Happy Forgings Limited — Q4 FY25 earnings call

Call held 19 May 2025

Management summary

Happy Forgings delivered stable growth in FY25, with adjusted revenue up 4.7% and adjusted PAT up 11.2%, despite significant headwinds in key end-user sectors and a 4% top-line impact from declining steel prices. The company achieved its highest-ever full-year profitability with strong margins and secured over INR1,600 crores in new orders for PV and Industrial segments, reinforcing its long-term growth trajectory and robust financial health with zero net debt to EBITDA.

Highlights

  • FY25 adjusted revenue grew by 4.7% to INR1,409 crores, demonstrating stable growth.

  • Achieved highest-ever full-year profitability with gross margin of 58%, EBITDA margin of 28.9%, and PAT margin of 18.6%.

  • Realizations strengthened to INR248 per kg, up from INR243 per kg, despite declining raw material prices.

  • New orders exceeding INR1,600 crores secured in PV and Industrial segments, with an annual peak revenue potential of INR250 crores.

  • Maintained a robust balance sheet with low debt-equity (0.1) and zero net debt to EBITDA, including liquid investment.

Concerns

  • Experienced a 4% impact on top line growth in FY25 due to declining steel prices.

  • Witnessed double-digit declines in international CV, farm equipment, and off-highway segments.

  • Faced a domestic slowdown in the MHCV segment.

  • European and North American farm equipment markets reported mid-teen declines in unit sales for calendar year '24.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹350 Cr
    YoY +2.5%
  • EBITDA
    ₹102 Cr
    YoY +5%
  • EBITDA Margin
    29.1%
  • PAT
    ₹68 Cr
  • PAT Margin
    19.2%

FY25

  • Adjusted Revenue
    ₹1,409 Cr
    YoY +4.7%
  • Adjusted EBITDA
    ₹407 Cr
    YoY +7.4%
  • Adjusted EBITDA Margin
    28.9%
  • Adjusted PAT
    ₹263 Cr
    YoY +11.2%
  • Adjusted PAT Margin
    18.6%
  • Realization per kg
    ₹248

What they filed

Q1 FY27: revenue up 26.8%, net profit up 37.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue361 354 352 354 377 +4%391 +10%424 +20%449 +27%
EBITDA105 101 102 101 116 +10%120 +19%133 +30%141 +40%
Net profit71 65 68 66 73 +3%79 +22%84 +24%91 +38%
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.

Segment breakdown

  • Commercial Vehicle
    30% Revenue Contribution
  • Farm Equipment
    30% Revenue Contribution0.05 mid-single-digit Growth Rate
  • Off-Highway Vehicle
    12% Revenue Contribution
  • Industrial
    14% Revenue Contribution30% Growth Rate (adjusted)
  • Passenger Vehicle
    4% Revenue Contribution

Order book

high confidence

Execution

executed over the next 5 to 8 years

Composition

  • Passenger Vehicle & Industrial (segment) ₹1,600 Cr
New orders in PV and Industrial segments provide strong revenue potential for the coming years.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹400 Cr New plan — includes solar capex · primarily funded by internal accruals and partially through debt
    • Heavy components segment (large crankshafts, axles, gears, oil and gas valves, precision machine parts) ₹650 Cr
    • PV segment expansion ₹80 Cr
    • New 4,000-ton press line for pass car order
    • Industrial line for wind pinions and heavy axle shafts
    • Ring mill
    • Solar capex (land acquisition and setup)
    Talking about our recently announced capex plan in the heavy components segment, our INR650 crores capex plan is progressing well and remains on track... The investment will be phased over the next 2 to 3 years, primarily funded by internal accruals and partially through debt... Our export sales in the PV segment are also set to contribute meaningfully in FY '26, adding to the growth in this segment. To support this expansion, we have lined up capital expenditure of approximately INR80 crores... So it will be close to INR300 crores without the solar capex. If the solar capex kicks in this year, then it will be close to INR400 crores.
  • Debt 0.0× EBITDA
    Our debt equity remains low at 0.1. And coming to the net debt, the net debt to EBITDA, including liquid investment is zero.
  • Dividend ₹3/share (final)
    the Board of Directors has recommended a final dividend of INR3 per equity share on the face value of INR2.
  • M&A Deal Acquisition · Announced · AUM ₹50 Cr

    Scouting for inorganic opportunities to expand machining capabilities and EBITDA size.

