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.