Synopsis: Transformers and Rectifiers (India) Ltd has seen its stock collapse more than 50 percent from its peak after stretched valuations, a weak Q2FY26, operational disruptions, leadership change, and a World Bank debarment. Yet a strong Q3 recovery, large order book, capacity expansion, and improved valuation suggest the company may be entering a meaningful turnaround phase.
Transformers and Rectifiers (India) Ltd was once seen as a strong growth company benefiting from India’s rising demand for electricity and power infrastructure. Its stock had performed very well in the past, making many investors confident about its future. However, that confidence has faded as the share price has fallen by more than 50 percent from its peak in just a few months. This sharp decline has surprised the market and created uncertainty about the company’s outlook. Is this heavy fall just a short-term setback, or does it signal bigger problems ahead for TARIL?
Transformers and Rectifiers (India) Ltd is a major power equipment company that makes different types of transformers used in electricity transmission, distribution, industries, and special high-voltage projects. The company serves many domestic customers in India and has good order visibility, which supports its business outlook. It plays an important role in strengthening India’s expanding power grid and meeting the country’s growing energy requirements. However, the company’s shares have fallen by more than 50 percent from their high of Rs. 578.65 reached in August and are currently trading in the range of Rs. 250 to Rs. 280.
What Went Wrong?
Stretched valuations turned fragile
At the beginning of 2025, Transformers and Rectifiers (India) Ltd was trading at extremely high valuations of around 150 times earnings in January. By August, this had corrected sharply to about 58 times earnings. Even though the valuation had come down from its peak, it was still high compared to the company’s actual earnings performance. Because of this, the stock remained very sensitive to any sign of weaker results, and even small disappointments triggered sharp selling.
Earnings slowdown in Q2FY26 hurt sentiment
The company’s growth momentum slowed down significantly in Q2FY26 (September 2025). Historically, In Q4FY25, the company had reported year-on-year sales growth of 30 percent, and notably in Q1FY25, revenue had surged by 106.98 percent. However, in Q2FY26, sales growth suddenly turned negative at a degrowth of 0.33 percent. At the same time, profit after tax (PAT) declined by 25 percent in the same quarter. Earlier, strong triple-digit profit growth in PAT had supported high valuations, but this slowdown broke that support and triggered the start of the stock’s decline.
Operational problems affected revenue and margins
The weaker performance in Q2FY26 was mainly due to temporary operational issues. There was a shortage of a key raw material called CTC, which caused delays in production and order clearances. Heavy rainfall across several regions also disrupted manufacturing and site readiness, leading to delayed delivery of high-value projects. As a result, finished goods and work-in-progress levels increased.
Margins were further hurt because the company delivered the last batch of low-margin orders in this quarter while fixed costs remained high despite lower revenue. The expansion at Changodar was also delayed due to monsoon-related disruptions and equipment delivery issues. Additionally, lower capacity utilisation and delays in project sites being ready, especially for some PSUs, affected execution and profitability.
World Bank debarment created a major shock
The World Bank barred TARIL for four years, until June 2029, over an alleged bribery case related to a power project in Nigeria. Following this news, the stock hit multiple lower circuits. Management clarified that the project was nearly four years old and involved supplying 70 transformers worth USD 24.7 million to TCN Nigeria. Most deliveries were completed in FY22, except three transformers that were damaged during unloading and later rebuilt and resent in FY23 and FY24.
The company stated that it had already received 90 percent of the payment in FY22, and the remaining 10 percent was received in the first quarter of FY26 (April-May 2025). Management emphasised that currently there are no existing or pending orders funded by the World Bank, and the debarment only prevents participation in future World Bank tenders.
CEO resignation and brokerage downgrade added pressure
On January 8, 2026, CEO Mukul Srivastava resigned, and Managing Director Satyen J. Mamtora was appointed as the new CEO. On the same day, the stock fell by 8.5 percent to Rs. 293.3, worsening already weak investor sentiment. Around this time, brokerage firm InCred downgraded the stock after Q3FY26 results and indicated a potential downside of around 30 percent. Even though Mr. Mamtora took over as CEO, the brokerage highlighted leadership transition risks as a key concern for investors.
Is The Company Ready To Recover?
Q3FY26 marks a clear operational turnaround
In Q3FY26, Transformers and Rectifiers (India) Ltd delivered a strong recovery in performance. Standalone revenue came in at Rs. 704.21 crores, a sharp jump from Rs. 428 crores in Q2FY26, showing that the earlier supply-side issues were largely resolved. EBITDA improved significantly to Rs. 114 crores, with margins expanding to 16.19 percent, driven by better operating leverage, higher execution of healthier margin orders, and early benefits of cost controls.
Profit after tax stood at Rs. 71 crores, reflecting both strong operations and disciplined financial management. On a consolidated basis, revenue rose to Rs. 737 crores from Rs. 460 crores in Q2, with EBITDA at Rs. 129 crores and PAT at Rs. 76 crores. This quarter represents a meaningful inflection point rather than a one-off bounce. The recovery looks broad-based and operational, not merely accounting-driven.
