Technocraft Industries (India) Limited

The Drum Closure division achieved exceptional net profitability in Q4 FY25, with an EBITDA margin of 39%, significantly above its baseline of 30%. This performance was driven by strong delivery across all geographies, including the U.S., Europe, and China. For the next year, management expects China to grow by 10-12% and the rest of the world by 4-5%, leading to an overall growth of 5-6% for the division. However, the 39% margin is considered exceptional and not sustainable every quarter.

The new Scaffolding facility in Aurangabad is currently operating at 75% and is expected to reach 100% utilization by September this year. This expansion is projected to generate an incremental INR 400 crores in revenue next year. While profitability was stretched in FY25 due to INR 15 crores of additional depreciation, management targets margins to improve to around 20% next year. Total Scaffolding sales are guided to reach INR 1,700 crores by March '26, with an expected growth rate of 10-15%.

Mach One, primarily a domestic India business, is not experiencing a slowdown in inquiries and maintains a healthy 6-month order book. The division is expanding into export markets like Saudi Arabia, South America, and the U.S., with a target to achieve 40% exports within the next three years. The targeted sales volume for Mach One next year is 9 lakh square meters, up from 470,000 square meters in FY25. The Aurangabad facility for Mach One is currently 75% operational and is expected to be fully operational by September this year.

The Technosoft division, which is 100% export-oriented and 75% U.S.-focused, saw lower profitability in FY25 due to investments in capacity and SG&A. However, management expects 'much higher growth' in FY26 and aims to restore margins to 20-22% from the current 14%. The division is shifting its focus to target larger, multi-billion dollar customers, having signed new logos like Pepsi, Henkel, and Kimberly-Clark, with engineering budgets of $10-15 million.

The Textile division faced increased EBIT losses, rising from INR 17 crores in FY24 to INR 39 crores in FY25. This was primarily due to low capacity utilization (60% of target sales) in Unit 2 and the highly competitive nature of the yarn business. To improve profitability, the company is strategically shifting to convert more yarn and fabric into finished garments, aiming to reduce losses and become cash positive next year. The garmenting side is seen as bullish due to potential trade agreements and India's lowest tariffs for garment exports to the U.S.

The company acknowledges ongoing uncertainties related to U.S. tariffs, particularly for Drum Closures, with a 90-day window and potential reciprocal tariffs. While current tariffs on Scaffolding (25%) are manageable due to higher tariffs on Chinese competitors (70%), the soft market in Europe due to the Russia-Ukraine crisis continues to impact demand. Management is closely monitoring these external factors.