Kennametal India Limited

Kennametal India is focused on driving productivity solutions and launching new products, with key growth segments identified as general engineering, energy (traditional and wind), and aerospace. The company emphasizes its diversified end-use subsegments, ensuring no single segment accounts for more than a double-digit dependence. This strategy aims to mitigate risks from industry-specific slowdowns and leverage growth opportunities across various manufacturing sectors.

For FY21, the machine tool business reported sales of INR 110 crores. The addressable market for machine tools in India is substantial, estimated between $800 million and $1.5 billion, with Kennametal currently addressing 10-20% of this market. The company has an aspiration to grow this segment to INR 500 crores, and management confirmed corporate support for this growth, though specific timelines were not provided.

Kennametal India operates under two distinct brands: Kennametal, positioned as a full-service solutions provider, and Widia, focused on performance. Approximately 80% of Widia brand products are manufactured in the company's Bangalore plant. The manufacturing strategy prioritizes producing high-quality products at the lowest cost, leveraging global manufacturing footprint, capacity utilization, and speed to market, particularly for intercompany exports.

New product launches have been a significant growth driver, contributing 16-20% of hard metals sales over the last three to five years. The company continues to develop and launch new products designed out of India, such as the HOBGRIND machine for regrinding Hobbs. Management highlighted new products, new customers, and expansion into new geographies as the primary strategic pillars for future growth.

The company maintains a well-established localization process, driven by customer requirements, quality, cost, and delivery. Raw material price volatility, particularly for Tungsten and Cobalt, is managed by passing on cost increases to customers after discussions. Gross margins have improved by 300-400 basis points over the last nine months, primarily due to enhanced capacity utilization and strategic price increases. Management aims to sustain this improvement through mix management, productivity, and prudent sourcing strategies.

Kennametal India has undertaken significant CAPEX for modernization and capacity building, increasing its capacity from INR 570 crores four to five years ago to over INR 900 crores. While substantial investments have been made, future incremental CAPEX is expected to be on the lower side, primarily focused on meeting volume requirements. The company's core manufacturing objective in India remains servicing the requirements of Indian customers.