KALYANIFRG - Kalyani Forge

📊 NSE: KALYANIFRG 🏢 Castings & Forgings 📅 Last Updated: 12/14/2025 8:47

💰 Financial Performance

Revenue Growth by Segment

In Q2 FY26, the Engine segment accounted for 62% of revenue, Driveline for 19%, and Axel for 10%. While Engine and Driveline revenues saw slight reductions due to lower US exports, the Axel business has grown over the last two quarters. Overall operating income for 9M FY25 was INR 177.6 Cr, flattish compared to INR 236.9 Cr in full fiscal 2024.

Geographic Revenue Split

The company serves both domestic and global markets. Domestic sales have maintained momentum post-GST cut, while export revenue has been adversely impacted by US tariff-related reductions, particularly in the engine product group.

Profitability Margins

PAT margin improved by 53% in Q2 FY26 compared to the previous quarter. Operating margin rose to 9.93% in 9M FY25 from 6.5% in FY24, driven by cost control, clean audit actions, and a shift toward a more profitable product mix.

EBITDA Margin

EBITDA margin grew to 13% in Q2 FY26, up from 9.93% in 9M FY25 and 6.5% in FY24. This improvement was achieved despite a reduction in export business through operational efficiency and strategic project gains.

Capital Expenditure

Capital work-in-progress (CWIP) stood at INR 15.05 Cr as of March 31, 2025, a significant increase from INR 5.28 Cr in the previous year. Total Property, Plant, and Equipment was valued at INR 60.37 Cr.

Credit Rating & Borrowing

Crisil Ratings reaffirmed 'Crisil BBB/Stable/Crisil A3+' on bank loan facilities totaling INR 100 Cr. Gearing was moderate at 0.75 times as of March 31, 2024.

⚙️ Operational Drivers

Raw Materials

Forging grade steel and machining materials are the primary inputs, though specific alloy names are not disclosed. Raw material price volatility is cited as a key risk factor affecting margins.

Capacity Expansion

The company is undergoing ongoing capital expenditure to improve operating performance. Current CWIP of INR 15.05 Cr indicates active expansion or modernization at existing units.

Raw Material Costs

Raw material costs are a significant portion of the cost structure; volatility in these prices is partially offset by cost-control measures and improved operational efficiency which helped raise EBITDA margins to 13%.

Manufacturing Efficiency

Average capacity utilization rose to 91-98% for the five months through January 2025. Efficiency is being further driven by the Vriddhi Council, which delivered INR 17 Cr in value gains.

📈 Strategic Growth

Expected Growth Rate

25%

Growth Strategy

Growth will be achieved through 'Strong Execution' (cost control and clean audit actions), 'Business Development' (ramping up new export business SOPs), and 'Capex Growth' (INR 15.05 Cr in CWIP). The Vriddhi Council project is a key driver, having already delivered INR 17 Cr in savings.

Products & Services

Hot-warm and cold-forged products including Stub Axle, Connecting rod, Crankshaft, Steering Knuckle, Wheel Hub, Double Yoke, Yoke Shaft, Tulip, Outer Race, Tripod, Inner Race, and Gear Blanks.

Brand Portfolio

Kalyani Forge Limited (KFL).

New Products/Services

New export business has ramped up with SOPs commenced in Q2 FY26, expected to offset temporary global top-line reductions.

Market Expansion

The company is targeting growth in the Driveline and Axel product groups and is ramping up new export business to diversify its geographic footprint.

Strategic Alliances

The company engaged the Vriddhi Council for strategic project execution, resulting in INR 17 Cr of value gains.

🌍 External Factors

Industry Trends

The forging industry is evolving with a focus on high-performance critical components. KFL is positioning itself by increasing its Internal Financial Control (IFC) scores and implementing compliance software to meet higher governance standards.

Competitive Landscape

KFL faces intense competition in the domestic forging and machining industry, which partially offsets its established market position.

Competitive Moat

The moat is built on four decades of promoter experience, established market position, and healthy relationships with reputed OEMs. This is sustainable due to the high technical expertise required for hot-warm and cold-forged products.

Macro Economic Sensitivity

The company is sensitive to the cyclicality of the automotive sector and global trade policies, such as US tariffs which reduced export momentum.

Consumer Behavior

Demand is shifting toward more complex driveline and axle components, which KFL is addressing through its product mix strategy.

Geopolitical Risks

US tariffs have directly led to a reduction in export sales for the engine product group, representing a significant geopolitical trade barrier.

⚖️ Regulatory & Governance

Industry Regulations

The company must comply with SEBI (LODR) Regulations and the Companies Act, 2013. It faced a delay in transferring unclaimed dividends to the Investor Education and Protection Fund (IEPF).

Taxation Policy Impact

Deferred tax assets (net) stood at INR 1.86 Cr as of March 31, 2025.

Legal Contingencies

The company has pending litigations; however, the auditor noted that in the absence of sufficient information, they were unable to state the impact of these litigations on the financial position (Refer Note 32.1).

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the 'Disclaimer of Opinion' issued by auditors regarding internal financial controls and managerial remuneration for FY25. Additionally, the resignation of CFO Nilesh Bandale in November 2025 adds managerial uncertainty.