Detailed Narrative
Strategic Investments and Greenfield Expansion
Craftsman Automation made substantial investments totaling INR 1,015 crores in the current year, including INR 250 crores for the remaining stake in DR Axion and INR 606 crores for Sunbeam. Greenfield capex amounted to INR 700 crores for the current period, with INR 219 crores allocated to the Bhiwadi alloy wheel plant and INR 91 crores to the Kothavadi plant. These investments are long-gestation, leading to initial operating losses and higher expenses in Q3 FY25.
Q3 FY25 Performance and Segmental Impact
Consolidated EBITDA for the nine months ended December 2024 was INR 609 crores, down from INR 684 crores in the prior year, primarily due to start-up costs and expansion-related expenses. The Aluminium segment's EBIT was negatively impacted by approximately INR 30 crores in Q3, stemming from INR 9 crores negative EBIT from Sunbeam and INR 20 crores negative EBIT from the Bhiwadi plant's start-up costs.
Outlook for New Projects and Profitability Turnaround
The Bhiwadi alloy wheel plant, which commenced operations in August 2024 and generated INR 38 crores turnover in Q3, is expected to become EBIT neutral by Q1 FY26 and achieve high single-digit EBIT positive by the end of FY26. Sunbeam, which contributed INR 284 crores turnover and INR 10 crores positive EBITDA in Q3, is projected to be EBIT positive by Q2 FY26 and for the full year.
Future Growth and Financial Targets
Management provided robust guidance for the next financial year, targeting consolidated revenue between INR 5,500 crores and INR 7,000 crores, and consolidated EBITDA between INR 850 crores and INR 1,100 crores (a 29% growth). Consolidated EBIT is projected to grow by 40% to INR 500-700 crores. The company also aims to reduce its consolidated debt-to-EBITDA ratio to around 1.4x in the next financial year, down from 2.24x currently.
Strategic Shifts in Powertrain and Aluminium Segments
The Powertrain segment is diversifying from heavy reliance on Commercial Vehicles to multinational clients for diesel engine production and long-lead stationary engine projects, with orders received for $100 million (INR 800-850 crores) revenue by FY28-29. The Aluminium segment has transformed towards 4-wheeler business post DR Axion acquisition, reducing dependence on 2-wheelers and aiming for INR 4,000 crores revenue in the next financial year.
Cost Optimization and Debt Management
Employee costs are expected to reduce by at least 30% over the next two years, with continuous headcount reduction. The company's consolidated net debt is projected at INR 1,900 crores for FY25, with a cost of debt around 9-10%. Debt is expected to decrease to INR 1,400 crores next year, partly aided by the anticipated sale of the Gurgaon plant, valued at around INR 300 crores.
Automated Storage Business Performance
The automated storage business has a full order book for the next year. For the nine-month period, automated storage contributed INR 142 crores, with the company expecting to close FY25 with INR 500 crores in revenue from this segment, positioning it among the top 2 Indian players in automated racking.
Depreciation and Tax Outlook
Depreciation for the next financial year is projected to be around INR 400 crores. The effective tax rate is expected to remain at the normal corporate tax rate of 25%, as tax benefits from the Sunbeam subsidiary (around INR 100 crores over 2-3 years) will not significantly impact the overall Craftsman/DR Axion tax structure.