Everest Kanto Cylinder Limited (EKC), a leading manufacturer of seamless steel gas cylinders, has reported its financial results for the second quarter of fiscal year 2026, showing a mixed performance amid temporary challenges in the CNG segment.

Key Financial Highlights

Performance Analysis

EKC reported a consolidated revenue of Rs 360.40 crore for Q2FY26, marking a slight decline of 1.90% compared to the same quarter last year. The company's EBITDA stood at Rs 42.90 crore, with a margin of 11.90%, showing a decrease from the previous year's 14.50%. The Profit After Tax (PAT) for the quarter was Rs 13.70 crore, significantly lower than the Rs 38.60 crore reported in Q2FY25.

Segment-wise Performance

The company faced temporary demand impact in the CNG segment due to the GST transition in the automotive industry. This transition appears to have affected the domestic volumes in the short term. However, the company's management noted that activity has since normalized as the industry moved into October, with underlying demand indicators remaining supportive.

The Industrial business segment continued to perform in line with expectations, providing some stability to the overall performance.

International Operations

EKC's US operations reflected the order-driven nature of the business, with lower dispatches during the quarter. However, the segment remains healthy on a half-yearly basis, and the outlook for the region in the second half of the fiscal year remains strong, supported by a robust order book.

Operations in the Middle East showed early signs of improvement during the quarter, indicating potential growth in this region.

Expansion Plans

EKC is progressing well with its new facilities at Mundra (India) and Egypt. The Egypt plant is preparing to begin trial production shortly, while construction at Mundra continues to advance as planned. Both facilities are on track and are expected to enhance the company's manufacturing capabilities in the coming year, enabling better service to domestic and international markets.

Management Commentary

Mr. Pushkar Khurana, Chairman and Executive Director, and Mr. Puneet Khurana, Managing Director, in a joint statement, expressed confidence in the company's future growth prospects. They stated, "With growing opportunities across clean energy and industrial applications, coupled with greater visibility in our order pipeline, we remain confident about our future growth prospects. Our efforts remain centred on advancing our capabilities, improving operating efficiency, supporting customers across domestic and international markets, and strengthening our leadership position in India."

Outlook

Despite the temporary setbacks in the CNG segment, EKC's management remains optimistic about the company's future. The expansion of manufacturing facilities, coupled with a strong order book in the US and improving conditions in the Middle East, suggests potential for growth in the coming quarters. The company's focus on clean energy solutions and industrial applications positions it well to capitalize on the increasing usage of gases in industrial production and the automobile sector.

Everest Kanto Cylinder Limited , a prominent player in the cylinder manufacturing industry, has been hit with a significant penalty for failing to meet its Net Foreign Exchange (NFE) obligations. The Office of the Development Commissioner, Kandla Special Economic Zone, has imposed a fine of ₹11.29 crores on the company for non-achievement of cumulative positive NFE for the block period 2020-21 to 2024-25.

Penalty Details

The penalty, which amounts to 1% of the shortfall in FOB (Free On Board) value, was levied under SEZ Rules 2006. According to the order:

Implications and Company Response

The company has been directed to deposit the penalty amount within the specified timeline. This financial obligation is expected to impact Everest Kanto Cylinder's Statement of Profit and Loss to the extent of the penalty amount.

In response to the order, Everest Kanto Cylinder has stated that it will comply with the authority's directive and deposit the amount within the given timeline or any extended period that may be allowed.

Regulatory Action

While the penalty is substantial, it's noteworthy that the proposed cancellation of the Letter of Approval under Section 16 of SEZ Act 2005 has been dropped. However, the company has received a warning against future contraventions.

Disclosure and Transparency

In compliance with SEBI regulations, Everest Kanto Cylinder has made the necessary disclosures to the stock exchanges. The company's prompt reporting of this regulatory action demonstrates its commitment to transparency with investors and regulatory bodies.

This incident underscores the importance for companies operating in Special Economic Zones to carefully manage their foreign exchange obligations and maintain compliance with SEZ regulations. It also highlights the potential financial risks associated with non-compliance in international trade operations.