Detailed Narrative
Strong FY26 Performance Driven by Manufacturing Growth
Classic Electrodes reported a robust performance for FY26, with total income reaching INR 244.21 crores, marking an 18.48% year-on-year growth. The second half of FY26 also showed strong momentum, with total income of INR 121 crores, a 20.68% increase over H2 FY25. This growth was primarily fueled by the manufacturing segment, which increased its contribution to 73% of gross revenue in FY26, up from 67% in FY25, reflecting improved operational efficiency and market demand.
Margin Pressure Amidst Raw Material Volatility
Despite healthy revenue growth, the company experienced a dip in gross margins from 14.6% to 12.8% in FY26. This was attributed to volatility in raw material prices, particularly metal prices, which increased in the last two quarters of FY26. Management noted that while they were able to pass on a major portion of these costs, customer resistance, especially from direct supplies to wagon builders, led to a marginal drop in overall margins. The company aims to improve gross margins to a minimum of 15% in FY27.
Capacity Expansion and New Product Line Development
The company continued to strengthen its manufacturing capabilities, with installed capacities of 10,600 metric tons for electrodes and MIG wire, and 2,500 metric tons for flux-cored wire. Significant volume growth was observed, with MIG wire production increasing from 3,240 MT in FY25 to 5,270 MT in FY26. A new product line, Elastic Railway Clips (ERC), is anticipated to commence commercial production in July 2026, expected to contribute INR 30-35 crores to FY27 revenue and offer healthy gross margins of 25-28%.
Strategic Investments and Future Outlook
Classic Electrodes made a strategic investment of approximately INR 2 crores in HM Power, an associate company manufacturing aluminum conductors, cables, and conductors, holding a 14-15% stake. HM Power is expected to generate INR 200 crores in revenue in its first year of operations. For FY27, the company projects a total income of INR 330-350 crores, driven by the new ERC business, increased contribution from flux-cored wire (targeting INR 20 crores), and continued growth in existing segments. Management is also exploring land for new facilities in West and South India for future expansion.
Commitment to Transparency and Corporate Governance
Addressing analyst concerns regarding the lack of a separate Q4 update and low trading liquidity on the SME platform, management committed to providing quarterly financial updates going forward⏳. They also emphasized their dedication to corporate governance and stated they would make announcements for any significant positive developments. While acknowledging the challenging market scenario, the company's focus remains on enhancing manufacturing efficiency, expanding product offerings, and improving capacity utilization to deliver sustainable value.