Detailed Narrative
Strong Q4 and FY25 Financial Performance
Kirloskar Oil Engines Limited delivered a robust financial performance in Q4 FY25, with sales crossing ₹1,400 crores, representing a 21% QoQ and 2% YoY growth. The EBITDA margin for the quarter stood at 12.1%, expanding by 200 basis points QoQ. For the full fiscal year 2025, the company achieved sales exceeding ₹5,000 crores, a 6% YoY increase, and an EBITDA margin of 12.8%, up 110 basis points YoY. The PAT margin for FY25 also improved to 8.1%.
Completion of 2X-3Y Growth Journey and Product Portfolio Expansion
The company successfully concluded its ambitious 2X-3Y growth journey, achieving a 1.6 times overall growth despite market volatility🌐. A significant achievement was the expansion of its product portfolio, now covering a range from 3 kVA to 6 megawatts, including a strong presence in the high horsepower (HHP) segment. HHP sales in powergen for FY25 reached ₹110 crores, growing 20% YoY. The company also effectively managed the transitions to CPCB IV+ and BS V emission norms.
Arka Fincap's Strategic Pivot and Growth Outlook
Arka Fincap is embarking on 'Arka 2.0,' focusing on building a diversified, retail-focused, high-return portfolio. The strategy targets a 3x AUM growth, a 3% Return on Assets (ROA), and maintaining GNPAs below 3%. Arka aims to build a loan book of ₹1,000 crores in small ticket loans against property and pre-owned vehicle financing within the next 6-9 months, with plans for a capital raise around January to support this growth.
Ambitious $2 Billion Revenue Target by FY30
Kirloskar Oil Engines has set an aggressive '2B, 2 billion strategy' to achieve $2 billion in revenue by fiscal year 2030. This growth will be propelled by continued focus on high-growth segments such as data centers and infrastructure, international expansion, and strategic inorganic opportunities in new technology tracks beyond traditional engines, including batteries and microgrids. The company's vision is to become a global technology leader in power solutions.
Significant Capital Allocation for Future Expansion
In FY25, the company invested approximately ₹520 crores, with ₹380 crores allocated to KOEL and ₹140 crores to its B2C business (LGM) for plant consolidation. Looking ahead, Kirloskar Oil Engines plans to invest around ₹1,000 crores in the next couple of years. This includes ₹700 crores for capacity enhancement at the Kagal plant, ₹80-90 crores for the Navy project, and ₹200 crores for acquisitions aligned with its technology roadmap and $2 billion growth strategy.
Improved Working Capital Management and B2C Rebound
The company demonstrated strong working capital management, reducing inventory by over ₹200 crores from ₹716 crores at the end of Q3 to ₹493 crores at FY25 end. Days Inventory Outstanding (DIO) improved by approximately 30 days, and receivables improved from 43 to 39 days, resulting in a healthy cash conversion cycle of just 22 days and a net cash position of ₹448 crores. The B2C segment also saw a solid rebound in Q4 FY25, with sales growing 42% QoQ to ₹317 crores and profitability increasing by 269% QoQ, driven by plant consolidation efforts.