Kalyani Forge Ltd

We are publicly listed on the National Stock Exchange and Bombay Stock Exchange. We have a workforce headcount of about a thousand plus employees, and we are located in Pune, in Maharashtra, near the seaport of Mumbai and also in the automotive hub of Pune.

We have five plants, which are all in the same one kilometre radius. In Koregaon Bhima and Sanaswadi outside of Pune. These are Hot Forging Division 1, Hot Forging Division 2, Machine Components Division 1, Machine Components Division 2, and Cold and Warm Forging Division.

Our business segments are primarily passenger cars, trucks, industrials, agro, and turbo, about 60 percent of our business is in the automotive segment, which is passenger cars and trucks, and, we are fairly well diversified with about 40 percent of business in the industrials and agro verticals.

So, as I said, we are a well-diversified company leveraging common strengths across various market segments. As a strategy, these are the core segments that we are tracking, and we are increasing our market sharing. In the truck space, this segment is high volume and has high volume, high value forgings in every truck, which makes it very attractive for us and a very good fit for the kind of products we make. It is also a large and mature market globally and in India. It is a fast growing market. The passenger cars as well have high volume and high volume value forgings in every car, including in electric vehicles. This also is a large and mature market globally, and there's a lot of headroom for growth, of passenger cars in India.

So we are very bullish about this space. The industrial segment has been a steady and growing market for large engines, so we're able to manufacture and sell similar products in the industrial space, especially for stationary engines, gensets, off road vehicles, construction equipment etc. This acts as a hedge against the cyclicality of automotive markets. At the same time, we're able to leverage our automotive standards expertise. To differentiate with our competitors. In the agro space there's a high volume market for agro engines. Again, this is a hedge against automotive cyclicality and similarly, we leverage the automotive manufacturing experience.

Many of you may already be familiar with our products, but recently we have a decided to focus on fewer product groups and increase our market share in these areas. So our main product groups are engine, driveline, and axle. Of these, the engine products obviously are the part of the ICE market, which is the existing conventional, powertrain technology, but it has a very long standing staying power and we are, we believe that the ICE market will continue to, grow in absolute terms, even though there will be some growth in the electric and alternate fuels or powertrain technologies.

Then the driveline and axle products are both x-EV products or fuel agnostic products. So we are fairly well placed to, ride the wave of new powertrain technologies, as well as the existing, best technologies in the market. In the engine group, we have connecting rods, crankshafts, they are very high precision products and connecting rods have been our marquee product, since inception.

We are present across all market segments, and we make connecting rods of various sizes. We're also the first in India to make the fracture split connecting rod. The BS6 connecting rod or the Euro 6 compliant connecting rod. So we are seeing good traction, in this area. Our fastest growing product segment, however, is the driveline space where we have established warm forging technology, which is a niche area. And we are amongst very few players in India who are able to produce warm forging products like outer races, tulips, inner race, and tripods. These go in the half shafts between the wheels in passenger vehicles, typically in passenger vehicles. Similarly, axle product group includes stub axles, steering knuckles, and wheel hubs. We are growing in this group as well. It is our third largest product group, and we have recently won some orders in all these three groups, which I will talk about in the later slides.

Kalyani Forge has a growth formula, which is very important for our business for achieving our long term goals, as well as our balanced scorecard targets. So, number one is Strong Execution, number two, Business Development, and number three, Capex. And these are the three ingredients that enable and ensure growth of the company. This is the approach that we have set forth over the last one and a half years or so. And this strategy and approach is playing out pretty positively. And we're able to see the results. So I'll take you through each of these in a bit of detail.

So in terms of strong execution, we have our financial results, which are most important. In Q2 we clocked a total revenue of 62.85 cores, EBITDA of 8.29, cores and bat of 3.9 cores. As you can see, there is a significant growth in, income and especially in EBITDA and PAT. The main reason is we have, had a favourable product mix in our sales, focusing on more profitable business, and we have also taken a lot of steps on cost control, improving operational inefficiencies, lean manufacturing, and so on. So our EBITDA margin in Q2 was also at 13. 2%.

