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    Krishna Defence

    KRISHNADEF
    Capital Goods·23 May 2025
    Management Summary

    Krishna Defence reported strong financial performance for H2 and FY25, driven by robust revenue and profit growth, and significant margin expansion. The company achieved its highest-ever order book and made strategic investments in design and technology firms. While facing challenges with operating cash flow and certain product developments, management remains optimistic about future growth, targeting a 30-40% CAGR over the next 3-5 years.

    Highlights

    5
    • FY25 Revenue increased by 83.1% to ₹1,949 million from ₹1,064 million in FY24.

    • FY25 EBITDA grew by 96.3% to ₹303 million from ₹154 million in FY24.

    • FY25 EBITDA margins expanded by 105 bps to 15.6% from 14.5% in FY24.

    • FY25 PAT surged by 124% to ₹219 million from ₹98 million in FY24, with PAT margins increasing by 205 bps to 11.3%.

    • Closing order book position for FY25 is ₹2,700 million, the highest ever.

    Concerns

    3
    • Operating cash flow has been negative for the last three years due to investments in growth and working capital.

    • Development of the ammunition product for Naval gun is moving slower than anticipated due to design challenges.

    • The spherical robot product for the Army was dropped due to lack of acceptance from services.

    What Changed2

    vs Q2 FY26

    Guidance items8 → 9 (+1)Q&A highlights8 → 6 (-2)
    Key financials

    Metrics

    10

    Periods

    2

    Headline

    5
    • H2 FY25 Revenue
      1,008 Mn
      YoY+41.6%
    • H2 FY25 EBITDA
      162 Mn
      YoY+50.6%
    • H2 FY25 EBITDA Margin
      16%
      YoY+1.0%
    • H2 FY25 PAT
      113 Mn
      YoY+58.2%
    • H2 FY25 PAT Margin
      11.2%
      YoY+1.2%

    FY25

    5
    • Revenue
      1,949 Mn
      YoY+83.1%
    • EBITDA
      303 Mn
      YoY+96.3%
    • EBITDA Margin
      15.6%
      YoY+1.1%
    • PAT
      219 Mn
      YoY+124%
    • PAT Margin
      11.3%
      YoY+2.1%

    Order Book

    high confidence

    Total Value

    ₹ 2,700 million

    as of 2025-03-31

    quantified

    Execution

    Execution time for existing orders ranges from 9 to 15 months.

    Composition

    Mix2 products
    • Bulb Bar60.0%
    • Weld Consumables40.0%

    Share of order book by product

    Pipeline

    qualified rfp

    Tenders in pipeline for ₹100-130 crores.

    "The company has a strong order book, with orders coming in piece meals rather than large single orders. The current order book of ₹2,700 million provides good visibility for future revenue, with execution timelines ranging from 9 to 15 months."

    Source:
    Prepared remarks

    Capital allocation

    5
    high confidence
    CategoryHeadline
    Capex

    ₹80 million

    Internal accruals

    Debt

    Debt disclosed

    M&A

    Conceptia Software Technologies Private Limited

    acquisition · closed

    M&A

    Waveoptix Defence Solutions

    acquisition · closed

    M&A

    VABO (Dutch company)

    joint venture · announced

    Guidance & targets

    9
    CategoryTargetPriority
    Revenue
    CAGR Growth
    30-40%
    High
    Revenue
    Total Revenue
    ₹500 crores
    High
    Revenue
    Waveoptix Revenue
    ₹100 crores
    High
    Revenue
    VABO JV Revenue Potential (Indian Naval Market)
    ₹5-6 crores
    High
    Margin
    EBITDA Margin
    18-20%
    Medium
    Capacity
    Halol Plant Utilization
    80%
    Medium
    Capacity
    Maximum Revenue from Installed Capacity
    ₹350-400 crores
    High
    Order Inflow
    Win Ratio for Tenders
    50-60%
    High
    Order Inflow
    Bukhari Product Orders
    New orders expected
    Medium

    Halol Plant Utilization

    next quarter
    Current55-60%
    Target80%

    Why it matters

    Increased utilization is key to achieving revenue targets and improving operational leverage.

    The utilisation facility as we speak right now is almost about, close to 60 odd percent you start to utilise. We have to take it up to 80%... We are hoping that it should be about in the range of 80%, which is the great capacity that we need to work at from the equipment.

