Elecon Engineering Company Ltd (NSE: ELECON) Q3 2026 Earnings Call dated Jan. 09, 2026
Corporate Participants:
Narasimhan Raghunathan — Chief Financial Officer
Dipak S. Dalwadi — Head Gear Division
Kaushik M. Patel — Head MHE Division
Analysts:
Harshit Kapadia — Analyst
Sanjay Laddha — Analyst
CA Garvit Goyal — Analyst
Sunil Manikant Kothari — Analyst
Gaurav Nigam — Analyst
Raj Shah — Analyst
Niraj Mansingka — Analyst
Saket Kapoor — Analyst
Rohan Vora — Analyst
Aman Soni — Analyst
Sani Vishe — Analyst
Ashwini Sharma — Analyst
Manish Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Elecon Engineering Co Limited Q3 FY26 Earnings Conference Call, hosted by Elara Securities India Private Limited. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I will now hand the conference over to Mr. Harshit Kapadia, from Elara Securities India Private Limited, for his opening remarks. Thank you, and over to you.
Harshit Kapadia — Analyst
Good evening, everyone. We welcome you all to the Q3 FY26 Earnings Conference Call for Elecon Engineering Company Limited. Today, we have with us the management representing Mr. Dalwadi, Head of Gear Division; Mr. Kaushik Patel; Head of Material Handling Equipment Division; and Mr. Narasimhan Raghunathan, Chief Financial Officer, along with his team to give us the earnings outlook. Over to you, sir, to give us outlook for the quarter three call.
Narasimhan Raghunathan — Chief Financial Officer
Thank you, Harshit. Good evening, everyone, and a warm welcome to Elecon Engineering’s Q3 and Nine Months FY26 Earnings Conference Call. Joining me today are Mr. Deepak Dalwadi, Head Gear Division; Mr. Kaushik Patel, Head MHE division. The earnings press release and the investor presentation have been filed with the stock exchanges and are also available on our website. I trust you have had the opportunity to review them. I will begin with a brief overview of our business performance, followed by a detailed discussion on the financial results.
Elecon Engineering, today, stands among Asia’s leading manufacturers of industrial gear solutions and material handling equipment built on decades of engineering excellence, deep domain expertise and trusted customer relationships. Our Material Handling Equipment division is emerging as a powerful growth engine for the company. Backed by over 70 years of experience, the division has unique capabilities to design and manufacture large, complex and high-capacity equipments such as wagen tipplers, stacker reclaimers, crushers and specialized conveyor systems. These capabilities are presence the very few players in India, creating a strong competitive moat for Elecon. Serving sectors such as power, steel, cement, ports, mining and the fertilizers, the MHE business continues to deliver customized high-value solutions that enhance customer efficiency and reliability.
In our gear division, Elecon maintains the leadership position in India’s organized industrial gear market. We offer one of the widest and most comprehensive gear portfolios ranging from heavy-duty gearboxes to precision engineered components, catering to industries such as steel cement, sugar, power and defense. Continuous investments in research and development and infrastructure ensure that innovation, customization and life cycle support remains central to our value proposition. With the presence across nearly 95 countries, a strong global distribution network and long-standing relationships with the customers worldwide, Elecon is well positioned to benefit from the ongoing capital expenditure cycle in India and international markets.
With this, I now hand over the call to our gear division head, Mr. Deepak Dalwadi who will walk you through the performance of the gear division.
Dipak S. Dalwadi — Head Gear Division
Yes. Thank you, Mr. Narasimhan. The gear division, which contributed approximately 78% of consolidated revenue in Q3 delivered a largely stable performance with revenue growth of 1.3% year-on-year. Both domestic and overseas businesses demonstrated resilience during the quarter. The new sales growth was largely due to timing-related factors, including delays in order inflows during the first half of the year, followed by execution and dispensed department arising from customer-driven dispatch schedules. Importantly, the underlying demand environment remains healthy. We are witnessing strong inquiry levels and improving order inflows across domestic and international markets. Market sentiment is gradually improving, supported by ongoing investments in power, steel, cement and a visible pickup in sugar segment.
With this improving visibility, the gear division is well partitioned to return to a stronger growth trajectory. To conclude the division performance, I now hand over the call to Mr. Kaushik Patel Head of MHE Division.
Kaushik M. Patel — Head MHE Division
Thank you, Deepak-ji. The MHE division continued its strong growth momentum, delivering 16% year-on-year given the growth during the quarter. This performance was driven by robust demand from power, cement, mining and port sector, along with steady execution. We remain confident that the MHE business will continue to perform well in Q4 FY26 and beyond supported by healthy order book, a strong project pipeline and deep customer engagement.
With this, I now hand over the call back to Mr. Narasimhan to provide further overview on Elecon’s financial performance.
Narasimhan Raghunathan — Chief Financial Officer
Thank you. I will now be walking you through the financial performance for Q3 and Nine months FY26. Financial performance, Q3 FY26.
