Kalyani Forge Limited — Q4 FY25 earnings call

Call held 28 May 2025

Management summary

Kalyani Forge delivered a strong financial performance in FY25, achieving its highest PAT and EBITDA in a decade, driven by operational efficiencies and strategic business mix changes. Despite flat revenue for the full year, new order wins reached an all-time high of ₹115 crores. The company is actively investing in CapEx for modernization and capacity expansion, with a focus on improving margins and targeting healthy top-line growth in the coming years.

Highlights

  • FY25 PAT of ₹8.3 crores is the highest in 10 years, marking an 80.43% increase over FY24's ₹4.6 crores.

  • FY25 EBITDA reached ₹26.5 crores, also a 10-year high, representing a 49.7% increase from FY24's ₹17.7 crores.

  • Q4 FY25 PAT significantly improved to ₹2.23 crores, a 214% increase compared to ₹0.71 crores in Q4 FY24.

  • New order wins for FY25 hit an all-time high of ₹115 crores, a 21% increase from ₹95 crores in FY24.

  • The company declared a dividend of ₹4 per share for FY25, the highest in the last five years, reflecting strong shareholder returns.

Concerns

  • FY25 revenue remained flat at ₹239.2 crores compared to ₹240 crores in FY24, despite new business wins, due to shedding non-profitable business and market factors.

  • Management noted a reduction in demand in the automotive space in Q3 FY25, indicating market volatility.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹59.34 Cr
    YoY +4.4% QoQ +1.3%
  • PAT
    ₹2.23 Cr
    YoY +214%
  • EBITDA
    ₹6.74 Cr
  • EBITDA Margin
    11.4%

FY25

  • Revenue
    ₹239.2 Cr
    YoY -0.33%
  • PAT
    ₹8.3 Cr
    YoY +80.4%
  • EBITDA
    ₹26.5 Cr
    YoY +49.7%
  • EBITDA Margin
    11.1%

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.

Order book

high confidence

Total value

₹350 Cr

as of 2024-03-31 quantified

Execution

The 350 crores order book includes multi-year programs.

Composition

  • New business SOPs (other) ₹50 Cr
The company achieved all-time high new order wins of ₹115 crores in FY25, which represents peak annual sales value from new programs.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹25 Cr New plan — FY26 budget approved by CapEx allocation committee and board. · Term loans secured for funding this CapEx of FY26
    • Reconditioning of old forging presses and machines
    • Forging modernization program
    • Machining capacity addition (connecting rods, driveline parts, axle parts)
    • Debottlenecking existing lines
    So the CapEx that we did in FY25 was 24.4 crores. This is slightly lower than the previous year of 26 crores, and our next year's budget, FY26 budget, is 25 crores, which is approved by the CapEx allocation committee and the board. ... Term loans were also secured for funding this CapEx of FY26 in the last quarter so we are pretty comfortable from a funding standpoint.
  • Debt Debt disclosed
    • Repayment Retiring some older debt
    There will be no additional debt other than this current CapEx plan. So there will not be any additional hit to our bottom line.
  • Dividend ₹4/share (final)
    Continuing with strong shareholder returns, we have declared a dividend of 4 rupees per share for FY25. This is also our highest dividend so far, at least in the last five years.
  • Liquidity Liquidity disclosed Company is comfortable from a funding standpoint for FY26 CapEx due to secured term loans.
    Term loans were also secured for funding this CapEx of FY26 in the last quarter so we are pretty comfortable from a funding standpoint

Guidance & targets

Profitability

  • Sustainable EBITDA Margin Profitability · future · High confidence 10-12%
    Sustainable EBITDA margin. Right now, the EBITDA is near about 10 to 12%, but our long term goal is 15%. So, in future also, we will be able to do in that range, 10 to 12%.

    — Mr. Nilesh Bandale

  • Long-term EBITDA Margin Goal Profitability · long term · Medium confidence 15%

    — Mr. Nilesh Bandale

Revenue

  • Top Line Growth Revenue · next year · Medium confidence healthy growth
    So definitely, again, it's this new order wins that are going to add to our top line. We are expecting a healthy growth in the next year as we are focusing a lot on our sample development, start of SOPs, and ensuring the capacities are in place or ramped up for the additional revenues. So that is the very concerted effort that we will be taking to ensure a significant growth in top line as well in the coming year.

    — Mr. Viraj G. Kalyani

  • Top Line Growth Revenue · Medium confidence substantially increase
    So Yeah. We cannot make a forecast. We do have our internal plans to, substantially increase our top line.

