Happy Forgings Limited (NSE: HAPPYFORGE) Q3 2026 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Unidentified Speaker
Ashish Garg — Managing Director
Pankaj Kumar Goyal — Chief Financial Officer
Analysts:
Unidentified Participant
Preet Pitani — Analyst
Mihir Vora — Analyst
Joseph George — Analyst
Sahil Sanghvi. — Analyst
Akash — Analyst
Nitin Agarwal — Analyst
Vijay Pandey — Analyst
Presentation:
operator
Sa. Sam. Sa. Sat. Sa. Sam sat. Sam sa. Ladies and gentlemen, you are connected to Happy Forgings Limited Conference. Please stay connected. This conference will begin shortly. Thank you. Sa. Sat sa. Foreign. Ladies and gentlemen, good day and welcome to the Q3 and 9 month FY26 earnings conference call of Happy Forgings Limited. This conference call may contain forward looking statements about the company which are based on the beliefs, opinion and expectations of the company as on date of this call. The statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Garg, Managing Director, Happy Forgings Limited. Thank you. And over to you sir.
Ashish Garg — Managing Director
Thank you. Good morning everyone and thank you for. Joining us today for the quarter three. FY26 earnings call of Happy Forgings Limited. Along with me I have Mr. Pankaj Kumar Goyal, our CFO and Strategy Growth Advisors, our Investor Relations Advisors. I trust everyone had the opportunity to Review the quarter 3 and 9 months FY26 financial results Investor presentations which are now available on the exchanges. I am delighted to share that we continued with a strong growth trajectory in the third quarter and nine months of fiscal year 26. 2026 delivered a robust operating and financial performance in quarter three and nine months FY26 the revenues continue to scale up and profitability showed a clear improving trend.
We have successfully navigated a period marked by softening steel prices, a challenging macro environment including weak global demand and geopolitical events while maintaining a positive growth momentum, improving profitability and further strengthening our balance sheet. Importantly, during this period we have invested meaningfully to build capacity and lay the foundation for future growth and we have done so without straining the balance sheet. This was enabled by our robust business model, efficient working capital management resulting in strong cash generation allowing us to fund growth initiatives while preserving financial strength and flexibility. For the third quarter, the company delivered an all time high performance across revenue from operations, gross profit, EBITDA and PAT and we achieved the highest ever EBITDA PAT margin during the quarter.
Profitability growth outpaced the revenue growth with PAT increasing to 22.3% year on year. This was driven by robust value value add as reflected in higher gross margin and operational efficiencies. For the nine month period, revenue touched 11.22crore with a PAT of 218crores, demonstrating a resilient and consistent performance given the macro environment. Importantly, the sequential improvement witnessed in Q3 over Q2 reinforces the growth momentum in the business and if this Trend continues in quarter four, it positions us well for a strong close in FY26. On the margins front, I would like to highlight that our EBITDA margins reached a new high of 30.8% in the quarter and for the nine months period crossed 30%.
Ashish Garg — Managing Director
While this represent a meaningful improvement over last year, margins can vary from quarter to quarter as raw material prices, capacity, addition and business mix evolve. Our focus remains on maintaining EBITDA margins with a substantial range with a sustained range between 29 to 31% over the medium term. Coming to our operational performance in Q3, we recorded a healthy year on year volume growth of approximately 14% driven by a strong uptick across domestic CV, farm and industrial segments as well as the passenger vehicle segment overall contributed meaningfully. Realizations remain broadly stable and range boundaries even as raw material prices softened during this period.
Going forward, as high value add segments scale up, we expect realizations to improve. From a geographic perspective, domestic business delivered strong mid teens year on year growth during the quarter driven by healthy demand across our core segments, especially commercial vehicle farm equipment. Direct exports remained subdued during the quarter reflecting both ongoing weakness in certain end markets and tariff literature uncertainties. In addition, changes in incoterms for select customers during the period resulted in a reclassification of certain revenues from direct exports to deemed and indirect export categories which also contributed to the apparent decline in direct export share.
However, when viewed on a broader and more meaningful basis, by combining direct deemed and indirect exports which together account for roughly one fourth of our finished goods sales, export market dependent revenues were largely flat on year on year basis. Importantly, this combined export linked revenue pool recorded a modest sequential increase indicating early signs of stabilization rather than further deterioration. Following the recent announcements around India, US Tariffs and other trade agreements, we are closely tracking developments and await further clarity on the fine prints for these agreements. Directionally, we view these developments are positive for long term economic growth and industry opportunities.