We are pleased to report a resilient and encouraging performance in Q3 FY26 despite certain short-term challenges. For the quarter ended December 2025, our consolidated revenue from operations stood at INR552 crores compared to INR529 crores in Q3 FY25, reflecting a year-on-year growth of 4.3%. The gear business reported a largely flat performance during the quarter primarily impacted by timing-related delays in order receipt and execution as well as customer-driven dispatch deferments. However, the underlying demand environment remains healthy. We witnessed robust order inflows across both domestic and international markets, supported by sustained inquiry levels, which gives us confidence in future order inflows.
The domestic market contributed 76% of the consolidated revenue, while overseas markets accounted for the remaining 24%. The consolidated order intake during Q3 FY26 stood at INR701 crores, representing a 7% year-on-year growth. The order inflow combined with a healthy inquiry pipeline keeps us optimistic about growth prospects going forward. Consolidated EBITDA for the quarter was INR109 crores compared to INR143 crores in Q3 FY25, translating into an EBITDA margin of 19.8%. Margins were temporarily impacted due to flat revenue performance, higher employee cost and a change in product mix. We expect margins to normalize as volumes pick up. Operating leverage plays out and the order book converts more rapidly into revenue. Profit after tax for the quarter stood at INR72 crores, representing a PAT margin of 13%.
Performance for nine months ended December 2025. For the nine months ended December 2025, after adjusting for the onetime arbitration of income of INR25 crores recognized in Q1 FY26 in the MHE division. Adjusted consolidated revenue stood at INR1,585 crores compared to INR1,429 crores in nine months FY25. Adjusted EBITDA for the period was INR340 crores with an EBITDA margin of 21.3%. In addition to the INR25 crores recognized in revenue in Q1 FY26 an additional INR10 crores was recorded under other income as part of arbitration settlement. Furthermore, INR80 crores was recognized as exceptional income below PVT representing unrealized mark-to-market gains from investment reclassification. As a result, Profit after tax for nine months FY26, including these onetime items stood at INR335 crores.
Segment-based performance gear division. The gear division contributed 78% of total revenue in Q3 FY26. Revenue for the quarter stood at INR429 crores compared to INR423 crores in Q3 FY25, reflecting a flat year-on-year performance due to the opposite — of course mentioned reasons. We expect a faster execution of orders to convert into revenue in Q4, which should support improved performance going forward. EBITDA for the gear division stood at INR78 crores in Q3 FY26 compared to INR118 crores in Q3 FY25. The EBIT margin declined to 18.2% compared to 27.8% in the same quarter last year, primarily due to higher employee cost and product mix. As revenues scale up, we are confident that margins will require with operating leverage coming into play. Order intake for the quarter was INR464 crores, and the open order book stood at INR811 crores as of 31st December 2025, providing strong revenue visibility for the coming quarters.
Material Handling Equipment division. The MHE division continued its strong growth momentum during Q3 FY26. Quarterly revenue stood at INR123 crores compared to INR105 crores in Q3 FY25, registering a 16% year-on-year growth. Growth was driven by strong demand in the product supply and aftermarket segments, particularly from the power, cement, fertilizer and port sectors. EBIT for the division stood at INR25 crores compared to INR33 crores in Q3 FY25. EBIT margins during the quarter were impacted by product base. Order intake during the quarter was INR227 crores compared to INR185 crores Q3 FY25. The open order book stood at INR561 crores as of 31st December 2025, reflecting strong growth prospects ahead.
While there has been short-term execution delays in the gear business, the fundamentals of both the divisions remain strong. The temporary mismatch between order intake and execution has impacted near-term revenue recognition. However, our solid order book and execution pipeline provides clear visibility for growth in the coming quarters. On the balance sheet front, we continue to maintain a robust financial position with a strong net cash balance of approximately INR600 crores, providing significant flexibility to growth opportunities, execute our capex plans and navigate macroeconomic uncertainties. Our capex outlay for FY26 to 2028 is estimated at INR400 crores aligned with our long-term strategic priorities.
Though our financial nine months performance remains strong and demonstrate the underlying strength of the business. Given the near-term softness, we believe it is prudent to rebase our outlook for FY26. On a consolidated basis, FY26 revenue maybe lower by up to approximately 5% and adjusted EBITDA margins may be lower by up to approximately 2% compared to our earlier guidance. That said, we remain confident about an improvement beyond the near term, supported by a healthy order book, a robust inquiry pipeline and improving execution momentum.
With that, I would now like to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Sanjay Ladha from Bastion Research. Please go ahead.
Sanjay Laddha
Hi, thank you for the opportunity. So, my first question would be, sir, we have seen order intake was lowest in the last eight quarters. How are you seeing this and what your view going forward?
Dipak S. Dalwadi
Hello. Can you hear me?
Sanjay Laddha
Yes.
