KEC margin falls to 4.96% as costs outpace revenue growth
Revenue rose 8.84% sequentially, but higher costs, interest and tax reduced net profit to Rs 29.74 cr.
Filed 02 Nov 2026, 21:27 IST · after market close · KEC International Ltd (KEC)
Key takeaways
- Consolidated operating margin fell 0.83 percentage points sequentially to 4.96% as expenses grew 9.80%, faster than revenue at 8.84%.
- Net profit declined 81.50% year on year to Rs 29.74 cr, with higher interest and a 2.73-percentage-point rise in the tax rate adding pressure.
- Other income contributed 32.46% of pre-tax profit, while KEC's margin was 6.57 percentage points below the 11.53% Industrials peer median.
Price around the results
Revenue recovered sequentially, but remained below last year
Consolidated revenue rose 8.84% sequentially to Rs 5,467.71 cr, but was down 10.24% year on year. Management attributed performance pressure to Middle East supply-chain disruption, land-acquisition challenges in India T&D and calibrated supplies. The company said year-to-date order intake exceeded Rs 13,500 cr, with approximately 70% from T&D.
Two straight quarters of margin decline
Expenses grew 9.80% sequentially against 8.84% revenue growth, narrowing operating margin by 0.83 percentage points; year on year, costs fell 8.21% while revenue fell 10.24%, pushing margin down 2.11 percentage points. Operating margin has now declined from 7.01% in Q4FY26 to 5.79% in Q1FY27 and 4.96% in Q2FY27. Interest expense rose 16.23% sequentially and 11.18% year on year, while the tax rate increased 8.03 percentage points sequentially to 27.25%; other income accounted for 32.46% of pre-tax profit.
Margin trails 88 reported Industrials peers
KEC's 4.96% operating margin was 6.57 percentage points below the 11.53% median for the 88 Industrials companies that had reported the same quarter, placing it seventh from the bottom. Year-on-year profit declined more sharply than revenue because operating profit fell 36.97%, interest rose 11.18% and the tax rate increased 2.73 percentage points. Sequentially, pre-tax profit fell 54.53% and net profit fell 59.05% despite higher revenue.
Management points to disruption now and deleveraging ahead
Management said geopolitical, logistics and supply-chain problems in the Middle East, along with elevated costs and extended lead times, were continuing. The company told analysts that its record order book, L1 position and tender pipeline provide revenue visibility, and said it expects improved performance in the coming quarters. Management also said net debt is expected to decline to approximately Rs 6,000 cr by year-end and described deployment of an AI-based camera system at project sites to strengthen safety monitoring.
No immediate stock reaction after the post-close filing
The results were filed after market close, so there was no market reaction to report yet. In the eight-result history supplied, the stock rose after three results and fell after five, with a median absolute move of 5.27%; the recent moves included declines of 5.27%, 11.11% and 7.68%.
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 | ₹5,468 cr | ₹5,024 cr | +8.84% | -10.24% |
| Other income | ₹13 cr | ₹14 cr | -4.81% | +186.61% |
| Expenses | ₹5,196 cr | ₹4,733 cr | +9.80% | -8.21% |
| Operating profit | ₹271 cr | ₹291 cr | -6.72% | -36.97% |
| Operating margin (%) | 4.96% | 5.79% | — | — |
| Interest | ₹191 cr | ₹164 cr | +16.23% | +11.18% |
| Depreciation | ₹53 cr | ₹51 cr | +4.31% | +4.82% |
| Profit before tax | ₹41 cr | ₹90 cr | -54.53% | -80.81% |
| Tax | ₹11 cr | ₹17 cr | -35.53% | -78.67% |
| Net profit | ₹30 cr | ₹73 cr | -59.05% | -81.50% |
| EPS (₹) | ₹1.12 | ₹2.73 | -58.97% | -81.46% |
Operating margin of 4.96% compares with a Industrials sector median of 11.53% across 88 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
- Q2 revenues were Rs. 5,468 crore, up 9% sequentially, while PBT was Rs. 41 crore and PAT was Rs. 30 crore.
- The company recorded YTD order intake of more than Rs. 13,500 crore, with approximately 70% from T&D.
Guidance & outlook
- Net debt is expected to decline to approximately Rs. 6,000 crore by the end of the year.
- Management expects improved performance in the coming quarters.
- The company says its record order book, L1 position and tender pipeline provide strong revenue visibility.
New initiatives
- An AI-based camera system is being deployed at project sites to strengthen safety monitoring and compliance.
Problems & risks
- Performance was affected by Middle East supply-chain disruptions, land acquisition challenges in India T&D and calibrated supplies.
- Geopolitical and supply-chain uncertainties, logistics disruptions, elevated costs and extended lead times are continuing in the Middle East.
What to watch
- Whether operating margin recovers from 4.96% after two consecutive quarterly declines.
- Whether interest growth moderates from +16.23% sequentially and other income remains a large 32.46% share of pre-tax profit.
- Whether order intake builds on the reported Rs 13,500 cr year-to-date level, with approximately 70% from T&D.