Kirloskar Oil Engines: Data Centres Could Power Growth

India’s genset market is entering a new phase. Valued at around ₹13,500 crore in FY25, it is expected to approach ₹22,000 crore by FY30. A driver is the expansion of data centres, where uninterrupted power is mission-critical. For Kirloskar Oil Engines (KOEL), this could create a valuable growth engine, but shareholders must watch margins and valuation. KOEL has about 28% of India’s power-generating set market, with Powergen contributing 49% of revenue. It is now moving into the larger hyperscaler opportunity. The trigger is 192 MW hyperscaler order. Besides supplying gensets, KOEL will provide operations and maintenance for five to six years. Revenue from this order is expected to start flowing from FY27. KOEL is also developing higher-horsepower systems and modular platforms such as Optiprime, positioning itself for larger projects. It plans to add 50,000 engines to its existing 1,35,000-unit capacity. A ₹1,400 crore capex programme over two years will fund a new facility at Kagal. Management targets ₹16,600 crore revenue by FY30. Yet near-term numbers underline the risks. Standalone Q1FY27 revenue rose 16% year-on-year to ₹1,461.4 crore, but EBITDA fell 4% to ₹165.5 crore. Margin dropped 230 basis points to 11.2%, while net profit declined 9% to ₹99.3 crore, mainly due to higher commodity costs. In FY26, standalone revenue from operations rose 25% to ₹5,646.8 crore, EBITDA increased 24% to ₹737.3 crore and continuing-operation PAT rose 13% to ₹441.5 crore. For shareholders, the opportunity is positive if KOEL converts the order into profitable recurring business and protects returns. However, capex, commodity inflation and execution risks could dilute gains. With the stock already rerated sharply, future returns will depend less on the story and more on earnings delivery.