Ashish Garg — Managing Director
In parallel, some OEMs in CV and pharma equipment segments have marginally revised their outlook for calendar year 2026 compared to the guidance issued in quarter three calendar 2025 with industry growth expectations now indicating stability to modest low single digit growth. Against this fact, outlook for export business hence appears more constructive as compared to the previous quarter which could support a gradual recovery and growth in our existing export linked business moving to our industry Segment Highlights for Quarter 3 FY26Our diversified portfolio remains a cornerstone of our strategy. This balance exposure allows us to effectively de risk while fully capturing the robust secular growth in the domestic and international markets.
Commercial vehicle contributed 37% to our operating revenue in nine months. The segment continues to be the highest contributor during the quarter. The combination of the GST rate cut, improving affordability and healthy infrastructure led demand mainly supported a meaningful pickup in the industry volumes. Also, domestic SEAVI dispatches saw an uptick supported by sustained freight activity. With improving lead indicators in the domestic market such as supportive policy measures and sustained infrastructure activity, we are optimistic about the segments to sustain its strong demand visibility and positive momentum positioning us well for continued growth. However, the broader global backdrop remains soft with major markets in North America and Europe yet to show meaningful recovery momentum.
Farm equipment contributed 31% to our total operating revenue in nine months. 26 the domestic tractor industry demonstrated growth supported by favorable monsoons and Harris agriculture output. Industry volumes grew on the back of strong rural demand and improved cash flows. Looking ahead in 2017, industry demand is expected to remain stable supported by normal monsoon assumptions, steady farm incomes and sustained mechanism trends to agriculture. As for the outlook released by some OEMs, the European and US farm equipment markets are expected to remain broadly stable or range bound in calendar year 2026. Industrials contributed 15% to our overall operating revenue in nine months.
Ashish Garg — Managing Director
This segment delivered a stable performance in the quarter supported mainly by demand across power generation, renewables such as wind, railways, oil and gas and digital infrastructure. Overall, the outlook for this segment is positive given the rapid expansion of India’s data center ecosystem, solar and grid capacity additions, rail modernization and maintenance cycles that are likely to continue support order influence off highway contributed 12% to our operating revenue made broader category weakness. The domestic off highway segment saw softer year on year basis, slower project awards particularly in roads and highway and other infrastructure segments along the land acquisition approval related delays moderated the pace of project execution.
This impacted equipment demand during the period. Industry conditions in Europe and US remained challenging during this period. Passenger vehicles contributed 5% to our total revenue in nine months. 26 the passenger vehicle segment continued to perform well and now contributed close to a mid single digit share of revenues. We have strong visibility on incremental business in this segment and expect this contribution to scale meaningfully in the next mix. Over the next few years. We increased our machining capacity to 68,000 tons, an addition of 9,800 metric tons in Quarter 3 FY26. This expansion is in anticipation of the upcoming demand.
Further, we will strengthen our forging capacities by commissioning a new 10,000 ton press in Quarter 4 FY26 and the 4,000 ton press in H1 FY27. To improve our cost efficiency and support our ESG commitments, we have signed a long term lease for 80 acres of land to develop a captive solar power plant. We anticipated the benefit of this investment to start coming in partly in FY28 and fully thereafter. Furthermore, we are on track with our heavy component related CAPEX which is progressing well as per the schedule. Looking ahead, we expect domestic demand momentum to continue as global trade dynamics evolve.
We hope that export pressures will also subside paving the way for a measured turnaround in our international markets. We have visibility of new and incremental peak annual business of approximately 800 crore expected to commence from FY27 onwards which will scale up over the next two to three years. This includes incremental revenues from heavy component CAPEX lines. The addition of this business will further strengthen our diversification efforts. A large part of the upcoming business is linked to industrial and passenger vehicles with nearly 2/3 oriented towards export markets. Consequently, the contribution of industrials, EV and export dependent segments is expected to increase meaningfully in the overall mix and have a positive impact on the revenue diversification and profitability as well as I’ll now invite our CFO Mr.
Pankaj Gohar Gol to share a detailed breakdown of our financial drivers and offer further analytical color on our quarter 3 and 9 months performance.
