Kalyani Forge Limited — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

Kalyani Forge reported a resilient Q2 FY26, with PAT margin improving by 53% and EBITDA margin reaching 12.6% despite a revenue decline to ₹56.23 crores, primarily due to US tariff impacts. The company focused on cost control, operational efficiency, and strategic project execution, including acquiring a new MNC customer in the Axel segment. While US tariffs remain a near-term headwind, management is confident in H2 growth driven by new business ramp-ups and existing business cycles, alongside ongoing preparations for capital infusion.

Highlights

  • PAT margin improved by 53% from the previous quarter through cost control, clean audit actions, and operational efficiency.

  • EBITDA margin grew to 12.6% (₹7.11 crores), marking its highest in the last four quarters, despite a reduction in exports.

  • The company acquired a new MNC customer in the Axel business, with orders valued at ₹5-10 crores per annum expected to kick in over the next six months.

  • Strategic projects, including the Vrindhi Council, delivered significant gains and savings worth ₹17 crore.

  • Successfully ramped up high volume non-auto export business in the US and commenced SOP for new transmission business in Europe, diversifying export base.

Concerns

  • Total income reduced to ₹56.23 crores, largely due to U.S. tariff-related exports coming down and customer destocking.

  • Employee costs increased due to clean audit actions (unprovisioned costs) and new recruitment, contributing to profitability impact.

  • The US tariff situation is expected to continue impacting business in Q3, although internal efficiency efforts are ongoing.

Key financials

  1. Total Income ₹56.23 Cr -9.3%YoY
  2. PAT ₹2.15 Cr +53.6%QoQ
  3. EBITDA ₹7.11 Cr
  4. EBITDA Margin 12.6%
  5. Forex Gain ₹0.94 Cr

What they filed

Q1 FY27: revenue up 4.2%, net profit up 217.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue62 59 59 64 56 −11%58 −1%57 −3%67 +4%
EBITDA8 6 6 6 7 −16%9 +44%7 +6%11 +78%
Net profit4 2 2 1 2 −45%-0 −107%6 +164%4 +218%
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

  • Engine
    62% Revenue Share
  • Driveline
    19% Revenue Share
  • Axel
    10% Revenue Share
  • Other Products
    10% Revenue Share

Order book

medium confidence

Inflow this quarter

₹7.5 Cr

Execution

kick in over a period of six months

Pipeline

L1 awaiting loa

200 crore order pipeline (95 crores + 115 crores)

Cancellations & deferrals

  • deferred: US truck-related business reduced due to tariffs and stock reduction, leading to minimized customer schedules and destocking.
The company is focusing on converting its 200 crore order pipeline into SOP in H2, alongside new order wins in the Axel segment and ramp-ups in Europe, despite temporary US tariff-related headwinds.

Source: Prepared remarks

Capital allocation

medium confidence
  • Capex ₹7 Cr
    • Recon and Productivity for improving existing business, increasing productivity, reconditioning machines, improving OEE
    • Ramp up business for increasing capacity on growing volumes
    • New business programmes for completely new order wins and capacity addition
    • Infrastructure upgrades to enhance or upgrade old factory equipment, utility equipment, IT software, safety compliance
    So here we have seven crores of projects commissioned in the last quarter, commissioned and capitalised from CWIP i.e. Capital Work in Progress.
  • Debt Net ₹24 Cr
    • New borrowing Internal preparations for fundraising and increasing equity to manage working capital requirements.
    I think so is closer to 24 crore and working capital requirements, as you mentioned, the requirement will go up and it should.
  • Liquidity Liquidity disclosed Cash flow and working capital improvement actions are underway to fuel growth, with working capital requirements expected to increase.
    And finally, our cash flow and working capital improvement actions are underway to fuel growth.

Guidance & targets

Volume

  • Driveline and Axel product group growth Volume · future · Medium confidence much more growth
    We expect to see much more growth in both the driveline and Axel product groups.

    — Mr. Viraj G. Kalyani

New Business

  • New MNC Axel business commencement New Business · next 6 months · High confidence kick in
    This business will kick in in the next over a period of six months based on validation cycles.

    — Mr. Viraj G. Kalyani

  • Europe transmission business scaling up New Business · coming quarters · Medium confidence scaling up
    And we expect to see that scaling up in the coming quarters as well.

    — Mr. Viraj G. Kalyani

Capex

  • CapEx program completion Capex · by the end of the year · High confidence 100%
    We are now at 58%. Of course, we would endeavor to reach 100% by the end of the year.

    — Mr. Viraj G. Kalyani

Order Book Conversion

  • Conversion of 200 crore order pipeline into SOP Order Book Conversion · H2 · High confidence 200 crores
    H2 focus on converting our 200 crore order pipeline that is this 95 crores and 115 crores into SOP.

    — Mr. Viraj G. Kalyani

Revenue

  • Overall growth Revenue · second half of this year · Medium confidence better growth
    And we are expecting better growth as well as market pull in the second half of this year.

    — Mr. Viraj G. Kalyani

What to watch in Q3 FY26

New MNC Axel business commencement

next 6 months
Current Order won in Q2, business to kick in over 6 months.
Target Commercial operations/revenue generation from new MNC Axel customer.

Why it matters

This new order is expected to add ₹5-10 crores per annum and is a key driver for Axel segment growth.

