Detailed Narrative
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.
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.
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.
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.
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.
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.