Pankaj Kumar Goyal — Chief Financial Officer
Thank you. I hope I am audible to all of you. Good morning everyone. Let’s now dive into the key financial metrics that defined our performance for the third quarter and nine months period of FY26. We recorded revenue from operation of 391 crore for Q3FY26 and 1122 crore for nine months FY26. This represents a YoY expansion of 10.4% and 6.2% for the quarter and nine months period respectively. We register a YOY volume growth of 13.8% in Q3 FY26 and 7.6% for 9 month FY26. Relations were marginally lower for both Q3.
Pankaj Kumar Goyal — Chief Financial Officer
And primarily due to changes in product. Mix and lower scrap prices. Gross profit reached 230 crore in Q360 and 663 crore for nine months reflecting an uptick of 12.2% and 8.5% YUI respectively. These performance anchored healthy gross margins of 58.9% for the quarter and 59.1% for nine months. A beta clocked in at rupees 120 crore for Q3 and 337 crore for nine months FY26 making a year on year sales of 18.7% and 10.8% respectively. Consequently, a beta margin settled at 30.8% and 30.1 respectively. As a result of operation, operating leverage profit after tax stood at 79 crore for the quarter and 218 crore for nine month FY26.
This reflects a significant YoY growth of 22.3% for quarter three and 11.8% for nine months on an adjusted basis with pat margins holding form at 20.2% and 19.4% for Q3 and nine months respectively. I would also like to clarify that we have no financial impact from the new labor codes transition as our current provisions and practices are already fully compliant with the updated regulations. Our balance sheet remains a core strength of the organization. Through focused working capital management we have maintained stability relative to working capital levels of H1FY26. This reduced our working capital intensity combined with our expanding margin profile has translated into robust cash flow conversions, thereby resulting in a 315 crude in cash flow from operation for the 9 month FY26 period.
Our treasury position has further strengthened with total liquid assets now exceeding 400 crore. This provides us with a significant buffer and the financial flexibility to fund our growth initiatives. From internal approvals we continue to invest for the future. Our ongoing CAPEX program is progressing as per schedule with 300 crore deployed in the first nine months of the year. We expected our total capex for FY26 to be in the range of 400 to 500 crore, all of which aimed at augmenting our high growth capabilities and enhancing long term value for our stakeholders. With that, we are ready to commence the question answer session.
I will turn it back to the moderator to invite the first question.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Preet Pitani from incredamc. Please go ahead.
Preet Pitani
Thank you for the opportunity. Sir. I only had one question. My question is on the line of cross Margin we have seen the improvement yoy on the grass margin despite raw material headwinds. What has led to such improvement and what do we expect going forward? Thank you.
Pankaj Kumar Goyal
So thank you. Gross margin improvement trend has improved over the last several years. It is improving year on year largely on account of the product mix changes which is happening and whereas the new product introduction is at better realization rate which is kind of improving the overall average for the realizations. And this is despite the falling raw material prices that has happened in the last one and a half two years. Going forward we expect this momentum to continue as well on a medium term basis as our export share will improve and also the industrial business will improve going forward.
Preet Pitani
Just a follow up on that the realization if I can see that this quarter it was 3% down year on year and despite we have seen gross margin improvement. So if you could just highlight that.
Pankaj Kumar Goyal
There’S a fall in steel prices as well. So you’re seeing the total realization base but if you see the raw material price, the raw material price was fall was even more than that. And secondly it’s because of the changes in the product mix.
Preet Pitani
Can you just name what are the top raw materials which have been used along with the percentage of the contribution to the overall raw material base.
Pankaj Kumar Goyal
So we largely consume alloy steel and alloy steel grades like 15, 41, 20m and CR5 are chrome moly grades and carbon steel grades largely used for automotive requirements and wind requirements. So this is the base that we consume and we also consume some bit of stainless steel in our product.
Preet Pitani
Thank you sir, I’ll join back in the queue.
operator
Thank you. The next question is from the line of Mihir Vora from Aquiris. Please go ahead. Yeah, thank you for taking my question.
Mihir Vora
So sir, just one clarification on CapEx. That what would be the nine month CapEx that you have already incurred and some projection for the FY27 CapEx number as well. Sure. So we have already completed a capex of almost 300 crores in nine months this financial year and expected the expectation for next year is close to 400 crores excluding solar project. Including solar it will be close to 480 crores. Okay. All right.