Dipak S. Dalwadi
See, now in near future is coming quarters, there is a good expecting business in the power sector. There is a substantial capacity increase going on in this segment. So we are hoping good orders from the power sector, then even steel sectors are also now growing, and overall trend for the steel sector is also showing in the growth. So we are also hoping good orders from the steel segment. And as the sugarcane grow very well in the last quarter. So we are also hoping the good business in the sugar sector — sugar industry also.
Sanjay Laddha
Sir, can you throw some light on the inquiries which you are talking about. So what I want to understand is when you say we have good inquiries and we have a good bid pipeline. So can you throw some light on how much is the bid pipeline we have and how much is going to be converted into the order book so that we get to know that how much percentage it is going to accrue on you because from the last three, four quarters, we are mentioning that, but the order intake and the order flow has been quite a lower side on that trend. I understand the business dynamics, but just wanted to have your views on that.
Dipak S. Dalwadi
See, whatever orders we — actually, now the power investment has started and they are releasing the orders. So we also received very good orders from the, say, L&T, MHI and QLR and all. So we are getting the orders from the power industry and — but at the later stage, they want their requirements. So that’s why it is to be executed in the next financial year. And also, there are many inquiries floating from the power industries and they are in pipeline, and we are hoping that all inquiries to be converted into the orders so we have a very full confidence for achieving the good inquiries and all — whatever in the pipeline, it will be converted into orders, which will be useful in the next coming quarters.
Sanjay Laddha
Sir, my another question, we are seeing competitively better demand for the domestic market for quite some time. While — when we communicate to the — in our investor presentation, we said that export revenue should be over 50% going forward in FY30. So how do you see this divergence because how do you see export market will pick up? What is the growth strategy for export? Any inorganic acquisition we are evaluating on that space?
Narasimhan Raghunathan
Yes. At the moment, we are not looking at any inorganic acquisitions. At the same time, how we look at the export business as such, we are explaining many investors conference call earlier that we are putting a lot of efforts, a lot of activities has been ongoing for the past three years, four years. We also backed lined up OEMs, and we have made the revenue targets of what we were looking for. And this on the OEMs, you are aware that they are going to give us a sustained business in forthcoming years. So overall, the long-term export growth or prospects, what we are looking at, and they’re considering how we are — at present, the market share and there is a huge potential. So all those aspects and the internal water the efforts which we are doing, all are in place.
At the same time, we are aware that certain geopolitical situations and certain regions, economic growth and other things. These are all the external factors, which is presently impacting us. Having said that, for the efforts, all the activities, which we have been doing for four years to five years now and all the orders which we executed and how the customers are looking at presently based on the experiences which they had with us for three years, four years. We are confident that in coming years, we’ll be able to reach our milestone of 50% revenue coming from the exports.
Sanjay Laddha
Sir, can you also throw some growth guidance. I’m not talking about a year perspective from that point of view. I’m talking what the longer 3-year time frame, what the growth we are targeting. So last time we say that it’s 20% growth guidance, we have lowered down that okay, that’s the business part of that. But if I see 3-year time frame, what are the growth prospects we are looking for?
Narasimhan Raghunathan
It’s around 20% to 25% what we are looking at as the guidance.
Sanjay Laddha
Thank you. Will get back in later. Thank you.
Operator
Thank you. [Operator Instructions] We take the next question from the line of CA Garvit Goyal from Serene Alpha. Please go ahead.
CA Garvit Goyal
Hi. Good evening, sir, and thanks for the opportunity. Sir, in continuation to the earlier participant only. Over the last 1.5 years or two years, we are continuously speaking or putting some emphasis on the export side. While we also received a few orders that were announced earlier, these have not been yet translated into materials in the larger volumes. So as a result, if we benchmark export against FY23, the business has delivered only a marginal annual growth of around 4% to 5% despite a consistent effort and focus that we are putting into. But at the same time, if we look at the domestic market, it appears to be in a strong capex cycle, particularly expose sectors that we talk to. We have not heard from management a clear articulation around the incremental market share gains in India and maybe targeting at 25%, 30% kind of growth in equity and the domestic market, while exports are muted.
We are — in Indian market — even in the Indian market, we are currently going at 15% to 20% kind of number. So I agree that the margins can be seen you as a management try to protect. But anyways, if we look at last two quarters, margins have also started falling. So I just wanted to understand from you, like why we are not aggressive on the domestic side? And number two, despite the cautious stake that we are taking on the domestic market, why are we facing a fall in the margins? Is it because even within the existing market share that we are speaking about continuously around 40%, we have started facing the competitive prices?
Narasimhan Raghunathan
Yes, Yes, I’ll address it. So while we continue to focus on our export market. We have been very strong in the domestic market. As you know, that nearly 40% of the organized market share is what we hold that still continues. We continue to be the leadership — leading the market in the Indian scenario. And we are taking all the efforts to — while we may not go for an aggressive market increase from now on, which comes with an additional competitive scenario and compromising on the margins, etc. At the same time, we continuously look at how we could enhance the product, upgrade our products, reduce our cost, all those aspects and how to retain the current market, like you see that what are the incremental business segments, like power sector and things like that, which is happening, we are able to continuously improve our revenue on account of debt.