    Looking for INR50-100 crores EBITDA size, mainly machining.

    Our CFO is also very strong, and we are scouting for some inorganic opportunities. So far, we have not clicked, but we are kind of working on it. And be in the tune of INR50 crores to INR100 crores size of EBITDA is what we are looking at and majorly towards machining.
  • Liquidity Cash ₹356 Cr Cash balance plus short and long-term FDR and liquid investment in mutual fund.
    Our cash balance plus short and long-term FDR and some liquid investment in mutual fund are worth around INR356 crores.

Guidance & targets

Revenue

  • Organic CAGR Revenue Growth Revenue · medium to long term · High confidence 15%
    we aim to register a 15% kind of organic CAGR revenue growth in medium to long term as we are going into different sectors.

    — Ashish Garg

  • Industrial Segment Annual Peak Revenue Potential from new orders Revenue · annual · High confidence INR250 crores
    These orders have an annual peak revenue potential of INR250 crores per annum

    — Ashish Garg

  • Crankshafts Revenue Contribution Revenue · FY25 · High confidence exceeding 50%

    Previously 47% → exceeding 50%

    In FY '25, it is exceeding 50%, above 50%. I will just check for FY '24 as well, just 47% last year. It was 47%, which is upwards of 50% now.

    — Ashish Garg

Market Share

  • PV Segment Revenue Contribution Market Share · next 2 years · High confidence 8% to 10%
    Overall, we remain confident of scaling this segment to contribute 8% to 10% of our total revenues over the next 2 years.

    — Ashish Garg

Realization

  • Realization per kg (stable steel price basis) Realization · next 4 to 5 years · High confidence INR275 to INR280
    And next 4 to 5 years, we should be looking at a realization between INR275 to INR280 on a stable steel price basis.

    — Ashish Garg

  • Machined Business Realization Realization · High confidence INR600 per kg-plus
    And definitely, on the machined business, as you picked up certain businesses, the realizations will be around INR600 per kg-plus.

    — Ashish Garg

Volume

  • Scrap Sales Volume Volume · coming year · Medium confidence increase
    So we generate over 30,000 tons of scrap every year. Probably this will go up in the coming year.

    — Ashish Garg

  • Farm Equipment Domestic Growth Volume · Medium confidence high single-digit
    we should be seeing a high single-digit kind of a growth. That is what we have been seeing or we have been discussing with other OEMs also.

    — Ashish Garg

  • Farm Equipment Exports Volume · from third quarter of this financial year · Medium confidence flattish or improvements
    the improvements will start seeing from third quarter of this financial year is what we are seeing.

    — Ashish Garg

Other Income

  • Other Income (maintained portion) Other Income · Medium confidence 70% to 75%
    Otherwise, 70% to 75% of the other income will be maintained.

    — Ashish Garg

Efficiency

  • Asset Turns (more forging business) Efficiency · Medium confidence 1.2x to 1.3x
    If we are able to do more forging business, then the asset turns could be in the range of 1.2x to 1.3x.

    — Ashish Garg

  • Asset Turns (purely machined business) Efficiency · Medium confidence around 1x
    But if it is a full purely machined business, then probably asset turns will be around 1x.

    — Ashish Garg

Revenue Growth

  • PV Segment Growth Revenue Growth · next 2-3 years · High confidence nearly 100% CAGR
    So that means more than 100% growth type of nearly 100% CAGR possible. Is it like that? Yes.

    — Ashish Garg

What to watch in Q1 FY26

Solar Capex Land Acquisition & Commencement

next 2 months (land acquisition), this year (capex)
Current 35 acres acquired, 60 acres planned
Target Acquisition of remaining 60 acres and commencement of solar capex

Why it matters

Solar capex is a significant part of the FY26 plan, impacting capital allocation and long-term energy costs.

