Kalyani Forge Ltd (NSE: KALYANIFRG) Q1 2026 Earnings Call dated Aug. 14, 2025
Corporate Participants:
Unidentified Speaker
Viraj G. Kalyani — Managing Director
Analysts:
Unidentified Participant
Presentation:
operator
Good morning ladies and gentlemen. A warm welcome to this conference call of Kalyani First Limited Q1FY25 26 covering the company’s financial results and future prospects. This conference call may contain forward looking statement about the company which are based upon beliefs, understanding and expectations of this company as on date of this call. The statement are not guarantees of the future performance and involves risks and uncertainties that are difficult to predict. As a reminder, A managing director Mr. Virajikalyani will be making the presentation after which participants will get the adequate time and opportunity to ask the questions regarding the presentation.
Please note that this conference call is being recorded now. I hand over the call to Mr. V. Kalani, managing Director of Kalani Force. Thank you. And over to Mr. Kalani.
Viraj G. Kalyani — Managing Director
#3Yeah. Thank you, Rajkumar. Good morning everyone. Good morning all shareholders, investors and all those interested in the Kalyani Ford stock. Very happy to have you here on our quarterly investor call. So I will take you through the highlights of the quarter. We’ve had a pretty good quarter of Q1 FY26. The major highlights are as follows. We have robust growth momentum. Revenue is up by 12% year on year and 9% quarter on quarter driven by ramp up in machine conrods, driveline and axle businesses. Our profitability is also strengthened PAT margin improved by 300 year on year through cost control, operational efficiency and product mix optimization.
EBITDA is at 10% which is maintained in spite of increased planned expenses and maintenance which we are decided to do in Q1 and I will talk about that in our later slides. Exports are on track to target. International sales is at 21% of our total sales and Europe sales have grown with new business coming in. Strategic projects. Last time I spoke about the Vritti Council which is about 13 strategic projects and initiatives which have delivered gains and savings worth rupees 10 crores of value in Q1. This has helped us to improve our top line as well as increase productivity and operational profitability.
Governance and compliance drive. We launched a clean audit review task force. Strengthened procurement governance with direct MD oversight on high value vendor engagements, Leadership and culture transformation. Key leadership, Senior leadership promotions based on merit have taken place. We have restructured roles to strengthen plant accountability and foster a high trust and performance driven culture. Future ready workforce. We have enhanced the trainee program to build a shop floor based leadership pipeline while ensuring compliance and integrity. For those of you who are new or joining us for the first time, I’ll just take you through our product offerings.
We Produce and sell critical high performance components which are forged and machined leveraging decades of experience. Our three main product groups are Engine, Driveline and Axle. Within the engine group, Connecting Rod is our signature product and it makes up about 70% of our sales. We also produce crankshafts, rocker arms and camshafts. Driveline is our second largest product group. Among those Tulip is the major product. These are typically warm and cold forged parts and we also make double yolks and yoke shafts which go into the propeller shafts. These are typically automotive applications for commercial for passenger cars and the double yolks and yoke shafts are for commercial vehicles.
The third group is axle and we produce stub axles, steering knuckles and wheel hubs. All these are growing businesses and I will share how we have grown in each of these areas. So we have a clear growth formula at Kalyani Forge which is a KFL growth formula which I have been speaking about since our first investor call. And so this is the the same format that we will continue to give updates on. The three main ingredients are Strong Execution, Business development and capex which help us achieve sustainable growth. So we’ll start with Strong execution. These are our financial results for the quarter along with trends of the previous quarters.
So as you can see our total income is at 64.52 crores and we’ve had a significant growth compared to previous quarter as well as same quarter. Last year our pat is at 1.4 crores which is significantly better than Q1 in the previous year. EBITDA is at 6.25 crores and EBITDA margin is at 9.7%. Now coming to sales this time we decided to give more details on our sales by product groups and segments based on the various questions that investors asked in the previous investor calls. So we have got all this data together and we will be reporting on these groups.
So you can see our sales by total sales, Engine, Driveline and Axle. And. This is the split of sales by different product groups. So 59 is engine, 18 driveline, 9% is excel and 14 are other products. So it’s important to note and we are happy to see growth taking place in our strategic segments. Our engine products have grown by 16% year on year. This is the most mature business so the growth it has a higher base and therefore the growth percentage would be slightly less compared to the other two. Driveline has grown by 42% year on year. That is compared to same quarter. Last year it is at 12 crores versus 8 crores last year and there’s a 10 growth quarter on quarter axle has shown the most significant growth and this is very much in line with our strategic focus.
It has grown 124%. So we are very happy about this and we have got. This is driven by increased customer demand as well as customer confidence in our ability to deliver. So this is now at 5 and a half crores in Q1 compared to 2 and a half crores in the same quarter last year. Then we come to sales by geography. I will talk more about exports here which is one of our strategic long term targets. We have a target of 50% exports over the medium to long term. So in the latest Q1 FY26 our export sales are at 21% of total sales and up 25% quarter on quarter.
