Detailed Narrative
Q1 FY26 Performance Overview
Technocraft Industries reported a fairly stable quarter overall, despite a turbulent economic climate. The scaffolding and formwork segment experienced an 8% year-on-year decline in revenue. Specifically, the scaffolding business saw a flat performance in sales and profitability quarter-on-quarter, with a slight degrowth of approximately INR20 crores.
U.S. Scaffolding Business Challenges
The U.S. scaffolding market is currently challenging, primarily due to various tariff changes. The effective tariff on scaffolding for the company is about 35%, with a potential increase to 34% if the Russian oil tariff is implemented. This has led to a slowdown, with customers on hold and a delay in procurement, resulting in U.S. sales for the scaffolding segment being down about 35% quarter-on-quarter.
Mach One (Formwork) Performance and Outlook
The Mach One (aluminum formwork) business is performing well and is on track to achieve INR900 crores in revenue for FY26, representing an increase of INR400 crores from the previous fiscal year's INR520 crores. The new Aurangabad plant, crucial for this growth, is currently operating at 60-65% capacity and is expected to reach 90-95% by August/September. The current order book for Mach One stands at INR350 crores, executable over approximately 4 months, and the inquiry pipeline remains robust.
Impact of U.S. Tariffs Across Segments
The company is facing an increase in reciprocal tariffs from 10% to 25% on India, effective August 10, with a potential additional 25% Russian penalty tariff from August 27. For drum closures, the company plans to absorb the additional 25% tariff to maintain market share, which will impact profitability. For the textile division, which could face a 50% tariff, the company is exploring manufacturing outside India or diversifying to other markets like Europe, UK, and domestic to mitigate sales drops.
Engineering Services Growth Strategy
The ER&D-focused engineering services business is experiencing higher revenue and profitability. The company has expanded its global footprint by opening a new office in Japan, hiring a business development head, and partnering with a local company. This segment is targeted to become a dominant part of the portfolio, aiming for over INR1,000 crores in revenue within the next 5-6 years, driven by the global shortage of engineering talent.
ROCE and Business Mix Management
While the scaffolding business has a lower ROCE (15-20%), the company aims to maintain an average group ROCE of 20%. This will be achieved by increasing the share of the higher-ROCE formwork business, which is expected to grow from 40% to 65-70% of the scaffolding/formwork segment in the next three years. The drum closure business will continue to operate at a high ROCE.