Elecon Engineering Company Ltd (NSE: ELECON) Q1 2026 Earnings Call dated Jul. 11, 2025
Corporate Participants:
Kamlesh Shah — Group Chief Financial Officer
Narasimhan Raghunathan — Chief Financial Officer
Analysts:
Mayank Bhandari — Analyst
Vishal Kapoor — Analyst
Pratik Kothari — Analyst
Harshit Kapadia — Analyst
Mythili Balakrishnan — Analyst
Raj Shah — Analyst
Niraj Mansingka — Analyst
Lakshmi Narayanan — Analyst
Nirmam Mehta — Analyst
Akash Vora — Analyst
Dibyansu Kumar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to-Q1 FY ’26 Earnings Conference Call of Elecon Engineering Company Limited. 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 the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded.
Please note that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on-date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr Bhutnari from Asian Market Securities. Thank you and over to you, sir.
Mayank Bhandari — Analyst
Good evening, everyone. On behalf of Asian Market Security, we welcome you all for the 1Q FY ’26 conference call of Telecom Engineering Limited. I take this opportunity to welcome the management of Elecon Engineering presented by Mr Kamlesh Shah, Group CFO; Mr, CFO along with.
Now I request sir to take us through an overview of the company quarterly results and then we shall begin with the Q&A session. Over to you.
Kamlesh Shah — Group Chief Financial Officer
Good evening and very warm welcome to everyone on our Q1 FY ’26 earnings conference call. I’m joined today by my colleague, Mr Nanda, Head of Gear Division; Mr Deepak, Head Designate of Gear Division; Mr Patel, Head of MHE Division; Mr Dagunathan, CFO. The press release and investor presentation have been uploaded on the stock exchanges as well as our company website.
I hope everyone has had the opportunity to go through the segment. To begin with, I’ll provide a brief macro-level overview of the prevailing business environment, followed by a detailed review of our financial performance, which Mr, our CFO, will take you through. Engineering is the leading manufacturer of gear solutions and material handling equipment recognized for its innovation, superior quality and dependable performance. Serving a broad-spectrum of industries, including steel, cement, sugar, power and marine, we are dedicated to delivering customized best-in-class solutions that drive operational efficiency and growth.
As one of Asia’s largest suppliers of industrial gear solutions, holds a leadership position in India’s organized gear market. Our global footprint spans approximately 95 countries, supported by a robust distribution network and long-standing relationships with key industry players. In-line with our strategic vision, we aim to increase the sale of exports to 50% of total revenue by FY ’23. This ambitious global expansion is powered by our strong R&D capabilities, continuous investment in-product innovation and strategic partnership with OEMs across international markets.
Our business is anchored by two divisions, industrial gear and material handling equipment, each playing a distinct role in setting our overall performance. The gear division, which contributed approximately 73% to our consolidated revenue in Q1, delivers a steady performance during the quarter with a growth of 6% in revenue on a year-on-year basis. The momentum saw some softness in Q1 is due to in terms of product deliveries, especially in Middle-East markets. We have also seen some impact of geopolitical volatility in some overseas markets during the quarter.
Having said that, we do not foresee any material impact on the business from a full-year perspective. We assume our resilence in FY ’25 also, where we have overcome compared — comparatively more muted momentum in the beginning of the year, but we ended on a very strong note. Compared to last year, the demand momentum currently is relatively better. We have received robust orders during the quarter and encouraging by the sustained inquiry levels, which bodes well for future order inflows.
The is well-positioned to build-on this momentum, supported by improving market sentiment and ongoing capital investment across key industries. Along with steady momentum in the steel and cement sector, we are seeing very strong growth coming from power this year. In Q4 FY ’25, we capitalized our new manufacturing facility in Gear division. While this marks a significant step towards enhancing our capacity and long-term growth. It has had a short-term impact on margins in Q1.
This is due to accelerated depreciation without corresponding revenue contribution from the new facility. As we ramp-up production and begin generating revenue from this new capacity, we expect the margin in the gear division return to normalized levels. Coming to the division, we continue to deliver consistent robust — robust performance. On a reported basis, revenue has increased by 139% Y-o-Y. This includes one-time amount of around INR25 crores from arbitration claim settlement of previous contracts which has — which we have recognized as revenue in Q1. Even after adjusting this amount, our revenue has nearly doubled on a Y-o-Y basis in this quarter.
Our strong performance is supported by a healthy order book, driven largely by sustained demand in the power and cement sector. We are also witnessing encouraging order visibility in the steel segment, reflecting broader industrial momentum. MHC continues to demonstrate a strong growth trajectory driven by the successful execution of our strategic initiatives, increasing market demand and our proven capabilities to deliver customer solutions across diverse industries. Looking ahead, we remain confident in Division’s continued momentum, supported by a healthy order book and robust demand outlook across the key sectors. All-in all, the current order backlog and momentum of the order inflows across both our divisions a strong foundation and visibility for growth — healthy growth in the coming quarters. Remains strongly focused on executing its long-term growth strategy.
