Gala Precis. Eng

Gala Precision Engineering reported a robust Q3 FY26, with consolidated revenue from operations growing 47% year-on-year to approximately Rs. 25 crore. This was primarily driven by the SFS segment, which saw a 149% year-on-year revenue increase in Q3 and 108% for the nine-month period, establishing it as a key growth driver. The DSS segment also demonstrated strong performance, with sales growing 37% year-on-year in Q3, significantly boosted by exports contributing 51% of its revenue.

Despite a 90% year-on-year increase in Q3 EBITDA to approximately Rs. 15 crore and an EBITDA margin of 13.12% (up 387 basis points), net profit remained flat due to one-time^📎 exceptional item^📎s totaling Rs. 1.64 crore. These included a Rs. 0.94 crore provision for retirement benefits under the new Labor Code and a Rs. 0.70 crore reversal of RoDTEP income. For the nine-month period, EBITDA margins stood at 16.07%, a decline of 110 basis points, also influenced by these one-off^📎 provisions.

The company's new Chennai facility generated approximately Rs. 11 crore in revenue during Q3 and has secured price agreements with four leading wind turbine OEMs for new bolt products. Management indicated that Phase One of the Chennai plant is nearing peak utilization, with Phase Two expansion planned to commence in Q1 FY27, requiring an investment of Rs. 9-10 crore. This expansion, along with the Wada plant, is expected to contribute a combined fastener revenue potential of Rs. 200-220 crore.

Gala Precision is investing in a 1.8 MW solar power plant under the open access model for captive consumption, with an estimated CAPEX of Rs. 6.2 crore, to be funded by bank borrowing and completed within six months. This initiative aims to reduce power costs by 15-20% annually and achieve carbon neutrality. Concurrently, the company is migrating to SAP HANA in FY27, with implementation starting in Q1 FY27 and a target go-live in Q3 FY27, involving a five-year subscription agreement of Rs. 3.48 crore to enhance operational efficiency and scalability.

Management provided a revenue growth guidance of approximately 28% for the current fiscal year (FY26) and aims to maintain a 20-25% growth trajectory for the next two to three years. EBITDA margins are expected to stabilize between 17% and 19% in the coming quarters. Key growth drivers include expanding market share with existing customers, adding new products (10-15% annually), and new business development in industrial, renewable, and mobility sectors across global markets.

The company's current debt level stands at Rs. 40.72 crore, primarily due to increased working capital facilities supporting revenue growth. While inventory days are on a reducing trend, full stabilization is anticipated to take a couple of quarters. Furthermore, despite general tariff reductions, Gala's fastener products remain subject to a 50% tariff under Section 232 of US trade law, limiting demand improvement from the US market unless these specific tariffs are substantially reduced.