Balance 60 acres is planned to be acquired in the next 2 months. So we expect the solar capex to happen in this year.

Risks & concerns

  • Global Macroeconomic Headwinds and Sector Slowdown

    high

    Persistent challenges across key end-user sectors, including double-digit declines in international CV, farm equipment, off-highway segments, and domestic MHCV slowdown.

    Management acknowledged

  • International Commercial Vehicle Market Downturn

    high

    Double-digit declines in CV deliveries reported by major OEMs in Europe and North America, impacting export performance.

    Management acknowledged

  • Farm Equipment Market Downturn (Europe & North America)

    high

    Mid-teen declines in unit sales for calendar year '24 in European and North American farm equipment markets.

    Management acknowledged

  • Declining Steel Prices Impact on Top Line

    medium

    Roughly a 4% impact on top line growth in FY25 due to declining steel prices.

    Management acknowledged

  • Global Tariff-Driven Uncertainties

    medium

    Lingering global tariff-driven uncertainties, particularly regarding potential US tariffs on India, could impact new business.

    Management acknowledged

  • Jammu Project Delay

    low

    Delay in land procurement and project due to government policy issues and 'war situation', holding for decision.

    Management acknowledged

Q&A highlights

7 direct
Scrap Sales Calculation and EBITDA Impact Direct
So we generate over 30,000 tons of scrap every year. Probably this will go up in the coming year. And so INR4 to INR5 a kg impact on the scrap prices, which is nearly affecting 1% of our EBITDA has gone in this year.

Clarifies the volume of scrap generated, its historical impact on EBITDA due to price declines, and potential for future positive contribution with rising steel prices.

Asked by Mitul Shah

Impact of US Tariffs and Sourcing from China Partial
So in some industrial segments, we are seeing where the sourcing was happening from China. So we are seeing some trend over there. And the discussions are ongoing. We are waiting for US to announce its tariff for India. So clarity will come on that and probably that will be a good trigger.

Addresses potential new business opportunities from global supply chain shifts away from China, particularly in industrial segments, but notes the uncertainty surrounding US tariff announcements for India.

Asked by Mitul Shah

Domestic vs. Export Commercial Vehicle Decline Direct
There has been more decline on the export side. And even in the domestic CV production when OEMs have reported 4% decline, and actual, this decline is more in terms of the component sourcing.

Provides clarity on the specific areas of weakness within the CV segment, indicating that export markets faced a sharper decline than domestic component sourcing, and highlights the company's relative outperformance.

Asked by Mitul Shah

FY26 Capex Plan and Solar Investments Direct
So it will be close to INR300 crores without the solar capex. If the solar capex kicks in this year, then it will be close to INR400 crores. We are in the process of buying land for solar, 35 acres is already acquired. Balance 60 acres is planned to be acquired in the next 2 months.

Quantifies the capex plan for the upcoming fiscal year, detailing the base plan and the additional investment contingent on solar project execution, which is crucial for capacity expansion and energy strategy.

Asked by Sonal Gupta

Disappointments and Successes in FY25 Direct
So yes, we were expecting last year CVs to perform better. But as you can see that post-election, CVs have not picked up the way we were expecting. And at the same time, the European slowdown in terms of double digit in CV was not expected... Positive side, yes, the PV production in terms of SUV has kicked off pretty well. It's a high gross margin business, which has kind of overall helped us in the entire situation.

Offers a candid assessment of market challenges (CV slowdown, European market) that impacted performance and highlights the successful ramp-up of the high-margin PV segment as a key positive.

Asked by Lakshminarayanan

Farm Equipment and CV Segment Performance vs. Market Trends Direct
No, on the farm equipment side, the business contributed 32% to our overall revenue, and there was a mid-single-digit growth in this sector, which is in line or better than the industry growth... On the CV side, we have seen a little subdued trend in terms of our revenues. But if you look at the numbers which are reported by the CV players, there has been a dip in CV production as well to the tune of 4%... if you compare to that over there as well, we have performed better.