So therefore, our domestic approach is — continues to remain robust. We bought a separate team who are continuously bagging those orders and approaching the market. So all those efforts are always there. And in terms of margins, we see more that it is a scenario which is playing out due to the lower turnover in the first three quarters.
Once we see in the fourth quarter, while, of course, turnover from a point of view is what we have doing the guidance, there has been a little bit of a lower outlook in the current year. In terms of margins, overall, margins is how we see, it gets normalized when we approach the Q4. So we remain on the same — more or less same decision, of course, considering the market in the current year. Our marketing team generally uses its flexibility to increase and decrease the price at which we sell the products. So at the same time, overall, our approach to its margins remains the same in the domestic market.
CA Garvit Goyal
So now you are saying going ahead also, we will be focusing on maintaining the market share instead of focusing on increasing the market share in domestic markets. Is that understanding correct?
Narasimhan Raghunathan
Yes, your understanding is correct. We would recently tried to increase the market share, but if it comes it in a very aggressive competitive scenario, then we would like to look at maintaining the margins.
CA Garvit Goyal
But in that case, how will we be able to grow?
Operator
I would request you to join the…
CA Garvit Goyal
No, no. It’s just a follow-up. It’s just a follow-up, actually.
Operator
All right. Please go ahead.
CA Garvit Goyal
So, in this particular case, I’m not understanding. At the same time, we are speaking about 20% to 25% growth, right? And we are aware geopolitical tensions are there. So, export is a bit on toast right now for us. So, if we are not looking to grow in Indian market, maybe at more than 25%, how will we be able to achieve that guided numbers? So, that I’m not able to understand.
Narasimhan Raghunathan
Yes. See, the growth what — the export growth, what we had indicated to be around 20% to 25% is how we see it. At the same time, we will have to factor in the geopolitical situations which are beyond our control. At the same time, our efforts definitely would be there to reach our milestones subject to the geopolitical concessions.
At the same time, our approach to the export market in terms of adding new clients, identifying growth opportunities in different markets, approaching different markets with the different approaches connecting with the OEMs, consultants and distributors in different regions. all those efforts and expanding our network of branches and wherever required, if there is assembly centers sort of thing, we’ll have to establish, we are keenly looking at. So therefore, all the efforts are on to improve that — to reach that milestone of export projections.
Operator
Thank you. We take the next question from the line of Sunil Manikant Kothari from Unique PMS. Please go ahead.
CA Garvit Goyal
All right. Thanks for the opportunity, sir. My question is to copy that. Basically, looking at the power sector opportunity, which is seems to be materializing thermal power mainly. So just wanted to understand your thought for next two years, three years, how you see MHE divisions opportunity, how prepared we are? Because I think some year, four some years, we were not investing much in materials. So in terms of team, technical capability or investment in machines, a little bit been thought process on MHE’s preparedness to capture the growth and possibility your growth will be very helpful.
Kaushik M. Patel
Okay. First of all, I will give you the update on the market. Yes, presently, as you mentioned, there is a good opportunity for us as MHE to grow and to capture the business in the power sector because there are many projects that have already been announced by the various end users like NTPC and other state government body. So I think a few orders have been finalized. And out of it, we got the good business in current year. So in a couple of years, yes, there is a good visibility for us to grow further. And apart from the power, of course, other sector is also helping us to grow because most of the end user has already announced their capex investment and, of course, some capital investment also that to upgrade their existing equipment. So we are hoping good growth in next two years, three years.
Sunil Manikant Kothari
And regarding our preciseness, how much…
Kaushik M. Patel
Now, coming to our capability, we have been in this business for more than 75 years. We have our own manufacturing setup over here. We have a design — dedicated design team for our equipment. In fact, we have upgraded our equipment considering the present market requirement and customer mix. And as far as the manufacturing is concerned, if you see most of the products require the fabrication activity.
Although we have an internal setup for the fabrication — but for fabrication, we have been now outsourcing to get the things done. Only to get it machining, we have an internal process. And apart from the upgrading our existing machines, we have a capex plan near to INR35 crores to INR40 crores. And out of the few machines, since we are expecting to get it in next quarter, next quarter means Q1 of next financial year. So we are also investing in our machinery as well as the expanding our capacity to meet the near future opportunity or get the opportunity to that.
Sunil Manikant Kothari
Yes. My second question is, sir, on the competition. I mean, compared to the previous cycle for 2007, how do you see the competition competitor pricing? And what any ability we have added in terms of in product? Or are we again planning or thinking about entering some maybe EPC or something. What’s your thought process for future growth that we might happen.