Acquired a new MNC customer in the Axel business in Q2 and we recently won their order. This business will kick in in the next over a period of six months based on validation cycles.

Risks & concerns

  • U.S. tariff-related exports reduction and customer destocking

    high

    Reduced total income and impacted US truck-related business, with Q3 expected to see similar impacts.

    Management acknowledged

  • Increased employee costs

    medium

    Due to clean audit actions (unprovisioned costs) and new recruitment for strengthening execution, contributing to profitability impact.

    Management acknowledged

  • Customer validation cycles and lead times for new order execution

    medium

    Delays the conversion of new order wins into production, impacting revenue recognition.

    Management acknowledged

Q&A highlights

5 direct
Impact of US tariffs on revenue and rising employee costs. Direct
As I said, largely it is due to the exports reduction. Our customers, some of our customer schedules have been really minimized because the end customer has destocking and they want to wait for the tariff clarity to come out, which as per the news, it should be coming up pretty soon.

Directly addresses the revenue decline and margin pressure, attributing it to external factors (US tariffs, destocking) and internal (clean audit, new recruitment).

Asked by Mr. Saket Kapoor

US exposure of total business/order book. Direct
I would say it's about 15 percent.

Quantifies the direct exposure to the US market, which is currently facing tariff-related headwinds, providing context for the revenue impact.

Asked by Mr. Saket Kapoor

Capital expenditure (CapEx) programs and their benefits. Direct
First is Recon and Productivity which is for improving existing business... The second programme is ramp up business, this is dedicated to increasing capacity... The third is the new business programmes, CapEx which is dedicated to completely new order wins... And fourthly is our infrastructure based CapEx...

Clarifies the strategic allocation of CapEx across four key areas, linking it to future productivity, capacity expansion, new business integration, and infrastructure upgrades.

Asked by Mr. Saket Kapoor

Size and impact of the new MNC customer order in the Axel segment. Direct
So the new business order we won, in terms of business value, I'd say it's in the range of 5 to 10 crores per annum. I don't want to give an exact number here. And it's a substantial business, which will add to our existing Axel portfolio.

Provides a quantitative range for a significant new order win, highlighting its contribution to the Axel portfolio and future revenue.

Asked by Mr. Saket Kapoor

H1 vs H2 performance and strategy for H2 growth. Direct
H2 focus on converting our 200 crore order pipeline that is this 95 crores and 115 crores into SOP. So we have already commenced an SOP for one of these projects in Q2 for the Europe transmission business.

Outlines the company's strategy for H2 growth, emphasizing the conversion of a substantial order pipeline and the commencement of new projects.

Asked by Mr. Saket Kapoor

Plans for infusing capital given rising working capital requirements and debt. Partial
Yes, our plans are moving forward. This is something we have taken up in our, at the board level and we are doing our internal preparations for fundraising, for increasing equity, et cetera. Once we have a very clear action that is, or clear corporate action that we plan, our team will make the relevant announcements.

Indicates that capital infusion is under consideration at the board level, but specific details are not yet disclosed, leaving investors awaiting future announcements.

Asked by Mr. Saket Kapoor

2 min read 5 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Kalyani Forge reported a total income of ₹56.23 crores for Q2 FY26. Despite a reduction in revenue, largely attributed to U.S. tariff-related export challenges, the company significantly improved its profitability. PAT increased to ₹2.15 crores from ₹1.4 crores in the previous quarter, marking a 53% improvement. The EBITDA margin reached 12.6% (₹7.11 crores), which is the highest in the last four quarters and comparable to Q2 last year, driven by cost control and operational efficiency.

Impact of US Tariffs and Export Strategy

The company's revenue was impacted by U.S. tariff-related exports reduction, with export sales falling to around 20% of total sales from 23% in the previous quarter. Management noted that customers are destocking and awaiting tariff clarity, which has minimized customer schedules. Despite these headwinds, Kalyani Forge's export strategy remains on track, with new high-volume non-auto export business ramped up in the US and new transmission business consignments commenced in Europe, which is expected to scale up in coming quarters.

Strategic Focus on Governance, Compliance, and Operational Efficiency

Kalyani Forge emphasized its special focus on Governance and compliance, completing clean audit reviews and implementing new ERP controls using SAP software. The company also implemented compliance software for full visibility across departments, leading to an increased Internal Financial Control (IFC) score. These initiatives, along with cost control and operational efficiency, contributed to the 53% PAT margin improvement and 12.6% EBITDA margin.

CapEx and New Business Development

The company commissioned ₹7 crores worth of projects in Q2, increasing its fixed asset property, plant, and equipment from ₹62 crores to ₹69.1 crores. Approximately 58% of the CapEx program, which includes Recon & Productivity, Ramp-up business, New business, and Infrastructure upgrades, is either in process or completed, with an endeavor to reach 100% by year-end. Kalyani Forge also secured a new MNC customer in the Axel business, with an order valued at ₹5-10 crores per annum, expected to commence production within six months.

H2 FY26 Outlook and Capital Infusion Plans

Management anticipates better growth and market pull in the second half of FY26, driven by increasing startup production of new businesses and improving business cycles. A key focus for H2 is converting a ₹200 crore order pipeline into SOP. The company is also making internal preparations for fundraising and increasing equity to support growth and manage rising working capital requirements, with announcements expected once a clear corporate action plan is finalized.

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