    How to verify

    guidance_and_targets[metric='Halol Plant Utilization']

    Risks & concerns

    4
    RiskSeverity

    Negative Operating Cash Flow

    Operating cash flow has been negative for the last three years, primarily due to funding growth and maintaining inventory for long-cycle projects.Analyst acknowledged

    medium

    Delay in Ammunition Product Development

    The ammunition product for the Naval gun is progressing slower than anticipated due to design challenges and supply chain issues.Management acknowledged

    medium

    Product Acceptance for New Developments

    The spherical robot product for the Army was dropped as it did not find willingness or large acceptance from the services.Management acknowledged

    low

    Raw Material Price Volatility

    Volatility in steel prices is not a major concern due to special grade steel procurement, high value addition, and fixed-price contracts with raw material reservation.Management downplayed

    low

    Q&A highlights

    6

    “The number that you've been talking about was at 100 crores base level that is there. We are about close to a ₹200 crores base level and we want to make sure that we are more realistic and not overoptimistic about things.”

    Analyst questioned the reduction in CAGR guidance from 40-50% to 30-40%; management clarified it's due to a higher base level and a more realistic approach.

    asked by Nitin Karmawat

    3 min read6 chapters

    Detailed Narrative

    01

    Strong Financial Performance in FY25

    Krishna Defence reported robust financial results for FY25, with total revenue growing by 83.1% to ₹1,949 million, up from ₹1,064 million in FY24. EBITDA saw a significant increase of 96.3% to ₹303 million, leading to an EBITDA margin expansion of 105 basis points to 15.6%. Net profit (PAT) surged by 124% to ₹219 million, with PAT margins improving by 205 basis points to 11.3%. The second half of FY25 also demonstrated strong growth, with revenue up 41.6% to ₹1,008 million and PAT growing 58.2% to ₹113 million.

    02

    Highest-Ever Order Book and Future Growth Outlook

    The company concluded FY25 with its highest-ever closing order book of ₹2,700 million, providing strong revenue visibility. Management projects a Compound Annual Growth Rate (CAGR) of 30-40% over the next three to five years, aiming to become a ₹500 crore company within this timeframe. This revised guidance from an earlier 40-50% CAGR is attributed to a higher base level and a more realistic assessment. The execution timeline for current orders ranges from 9 to 15 months, with an order pipeline of ₹100-130 crores in tenders.

    03

    Strategic Investments and Product Diversification

    Krishna Defence made key strategic moves, acquiring a 20% stake in Conceptia Software Technologies, a Bangalore-based company specializing in ship and submarine design with ₹60-65 crores in revenue. This partnership aims to create synergy in design and product manufacturing. The company also increased its stake in Waveoptix Defence Solutions from 25% to 40%, noting its FY25 revenue of ₹9.9 crores and PAT of ₹90 lakh. Additionally, a joint venture with a Dutch company (VABO) for composite lightweight fire-resistant doors is progressing, with trials successful and production expected to commence this year, targeting an initial ₹5-6 crores opportunity in the Indian naval market.

    04

    Capacity Expansion and Utilization

    The company successfully doubled its capacity at its Halol plant, which became operational around February 2025. Current utilization is approximately 55-60% and is targeted to reach 80%. The maximum revenue potential from the installed capacity is estimated to be ₹350-400 crores. Further CapEx of ₹8-10 crores is planned for FY26, primarily for automation and efficiency improvements, funded entirely through internal accruals.

    05

    Working Capital Management and Challenges

    Despite strong growth, the company has experienced negative operating cash flow for the past three years. Management attributes this to funding growth and maintaining higher inventory levels (approximately ₹72 crores or 36-37% of last year's revenue) necessary for long-cycle defence projects. Efforts are underway to improve the working capital cycle, particularly by optimizing trade receivables and payables. The company maintains a low debt profile, with acquisitions and CapEx primarily funded by internal accruals.

    06

    Product Portfolio and Indigenization Efforts

    Krishna Defence continues its focus on indigenizing critical defence products previously imported. Key products include bulb bars (60% of FY25 revenue), welding wires, and armoured steel profiles for T-90 tanks. The company is also developing new products, though some, like the ammunition product for Naval guns, are progressing slower than anticipated, and others, like the spherical robot, have been discontinued due to lack of acceptance. The dairy equipment segment, though a smaller part of the business (4-5% of revenue), continues to operate profitably in auto-mode.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.