Europe sales have grown as you can see in the graph here, with increased demand and there have been some new business sops kicking in. We have also successfully ramped up high volume export businesses across the board. So an important point to highlight here is that our exports businesses consist of a variety of part numbers, variety of market segments and typically we supply to Europe and US and to some extent to Japan. There are some businesses which are very niche and low volume and the demand is fluctuating throughout the year based on several factors. So we decided that just like we have done with our domestic business where we either phased out or removed non profitable businesses in exports, we have decided to prioritize the steady high volume and high value businesses, ensure there’s a very clear operations focus on ramping those up.
And and therefore we gave second priority to the niche and very low volume businesses which otherwise would have taken up a lot of our capacities at the expense of the growing export businesses. So this type of very focused execution has helped us to ramp up a lot of the important export parts which will increase customer satisfaction and help us to get new orders in the future. Business development. As I presented last quarter, we have had new business order wins in FY25 of 115 crores. And this has been probably a historic high for us. Based on subsequent interactions with shareholders, I wanted to give more clarity on these numbers.
So this figure of 115 crores, it represents peak annual revenue. Typically our new business orders have a program lifetime of 5 to 10 years and therefore there’s an initial ramp up phase and then in the first year and then it by year two or year three it reaches the steady state peak value. So that is the level that we refer to and then it continues for a few years. And then it tapers down in the last two or three years over a 10 year period. So 115 crores means typically it’s 115 crores every year except for the initial ramp up phase and the end of life phase.
One new machine Conrad program SOP commenced in Q1. We have also completed three PPAPs that is pre pre production approval process and our APQP project management is fully digitized in software. So we focus a lot on executing these orders so that it’s adding on to the existing business without disturbing the existing business. So that was a major focus. Additionally, I wanted to highlight the new order wins by product. So as you can see here on the, on the graph in the bottom, bottom right corner, majority of the new business order wins have been related to connecting rods and then a significant portion is of nozzle rings which are turbocharger parts.
We’ve also had tulips in the previous year which are which have started SOP this year. And we are keeping track of. New. Order wins by product, by geography, by supply condition and so on. But we make sure that new RFQs that come in are very strictly aligned to our strategic intent. Another update on business development. I’m happy to share that we received two customer awards in Q1. We received a technology and support award from Coel which is Kiloskar Oil Engines limited. They are one of our oldest customers and we received this award for developing one of their new engine connecting rods. Similarly, as I had updated in the last investor meet, we also received a collaboration excellence award from Mahindra for the fastest development of connecting rods and setting up a new line for them.
So we’re very happy to get this recognition from our old and established customers. Finally, the third pillar of our growth formula is CapEx. Last quarter I had highlighted that we have a budget of 25 crores approved by the CAPEX Allocation Allocation committee and the board. This is for FY26. So last three years or including this year, we are maintaining a steady CAPEX plan which is based on very clear strategic intent tied to new business programs as well as upgrading existing machinery for existing business. In Q1, 4 crores of capex items have been received and some of them are commissioned already and some are under commissioning.
That’s what you can see in the graph here. We commissioned a new connecting rod machining line. Our forging modernization program is initiated for profitability improvement. The first full recon project was completed in in last quarter. So in Q1 the second forging process recon project is Also underway. And I’d like to highlight that we have ample land available in our existing premises for expansion. So most of our capex goes into machinery and very direct expenditure which has a better conversion into sales. So that’s all I have for the updates for this quarter. I have added some slides about our company which most of you are already familiar with.
So I won’t go into them in detail but our investor presentation is available online. So I invite you to take a look at all these slides at your leisure so that we have more time for Q A and conversation. Thank you. Rajkumar, over to you to open up for Q A.
Questions and Answers:
operator
Thank you. Sir, I request the attendees over here if they have any questions so kindly raise their hands or they can use the chat box for questioning. Yes, we have Saket Kapoor, sir. Yeah. Saket Kapoor, you unmute.
Unidentified Participant
Yeah. Namaskar sir.
Viraj G. Kalyani
Yeah, Namaskar.
Unidentified Participant
As you mentioned about the 25 crore run rate that we have maintained for the capex. So if you could just give us some color. When we started this exercise in 2024 what was the capacity and gradually what have been the capacity addition for 2425 and hence also for this year and the asset turnover which we will be experiencing because of. I think so this 75 crore capex that we have gone through. Also you have spoken about modernization efficiencies which you are. Which you are alluding alluded earlier and you have to bring to the system because I think so margins for this quarter according to me are subdued.
Other expenses line item are also on the higher side. So if you could just throw some more color on.
