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%.