We are actively diversifying our business portfolio and expanding our presence across new sectors and international markets. Our wide-ranging product portfolio, backed by strong in-house R&D and engineering capabilities continues to differentiate us in the industry. Our ability to deliver customers high-quality solutions position us well to meet the evolving and complex needs of our customers. The energy is on the robust upward trajectory and emerging as a key growth driver for ICOM. In the gear division inquiry lever remains encouraging, we are seeing consistent demand from both domestic and international markets. Although there are some geopolitical headwinds in some of the overseas market that traction is quite steady on an overall basis. We are seeing a positive outlook in the defense industry and expecting to receive orders in later part of this year.
We take pride with the — we have executed and delivered in the last year during the challenging macroeconomic environment in the earlier part, we displayed great visilence and discipline. As the external environment improved, showed its ability to capitalize on the same and we ended FY ’25 on a very strong footing. Looking at the order inflow momentum continues to be consistent. Together with the current order backlog, it provides a good foundation and visibility for sustained momentum and growth in the coming quarter.
With this, I would like to hand over the call to Mr, our CFO for financial highlights for Q1 FY ’26. Over to you,.
Narasimhan Raghunathan — Chief Financial Officer
Thank you, sir. Good evening, everyone. A very warm welcome to our Q1 FY ’26 earnings call. I will now take you through the highlights of our financial performance for the quarter ended 30th June 2025. We are pleased to report a resilient performance for Q1 FY ’26. For the quarter ended June 2025, our consolidated revenue from operations stood at INR491 crores compared to INR392 crores in Q1 FY ’25, reflecting a healthy growth of 25 percentage on a year-on-year basis.
This has been driven largely by strong growth in the domestic business Activities across both divisions, which has also been aided by a favorable base. In the overseas business, we have faced some geographic — geopolitical led headwinds in Middle-East market. Nonetheless, the inquiry levels in most overseas markets remains encouraging. Domestic demand too is picking-up meaningfully, particularly from core sectors of power, steel and cement. The consolidated revenue for Q1 FY ’26 includes INR25 crores pertaining to arbitration settlement for some of the earlier contracts in the MHC divisions, which has been recognized in the current quarter. The domestic market contributed 75% to the consolidated revenue, while the revenue 25% come from overseas markets. Our domestic revenue in Q1 FY ’26 stood at INR367 crores compared to INR259 crores in Q1 FY ’25, reflecting a growth of 41.4 percentage on a year-on-year basis. Our overseas revenue in Q1 FY ’26 stood at INR124 crores compared to INR133 crores in Q1 FY ’25, reflecting a decline of 7% on a year-on-year basis. The order book visibility and continuing inquiry levels keeps us optimistic for higher-growth in the coming quarters. Our consolidated EBITDA for the quarter was INR130 crores, up from INR92 crores in Q1 FY ’25, representing a growth of 41 percentage. The EBITDA margin for the Q1 FY ’26 stands at 26.6% compared to 23.5 percentage in Q1 FY ’25. After adjusting the one-time arbitration settlement income, EBITDA for Q1 FY ’26 would come to INR105 crores compared to INR92 crores in Q1 FY ’25, reflecting a growth of 14% year-on-year. Adjusted EBITDA margin would come to 22.6% versus 23.5% in Q1 FY ’25. The consolidated EBITDA margin has been impacted by the increased cost in the Gear division, which was driven by employee cost together with brand-building initiatives undertaken in the overseas markets. As our recently commissioned capacity ramp-up and the benefits from the above initiatives in the overseas markets in terms of revenue starts to come in, we expect the margin to return to a normalized level. At a consolidated level, we expect to maintain an EBITDA margin of 24 percentage on a steady-state basis. Apart from INR25 crores recognized in the revenue, we have recognized another INR10 crores pertaining to the arbitration settlement under other income as well during the quarter. In Q1 FY ’26, we have also recognized INR80 crores as an exceptional income. This pertains to the unrealized mark-to-market on reclassification of our investment in AMCO Electon India Limited from associate to a financial asset. The profit-after-tax for the quarter, including this one-time income comes to INR175 crores. Segment-wise performance. The Gear division accounted for 73% of the total revenue in Q1 FY ’26. For the quarter ended June 2025, the Gear division’s revenue stood at INR357 crores compared to INR337 crores in Q1 FY ’25, up by 6 percentage year-on-year. The EBIT for the gear division stood at INR66 crores in Q1 FY ’26 compared to INR80 crores in Q1 FY ’25. The EBIT margin declined to 18.4% in Q1 FY ’26 compared to 23.7% in the same quarter last year, mainly due to the increased — increase relating to employee cost and brand-building initiatives undertaken in the overseas market. EBIT margin was also impacted by accelerated depreciation on the