Mihir Vora
Okay, the next one is basically we. Saw a good decent growth in the industrial segment here which you mentioned in opening remarks was driven by the domestic part of it. But can you throw some more light on what kind of components are we basically giving into the railway segment which you mentioned here and some more light on the components in the industrial part. So railways is a Very small segment for us. We produce piston pins for local application where we are import substitutes and within industrial we supply crankshafts as well as wind pinions. The large crankshaft goes for heavy gems applications and the wind pinions are for wind gearboxes.
Okay, okay, okay.
Mihir Vora
And lastly on the order book front. Which you have mentioned around 800 odd crores which also includes the heavy engineering part. But here are we seeing some incremental orders like previously I think we had mentioned a confirmed order of 100 odd crores. Do we see any more confirmation?
Ashish Garg
We are in the heavy engineering segment. So on the heavy engineering, particularly on the large crankshaft family we have close to 180 crores of signed orders right now. And going forward we are waiting for the capacity to come in place. But we are already in discussion with several OEMs for this project. But as the timelines are very close by. So I think the real marketing will start around June, July because we expect equipment to reach in the plant and that will be the time when you know, we can actually demonstrate our capabilities once the infrastructure is built.
So when do we expect that plant. To be utilized at a fair level? Like will it be in FY28 or 29? So some bit of utilization will start coming from FY28. Largely from FY29.
Mihir Vora
Okay. Okay. That’s all from myself. Thank you.
operator
Thank you. The next question is from the line of Joseph George from iifl. Please go ahead.
Joseph George
Hi. Thank you. I have two questions. One is when I look at your capacity numbers that are given in the PPT, your forging standard 127k and machining stands at 68k. Could you give us a sense of where these numbers end at the end of FY27?
Ashish Garg
Yes. So FY27 will be looking at forging capacity of 1 lakh 50,000 tons and the machining capacities around 82,000 tons.
Joseph George
Okay. And this obviously doesn’t include much of the heavy engines capacity or heavy components capacity.
Ashish Garg
No, that will probably come. In and when, when that comes in we’ll end closer. 200,000 in terms of forgings around 180,000 on the forging side and around around 90,000 in terms, in the, in terms of commission.
Joseph George
Understood, thanks. The second question that I had was on gross margins you mentioned that, you know, you, your initial comment had reference to raw materials. Et. What I want to understand is isn’t the price of steel a complete pass through under your contracts with your customers? That is one. And second is we have seen currency moving all over the place, be it, you know, euro, inr, USD, inr. What are the implications for these currency moments for your profitability?
Pankaj Kumar Goyal
So I’ll take with the. So steel is a pass through in most of the cases you can say almost 85% of the business deal is a pass through, but there is a lag of one month and in export there is a lag of one quarter. But scrap is not passed through. So whatever scrap gain or loss comes, that goes directly in the ebitda. So if you see last year till December we have seen scrap prices falling and going forward we see scrap prices improving as well. So the new contracts probably will get signed now for the scrap prices will be at a better realizations, better prices as it has started to move upwards.
But on the steel side it is a pass through for us and on the domestic side it is passed with a one month lag and we have sufficient inventories to actually cover that. With regard to forex, forex in some of the contracts is a pass through mechanism and in some of the contracts is a long term agreement where we hedge our currency on a long term basis. So we work on both contracts, both type of contracts, but largely on the open contract. We follow hedge policy. Right now there’s no significant.
Joseph George
Okay, how long are your hedges typically duration?
Pankaj Kumar Goyal
It is typically for one, one and a half years looking forward.
Joseph George
Understood. Thank you, that’s all I had.
operator
Thank you. The next question is on the line of Sahil Sangvi from Monarch Network Capital. Please go ahead.
Sahil Sanghvi.
Yeah, good morning sir and good to see the numbers improving. Congratulations on that. Also on holding a very strong margin number. Like I have two set of questions. One, if you can give me the split of what was the growth in the domestic market and the growth or degrowth in the export market. If you can split that in whatever minor possible revenue volumes.
Pankaj Kumar Goyal
Okay, sure. So roughly 55% of our revenue comes from domestic CV and domestic farm business. So where in terms of value we have grown by almost 22%. You can see on an average in terms of value, in terms of volume, 22%, right? Yes. On the domestic CVN farm which is around 55, 57% of our revenues. Whereas on the off five way side we have witnessed a degrowth both domestic as well as international and we have a large customer where we have seen this actually depend on the CV export side we have seen a weakness where there is a degrowth to the level of almost 10 12% both in Europe as well as in the US market.
And the degrowth is more on the US business on the seaweed side on the farm export is very small percentage. It’s a new vertical where we have seen growth and on the PV side we have seen on the domestic as well as export side a growth of almost 37% year on year. So that is something which is ongoing. So largely on the degrowth side it’s off highway business which where we have seen it growth and the CV export business which has where we have seen this energy growth.
Sahil Sanghvi.
Right sir, and this is very elaborate. My second question is to understand what happens to the new orders next year especially on the export front if the demand remains subdued. So we have a very strong new order book as such. But what kind of visibility do we have of these orders getting converted at the right time? Anything you can explain on that?
Pankaj Kumar Goyal
So on the export side we have largely three programs on and largely for us which is for the industrial sector for Gen 6 which we have already started ramping up and we have a visibility for the entire year thanks to the tariff situation that you know the numbers are very clear now. On the EV business we are already ramping up. Already started the ramp up in December, starting from December. On the EV export business which is indirect exports to North America. And the third large order that we have is for the for the PV sector export over there as well.
The visibility is there that we have to build stocks in US warehouses in September. So we’ll start ramping up from May, June onwards on that business as well. And that is not related to cv. That’s a PV program where volumes are established and not much of a variation is seen as of now in terms of volumes for that. So that’s the visibility we have on all these three projects and we expect export percentage to improve meaningfully from second quarter of next financial year.
Sahil Sanghvi.
Got it. Very helpful. Thank you sir and all the best.
Pankaj Kumar Goyal
Thank you.
operator
Thank you. The next question is from the line of Akash from nvafm. Please go ahead.
Akash
Yeah, thanks for taking my question. So just wanted to understand from very quarter on quarter perspective I think we have seen a realization by almost 5%. So just wanted to understand and due to which we have also seen a kind of gross margin dipping on a sequential basis. Just wanted to understand, I mean which what you can say which segment is a margin driver for us or which segment has basically fallen off due to which we have taken a hit on our margins. What I wanted to understand. So I am just not clear with your question. Can you just repeat once again you are asking that realization. Can you just Come once again.
Pankaj Kumar Goyal
Yeah, sure. So sir, we have seen our realizations dip by almost 5% on a sequential basis. I don’t think steel prices have fallen much on a quarter basis. Yeah. So what I wanted to understand which segment is basically hitting us in terms of gross margins and realizations.
Pankaj Kumar Goyal
So basically it’s not. It has not gone down. You can say that because of the product mix changes you are seeing this largely on account of increased sales on the forged products to the tune of almost 1.52%. We are seeing this on the other side. Again there are the cost is also less because of more of forged product sale and that has also resulted in improvement in margin. And that has happened because of the product mix. Even though there is a realization change is there. But if you look at the cost sequentially, cost has also gone down.
Akash
Yeah, so that’s what I want to understand. Understand that for the products mix part basically we have a higher set of realizations and margins in this segment. Is it industrial cv and that basically
Ashish Garg
. Is an industrial export business which has picked up which is largely very heavy components that we are exporting which are largely on a forged nature of products where the realization is not similar to crankshafts is less than that over there there is an increase. But yes, relatively the cost is not the same. So if you sequentially, if you see the cost increment has not happened. But even despite of that there is an improvement in overall margin.
Akash
Understood. And sir, I think to an earlier participant question you explained with the volume growth across all segments except for industrial. So on a BIOI basis industrial, they’ve seen how much volume growth?
Ashish Garg
Just a sec. Surround volume growth on industrial is around 2%.
Akash
Understood. And my last question will be for I think we are installing a 10,000 ton forging pressure in this quarter. So would like to understand what for which components, which segment are we installing that and basically what new programs are in place or new orders will start for us incrementally in FY27 and for which segments. Yeah, that’s it.
Pankaj Kumar Goyal
So we have already started ramping up on some of the industrial businesses on this line. This will contribute on the industrial as well as on the CV side. And we’ve started ramping up from over 8,000 ton press line and we expect to reach peak capacity utilization on 8,000 ton very soon. And that is the reason this 10,000 ton press line was planned. So the incremental volumes on the industrial side as well as on the CV side that we are looking from some of our customers on the Domestic business will clearly come out of this press line.
Akash
Understood, thank you. I’ll come back in.
operator
Thank you. The next question is from the line of Nitin Agarwal from GM Financial. Please go ahead.
Nitin Agarwal
Yeah, thanks for the opportunity and congratulations on great set of number. I just wanted to have your thoughts about the recent deal with the US some of the components fall under 232 section. So where are we? What kind of a duty, you know, are we expecting on our product exported to the US market? I know a lot of clarity is required what is but wanted to know yourself. Will it be 0 under 232 section or 18% kind of a duty?
Ashish Garg
So it is still not clear. See in most of the cases the duty is paid by our customer. So we have not kept it in our scope. And it also depends how they are importing it and how they are getting it cleared, you know, prior to this situation. Because they cannot change that terms if they are importing under certain clause. So different customers are importing and you know, getting it cleared in a different manner. So it’s very difficult to say yes, there are definitely ways and means to get it cleared under 18% as well. But we are aware that, you know, not many are doing that right now.
So we, we still have to see that, you know, how there’ll be more clarity coming in on this I think, you know, in next one month’s time. But it’s not enough.
Nitin Agarwal
Okay, so just one more question on that as well. So if we are coming to equally person duty, do we get a competitive advantage to you know, companies which are based out of China? So do we get additional business from us? Any sense on that?
Ashish Garg
You are right. India will be at a advantageous position, you know, if you compare with China as well as Brazil because a lot of fortune machine components of this size are actually coming out of Brazil in the U. S markets. Brazil today is at 50% and so is China. So India will get the benefit of this. And on one of the industrial projects which the supply chain is in China. So we will be seeing, you know, business increasing in this part.
Nitin Agarwal
Okay, okay, that’s really helpful. That’s it from my side. Thank you.
operator
Thank you. Participants who wish to ask a question may press star and one on the touchstone telephone. The next question is from the line of Aniket Matre from Mutila Lost World securities. Please go ahead.
Unidentified Participant
Hi sir, good morning. Thank you for the opportunity. Just quickly on the you had indicated incremental order wins of 8 billion. By when do you expect to Reach this number.
Pankaj Kumar Goyal
Good morning. Almost 80% of the business, 80, 85% of the business is to be delivered in the next two years and accordingly the ramp up and the capacities are planned for those businesses. And regarding the higher horsepower which is around 180 crores out of this 800 crore which will come some bit of it will come in FY28 and balance is going 29 and largely you can see around 620 crores of the business is across the other range of sectors which will be delivered which will start ramping up and start, you know, executing these numbers in next, you know, 18 to 20 months.
So by FY28 we should expect 80, 85 of this 8 billion to be executed.
Unidentified Participant
Yes. Understood.
Unidentified Participant
Got it. The other question I had said was on your again from a margins perspective, basically you had indicated that from Q2 FY27 exports will start ramping up. Right. And I mean as a general thumb rule we understand exports will be higher margin. So is it fair to assume that margins can continue to gradually inch up as our mix improves in the coming years?
Pankaj Kumar Goyal
So Niket, as we are already at a very strong range of numbers, definitely some improvements will come so we can say that you know, it’ll be range bound 28 to 32%. And also on the realization bit and you know as we start exporting, yes some improvements will happen over there as well. Scrap prices also we are seeing improvement which will also drive, you know, some improvements over there. And thirdly, you know with regard to the solar project which is coming up, we expect, you know that to also improve our power cost starting from third quarter because it will roughly generate around power almost 25 to 30 quarts per annum.
Unidentified Participant
Project itself I guess should be about 50 base points increment if I’m understood. Can you repeat you were not clear? No, sorry, I. I was asking about the solar project. What kind of benefit can we expect from the in terms of our margins once it’s fully operational?
Pankaj Kumar Goyal
So we expect to reduce our power cost by 25 to 30 crores per annum. So which is a substantial cost reduction that we’ll be seeing on our power bill on annualized basis.
Unidentified Participant
Understood. And how much steel prices? I mean we are hearing steel prices are again inching up. Are we seeing that in our grade of steel that we use for our raw material?
Pankaj Kumar Goyal
So the alloy steel market actually the settlement happens with a lag and sometimes the settlement happens with a retrospective date. So large OEMs like Tata Motors actually decide on this alloy steel pricing. It is not like the daily price movement that happened on the daily price movement levels on the ingots and also on the TMT rates. It is already clear on the charts that the steel prices have started moving, moving up also on the scrap prices. So we can say that yes, the settlement that will happen will also drive the loyalty steel prices. But as of now it is not settled.
So when the settlement happens it could be retrospective. That happens from first of Jan. But yes, definitely the. It looks like that the cycle is now started even on the commodity side which will probably, you know, be there for next year 12 to 15 months.
Unidentified Participant
And what is the kind of increase we are seeing for our grade of products for steel?
Pankaj Kumar Goyal
So it is still not settled. It could be in a range of three to four rupees a kilogram. But it all depends on the primary steel producers and Tata Motors to settle it. Because once it is settled it is settled for at least one or two quarters. Because the changes will not happen in between. But roughly you can say three to four rupees is expected to go up. That can happen from 1st of April or some bit of it can passed on from 1st of Jan. That’s not clear.
Unidentified Participant
Just my final question on exports. I understand about. Just correct me if I’m wrong. About 50 of our exports mix comes from CVS, right? And roughly just about 1% from farm equipment. Could you help us understand what is the mix for industrial exports and OHV exports and EV exports.
Pankaj Kumar Goyal
Sorry. If I combine direct and indirect. So 3% is off highway exports. 8% is industrial exports and 4% is the farm equipment exports. And PV. PV is around 10 to 12%. Passenger vehicles. Passenger right now is very small. We have just started. From December onwards it is just 1% right now. So we expect this percentage to improve going forward.
Unidentified Participant
Got it, sir. That’s it from my side. Thank you and all the very best. Thank you.
operator
Thank you. Participants who wish to ask a question may press star and 1. The next question is on the line of Vijay Pandey from Nuvama. Please go ahead.
Vijay Pandey
Thank you for taking my question and. Congratulations for a good set of numbers. Couple of questions. I just wanted to understand if you can tell us that for the pipeline of 800 crores. So what will be the bifurcation in terms of industrial commercial vehicle of highway and passenger vehicle.
Pankaj Kumar Goyal
Yes, just give me a minute. So it is roughly around 24% coming from passenger vehicle. 27% coming from commercial vehicle, 44% from industrials and 4% from farm equipment.
Vijay Pandey
Okay. Okay. Secondly, so the. The recent. Recently the Volvo in the conference call or in the earnings release they have increased the guidance for calendar year 26. So just wanted to understand small boat trucks. I just want to understand how do you see the outlook? Are you seeing some improvement in Europe and US market on the CV side? Because some of the OEMs are increasing the guidance, especially for Europe.
Pankaj Kumar Goyal
On the guidance side. The. You know, when we have reviewed, there is a slight improvement. What they are showing. Okay, your heavy duty, we are seeing close to 10%. 10,000.
Vijay Pandey
Any improvement on the north?
Vijay Pandey
Roughly around 10,000? Yes, roughly around 5% forecast increase is there for Europe for CV for next year? For this year, Sorry, this calendar year. So are we seeing that in our orders also or our sales also?
Ashish Garg
Let’s see sir, there we maintain min max levels for European OEMs and we still have to see that movements coming in because there will be inventory which you know, which we are kind of reducing because of last year. Once we see that uptick will we see. But right now on the CV side still the numbers that we have till June with us reflect slight improvement but not much of improvement we are seeing over there. But definitely yes, over last year we see some improvement on those numbers as well. The off highway side we are seeing on off highways side and industrial side we are seeing some improvements.
You know, we have the forecast for the entire year which definitely shows a better number.
Vijay Pandey
Thank you, that’s pretty helpful. So the. The new CapEx. So that plant that will become operational in FY28. So what will be the our forging and machining capacity for that?
Pankaj Kumar Goyal
Yes, so forging capacity will improve from 1 50,000 tons to 180,000 tons. So roughly increment of 30,000 tons in terms of the forging capacity. And in phase one, as there are two large machining lines planned for FY28, there is first machining line will come which will add additional 5,000 tons of machining capacity. And FY29 there is another machining capacity which is planned. So roughly 10,000 tons of machining capacities will also increase by FY28 and 29. Combined or 10,000 each.
Pankaj Kumar Goyal
No, sorry, 5,000 tons each. Because these for the particularly for large high horsepower crankshaft. But we also plan to sell semi machined products or other machine products which are not in crankshaft application, especially on the wind side which are in discussions. And relatively the capex for those programs will not be same will be much lesser. The machining capex will be, you know, coming at lesser price.
Vijay Pandey
Sure. Thank you sir. Thank you all the best for coming quarters. Thank you.
operator
Thank you. Participants who wish to ask a question may press star and 1. The next question is from the line of Mithul Shah from Fantomat Financial Services. Please go ahead.