Viraj G. Kalyani
Yeah, sure. So you’ve asked a couple of things about capex. One is capacity. The second is. If you could just turn over. Sir, I said turnover. Yeah.
Unidentified Participant
And the third was the efficiency and why the other expense line item is on the higher.
Viraj G. Kalyani
Yes, yes, yes.
Unidentified Participant
I will repeat again sir, you. You continue with the question.
Viraj G. Kalyani
Yeah. So these are all three interrelated capacity has been. We. We look at capacity in two sections. One is forging capacity of our forging plants and machining capacity of our machining plants. So we have installed capacity in forgings of close to 500 crores. But this is at sort of 100% or 100% OEE. That’s overall equipment efficiency. When we look at the OEE capacity of forgings we are currently at 150 to 200 crores. Now these are very initial numbers because we started analyzing capacity, install capacity and OE capacity just this quarter so that we are taking Much clearer capital allocation decisions.
So the whole game plan is to increase the OEE of our forging capacity which includes reconditioning the presses, replacing certain equipment in the press lines like induction heaters, conveyors and ancillary parts. So over the last three years this OEE capacity has been increasing on the forging side in terms of how much it has increased. I will have to get back to you and we will probably give those kind of insights in the next quarter. On the machining side, our capacity is close to 100 crores. 100 to 150 crores. Here the OEE is much better. But we need to add more capacity as and when we get new business.
So we have added about. These are very rough numbers. About 10 to 20 crores on the machining side or closer to 20 crores on the maching side in the last two years. Coming to asset turnover, we can. So our current asset turnover is very low, sorry, very high compared to our competitors. Which means our asset base, net asset value is still very low. The typical ratio is 2 is to 1. That is sales to fixed assets should be in the ratio of two is to one. And we are currently at close to four whereas most of our competitors are at two or below.
So there is a lot of headroom to improve our asset base and it will. This is what makes the sales very sustainable and robust. And that is the strategy we are following coming to the margins for this quarter. The other expenses are also tied to this entire strategy of improving our capacity and improving the OE capacity. So we had some significant maintenance expenses which are apart from the reconditioning to make sure that all our lines are. We are increasing uptime across the board. There has been a lot of increased focus on maintenance from the end of Q1 as well as it will continue in this quarter with significant oversight from top management where we want to make maintenance as a very strong core capability of the organization.
Unidentified Participant
Sir, when you mentioned that 500 crore OE means. Sir, I missed your very first comment. And after that,
Viraj G. Kalyani
yeah, the installed capacity is 500 crores and the OEE capacity is around 150 crores.
Unidentified Participant
And OE what do. How do we explain OEs operational
Viraj G. Kalyani
overall equipment efficiency? So OEE is a formula in manufacturing which is availability multiplied by productivity multiplied by quality. So these are in percentages. Availability is about machine uptime. Productivity is typically how much you can produce against the target production rate. And quality is how many okay parts versus total parts produced. So if the machine condition is very old or not reconditioned for a long time. The OEE will erode over time. And therefore the actual productive capacity. That’s what OE capacity means. The productive capacity will come down.
Unidentified Participant
You mentioned that our OE is 500 crore. And out of that the forging capacity is 150 crore.
Viraj G. Kalyani
No, I said for the forging capacity our installed capacity is 500 crores. And the OEE capacity is 150 crores.
Unidentified Participant
Okay. So a lot of effort needs to be taken now to move that from 150 to the 500.
Viraj G. Kalyani
Yes. Yes. It won’t reach 500. Because we aim to have at least 60%. 65% OEE in 4G. That’s a realistic target.
Unidentified Participant
Okay, so that translates into 300 some. Some closer to three.
Viraj G. Kalyani
Yes. Okay.
Unidentified Participant
And other than that sir, the machining part revenue. How. How will. How should we map that also?
Viraj G. Kalyani
So the machining capacity is 100 to 150 crores. And there we have. I mean that’s a separate capacity. So the forging capacity plus machining capacity is what we get as an overall sales. Sales. Yes. Only thing is we have to adjust for interplant sales between for forging and machining. So it’s a little more complicated to explain in a quick call. But it’s the simpler way to look at it is look at both separately.
Unidentified Participant
Last point is can you give the breakup between the forging and the machining capacity for this, this quarter and last financial year. And how should this map up for the current fiscal year? With the type of order booking and the efficiency that we are factoring in for this year. You could give that those two number. I’ll join the queues.
Viraj G. Kalyani
The. I. I cannot give you an exact number because it may accurate percentage wise are we are doing 60%. Six. 60.
Unidentified Participant
Yeah.
Viraj G. Kalyani
60% of our sales is machined machined supply condition and 40% is as forged. That’s the overall split I can give you at this point.