Kaushik M. Patel
Okay. Let me make it clear, we have adopted the strategy that we should focus on equipment supply and providing the after sale service and that will continue over the next two years. We don’t have a thought to enter into EPC business. But looking to the present market needs, I think for us, we have ample opportunity to put our equipment in the new projects, which is being announced by the end user. Reason is only that many end user has changed their strategy for closing the tender. And those strategies are favorable to MHE, in fact, favorable to Elecon to supply the equipment in the market or for particular projects.
As far as the competitor is concerned, you must be aware about the market scenario that few players like McNally Engineering and TRF, McNally has become bankrupt. TRF has already announced to shut down their material handling operations. So, only a few competitors are there like L&T and TKL. But again, if you see the business strategy of L&T and TKL, they are more focusing on the EPC projects. Of course, we have a competition with them, but not to the extent that every sector. And Elecon being the first equipment manufacturer for material and drilling equipment, most of the PSUs’ preference is with Elecon.
Sunil Manikant Kothari
Okay. Thank you, and my good wishes to Mr. Narasimhan for future career and thank you very much
Operator
Thank you. Ladies and gentlemen, a reminder. Please restrict your questions to two per participant and rejoin the question queue for follow-up questions. We take the next question from the line of Gaurav Nigam from Tunga Investments. Please go ahead.
Gaurav Nigam
Yes, sir. Sir, I have one question on the gear division. What was the mix of engineered gears in this quarter’s revenue and you — on the gear specifically, you mentioned about the revenue difference which has happened. So, would you be able to quantify how much was this revenue deferral that we are talking about?
Kaushik M. Patel
Yes, that’s — just a minute.
Narasimhan Raghunathan
So in terms of revenue deferral, it is around INR30 crores to INR40 crores, where some of the dispatches what is — where we try to squeeze before December, that is getting extended to January or February. So the revenue mix in the AP and CP. So the CP is 52% this quarter, and the remaining is 48% if we — for this quarter.
Gaurav Nigam
Understood, sir. So that was question one. Just a quick second question on the export side. I mean we had indicated about OEM count that we had acquired had tied up. Can you update on that business? What is the status and how much business did we do with them in this quarter? Or in nine months, whatever you — competitor?
Narasimhan Raghunathan
Yes. It is around 18 OEMs, where we are tied up with. Having tied up with the 18 OEMs, the revenue what we got during this nine months is around INR31 crores and what we look forward in future, is that a repetitive business, which could come in the future.
Gaurav Nigam
Got it, sir. This is great, sir. Thank you.
Operator
Thank you. We take the next question from the line of Raj Shah from ENAM AMC. Please go ahead.
Raj Shah
Okay, sir. My first question is regarding the gross margins. So if you see the gross margin of 43% that we reported in this quarter is lowest in the last five years. I know you cited some reasons, customer deferments and product mix. Can you throw some light on exactly where which customers will do it international or domestic. And the product mix changes, as you mentioned, engineered products in U.S. business of 52%. I’m trying to understand why the December fall in gross margins according this quarter?
Narasimhan Raghunathan
Yes. The gross margin — see, the product mix is around 52% from catalog products and 48% from engineered products. The gross margin largely while in certain things like, for example, exports during this quarter, we are a little bit low, where the margins are better off. Then the product mix sometimes keeps fluctuating between the catalog products and engineered products. So that’s also one of the other, we would say that it’s more of a timing thing. And specifically, we are also a few orders, specific orders, which we are executing presently. This is for sort of indigenously developed the product for the Indian Navy which is — though it is of a smaller order value, since it is being done for the first time by us, it has got higher sort of manufacturing costs, which is more towards learning and understanding and designing and things like that. So that’s once again from a onetime point of view.
At the same time, overall, there is no significant gross margin in long term, it is impacting us. Only thing is that probably 0.5 or 1 percentage as what we had explained on seeing the competitive scenario, our marketing team how we are viewed — how our approach to it that we look at the pricing of the products and accordingly factor those things. But otherwise, gross margin per se in the gear division as well as, of course, our MHE division is strong. the gear division, the overall gross margin levels remains the same, except for during this year, it has been on the lowest side.
Raj Shah
Okay. So just to follow up to that, you said 1% intended towards competitive scenario. Now the amount that you told regarding the AM maybe onwards, if you can intrigue some percentage of that? And whether this will be beneficial for us in the future orders of Indian Navy?
Narasimhan Raghunathan
Yes. It is around 0.5%. Definitely, that is a thought process that by bagging those orders, which is of a significant for us. In the first time when we execute, we are testing. But once we establish our credentials then there is a potential that such orders could come in the future. And whatever the learning costs which we incur in the first year, obviously, we will not be incurring it for a similar product in future years. And we are eager to back those orders and while in the initial years, it could be a little bit on lower sale on the margins. Definitely, there is a huge prospects for such orders.
Raj Shah
Okay. Sir, any update on…
Operator
Raj, I would request you to rejoin the queue for follow-up questions.
