Kalyani Forge

Kalyani Forge reported a strong Q4 FY26, contributing to a record-breaking financial year. The company achieved a Profit After Tax (PAT) of ₹9.32 crores for FY26, marking its highest profitability in 14 years, with an Earnings Per Share (EPS) of ₹25.6. For Q4 alone, PAT stood at ₹5.88 crores and EPS at ₹16.17. Total revenue for FY26 was ₹238 crores, with Q4 revenue at ₹59.24 crores. Despite flat revenue year-on-year, this was achieved after strategically phasing out ₹40 crores of non-fit business, indicating a healthier revenue mix.

A significant highlight was the sustained improvement in profitability, with Q4 EBITDA margin reaching 15.2%, marking the second consecutive quarter above 15%. The full-year FY26 EBITDA was ₹31.58 crores, translating to a 13.3% margin, a notable increase from 11.1% in FY25. This margin expansion is primarily attributed to the exit from low-margin businesses and the successful implementation of various cost reduction and operational efficiency initiatives. Management has set a new floor of 15% for EBITDA margin and aims to reach 20% by the end of the current financial year or early next.

The company secured 3 major order wins in Q4, including an OEM wheel hub from customers like SKF and Schaffler, which are expected to ramp up from Q1 FY27. A new EV high-volume Axel business order worth ₹20 crores in annual revenue was also secured. Kalyani Forge's product portfolio is well-hedged, with engine components accounting for 60% of revenues, driveline 20%, and axle 10%. Driveline and axle segments are considered future-proof and fuel-agnostic, applicable to electric vehicles, ensuring long-term growth visibility.

Kalyani Forge's 'Vriddhi Council' projects, focusing on supply chain optimization, material cost reduction, machining efficiency, and power cost reduction, are yielding positive results. A new 'Plant Engineering' initiative, started in Q4, is unlocking efficiencies by redesigning plant layouts, electrical, water, and air pipelines, and improving machine standards. These initiatives, coupled with improved material and power cost discipline and operational stabilization through machine reconditioning and die-run prioritization, are contributing significantly to margin expansion and increased capacity utilization.

The company's Property, Plant, and Equipment (PPE) increased to ₹86.5 crores from ₹60.5 crores last year, with a Capital Work-in-Progress (CWIP) of ₹10.3 crores. FY26 capex spend was ₹23.44 crores, and the plan for FY27 is ₹30 crores. This FY27 capex is strategically allocated, with 60% directed towards future growth areas like new business, driveline, and axle. The debt-to-equity ratio stands at 1.11, an increase linked to growth capex and working capital for scale-up, with a target to maintain it between 1.0 and 1.2. The company is also actively exploring equity funding options to strengthen its balance sheet.

An area of focus for management is the working capital, as receivables have been increasing faster than sales booking. This is partly due to warehousing and stocking commitments for key OEMs, which temporarily increase receivables. The cash conversion cycle, which peaked at 176 days in Q2, is now improving sequentially. Management is targeting to reduce the cash conversion cycle to 120-130 days, emphasizing credit controls and systematic payment processes to stabilize receivables going forward^⏳.