    — Mr. Viraj G. Kalyani

Exports

  • Exports as % of Total Revenues Exports · next few years · High confidence 50%

    From 20% today

    So this has increased compared to 15% earlier. And this is, a very healthy development. It's very strategic that we want to increase our exports business, take it up to 50% of total revenues in the next few years. So that is the direction we are going in.

    — Mr. Viraj G. Kalyani

Volume

  • Tonnage Production Volume · next year · Low confidence some increase

    From 11,000 to 12,000 tons today

    Currently, our tonnage is in the range of 11,000 to 12,000 tons of production. Definitely with the top line growth, there will be some increase in tonnage next year.

    — Mr. Viraj G. Kalyani

Efficiency

  • Employee Cost as % of Sales Efficiency · Medium confidence come down
    On the employee cost, we are targeting to bring it, to a much more efficient level. But the major lever is increasing the top line. So employee cost as a percentage of sales, would come down.

    — Mr. Viraj G. Kalyani

  • Asset Turnover Ratio Efficiency · Medium confidence 2:1

    From 4:1 today

    Typically, in the forging industry, asset turnover ratio of two is to one is a thumb rule. So that's what we are going to aim towards. ... Right now, our asset turnover, would be Its net worth is 60, and our turnover is near about 240. We consider with network and then or a sector mode, set sensor four times of assets. It's four times.

    — Mr. Viraj G. Kalyani

What to watch in Q1 FY26

Top Line Growth

next quarter (Q1 FY26)
Current FY25 revenue flat at ₹239.2 crores
Target Healthy growth / Substantial increase

Why it matters

Revenue growth is crucial for breaking the 10-year flat trend and leveraging improved profitability from operational efficiencies.

We are expecting a healthy growth in the next year as we are focusing a lot on our sample development, start of SOPs, and ensuring the capacities are in place or ramped up for the additional revenues. So that is the very concerted effort that we will be taking to ensure a significant growth in top line as well in the coming year.

Risks & concerns

  • Automotive Market Demand Reduction

    medium

    Reduction in demand in the automotive space was observed in Q3 FY25, impacting overall revenue.

    Management acknowledged

  • Tonnage Production Prediction Difficulty

    low

    Management stated that predicting exact tonnage production for the next year is difficult as it is a forward-looking prediction.

    Management acknowledged

Q&A highlights

6 direct
Order Book Clarification Direct
The 350 crores that we showed in last year, I mean, in the last one of the earlier presentations, was an overall order book value, which includes multi-year programs. The 115 crores are a peak annual values for these programs. So we have just made our measurement much more consistent so that we can compare these numbers to the sales figures.

Clarifies the distinction between total multi-year order book and annual new order wins, providing clarity on reported figures.

Asked by Mr. Harish Chawla

Top Line Growth Strategy Partial
So definitely, again, it's this new order wins that are going to add to our top line. We are expecting a healthy growth in the next year as we are focusing a lot on our sample development, start of SOPs, and ensuring the capacities are in place or ramped up for the additional revenues.

Addresses concerns about stagnant revenue by outlining a strategy for healthy top-line growth in the coming year, focusing on new orders and capacity.

Asked by Mr. Harish Chawla

CapEx Payback and Margin Impact Partial
Payback period, well it depends from project to project. Some projects, we expect payback within six months, some are within, one year, and some are within two years. ... definitely, the, what we keep an eye on is the CapEx ensures we maintain our existing margins or we are increasing, the margins with much more efficient machinery or newer technology.

Provides insight into the expected returns and strategic rationale behind CapEx investments, linking them to margin improvement and efficiency.

Asked by Mr. Nitin Gandhi

Sustainable EBITDA Margin and Drivers Direct
Sustainable EBITDA margin. Right now, the EBITDA is near about 10 to 12%, but our long term goal is 15%. So, in future also, we will be able to do in that range, 10 to 12%. It is because of operational efficiency. We did lot of efforts on our operational excellence, and that are reflecting here. Additionally, we improved our sales mix and removed some low profit, businesses as well.

Clearly states current and long-term EBITDA margin targets and details the operational and strategic initiatives driving margin expansion.

Asked by Mr. Vanesh

CapEx Cycle and Capacity Additions Direct
This CapEx cycle will continue as our growth plans, which are in place for the next few years. ... Another major program is the machining capacity addition. So we are expanding, new machining lines for our various products, which are like connecting rods, driveline parts, and axle parts. ... as we are doing a lot of reconditioning, we will improve the utilization of some of the existing machinery. So it may not add capacity, but it will improve utilization.

Clarifies the ongoing nature of CapEx, distinguishing between modernization for efficiency/utilization and direct capacity additions in specific product lines.