Unidentified Participant
And this year. Sir, with the type of order book which you have just mentioned. And about also that 115 crore peak revenue sales one order program which you have. How should this look like for the year? And sir, you already mentioned that other expenses one of items. So that will not be there for the next quarter going ahead.
Viraj G. Kalyani
Yes, it will be much less in the next quarter. I cannot give an exact quantification at this point. But as I said it’s related to maintenance expenses which were necessary to improve our productive capacity.
Unidentified Participant
Okay, sir, to follow. But I will take after my friends. Thank you.
operator
Okay. Moving with the other participant, Somil Shah.
Unidentified Participant
Yeah. Hi, good morning and thanks for the opportunity.
Viraj G. Kalyani
Yeah, yeah.
Unidentified Participant
So in our annual report I think we have mentioned about with the council and our guidance of doubling of revenue with an EBITDA margin of 15 by 27. So wanted to know more on this. What’s this council about and what role will it play for doubling our revenue in two years?
Viraj G. Kalyani
Yeah, thank you. So this council is a council of project leaders that are driving strategic, high, high impact strategic initiatives across the company. These are initiatives which involve ramping up production and major cost savings like in purchase cost savings, power cost reduction, cutting tools efficiency cost of poor quality reduction and these are a few examples. So they are going to. These are very structured projects which with cross functional teams. We review them every month at, in the steering committee and they have a clear mandate to increase the top line as well as increase the EBITDA in line with our long term goals.
Unidentified Participant
So if we are projecting or doubling of revenue by 27, so that is two years. So what’s, what’s our internal for this year? Since we have grown hardly 13 to 14% for this quarter.
Viraj G. Kalyani
Sorry, what is that?
Unidentified Participant
So basically we are projecting doubling of revenues in two years. So by 27. So what’s our internal estimate for this year? Because if you want to double our revenue in two years, so this year how much growth can we expect?
Viraj G. Kalyani
We don’t give forward looking guidance on revenue but as I have shared we have new business coming in in this year which will add on to the existing, existing business which was of FY25.
Unidentified Participant
Okay, so your order book I think is around what 150 crores in order book.
Viraj G. Kalyani
That’s the new business order. So that peak volumes at different stages, different parts reach peak level at different, in different years.
Unidentified Participant
Okay, so this, this is, this won’t be executed completely in this year, Correct?
Viraj G. Kalyani
Yeah, part of it will get executed this year.
Unidentified Participant
Okay, and so how confident are we, I mean to achieve doubling of our revenues in two years are we on track to achieve it?
Viraj G. Kalyani
We are fairly on track. The key, I mean it’s not an easy task but the key ingredients as I’ve said is strong execution and business development and capex. So all three have to work in tandem. We have to achieve the goals in, you know, in line with our deadlines. A lot of the execution involved is in improving our productive capacity so that our output is ramping up across the board. And we have seen this in the growth in the driveline and axle business in over the last few quarters. Similarly I haven’t shown a graph of our connecting rods sales.
Those have also been growing steadily every quarter. So this will involve a lot of, a lot of hard work and our teams are geared up for it.
Unidentified Participant
It’s not on absolute basis. Can you can’t even confirm on the percentage basis. I mean we can expect the mid teens or higher growth for this year.
Viraj G. Kalyani
Yes, I mean what I have said so far is all I can provide in terms of growth guidance. I can’t give any exact numbers because it’s the future is anyone’s guess.
Unidentified Participant
Yeah. Because as a shareholder we have seen hardly any growth in our revenues for past many years.
Viraj G. Kalyani
Yes, yes. But as you can see now, you can see the growth on this slide.
Unidentified Participant
Okay, and, and is there any seasonality in our business? I mean normally out of the four quarters, is it that the first half is a bit slower and the second half is a bit stronger. So how shall we look at it?
Viraj G. Kalyani
There is seasonality in different segments. So automotive has more of a festive season bump in Q2 and Q3. Construction industry has more in the, has a slump in monsoons and then it picks up later in the year. Exports business tends to have a little slump in Q4. So seasonality differs across segments and therefore we are quite diversified across these different market segments so that our overall revenue and business is not fluctuating.
Unidentified Participant
Okay, so Q1 to be a seasonally weaker quarter and Q2 Q3 stronger quarter, is it?
Viraj G. Kalyani
No, as I said, all our segments have different seasonality and they, they counter each other. So we, we tend to have overall steady market demand on an aggregate.
Unidentified Participant
Okay, and my final question, Last year we did about 48 crores of export order. So out of the total sales of 237 crores which is about 20%. So how much of this is to the US and are we facing any challenges due to U. S tariff issues?
Viraj G. Kalyani
Yeah, so sorry, no, we are not facing challenges on the tariff situation. Currently. We, our businesses are very niche and you know, very high precision products and it’s not very easy to just change over, you know, to some other location. So these are steady businesses that we have going into the U.S. in fact we have seen pretty good growth in our high volume businesses even to the US So that’s how it is. Overall percentage between Europe and US it’s probably in the range of they’re pretty equal. Europe will be slightly higher.
