MM Forgings Navigates Headwinds with Strategic Investments and EV Ambitions in H1 FY26

MM Forgings Limited, a prominent player in India's forging sector, has reported a mixed performance for the first half of fiscal year 2026 (H1 FY26), navigating a challenging global economic environment marked by volatility and geopolitical shifts. Despite these headwinds, the company demonstrated resilience, driven by a strong focus on operational efficiency and strategic long-term initiatives.

For H1 FY26, MM Forgings reported a consolidated turnover of INR758.29 crore, a slight moderation compared to the previous half-year's INR793.11 crore. The EBITDA stood at INR141.56 crore, down from INR162.66 crore in H1 FY25. Profit After Tax (PAT) for the period was INR35.76 crore, compared to INR62.02 crore in the prior period. The company's performance was significantly influenced by external factors, including a slowdown in the Class VIII truck market in the US, escalating tariff tensions, and rising input costs.

Segmental and Geographical Performance

The company's revenue streams highlight its diversified yet concentrated market presence. Commercial Vehicles continued to be the dominant segment, contributing 79% of the overall revenue, amounting to INR599.05 crore. Passenger Vehicles accounted for 10.8% (INR81.89 crore), while Agri and Off-Highway segments contributed 9.8% (INR74.31 crore). The 'Others' category made up the remaining 0.4% (INR3.03 crore).

Geographically, domestic sales remained robust, accounting for 61.4% of total revenue. However, exports faced significant pressure, particularly from the US market, which saw its share drop from 16% to 8.8%. This decline was attributed to inventory build-up at customer ends and a general slowdown in the US Class VIII truck market. Conversely, Europe's contribution increased to 21.4%, partially offsetting the US decline, while South America contributed 6.1% and other regions 2.3%.

Financial Summary Table (Consolidated - H1 FY26)

Strategic Initiatives and Future Outlook

MM Forgings is proactively addressing market challenges through several strategic initiatives. A key highlight is the installation of a 16,500-ton hot forging mechanical press, touted as the world's largest. This press, expected to be commissioned by March-April 2026, is projected to add approximately INR300 crore to the annual turnover, with higher margins due to its capability to produce larger, more complex parts. Revenue from this new capacity is anticipated to start flowing from Q2 FY27.

The company's EV subsidiary, Abhinava Rizel, is making significant strides in product development. Despite initial delays due to magnet supply disruptions from China, Abhinava Rizel has developed highly efficient EV motors in-house and is diversifying into manufacturing controllers. The subsidiary has secured a customer with a potential annual order book of INR20-30 crore, with sample parts due for delivery soon. Management expects Abhinava Rizel to commence manufacturing shortly, contributing to revenue from Q2 FY27, positioning FY27 as a potential 'breakout year' for the company.

Geographical Revenue Breakup (H1 FY26 vs FY25)

Capital Allocation and Debt Management

MM Forgings maintains a disciplined approach to capital allocation and debt management. The company plans to invest INR70 crore or less in capital expenditure during H2 FY26, followed by INR100-120 crore in FY27, focusing on productive assets that enhance capacity and efficiency. The management has expressed a clear intent to maintain current debt levels, viewing them as 'peak debt', and is not looking to add more to its books. To optimize finance costs, the company is actively converting rupee-denominated debt into foreign currency loans, targeting an annual interest outflow of INR50-60 crore.

Free cash flows generated will be primarily utilized to strengthen working capital and explore both organic and inorganic growth opportunities, rather than immediate significant debt reduction. This strategy underscores a commitment to long-term stability and strategic flexibility.

Outlook and Management Confidence

Management anticipates Q2 FY26 to be the weakest quarter, with expectations of a pickup in sales from November onwards, particularly in the North American market. They project H2 FY26 turnover to be between INR750-800 crore, bringing the full-year revenue close to the previous year's figures. The company holds an order book of INR300 crore, with INR200 crore expected to be realized in FY27, reinforcing confidence in future growth. MM Forgings aims to push its capacity to around 140,000 tons, with utilization expected to reach 80,000-90,000 tons in the next year, market conditions permitting.

Overall, MM Forgings is demonstrating strategic clarity and disciplined execution in a challenging environment. The focus on capacity expansion, EV innovation, and prudent financial management positions the company for sustained resilience and value creation in the coming fiscal years.