Harsha Engineers International Ltd (NSE: HARSHA) Q4 2025 Earnings Call dated May. 08, 2025
Corporate Participants:
Unidentified Speaker
Vishal Rangwala — Chief Executive Officer
Maulik Jasani — Vice President, Finance
Sanjay Majumdar — Strategic Advisor
Analysts:
Unidentified Participant
Harshit Patel — Analyst
Harshit Patel — Analyst
Amit Anwani — Analyst
Nikunj Doshi — Analyst
Yash Purbhe — Analyst
Jason Soans — Analyst
Avnish Tiwari — Analyst
Presentation:
operator
Conference is now being recorded. Sa. Sam it Sam Ram Sam. It. It. Sam it. It.
operator
Ladies and gentlemen, you are connected to the Harsha Engineers conference call. Please stay connected. The call will begin shortly. Participants, you are connected to the Hersha Engineers International Limited conference call. Please stay connected. The call will begin shortly. Thank you ladies and gentlemen. Good day and welcome to the Harsha Engineers International Limited conference call. 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 n0 on your touch tone phone.
I now hand the conference over to Mr. Vishal Rangwala, CEO of the company. Thank you. And over to you Mr. Rangwala.
Vishal Rangwala — Chief Executive Officer
Thank you Rupija. Good evening everyone and welcome to Quarter 4 Financial Year 2025. Post Result Update call. As per our normal practice, our CFO Mr. Maulik Jasani will take you through at greater length with key numbers. However, I’m assuming that most of you would have had a chance to go through that already. And to begin with, let me talk a little bit about the whole overall environment, what we are in right now. We are passing through a very prolonged turbulent period starting with geopolitical tension and economic turmoil from Ukraine Russia war starting two years ago to Israel Hamas war as well as followed by this tariff war started by Mr.
Trump and now post that the unfortunate Pelgam incident, an escalating tension between India and Pakistan. However, we feel that amid all these uncertainties and tensions we are as a country going to see some positive GDP achievement and growth, hopefully over 6%. And I sincerely hope that things normalize over a period of time, hopefully soon. So with that, you know, specifically at Hersha level, I’m happy to report that notwithstanding one off provisioning we have made in quarter four for the impairment of our investment in Hersha Romania and a one time bed that write off has taken in our solar division.
Overall, India engineering business has continued to show a robust performance and our prospect in relation to our overall India business continue to look very bright. Let me first talk a little bit about our pinpoint which is continued stress in Hersha Romania. As mentioned earlier, we are in the process of completing a major long term strategy for Romania which could involve a significant overhaul or resizing of Romania operation. In the meantime, on a conservative basis, taking into consideration the continued weak demand scenario in Europe and based on a certain indications given by one of our major customer about their possible reduction in offtake, we have made a one time impairment provision of around rupees 95 crore in the value of our investment in Romania.
In our standalone books we just Translated into a net one time provision of around rupees 28 crore in consolidated financial statement for FY 2025. On the positive note, the performance of our China subsidiary has remained satisfactory in quarter four and has therefore positively contributed both in terms of EBITDA as well as debt level for quarter four and FY25. Going forward, we anticipate this positive contribution to continue. From our Hersha China division, Our India engineering business has posted a strong growth in quarter four both in top line as well as the bottom line aided by restocking and resumption of normal purchases by most of our key customers.
We have also started getting early signal of revival in industrial demand in quarter four and we are hopeful that this trend will continue and become more distinctly visible in coming quarters. Our development of new SPU and our interaction with our key customer for medium to long term outsourcing business also is strongly continuing. I’m extremely delighted to inform you that our bronze bushing business has really grown significantly in this financial year and we have recorded a turnover in excess of 100 crores in this division for financial year 2025 going forward. With the additional capacities in our new greenfield facilities coming in production very soon, I expect this business to continue to grow strongly clocking at least about 30% growth in financial year 26 over 25.
Similarly, the stamping business continues to grow at a decent pace and we are also in the process of developing co a few value added stamping which should start yielding results in coming quarters. Further, the sales to Japan Japanese customer look flat and we are getting signal from key Japan based customer indicating that their offtake is likely to increase in coming quarter. Similarly, although sales of LSV appear large size variant cages appear to be flat, we believe that the sign of revival in industrial demand becoming stronger, the sales of this segment should also increase going forward.
