Varroc Engineering Delivers Operationally Steady 4QFY26 Performance; Higher Taxation Impacts PAT

Mumbai, May 28 : Equirus Securities, in its latest 4QFY26 result review on Varroc Engineering, noted that the company delivered an operationally steady performance with revenues and EBITDA surpassing estimates, although higher taxation resulted in a miss at the profit-after-tax  level.

Varroc Engineering reported consolidated revenue of Rs 23.7 billion for 4QFY26, marking a growth of 13% year-on-year and 4% quarter-on-quarter. The performance came approximately 3% ahead of Equirus Securities’ estimate of Rs 23.1 billion.

EBITDA stood at Rs 2.2 billion, up 1% year-on-year and 6% sequentially, surpassing estimates by around 6%. EBITDA margin came in at 9.4%, ahead of expectations, supported by improved operational efficiencies and stable gross margins.

Gross margin for the quarter stood at 35.8%, while employee costs increased 11% year-on-year to Rs 2.4 billion. Other expenses rose 22% year-on-year to Rs 3.9 billion, reflecting continued investments and operational scaling.

Profit before tax  grew 4% year-on-year to Rs 1,074 million, slightly ahead of estimates. However, recurring PAT declined 10% year-on-year and 27% quarter-on-quarter to Rs 693 million, primarily due to a significantly higher tax outgo during the quarter. The effective tax rate rose sharply to 35.7% compared to 23.5% in the corresponding quarter last year.

The company also reported improved contribution from joint ventures and associates, with profit from JV operations rising to Rs 14 million during the quarter compared to Rs 3 million in the year-ago period.

Interest expenses declined 14% year-on-year to Rs 349 million, while other income increased 14% year-on-year to Rs 55 million.

On the cash flow front, cash flow from operations  for FY26 stood at Rs 5.4 billion compared to Rs 7.4 billion in FY25. Capital expenditure during FY26 increased to Rs 4.0 billion against Rs 2.8 billion in FY25, indicating continued focus on capacity enhancement and growth investments.

Equirus Securities maintained that the quarter reflected a “decent operational performance,” though elevated taxation weighed on net profitability.

At the current market price of Rs 589, Varroc Engineering trades at FY27E and FY28E P/E multiples of 21.2x and 16.2x respectively.