new manufacturing facility, while the corresponding revenue has still not come in. The order intake for the quarter was INR480 crores, reflecting a healthy 21 percentage year-on-year increase. As at 30th of June 2025, our open order book stood at INR710 crores, positioning us for a sustainable growth in the upcoming quarters. The Material Handling Equipment division delivered another outstanding performance in Q1 FY ’26. Including the arbitration settlement scheme, segment income, the MHC division’s revenue for the quarter was INR133 crores compared to INR56 crores in Q1 FY ’25, growing by 139 percentage year-on-year. Excluding the one-off income, revenue growth would have been at 93.6 percentage. This growth is driven by a strong demand in both the product supply and aftermarket segment across the core end-use sectors of power, steel and cement. Debit for stood at INR61 crores compared to INR14 crores in Q1 FY ’25, reflecting a significant growth. After adjusting for the arbitration income, the EBIT would have grown by 155% year-on-year. The adjusted EBIT margin stood at 27% in Q1 FY ’26, up from 25.3% in Q1 FY ’25. This was primarily due to a favorable product mix and a higher contribution from the aftermarket business. The order inflow for the quarter stood at INR134 crores compared to INR149 crores in Q1 FY ’25. As at 30th of June 2025, the open order book for MHE stood at INR400 crores, reflecting a strong demand and growth prospects. On the balance sheet front, we are pleased to report a strong net cash position of around INR550 crores, providing us with significant financial flexibility to pursue growth opportunities and maintain operational resilience. Looking ahead, the capital expenditure budget for FY ’26 to FY ’28 is INR400 crores for the next three-year period. On that note, I would like to open the floor for questions you may have. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handset while asking a question ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Vishal from Bandan AMC. Please go-ahead.
Vishal Kapoor
Hello, good evening. Thank you for the opportunity. The first question is on the exports on the international business side. Could you elaborate exactly what happened? What led to the decline in exports of 7% on a year-on-year basis.
Kamlesh Shah
This was due to some hold of deliveries for the goods in the Middle-East because of Israel and Iran what kind of situation and the delivery will get there by the Q to some,
Vishal Kapoor
How big would have this been? I mean what? What is the approximate quantum?
Kamlesh Shah
1, 4, 14 crore, 1 4, 14 crores.
Vishal Kapoor
That’s it. So even if I exclude — even if I adjust for this INR14 crores, we would have still reported a decline in the exports revenue.
Kamlesh Shah
Yeah, that momentum will come up by Q2, Q3.
Vishal Kapoor
Are we seeing any weakness in our core geographies, say UK, Europe or any other geographies that we have been?
Kamlesh Shah
In fact, this time, UK and Europe both have got in a better way, particularly compared to the Q1 last year.
Vishal Kapoor
Okay. So which are the other geographies that would have been weaker for us? I mean, because I mean you’ve reported INR124 crores of exports. Even if I address for INR14 crores, you would have still reported decline.
Kamlesh Shah
So that is what I’m trying to understand. What I said, one is of INR14 crore the delivery deferred to Q2 as well as some orders are on-hold also in the Middle-East.
Vishal Kapoor
Okay. Okay. The other question is on the order inflow of INR480 crores in the gear business that we’ve reported, what portion of these orders would have come from the international side, international orders?
Kamlesh Shah
From our MHC business for the gears business? Gear business, yeah. So INR119 crore is the order from business.
Vishal Kapoor
And this is what sort of growth on a year-on-year basis? What is the difference?
Kamlesh Shah
The growth — I should go on what this revenue of this quarter plus the future — for the rest of the year?
Vishal Kapoor
I was trying to understand this INR119 crores of order inflow that you’ve got from the international business for peers. This is a growth of what percent?
Kamlesh Shah
Yeah. On year-on-year basis.
Vishal Kapoor
Yeah.
Kamlesh Shah
10% growth.
Vishal Kapoor
10% growth. Okay. And last question is on the profitability. You said that higher manpower cost and operational expenses of the new plant have impacted the margins in the gears business. So by when do you — by when do we see normalization of profitability here?
Kamlesh Shah
I think by the end-of-the year, we’ll sustain our margin what we already spent. Now so.
Vishal Kapoor
When you say that you should have 24% margin within — for the gears business, we should be about at the same level, 24% 25%.
Kamlesh Shah
Further, this margin is also because of the change of product mix also. Generally my product mix between the engineered product and the starter product is 50-50 or 50% of 50% plus in the engineer product. For Q1, my revenue from engineered product is 43% and 57% from the standard port.
Vishal Kapoor
Okay.
Kamlesh Shah
Generally, not if you compare on quarter-on-quarter basis, this change will be there but it is getting covered indeed. Indeed.
Vishal Kapoor
All right. All right. I’ll come back-in the queue. Thank you.
Kamlesh Shah
Thanks.