Another noteworthy feature is our Solar division in this quarter. After critically evaluating the recovery possibilities of old sticky debts of two of our major customers, we have written off a bad debt of around 20 crores. We have also made an ECL provision of around 5 crore as per India’s provisions, but we are quite confident of reversing the ECL part of the same going forward. It will be evident that if we adjust this one off impact of in the Solar division bit depth on the part time the year shows a decent growth in financial year 2025.
This division continues to Enjoy tailwind in terms of strong demand aided by a favorable solar energy ecosystem and we are expecting a healthy growth of top line in a current financial year in this division based on orders on hand and in pipeline. Needless to add, the philosophy and strategy remains same. Continued focus on small and mid sized projects and not involving major risk or not requiring significant capital allocation. Now in terms of our targeted growth in coming financial year, we believe that while India engineering business should grow in low teens, on a consolidated basis, we.
Expect. At least a higher single digit growth in financial year 2026 in top line as much and a much stronger growth in the bottom line. As we continue to see volatility in the global market. It is difficult to project with very high confidence. However, that’s what we right now see with this. I thank you all for continued support. And. I would like to turn this over to Mr. Maulik Dasani who will talk us through numbers and more details. Maulik, over to you.
Maulik Jasani — Vice President, Finance
Thank you Vishal Bhai for the business overview. Hello everyone and good evening. For the quarter ended March 25 for our engineering segment at consolidated level we have achieved the top line of 330 crore. We have reported the consolidated EBITDA for engineering segment of rupees 38.3 crore. However adjusted EBITDA is of rupees 66 crore after adjusting the impairment on consolidated goodwill. While the EBITDA in the Previous quarter was 48.2 crore and last year same quarter four was 60.6 crore. For the whole year of 202425 engineering segment at consolidated level have achieved top line of rupees 12.69crores against top line of rupees 12.27crore.
In the previous year we reported the consolidated EBITDA for engineering business at rupees 199 crore while adjusted EBITDA is of rupees 227 crore. After providing impact of the impairment for engineering segment. While the last year EBITDA was 198 crores. For the quarter and year ended margin has improved as explained by Visaan mainly on account of increasing sales leg in price pass through better product mix, better cost control and financial income improvements. As discussed in engineering segment adjustment of impairment is rupees 27.7 crore at consolidated level and rupees 95 crore at standalone level. With reference to investment of our Romania subsidies.
While in our solar business we have achieved annual revenue of rupees 139 crore and we have reported EBITDA loss of rupees 14 crore. After giving impact of the bad debt write off of around 20 crore and providing ECL provision of around 5 crores as a overall working capital cycle at consolidated level remains around 126 days for the year and for the year end March 25 against the 144 days in the previous quarter and 142 days in the previous year March 24. The company has incurred a capex of rupees 78 crore in the last quarter at consolidated level and rupees 209 crore for the whole financial year 202425 which includes capex incurred at our new site Windfield sites of Hersa engineers advantage as well as ground mounted project of 10 megawatt.
In our Hersa Engineers company which is under installation for this whole year the revenue from boosting was around 102 crore. From stamping was around 55 crore. LSV business was around 43 crore while revenue from Japanese customer was around 65 crore. With this brief note on financial numbers I request operator to take the Q and A from the participants. 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 one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets 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 Harshit Patel from Equida Securities. Please go ahead.
Harshit Patel
Thank you very much for the opportunity, sir. So firstly could you give us a flavor on.
operator
Please go ahead with the question. Your line is unmute.
Harshit Patel
Hello? Am I audible?
operator
Mr. Patel, can you hear us?
Harshit Patel
I can hear you. Am I audible?
operator
Yes, you are. Now please go. Now you are audible.
Harshit Patel
Thank you. Thank you very much for the opportunity, sir. So firstly, could you give us a flavor on how pricing has behaved in the fourth quarter of FY25 as well as for the full year in both domestic market as well as exports that we do from India. Any material change to this trend that you envisage going forward in FY26?
Vishal Rangwala
Hi Arjit. So if we talk about the past year, I think we have seen some benefit of price reduction which has come through specifically on the steel side and that is being passed through to customer. So we have seen some lag and specifically I would mention that quarter four that lag was a little bit larger. Otherwise we have not seen any major change in pricing overall with our customer. And. As you know that we have a continued pass through mechanism in place. So that being the case for upcoming year also. Again it’s a lot of volatility as I mentioned earlier. So difficult to predict how it what direction.
