HAL Q2 FY26: Revenue ₹6,628 Crore (+11%), PAT ₹1,662 Crore (+11.6%) — Margin Pressure Visible
HAL delivered steady revenue growth at ₹6,62,846 lakh (₹6,628 crore, +11% YoY) and a profit of ₹1,66,252 lakh (₹1,662 crore, +11.6% YoY) in Q2 FY26. However, EBITDA margin contracted, indicating early signs of cost pressure.
*Detailed Quarterly Overview*
* Revenue from operations: ₹6,62,846 lakh vs ₹5,97,655 lakh in Q2 FY25
→ YoY growth: +10.9%
* Sequential (QoQ) growth: from ₹4,81,914 lakh in Q1 FY26
→ +37.5% QoQ, reflecting higher execution and deliveries.
* Other Income: Other income rose to ₹88,894 lakh (vs ₹54,400 lakh YoY)
→ Driven by higher treasury income, interest, and miscellaneous credits.
* Total Income: ₹7,51,740 lakh (vs ₹6,52,055 lakh YoY).
→ +15.3% YoY growth.
*Expense Breakdown — Where Margins Got Pressured*
* Cost of materials consumed: ₹4,07,204 lakh
* Employee benefit expenses: ₹1,33,187 lakh
* Other expenses: ₹51,525 lakh
* Provisions: ₹51,731 lakh
* Depreciation & amortisation: ₹22,540 lakh
* Finance cost: ₹34 lakh
* Total gross expenses: ₹5,63,331 lakh
* Capital-related adjustments: ₹33,636 lakh
* Net expenses: ₹5,29,695 lakh
*Why margins tightened*
* Material cost increased sharply in line with execution.
* Employee cost rose due to pension and wage-related adjustments.
* Provisions jumped to ₹51,731 lakh (vs ₹25,074 lakh YoY), cutting operating margin.
Together, these factors caused EBITDA margin contraction despite higher revenues.
*Profitability Analysis*
* Profit Before Tax (PBT): ₹2,22,045 lakh vs ₹1,99,668 lakh YoY
→ 11.2% YoY growth
* Tax Expense: ₹55,793 lakh (Q2 FY26)
* Profit After Tax (PAT): ₹1,66,252 lakh vs ₹1,49,036 lakh YoY
→ +11.6% YoY
* QoQ growth from ₹1,37,715 lakh
→ +20.7% QoQ
* Basic & diluted EPS: ₹24.86 (vs ₹22.28 YoY)
*Balance Sheet Highlights (as of 30 Sept 2025)*
1. Assets
– Total Assets: ₹1,22,97,854 lakh
– Non-current assets: ₹16,71,693 lakh
– Current assets: ₹1,06,26,161 lakh
– Inventories surged to ₹28,41,990 lakh (vs ₹21,67,570 lakh in Mar 2025). This indicates build-up for future execution.
2. Cash & Bank Balances
– Cash & cash equivalents: ₹3,13,774 lakh
– Bank balances: ₹41,32,219 lakh
3. Liabilities & Net Worth
* Equity
– Share capital: ₹33,439 lakh
– Other equity: ₹36,62,813 lakh
– Total equity: ₹36,96,252 lakh
* Liabilities
– Total liabilities: ₹86,01,602 lakh
– Non-current liabilities: ₹37,57,725 lakh
– Current liabilities: ₹48,43,877 lakh
– Other current liabilities: ₹32,10,651 lakh
*Cash Flow (H1 FY26)*
* Operating Cash Flow (OCF): Positive ₹7,38,156 lakh
→ Strong collections + working capital movements
* Investing Cash Flow: Negative ₹7,78,408 lakh
→ Heavy investment in capex, intangibles (₹35,587 lakh) and large bank deposits (₹7,69,836 lakh)
* Financing Cash Flow: Negative ₹1,00,667 lakh
→ Due to dividend payout
*Key Disclosures from Management and Auditors*
* Pension cost impact: Additional employee cost due to pension contribution revision: ₹2,175 lakh
* Salary refixation case: Recovery adjustments for workmen: ₹1,193 lakh recognized.
* Inventory flood loss revision: Earlier inventory loss reversed partly; final loss retained: ₹3,664 lakh.
* FPQ (pricing) still provisional: FY24 & FY25 prices pending final approval; sales recognized based on provisional indices.
*Caveats and catalysts*
* Positives
– Strong revenue and PAT growth
– High operational cash generation
– Big inventory buildup signals strong order execution in coming quarters
– Strong liquidity (huge bank balances)
* Concerns
– Margin contraction due to higher material & provision costs
– Pricing uncertainty due to pending FPQ finalisation
– Employee cost volatility due to pension and wage adjustments
– Large working capital requirement as inventory climbs
*Conclusion*
HAL delivered a solid Q2 FY26 with 11% revenue growth and 11.6% PAT growth, backed by higher execution and better collections. However, operating margins fell as costs and provisions increased sharply. Going forward, margin recovery, FPQ pricing finalisation, and inventory management will be key things to watch.
The image added is for representation purposes only