Operator
Thank you. The next question is from the line of Pratik from Unique PMS. Please go-ahead.
Pratik Kothari
Yes, good afternoon, sir. So sir, first, this Middle-East order the delay, which would be from the international subsidiary side, the delays which we spoke about, not from India to exports.
Kamlesh Shah
But ultimag is going from India to Dubai or directly the customer as the case may be, we depend upon what the order says about the delivery schedule and how the delivery sched up. But the orders from and because of this current geopolitical challenges in-between the Israel and Ira, which also is getting escalating. So the customer has put the hold-on the delivery for this period and is going to look at in the Q2 sometime.
Pratik Kothari
Correct, correct. And of this ROU assets which we had capitalized last year in Q4. I mean, so everything is now capitalized and what we see in interest and depreciation is now fully accounted for.
Kamlesh Shah
But some part is just — it is of nearly INR25 crores, which is getting capitalized in this — in Q2 sometime.
Pratik Kothari
Okay, which will come subsequently. Yeah. Okay. Fair enough. And sir, on this arbitration now, all of this past arbitration is behind us. I mean, after this order which we have.
Kamlesh Shah
Whatever we did, whatever we committed, we real other I think we realized better than that. Yes. But still now we have initial further two arbitration proceedings and which we are — which we are expecting one of them will get the outcome will come by end of this year and another will come in the next year sometime. We are expecting — where we are expecting INR20 crore-plus in terms of the realization.
Pratik Kothari
Correct, correct, correct. Fair enough. And sir, this INR400 crores of capex for next three years, including this one. I mean some light, where do we intend to spend this? What will be the — where-is it — this will be again on the route of ROU or will we be taking it on a balance sheet? So two questions here.
Kamlesh Shah
So this will be both of it because some part will be at our own and some part we will go with an ROE. Because this is more beneficial to us because I see as a long-term benefit to the organization rather than the.
Pratik Kothari
That’s right. And where will this spend be? I mean, let’s INR400 crores, how do you intend to spend?
Kamlesh Shah
That will be over a period of three to four years. So what would I will spend, but some part may come in the fourth year not for this.
Pratik Kothari
My question was where do we intend to spend? I mean on what? Is it specific in gear, somewhere in international is MSC?
Kamlesh Shah
INR400 crores, INR400 crores will be in the gear division and over and above this INR400 crore — for INR35 crores we are going to spend in MHE division also because my MSE division is also getting the momentum that the INR35 crore of MHU is coming this year, whereas the INR400 crore of gear division will be spent over the period of three years.
Pratik Kothari
Correct, correct. Great. Thank you and all the best, sir.
Kamlesh Shah
Thank you.
Operator
Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. Please go-ahead.
Harshit Kapadia
Hi, sir. Thank you for the opportunity. Sir, can you — could you give us some update on the domestic business, how it has been growing and how which sectors have contributed to this growth? That’s the first question.
Kamlesh Shah
Growth is coming domestic — if you say to the domestic market, we are quite positive and robust about the domestic market because that momentum is continuing, you can say for last couple of years and that will further continue for the next couple of years also. Now this year, we are seeing the momentum from steel cement and the power sector is also giving the boost to us.
So recently only we get an order for nearly INR80 crore from the power sector itself. And we also see a good momentum, which is going to come in this year from the defense sector also, because defense sector, I think we are expecting anything in the Q2, a small thing, but the big one we can expect anytime now, because everything is being geared up year and we are quite positive for that.
Harshit Kapadia
And sir, any tentative size you can say, will it be like INR500 crores or so for the defense part, sir?
Kamlesh Shah
See we are expecting close to INR200 crore this year. And next year we are expecting a better number as we go for the year.
Harshit Kapadia
Understood. And by H2, do you think this margins would mainly move towards 24% 25% range or it will start reflecting from Q2 onwards, sir?
Kamlesh Shah
This will be there from Q2 onwards. You can see that momentum of 24% last year.
Harshit Kapadia
Okay. And sir, the capex which you mentioned where it is — which is largely for the gearboxes. So which sector are we going to see more of the gearboxes being specific, if you can share something. Is there anything also for the high-speed gearboxes, which you are always trying to enter into, if you can give some clarity on that.
Kamlesh Shah
All of machines are in a general-purpose machines, because it is not for a specific line or for the specific sector or specific customer unlike in the auto mobile sector if you see. So this will be for the — across the sectors and across the applications over there, including for the aspect gear. But we are mainly gearing up ourselves for our export market where we see a good momentum is coming up for the — from the OEM business and we have to keep ourselves ready for any kind of volume which we estimated to go.
Harshit Kapadia
Okay. Thanks. And sir, last question on the MSG segment side, sir, you know the margin this quarter has been the highest over last few quarters. What is the sustainable margin that one can one-week — one thing we can expect and any number you can suggest for MHE for the full-year basis, what is the number that we can expect?