Raj Shah
Sir that was a follow up question. This is the second question that I am asking.
Operator
Okay, please go ahead.
Raj Shah
Sir, a follow-up question, there is a second question. So any update on the INR200 crores aircraft carrier order that was expected in Q4 and the next-generation miss order in defense?
Narasimhan Raghunathan
Yes. So one is that it is getting bid a longer time. So probably Mr. Deepak Dalwadi, you can explain.
Dipak S. Dalwadi
Yes, that new generation Corvette, that is we are expecting the GSL and GRSE are expecting the orders anytime and we are expecting RFP by the Q3 of next financial year.
Raj Shah
And aircraft carrier orders, sir?
Dipak S. Dalwadi
Yes, and regarding this indigenous aircraft carrier that follow-up project is expected to be given to the shipyards in coming future and for that we can get the RFP in the Q1 of financial year ’27.
Raj Shah
Okay, sir. This is not a question, but if you can just be more detailed in guidance regarding the segment wise guidance. Last quarter it was INR650 crores in MHE, INR2,000 crores in gear. Similar breakup if you can give, that would be great?
Narasimhan Raghunathan
Yes, it is broadly around INR700 crores from MHE and the balance is towards the gear division.
Raj Shah
Okay. Thank you, sir.
Operator
Thank you. We take the next question from the line of Niraj Mansingka from White Pine Investment Management Private Limited. Please go ahead.
Niraj Mansingka
Sir, two questions. One is on the margins front, I think you have discussed that. But if you remove the Indian Navy margins, how much would the margins for the gear division come back to?
Narasimhan Raghunathan
Sorry, can you repeat again?
Niraj Mansingka
Sir, if you remove the exceptional lower margins in the Indian Navy, how much would the margins come back to on the gears side?
Narasimhan Raghunathan
You’re looking at gross margin or net margin?
Niraj Mansingka
EBIT margin.
Narasimhan Raghunathan
EBIT margin if you remove that.
Niraj Mansingka
If you lower margin at the Indian Navy, how much would the adjusted margin for the gears division will be?
Narasimhan Raghunathan
Yes. So specifically, probably we will come back to you and clarify to you specifically.
Niraj Mansingka
But sir, it would be useful if you discuss here because how will the public know because public forum or you can just tell us some broad range because the margins fall has been quite large in the last five quarters in the company. So that’s the reason I was asking you.
Narasimhan Raghunathan
It is around 2% to 3%.
Niraj Mansingka
Okay. The other question is, in the last few quarters, orders for the order intake has been good in the gears division right? But the revenue reported for the gears has not increased. So our cumulative order book from March is increased from INR583 crores to INR811 crores. But our run rate of gear revenue has slowed down. What might be the reason? And can we also correlate that the margin will be lower in the existing orders because there is, as you said, employee costs and other cost increase or those have been taken care of?
Dipak S. Dalwadi
See, for the question to your first — answer to your first question, the whatever orders we have booked in Q3, they are major for the power industries and their requirements are at the later stage. So all these orders will be executed in the next — I mean, next financial year. So that’s why the order books are showing high but the order execution, they have been deferred by the customers in the next financial year.
Niraj Mansingka
I got it. Any time line you have a thought on when you will start those revenues because the run rates have gone quite low.
Dipak S. Dalwadi
From Q1 itself.
Niraj Mansingka
Q1 itself. Okay. And sir, last question on the U.S. tariffs. On the export, how are you managing it? Like would you be impacted if the tariff status quo maintains?
Narasimhan Raghunathan
You’re asking of the tariff and impact to us?
Niraj Mansingka
Yes, sir.
Narasimhan Raghunathan
Yes. Broadly, you know that as the economy — U.S. economy per se is not growing well. At the same time, we are not — while we are looking at more growth opportunities, the present revenue is not that much impacted. We are able to manage that due to the tariff implications.
Niraj Mansingka
Okay. Sir, and the question you did not…
Operator
Niraj, I would request you to please join back the queue.
Niraj Mansingka
The question was not answered. Just one second. Sir, the question was that, the orders that you have in hand, do they have higher margins or do they have lower margins? The orders of INR811 crores on the gear site?
Narasimhan Raghunathan
We’ll work out that and clarify a little later point of time.
Niraj Mansingka
Okay, sir.
Operator
Thank you. Ladies and gentlemen, in the interest of time, we request you to restrict to one question per participant and rejoin the question queue. We take the next question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Saket Kapoor
Yes. Sir, I hope I’m audible.
Dipak S. Dalwadi
Yes.
Saket Kapoor
Sir, firstly, the small point is about our existing order book. The closing order book is at INR1,372 crores. So if you could just give us some color what is the execution cycle, I think so you mentioned about some power companies order, which is there in the order book, but they will get executed for Q1. And then, sir, you have also spoken about some product mix and absorption of cost because of the increased employee costs and others. So if you could just give us some color, the earlier participant has asked, how is the margin profile likely to be on the existing order book? And lastly, sir, on the utilization level since we have already done capex, and we are also advertising further addition, what is our current capacity utilization levels for both the divisions?
