SCML - Sharp Chucks and

📊 NSE: SCML 🏢 Castings & Forgings 📅 Last Updated: 12/14/2025 13:10

💰 Financial Performance

Revenue Growth by Segment

The company operates in a single manufacturing segment. Total Operating Income (TOI) grew at a CAGR of 16% over the last five years. FY24 revenue stood at INR 201.82 Cr, a 14% increase from INR 176.82 Cr in FY23. FY25 total revenue reached INR 246.23 Cr. H1FY26 revenue was INR 132.66 Cr, representing a 2.34% YoY decline from H1FY25 (INR 135.83 Cr) due to cyclical market fluctuations.

Geographic Revenue Split

Revenue is primarily domestic, driven by established relationships with Indian OEMs. While specific regional percentages are not disclosed, the company serves major domestic players like Mahindra & Mahindra and Swaraj Engines from its headquarters in Jalandhar, Punjab.

Profitability Margins

Operating profitability (PBILDT) has remained stable between 11-12% over the last three fiscal years. FY25 EBITDA margin was 11.74%. H1FY26 PAT margin improved to 4.24% from 3.35% in H1FY25, reflecting better cost management despite a slight revenue dip.

EBITDA Margin

EBITDA margin for H1FY26 was 13.00%, an improvement from 11.13% in H1FY25 (up 187 bps). This was driven by a 14.37% YoY increase in absolute EBITDA to INR 17.29 Cr, resulting from a shift toward higher-margin precision machined products.

Capital Expenditure

The company has historically invested in capacity enhancement, reaching 30,000 MTPA for casting and 3,600 MTPA for forging. While specific future CapEx in INR Cr is not detailed, recent growth was driven by adding new product lines like crankcases and cylinder heads.

Credit Rating & Borrowing

Upgraded in February 2025 to CARE BB; Stable / CARE A4+. Interest coverage ratio stood at 2.55x in FY24. Finance costs for FY25 were INR 12.32 Cr, with H1FY26 costs at INR 6.62 Cr. Liquidity is considered stretched with 86% utilization of working capital limits.

⚙️ Operational Drivers

Raw Materials

Iron & steel scraps, cast iron (CI) boring, Mild Steel (MS) iron, pig iron, MS rounds, and flat iron. These materials constitute approximately 55-65% of the Total Operating Income.

Import Sources

Raw materials are primarily sourced from local suppliers within India to maintain a lean supply chain and reduce lead times for OEM deliveries.

Key Suppliers

Specific supplier names are not disclosed, but the company maintains a diversified base of local vendors to mitigate procurement risks.

Capacity Expansion

Current installed capacities include Casting: 30,000 MTPA; Forging: 3,600 MTPA; and Machining: 14,400 MTPA (utilizing CNC, VMC, and HMC). Expansion is focused on defense-sector products like 81mm shell bodies.

Raw Material Costs

Raw material costs represent 55-65% of revenue. The company uses a price pass-through mechanism with OEMs to mitigate the impact of global commodity price volatility, though a time lag in adjustments can temporarily squeeze margins.

Manufacturing Efficiency

Efficiency is driven by integrated operations and certifications like IATF 16949:2016. The company has transitioned from basic castings to precision machining (14,400 MTPA) to increase value-add per unit.

Logistics & Distribution

The company leverages its Jalandhar base to distribute precision components to major OEM plants across India, though specific logistics costs as a % of revenue are not provided.

📈 Strategic Growth

Expected Growth Rate

16%

Growth Strategy

Growth is targeted through a 16% CAGR by expanding the product portfolio into high-value components like crankcases and cylinder heads. A major strategic pivot includes entering the defense sector with 81mm forged shell bodies and increasing the share of business with existing OEMs like M&M.

Products & Services

Cylinder blocks, brake housings, flywheels, gears, striking tools, hammers, drill chucks, lathe chucks, power chucks, and 81mm shell bodies.

Brand Portfolio

Sharp Chucks

New Products/Services

New additions include 81mm shell bodies for defense, crankcases, and cylinder heads, which are expected to contribute to volume growth and margin improvement in FY26.

Market Expansion

Targeting the defense and railway sectors to diversify away from the cyclical agriculture/tractor market. The company is also expanding its precision machining capabilities to serve global engineering standards.

Market Share & Ranking

Holds a dominant 50% share of business with M&M for specific casting and machined components in the domestic tractor segment.

Strategic Alliances

Maintains deep business shares with key partners: Mahindra & Mahindra (50% share of business), Swaraj Engines (15-20%), and International Tractors (10-15%).

🌍 External Factors

Industry Trends

The industry is shifting toward lightweight and high-precision components. SCML is positioning itself by increasing its machining capacity to 14,400 MTPA and entering the defense sector, which is seeing increased domestic procurement (growing at 10-12% annually).

Competitive Landscape

Competes with both organized players serving OEMs and unorganized players in the replacement market. SCML's advantage lies in its IATF certifications and large-scale integrated capacity.

Competitive Moat

The moat is built on 30+ years of OEM relationships and integrated 'casting-to-assembly' capabilities. This integration is sustainable as it creates high switching costs for OEMs like M&M who rely on SCML for 50% of their business share.

Macro Economic Sensitivity

Highly sensitive to Indian GDP growth and rural demand, as tractor sales (a major revenue driver) are linked to agricultural performance and monsoon cycles.

Consumer Behavior

Demand is derived from OEM production schedules, which are currently influenced by a trend toward mechanization in agriculture and increased defense spending by the government.

Geopolitical Risks

Global commodity price fluctuations (iron/steel) represent a risk to the 55-65% of TOI represented by raw materials. Trade barriers could impact the sourcing of specialized scrap or the export of machine tools.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by automotive manufacturing standards and pollution control board norms for foundries. The company must comply with Rule 11(g) regarding audit trails in accounting software, which was noted as a non-compliance area in FY25.

Environmental Compliance

Maintains ISO 9001:2015 and IATF 16949:2016 certifications. ESG-related costs are embedded in operational expenses for furnace emission controls.

Taxation Policy Impact

The company provided INR 1.86 Cr for current tax in FY25. The effective tax rate is approximately 25% based on a PBT of INR 10.31 Cr.

Legal Contingencies

The company reported no pending litigations that would have a material impact on its financial position as of March 31, 2025.

⚠️ Risk Analysis

Key Uncertainties

Raw material price volatility (55-65% of TOI) and high client concentration (70% from top 4 OEMs) are the primary business risks, with a potential 5-10% impact on margins during commodity spikes.

Geographic Concentration Risk

Revenue is heavily concentrated in the domestic Indian market, specifically tied to the performance of the North Indian manufacturing hub.

Third Party Dependencies

High dependency on a few large OEMs (M&M at 50% share) for revenue and local vendors for scrap metal procurement.

Technology Obsolescence Risk

Low risk in the medium term as the company uses modern CNC/VMC/HMC machining. However, the shift toward Electric Vehicles (EVs) could eventually impact demand for traditional engine components like cylinder blocks.