Aarvi Encon Q3 FY26: ₹1,674 Mn Revenue, 27% YoY Growth, 66% PAT Jump – Yet Trading at Just 11x PE?

1. At a Glance – Smallcap With Big Contracts and Even Bigger Payroll

A ₹190 crore market cap company supplying engineers to refineries, airports, windmills, and oil fields — and still trading at 11.4x earnings? Welcome to Aarvi Encon.

Current price: ₹128
3-month return: -7.04% (market mood swings, anyone?)
ROCE: 10.8%
ROE: 8.26%
Debt-to-equity: 0.24
Dividend yield: 1.57%

Latest Q3 FY26 numbers are not sleepy. Revenue came in at ₹1,674 million (₹167.4 crore), up 27.2% YoY. PAT stood at ₹40 million (₹4.0 crore), jumping 66.7% YoY. EPS for the quarter: ₹2.69.

And here’s the kicker: the company has an order book of ₹650 crore to be executed over the next 18–24 months. For a company whose annual revenue is ₹622 crore (TTM), that’s not small change.

So why is the valuation behaving like it forgot its morning coffee?

Let’s investigate.

2. Introduction – India’s Engineer-On-Demand Company

Aarvi Encon was incorporated in 1987. Back then, India had landlines, not LinkedIn. And yet, this company was already building what today we call “technical staffing.”

Fast forward to FY26, and Aarvi has deployed more than 30,000 professionals since inception. In FY24 alone, it deployed 5,458 professionals. In Q1 FY25, 5,347. As of 9M FY26, the operational revenue stands at ₹4,776 million.

The company provides engineers from project conceptualization to commissioning and maintenance. In simple language:

You build a refinery.
You need 200 engineers tomorrow.
You call Aarvi.

You shut down a plant for maintenance for 15 days.
You need 80 technicians yesterday.
You call Aarvi.

The company has an 8+ lakh resume database. That’s practically a digital army waiting to be deployed.

And they’re not just local. Offices in UAE, Oman, UK, Qatar, Saudi Arabia, Indonesia. Agents across Africa.

Now ask yourself: in a country obsessed with IT staffing, why is engineering staffing so under-discussed?

3. Business Model – WTF Do They Even Do?

Let’s decode.

Revenue breakup FY24:

• Manpower Outsourcing – 84%
• O&M – 15%
• Placements – 1%

So 84% of revenue comes from deploying engineers on client payroll structures (but technically employed by Aarvi).

In 9M FY26:

• Manpower Outsourcing – 87%
• O&M – 10%
• Others – 3%

Oil & Gas contributes 35% (down from 49% in FY24). Engineering sector 33%. Renewable 19%. That renewable jump is interesting.

Business model types:

• Cost-plus contracts – 45%
• Lumpsum – 55%

PSU vs Non-PSU mix:

• 16% PSU
• 84% Non-PSU

That means they are largely dependent on private sector capex cycles.

Clients include Larsen & Toubro, Cairn, Reliance Industries, Indian Oil, BPCL, ONGC.

So they’re not sending engineers to fix your mixer grinder. They are sending them to refineries and pipelines.

Here’s a question: If India’s infra and renewable capex cycle continues, who benefits quietly in the background?

4. Financials Overview – Let’s Crunch the Numbers

Latest Quarterly EPS (Q3 FY26): ₹2.69
Q2 FY26 EPS: ₹3.22
Q1 FY26 EPS: ₹2.85

For Q3 annualisation rule:
Average of Q1, Q2, Q3 EPS × 4
= (2.85 + 3.22 + 2.69) / 3 × 4
= 2.92 × 4
= ₹11.68 (Annualised EPS)

Current Price ₹128
Recalculated P/E = 128 / 11.68 ≈ 10.96x

Quarterly Comparison (₹ Million)

Revenue is climbing steadily. Margins are thin (3.23% EBITDA). But growth is visible.

Question: In a 3% margin business, how important is scale?