Dipak S. Dalwadi
See, for the question to your first — answer to your first question, the — whatever orders we have booked in Q3, they are major for the power industries and their requirements are at the later stage. So all these orders will be executed in the next — I mean, next financial year. So that’s why the order books are showing high, but the order executions, they have been deferred by the customers in the next financial year.
Operator
Thank you. We take the next question from the line of Rohan from Envision Capital. Please go ahead.
Rohan Vora
Hello, sir. Thank you for the opportunity. So, sir, my question was broadly on the impact of increasing commodity price — metal prices. So, how does that impact our existing order book in terms of margins going forward? Thank you.
Dipak S. Dalwadi
See, as such, because of the demand situation in the existing market, the price range are more or less stagnant. So there is no such increment in the commodity markets. And because of that, our raw material prices are almost stagnant. So there is not much impact because of the raw material prices for getting the orders from the market.
Rohan Vora
Sure, sir. But for our existing order book, some of the metal we purchased right in the future and at a higher price. So will we be able to pass this one to our customers?
Dipak S. Dalwadi
I don’t think in the near future also, there will be a price increase in the market for the metals and all the major commodity items. We don’t see any increase. Because normally, we look forward for the six months onwards for the raw material prices for the booking the orders as well as the study of the market. And that we find that there are no — it doesn’t see any increase or I mean, major change in the raw material prices of the major category items of these commodity materials.
Rohan Vora
No, no, absolutely, sir. So I am talking about the increase in commodity price that has already happened. Metal prices that have gone up in the last one month, two months. I’m talking about that, sir?
Narasimhan Raghunathan
Yes. If you see…
Dipak S. Dalwadi
But we are also managing and having a good relationship with our suppliers. So we are managing the prices.
Rohan Vora
Okay. Okay, sir. Thank you
Operator
Thank you. We take the next question from the line of Aman Soni from Nvest Analytics Advisory. Please go ahead. Aman, please unmute your line and proceed with your question.
Aman Soni
Hello, am I audible now?
Operator
Yes, please go ahead.
Aman Soni
Sir, just a clarification on the guidance side. You mentioned most of the order book in the gear segment will be definitely attributed most here. But at the same time, we are targeting INR1,800 crores in gears for this year. To keep that number, we need to do around INR575 crores in last quarter, right? So out of the adjusting order book of INR800 crores we have to execute INR5 crores that means we have to execute a significant portion in Q4 itself, isn’t it?
Dipak S. Dalwadi
Yes. So we have lined up because now we are having good orders on hand. So we have lined up all our manufacturing activities, and we are confident that we will achieve all the numbers what we have guided.
Aman Soni
No, no. Actually, I’m asking, while you are saying out of the existing gear order book, a significant portion will be executed next year, right? Then how we will be managing like INR575 crores of execution in gear division in Q4?
Dipak S. Dalwadi
See, we — what I talked about, that was for the engineering product. But for the catalog products, we are having a late manufacturing cycle of, say, one month or 30 days or 60 days. So for that, we are getting the orders and we will execute orders. And there is a very good orders in pipeline. So we will definitely execute these orders in the shorter lead time.
Aman Soni
So does that mean in Q4 also we will be particularly investing more of catalog products and that’s why margins can be on a lower side because product mix is not getting things well?
Dipak S. Dalwadi
No, no. It is not like this. The CP orders, which we are getting, we are executing in the same quarter. The EP product orders we get in September month in Q2, it will be delivered somehow in Q4 and some orders we received in Q3 for the EP product, it will be delivered in Q4 only. So the mix of the CP and TP would be similar in Q4. But the AP products, which we got in the December month only, that would be spillover in Q1 next year.
Aman Soni
And sir, in the last two quarters…
Operator
Aman, I would request you to join back the queue for follow-up questions.
Aman Soni
Just a follow-up only on this question on the margin side. In last two quarters, we have been speaking again and again about like this product mix is getting impacted. So I just wanted to understand like when this picture will get clear, like if that is going to be the case, like if we are facing any delay in execution of our engineering products, then our margin profile is going to be suffered, right?
Narasimhan Raghunathan
Yes. This is the one case. The other case is that if you see the product and the service mix. So that also includes in the margins. So this quarter, there is the one case, the service portion from the revenue that also impacted the margin. But we have a good order in the service business also. So that will be executed in Q4. So that is not the case in Q3, the margins were lower, and the Q4, the EP product, CP products as a service, that will be a mix of all the things. So margin, it will not like that, it happened in Q3.
Operator
Thank you. We take the next question from the line of Senthil Kumar from Joindre Capital Services Limited. Please go ahead. Senthil, please unmute your line and proceed with your question. Since there is no response, we will move on to the next question, which is from the line of Sani Vishe from Axis Securities. Please go ahead.
