Lokesh Machines reported a significant turnaround in profitability for the quarter ended June 30, 2026, with net profit rising 121.7% year-on-year to ₹1.01 crore. Revenue from operations grew 15.4% to ₹55.46 crore, marking the end of the sanctions era for the capital goods manufacturer after its removal from the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) List on the last day of the quarter.

The financial performance was underpinned by a resurgent Defence and Components division, which saw revenue surge 693% to ₹15.55 crore, contributing 27.9% of total income compared to just 4.1% a year ago. This growth offset a 13.2% decline in the Machinery division, which remained constrained by blocked export channels during the sanctions period. The reopening of USD and EUR banking channels is expected to restore access to US and European markets for the Machinery segment starting Q2FY27.

Financial Performance

Despite a sharp rise in raw material costs, Lokesh Machines maintained pricing discipline, keeping EBITDA margin at 17.79%, only 60 basis points lower than the 18.39% recorded in Q1FY26. Gross profit expanded 17.0% year-on-year to ₹30.72 crore, outpacing revenue growth and demonstrating operating leverage.

*Note: Q1FY26 revenue derived from YoY growth percentage provided in source.

What the Numbers Show

A critical divergence exists between the top-line growth and the bottom-line expansion. While revenue grew modestly by 15.4%, net profit more than doubled. This disparity is largely attributable to a reduction in the effective tax rate, which eased to 28.5% from 36.6% in the prior year, alongside the high-margin contribution from the Defence segment. Additionally, finance costs remained elevated at ₹4.65 crore, constituting the largest expense below EBITDA, highlighting the continued pressure of debt servicing despite the recent equity infusion.

Balance Sheet and Order Book

The company strengthened its capital structure during the quarter, infusing ₹23.62 crore through preferential equity issuance. Capital employed rose 16.3% quarter-on-quarter to ₹265.55 crore, driven primarily by a 33.4% increase in capital deployed in the Defence and Components division as production ramped up.

Lokesh Machines holds an order book of ₹271 crore as of August 12, 2026, which exceeds the total revenue of the previous financial year (₹209.62 crore). The order pipeline is diversified, with General Purpose Machines accounting for 38.0%, Defence for 36.2%, and Special Purpose Machines for 13.7%. A recent ₹58.21 crore order from the Ministry of Defence for machine gun modification kits underscores the strength in the defence vertical.

Lokesh Machines reported a 122% year-on-year surge in standalone net profit for Q1FY26 to ₹101.01 lakh, driven by robust revenue growth in its Components Division. The Hyderabad-based machinery manufacturer also confirmed its removal from the US Office of Foreign Assets Control (OFAC) sanctions list on June 30, 2026, marking the conclusion of regulatory proceedings that had restricted its foreign currency transactions since October 2024.

The Board of Directors, chaired by Whole Time Director Mullapudi Srinivas, approved the unaudited financial results on August 12, 2026. Statutory auditors Brahmayya & Co. issued a limited review report with an unmodified conclusion. The Board also approved the Directors’ Report for FY26 and announced the 42nd Annual General Meeting (AGM) scheduled for September 22, 2026, via video conferencing. E-voting for the AGM will close on September 15, 2026.

Financial Performance Highlights

Revenue from operations rose 15.4% year-on-year to ₹554.57 crore (₹5,545.74 lakh) in Q1FY26, compared to ₹480.47 crore (₹4,804.71 lakh) in Q1FY25. This top-line expansion was underpinned by significant growth in the Components Division, which saw revenue jump nearly eight-fold to ₹155.54 crore (₹1,555.37 lakh) from ₹19.59 crore (₹195.94 lakh) in the prior-year quarter. The Machinery Division contributed ₹402.20 crore (₹4,022.03 lakh), a slight decline from ₹463.64 crore (₹4,636.43 lakh) in Q1FY25.

Profit before tax increased 96.7% to ₹141.32 lakh from ₹71.85 lakh. Net profit after tax more than doubled to ₹101.01 lakh from ₹45.55 lakh. Earnings per share (basic and diluted) stood at ₹0.49, up from ₹0.23 in the corresponding quarter last year.

*EBITDA calculated as Profit Before Tax + Finance Costs + Depreciation + Tax Expense.

Segment-Wise Performance

The Components Division emerged as the primary growth engine, contributing ₹214.91 lakh to segment profit before interest and tax (PBIT), a substantial increase from ₹10.52 lakh in Q1FY25. In contrast, the Machinery Division’s PBIT declined to ₹515.05 lakh from ₹618.64 lakh. Total segment PBIT rose 16.0% to ₹729.96 lakh. Interest expenses increased slightly to ₹464.82 lakh from ₹439.63 lakh, while other unallocable expenses remained stable at ₹123.82 lakh.

Regulatory Update: OFAC Delisting

A critical development for Lokesh Machines is the formal removal of its name from the OFAC Specially Designated Nationals and Blocked Persons (SDN) list. The company had been designated on October 30, 2024, based on allegations regarding exports to Russia. Management contested this, stating it was unaware of any dealings with sanctioned entities.

After submitting comprehensive responses to two questionnaires via US law firm Blank Rome, OFAC’s Reconsideration Team issued a letter dated June 30, 2026, confirming the delisting. The Ministry of External Affairs, Government of India, also confirmed the unblocking of property and interests on July 8, 2026. This resolution restores the company’s ability to conduct foreign currency transactions without restriction.

Capital Raise and Shareholding

During Q1FY26, the company allotted 13 lakh equity shares and 27.78 lakh warrants at a premium of ₹171.71 per share to promoters and non-promoters. On July 11, 2026, 5 lakh warrants were converted into equity shares by non-promoters, increasing paid-up capital to 217.97 lakh shares. As of August 12, 2026, 22.78 lakh warrants remain pending conversion.

What the Numbers Show

The divergence between the Machinery and Components divisions highlights a strategic shift in revenue mix. While the core Machinery Division saw modest PBIT contraction, the Components Division delivered explosive growth, suggesting successful penetration or capacity utilization in high-margin component manufacturing. The restoration of international banking access via OFAC delisting is likely to further support export-oriented operations in future quarters.