 60 inventory days.
Prashant Garg
No, our target would be 80, anywhere between 80 to 90. We are targeting 80 to 85 actually and inventory days of 60 to 65.
Unidentified Participant
Got it. Because one third of the business is cash and carry and the rest is saying it’s 60 to 90 days. So I was assuming that, I mean it would be more closer to 60. Okay. My next question would be regarding the current capacity utilization and the revenue potential from our new capex that we are completing in following months.
Prashant Garg
So as I mentioned we have already installed a new electrode plant of 10 tons per day capacity. So we have significant capacity available for now electrodes manufacturing. Our new wire line should be delivered in the month of July. So that will add capacity until then. Right now for wires we have close to 88, close to 85. 90% capacity addition utilization for wear plates heavy engineering we are as we speak close to 85, 90% utilization. So of course as soon as these new shop floors get ready and available for manufacturing these capacities will utilization will drop to around 50 to 60% and therefore you know revenue will start getting, the revenue increase from this divisions will start happening which was, which did not happen so much in the last year.
Unidentified Participant
Got IT. So the 650 crore guidance further the need medium term guidance. Would we require any additional capex apart from the new facility that’s coming up?
Prashant Garg
No, we don’t expect any additional capex not just for up to 650 crores but even up to higher. I think the capex that we are doing, the 100 crores capex that we have indicated should be enough to propel US to 800 to 900 crores in the coming years.
Unidentified Participant
Got it. Thank you very much. I wish you all the best.
Prashant Garg
Thank
Sunil Jain
You.
Operator
Thank you. Participants, if you wish to register for a question please press star and then one now. Next question comes from the line of Sunil Jain from Nirmal Bank Securities Private limited. Please go ahead.
Sunil Jain
Yeah, thanks for this follow up. More of a question related to you have a roller which is contributing handsomely in the revenue. So apart from roller, any other product like this you are pursuing two, three products. So any development on that?
Prashant Garg
So steel mill rollers are another such application where we’ve been able to get substantial inroads. Of course that’s, you know, we have, we are participating in tenders from state owned steel plants which are sale units where it gets into a price war. But now we are focusing on private players also. So I think that is one area where we did good revenue last year. Last to last year did not have much contribution in this year. But again I think this year we will have significant revenues coming in.
We have got active cases then. Apart from this, we also have vertical roll mill rollers. We’ve recently backed an order from a leading cement manufacturer for supply of grinding rollers in a vertical roller mill which is another kind of grinding equipment which is used very commonly in the cement and power sector. In fact, the mill population of VRMs are much higher than roller press rolls in these sectors. So we’ve got our first breakthrough order and we think there’s a lot of much higher potential of, of these rollers in comparison to the rollercoasters.
This will start reflecting in our revenues. Apart from this, there are shaders which are used for alternate fuels processing in which basically the organic and the municipal waste is collected from major cities or settlements and then they are shredded to the right size and fed into the rotary kilns or, or furnaces which are. And it is used as a fuel. And these shaders are facing a lot of wear and tear because of the nature of the waste product that they are handling. So we are now developing spare parts for these shredders which will help us replicate the success story of roller press holes in the industry.
Sunil Jain
So anything which you can indicate, like the product, like roller mill, shield roller, so the cement roller mill, like that product, the contribution in revenue is how much and how much it can increase in next three, three to four years.
Prashant Garg
Sir, we can connect offline if needed. Because this is confidential data. It’s business is sensitive to, you know, our business. So I won’t be able to mention it specifically.
Sunil Jain
Okay. Okay. No problem sir. Thank you. Thank you very much.
Operator
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Prashant Garg, Chairman and Managing Director from Diffusion Engineers Ltd. For closing comments.
Prashant Garg
Thank you all for your participation and insightful questions. As we move through FY26, we remain focused on execution innovation and scaling sustainably. I would also like to express my gratitude to our dedicated team members, valued clients, suppliers, bankers and all our stakeholders who continue to place their trust in us. For any further information, please feel free to contact our investor relations team. Thank you and have a great evening ahead.
Operator
Thank you on behalf of Diffusion Engineers Ltd. That concludes this conference. Thank you everyone for joining us and you may now disconnect your lines.