Kross Ltd

Kross Limited reported a challenging Q2 FY26 with revenues at INR 130.9 crores, a 6% decline compared to Q2 FY25, and an EBITDA margin of 11.3%. For H1 FY26, revenues stood at INR 270 crores, down 5% year-on-year, with an EBITDA margin of 11.4% and PAT of INR 18.8 crores. The decline was primarily attributed to a GST rate cut leading to postponed customer purchases and soft MHCV volumes, though demand picked up meaningfully from Q3.

The company is actively pursuing growth through capacity expansion and new product initiatives. Trials for the extrusion plant are underway, with commercial production expected by the end of Q3 FY26, which will enhance axle capacity by 50%. Construction of the seamless tube unit is on schedule, and the first batch of Tipping jacks, a new segment to deepen presence in the trailer ecosystem, is scheduled for production in November 2025. These initiatives are expected to drive future revenue streams.

Kross Limited's export business continues to build momentum, contributing 4.2% of H1 FY26 revenue, marking a 24% year-on-year increase. The company has secured purchase orders from leading Tier-1 OEMs in Europe and aims to achieve a full-year revenue contribution of 5% in FY26, with a clear roadmap to reach double-digit export share by FY27. Exports are highlighted as having the best margins for the company.

Management noted a subdued auto sector for 17-18 months but sees a revival from October onwards with good demand visibility until March. Despite a 7% decline in overall H1 tractor-trailer volumes, Kross claims to have maintained its market share at 26-28%. The tractor business showed double-digit growth in H1 FY26, and the company aims to increase the off-highway OEM segment's contribution to 15% of revenue over the next two years.

While Q2 margins were weak, management is focused on improving profitability. They are implementing cost-saving proposals, particularly in steel procurement, and expect margins to move closer to 15% in the next one to two years, driven by the new extrusion line and increased exports. The extruded beam technology is anticipated to provide approximately 2% cost savings relative to the axle's realization value, contributing to overall margin benefit.

The company has deployed 84% of its IPO proceeds, with the remaining 16% planned for utilization within FY26, including INR 90 crores for loan repayment. Key capital projects include the seamless tube project, estimated at approximately INR 170 crores, and other growth capex (excluding seamless tube) of approximately INR 150 crores. The extruded axle plant alone involved a spend of INR 24 crores, with product rollout expected from January onwards.

Cash flow has been constrained due to the cyclical industry slowdown^🌐. A significant portion of revenue (42%) comes from trailer fabricators, where receivable days often exceed 90 days. Management acknowledged this challenge, noting that the crunch is primarily due to the subdued season, which is now showing signs of improvement.