Execution strength and project momentum improving
Management highlighted that better project execution, improved order conversion, higher plant utilisation, and tighter cost control across the organisation played a key role in the turnaround. They stated that the company is “back on stride” and well positioned to meet its revenue and profitability targets for the year. The strong sequential jump in revenue suggests that bottlenecks faced in Q2 were largely temporary. The company has convincingly addressed its short-term execution issues, reducing the risk of repeated operational disruption.
Strategic breakthrough in HVDC with PowerGrid
A major highlight of Q3 was the receipt of a prestigious HVDC repair order from PowerGrid, making TARIL the first Indian-origin company to secure such a contract. This is strategically significant as it validates the company’s technological capability, engineering credibility, and acceptance among marquee customers. The order strengthens TARIL’s position in the high-voltage and advanced transformer segment and could open long-term opportunities in India’s expanding HVDC ecosystem. This order elevates TARIL from a conventional transformer supplier to a more technologically differentiated player, which could support better valuations over time.
Backward integration roadmap
The CTC plant is targeted for commissioning in FY26-27, followed by a Press Board facility in Q3 FY26-27 and an RIP bushing plant in Q4 FY26-27, along with the first phase of a fabrication facility in the same period. Civil work has already begun, and equipment orders are in place. These steps are expected to increase in-house value addition, reduce dependence on suppliers, and improve cost efficiency over the medium to long term. Backward integration is a structural positive that should make earnings more resilient and margins more predictable.
Capacity expansion supports growth visibility
TARIL is expanding manufacturing capacity meaningfully. At present, Moraiya has a capacity of 27,000 MVA, Changodar 12,000 MVA, and Odhav 1,200 MVA. In the next financial year, the company plans to add 15,000 MVA at Changodar in Q1 and 22,000 MVA at Moraiya in Q2, taking total capacity from about 40,000 MVA to around 75,000 MVA, an increase of roughly 74 percent.
The Changodar expansion is on track for completion in Q1 FY26–27, while Moraiya is expected to be operational by Q2 FY26-27. Management expects plant utilisation to reach around 85 percent by next year-end, including these expansions. The scale-up is ambitious but justified by demand visibility; execution risk remains, but the trajectory is clearly growth-oriented.
Financial guidance and order visibility
For FY26, management is confident of delivering revenue of approximately Rs. 2,600 crores with EBITDA margins of around 16 to 17 percent. They also continue to guide for USD 1 billion (around Rs. 8,000 crores) revenue by FY28-29, driven by both core transformer growth and backward integration businesses.
Currently, the company has around Rs. 5,500 crores in executable order book and expects this to reach around Rs. 8,000 crores by year-end. Management also noted that most PSU orders typically come in Q4, citing INR2,400-2,500 crores of orders received in a single quarter in FY25 as precedent. The guidance looks achievable rather than aggressive, especially given the seasonality of PSU orders and expanding capacity.
Margins, competition, and World Bank risk look manageable
Management expects margins to remain stable in the 15 to 16 percent range, with only minor variation of 1 to 2 percent depending on operational efficiency. They also clarified that most orders are protected by IEEMA price variation clauses, reducing raw material risk. On potential Chinese competition, management believes impact will be limited as Chinese firms would still need to manufacture in India, and the only existing Chinese player (TBA) is already largely booked with Adani and Reliance projects.
Regarding the World Bank issue, the company stated on the concall, that there is currently no active debarment, and they have submitted their response by the January 12 deadline, expecting resolution within 2-3 weeks. Working capital has improved from around 125 days to about 120-122 days, and the company aims to become net debt free within 18-24 months using internal cash flows. Regulatory overhang appears containable, competition risk is not existential, and balance sheet discipline is improving, reducing downside risk.
Valuation now offers margin of safety
TARIL’s price-to-earnings ratio has corrected to 31.3x, which is significantly below the industry PE of 43.1x and the broader average PE of 52.9x. This marks a sharp derating from the earlier stretched levels of 150x in January 2025 and 58x in August. Given the recovery in earnings, strong order book, and capacity expansion, the current valuation appears far more reasonable. The stock has moved from “overpriced and fragile” to “reasonably valued with recovery potential.”
Transformers and Rectifiers (India) Ltd stands at a crossroads. The sharp correction from its 52-week high reflects a combination of stretched past valuations, temporary operational challenges, leadership transition concerns, and the World Bank debarment overhang rather than a structural deterioration in the business. At the same time, the strong recovery in Q3FY26, improving execution, expanding capacity, and a robust order book suggest that the company retains solid long-term growth drivers linked to India’s power and grid expansion.
While risks around project execution, competition, and regulatory clarity remain, the current valuation provides a greater margin of safety than before. For investors, TARIL is no longer a high-flying momentum story but rather a company in recovery mode.
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