Unidentified Participant
Okay. And we don’t face any challenges due to FedEx?
Viraj G. Kalyani
No, at the moment we are not seeing any such challenges. We are connected with our customers on this aspect. But are, I mean the, the outlook is that any tariff impact would be passed on to the end customer or end consumer.
Unidentified Participant
That’s it. From my side. Yeah. Thank. You.
operator
With the next participant with Balakrishnan.
Unidentified Participant
Hi. Am I audible?
Viraj G. Kalyani
Yeah. Hi. Hi.
Unidentified Participant
Yeah, sorry, there is more background. So just want to understand. So you mentioned that hard forging OEE is about 100 crore and machining is about 150 crore. So in that sense the numbers that we are doing today in terms of the quarterly run rate, is that sort of optimum? And for us to grow for this year, we’ll have to keep unlocking this OE capacity up. Is that, is that, is that a fair understanding?
Viraj G. Kalyani
Yes, yes, correct. That, that is a. You, you’ve understood it correctly. We have to keep unlocking the capacity especially on the forging side. On the machining side there is some unlocking and you know, potential for efficiency improvement. But there we are adding new capacity in machine.
Unidentified Participant
So just to understand this better. So sorry. So just to understand this better. So is it like, is it like a. Every monthly exercise, every quarterly exercise, how is it. Because I mean we are at this level and at this point, I mean we did 64, 65 crore this quarter and if you just analyze this number, probably you will get to about 460 to 70 crore which of course is a growth over last year. But just to sort of get to a higher growth towards what we want to achieve in terms of our overall aspirations.
Viraj G. Kalyani
Yeah, yeah.
Unidentified Participant
So, so that would sort of increase the asking rate. And I mean, so just want to understand.
Viraj G. Kalyani
Yes, for every quarter will go up.
Unidentified Participant
But, but is that possible? Yeah, but is that possible in terms of unlocking that OEE from a, from your capacity point of view?
Viraj G. Kalyani
Yes, we have seen very good results just in two months of having this OEE approach. I’ll give you some examples. We have three press lines where we did some changes in the configuration in, in doing some, you know, removing some clearances in the machine, improving alignment and servicing the machine. It took about three to five days of keeping that machine down and, and doing this overhaul. And right after that we were doing record production per shift and per day. And this has, this has been a very clear result that we’ve achieved. So these are low hanging fruit but they require a lot of coordination across maintenance, production, procurement and at the same time being able to satisfy our customer schedules for the month.
But we are seeing good results in unlocking this. It’s, it’s kind of, this kind of focused approach. And more of a technical approach to maintenance was missing in the past and we are now really unlocking that and we have all the experience and a lot of skill set in our team on this and we’re just channelizing it better.
Unidentified Participant
Got it. Understood, that’s very clear. Thank you. So other question, other question was as we scale up the business and you mentioned one part of your vector of getting this growth is CapEx and you outline 25 crore this quarter. I mean sorry this year as CapEx. So how are you planning to fund it in terms of this capex for, for this year and, and, and also the capex that you envision for next year and the plan overall to get to that 500 crores.
Viraj G. Kalyani
So for this year’s capex we already received a term loan and we are fully covered. We also have some additional sanction for the term loan. So it will also help in next year’s capex. At the same time we are seriously exploring raising capital from equity in. In the coming quarters.
Unidentified Participant
Understood. And from a new business.
Viraj G. Kalyani
And sorry, one point was it’s not 100 debt financed. We are, it’s 75% is financed by debt and 25% from our internal accruals.
Unidentified Participant
Okay, got it. I’m sorry just as a follow up on that, in terms of your equity issuance that you, I mean equity raise that you’re planning to do, is it any, anything that you can share in terms of your thoughts, whatever you have formed up so far, is it going to be.
Viraj G. Kalyani
Yeah, no, it’s. Since it’s a sensitive sort of topic, I mean investor sensitive topic. I can’t give any specifics at this point. We are, we. We are starting the groundwork for it.
Unidentified Participant
Right, right. And just the other question on the improvement in the margin so broadly from a. The glide path from let’s say 10, 11% that we would have done this quarter normalized assuming whatever one off expenses that you. So if you can broadly outline what are the three. I mean from a key factors to.
Viraj G. Kalyani
Yeah.
Unidentified Participant
What are the glide part for us to get to 11. From 11 or 1011 to 15%. Yeah. Next two years. Yeah.