Harshit Patel
So net native benefited in the fourth quarter is my understanding right?
Maulik Jasani
Yes. Out of increased margins in fourth quarter. One of the parameter is also the leg in price pass through actually.
Harshit Patel
Understood sir. My second question is on exports. How do you see exports panning out in FY26 especially since we had signed a major sourcing contract last year which is supposed to give us good revenues in the second half of FY26. So do you see at least a single digit growth happening in the regular exports business excluding this new contract for the next year?
Vishal Rangwala
It’s a very difficult question to fully answer because our signals we are getting from our customers is very varying. So even though some of them has predicted growth and thereby we are projecting some increased demand and preparing for it, but overall we are looking at some growth. Difficult to exactly quantify how much that is for our regular business.
Harshit Patel
Understood. So we appreciate that. Thank you very much for answering my questions. I’ll get back in the question.
operator
Thank you. Thank you. The next question is from the line of Amit Anwani from PL Capital. Please go ahead.
Amit Anwani
Thanks for taking my question. First question on Romania you highlighted that the pain is very prolonged and we have provided for 95, if I’m not wrong, 95 crores impairment for Romania and and at one place you also highlighted about the customer offtake not happenings. Was it? So if you could clarify now what are we building in for Romania when we typing when we are guiding the growth numbers which you have given and second, is this customer offtake related to India plant or if you could clarify more on that also.
Vishal Rangwala
So I’ll start with the second question. This offtake is Romania from our Romania facilities for our Europe based customer. One of our customer has indicated that they are going to buy very less or lot less semi finished products from us, from Romania and that’s what has triggered this impairment activity.
Sanjay Majumdar
In terms of the plan, actually we are in the process of formulating a very comprehensive long term plan. As Vishal mentioned in his initial opening remarks. I think it is going to be a long term strategy idea is obviously to ensure that whatever assets we have, how gainfully we can utilize and how we can make the whole thing smooth. Very obviously the fact that we have provided for impairment would mean that yes, the Romania operations cannot continue at the current level in this form. So give us maybe two, three months More and we’ll get back to you.
Amit Anwani
Are we factoring anything from Romania when we guide for high single digit growth on control?
Unidentified Speaker
Of course something coming definitely from Romania.
Amit Anwani
Okay, sure. Enter any reasons why the Japanese I think that was also our long term vision to include increase the wallet share from Japanese customers and currently we understand that it is not what we expected. Any reasons and expectations for FY26 on Japanese wallet share?
Vishal Rangwala
So what we shared that, you know, due to various projects. I think we have shared this last quarter also that due to various projects delaying due to sometimes technical reasons, some few other reasons our this year’s plan of growth with Japanese customer has not materialized to the extent we expected Partly also the demand from a global demand also played a role and based on various interaction with the Japanese customer we are seeing more projects are coming online, more products are productionized from our side. We are expecting to go back on the growth path with Japan based customer in the next financial year.
Sanjay Majumdar
So the development pipeline for Japan segment continues. There is no real, I mean material alteration so you know, it’s just taking more time. That’s the whole thing.
Amit Anwani
Right. And lastly on solar is there any more doubtful debt and what is the total debt on solar site?
Maulik Jasani
Yeah, so effectively we have provided the major doubtful debts as a bad debt and as mentioned in our commentary we also provided for the ACL provision as per India’s norms which is around 5 crore and we already mentioned that we are expecting that this will be realizable very soon and accordingly we do not have anything on the books left.
Sanjay Majumdar
This was in fact protracted negotiations were happening over last two, three years post our takeover. Quite a significant portion has already been recovered. Some portion is yet to be recovered so what we felt is probably not going to come that we took a conservative view and wrote off in one go. So there’s no further eastern balsamout.
Amit Anwani
Yeah, thank you so much. Thanks. That’s all from my side. Yeah, thank you.
operator
The next question is from the line of Nikonj Doshi from Bay Capital. Please go ahead.
Nikunj Doshi
Yeah, hi, good evening. Just regarding this bad debt only just want a clarification who are these clients? Means are these utilities or who are these clients? Basically.
Maulik Jasani
These are the old receivables pertains to the EPC contracts done by the solar business and there are multiples including two majors. We could not be. We would not be able to give the name but yes, these are very old and we are not having running business except wherever there is A, O.