Kamlesh Shah
Full-year, I think we always pan-out. MHE is expected to generate a revenue of INR650 crore for this year, that is year ended, 31 March 2026. And what we see that 23% is sustainable margin that we already see. When I said 23% mix over a period of next two to three years category. So any change in-product mix are improving the margin that 23% is conservative figure, which what we said is minimum achievable for us. I mean, good product mix which are giving a better revenue margin for us in?
Harshit Kapadia
Okay. And just sorry to add one more question, sir, we started also exports business in the MHE. Can you share some update on where are we on that and are we going to see more traction on the export side for MHE as well, sir?
Narasimhan Raghunathan
Okay. Yes. As we told last year, we secured an order of export that is of INR1.4 million and that has been successfully executed in last year. And yes, we have a focus on export and we have an ample inquiry from the overseas market. In fact, we are expecting one order in coming quarter in Q2, that amount is near to 1.8 million USP. So going-forward, export deal is our focus area and we are going to create our footprint in the global market as far as MSG business is concerned.
Harshit Kapadia
And also, sorry? Yeah, go-ahead, go-ahead, sir.
Narasimhan Raghunathan
Yeah. In that we are also expecting one good order least in Q4 of this financial year or quarter-over next financial year? And 12 million USB.
Harshit Kapadia
That’s a large order. And our stance On we taking only the product part of MSC and not the company TPC also stands for exports as well, right? So the orders which.
Narasimhan Raghunathan
We are talking about same strategy what we have adopted since 2017. So we are focusing on supplying of the equipments and of course, after-sales market.
Harshit Kapadia
Understood sir. Okay. Yeah. Thank you very much.
Kamlesh Shah
We are very clear of the business study to just go for the supply of equipment only and after we don’t want to explore further in projects anymore.
Harshit Kapadia
Fair enough, sir. Thank you very much and missing you all the best.
Kamlesh Shah
Thank you.
Operator
The next question is from the line of Niti Balakrishnan from Alchemi Capital Management. Please go-ahead.
Mythili Balakrishnan
Hi. A couple of questions. I wanted to check with you on the OEM business. You had mentioned that last year we had done around INR60 crores in FY ’25. What is the momentum you’re seeing in that business currently?
Kamlesh Shah
That is a momentum which is keeping up — which is keeping us busy and that is the reason we are quite confident and that is how we are putting our capex plans. I think Nandaji would be the one who can just go on more also.
Narasimhan Raghunathan
You see, basically we have supplied some of the prototypes in the past and then we have also started receiving the production on this basis and as we projected last year, it was 1.1 million for 6 million. 6 million we got it at least that. And going-forward also, we are quite robust situation on that. And we expect almost EUR2 million now. In this Q1, we generated the revenue of EUR2 million. And by end of this year, we are confident to generate nearly EUR7 million of business powers.
Mythili Balakrishnan
Got it. Got it. In terms of our guidance of 2650 crores of revenue. This does not include the INR25 crores-odd of arbitration that we have.
Kamlesh Shah
No, it is only revenue of your projected, normal business revenue.
Mythili Balakrishnan
Got it. In terms of depreciation, if I remember in the last call, you had mentioned that there should be in a INR70 crore to INR75 crore run-rate for the full-year FY ’26. But clearly, we are running ahead of that and it probably is closer to INR100 crore. Would that be the right number to look at?
Kamlesh Shah
Yes. For all as the console level, the depreciation would be at that level — of that sum here as far as for this year, my depreciation by end-of-the year would be nearly INR90 crores for gear.
Mythili Balakrishnan
And for the overall company, it will be closer to INR100 crores, right?
Kamlesh Shah
Yeah.
Mythili Balakrishnan
Got that. Also in terms of the inflows to the NHE division, not — it seemed a little weak this quarter. So I just wanted to get a sense, is that some seasonality to the business or is it anything else to read into that?
Kamlesh Shah
It, yes, we were expecting certain order to come in Q1 that has been now coming in Q2. In fact, we already secured few orders in July itself in last 10 days. So I think whatever gap is generated in Q1 comparing to last year quarter one, I think that has been cover of now. And going-forward, there is a good traction in the business from cement, steel and power.
Mythili Balakrishnan
Got it, got it. That’s all from my side. Thank you. Thanks a lot for this.
Operator
Thank you. The next question is from the line of Raj Shah from Enam AMC. Please go-ahead.
Raj Shah
Am I audible?
Kamlesh Shah
Yeah.
Raj Shah
Yes, yes. Hi, sir. So my first question was regarding the brand-building activities and increase in employee cost which led to lower-margin — margins in this quarter. If you can explain where this cost was spent in which areas and what was the long-term?
Kamlesh Shah
That amount is spent in the euro mainly where we are just working more on the digital platform and engaging the service of the consultant over there for the brand. And employee cost, yes, it is because of the normal increment, plus we also increased some employees to us as tariffs. The quantum of. I don’t know the actual quantum of how much we have spent in this Q1 and what is our target to spend in that — for the full-year also. But that is as per our plan what we have out earlier also.
