Craftsman Automation Limited — Q4 FY26 earnings call

Call held 8 May 2026

Management summary

Craftsman Automation reported its Q4 FY26 earnings, projecting robust revenue growth in the mid-teens for FY27, driven by double-digit growth in the powertrain segment and successful ramp-up of the alloy wheel business to a 3 million unit annualized run rate. The company is actively restructuring its Sunbeam aluminum die casting business to improve currently low margins and is focused on reducing its net debt to EBITDA. However, inflationary manpower costs and the short-term impact of new capex on margins remain key challenges.

Highlights

  • FY27 revenue growth expected in 'mid-teens', indicating strong forward momentum.

  • Powertrain segment is stable and growing, with expectations for 'double-digit growth'.

  • Alloy wheel business achieved an annualized exit run rate of 3 million units in March 2026, demonstrating successful ramp-up.

  • Stationary engine order book finalized for the first $100 million, with strong inquiry momentum for Phase 2 expansion.

  • Net debt to EBITDA is projected to continuously fall, targeting below 2 in the current year and further to 1.5.

Concerns

  • Sunbeam acquisition's aluminum die casting business is currently operating at 'single-digit' margins due to non-profitable customers and legacy products, requiring ongoing restructuring.

  • Manpower cost inflation is a significant concern, with management finding it 'very difficult to pass on to customer'.

  • Future capex in the current year is expected to 'spoil the margins' due to disproportionate revenue growth relative to capacity expansion, impacting short-term profitability.

Key financials

  1. Net Debt to EBITDA 2.43
  2. ROCE (Consolidated) 16%
  3. Aluminum Business EBIT Level (Last Year) 10.3%
  4. Alloy Wheel Revenue (Last FY) ₹260 Cr

What they filed

Q1 FY27: revenue up 42.1%, net profit up 135.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue906 929 1,151 1,044 1,192 +32%1,237 +33%1,346 +17%1,484 +42%
EBITDA132 115 161 177 200 +52%214 +86%251 +56%266 +50%
Net profit29 5 27 40 47 +62%56 +1020%78 +189%94 +135%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

$100 Mn

as of 2026-03-31 quantified

Execution

will be able to reach that $100 million sort of revenue in '29, '30

The stationary engine order book for the first $100 million is finalized and on track to generate revenue by FY29-30, with strong inquiry momentum for a second phase.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Land acquisition for DR Axion greenfield plant ₹150 Cr
    • Land acquisition for Sriperumbudur project (50 acres) ₹150 Cr
    Today, when DR Axion wanted to go for another plant, just for the greenfield, land acquisition itself on public disclosure, you know, it is in the region of around, INR150 crores. Around INR150 crores, just the land which is adjacent to the SIPCOT area. We paid less than the SIPCOT area, it is the capex which is required. At the current civil construction, when you are looking at it, it's high.
  • Debt Net ₹3,100 Cr · 2.4× EBITDA
    I think we are already at 2.43 net debt to EBITDA. We are looking at, going forward, it'll be less than 2, I would say, in the coming, the current year itself, totally. And then it'll go down further to 1.5.
  • M&A Sunbeam Acquisition · Integrated

    To capture margins via shift and restructuring of aluminum die casting business.

    Currently at single-digit margins, undergoing restructuring to improve profitability.

    In the aluminium die casting side of the business, the acquisition of Sunbeam, where are we in terms of the capturing of margins via the shift and what is the progress there? We are just lacking behind on the margin-wise with a single, still at single-digit for various reasons.
  • M&A Suprash Developers and Srikara Technologies Acquisition · Closed · Consideration ₹[object Object] (undisclosed)

    Acquired as a vehicle to secure 50 acres of land for the Sriperumbudur project, which was otherwise delayed.

    Acquisition of companies allowed securing 50 acres of land at INR150 crore cost, enabling the Sriperumbudur project.

    We have taken over their as a vehicle, the investment in those 2 companies. We have taken around 50 acres of land at around INR150 crore cost, but we have taken over those companies. Those are the subsidiaries.

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · FY27 · Medium confidence mid-teens
    As I mentioned last time itself, we for the first time we had given some guidance because of so many changes in the business, so many plants coming in and also subsidiaries. I will just give you a rough indication. It is truly double digit, most probably, in the mid-teens, I would say. That is what is the expectation for the growth.

    — Srinivasan Ravi

  • Powertrain Segment Growth Revenue · Medium confidence double-digit growth
    On the powertrain, we are stable, and we are growing. I think we can expect a double-digit growth.

    — Srinivasan Ravi

  • Aluminum Business Revenue Revenue · FY27 · Medium confidence INR6,500 crore
    The way to look at is so that, for example, we'll be around INR6,500 crore in the aluminum business in the FY 2027 or so.