Sanjay Majumdar
And M commitment and even in some. Cases the legal proceedings for recovery are going on. So we have been advised not to really, you know, diverge more.
Nikunj Doshi
But so we have filed for NCLT recovery and bankruptcy for them or how are we planning to recover?
Maulik Jasani
Litigations are at a different level.
Nikunj Doshi
Okay, but any hope of recovery.
Sanjay Majumdar
100%. So what we are hoping to recover we have not written out. So what we are not hoping to recover we have written out.
Nikunj Doshi
Okay, but when we acquired this solar business, we knew about this.
Sanjay Majumdar
Of course and 70, 80% thereof has already been recovered.
Maulik Jasani
There has been lot of dialogues on this and there has been quite a few recovery Aspen also.
Nikunj Doshi
Yeah, thanks.
operator
Thank you. Participants who wishes to ask a question? We press star and one. The next question is from the line of Yash Purvey from Inved Research. Please go ahead.
Yash Purbhe
Yeah, thank you for the opportunity. So my question is Ministry of Commerce has recently issued a draft on quality. Control order for standardizing the bearings in. India, especially to curb the import from China. So how are we seeing this development? Do we expect the bearing sector to India grow rapidly?
Vishal Rangwala
We believe that is quite possible. However, this bearings which are imported from China offer, you know, may not be the grade one quality all the time. So I’m not able to fully answer by saying that how much of that benefit will come to us and all that. Having said that, we definitely see that long term government is pushing to ensure that whatever is imported, it can be made in India, should be made in India and we are very supportive of that. We should be benefiting beneficiary of that and we will support that at our level.
It will not be that easy and it will not be an overnight transformation. However, we believe this is the right direction and we should benefit out of this and directionally.
Unidentified Speaker
China plus one has always remained our long term strategy as well. So this actually in a way support this.
Yash Purbhe
Thank you.
Unidentified Speaker
Thanks.
operator
Thank you. The next question is from the line of Jason Soarns from IDBI Capital. Please go ahead.
Jason Soans
Yes, thanks for taking my question sir. I just wanted to understand, you know, just from a broader sense. You know, of course bearings find most of the applications in the industrial side and auto side. And of course there were a lot of plans for localization and all these things by the big three as well in terms of your customers. So sir, how was that? I mean of course recently there has been slowdown in the industrial side and there has been some capex pushback also. So how is the demand sir, now looking from your clients house? Just wanted to understand.
I understand there are a lot of uncertainties on the horizon but just from a ground level, how is it looking? And probably you can use like a 3 or your perspective at least in, in terms of that.
Vishal Rangwala
So Jason, you know it is extremely difficult for us to do a three year version of this. Actually our customers are struggling to give us a good 1 year version of this.
Jason Soans
Actually I asked for a 1 year version only. Actually I asked for a 1 Year version only 3 years. I understand there are a lot of things on the horizon, uncertainties are there. So I just asked you for a one year version only. How is it? I know demand is on the slow, on a slow wicket recently. So just wanted to know how is it from a ground level perspective.
Vishal Rangwala
So from our point of view and you know, remember we are tier two, I mean we are a supplier to bearing industry. So I would not really be able to fully answer the bearing demand. But having said that, we are seeing some improvement across global demand with the limited information we have that we see that there would be some improvement. However, the customers are cautiously telling us. That. This demand improvement is sustainable or not, we are not sure. So the forecast are, you know, take this but you know, it will change again kind of inputs we have received and so there is a lot of volatility in general is what we are seeing in the market.
Maulik Jasani
But still, you know, at our level there are two aspects. One, we are a major supplier to almost all key bedding companies in India do. Based on our own interaction with various customers we still feel confident that overall at India level we should grow. As Vishal has indicated in his opening comments, in a lower teens at least it’s a lower double digit, not a single digit growth in India that we are anticipating and that is on several counts. So we have stampings, we have bushings. We are seeing a lot of traction in bushings. For example, we are talking of a very significant 30, 40% growth in bushing segment.
We are anticipating factors. So I think at least on a very limited way for India, I think we continue growing decently. This is all we can say at this point in time.
Jason Soans
Sure, thanks for that. Just wanted to understand this valuation impairment now if possible. I mean on a standalone level it’s 95 crores and on a console level it is 28 crores. So why is the difference that it possible to explain? Simple, just simply if it’s possible. Yeah, because on a standalone it’s 95 and console it’s 28. So yeah.