Raj Shah
Okay, got it. Another question was on borrowing cost. There was an increase in last quarter — last year same quarter it was INR2 crores. This year it was INR6 crores. So I was just trying to get the sense want it only for the entire year because as per March ’25, the borrowings have increased.
Kamlesh Shah
And it’s not the borrowing, but what we have did, I think we also discussed earlier with it at the various borrow. We have acquired the machinery and we did the capex under operating lease. So considering the as applicable, this is to be divided into two-parts. One is on account of the principal amount and the — on the interest portion of it, which is called the discounting based on the discount. So discounting part is getting reflected as a finance cost and principal amount is reflected as depreciation also. Okay, it’s not a borrowing, but it is a division of the lease amount over the period of five years between principal and discount as per the Index start.
Raj Shah
Got it. And around INR25 crores, I guess you said it is yet to be capitalized between.
Kamlesh Shah
It will be. Well, we just received the machines in June sometime and it is under installation.
Raj Shah
Oh, got it. And sir, with this new capex getting commissioned, what would be our revenue potential?
Kamlesh Shah
Additional revenue with this INR300 crore capex what we did over the period of three years, it is going to generate additional INR500 crore of revenue for us.
Raj Shah
Okay. Thank you, sir. That answers my question.
Kamlesh Shah
Thank you, Raj.
Operator
Thank you. The next question is from the line of Niraj Mansinga from White Pine Investment. Please go-ahead.
Niraj Mansingka
Sir. Thank you very much. I just wanted to know one small thing. You talked — you spoke about 11, 12 OEM customers in the past. Can you just give an overall color on — I know you’ve got orders on that, but can you give an order color on of these orders, how many are how much are still working progress product are?
Kamlesh Shah
So now as on today, our number of OEMs are 818. So they are of — which some are under the development, which is there also and most of them are now started the commercial production also that is a serious production.
Niraj Mansingka
So when do you see this larger for them happening in the commercial started?
Kamlesh Shah
That larger-scale we start, it will say from January 2026 onwards.
Niraj Mansingka
And what can be the run-rate, any thoughts on that? And I know it’s speculative to some extent, but any color on the range as we can go on per customer basis or.
Kamlesh Shah
So with the current geopolitical scenarios, which is there in Western countries as well as the Middle-East levels and particularly on the western side of Asia, presently it becomes very challenging for us, but this year we are going to generate 70 crore of revenue from these OEMs. So if all things get normalized, then I think we are quite sure it will generate INR100 crores plus of revenue per potential for us. At the first phase there was what we see. Going-forward the same will generate more revenue by adding more product portfolio in our basket or we may also explore new opportunities from the other OEMs also.
Niraj Mansingka
Okay, got it. Thank you for the color. Thank you.
Operator
The next question is from the line of Lakshwin Arayan from Tunga Investments. Please go-ahead.
Lakshmi Narayanan
Thank you. Just a few questions. First is that what is the revenue mix from PAS and refurbishment in the US section? And do you actually offer on-site or you actually do refurbishment by your types at your own location.
Kamlesh Shah
I think we are not — I think your voice is not clear. Is it should not talking about repurbishment? You’re talking about repurbishment?
Lakshmi Narayanan
Yes. So my question is that what percentage of our revenues in is actually coming from PAS and refurbishment. And then whether we do, we offer on-site Refurbishment or you actually bring the gear at your location and do the refurbishment?
Kamlesh Shah
Yeah. So-far the numbers are concerned, for this quarter, Q1 from our revenue, it is we have generated 32% from service CSDN. So as a service which includes both up breakdown. So this is a spare part plus a refurbishment also. Regarding the onsite and option, I think Mr who will just give a seat.
Narasimhan Raghunathan
Normally if we see small adjustments are to be done, we do it at the site, but the major refurbishment is to be done. The comes to our refurbishment center at and you know this. Actually and that’s how we normally work on that.
Lakshmi Narayanan
Got it. And do you see a potential of this refurbishment of even in international markets because I’m told that refurbishment is a large market and it is slightly underpenetrated. If my assumption is right, what is your plan on this? Because it seems to be a large market?,
Kamlesh Shah
Yes, you are right. Repurbishment is a huge market which is there. So we already planned last year and we already have placed one full-fledged service team at the USA. We are still going to explore the same to other setup in further expanding the setup in the Europe also.
Lakshmi Narayanan
Got it, sir. Sir, and you had mentioned there is a heightened capex in sectors like cement, steel and power. Just want to understand in particular domestic market in US, I know-how long is your capacity booked on these things? Or and second, do you actually see it continue for a longer time, which is two to three years, these three or four sectors you actually mentioned.
