# 1. Financial Performance ## A. Key Figures * Consolidated Sales: ₹742 Cr vs. ₹773 Cr prior period (-₹28 Cr export decline) * EBITDA: ₹142 Cr vs. ₹162 Cr prior year · Operational EBITDA Margin: 17.5% vs 19.5% * **PBT:** ₹53 Cr vs. ₹87 Cr prior year · **PAT:** ₹36 Cr vs. ₹62 Cr prior year * **Consolidated EBITDA Margin:** 19% vs. 21% prior year * **EBITDA per Ton:** ₹38,000 vs. ₹40,000–₹40,500 previously * **Net Debt:** ₹843 Cr FY'25 · ₹855 Cr Q2 FY'26 (marginal increase) * **Capex:** ₹100 Cr (H1) · ₹70 Cr or less expected (H2) ## B. Revenue & Growth * **Top-Line Pressure:** Turnover and consolidated sales declined YoY, driven by a significant drop in export revenue despite stable operational EBITDA margin. * **Growth Catalyst Ahead:** New forging press expected to contribute from **Q2 FY'27**, with projected **annual turnover of ~₹300 Cr** at significantly better margins due to scale and efficiency. ## C. Profit Margins * **Margin Erosion:** Consolidated EBITDA margin contracted 200 bps amid inflation-driven **power and fuel cost increases** and higher employee costs linked to lower volumes. * **Cost Discipline:** Material costs improved to **~42% of sales**, supported by stable input prices and internal cost control, though sustainability remains under review. * **Future Margin Upside:** New press expected to deliver **higher profitability potential** due to lower capital allocation per unit, though specific margin guidance not yet available. ## D. Balance Sheet * **Debt Stabilization:** Company has reached **peak debt**, with net debt expected to stabilize around **₹850 Cr**; no new borrowing planned outside existential needs. * **Deleveraging Path:** Inventory reduction opportunity of **at least ₹50 Cr** could drive modest net debt reduction, but priority remains financial flexibility over aggressive paydown. ## E. Cash Flow * **Interest Optimization:** Management actively converting rupee debt to foreign currency loans, targeting **annual interest outflow reduction to ₹50–60 Cr** from ~₹70 Cr, saving **₹20–30 Cr** in cash outflow. * **Cash Allocation Strategy:** Excess free cash flow will be retained as **cash/cash equivalents** or used to reduce working capital—**not prioritized for debt repayment** over next two years. --- # 2. Order Book & Demand ## A. Key Figures * **Order Book:** **₹300 Cr** total · **₹200 Cr** expected realization by FY27 * **Sales Decline (Americas):** Contribution fell from **16% to 8%** of total sales (~**₹50 Cr** revenue loss) * **Geographic Mix:** **Europe** 21% · **South America** 6% · **Other Regions** 2% * **Revenue Outlook:** Base of **₹1,500 Cr**, potential rise to **over ₹2,000 Cr** with **₹500–700 Cr** from new investments * **Annual Order (Abhinava Rizel):** **₹20–30 Cr** per year ## B. Customer Rebound * **C. S. Demand Recovery Underway:** Rebound in Class VIII truck market observed from November, driven by depleted customer inventories and restocking, not market share loss. * **Market Structure Shift:** CV sector expected to grow only ~2%, with structural preference shifting to tractor trailers, reducing demand for front axles. * **Share Reclamation:** Company regaining traction in key markets through active customer re-engagement and improved sales execution. ## C. Order Visibility * **Clear Near-Term Visibility:** Majority of ₹300 Cr order book to be fulfilled within current fiscal cycle, with FY27 delivery path de-risked. * **Growth Levers in Play:** Revenue upside of ₹500–700 Cr hinges on timely execution of ₹1,000 Cr investments and no project slippage. * **Past Sales Pressure:** MM Forgings faced 6–8 quarters of declining sales due to customer offtake issues and delays, now targeting reversal. ## D. Sales by Region * **Europe Gaining Momentum:** Market share expanding with new client additions; absolute revenue expected to grow despite global headwinds. * **Americas Volatility Stabilizing:** Regional contribution normalized around 16% after sharp drop, supported by domestic sales strength and early recovery signs. --- # 3. Capacity & Production ## A. Key Figures * **Forging Capacity Utilization:** **75,000 tons** (current) · **80,000–90,000 tons** (expected FY25–FY26) * **Production Volume:** **52,000 tons** (H1) * **Sales Volume:** **37,000 tons** (H1) vs. 40,000 tons (prior H1) * **Domestic Revenue:** **₹437 Cr** standalone · **5%** of total sales * **Capex (5Y):** **>₹1,000 Cr** ## B. Forging Utilization * **Subsidiary Progress:** Abhinava Rizel nearing commercial production start, enhancing group-wide capacity absorption. * **Revenue Capacity Constraint:** Current asset base limits revenue potential to **~₹2,500 Cr** despite high utilization, due to turnover-to-investment cap of 2x. * **Capacity Definition:** HF refers to Heavy Forgings (6,000-ton press+), while FS denotes regular forge shop operations. ## C. New Press Ramp-up * **Global-Class Asset Commissioning:** World’s largest 16,500-ton hot forging press set to begin operations in **April**, following March commissioning. * **Phased Market Rollout:** Initial focus on larger parts for existing customers, with broader commercialization to follow post-ramp-up. ## D. Output Volume * **Flat Production, Lower Sales Volume:** H1 output stable YoY at 52,000 tons, but sales volume declined to 37,000 tons from 40,000 tons previously. * **Path to 1 Lakh Tons:** Full