BHEL Posts Strong Q2 FY26 Comeback as Profit Rebounds

BHEL Posts Strong Q2 FY26 Comeback as Profit Rebounds

BHEL staged a clear comeback in Q2 FY26, reporting a return to profitability after a loss in the prior quarter. Revenue, margins and segment performance all improved quarter-on-quarter, driven largely by better execution in the Power segment, lower “other expenses”, and positive working-capital movement in a few areas.

*Headline numbers (quarter ended 30 Sep 2025)*
* Revenue from operations: ₹7,511.80 crore (Q2 FY26) vs ₹5,486.91 crore (Q1 FY26) and ₹6,584.10 crore (Q2 FY25)
* Other income: ₹181.75 crore; Total income: ₹7,693.55 crore
* Total expenses: ₹7,201.54 crore
* Profit before tax (PBT): ₹492.01 crore (positive), after a loss of ₹607.43 crore in Q1 FY26 and vs PBT of ₹131.94 crore in Q2 FY25
* Net profit (PAT): ₹367.67 crore vs loss of ₹454.89 crore in Q1 FY26 and ₹96.67 crore in Q2 FY25
* Basic & diluted EPS (not annualised): ₹1.06 vs (₹1.31) in Q1 FY26 and ₹0.28 in Q2 FY25
* Total assets (30 Sep 2025): ₹72,361.98 crore
* Total liabilities: ₹47,577.63 crore

*What Sparked the Q2 Turnaround*
* Revenue recovered strongly QoQ: Revenue rose ~37% sequentially (₹5,487 crore to ₹7,512 crore). That alone gives headroom for profit recovery, provided costs are controlled.
* Expenses were contained: Total expenses in Q2 were ₹7,201.54 crore, only modestly higher than Q1 in absolute terms, but the combination of higher sales and relatively controlled overheads pushed operating profitability to positive levels.
* Big swing in segment profits, especially Power: The Power segment reported a turnaround in segment profit (profit before tax & finance cost) to ₹593.76 crore in Q2 from a loss of ₹510.00 crore in Q1, that swing is the main operational story behind the group PBT recovery. Industry segment also contributed ₹280.04 crore.
* Finance costs stayed elevated but manageable: Finance cost was ₹195.21 crore in the quarter, material but well covered given the operating profit.

*Breakdown of Key Numbers*
* Cost of materials & services: ₹5,741.38 crore (Q2)
* Change in inventories: Negative ₹527.87 crore (this negative number indicates inventory drawdown that supported revenue recognition)
* Employee benefit expense: ₹1,479.97 crore
* Depreciation & amortisation: ₹75.46 crore
* Other expenses: ₹237.39 crore in Q2, notably much lower than Q1’s ₹675.05 crore (this fall materially helped the profit recovery)

*Balance sheet & cash-flow highlights*
* Total assets: ₹72,361.98 crore
* Total liabilities: ₹47,577.63 crore
* Net assets remain healthy with other equity ~₹24,087.94 crore
* Working capital: For the six months ended 30 Sep 2025, OCF was under pressure, inventories and trade receivables movements created headwinds (inventories movement ~₹2,594.79 crore used, trade receivables ~₹655.30 crore increase)
* Net cash from operating activities for H1 was negative ~₹1,181.95 crore

*Key Concerns to Monitor*
* Receivables & project execution: BHEL’s business is project heavy, slower collections or project delays can bite cash flow even when the P&L shows profit.
* Foreign receivables: Auditor’s emphasis notes reference some overdue overseas amounts (e.g., amounts stuck due to geopolitical issues). It doesn’t change Q2 profit but is a contingent concern.

*Conclusion*
BHEL’s Q2 FY26 shows a real and measurable rebound: strong sequential revenue growth, a large swing in Power segment profitability and a return to positive PAT (₹367.7 crore). That’s the operational comeback. The caveat is cash conversion: the company’s cash flow and working-capital lines need attention (inventory and receivables movements), and certain debtor issues flagged in auditor notes need attention.

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