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Shanthi Gears Ltd

| Quarterly Financial Results Q3 FY 2025-26

NEUTRAL SENTIMENT

Report Source

⬤22nd Jan 26

Summary : Shanthi Gears reported a Q3 FY26 revenue and profit decline, but achieved highest-ever order booking, declared an interim dividend, and saw its CFO resign.

Quarterly Report Analysis & Insights

Financial Disclosures

  1. Total Expenses Q3 FY26: ₹97.74 Crores (down from ₹125.97 Crores in Q3 FY25).
  2. Cost of materials consumed Q3 FY26: ₹59.30 Crores.
  3. Employee benefits expense Q3 FY26: ₹20.36 Crores.
  4. Other expenses Q3 FY26: ₹21.30 Crores.
  5. Statutory Impact of new Labour Code (Exceptional Item) Q3 FY26: ₹1.56 Crores.
  6. Revenue from Operations Q3 FY26: ₹116.82 Crores (down from ₹157.51 Crores in Q3 FY25).
  7. Total income Q3 FY26: ₹120.89 Crores (down from ₹161.40 Crores in Q3 FY25).
  8. Nine months ended Dec 2025 Revenue from Operations: ₹383.62 Crores (down from ₹451.41 Crores in Dec 2024).
  9. Drop in revenue primarily due to lower order booking in previous quarters.
  10. Negative Free Cash Flow of ₹1.72 Crores during Q3 FY26 due to capital expenditure.
  11. Reserves and surplus (Other equity) as of 31 March 2025: ₹395.32 Crores.
  12. Unaudited standalone financial results.
  13. Consolidated not applicable as no Subsidiary/Associate/Joint Venture.

Corporate Overview

  1. Drop in revenue and profit before tax due to lower order booking in previous quarters.
  2. Negative Free Cash Flow due to capital expenditure on core machines.
  3. Manufacture of Gearboxes and Gear Products.
  4. Focus on 4 key priorities: Revenue, Profitability, Return on Invested Capital (ROIC), and Free Cash Flow (FCF).
  5. Highlights highest-ever order booking and interim dividend declaration.
  6. No separate reportable segments as per Ind AS 108.
  7. Capital expenditure on core machines leading to negative Free Cash Flow.

Risk Factors

  1. Revenue and profit before tax declined.
  2. Negative free cash flow due to capex.
  3. Chief Financial Officer resigned for personal reasons.
  4. Statutory impact from new Labour Code.

Key Drivers

  1. Highest-ever order booking in Q3 FY26.
  2. Strong unexecuted order book of ₹305 Crores.
  3. Interim dividend of ₹3 per share declared.
  4. Achieved 31% Return on Invested Capital.

Auditor’s Report

  1. Limited Review Report; no audit opinion expressed.
  2. Nothing came to attention suggesting material misstatement in financial results.

Board Commentary

  1. Mr. Ranjan Kumar Pati, Chief Financial Officer, is stepping down effective 19th March 2026 due to personal reasons.
  2. Interim dividend of Rs. 3/- per equity share declared for FY 2025-26.
  3. Dividend payable to shareholders by 20th February 2026.
  4. Statutory impact of new Labour Code amounting to Rs 1.56 crore provision.
  5. Statutory impact of new Labour Code amounting to Rs 1.56 crore provision.
  6. Capital expenditure on core machines leading to negative Free Cash Flow.

Corporate Governance

  1. Audit Committee reviewed financial results before Board approval.
  2. Chief Financial Officer stepping down due to personal reasons.

Management Discussion & Analysis

Future Strategy

  1. Continue focus on Revenue, Profitability, ROIC, and FCF.
  2. Monitoring finalization of new Labour Code rules for appropriate accounting effect.

Operational Focus Areas

  1. Focus on Revenue, Profitability, Return on Invested Capital (ROIC), and Free Cash Flow (FCF).

Performance Drivers

  1. Focus on Revenue, Profitability, Return on Invested Capital (ROIC), and Free Cash Flow (FCF).

Risk Control Measures

  1. Monitoring finalization of Central/State Rules and clarifications for Labour Code.

Critical Risks

  1. Statutory impact of new Labour Code amounting to Rs 1.56 crore provision.