Azad's margin slips sequentially as interest and other income climb
Standalone revenue grew +26.40% YoY, but costs outpaced sales sequentially; other income made up 34.68% of pre-tax profit.
Filed 11 Jul 2026, 12:37 IST · after market close · Azad Engineering Ltd (AZAD)
Key takeaways
- Standalone revenue grew +26.40% YoY while expenses rose +25.99%, lifting operating margin by 0.21 percentage points.
- Quarter-on-quarter margin narrowed 1.87 percentage points as expenses grew +4.08% against revenue growth of +1.02%, despite net profit rising +3.20%.
- Other income contributed 34.68% of pre-tax profit, while interest expense rose +167.50% YoY.
Price around the results
YoY growth held, but quarterly momentum softened
Azad Engineering reported standalone revenue growth of +26.40% YoY, with operating profit rising +27.11% and net profit increasing +34.96%. Net profit grew faster than pre-tax profit as the tax rate fell 0.72 percentage points to 28.51%. Sequentially, however, revenue increased only +1.02% and net profit rose +3.20%.
Q4 margin gave back part of Q3's expansion
Operating margin narrowed 1.87 percentage points QoQ because expenses grew +4.08%, faster than revenue. This followed a rise to 38.57% in Q3FY26, so Q4FY26's 36.70% margin marks a pullback rather than a continuation of that expansion. On a YoY basis, costs grew slightly slower than revenue, leaving margin 0.21 percentage points higher.
Other income and financing costs changed profit mix
Other income accounted for 34.68% of standalone pre-tax profit, making the reported profit mix less dependent on operations than the operating margin alone suggests. Interest expense increased +167.50% YoY to Rs 9.63 cr, while depreciation rose +81.65%, adding pressure below operating profit. The QoQ tax-rate increase of 0.79 percentage points also partly offset the benefit from higher other income.
Capacity and product expansion remain central to management's plan
Management said it expects to sustain growth through capacity investments and said Azad commissioned two dedicated lean manufacturing facilities during FY26, followed by another facility last month. The company told analysts that it plans to deepen revenue from existing clients, expand into higher-value turbine and landing-gear products, and co-locate with key global OEMs. Management also said Azad secured a USD 112 million agreement for complex airfoils used in advanced gas turbine engines.
The recorded stock reaction was unusually negative
The recorded day-0 reaction was -8.47%, compared with a median absolute move of 3.18% across eight prior result reactions. The stock was down -2.74% after five sessions, making the initial decline larger than its usual post-results move even though the longer 15-session reading was +6.28%.
Q4FY26 at a glance
Standalone figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹157 cr | ₹156 cr | +1.02% | +26.40% |
| Other income | ₹17 cr | ₹9 cr | +97.68% | +350.79% |
| Expenses | ₹100 cr | ₹96 cr | +4.08% | +25.99% |
| Operating profit | ₹58 cr | ₹60 cr | -3.88% | +27.11% |
| Operating margin (%) | 36.70% | 38.57% | — | — |
| Interest | ₹10 cr | ₹8 cr | +19.48% | +167.50% |
| Depreciation | ₹16 cr | ₹14 cr | +18.38% | +81.65% |
| Profit before tax | ₹49 cr | ₹47 cr | +4.33% | +33.57% |
| Tax | ₹14 cr | ₹13 cr | +7.27% | +30.33% |
| Net profit | ₹35 cr | ₹34 cr | +3.20% | +34.96% |
| EPS (₹) | ₹5.44 | ₹5.27 | +3.23% | +27.10% |
Operating margin of 36.70% compares with a Industrials sector median of 15.66% across 71 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -8.47% | -8.50% |
| Next session | -8.82% | — |
| 5 sessions | -2.74% | -4.38% |
| 15 sessions | +6.28% | — |
| 30 sessions | -2.36% | — |
Volume on the results session was 1.14× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- During FY26, Azad commissioned two dedicated lean manufacturing facilities for customers and commissioned another facility last month.
Guidance & outlook
- The company expects to sustain strong growth momentum, supported by industry tailwinds and continued capacity investments.
- The company plans to increase revenue from existing long-standing clients through wallet share gains.
- The company plans to expand into higher-value products including advanced gas, steam and nuclear turbines and landing gears.
- The company plans geographical expansion to co-locate with key global OEM manufacturing footprints.
Expansion
- Azad commissioned four dedicated lean manufacturing facilities for customers since listing, including two during FY26 and one last month.
- Azad signed an MoU for expansion into Saudi Arabia.
- The company plans strategic inorganic acquisitions to build large-component and full-stack production capabilities.
New orders
- Azad secured a USD 112 million agreement to supply highly engineered complex airfoils for advanced gas turbine engines.
New initiatives
- Azad is pursuing technology-led optimisation through automation, lean manufacturing, quality enhancement and improved capacity utilisation.
- Azad plans to provide end-to-end production capabilities for Advanced Turbo Gas Generators.
- The company is building a comprehensive product portfolio for diversified new clients.
Competition
- Azad states that it has competitive strength against manufacturers from China, Europe, the USA and Japan.
What to watch
- Whether operating margin recovers from 36.70% after reaching 38.57% in Q3FY26.
- Whether interest expense moderates from Rs 9.63 cr after its +167.50% YoY increase.
- Disclosures on execution of the USD 112 million complex-airfoil agreement and the newly commissioned facilities.