Elecon Engineering Shares Drop 13% as Q3 Results Show Margin Pressure Despite Revenue Growth

Elecon Engineering Company shares fell over 13% on Friday, January 9, following the release of its December quarter results after market hours on Thursday. The engineering company faced significant margin pressure despite modest revenue growth, leading to a sharp decline in profitability.

Financial Performance Overview

The company's financial performance for Q3 showed mixed results with revenue growth offset by margin contraction:

Metric	Q3 FY26	Q3 FY25	Change (%)
Net Profit	₹72.00 cr	₹107.50 cr	-33.0%
Revenue	₹551.70 cr	₹528.90 cr	+4.3%
EBITDA	₹109.20 cr	₹141.10 cr	-23.2%
EBITDA Margin	19.8%	26.9%	-710 bps

The significant margin contraction from 26.9% to 19.8% in EBITDA terms reflects the operational challenges faced by the company during the quarter.

Gear Division Performance

The gear division, which forms the larger portion of the business, showed minimal growth during the quarter. Revenue stood at ₹429.00 crore, marginally higher than ₹423.00 crore in Q3 FY25, reflecting essentially flat performance. The division's challenges included:

Delays in order inflows during the first half of FY26
Affected execution schedules and deferred dispatches
Impact from customer timeline adjustments

Parameter	Q3 FY26	Q3 FY25	Change
Revenue	₹429.00 cr	₹423.00 cr	Flat
EBIT	₹78.00 cr	₹118.00 cr	-33.9%
EBIT Margin	18.2%	27.9%	-970 bps

Despite the challenging performance, demand from domestic power, steel, cement, and material handling equipment industries remained steady. The margin contraction was attributed to flat revenue performance, increased employee costs, and changes in product mix.

MHE Division Shows Growth

The Material Handling Equipment (MHE) division demonstrated better revenue performance with 16.3% year-on-year growth:

Parameter	Q3 FY26	Q3 FY25	Change (%)
Revenue	₹123.00 cr	₹105.00 cr	+16.3%
EBIT	₹25.00 cr	₹32.45 cr*	-22.9%*
EBIT Margin	20.2%	30.9%	-1070 bps

*Calculated based on margin percentage provided

While revenue growth was encouraging, the division also faced margin pressure due to an unfavourable product mix during the quarter. The division continues to secure new orders consistently in the domestic market and anticipates order inflows from international markets.

Strong Order Book Provides Optimism

Despite the quarterly challenges, Elecon Engineering maintains a robust order position:

Order Metrics	Amount
Q3 Order Intake	₹701.00 cr
Order Book (Dec 31, 2025)	₹1,372.00 cr

Prayasvin B Patel, Chairman & Managing Director, emphasized the positive outlook: "The strong order book, combined with a healthy order inflow outlook across both domestic and overseas markets, provides good visibility and confidence going forward."

Market Response

Shares of Elecon Engineering traded 13.1% lower at ₹437.70 during Friday's session. The stock has declined 40% from its recent 52-week high of ₹716.00, reflecting investor concerns about the margin pressure and operational challenges faced by the company.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-15.85%	-11.89%	-10.47%	-33.85%	-30.08%	+1,590.82%

Elecon Engineering Company reported mixed financial performance for the third quarter, with net profit declining significantly despite revenue growth. The engineering company faced margin pressures that impacted overall profitability during the quarter.

Financial Performance Overview

The company's Q3 consolidated results showed contrasting trends across key financial metrics:

Metric	Q3 Current Year	Q3 Previous Year	Change (%)
Net Profit	₹72.00 crores	₹110.00 crores	-34.55%
Revenue	₹550.00 crores	₹530.00 crores	+3.77%
EBITDA	₹110.00 crores	₹140.00 crores	-21.43%
EBITDA Margin	19.79%	26.96%	-717 bps

Revenue Growth Amid Profitability Challenges

Elecon Engineering achieved revenue growth of 3.77% year-on-year, with Q3 revenue reaching ₹550.00 crores compared to ₹530.00 crores in the corresponding quarter of the previous year. This positive revenue trajectory indicates sustained business activity and market demand for the company's engineering solutions.

However, the company faced significant profitability pressures during the quarter. Consolidated net profit dropped substantially by 34.55% to ₹72.00 crores from ₹110.00 crores in Q3 of the previous year, highlighting operational challenges that impacted bottom-line performance.

Margin Compression Impacts EBITDA

The company's EBITDA performance reflected the margin pressures experienced during the quarter. EBITDA declined to ₹110.00 crores from ₹140.00 crores year-on-year, representing a decrease of 21.43%. More notably, the EBITDA margin compressed significantly to 19.79% from 26.96% in the previous year, indicating a reduction of 717 basis points.

This substantial margin compression suggests increased operational costs or pricing pressures that affected the company's profitability metrics despite the revenue growth achieved during the quarter.

Leadership Change in Finance Function

In a separate corporate development, Narasimhan Raghunathan has resigned from his position as Chief Financial Officer of Elecon Engineering. This leadership change in the finance function comes alongside the company's mixed quarterly performance, marking a significant transition in the senior management team.

The resignation represents a key personnel change that will require the company to identify and appoint a new CFO to oversee financial operations and strategic planning going forward.