Asked by Mr. Saket Kapoor

Defence Sector Strategy Direct
We are, we have started a project with one of our customers. Given the, sensitive nature of some of these projects, I cannot divulge details. But, our, projects and new business in defence are currently focused on our existing, product portfolio. As we evolve and build our capacity, we will, look at more such allied products or components, which we can leverage with our existing facilities. But it is part of our long term, growth strategy.

Confirms the company's entry and long-term strategic focus on the defence sector, leveraging existing capabilities.

Asked by Mr. Sunil Kumar Amin

Funding for CapEx and Debt Management Direct
As you have a CapEx plan, so you have to raise debt term loan that will hurt your bottom line or it will be managed? ... It will be managed. I think Nilesh can, share more details on how we're doing that. ... There will be no additional debt other than this current CapEx plan. So there will not be any additional hit to our bottom line. ... And we're also retiring some of our older debt. Older debts. Yeah. So there's a close watch we're keeping on our debt to equity ratio.

Reassures investors about the company's prudent approach to funding CapEx, indicating no additional debt for the current plan and active management of the debt-to-equity ratio.

Asked by Mr. Ankur Agarwal

Land Availability for Future Expansion Direct
We are very fortunate to have a vast amount of land, open land in our existing premises. Thanks to our visionary executive chairperson who took the bold decision to acquire, a big portion of land in Sanaswadi. So currently, we are occupying, I'd say less than 25% of that land. So we have good amount of space to expand.

Addresses potential concerns about physical expansion constraints by confirming ample land availability for future growth.

Asked by Mr. Ankur Agarwal

3 min read 6 chapters

Detailed narrative

Q4 & FY25 Financial Performance Highlights

Kalyani Forge reported a robust financial performance for FY25, achieving its highest PAT and EBITDA in a decade. Full-year PAT stood at ₹8.3 crores, an 80.43% increase from ₹4.6 crores in FY24, while EBITDA grew by 49.7% to ₹26.5 crores from ₹17.7 crores. Q4 FY25 also saw significant improvement, with PAT reaching ₹2.23 crores, a 214% jump from ₹0.71 crores in Q4 FY24. Despite these profit gains, FY25 revenue remained flat at ₹239.2 crores, slightly down from ₹240 crores in FY24, attributed to shedding non-profitable business and market factors.

Growth Formula and Business Development

The company's growth is underpinned by a formula of strong execution, business development, and CapEx. FY25 saw all-time high new order wins of ₹115 crores, a 21% increase over FY24's ₹95 crores. This growth is supported by new machine connecting rod programs with SOPs commencing in Q4, and samples approved for a new high-volume automotive export order. Kalyani Forge also received a collaboration excellence award from Mahindra for fast development of connecting rods, highlighting strong OEM relationships.

Capital Expenditure and Modernization Initiatives

Kalyani Forge is committed to continuous investment, with CapEx of ₹24.4 crores in FY25 and an approved budget of ₹25 crores for FY26. This CapEx is strategically allocated towards reconditioning old forging presses, a forging modernization program, and machining capacity additions for products like connecting rods, driveline, and axle parts. The goal is to improve operational efficiencies, product quality, and OEEs, ensuring existing margins are maintained or increased. Fixed assets at Q4 end stood at ₹60.4 crores, with ₹15 crores in Capital Work In Progress.

Operational Efficiency and Sustainability Focus

Operational efficiency is a key driver for margin expansion, with FY25 EBITDA margin improving to 11.1% from a previous 7-8% trend. Initiatives include improved sales mix, removal of non-strategic businesses, and a detailed energy audit to identify power cost reduction and energy efficiency areas. The company also achieved a sustainability assessment score exceeding 70%, which is becoming an important factor for winning orders. A new CHRO has been appointed to strengthen HR and cultural transformation towards a performance-oriented organization.

Strategic Market Diversification and Export Growth

The company is diversifying its product offerings across engine, driveline, and axle components, serving commercial vehicles, passenger cars, industrials, and agro segments. Exports increased by 11% in FY25 to ₹48 crores (approx. 20% of total revenue), with a strategic target to increase this to 50% of total revenues in the next few years. Kalyani Forge is also present in the railway sector with niche components for braking systems and has started a project in the defence sector, aligning with its long-term growth strategy.

Capital Structure and Shareholder Returns

Kalyani Forge is prudently managing its capital structure, securing term loans for FY26 CapEx without planning additional debt for the current plan and actively retiring older debt. The company maintains a close watch on its debt-to-equity ratio. For shareholder returns, a dividend of ₹4 per share was declared for FY25, the highest in the last five years. The board plans to discuss a formal dividend policy in upcoming meetings, and an equity capital raise is under evaluation for future growth.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls