Kalyani Forge Hits Record 15.7% Margins, But Q3 FY26 Sees ₹0.12 Cr Net Loss

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AuthorAditi Singh|Published at:
Kalyani Forge Hits Record 15.7% Margins, But Q3 FY26 Sees ₹0.12 Cr Net Loss
Overview

Kalyani Forge Limited reported a significant achievement with a record 15.7% EBITDA margin in Q3 FY26, showcasing improved profitability on ₹58.22 Cr revenue. However, the company posted a net loss of ₹0.12 Cr, attributed to a non-cash deferred tax adjustment. Management is prioritizing business quality and long-term growth drivers like driveline and axle segments.

Kalyani Forge Surpasses Profitability Goals with Record EBITDA Margin, Navigates Net Loss

Kalyani Forge Limited has marked a significant milestone by achieving its highest-ever EBITDA margin of 15.7% during the third quarter of the fiscal year 2026. This impressive feat was recorded on a revenue of ₹58.22 Crore. Despite this operational success, the company reported a marginal net loss of ₹0.12 Crore, which was primarily due to a non-cash deferred tax adjustment. This situation highlights a strategic shift towards optimizing business quality and profitability over sheer revenue growth.

Financial Performance Deep Dive

In Q3 FY26, Kalyani Forge generated revenue of ₹58.22 Crore, a slight increase quarter-on-quarter. The company's focus on operational efficiency is evident in its record EBITDA margin of 15.7%. Profit Before Tax (PBT) stood at ₹3.94 Crore, marking the highest in the last four quarters. However, a non-cash deferred tax adjustment led to a net loss after tax (PAT) of ₹0.12 Crore. Employee costs remained a notable expenditure, hovering around 21-22% of revenue, though management aims to reduce this percentage through productivity enhancements.

Interest costs have also seen a slight increase year-on-year over the first nine months of FY26, a factor to monitor in future performance.

Strategic Pivot and Outlook

Kalyani Forge's management is steering the company towards a strategy of "business quality over random top-line growth." This involves product rationalization, upgrading customer profiles, and optimizing volume and pricing. The company is keen on increasing its share of business with Original Equipment Manufacturers (OEMs) and expanding its driveline and axle segments.

Medium-term targets include stabilizing EBITDA margins around 15%, with a long-term goal of achieving 20%. Revenue for FY26 is anticipated to be similar to the previous year or slightly higher. The company has allocated ₹25 Crore for capital expenditure in FY26, with 60% directed towards the driveline and axle segments, indicating a focus on future growth areas. A target of productionizing ₹30 Crore of new business within FY26 is also in place.

Historical Context and Growth Trajectory

Looking back, Kalyani Forge has navigated fluctuating sales trends. For instance, net sales declined from ₹286.35 Crore in March 2019 to ₹236.64 Crore by March 2025 [13]. However, operational efficiency and profitability have seen improvements, with operating profit increasing significantly over recent years [13]. The company also reported net sales of ₹2,407 million in FY23-24, a decrease from the previous year, but achieved a higher PAT of ₹4.55 crores, showing resilience and focus on value addition [46]. This current quarter's record margin aligns with this strategic focus on profitability and sustainable growth.

Investor Risks and Governance

While the company is focused on improvement, certain aspects warrant investor attention. The reported net loss, though explained as non-cash, remains a point of observation. High employee costs and the slight increase in interest expenses are also factors to consider. Additionally, CRISIL downgraded Kalyani Forge's ratings to 'CRISIL BBB/Stable/CRISIL A3+' in June 2024, indicating potential concerns regarding its financial risk profile [44]. The recent changes in Independent Directors, with Mr. Abhijit Sen retiring and Mr. Swaminathan joining, mark a transition in the governance structure.

Peer Comparison and Industry Landscape

Kalyani Forge operates in a competitive forging industry alongside major players like Bharat Forge, Sundram Fasteners, and Bosch [26, 29, 30]. In the recent Q3 FY26 period:

  • Bharat Forge reported mixed results, with consolidated revenue down YoY due to export challenges, but strong domestic automotive and defense growth [4, 10].
  • Sundram Fasteners demonstrated robust performance with record profits and revenue growth [3, 6].
  • Bosch showed consistent revenue growth and profit improvement [5].
  • Shakti Pumps, a peer in a related sector facing execution challenges, reported revenue and profit declines but maintained a strong order book [7, 9].

Kalyani Forge's strategic emphasis on high-margin driveline and axle segments aims to carve out a niche and improve its competitive standing, moving away from lower-margin businesses [46].

Future Outlook

The company's forward view remains centered on achieving its long-term EBITDA margin targets and scaling up profitable segments. Opportunities in Free Trade Agreements (FTAs) with Europe and the US are seen as potential catalysts for export growth. Investors will be watching the execution of new business productionization and the sustained improvement in operational quality.

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