Clarifies that the company's performance in both farm equipment and CV segments was in line with or better than broader industry trends, correcting an analyst's perception of underperformance.

Asked by Lakshminarayanan

Outlook for Defense and Farm Equipment Exports Direct
So domestic market on the farm equipment side has started showing some green shoots... On the export side, on the farm equipment side, there is certainly in terms of guidance, what we have seen from some of the large players, we are seeing that it's kind of will be kind of a flattish or the improvements will start seeing from third quarter of this financial year is what we are seeing.

Provides a forward-looking view on the farm equipment sector, indicating positive signs in the domestic market and anticipated improvements in exports from Q3 FY26.

Asked by Vijay Pandey

Product Mix and End-User Segments for New INR650 Crores Project Direct
Mitul, so a large portion of this sales, approximately 50% of the revenues on this line will come from higher horsepower engines, which are majorly consumed for data center requirements, mining, defense and marine applications. So 50% of those business will be catered from this line. And balance will be split between oil and gas, defense and aerospace as we'll be having the capability to forge heavier range of parts.

Details the strategic diversification and high-growth end-user segments (data centers, defense, aerospace) targeted by the significant new capex project, highlighting future revenue streams and capabilities.

Asked by Mitul Shah

2 min read 7 chapters

Detailed narrative

Robust Financial Performance Despite Sector Headwinds

Happy Forgings reported a stable financial performance in FY25, with adjusted revenue growing by 4.7% to INR1,409 crores. Adjusted EBITDA increased by 7.4% to INR407 crores, leading to an EBITDA margin of 28.9%. Adjusted PAT rose by 11.2% to INR263 crores, achieving a PAT margin of 18.6%, marking the highest-ever full-year profitability despite a 4% top-line impact from declining steel prices.

Strategic Diversification Mitigates Market Slowdown

The company successfully navigated significant headwinds, including double-digit declines in international Commercial Vehicle (CV), farm equipment, and off-highway segments, as well as a domestic slowdown in MHCV. This resilience was attributed to strategic diversification into new segments like Passenger Vehicles (PV) and Industrial, which now contribute 4% and 14% of revenues, respectively, up from 2% and 12% three years ago.

Significant New Order Wins and Realization Improvement

Happy Forgings secured new orders exceeding INR1,600 crores in the PV and Industrial segments, with an annual peak revenue potential of INR250 crores, to be executed over the next 5-8 years. Realizations per kg strengthened to INR248, up from INR243, despite a INR7-8 per kg decline in raw material prices, driven by an improved product and machining mix.

Ambitious Capex Plans for Future Growth

The company is progressing with its INR650 crores capex plan for a heavy components facility, expected to commence production in FY27. Additionally, INR80 crores is allocated for PV segment expansion. The total FY26 capex is projected at INR300 crores without solar, potentially rising to INR400 crores with solar investments, which include acquiring 95 acres of land.

Strong Balance Sheet and Capital Efficiency

Happy Forgings maintains a robust financial position with a low debt-to-equity ratio of 0.1 and zero net debt to EBITDA, including liquid investments. The company generated INR292 crores in cash from operations after adjusting for working capital and taxes, enabling it to fund its capex primarily through internal accruals. A final dividend of INR3 per equity share was recommended, reflecting commitment to shareholder value.

Segmental Performance and Outlook

In FY25, CV and Farm Equipment segments each contributed 30% to revenue, while Off-Highway contributed 12%. Domestic farm equipment showed green shoots, with expectations of high single-digit growth, and exports are anticipated to be flattish or improve from Q3 FY26. The PV segment is targeted to contribute 8-10% of total revenues over the next two years, with nearly 100% CAGR growth possible.

Industrial Segment Expansion and Diversification

The Industrial segment's revenue share increased to 14% in FY25, showing approximately 30% growth on an adjusted basis. This segment is seeing good traction in wind and new clients. The new INR650 crores project will primarily cater to higher horsepower engines (50% of revenue) for data centers, mining, defense, and marine applications, with the balance split across oil & gas, defense, and aerospace.

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