We have also been able to provide strong shareholder returns over the last five years, as you can see in the chart. Thanks to our shareholders, we have outpaced the, BSC Sensex with 180 percent growth compared to the market, which is at 100 or at 94%. Along with we this, we have strengthened our board with new independent directors joining following some vacancies we had due to retirement of the earlier board members. This is helping us a lot with the right kind of guidance, industry expertise and strategy to achieve our growth targets.

Our leadership team is also strengthened, with very clear, organisation structure across our manufacturing divisions, product lines and market segments. The leadership is also established at multiple levels so that there is a clear succession planning for the future. We have a cost reduction program in place where we're focusing on material costs, power costs, and productivity and we have a digital shop floor program, which I will talk about in the next slide.

The second ingredient of our growth is business development. And I'm happy to share with you that we have won record new orders. We have one total multiyear order book of 384 crores in H1 of FY25. So this translates to a peak annual value of 63 crores of new orders, as you can see in the graph. On the right and to give perspective, our existing forecasted order book for this year is 273 crores.

So it is about 25% of the existing order book that we have won new orders. There is a continuous new business development process which is on track. We had a similar order book winning in the previous year as well, and we are continuing this growth engine which was an area that required a lot of a lot of boost and we are seeing the results play out in in these Last few quarters.

There's a focus strategy on core products and segments. So by eliminating non-core products, we're able to give more and more attention to the right set of customers, to the right locations and market segments. And, therefore, we're able to fine tune our offerings as well as consolidate our internal processes, Capex, and all the decisions that go along with it.

This has greatly simplified our operations as well. So, we strongly believe in this focus strategy.

Kalyani Forge also enjoys an entrenched position, with in the market with multi decade relationship with OEMs. And, so we are getting significant traction with our existing customers itself, while we do, target new customers.

New customer acquisition and larger expansion projects take us to capex. This is our third ingredient for growth. As you can see we have steadily increased our capex over the last five quarters in Q2 our fixed assets have grown to 62.5 crores which is, almost about 8 crores of growth. We commissioned several Capex product projects in Q2 FY 25, particularly in plant and machinery, our machining expansion Phase 1 is complete. And Phase 2 is underway. So phase one is, has been for the immediate, connecting rod machining lines. Phase 2 is in the driveline and axle space, where we have, recently installed new plant and machinery or new cells. And this will continue in the coming quarters, we have a new 1600 ton forging press also installed last quarter and the 4000 tonne press, which I had spoken about, in an earlier AGM, this is on track for completion in Q3. This has been a long pending project, which was on the back burner for almost a decade. And now we're happy to see this, come to fruition as it will unlock larger weight products thanks, especially for the truck segment and industrial segment.

Continuing on CAPEX, this is just an image to help you understand how we are expanding our machining capacity. We have done 5 layouts for six old machining lines based on lean manufacturing principles. With this, we have been able to save 50 percent of existing shop floor space and free it up for new expansion. So these are a lot of low hanging fruits that we are able to, utilize and therefore make very judicious capital expenditure for growth.

And finally on Capex side, we have a digital shop floor initiative where we have digitized a lot of our, machine data inspection and quality data to provide a lot of insights and analysis. The quality data helps in traceability and rapid problem solving for our internal teams, as well as with customers.

We have learning management and training tools, and this is enabling automation and predictive maintenance of machines. So these digitization projects are underway in collaboration with our Group technology partner, Kalyani Studio, which has been a software startup founded in 2016. So we're able to leverage a lot of synergies with this company.

