Electrosteel Castings Limited discussed its Q3 and 9M FY2026 results, marked by a 3.5% QoQ decline in ductile iron (DI) pipe sales volume due to a slowdown in domestic water infrastructure spending under JJM. Management remains optimistic, noting that the slowdown is temporary and linked to administrative/fiscal delays. Exports grew 11% QoQ, and the company anticipates a gradual rebound starting in Q1 FY2027, focusing on cost control and diversification into DI valves.
Q3 FY2026 Performance and Market Headwinds
Electrosteel Castings reported challenging results for Q3 FY2026, directly attributable to headwinds in the domestic water infrastructure sector. Sales volume for ductile iron, cast iron, and fittings was down 3.5% quarter-on-quarter, impacting the top line. This was partially offset by intermediary product sales (coke, sponge iron).
The primary cause for the subdued demand was temporary delays in Government spending under the Jal Jeevan Mission (JJM) at both central and state levels. Management stressed that this slowdown is temporary rather than structural.
Financial Highlights (Consolidated Q3 FY26)
- Total Income: Rs. 1,526 crores (Lower YoY due to domestic volume reduction).
- EBITDA: Rs. 88 crores (Margin: 5.8%).
- PAT: Reported a loss of Rs. 22 crores, which includes an exceptional provision of Rs. 38 crores for new labor laws.
Outlook and Government Policy on JJM
Management expressed confidence based on recent government fiscal actions:
- The Government of India revised the JJM outlay for FY2025-2026 to approximately Rs. 17,000 crores (revised estimate).
- The February 1, 2026, Budget allocated Rs. 67,600 crores against JJM for the next year.
The resumption of fund releases under AMRUT and JJM is expected to improve sentiment. Management noted that funds are now being released contingent on state allocation proofs, with new payment channelization via the SPARSH platform to improve control.
Despite domestic weakness, exports strengthened, with volumes up 11% QoQ. Around 40% of exports go to the Middle East, positioning Electrosteel as the largest exporter to that region.
Margin Recovery and Future Strategy
Regarding the drop in gross profit by 1,222 basis points YoY, the reasons cited were:
- Reduction in per tonne realization.
- Lower overall production levels due to muted demand.
- Corrections in raw material prices affecting unit revenue.
Sunil Katial indicated that gross margin recovery to previous highs (near 50%) will be gradual, stabilizing somewhere midway after a challenging next few months. New strategies include:
- Capitalizing on the introduction of Ductile Iron valves in the domestic market, aiming for a 30%-35% gross margin on that segment.
- Diversification of the product basket to enhance stability against cyclical surges and dips.
JJM Functional Coverage
When questioned about the claimed 80% coverage for JJM, Madhav Kejriwal clarified that the actual functional work completed is closer to 55%-60%, as much of the reported infrastructure is not yet connected to functional household taps.
Market Share and Valves Business
Electrosteel currently holds an estimated 18% to 25% share of the domestic DI market, positioning it among the top two or three players. Regarding the newly acquired valve business, the turnover for the calendar year was approximately EUR 37.8 million (close to Rs. 400 crores), with EBITDA margins estimated around 12%-13%.
Concluding Remarks
Management reiterated its commitment to driving sustainable growth, strengthening the balance sheet, and creating long-term stakeholder value, anticipating better market conditions starting around April 2026 (Q1 FY2027).
Source: BSE
