1. At a Glance – Blink and You’ll Miss the Rally
HBL Engineering Ltd is that rare Indian midcap which woke up one fine morning and decided to become Railways’ favourite child. With a market cap of ₹21,629 Cr, a current price of ₹780, and a one-year return of 42.6%, this stock has gone from “battery wala company” to “Kavach ka king”. The latest quarter was spicy: Q3 FY26 revenue at ₹874 Cr, up 94% QoQ, and PAT at ₹221 Cr, up a jaw-dropping 242% YoY. Operating margins? A chunky 35%—because when the government writes the cheque, margins suddenly discover self-confidence.
ROCE is sitting pretty at 27.3%, ROE at 20.6%, debt is practically missing (₹87 Cr, debt-to-equity 0.04), and interest coverage is so high (69x) that lenders are probably bored. The crown jewel? An order book of ₹4,479 Cr, up nearly 4x in less than a year. Rail signalling, defence electronics, lithium batteries—HBL is everywhere the government loves to spend.
Question for you already: Is this still a “hidden gem”, or has the entire Dalal Street wedding baraat already arrived?
2. Introduction – From Batteries to Bharat’s Rail Brain
Once upon a time, HBL was known for batteries—industrial, boring, dependable batteries. Then Indian Railways decided it doesn’t like accidents, defence decided it likes indigenous suppliers, and suddenly HBL found itself in the middle of a multi-decade capex party.
Founded in 1983, HBL Engineering (formerly HBL Power Systems) quietly built competencies in industrial batteries, defence electronics, and rail signalling. For years, it was a steady but unspectacular player. Then came Kavach—India’s homegrown Train Collision Avoidance System—and HBL didn’t just participate; it dominated.
Today, HBL is no longer a cyclical manufacturing company. It is a policy-backed, order-book-heavy, execution-driven engineering business. That’s code for: revenues are visible, margins are strong, and growth is less about “market demand” and more about “how fast can you execute”.
But—and there’s always a but—when one product becomes too big, concentration risk starts waving from the corner. We’ll get there.
Before that, let’s answer the most important
question.
3. Business Model – WTF Do They Even Do?
Imagine HBL as a three-legged stool, each leg getting thicker with time.
1) Industrial Batteries – The OG Cash Cow
This segment contributes 71% of FY25 revenue, down slightly from FY23 but still the backbone.
- Lead Batteries (VRLA & PLT): Telecom towers, UPS, data centres, railways, defence. Stable, boring, cash-generating.
- Nickel-Cadmium Batteries: HBL is #2 globally here. Demand is driven by oil & gas, power, and exports—exports grew 40%, especially in the Middle East.
- Lithium Batteries: The future child. Used in Vande Bharat trains, Siemens Germany projects, global defence, and even undersea defence vessels. This segment grew 37% from FY23 to FY25.
Translation: VRLA pays the bills, lithium writes the future script.
2) Defence Business – High Margin, High Clearance
About 12% of FY25 revenue, but strategically priceless.
- Batteries for aircraft, missiles, submarines.
- Electronic fuzes for grenades, artillery shells, rockets, missiles.
- Grew 24% between FY23–FY25.
Defence contracts are slow to start but sticky once you’re in. And margins? Let’s just say nobody negotiates hard with missile batteries.
3) Industrial Electronics – The Rockstar
This is where things get spicy. Share jumped from 10% in FY23 to 15% in FY25.
- Rail Signalling (Kavach v4.0): First OEM to certify v4.0, approved in May 2025. Contracts worth ₹4,000 Cr, covering 6,980 km, 2,425 locomotives, 758 stations.
- Train Management System (TMS):
