Technocraft Industries (India) Limited

Technocraft Industries reported strong business momentum in Q4 FY26, particularly in the U.S. scaffolding business, which recovered rapidly in the March quarter after two slow quarters. This momentum is expected to continue into the June quarter, driven by investments in AI and tech ecosystem-driven infrastructure. Demand for drum closures remains stable, with expectations for single-digit revenue growth and 4-5% quantity and price growth. The company anticipates a better year ahead, assuming no unforeseen geopolitical events.

The scaffolding segment's margins saw a sharp uptick in Q4, but this included a one-time^📎 benefit of INR20 crores from steel quantity discounts. Adjusting for this, the sustainable margin is projected at 16-17% going forward^⏳. Despite a 25% increase in steel prices over the last three months, the company successfully passed on these costs due to its backward integration in aluminum extrusions. For FY26, the combined scaffolding and formwork revenue was approximately INR1,342 crores, split roughly 50-50 between scaffolding (~INR680 crores) and formwork (~INR660 crores). Minor debottlenecking efforts are expected to increase scaffolding capacity by 10-15% this year, with a larger formwork expansion of INR150 crores planned for FY28/FY29 impact.

The engineering vertical is experiencing strong revenue growth, expanding at 8-10% every quarter. This growth is fueled by heavy investments in AI, as the company pivots to create new services and products, such as digital transformation, building digital twins, and automation for engineering companies. While demand is robust, these investments may lead to slower bottom-line growth compared to the top line in the near term, as the company reengineers its service offerings.

The Mach One (aluminum formwork) segment faced challenges with volumes declining by approximately 17% year-on-year, primarily due to delays in real estate project offtakes and slow site mobilization, resulting in 60-70% capacity utilization. However, the order book remains strong, exceeding 4.5 lakh square meters, representing over six months of current production capacity. The company emphasizes its strategic advantage through backward integration with its own aluminum extrusion plant, which ensures high quality, control over chemical composition, and the ability to recycle used formwork, saving working capital and providing consistent quality to customers.

The textiles division is undergoing restructuring efforts. The yarn division showed an improvement in EBIT, moving from a negative INR4 crores to a positive INR1.5 crores, with a 10% EBITDA margin expected in Q1 FY27 due to improved yarn spreads. The fabric division is under serious evaluation for restructuring, including the possibility of shutting down its processing house and utilizing external vendors, as the company works to reduce losses in this segment.

The company has effectively managed the impact of U.S. tariffs on scaffolding (50%) and drum closures (25-27.6%), as these are now standard across all countries, allowing costs to be passed on to customers. This provides a competitive advantage, especially against China, which faces an additional 25% tariff. Forex benefits contributed INR20 crores in Q4 FY26 and INR46 crores for the full FY26, which is a recurring income stream, distinct from the one-time^📎 steel discount benefit.

In FY26, the company incurred INR110 crores in capex, primarily for operational efficiencies, maintenance, and debottlenecking, rather than significant capacity augmentation. Minor debottlenecking efforts are expected to increase scaffolding capacity by 10-15% this year. A larger expansion for aluminum formwork and extrusion capacity, estimated at INR150 crores, is planned towards the end of the current financial year, with its effects anticipated in FY28 and FY29. No significant incremental capex is planned for the Mach One segment this financial year.