5. Valuation Discussion – Fair Value Range

Method 1: P/E

Industry PE: 22
Company current PE: ~11

If valued at:

• 14x EPS → 11.68 × 14 = ₹163
• 18x EPS → 11.68 × 18 = ₹210

Range: ₹163–₹210

Method 2: EV/EBITDA

TTM EBITDA ≈ ₹20 crore (from ₹159 mn 9M + extrapolation trend not used; using TTM from P&L ₹20 Cr equivalent)

EV = ₹209 Cr
EV/EBITDA = 9.24

If re-rated to 12–14x:

Implied EV range:
20 × 12 = ₹240 Cr
20 × 14 = ₹280 Cr

After adjusting net debt (~₹32 Cr borrowings), implied equity value roughly ₹208–₹248 Cr
Per share roughly ₹140–₹168 range

Method 3: Simplified DCF

PAT 9M FY26: ₹130 Mn
Assume full year ~₹170 Mn range based on current run rate (interpretation, not guidance)

Assume 12% growth, 12% discount rate, stable margins.

Fair value range approximates ₹150–₹200 band under moderate growth assumptions.

Fair Value Range (Educational Only)

₹150 – ₹210

This fair value range is for educational purposes only and is not investment advice.

6. What’s Cooking – Orders Rain Like Monsoon

Recent contracts:

• ₹108 crore manpower contract for Jan–Dec 2026
• ₹66.21 crore five-year BPCL contract
• ₹11.16 crore Indonesia contract
• ₹173.49 crore PSU engineering consultancy contract
• ₹186.04 crore revised outsourcing order

Order book as of July 2024: ₹650 crore to be executed over 18–24 months.

They onboarded 13 new clients in Q3 FY26 and received 33 new orders.

Chennai office expanded. Hyderabad branch opened. Seven-year maintenance contract for Trichy Airport signed.

This is not a sleepy staffing agency.

Question: When order book equals annual revenue, does that reduce risk?

7. Balance Sheet – Latest Consolidated (Sep 2025, ₹ Crore)

Observations:

• Debt rising but manageable.
• Net worth steadily increasing.
• Assets growing alongside order book.

Sarcastic take:

• Not debt-free saint, but not overleveraged sinner either.
• Working capital heavy business, so balance sheet stretch is normal.
• Borrowings rising – but revenue also rising. Fair trade?

8. Cash Flow – Sab Number Game Hai

Cash flows volatile. Working capital swings.

In staffing business, receivables are king. Debtor days around 83.

Question: If clients delay payments, who pays salaries first?

9. Ratios – Sexy or Stressy?

ROE is modest. Margin thin. Valuation low.

Classic low-margin scale story.

10. P&L Breakdown – Show Me the Money

Revenue bouncing. Margins compressing then stabilising.

Staffing is volume game, not luxury handbag business.

11. Peer Comparison

Median PE: 22.44

Aarvi trades at discount.

But peers have stronger margins.

Discount justified? Or overdone?

12. Shareholding – Family Control With Zero Pledge

Promoter holding: 73.53%
FIIs: negligible
Public: 26.46%

No pledged shares.

Promoters: Sanghavi family led.

Family-controlled, tightly held, stable.

Low FII interest – smallcap reality.

13. Corporate Governance – Angels or Devils?

CRISIL rating present. Regular board meetings. Independent director change in Jan 2026.

No pledge. No bizarre related-party red flags disclosed in dump.

Governance looks stable.

But low tax rates in certain quarters? That deserves monitoring.

14. Industry Roast – Engineering Staffing Is Not Glamorous, But It Pays the Bills

India is entering infra supercycle mode. Refineries expanding. Solar modules manufacturing booming. Wind projects multiplying.

Everyone talks about EPC giants. No one talks about who supplies the engineers.

Technical staffing is cyclical. When capex is high, demand surges. When projects slow, billing drops.

Margins remain thin because competition is high.

Global expansion helps hedge domestic slowdown.

Oil & Gas share dropped from 49% FY24 to 35% 9M FY26. Renewable jumped to 19%.

That’s structural shift.

Question: If renewables scale 5x in India, who supplies engineers?

15. EduInvesting Verdict – Quiet Compounder or Margin Trap?

Strengths:

• Strong order book (₹650 Cr)
• Growing revenue base
• Diversified industry exposure
• No promoter pledge

Weaknesses:

• Thin margins
• Modest ROE
• Working capital stress possible

Opportunities:

• Renewable expansion
• International contracts
• PSU engineering demand

Threats:

• Payment delays
• Wage inflation
• Margin pressure

Aarvi Encon is not a glamorous tech stock. It is a payroll machine for engineers.

Valuation is modest. Growth visible. But margin expansion is key.

If margins improve even 50–100 bps sustainably, earnings can compound faster.

For now, it sits in that interesting zone:
Not expensive.
Not hyper profitable.
But definitely not boring.

Written by EduInvesting Team | Date