Whalesbook
Tega Industries Q3 Earnings Hit by Acquisition Costs; Molycop Deal Nears Completion
Tega Industries Limited, a leading global manufacturer of specialized consumables for the mining industry, reported a significant drop in its third-quarter (Q3 FY26) earnings, primarily impacted by substantial one-off expenses related to its ambitious acquisition of Molycop. While revenue remained nearly flat year-on-year, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) saw a sharp decline.
Financial Deep Dive
For the nine months ended December 31, 2025 (9M FY26), Tega Industries posted consolidated revenue of ₹1,210.3 Crore, a 6% increase compared to ₹1,139.0 Crore in the same period last year (9M FY25). However, EBITDA for the nine-month period decreased by 4.5% to ₹216.1 Crore from ₹226.4 Crore, with EBITDA margins narrowing to 18% from 20%.
The most striking performance was in the third quarter ended December 31, 2025 (Q3 FY26). Revenue saw a marginal dip of 0.7% year-on-year to ₹417.5 Crore compared to ₹420.6 Crore in Q3 FY25. More significantly, EBITDA plummeted by 41.6% to ₹60.0 Crore from ₹102.7 Crore in the prior year's quarter. This led to a sharp compression in EBITDA margins, which fell to 14% from a robust 24% in Q3 FY25.
The 'One-Off' Impact: Management clarified that these margin contractions were significantly influenced by one-time expenses. Approximately ₹51-56 Crore in costs were incurred, comprising about ₹6 Crore for labor code regulations and a substantial ₹45-50 Crore related to transaction and professional fees for the Molycop acquisition. If these expenses were excluded, EBITDA margins would have remained comfortably above the 20% threshold.
Segment Performance: The Consumables Business, which forms the core of Tega's operations (84% of 9M FY26 revenue), showed resilience. Q3 FY26 revenue grew by 0.8% to ₹358.5 Crore, maintaining healthy gross margins of around 60% and typical EBITDA margins of 22-23%.
The Equipment Business, while smaller (12% of Q3 FY26 revenue), demonstrated a turnaround. Its 9M FY26 revenue grew a strong 34% YoY to ₹182.6 Crore. However, Q3 FY26 revenue for this segment decreased by 13% to ₹47.5 Crore, though it typically operates with gross margins of 40-45% and EBITDA margins of 13-14% and is now PBT (Profit Before Tax)-positive.
The company's order book stood at ₹1,140.2 Crore as of December 31, 2025, with ₹810.2 Crore expected to be executed within the next 12 months.
Molycop Acquisition Nears Climax
Progress on the Molycop acquisition, a transformative deal for Tega, was highlighted. Tega has increased its stake in the Molycop entity to 84%. Anti-trust filings have been completed in 12 jurisdictions, and an FDI filing in Spain is done. The transaction is on track for completion by March 31, 2026, with financing involving a mix of internal accruals, debt (up to ₹1,500 Crore from banks), and equity, with current funds deemed sufficient. This acquisition, valued at an enterprise value of approximately USD 1.45 billion, aims to turn Tega into a leading multinational mining solutions provider.
Outlook & Strategy
Despite macro uncertainties, management expressed confidence, citing a diversified portfolio and strong balance sheet. For the full year FY26, Tega expects decent double-digit growth at the group level, with the consumables business growing around 8% and the equipment business around 28-30%. Geographic expansion into Europe, Latin America, and Australia is a key strategy, with contributions expected from FY27 onwards. A capital expenditure (CAPEX) project in Chile is also on schedule for commercial production in Q2 FY27.
Risks & Negative History
Specific Risks: Investors will closely watch the successful integration of Molycop, the impact of increased debt on the balance sheet, and execution risks in new geographies. Fluctuations in commodity prices and global mining demand also pose potential headwinds.
Negative History: Tega Industries faced a SEBI warning in October 2025. A designated person within the company received a warning for minor violations related to insider trading regulations. The Securities and Exchange Board of India's (SEBI) committee noted it was a first-time offense involving minimal share value and opted for a warning rather than a penalty. This indicates a need for ongoing vigilance on corporate governance practices.
Peer Comparison
Tega Industries operates in a competitive global mining consumables market. Its key global rivals include Metso, Weir Minerals, and FLSmidth, companies known for their broad product portfolios and established client relationships. Tega ranks as the second-largest global producer of polymer-based mill liners by revenue and holds an estimated 10-12% global market share in the mill lining segment. While the company has demonstrated strong revenue and net income growth over the past five years, exceeding industry averages in some metrics, its recent quarterly performance was impacted by acquisition-related costs, a factor that may differ from competitors' immediate results. Competitors like Metso offer full-scope plant solutions, while Weir Minerals leverages strong brands and service networks.