Azad's revenue growth lifts margins, but higher finance costs cut profit
Operating margin widened to 37.85%, yet a sharp rise in interest and depreciation outweighed lower tax and pulled net profit down year on year.
Filed 06 Nov 2026, 19:28 IST · after market close · Azad Engineering Ltd (AZAD)
Key takeaways
- Consolidated revenue grew 31.12% year on year as expenses rose 27.48%, widening operating margin by 1.77 percentage points.
- Net profit fell 5.15% year on year because interest rose 85.39%, depreciation 93.05% and other income 65.96% despite lower tax.
- Management said throughput from new capacity should begin in Q3 FY27, with revenue expected to ramp from Q4 FY27 and a run-rate target of over Rs 1,300 cr by FY28.
Price around the results
Revenue accelerated while operating margin recovered
Azad Engineering reported consolidated revenue growth of +31.12% year on year and +10.63% quarter on quarter. Expenses grew more slowly, at +27.48% year on year and +9.63% sequentially, so operating margin widened by 1.77 percentage points year on year and 0.56 percentage points quarter on quarter. At 37.85%, the margin was 26.36 percentage points above the 11.49% median for the 195 Industrials peers that had reported.
Higher depreciation and interest diluted profit conversion
Profit before tax fell 10.64% year on year even as operating profit rose 37.53%, as interest increased 85.39% and depreciation rose 93.05%. Other income also declined 65.96% and accounted for 10.05% of pre-tax profit in the quarter, making the comparison less supportive than operating performance alone suggests. The tax rate fell by 4.30 percentage points year on year, which softened the net-profit decline to 5.15%; sequentially, the tax rate rose 15.69 percentage points and net profit fell 12.03% despite a 6.47% rise in pre-tax profit.
Margin direction is improving after the FY26 peak
Operating margin rose from 35.91% in Q1FY26 to 39.20% in Q3FY26, then eased to 37.96% in Q4FY26 and 37.29% in Q1FY27 before recovering to 37.85% in Q2FY27. This was not a third consecutive quarterly decline, but the margin remains below the Q3FY26 peak. Management said revenue from the new capacity had not yet fully flowed through during the quarter.
Management points to capacity-led growth ahead
Management said Energy and Oil & Gas remained the largest segment at 81.1% of revenue, while Aerospace and Defence grew 28.3% year on year and contributed 16.8%. The company told analysts that new-capacity throughput should begin in Q3 FY27, revenue should ramp from Q4 FY27 and all plants should be fully ramped by Q2 FY28. Management also said capital deployment and commissioned plants remain on schedule, and reiterated long-term annual revenue growth guidance of over 25%.
Market response is still pending
The consolidated results were filed after market close, so there is no market response to assess yet. Across the previous eight result reactions, the stock rose five times and fell three times, with a median absolute move of 3.18%.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹191 cr | ₹173 cr | +10.63% | +31.12% |
| Other income | ₹4 cr | ₹4 cr | +17.46% | -65.96% |
| Expenses | ₹119 cr | ₹108 cr | +9.63% | +27.48% |
| Operating profit | ₹72 cr | ₹64 cr | +12.29% | +37.53% |
| Operating margin (%) | 37.85% | 37.29% | — | — |
| Interest | ₹12 cr | ₹10 cr | +20.54% | +85.39% |
| Depreciation | ₹23 cr | ₹19 cr | +20.89% | +93.05% |
| Profit before tax | ₹41 cr | ₹39 cr | +6.47% | -10.64% |
| Tax | ₹11 cr | ₹4 cr | +177.17% | -23.59% |
| Net profit | ₹31 cr | ₹35 cr | -12.03% | -5.15% |
| EPS (₹) | ₹4.79 | ₹5.53 | -13.38% | -5.15% |
Operating margin of 37.85% compares with a Industrials sector median of 11.49% across 195 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Energy and Oil & Gas remained the largest segment at 81.1% of revenue, while dedicated customer facilities moved through qualification toward full-volume supply.
- Aerospace and Defence grew 28.3% year on year and contributed 16.8% of revenue.
Guidance & outlook
- Throughput from the new capacity is expected to begin in Q3 FY27, revenue to ramp up from Q4 FY27, and all plants to be fully ramped up by Q2 FY28.
- The installed capacity positions AZAD to reach an annual revenue run-rate of over ₹1,300 crore by the end of FY28.
- AZAD reiterates its long-term annual revenue growth guidance of over 25%.
- The company expects rising revenue to translate directly into better profitability because the cost base is largely in place.
Expansion
- Treasury funds have been deployed into capital expenditure, infrastructure and plants have been commissioned, and capital deployment plans remain on schedule.
- The company has signed an MoU for expansion into Saudi Arabia.
- AZAD plans strategic inorganic acquisitions to complement and enhance its capabilities.
- The company plans to build capabilities for large components and acquire technologies to achieve full-stack production capabilities.
New initiatives
- AZAD has put skilled teams, raw materials, tooling and consumables in place to keep every facility production-ready.
- The company is running multiple customer delta qualifications simultaneously.
- AZAD is pursuing technology-led optimization through automation, lean manufacturing, quality enhancement, capacity utilization and economies of scale.
- The company plans to provide end-to-end production capabilities for ATGG, including manufacture, assembly and integration.
Competition
- The company says its machining-time reductions and strict quality adherence create competitive strength against manufacturers from China, Europe, the USA and Japan.
Problems & risks
- Revenue from the new capacity had not yet fully flowed through during the quarter.
What to watch
- Whether new-capacity throughput begins in Q3 FY27, as management said.
- Whether operating margin holds above 37.85% while capacity is ramped.
- Whether interest and depreciation growth moderate from 85.39% and 93.05% year on year.