And this is our leadership, the board of directors. Mrs. Rohini Kalyani is our executive chairperson, she has decades of industry experience, and leading Kalyani Forge for over 25 years and she's also happens to be the only, female leader in forging industry, and has been a pioneer in technology, the connecting rod, machining, fracture split technology, as well as the warm forging technology, these were all spearheaded under her leadership. So we're able to, really leverage her experience on the board.

Next is, myself. I'm the managing director. I've already given my, introduction at the beginning of the presentation.

Mr. Gaurishankar N. Kalyani. He's the Non-Executive and Non-Independent Director, He is also on the Board of various group companies. He has a lot of experience in commercial and other businesses.

In terms of Independent Directors, we have Mr. Ajay Tandon who recently joined, as an independent Director. He has been at the helm of affairs in the Tata group, being the MD of Tata Autocomp. He was also on the board of several Tata group companies.

Similarly, Mr. Jeevan Mahaldar, also joined, in the last quarter. He's, an Independent Director and he has been, MD and, board member, in the Minda group for several years, before that he had worked with, Tata Ficosa and several other global companies.

Mr. Abhijit Sen, he's also an independent director; he has been with us for several years now. He was the CFO of Citibank, in his earlier career days and has a lot of financial expertise.

So overall we have a deep expertise at scale, automotive domain knowledge, global exposure and strong strategic and leadership skills.

With that I come to the end of our presentation Thank you very much for your patience and for listening. I'd like to now hand over to Rachana, who will moderate for Q& A.

We have a question from Mr. Amin, Good morning, sir.

See yesterday it was auspicious day, that was Dev Diwali and you have rather we have all celebrated the occasion with fantastic results. See the EBITDA, you could raise it from 7. 48 to 13. 2 in a quarter, it's unbelievable. Absolutely unbelievable. And I'm sure that with this, rapid run, we may definitely double that figure to say 15, is it?

Mehul Jain asking. The question is, is this EBITDA margin sustainable?

Top line, clean Charge top line, we have a target of growing our, top line, doubling our top line over the next few years. I cannot give an exact forecast. Not exact, but, let's say companies have an internal goal that in the next 4 5 years we have to go here and manage the margins like this. Yes. So our long-term target is to double the revenues to about 500 crores and, increase our EBITDA margin to 15%.

outlay around, 25 to 30 cores. some of it is based on the business projections that we are getting from our customers.

Kamaldeep Singh for your question. Sales target for this and next FY and how we are planning to increase sales. I won't disclose our exact targets for each year as we don't make forward looking statements. But I can elaborate how we are planning to increase sales. As I had shown in my presentation, we have a focused strategy on three product segments i.e. engine, driveline, and axle.

We are working closely with our existing customers. Thank you and we have received a record number of new orders around 62 crores of peak annual, orders we have one in H1 of FY25. So this is the effort that we are continuing and we have a three strong formula for growth, which is strong execution, business development and Capex.

On full capacity, your next question is on full capacity, how much sales are possible and capacity utilization currently and targets for this and next FY? (reading question from chat box) Thank you for your question. Again, capacity is very, very important in the forging industry. It's also very expensive so we must be very judicious in allocating capacity to the right type of business. So, currently in our forging plants, our utilization is fairly low and in our machining plants, our utilization is much higher, this is because in our forging plants, we, had to phase out some non-profitable business and make room for better business from our existing customers.

And there's also, our efforts are to work on upgrading our forging machinery, reconditioning, modernizing, and so on, so we don't need additional capacity in our forging side, but machining side, we will be spending in terms of a new capacity based on every new business order or visibility that we get.

There's one more question from Mr. Mehul Jain. How much company spends on new product development? that's a that's a good question. I honestly don't have the numbers at my fingertips right now, we will get back to you on this, but we have a pretty- significant outlay for new product development and it's, it's based on the, outlook from our customers. We are seeing some certain products are undergoing design changes and so we proactively, work on those and for new business where we have received orders from our customers, that's part of our regular, new product development activities. So it is a pretty significant, spend as well as effort that we put on it.