Viraj G. Kalyani
So the biggest factor is material cost. We. Which is at 48% right now we need to bring it to 45%. This will happen with more machining content, more fully finished content and therefore better pricing, better value addition as well as improving the yield of our materials and reducing cost of poor quality. So reducing the rejections which are internal rejection rates. This will also improve as we do the machine reconditioning so it’s another side benefit that the machine accuracy makes the production quality much better. So that’s material cost. Next is manpower cost. This is something we have to, it’s, it’s more tricky in the sense it’s kind of a fixed cost.
But the key is to increase productivity of the workforce and to improve talent density. So we do have a strong performance culture now, which we have been increasing the last few quarters. So there’s much more accountability, much more clear targets, balanced core card system across all team members and stronger engagement with our labor workforce to increase their productivity. Third is power cost, where there’s a lot of energy efficiency initiatives that we are undertaking. We did a energy audit, a very detailed energy audit last quarter and this quarter we have started implementing on the recommendations from that audit.
So it involves modernizing some of the power transmission equipment, the regulating equipment to ensure good quality of power and so and changing some of our old equipment to more energy efficient equipment. So that’s the third part of the EBITDA increase. And then the fourth is on the consumable costs as well as transport costs and a lot of the supporting or indirect costs. So those all have, you know, we are looking at better procurement, better improving the vendor base and improving our overall planning input.
Unidentified Participant
Very clear. So I mean in terms of, in terms of this 15, I mean just going by the map, I mean we are at around 45, 48 in terms of material cost. And you’re saying that if we get it to 45, I mean that itself will help us to get to that 15 number?
Viraj G. Kalyani
Yes, yes.
Unidentified Participant
So. So I mean, so in a sense, of course it’s. Not everything can be put to precise numbers. But if we achieve a lot of the initiatives that we working on, we probably there could be, we could reach that 15% number given that growth will also have some kind of operating leverage. Is that a fair understanding? I’m not asking that it’ll be whether you will do it. I’m just asking whether the business has some.
Viraj G. Kalyani
Yeah, yeah. Top line growth is, is another major lever in improving the EBITDA margins. So that ties into the, you know, capacity improvement, OE improvement.
Unidentified Participant
Got it.
Viraj G. Kalyani
Yeah. And the material cost is, it’s quite challenging to execute that kind of trans. Transformation but. And it takes a little bit more time, but it, the, the path is clear.
Unidentified Participant
Understood. Sorry, just two more questions if I can. Yeah, one is, so you mentioned machining is about 55% right now for us in terms of revenue.
Viraj G. Kalyani
60.
Unidentified Participant
60. I’m sorry. So any broad targets for this year and also the yield improvement or the rejection rates that we have. Whatever you can share. Let’s say what is it today? What was let’s say two years back and what are you trying to target so that just for us to get a good sense on the improvements.
Viraj G. Kalyani
Yes, machining is from 60%. Our target is to go to 70% this year or 65 to 70%. I’ll just be conservative on the cost of poor quality or rejection. We measure in terms of COPQ cost report quality which takes the more holistic all the costs involved including rejection, rework, segregation and so on. So I. I can’t. We are targeting about 1.5 crores of savings from COPQ COPQ reduction for the year. That’s a clear number I can give you. I don’t have the yearly trends readily available right now.
Unidentified Participant
Okay, got it. I have a couple of questions but I’ll join back in the queue. Yes, thank you.
operator
Okay. Are there any other participants who would like to ask questions? Can I continue? So yeah, SAR is again here.
Viraj G. Kalyani
Yeah, yeah. I mean some, some may have follow up questions. We can. Yeah them if there’s no other new. New question. New participants.
Unidentified Participant
So when you mentioned about this 115crore new order edition, what would be the closing order book number then? Including this or excluding anyway you, you if you can share, this is the new one which you have backed. So what have been the closing order book?
Viraj G. Kalyani
Closing order book is close to 260 crores for last year. Okay.
Unidentified Participant
And that executable period is by what. Time we will execute,
Viraj G. Kalyani
not 200. Yeah. 260 crores would be sort of including the regular schedules as well as some of the earlier new business. So we had 95 crores of new orders in FY24 and 115 crores in FY25. So is your question in terms of these two numbers or. Or are you asking something else?
Unidentified Participant
My question was for 31st March 2025 what was our closing order book? I think so 115 is the new specific order which you have won for the first quarter. That will span over a 10 year or 10 year period which you mentioned peak revenue of 150.
Viraj G. Kalyani
Yeah, 115 is of F. FY25 means which we won throughout FY25. Okay.
Unidentified Participant
So that. That is a particular one or any. What should be the closing order book for 31st March 2025.
Viraj G. Kalyani
Closing order book? I’m not sure how we can specify that. But maybe in the. In the next quarter’s presentation I will make this more clear. In FY24 we had 95 crores out of this. Some part of it has got into production throughout FY25 and remaining will carry forward into FY26. Similarly this FY25 115 crores some part of it will get executed in FY26 and remaining will carry on into FY27.