Sani Vishe
Yes. So sir, this is kind of a follow-up on the earlier question from the early participants. So at the end of Q2, also we had a very strong order book, and we were very confident about achieving good revenues in Q3 and Q4 but at this trend, there are some external factors which are beyond our control, and we could not achieve in the Q3. Now again, we have a good order book, and we are expecting confidence and a very good performance in the Q4. So what is the change that gives us the confidence that this time, it will happen? Or are there any similar risks that we will not be able to achieve this guidance?
Narasimhan Raghunathan
Yes. See, what happened is like what Mr. Ashish also said for catalog products, what we — when we project we factor in that from the time we inquiry to the execution, it takes about one month or so. So based on that, we — considering the market scenario, we get the understanding of how the market is performing and accordingly factor that. And more sense for the products, there is more clarity, we are able to provide better clarity on that aspect. So therefore, depending upon how the — for that quarter, it is fluctuating, we factor both the order on hand, how it will be executed plus the order intake, what we will be getting for catalog products which will be delivered in the quarter. So this sort of mix and match fluctuates and that is what will be factoring in when it come for revenue.
Sani Vishe
Okay. So simply to the confidence level of achieving this guidance is higher compared to the earlier quarter. Is that right?
Narasimhan Raghunathan
Yes. The guidance quarter we have spelled out with the revision, you would know what we have spelt out that is achievable definitely.
Sani Vishe
Okay sir. Thank you.
Operator
Thank you. We take the next question from the line of Ashwini Sharma from Emkay Global Financial Services Limited. Please go ahead.
Ashwini Sharma
Yes, my questions have been answered. Thank you.
Operator
Thank you. We take the next question from the line of Juhi from Arihant Capital Markets Limited. Please go ahead. Juhi, please unmute your line and proceed with your question. Since there is no response, we will move on to the next question which is from the line of Manish Gupta from Equinox Investment Advisors. Please go ahead.
Manish Gupta
Sir, with the US trade deals being debated again and again, and there is rather no clarity when it will be signed, what are the geographies where you are more optimistic about growth?
Dipak S. Dalwadi
Yes. We are more expecting the Middle East and Europe.
Manish Gupta
Okay. And since China is also taking tariffs in U.S., they would be competing hard in these geographies as well. So how is our competitive competitiveness compared to China in these markets?
Narasimhan Raghunathan
See, you may be knowing that China, though they are competing, but they were not very good in the aftersales service. So that’s why we are not facing any competition from China in terms of the order executions and getting the traction from the Europe and Middle East because in the after-sale service, we are having operated compared to the China.
Manish Gupta
And my second question will be, sir, you moderated financial year ’26 guidance. So beyond financial year ’26, what will be your guidance instead of topline as well as how would you expect the margins to behave in periods after financial year ’26?
Narasimhan Raghunathan
Yes. Probably in another — in the current quarter, we will have to do the budgeting expenses, wherein we get the input from all the both the divisions and different markets. And then we’ll be able to spell out how we look at in the next year.
Dipak S. Dalwadi
Generally, we do review our guidance in Q4 con call. So we will maintain the same and we will spell out the next year guidance in Q4 on call. Thank you.
Manish Gupta
All right, sir, considering that private capacity is just not taking off and geopolitics is kind of very, very volatile as well as export markets are concerned. So do you feel there is a double-digit growth in coming years for you? Or do you expect things to normalize sooner than later?
Dipak S. Dalwadi
See, the power industry has started now performing and they have now released — I mean, investments, government is releasing investment in power. So we are hoping good tractions from the power industries. And even sugar indices are also expecting to pick up in coming months. So we are expecting good traction from the sugar industries and also from the steel industry and cement also started now showing some expansion. So we are expecting good tractions from all these segments.
Narasimhan Raghunathan
Since we are also spread out fairly well in different industries across this thing, any pick on don’t tick on a few industries, we are able to manage that. And that’s how we are optimistic that the growth will be better.
Operator
Thank you. Ladies and gentlemen, we take that as a last question and conclude the question-and-answer session. I now hand the conference over to the management for their closing comments.
Narasimhan Raghunathan
In closing, I would like to thank all of you for joining us today and for your continued trust and support. While the gear division delivered a resilient performance during the quarter, we are particularly encouraged by the strong momentum and long-term potential of the MHE division, which brings balance and incremental growth to our overall business. Even as we revise our near-term guidance, our focus remains firmly on disciplined execution, prudent capital allocation and strengthening our leadership in high-growth segments. We are confident in our ability to build on the current momentum, navigate short-term challenges and continue delivering sustainable value for our shareholders and all stakeholders. Thank you once again for your participation. Should you have any further questions, please free to reach out. Have a great evening. Thank you.
Operator
[Operator Closing Remarks]