SYNOPSIS: Oswal Pumps is grappling with margin pressure, rising receivables, one-time costs and a steep stock decline, with tender-rate cuts and delayed payments intensifying financial strain despite management’s optimistic guidance.
Oswal Pumps Limited is primarily in the business of manufacturing and installation of solar and grid submersible pumping systems, solar and grid monoblock pumps, electric motors and solar modules. The stock hit its 52-week high at Rs. 889.45 on 21st August 2025, and is currently trading at a discount of nearly 41 percent from its Friday’s closing price.
With a market cap of Rs. 6,013.4 crores, shares of Oswal Pumps Limited closed in the red at Rs. 527.6 on BSE, down by around 1 percent, as against its previous closing price of Rs. 531.5. In the last one month, the stock has tumbled by more than 17 percent.
Headwinds, Risks, and Red Flags
There are several red flags surrounding the company that investors should closely monitor. During the quarter, Oswal Pumps’ EBITDA margin stood at 24.7 percent, while operating EBITDA margin came in at 23.7 percent, reflecting a QoQ decline of 368 basis points. This weakness was primarily driven by a reduction in PM-KUSUM and Magel Tyala tender rates, which fell by an average of 7.5 percent, affecting more than 80 percent of the company’s core revenue.
Margins were further impacted by one-time factors, such as nearly Rs. 40 crore worth of low-margin module sales – significantly lower than margins earned on full pumping systems – and a one-time expense of Rs. 2.5 crore related to increasing the authorised capital of Oswal’s subsidiary. Combined, these factors contributed roughly 180 bps of operating margin compression, which management expects to recover in Q3 FY26.
Overall, these elements led to a total operating EBITDA compression of over 6.5 percent. However, through value-engineering efforts and operational efficiencies, the company was able to offset around 285 bps of the impact.
While rate revisions continue to pressure margins, Oswal Pumps is progressing on several backwards-integration and value-engineering projects that are expected to improve operating profitability by an additional 1 percent by Q4 FY26. Working Capital Concerns: Oswal Pumps saw its receivable days increase to 138, up from 126 days at the end of June 2025. This rise was driven by two key factors.
The first and most significant factor was the payment structure under the PM-KUSUM and Magel Tyala schemes. Payments under these programmes are tied to RMS data, which is generated only after pumps operate for a minimum of 90 days. Due to an extended monsoon season, pump usage by farmers was lower than expected, delaying RMS data generation and consequently prolonging the receivable cycle.
The second factor was a temporary delay in bank loan disbursements linked to the Magel Tyala programme. As a result of the elongated receivable cycle, the company reported a net debt position of Rs. 38 crore at the end of the quarter.
What’s Next for Oswal Pumps?
Despite recent operational pressures, Oswal Pumps remains optimistic about its performance outlook. For FY26, the company is targeting revenue growth of 50-60 percent, with a medium-term aim of sustaining a 30-35 percent CAGR. Management noted that the one-time margin impact seen during the quarter is unlikely to recur, and additional cost savings of at least 100 basis points are expected by Q4 FY26.
The company anticipates closing Q3 FY26 with operating EBITDA margins in the range of 25.5-26 percent, improving further to 26.25-26.75 percent in Q4. PAT margins are expected to remain healthy in the 17.5-19 percent range.
Oswal Pumps also highlighted its strong order pipeline, with an order book exceeding 18,800 pumps, covering direct PM-KUSUM, Magel Tyala, indirect PM-KUSUM and export orders. Additionally, a near-term pipeline of more than 30,000 pumps across key states, including Maharashtra, Haryana, Karnataka and Madhya Pradesh, provides solid visibility to achieve its FY26 growth targets.
Financial Performance:
In Q2 FY26, Oswal Pumps experienced a marginal growth in the revenue from operations of Rs. 540 crores, an increase of around 5 percent QoQ and 74 percent YoY. Meanwhile, its net profit stood at Rs. 98 crores, representing a rise of more than 3 percent QoQ and 48 percent YoY.
Between FY22 and FY25, the company’s revenue grew at a 3-year CAGR of nearly 58 percent, while net profit surged at a CAGR of ~155 percent.
In terms of financial ratios, Oswal Pumps has a RoE of 87.5 percent and ROCE of 77.9 percent, with a debt-to-equity ratio of 0.08. Further, the stock is currently trading at a lower P/E of 18, compared to the industry average of 40.9.
Written by Shivani Singh
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