Is HBL Engineering a Good Buy?
HBL Engineering has emerged as a diversified engineering and technology-driven company, with its fundamentals reflecting strong growth visibility, a robust order book, and sectoral diversification into high-demand areas like railways, defence, and industrial electronics. At the same time, certain red flags such as governance concerns, increasing receivables, and working capital intensity temper the outlook slightly.
Strong Revenue Growth Outlook
The company expects FY26 sales to reach around ₹3,000 crore, representing an impressive 52% growth over FY25. This sharp increase is not a one-time expectation; management has also guided for sales in FY27 and FY28 to grow at a compounded annual growth rate (CAGR) of 20% over FY26. Such visibility provides confidence in the sustainability of growth, driven by strong demand pipelines and an expanding product mix.
Expanding Order Book
A defining strength of HBL Engineering lies in its order book, which provides multi-year revenue visibility. As of June 2025, the order book stood at ₹4,029 crore, which is nearly 2x of FY25 sales. This represents a dramatic jump from the ₹1,179 crore order book reported as on August 31, 2024, as per CareEdge. The exponential growth highlights the company’s ability to secure large, long-duration contracts across core sectors like railways and defence. Such a strong pipeline not only underpins revenue guidance but also diversifies risk across multiple projects and customers.
Breakthrough in Railway Safety Systems
HBL has achieved a major milestone by becoming the first company to receive RDSO approval for Version 4.0 of its Kavach Systems. Kavach is India’s indigenously developed Train Collision Avoidance System (TCAS), and Version 4.0 approval places HBL in a leadership position in the safety and signalling market. The importance of this cannot be overstated, as the government’s strong focus on railway modernization, particularly with Vande Bharat trains and broader TCAS deployment, creates a long runway for growth.
Adding to this momentum, in December 2024 the company secured a large work order worth ₹1,522 crore from Chittaranjan Locomotive Works. The order involves the supply, installation, and commissioning of on-board TCAS equipment in locomotives within one year. This contract alone provides a significant revenue boost in the near term while strengthening the company’s positioning in railway electronics and safety technologies.
Diversified Business Model
According to CareEdge Ratings, HBL Engineering generates revenues from industrial, defence, and aviation batteries, electronics, and other products, with batteries being the largest contributor followed by electronics. Importantly, the company has been reducing reliance on telecom, which was earlier a major revenue source, and instead increasing its share of electronics. In FY24, electronics revenue grew by nearly 2.98x, driven by railway TCAS/TMS and signalling solutions. With expected demand from Vande Bharat trains and Kavach systems, the electronics segment is poised to be a key growth driver, alongside batteries and defence-related orders.
This diversification across segments helps reduce dependence on any single vertical, while aligning the company with high-priority sectors where government investment is robust.
Red Flags and Risks
While the growth outlook is robust, certain challenges cannot be ignored:
Governance concern – The resignation of Mr. Advay Bhagirath Mikkilineni (Non-Executive Director) on November 4, 2024, raises questions about board stability and continuity.
Rising receivables – Trade receivables increased from ₹312 crore in March 2023 to ₹381 crore in September 2024, highlighting delays in collections and potential pressure on liquidity.
Working capital intensity – The company operates in a working capital–intensive business, given the long project cycles in batteries, defence, and railways. High working capital requirements could strain cash flows, especially in years of rapid revenue growth.
Summary of Fundamentals
Revenue visibility: FY26 sales expected at ₹3,000 crore (+52% YoY), with FY27–28 CAGR of 20%.
Order book strength: ₹4,029 crore as of June 2025 (2x FY25 sales).
Technological leadership: First RDSO approval for Kavach 4.0.
Large contracts: ₹1,522 crore order from Chittaranjan Locomotive Works in Dec 2024.
Diversification: Balanced revenue streams across batteries, defence, and electronics, with declining telecom exposure.
Risks: Board resignation, rising receivables, and high working capital intensity.
Conclusion
HBL Engineering is positioned at the intersection of India’s railway modernization, defence needs, and industrial electronics growth. Its strong order book, revenue guidance, and leadership in Kavach systems make the company’s fundamentals appear promising. However, governance challenges, rising receivables, and the inherent working capital burden remain cautionary elements. On balance, the fundamentals are weighted heavily toward growth, with a few red flags that warrant monitoring.