    — Srinivasan Ravi

  • Aluminum Business $1 Billion Target Revenue · Medium confidence 2 to 3 years
    I think it will be 2 to 3 years' time. It is also a little sensitive towards aluminum prices, but I would say that at the current aluminum prices, I think 2 to 3 years we should be there.

    — Srinivasan Ravi

Debt

  • Net Debt to EBITDA Debt · Current year, then further · High confidence less than 2, then 1.5

    From 2.43 today

    I think we are already at 2.43 net debt to EBITDA. We are looking at, going forward, it'll be less than 2, I would say, in the coming, the current year itself, totally. And then it'll go down further to 1.5.

    — Srinivasan Ravi

Capacity Utilization

  • Alloy Wheel Capacity Utilization Capacity Utilization · Next year · Medium confidence 70-80%
    I think we should touch around close to 4 million (nos) in the next year. That means around 70%, 80% capacity utilization within the plants.

    — Srinivasan Ravi

  • Powertrain Capacity Utilization (Upper Limit) Capacity Utilization · Medium confidence 85%
    Powertrain, we are still at around 65%, 70% because there are some pockets and segments where the customers are not doing well. But I think 85% will be the upper limit.

    — Srinivasan Ravi

  • Sunbeam Capacity Utilization (Near Term) Capacity Utilization · Near term · Medium confidence 45-50%

    From 70% today

    Capacity utilization, which is around 70%, will come down to around 45%, 50% in the near for the Sunbeam because some of them are legacy products unviable to continue manufacturing.

    — Srinivasan Ravi

  • DR Axion Capacity Utilization Capacity Utilization · Medium confidence 80-85%
    Their capacity utilization is the tune of around 80%, 85%, I would say.

    — Srinivasan Ravi

  • Craftsman Capacity Utilization Capacity Utilization · Medium confidence 70-80%
    Craftsman side also the capacity utilization is a reasonable 70%, 80% level, but our incremental orders are quite strong, so we are increasing capacity.

    — Srinivasan Ravi

Powertrain

  • Large Engine Projects Traction Powertrain · Next year · Medium confidence high single-digit number
    Next year it may be reaching a high single-digit number, I think a part of the powertrain of the large engine projects. '29, FY 2029, FY 2030 will be seeing good traction on that segment.

    — Srinivasan Ravi

What to watch in Q1 FY27

FY27 Capex Plan Decision

By September
Current Undecided, analyst estimate INR1,000-1,100 crores for FY27
Target Specific capex amount for FY27

Why it matters

Crucial for future capacity expansion, growth trajectory, and financial planning, as it will influence short-term margins.

On FY 2027 itself, we are not very clear about the capex as today because we have taken some interim requirements. But September we have to decide on the capex even for FY 2027.

Risks & concerns

  • Manpower Cost Inflation

    high

    Inflationary manpower costs are rising significantly and are difficult to pass on to customers, causing 'sleepless nights' for management.

    What is worrying us the inflationary manpower cost, which is very difficult to pass on to customer. This is where we are working on.

    Management acknowledged

  • Commodity Price Volatility (Aluminum)

    medium

    FY27 growth guidance assumes aluminum prices remain at current levels, indicating sensitivity to price changes.

    When we say mid-teens, we also have to assume that the aluminum prices are around the level what it's currently.

    Management acknowledged

  • Impact of Future Capex on Margins

    medium

    Future capex in the current year is expected to 'spoil the margins' due to disproportionate revenue growth relative to capacity expansion.

    Because the future capex in this year will again spoil the margins.

    Management acknowledged

  • Legacy Business Profitability (Sunbeam)

    medium

    Sunbeam's legacy products and minuscule customers are not profitable, necessitating restructuring and price resets.

    The legacy products from at least the one of the acquisitions we made in the last, is suffering very badly because of the 15-year-old, 10-year-old legacy products and some of the minuscule customers.

    Management acknowledged

Q&A highlights

5 direct
Alloy Wheel Project Expansion Direct
The exit run rate of the alloy wheel, approximately it is around volume-wise annualized when you look at it on the March. It is equal to around 3 million alloy wheels is the exit rate for the month of March.

Provides specific volume metrics for the alloy wheel business ramp-up, indicating successful capacity utilization.

Asked by Pritesh Chheda

Sunbeam Acquisition Margins and Restructuring Partial
We are just lacking behind on the margin-wise with a single, still at single-digit for various reasons. We are on the right track that we are exiting customers where it's not profitable, exiting subsegments of the business with same customers where it's not profitable totally or even selling one portion of the low-value business which is around INR30 crore per year.

Highlights the current low profitability of the Sunbeam business and the ongoing strategic actions to improve it, with expected results from Q2.