Maulik Jasani
Yeah. So Jason, basically at a standalone level it is like a fair value minus our investment. So we have invested around 143 crore at a standalone level and we have reduced it to 48 crore by providing for 95 crore of the depreciation based on valuation, based on the fair valuation done by the registered value. Now, okay, there has already been loss happened since our acquisition. So since acquired, whatever loss booking at the console level that has been removed because my book value of this investment at consolidated level has already reduced by 67 crores. That is the we have already book since 17 of our acquisition and that 67 crore has been reduced and accordingly 28 crore has been provided as impairment.
Jason Soans
Sure, sure. And so when was this Romanian subsidy acquired? Which year was it?
Maulik Jasani
February 2016.
Jason Soans
February 2006. Okay, okay. And lastly, just wanted to understand. I. Mean of course you spoke about a major overhaul plan in the Romanian subsidiary. Are we looking at more such valuation impairments going down or do you think it’s one time or is it too soon to, you know, say anything on this?
Maulik Jasani
No, as we just said, this valuation is done by the registered value for our best possible estimate and forecast. We have it as on today and definitely that is all are achievable and we are working on that direction. And as of now it is not in our hindsight anywhere. Otherwise we would have provided so particularly differently.
Unidentified Speaker
We have. Fully provided?
Maulik Jasani
Yes, fully provided. Yes.
Jason Soans
Okay, okay, sure, sure. And so also just one lastly I wanted to ask in terms of the tariff for and the Trump, Trump Tarif wanted to understand that is there any, I mean of course there’s a clear thing that China is getting isolated and probably those benefits, that’s one target aim of the US Government. So are we looking at some demand traction coming from for Indian suppliers in that if that plays out and excess tariffs are implied are levied on China, do we think more business can come to players like us?
Vishal Rangwala
Yeah, definitely. And you know, we have shared this from a China plus one perspective in fact as well that there is a direct business which can come our way from various geographies, but specifically us in this current scenario. And however on top of it, we are seeing that our customers are also deleveraging their supply chain and their manufacturing base from China and they are adding more and more capacities in India. So we expect that we will benefit out of that also by supplying more products into India which eventually goes for export to US and similar geographies.
Jason Soans
Okay sir, thanks. Thanks. Those are all my questions. Thank you so much for answering them.
Vishal Rangwala
Thanks Jason.
operator
Thank you. Participants who wishes to ask a question may press star and one the next question is from the line of Avnish Tiwari from viaicadia. Please go ahead.
Avnish Tiwari
Hi, am I audible?
operator
Yes, you are.
Avnish Tiwari
On this tariff question, what is the level of tariff which is currently you are paying if you are exporting to US and versus how much let’s say if it’s being exported from China to us.
Maulik Jasani
So tariff rates are not very specifically defined so far and effectively if you see in our current exports, maximum exports are such exports where the clearance from custom duty are on the customer aid. So there is a direct impact to hrsa. As of now, just to answer your questions, we personally as of now believe that we will fall under the country tariff. Whatever country tariff will come as a rate, as a final rate whenever it is published. And as of now we see that we will not fall under any specific category. But yes, definitely these all are very subjective.
Once the things will be put in the US Customs official records then only we will have a better clarity.
Avnish Tiwari
And given there is a significant tariff differential between India and China, are you experiencing intensity of customer inquiries or interactions very different now versus let’s say one and a half month or two months ago?
Maulik Jasani
I believe it will have and it is there. More importantly it will have on a deemed export side also because as Visal, as Mendini may comment, we are a tier 2 so we may not have a direct inquiry that much. But definitely we will have an indirect inquiry because we are part of the longer supply chain.
Avnish Tiwari
Thank you.
Maulik Jasani
Thank you.
operator
Thank you. Participants who wishes to ask a question may press star and one. Anyone who wishes to ask a question may press star and one. Now as there are no further questions from the participants, I now hand the conference over to Mr. Dashal Rangwala for closing comments.
Vishal Rangwala
So with this we would like to thank everyone who has joined this call and appreciate the continued interest in Hersha Engineers. We wish a good evening to everyone and thank you very much for that. Thank you Jhu.
operator
Thank you on behalf of Hersha Engineers International limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.