Kamlesh Shah
Generally we get the order which is attributable which is a period of six months when it is a customer or the engineer product it is there. So booking the — and all the customers moves very well about our delivery capabilities accordingly they place all. They also don’t take the order very much in advance also. So they play the orders. And we have a clear visibility for next — up to 2027, we have a very clear visibility of the order inflow as well as the execution of the order and the revenue visibility because for the domestic sector. Domestic.
And also we have the same clear other visibility. But in overseas market, considering the — just started the pace for the OEM market, we don’t know-how it will get — it will accelerate and take the larger space in the market considering the geopolitical scenarios.
Lakshmi Narayanan
Okay. So one last question from my side. What percentage of revenues are contributed by-products where only you have the capability to make and others don’t have in your beer division or maybe material handling division.
Kamlesh Shah
So in the gear division, if I say more specifically, it is on account of the engineered product where we have very less competition and to some extent no competition. And particularly if you see the capability on account of the deference side, we don’t foresee any competition so-far in India and domestic markets are concerned. So whatever competition is coming — that is only coming from the overseas market.
Lakshmi Narayanan
Got it. Thank you, sir. I will get back-in queue.
Kamlesh Shah
Thank you.
Operator
Thank you. The next question is from the line of Nirma from Unique PMS. Please go-ahead.
Nirmam Mehta
Sir, on a TV intervie, you had mentioned we can grow for 25% CAGF for the next three years. So according to which segments would drive this growth? I mean, we have a lot of businesses, we’ve added new segments, we are working on new things. So what would be the major driver of growth for this 25% growth.
Kamlesh Shah
Growth is coming from the overseas market in the user as well now we are now focusing on versus market for the MHE division also. And MHE division also is coming very confidently for its growth trajectory. The overseas market for the OEM and the gear also — MHE also as well as the normal business is strong in the gear, both in domestic as well as the versus market?
Nirmam Mehta
Okay, sir. Yeah. Thank you.
Operator
Thank you. The next question is from the line of Akash from Dalal and Rocha. Please go-ahead.
Akash Vora
Yeah, thanks for the opportunity. Sir, firstly, I just wanted some clarification on questions asked by earlier participants. So regarding capex, so I think we had — we were planning around the INR200 crore capex last year, of which INR150 crore was spent on the P&L. So the balance INR50 should reflect in this year’s P&L plus how much can we expect in FY ’26, the capex?
Kamlesh Shah
Overall capex in FY ’26 will not be more than INR100 crore.
Akash Vora
Okay, okay. And you also spoke about possibility of winning a defense order. So for — so that order amount, if you could quantify, did you allude to INR200 crores for that defense order?
Kamlesh Shah
There are various opportunities are there in the defense sectors. What you see in the Q2, we are expecting an order of nearly INR200 crores. The large order for the P17, I know they are the — and now they know new, which is called the P17 breave, which we are expecting and which is going to come. Maybe it may come in the Q4 or maybe in the next year sometime.
Akash Vora
And any ballpark guess on what would be that order value or worth?
Kamlesh Shah
That we are estimating it will be INR1,000 crore-plus order.
Akash Vora
Okay. All of these defense orders will be executable in one — more than 12 months, 12 to 18 months kind of a timeframe, right? Even more than that.
Kamlesh Shah
The INR200 crores which I will just come by Q2 to some time, which will be executed over the period of now two years and that the big order which we are expecting maybe by Q4 or the next year sometime. That will be attributable over a period of three years as per the deliver issues.
Akash Vora
Understood. And you also mentioned about some recent within the power sector of INR80 crores. So that was on the gears or MHE side?
Kamlesh Shah
These are gear side. So we are seeing the same momentum also will be there in the next year.
Akash Vora
Understood. And sir, you mentioned about, so I think our total export book is around — overseas business is INR124 crore. So out of that, can you give us a split of how much is overseas and how much is export from India?
Kamlesh Shah
Yeah. The INR43 crore is export from India and the remaining from the overseas, which will be produced and I mean your products are assembled in overseas and will be delivered over there.
Akash Vora
Understood. And sir, if you could help us with the sector breakups, I mean, which you give every quarter like how much so our revenue this quarter would be from power cement steel for the top three core sectors.
Kamlesh Shah
So what I’ll do, I’ll forward an email to you giving the new entire picture of that.
Akash Vora
No worry, sir. And sir, one question from the strategy standpoint. So I think last quarter we mentioned that we’ll be opening certain assembly centers in the US so you know, to enhance our business there. So again, what’s the progress on that?
Kamlesh Shah
So in of work-out an alternatives for that to accelerate other than I’ll put my own entity over there, we have worked out how we will outsource over there by taking the — at least the marketing efforts from our side. So that — we are still waiting about the outcome of the tariff from the, which will help me to become more clear and specific on that.