Unidentified Participant
Sir you mentioned about connecting rods as the key component of our product profile and I think so you have given us the breakup also. If. If going ahead if we can get unit realization also then we can understand out for the total machine how much do our equipment contributes to the cost of the to the machine. So that will give us some understanding as a percentage of the total machine. Cost what should be our that’s a.
Viraj G. Kalyani
That’s a sensitive information business sensitive information for us so I don’t think we can disclose at that level.
Unidentified Participant
Sir another point was that we hosted our call at 11am and presentation was uploaded nine or 10 minutes ago only. So requesting that next time either with the results you come up with the presentation or give us at least a two hours time today being the penultimate day for earning season also we find it very difficult to align our schedule so for better participation also we should look at the second half 4pm scheduled and some two days gap also can work and we should do it on 18th. We would have been very different than by today’s schedule.
Viraj G. Kalyani
So that was one and that’s a good suggestion. We’ll. We’ll. We’ll definitely take that into our planning for next quarter onwards.
Unidentified Participant
I was. I just. I read an article earlier sir maybe correct me there when at the time you were inducted or you give our company gave some target of say 4 500cr revenue way back in 2017-18 so correct me there.
Viraj G. Kalyani
No I don’t think we have given that in 1718
Unidentified Participant
maybe sir one target. I. I will just share the article later on if I have the same but at the time of you joining we had a program but that got differed over a period of three to four years so if you could just explain to the investing community what changes have you made that.
Viraj G. Kalyani
Well yes I think that that article would have been way back in 2013 or 14. I had just joined in 2012. I had. I was in a much. I was much younger that time. I was 24 years old in 2014 but our plans were clear on expansion. The only thing that was not clear on that at that time was the clarity on CapEx so we did not have a structured program of CAPEX and capital allocation like we have this time. As you can see the numbers on CAPEX as well. You know, last three years we have been working on it and having that.
That reflects the kind of ambition that we have as an entire leadership team and the board as well. So that clarity was not there in 201415 because there was a lot of uncertainty about electric vehicles and new technologies and Connecting Rod was our signature product back then as well. So we were just being very very conservative that time. Right. So that’s what has changed.
Unidentified Participant
So we hope that this, this time we will implement what we have.
Viraj G. Kalyani
Yes. Yes.
Unidentified Participant
Program to get an understanding. Sir, as as the earlier part Balasar was also asking see how should one look at the revenue in terms of the utilization percentage so that we can get an understanding how well are we aligned to our target of the doubling the revenue in two years from from the exit of FY25. So your revenue of 64 crore. How should that be factored in terms of utilization? And starting from Q1 how will the utilization levels will be for the exit of this financial year. Then we can map out how things will work out.
May work out okay.
Viraj G. Kalyani
But that that. That is an indirect way of giving a guidance to you. So. But only in terms of utilization of Q1. Again it’s it would split between forging and machining. I I On the forging side the utilization is around 40% and on the machining side it is around 80 80%. Now utilization is different from the OEE capacity. So just please take that into consideration.
Unidentified Participant
Why I am asking that question earlier Participant also asked so we only want to understand how will the margin improvement happen with the incremental increase in the utilization level. Since you mentioned about various five factors that will add to the margins when when worked out.
Viraj G. Kalyani
Yeah.
Unidentified Participant
So I think the utilization levels are somewhat at peak only where where the wave we have exited for Q1. So there would not be any further improvement in in that case since machining is 80% and forging is 40. So we will not be having any further volume addition. Is that understanding correct?
Viraj G. Kalyani
No, this is 40% is has a lot of headroom for growth. I mean that’s not fully anywhere close to being fully utilized on the forging side. On the machining side we are adding new capacity. We are increasing the installed capacity through our some of our Vriddhi Council projects. So that’s there is a lot of headroom for growing installed capacity in machining and growing OE capacity in Both forging and machining and then growing utilization through increased order books or increased schedules from the customers and the production against those schedules.
Unidentified Participant
Last point. I’ll join the Q. Sir, what was the capacity addition for the year ending 31st March 25th in terms of the. The forging and the machining part and with the new capacity addition and the type of steps we are augmenting in the this scheme. What should be that for. For the exit of FY26. If these two comparison you can.
Viraj G. Kalyani
Capacity addition in machining was close to 20 crores. And this is. I would take off two years FY24 and FY25. So you can assume 10 crores each year. It’s very rough numbers. Forging side capacity was increase was of one press line which comes to. I. I’ll. I’ll have to look at the numbers but it could be close to 10 crores. You have.
Unidentified Participant
You are mentioning how much we have spent at cap on the. But.
Viraj G. Kalyani
Currently is at close to 10,000 tons in terms of OE capacity and it should. It should be increasing. It can go up to 20,000, 25,000 tons. But again these are ballpark figures. These are ballpark figures. Rough estimates.
