Kross Limited Navigates Headwinds with Strategic Expansions and Global Ambitions in H1 FY26

Kross Limited, a prominent player in the Indian automotive component manufacturing sector, recently announced its financial results for the second quarter and half-year ended September 30, 2025 (Q2 & H1 FY26). The company reported a revenue of INR130.9 crores for Q2 FY26, marking a 5.8% year-on-year decline. For the first half of the fiscal year, revenue stood at INR270.3 crores, down 5.3% compared to H1 FY25. Despite these revenue headwinds, Kross Limited is actively pursuing a robust strategy of capacity expansion, product diversification, and global market penetration, signaling a strong focus on long-term growth and profitability.

The management attributed the Q2 revenue softness primarily to the announcement of GST rate cuts, which prompted customers to defer purchases from August and September into Q3, particularly impacting the Commercial Vehicle (CV) business. While MHCV volumes remained subdued during the quarter, demand has shown a meaningful pickup from Q3 onwards. EBITDA for Q2 FY26 was INR14.8 crores with a margin of 11.3%, and for H1 FY26, it was INR30.9 crores with a margin of 11.4%. Profit After Tax (PAT) for H1 FY26 increased by 8.7% to INR18.8 crores from INR17.3 crores in H1 FY25, with a PAT margin of 6.9%.

Financial Snapshot: H1 FY26 Performance

Strategic Initiatives Driving Future Growth

Kross Limited is actively investing in several key initiatives designed to enhance its manufacturing capabilities, diversify its product portfolio, and expand its market reach. These strategic moves are expected to mitigate the impact of cyclical industry fluctuations and position the company for sustained growth.

Extrusion Plant Commissioning: The company's extrusion plant equipment has been successfully delivered, with trials currently underway. Commercial production is slated to begin by the end of Q3 FY26. This expansion is critical as it will enhance Kross Limited's axle capacity by 50%, increasing axle beam capacity from the current 5,000 units/month to 7,500 units/month. This backward integration is a strategic step towards becoming the number one trailer axle manufacturer in the country.

Seamless Tube Manufacturing Facility: A significant investment of Rs. 167 crores is being channeled into setting up a seamless tube plant in Adityapur Industrial Area. Construction is progressing on schedule, with foundation work for heavy machinery underway and deliveries from overseas suppliers as planned. This facility, expected to commence commercial production by Q4 FY27, will manufacture seamless tubes of diameter 115-220 mm, catering to both captive requirements for trailer axles and parts, and external markets such as Oil and Gas. This initiative is anticipated to reduce reliance on external vendors and lower production costs, thereby improving profitability.

Entry into Tipping Jack Segment: To deepen its presence in the trailer ecosystem and diversify revenue streams, Kross Limited has entered the tipping jack segment. The facility is fully installed, and production of the first batch of tipping jacks is scheduled to commence in November 2025. This new vertical is expected to contribute to revenue diversification from Q4 FY26, with a target of 300-400 units per month for FY27, potentially adding approximately INR50 crores to the top line.

Expansion in Agricultural Segment: The agricultural business delivered robust double-digit growth in H1 FY26, with strong traction expected to continue into Q3. Kross Limited has completed commercial and quality audits for a leading MNC off-highway OEM, and business volumes are expected to be finalized by Q4 FY26. The company aims to increase this segment's contribution to 15% of total revenue over the next two years, highlighting its strategic importance.

Global Footprint Expansion: Export sales continue to show healthy momentum, contributing 4.2% to H1 FY26 revenue, a 24% year-on-year increase. The company has secured purchase orders from leading Tier-1 OEMs in Europe and the US for two families of parts, with final supplier approval expected in Q3 FY26. Kross Limited is on track to achieve a full-year export revenue contribution of 5% in FY26, with a clear roadmap to reach a double-digit export share by FY27. This global expansion is expected to enhance overall margins.

Management Outlook and Financial Discipline

Management expressed optimism about delivering a significantly stronger H2 FY26 compared to H1, supported by a favorable economic environment, GST rate reductions, a strong monsoon, and robust domestic demand visibility. The company anticipates an improvement in EBITDA margins to approximately 15% in the next one to two years, driven by the new extrusion line and increased export contributions, which typically offer better margins.

In terms of financial discipline, Kross Limited has efficiently utilized its IPO proceeds, with 84% already deployed towards capital expenditure for these strategic projects. The remaining 16% is planned for utilization within the current fiscal year (FY 2025-26). The company's focus on deleveraging the balance sheet is expected to allow for the utilization of further internal accruals towards incremental capital expenditure requirements, aligning with its long-term strategic goals.

Despite the short-term challenges posed by market dynamics, Kross Limited's proactive approach to capacity expansion, product diversification, and global market penetration underscores its commitment to sustained growth and enhanced shareholder value. The company's backward integration strategy and focus on high-margin segments are expected to drive profitability and strengthen its competitive position in the automotive component industry.