Pitti Engineering Limited

Pitti Engineering reported a robust FY25, with consolidated revenue growing 34.87% to INR1,743.36 crores and EBITDA increasing 49.77% to INR271.12 crores. PAT for the full year was INR122.28 crores, up 36.32%. Q4 FY25 also saw strong growth, with revenue up 28% to INR472.30 crores and EBITDA rising 54% to INR80.08 crores. Lamination sales volumes for FY25 reached 63,215 metric tons, a 49.43% increase, with Q4 volumes at 17,185 tons, up 50.28%.

The company's major capex cycle is largely complete, with new capacity commissioned at the Aurangabad plant, bringing consolidated sheet metal capacity to 90,000 MT. Machining capacity now stands at 648,000 machine hours, and casting facilities at 18,600 MT. Management plans tactical capex of approximately INR50-odd crores for machine shop and INR15-20 crores for lamination in the current year, with a cumulative INR130-140 crores over 24 months for further capacity expansion, focusing on equipment additions with short lead times.

Pitti Engineering sees continued demand across key product segments, including railways, green energy (wind and hydro), and power generation. The machine components business is targeted to reach INR750 crores in the next 18-24 months, up from INR375 crores in FY25. Emerging segments like data centers, automotive, and appliances are expected to grow their share of business from current low single digits to 10-12% over the next two years, contributing to a more profitable product mix. The European market is expected to contribute INR150-200 crores in revenue over the next two years.

Raw material prices, particularly electrical steel, have increased by about 7% in April compared to January. Supply constraints are emerging due to the expiry of BIS approvals for Chinese mills and safeguard duties of 12.5% on CRMO producers. Management asserts a 100% pass-through policy for raw material costs to customers, mitigating margin impact. Discussions around tariffs, especially for exports to the US via Mexico (70% of Mexico sales eventually land in US), are ongoing, with the company maintaining that tariffs are ultimately borne by the consumer.

FY25 was marked by the successful completion of two acquisitions (Bagadia Chaitra Industries and Dakshin Foundry) and a merger. These integrations are expected to drive efficiency and margin improvement. Bagadia Chaitra contributed INR 17.34 crores EBITDA and Dakshin INR 12.50 crores EBITDA on a standalone basis for FY25. The company targets a 75 bps to 1 percentage point increase in EBITDA margins over the next 12-18 months, aiming for 16.5-17% in the current fiscal year (FY26), driven by enhanced utilization and cost rationalization.

With the major capex cycle complete, the company's focus shifts to debt reduction. Net debt stood at INR 435 crores at the FY25 year-end. Management aims to reduce net debt by INR 100-120 crores in the current fiscal year (FY26) through accumulated profits, as there are no major capex commitments. This strategy is expected to improve the overall financial health and boost PAT flow-through, with current finance costs considered peak.

While the overall order book for existing railway customers has remained stable, the company is seeing significant volume growth in data centers, power generation, and renewables. The inflow of Requests for Quotation (RFQs) from new customers, particularly medium-sized enterprises in Europe and the US, has increased by over 200%, with potential annual business ranging from $0.5 million to $50 million. This indicates new opportunities arising from global supply chain diversification, though management remains cautious about sustainability beyond tariff arbitrage.