Unidentified Participant
So 10 to 20. But journey will take how much time.
Viraj G. Kalyani
That is. That’s a very good question. I mean that’s the major challenge. We have an internal target to get there in. You know in within the next one and a half to two years. But. And that is an ambitious target. Okay.
Unidentified Participant
Right sir. So all. All this is backed up by your customers order booking. All this is aligned to what the execution cycle will map over a period of time. That is what the program should be and that is whether you get the confidence to go on for the addition. That understanding is correct?
Viraj G. Kalyani
Yes. Yes.
Unidentified Participant
And all other efficiencies under the program will be incremental to the efficiency and the margin additions going in.
Viraj G. Kalyani
Yes.
Unidentified Participant
This year we will be factoring in 10 crore of efficiency to the bottom line from the program. This is what your presentation speaks. It’s not.
Viraj G. Kalyani
It’s not a clear. It’s not a one is to one addition. This 10 crores also involves. I mean there have been other cost increases which may you know which are getting covered by this 10 crore savings. So part of this 10 crores goes straight to the bottom line.
Unidentified Participant
Right sir. Thank you sir. If I have any other feedback I will share with the department so that that can be passed on to you.
Viraj G. Kalyani
Yes, thank you.
Unidentified Participant
Thank you sir. And all the best.
Viraj G. Kalyani
Thank you.
operator
Any other participants who Would like to ask questions.
Unidentified Participant
Yeah, I had just two questions. Can I ask?
operator
Yes.
Unidentified Participant
So without just one question was around actual business grew very well. So what contributed Is it a new customer or. And do you think this is kind of sustainable for the. For FY26? So that was my first question.
Viraj G. Kalyani
Which one did you say? Axel.
Unidentified Participant
Yeah, Axel. Like it grew almost 100% or 120%. So yeah. So is this going forward sustainable and do you see this business which Is I think 8, 9% of your business at this point of time is that going to be a higher share let’s say in FY 26 and 27?
Viraj G. Kalyani
Yes. This is a very strategic growth area for us. It’s a non ice business so it, you know it will in. In irrespective of fuel or electric powertrain, this business will continue. The growth percentage may not be as high just because right now it’s a lower base effect. But this, this business has been ramping up with our existing customers. We have had very close coordination with them on capacity increase and we are also we have new orders in the pipeline from them as well as from some other customers on similar products. So there is increasing customer confidence on these products.
And where earlier there was a lot of confidence on the engine products but now they are also seeing us as a serious player in this space.
Unidentified Participant
Okay. And just I think just one more thing was around the fact that you mentioned a few years back, almost a decade but you had some plans and you were not sure about this transition from ICE to EV etc and you were not clear on the assets etc. So I mean today also we are somewhat in that situation where probably that transition is much more clear.
Viraj G. Kalyani
Yes.
Unidentified Participant
So I mean 60% of the revenue comes from engine. So how do you see I mean one is this immediate number but let’s say three, four years out. How do you see that? How do like more business will be redundant for us or like just wanted to get your perspective.
Viraj G. Kalyani
No, we. We have a very positive outlook on all our businesses including the engine business. There are. The ev. EV transition has met with a lot of challenges and a lot of the realities are coming out now in you know as, as a lot of electric cars get into implementation phase. A lot of customers have rolled back on their EV programs. A lot of governments as well have rolled back on subsidies and so on and there’s a more, more and more consensus on a multi fuel future. So engines are here to stay. And even in.
Even though evs may increase it’s most probably restricted to the passenger car space and maybe the two wheeler space. We are. Our engine business is mostly on the truck space, a truck segment and off road and industrial segments which will continue to grow. But we have a substantial chunk of business which is currently 40, which is non ice based products. And those will also, as you can see those growth rates are higher than the engine growth rates. So we will keep a balanced outlook on this. But we will not let go of our core business of engine.
And there’s a lot of headroom to grow and a lot of market share to recapture.
Unidentified Participant
Important. And just one question. How many active customers do we have? Roughly.
Viraj G. Kalyani
Roughly around 40 to 50.
Unidentified Participant
40 to 50. Okay.
Viraj G. Kalyani
Yeah.
Unidentified Participant
Okay. Thank you very much. Virajan. All the very best. You’ll be ready.
operator
Okay. With your permission, should we conclude this meeting?
Viraj G. Kalyani
Yes, sure. If there’s no more questions.
operator
Okay, thank you.
Viraj G. Kalyani
Have I. Oh, sorry. Screen is. Yeah.
operator
There are no questions. So thank you all the participants and the MD for your time. We would be posting this transcript and the recording as well on the shock action shortly and looking forward for your encouragement and support as always. On this note, we end this meeting. Thank you everyone.
Viraj G. Kalyani
Thank you.