Akash Vora
Sir, my last question on MHE. So sir, MHE orders we have seen from the last three, four quarters, they have been increasing. This is the first-quarter wherein the orders have been slightly — have slightly declined. And also secondly, this quarter we have done such high margins in MHC approx almost 83% even if we exclude the arbitration amount. So how much is the service component to the business is two things I’d like to understand.
Kamlesh Shah
So if I give the answer for the first, the quarter-on-quarter comparison of the order flow and the revenue, I think so-far other sectors of the company are the sectors in which we are there, it will not be even earlier also I was talking the same on the various world. So not to compare us with a quarter-on-quarter basis, that I think will not be the right approach, that’s why. The margin is high is what you said, yes, this time it is high, but there is a one-off item of the revenue is nearly INR25 crore. If you remove that, our margin profile is 27%.
Akash Vora
So how much would be the share rates or replacement component rate because of the margins also high.
Kamlesh Shah
The service component in this quarter is 41% in.
Akash Vora
Understood, sir. That’s helpful, sir. I’ll come back-in the queue. Thank you.
Operator
Hello. Thank you. The next question is from the line of Mayank Bhanari from Asian Market Securities. Please go-ahead.
Mayank Bhandari
Yeah, thanks for the opportunity. Sir, just wanted to understand the MHE business segment performance once again. So we have clocked in almost revenue of INR133 crore, which includes INR25 crore of arbitrage income. Is it? And this also includes — so what is the net margin we have clogged in here in terms of.
Kamlesh Shah
In terms of absolute value, in terms of percentage.
Mayank Bhandari
Percentage.
Kamlesh Shah
In terms of percentage 27% in energy division, we clock demand for this quarter.
Mayank Bhandari
Okay. And for the full-year, we are guiding how much revenue.
Kamlesh Shah
What we said full-year 23% sustainable margin, because we don’t know-how the revenue mix will perform over the period of time. But we generally have always delivered better margin organic market.
Mayank Bhandari
On the — okay, on the gears segment, how is — how are we seeing offtake or the orders in the Engineered segment, particularly vis-a-vis standard. Is there any mix change in this quarter which is resulting in very sharp decline in the margin so my.
Kamlesh Shah
This quarter, my — there is a sharp decline in the cad even on account of two. One is the product mix. Yeah, because this quarter we did standard product sales of 57% with — and engineered products, we did a revenue of 43%. That is one comment. Second, whatever we did and second, the impact is on account of accelerated depreciation.
Mayank Bhandari
Apart from the depreciation, sir, what is the normal mix or the standard mix which.
Kamlesh Shah
Doesn’t be more normal mix is engineered product is 50% plus anytime. It may be between 50% to 55% over there. So once that — I think that will start from Q2 onwards. So what the engineer products are just margin will improve from sure. And what we said, the yearly map the margin profile for here is going to 25% EBIT. I think it is achievable for us.
Mayank Bhandari
Okay, thank you.
Operator
Thank you. The next question is from the line of Dibyanshu Kumar from Alpha Wealth Fund. Please go-ahead.
Dibyansu Kumar
Thank you, sir for the opportunity. So first question is, how do you see competition evolving in India, industrial markets, especially with the new entrance economy?
Kamlesh Shah
Yeah, competition generally will be there, but what the new entrants are coming or existing players who are coming out within additional product profile. However, it will — it is going to reduce highly-engineered product is there, which is required high. So one can add the new machines and the new technology, but absorbing the technology and using the machine at the optimum level also is taking its own time to reach to a soft trend there.
Dibyansu Kumar
And this is my another question is with India’s rising defense capex, what’s the target for defense as of total percentage of total gear division revenue by any future year?
Kamlesh Shah
So in terms of the revenue, we can’t a project which is coming, which are exhibitable over the period of two to three years or sometime maybe a five years also. And we see a good traction is coming in defense sector, particularly Indian Navy. You might have heard about recent developments on the standard in the Indian Navy considering the challenges. So we see a good traction and that is also we are betting upon a lot on this different sector for Indian navy or different product.
Dibyansu Kumar
Thank you for answer thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraint, this was the last question for today’s conference call. I now hand the conference over to the management for closing comments thank you.
Kamlesh Shah
In closing, I would like to thank you all for joining this call and for your continued support to Alecon Engineering. We are encouraged by the steady momentum across both our Gear and NHC division.
Our consistent execution focus on high-growth segment and disciplined approach to cost and capital allocation position us well for sustained performance and we remain confident in our ability to build-on this momentum, strengthen our market leadership and continue delivering the value to all our stakeholders. And we will continue to focus on maximizing value for our shareholders.
Thank you once again for your participation and trust in Alecon Engineering. If you have any further questions or inquiries, please do not hesitate to reach-out to our Investor Relations Advisor SGA or our CFO, Mr Ragunathan or Mr Jain, our Investor Relations Officer. Thank you.
Operator
Thank you. On behalf of Elecon Engineering Company Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.