Unidentified Participant
Sir, thank you for the opportunity and congratulations for a very strong performance, particularly record high margins in this tough business environment. Sir, I have two questions. First one is on US side considering the. Of course it’s too early but in last few days this revised duty structure are you getting any sense or any initial discussion with a very high level of inquiries or very strong traction. So Mittal, a lot of you know the inquiry flow was already there but yes, the decision making was not happening the last 68 months everything was stuck particularly on the farm side where they are seeing relative weakness and the idea was to cut cost for the North American OEMs.
So over there we have started our discussions and again on the PV side for our existing customer base where we already have programs, we are in discussions for Southern and other activities also. So definitely interactions have started now and we are hopeful that the conversion of business will also happen in this year could be much faster and assuming that latest revised duty structure remains there and considering all our peers are sizable in terms of the US contribution where do you see our US revenue two or three years down the line as a percentage of overall business?
Pankaj Kumar Goyal
So Mithul on so right now we are around 7 to 8% on direct and indirect business.
To us this will definitely, you know inch up to 15 to 16% going forward and the meaningful increase will come from PV and PV programs that we already have and for which we are plan to ramp up very soon. And also on the industrial side which will come at a medium term basis. Yeah but sir, actually the CV cycle seems to be bottoming out globally now after almost one and half two years slowdown. But don’t you think CV would be bigger trigger compared to CVs or farm? So these are completely based on the new project wins and the new orders which we have.
And on the CV side we don’t have much of a business in North America right now and we still have to see but right now on the CV side there are excess inventories which are in place. So the flow of new businesses on the CV side is very less post this correction probably we’ll have to see because definitely there will be shift from China and we can see more opportunity on the CV side as well. So lastly one clarification on this solar project as you said next year Q3 it will become operational. So when can we expect fully operational that 2530 cr benefit on annualized basis.
Would that be from Q3, Q4 next year or it will take another year or so? No, once the facility started we can reach the idle generation levels within 10, 15 days. Just that October to February or you know, mid Jan period is a winter period in North India. Lead generation is relatively lesser. But yes, you can see that we can start producing peak units from mid February onwards on the plant and it will kind of peak out, you know, because summer months will definitely have higher units. But yes, on the plant, once the plant is operational, then within 10, 15 days you can reach up to the optimum generation capacity.
Yes sir. And this and this is the entire is for captive use? Yeah. And related to that in FY28 or 29 this solar would be how much portion of the overall contribution of power requirement? Because FY28 we expect the entire utilization for this to come and.
Unidentified Participant
Hello? Hello? Hello? Hello. Hello. Hello. Hello. Management. I’m audible. Yes, Mark, so sorry for the inconvenience caused. Hello?
Unidentified Participant
Yeah Mark, what happened?
operator
The team is looking into it ma’. Am, so they will give you a clear response on what exactly happened. What I’ll do is I’ll just wait for a couple of minutes. The participants are yet joining into this call.
Unidentified Speaker
Okay. So Vika, should we like just give closing remark and say that there was some technical issue and we can take questions offline?
Ashish Garg
Yes, I think that’s what we will do. It’s already 11. I think most of the participants have already left.
Unidentified Speaker
So let’s announce for the closure and. Request them to send in closing remark and close it. I think we’ll reach out separately to people then.
operator
Yes, so what I’ll just give the hand over to you sir and then you can just give your closing remark.
Unidentified Speaker
Mr. Ashish.
Ashish Garg
Yes. Yes.
operator
As there are no more further questions. From the participants, I now hand the conference over to Sir Ashish Garg for the closing comments.
Ashish Garg
Thank you and sorry participants for the technical issues. To conclude, our performance through quarter three and nine months of FY26 reinforces the strength of our core fundamentals and our growth strategy in a dynamic landscape. Our focus remains on leveraging advanced engineering capabilities and operating scale to deliver consistent outcomes. Looking ahead, continued investments in capacity and deeper customer integration will drive sustained long term value creation. We thank you for the continued trust in happy forging limited. It’s a privilege to have you to join us for an insightful discussion.
We believe to have addressed our queries satisfactory. However, we welcome any further engagement through an IR team. Should you have any follow up questions, please reach out to sga, our investor relation partners. Thank you for joining us today
operator
. Thank you on behalf of Happy Forgings Ltd. That concludes this conference. Thank you for joining us. You may now disconnect your lines. Sam. Sa.