Craftsman Automation plans a consolidated capex of ₹1,500 crore for FY27, to be funded by internal accruals. The company is cautious about further expansion due to global economic uncertainty.
Craftsman Automation Approves ₹1,500 Crore Capex for FY27
Consolidated FY27 Capex: ₹1,500 crore Standalone Capex: ₹1,000 crore Reader Takeaway: Disciplined capex funded internally; cautious outlook amid global uncertainty. ## What just happened Craftsman Automation's management has approved a significant consolidated capital expenditure (capex) plan of ₹1,500 crore for the fiscal year 2027. This includes ₹1,000 crore allocated for standalone operations and ₹430 crore for its subsidiary, DR Axion. The plan also incorporates maintenance capex estimated at ₹250-300 crore. ## Why this matters The entire capex requirement will be met through the company's internal accruals, indicating a strong internal cash generation capacity and a debt-free expansion strategy. Management's cautious 'wait-and-watch' approach to further expansion, pending clarity on global economic conditions, signals prudent financial management. ## The backstory Craftsman Automation is strategically expanding its high-pressure die casting capacity in the Aluminium segment, which is currently operating at over 80% utilization. The Powertrain segment is at around 70% utilization, with a focus on new projects like heavy horsepower engines. The company is also undergoing restructuring of legacy low-margin businesses under Sunbeam, aiming for mid-teens EBITDA margins by Q4. ## What changes now The approved capex will fuel growth in key segments, particularly the Aluminium division and the development of Heavy HP engines. The company has set an ambitious target of USD 100 million in revenue for its Heavy HP engines project by FY29/FY30. Sunbeam restructuring is expected to be 90% complete by December, aiming to align its margins with the parent company. ## Risks to watch Global economic uncertainty and manufacturing volatility are key concerns, prompting a cautious capital allocation strategy. Rising infrastructure and construction costs compared to 2016 make new capacity expansion more expensive. The transition phase for Sunbeam's legacy businesses requires customer support, potentially causing short-term margin pressures. ## Peer comparison Companies in the auto ancillaries and engineering sectors often undertake significant capex cycles. However, Craftsman Automation's strategy of funding entirely through internal accruals differentiates it, reducing financial leverage risks compared to peers who might rely on debt financing. ## Context metrics (time-bound) - Aluminium Segment Utilization: >80% - Powertrain Segment Utilization: ~70% - Sunbeam Restructuring Completion Target: 90% by December - Heavy HP Engines Revenue Target: USD 100 million by FY29/30 ## What to track next Investors will be keen to observe the progress of the Sunbeam restructuring and its impact on margins. Monitoring the ramp-up of the Heavy HP engine project towards its FY29/30 revenue target will be crucial. The company's decision on additional expansion post-Q2/Q3 will also be a key indicator of future growth plans.