utilization of ~140,000-ton total capacity hinges on **market demand recovery**; near-term output guided at 80,000–90,000 tons. --- # 4. Product & Segment Mix ## A. Key Figures * CV Sales Mix: 80% overall · 90% domestic · 91% exports * Product Value Addition: ₹1.93 lakhs/ton sales per ton (up from ₹1.8 lakhs/ton) * **Forged & Machined Share:** **51%** of product mix (down from 58%) * **EV Motor Opportunity:** **₹20–30 Cr** potential revenue from new customer ## B. CV Dependency * **Persistent CV Focus:** Despite market shifts, business remains heavily reliant on commercial vehicles, with no near-term strategic pivot expected. * **Domestic Market Pressure:** CV unit sales declining due to shift toward tractor trailers, narrowing the addressable market for MMF products despite higher TIV. ## C. EV Subsidiary Progress * **EV Motor Breakthrough:** New in-house motor designs successfully developed and tested; sample orders placed, paving way for commercial launch. * **Technology Leadership:** Abhinava Rizel stands out as a rare Indian player capable of ground-up motor design, with **2% higher efficiency** reported by customers. * **Product Expansion Underway:** Moving beyond motors into controller development, with samples ready and commercialization plans in motion to meet OEM demand for integrated systems. ## D. Machined Parts Value * **Higher Value Realization:** Significant increase in sales per ton driven by enhanced value addition in machined components, despite lower volumes. * **Growth Constraints:** Expansion into off-highway and industrial segments limited by lack of planned machining capacity investments. --- # 5. Client & Market Risks ## A. U.S. Tariff Impact * **Tariff Burden Fully Passed Through:** The 50% U.S. tariff is currently absorbed entirely by customers, resulting in no direct financial impact on the company. * **Near-Term Resolution Expected:** Tariff headwinds are anticipated to ease soon, potentially unlocking improved demand dynamics. * **Customer Behavior Shifting Post-March:** Beyond March, customers are likely to pursue **resourcing alternatives or pricing renegotiations**, given the unsustainability of a 50% cost increase. * **Limited Viable Alternatives:** Potential sourcing shifts to **B. S. local suppliers** are constrained by capacity and cost, while moves to **China or Mexico** face comparable tariff and geopolitical hurdles. * **Demand Rebound Despite Uncertainty:** High customer inventory drawdowns have led to **increased offtake**, supporting near-term volume recovery independent of tariff resolution. ## B. Customer Adoption Hurdles * **Abhinava Rizel Secures First Customer:** The EV subsidiary landed a key customer in early May, though commercialization was delayed by **China-sourced magnet supply disruptions**. * **Start-Up Adoption Barrier Persists:** Major OEMs remain hesitant to adopt new technologies from startups, creating a significant go-to-market challenge despite demonstrated interest. * **No Recent Order Losses to Competition:** The company has not lost any orders domestically or internationally over the past six months due to competitive pressures. ## C. Project Delays * **Mixed Global Macroeconomic Signals:** Conditions are **positive in India**, **negative in the U.S.**, **neutral in Europe**, and **slightly improving in South America**. * **Sales Ramp-Up Impaired by External Delays:** Customer project delays and international economic volatility have collectively dampened revenue growth. * **Rare Earth Magnet Constraint Resolved with Strategic Upside:** Supply bottlenecks delayed commercialization but have since fostered **ongoing product development and deeper customer engagement**. --- # 6. Guidance & Outlook ## A. Key Figures * **H2 FY Revenue:** **₹750–800 Cr** (full-year near prior level, ± few pct pts) * **Capex (Next FY):** **₹100–120 Cr** (capacity expansion via 16,500-ton press) * **16,500-Ton Press Contribution:** **₹300 Cr** incremental turnover from FY '27 * **Peak Net Debt:** **₹850 Cr** (current operations ceiling, not fixed long-term cap) ## B. FY27 Recovery View * **Breakout Anticipated in FY '27:** New growth assets coming online in Q1 FY '27 to drive recovery, assuming stable conditions. * **Rebound Triggered by Class VIII Market:** U.S. truck market recovery expected from June onward, enabling margin improvement on **INR50–100 Cr** sales rebound. * **Growth Trajectory Resumes:** Management expects reversal of decline and return to growth from FY '27, with **sales rising at least ₹300 Cr within 12–18 months** if conditions stabilize. * **Q2 as Trough Point:** Current quarter expected to mark the low point, with H2 recovery supported by new product launches and North American sales ramp-up. ## C. Capex & Leverage Plan * **Disciplined Capex Execution:** Spending tightly controlled to avoid leverage spike; focus on high-return forging capacity expansion. * **Debt Ceiling Flexible:** While ₹850 Cr is current peak debt threshold, management reserves right to exceed it for compelling growth opportunities. * **Funding Strategy:** Growth to be funded via internal accruals and selective debt; **equity infusion under review** as outlier option to manage interest costs. * **No Near-Term Debt Paydown:** Despite projected **>20% EBITDA margins** and operating leverage at scale, debt reduction not prioritized before FY '27.