Detailed Narrative
Q1 FY26 Performance Overview
Kalyani Forge reported a strong Q1 FY26 with total income reaching ₹64.52 crores, marking a 12% year-on-year and 9% quarter-on-quarter revenue growth. Profitability significantly improved, with PAT at ₹1.4 crores and PAT margin up 300% YoY. EBITDA stood at ₹6.25 crores, translating to a 9.7% margin, maintained despite increased planned expenses and maintenance activities.
Strategic Growth Drivers & Initiatives
The company's "Vriddhi Council," comprising 13 strategic projects, delivered ₹10 crores in gains and savings during Q1. These initiatives focus on production ramp-up, cost savings (purchase, power, tools, quality), and are reviewed monthly to drive top-line growth and EBITDA expansion. Governance and compliance were strengthened with a clean audit review task force and direct MD oversight on high-value vendor engagements.
Capacity Enhancement & Modernization
Kalyani Forge is actively working on unlocking capacity, particularly in forging, where current OEE capacity is ₹150-200 crores against an installed capacity of ₹500 crores, with a target to reach ₹300 crores (60-65% OEE). In Q1, ₹4 crores of the ₹25 crore FY26 CapEx budget was utilized, commissioning a new connecting rod machining line and initiating a second forging press recon project. The company aims to increase tonnage OEE capacity from 10,000 tons to 20,000-25,000 tons within 1.5-2 years.
Product & Geographic Mix Evolution
The product mix in Q1 FY26 saw Engine components contributing 59% of sales (up 16% YoY), Driveline 18% (up 42% YoY to ₹12 crores), and Axle 9% (up 124% to ₹5.5 crores). Exports constituted 21% of total sales, growing 25% QoQ, with Europe sales showing particular strength. The company targets 50% exports in the medium to long term, focusing on high-volume, high-value businesses in Europe and the US.
Margin Improvement Strategy
Management outlined a clear strategy to achieve a 15% EBITDA margin, primarily by reducing material cost from 48% to 45% through increased machining content, better pricing, and yield improvement. Other levers include increasing manpower productivity, implementing energy efficiency initiatives to reduce power costs, and optimizing consumable, transport, and indirect costs through better procurement and planning. The company also targets ₹1.5 crores in savings from Cost of Poor Quality (COPQ) reduction this year.
Business Development & Order Wins
Kalyani Forge secured new business orders worth ₹115 crores in FY25, representing peak annual revenue over a 5-10 year program lifetime. This follows ₹95 crores in new orders in FY24. The company received two significant customer awards in Q1: the Technology and Support Award from KOEL and the Collaboration Excellence Award from Mahindra, recognizing its capabilities in new product development and line setup. New order wins are primarily in connecting rods and nozzle rings, with tulips also starting SOP this year.
Outlook on Engine Business & EV Transition
Despite concerns about the EV transition, management maintains a positive outlook on its engine business, which primarily serves the truck, off-road, and industrial segments. They believe these segments will continue to grow, asserting that EVs are largely restricted to passenger cars and two-wheelers. The company also highlights that 40% of its current products are non-ICE based, which are experiencing higher growth rates, indicating a balanced and diversified portfolio.