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HBL Engineering
Our verdict on HBL Engineering isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
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Export revenue grew significantly by 55.6%, increasing its share of total revenue to 23.15% as the company successfully expanded its footprint in the Middle East and other global markets. (2 expanding)
“Batteries Exports: 21,086.72. Unallocated Exports: 1,655.16.”
HBL is aggressively expanding its technological moat by entering new consumer markets (Automotive, UPS, Inverters) and Solar Photovoltaic systems. The company reclassified substantial R&D development costs as Intangible Assets, signaling a shift from exploratory R&D to commercialized proprietary tech. (1 expanding)
“The company, during the year 2011-12 undertook substantial development activities and improvements by changing the product design, materials, manufacturing processes and developed prototypes... reclassify the expenditure and to recognise the costs incurred in the development phase as ‘ Intangible Assets’”
HBL strengthened its technological moat by becoming the first OEM to obtain v4.0 certification for Kavach and investing in in-house high-energy density Lithium-Ion cell manufacturing. (1 expanding)
“HBL was the first among the OEMs to obtain v4.0 certification, on 13 May 2025.”
The 'Unallocated' segment, which includes electronics and railway signaling, saw a significant increase in revenue share, growing from 7.7% to 12.2% of gross revenue. This reflects management's strategy to reduce dependence on the telecom battery sector. (1 expanding across 1 engine)
“Unallocated Domestic sales: 11,649.82. Unallocated Exports: 1,655.16.”
Domestic revenue share decreased as a percentage of total revenue, falling from 86.9% to 76.8% as the company faced headwinds in both telecom batteries and rail signaling within the Indian market. (1 contracting)
“The Company derives revenue from the transfer of goods and services over time and at a point in time in the following major segment product and geographical regions... Within India... Total... March 31, 2025: 1,49,433.58 [Lakhs]; March 31, 2024: 1,92,211.13 [Lakhs]”
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What could break the thesis?
The risk is intensifying as the total amount involved in disputed demands (not deposited) has increased to Rs. 4,000.48 lakhs, primarily driven by a large Central Excise Act dispute of Rs. 2,169.92 lakhs. (5 intensifying, 3 high-severity)
“Inspite of an increase in finance cost... PBT for the year was Rs.2169.90 lacs compared to Rs.511.27 lacs in the previous year.”
The risk remains stable but significant. While the value of imports decreased slightly from Rs. 164 crores to Rs. 144 crores, the company notes that for new segments like Lithium-ion, it remains dependent on imported cells with marginal domestic value addition. (2 stable)
“Imported Raw Material: 23,682.86 (39.67%)”
The risk is easing as HBL became the first OEM to obtain the critical Kavach v4.0 certification on May 13, 2025, allowing it to begin executing its Rs. 4,000 crore order book. (1 easing, 1 stable)
“Delays in product qualification process continued which were highlighted in the previous years Management Discussion and Analysis.”
The risk remains high as management confirms a continuing drastic fall in demand from the telecom sector, which was a large proportion of business. While other segments grew, the company would have been in loss without new product lines. (1 stable)
“The primary reason for this was the continuing drastic fall in demand from the telecom sector which was a large proportion of the company’s business... But for the new product lines, the company would have been in loss both in FY 11 and FY 12.”
The risk is intensifying as major telecom operators (BSNL and private entities) have shifted preference to Lithium-ion technology, where HBL is not participating due to unattractive pricing and warranty risks. This is expected to cause a 'considerable reduction' in 2V-VRLA battery revenue in FY26. (1 intensifying)
“This trend is accelerating in FY26 and is expected to continue in future, resulting in a substantial reduction in demand for lead acid batteries... In view of the above market trend, there will be a considerable reduction in 2V-VRLA battery business and thus revenue in FY26 and in the coming years.”
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