Asked by Pritesh Chheda

Overall Revenue Growth Outlook for FY27 Direct
It is truly double digit, most probably, in the mid-teens, I would say. That is what is the expectation for the growth. When we say mid-teens, we also have to assume that the aluminum prices are around the level what it's currently.

Gives a clear forward-looking revenue growth guidance for the next fiscal year, with a crucial assumption about commodity prices.

Asked by Pritesh Chheda

Scaling Segments Beyond Powertrain Direct
Powertrain is scaling up. Also, the stationary engine side is the order book is for the first $100 million is finalized and is with us. So as slated earlier as stated earlier, I would say, we will be able to reach that $100 million sort of revenue in '29, '30.

Reveals specific order book details for the stationary engine segment and discusses other growth avenues like data centers and value-added aluminum products.

Asked by Vignesh

Powertrain Segment Margins and Overhead Pass-through Partial
On the powertrain segment, I think we have grown only a small portion last year. It's not the scale benefit which has really played out in the last year. I would say that the repair and maintenance which went on for almost 4, 5 quarters, which was depressing the EBIT margins, was the main -- EBITDA margins were the main reason for that change.

Explains the drivers behind powertrain margin improvement, attributing it to operational efficiencies rather than just scale, and acknowledges challenges in passing on all cost increases.

Asked by Joseph George

Cash Flows and Working Capital Direct
I think the plants which are suppose the aluminum business was ramping up in the last few years. Earlier it was mainly powertrain driven, so that means suddenly there was a spike in the working capital requirement and now rationalization has happened. I think the payment cycles are also set in. I think it is the same way going forward.

Clarifies the reasons for past negative working capital impacts, linking it to the aluminum business ramp-up and subsequent normalization.

Asked by Joseph George

Capex Expectations for FY27 and FY28 Partial
On FY 2027 itself, we are not very clear about the capex as today because we have taken some interim requirements. But September we have to decide on the capex even for FY 2027. FY 2028 depends on the performance of FY 2027.

Indicates uncertainty and a phased approach to future capex, with a key decision point in September, which is important for future growth and financial planning.

Asked by Joseph George

Aluminum Entity Consolidation Strategy Direct
How we can have better leverage or better synergy between all the aluminum businesses. That is our target. The easy one was how to do it with the DR and Sunbeam. It's also related to Craftsman aluminum business.

Explains the strategic rationale behind merging aluminum entities, aiming for synergy, better leverage, and increased competitiveness against larger global players.

Asked by Ram Seshan

2 min read 5 chapters

Detailed narrative

FY27 Growth Outlook and Segment Performance

Craftsman Automation projects a 'mid-teens' revenue growth for FY27, with the powertrain segment expected to achieve 'double-digit growth'. The alloy wheel business has successfully ramped up, reaching an annualized exit run rate of 3 million units in March 2026, with capacity utilization expected to reach 70-80% next year. The stationary engine order book for the first $100 million is finalized, with revenue expected by FY29-30, and strong inquiry momentum for a second phase.

Aluminum Business Restructuring and Consolidation

The aluminum die casting business, particularly the Sunbeam acquisition, is currently operating at 'single-digit' margins due to non-profitable customers and legacy products. The company is actively restructuring this segment, exiting unprofitable businesses and resetting prices, with improvements expected from Q2 onwards. Strategically, Craftsman is consolidating its aluminum entities (Sunbeam, DR Axion, and its own aluminum business) to achieve better leverage and synergy, targeting approximately INR6,500 crore in aluminum business revenue by FY27.

Capital Allocation and Debt Management

The company's net debt to EBITDA currently stands at 2.43, with a clear target to reduce it to less than 2 in the current year and further to 1.5. Capex decisions for FY27 will be made by September, with management noting that significant capex has already been incurred in the aluminum business. The acquisition of Suprash Developers and Srikara Technologies for INR150 crore facilitated the timely acquisition of 50 acres of land for the Sriperumbudur project, which is under civil construction and expected to be commissioned by December.

Operational Challenges and Cost Pressures

Manpower cost inflation is a significant concern, with management highlighting the difficulty in passing these increased costs to customers. The company is focusing on improving manpower productivity through better operations, equipment, layouts, and semi-automation. Additionally, the impact of future capex in the current year is expected to temporarily 'spoil the margins' due to the disproportionate growth in capacity versus revenue realization.

Capacity Utilization Across Segments

Current powertrain capacity utilization is around 65-70%, with an upper limit of 85%. DR Axion and Craftsman's own operations are at 80-85% and 70-80% utilization respectively. Sunbeam's capacity utilization, currently around 70%, is expected to decrease to 45-50% in the near term as non-viable legacy products are phased out. The new powertrain business for large engines is still in early stages, with capacity utilization at only 10%.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Automobile and Auto Components earnings calls