/** Title: Kalyani Forge Q1 FY27: Margin Expansion, OEM Mix Shift, and a Disciplined Capex Playbook */

Kalyani Forge Q1 FY27: Margin Expansion, OEM Mix Shift, and a Disciplined Capex Playbook

Kalyani Forge entered FY27 with a quarter that was less about headline revenue growth and more about operating quality. For Q1 FY27, the company reported total income of INR 67.07 crore, up from INR 64.53 crore in Q1 FY26 and INR 59.24 crore in Q4 FY26. What stood out was profitability. EBITDA rose to INR 10.89 crore and the EBITDA margin expanded to 16.2%, a sharp improvement from the sub-10% range seen a year earlier. Profit after tax came in at INR 4.48 crore versus INR 1.41 crore in Q1 FY26.

Management framed the quarter as a continuation of a structured transformation journey, where operating leverage is being compounded by shopfloor initiatives and a gradual reshaping of the customer and product mix. In the conference call, the Managing Director also clarified that Q4 FY26 profit had a deferred tax gain impact, making Q1 FY27 a more normalized marker of profitability.

Execution shows up in margins and returns

Kalyani Forge’s profitability improvement is visible across metrics the company itself is tracking closely. ROCE improved to 22% in Q1 FY27 from 18% in Q4 FY26, which management highlighted as crossing 20% for the first time. The company also reported a better working capital outcome for the quarter, with the cash conversion cycle improving to 148 days from 168 days in Q4 FY26.

Management attributed margin expansion to a combination of operating leverage and efficiency improvements. The investor presentation and call repeatedly referenced initiatives such as Vriddhi Council projects, plant engineering efforts, tighter material and power cost discipline, and operational stabilization through machine reconditioning and die-run prioritization. The company also cited price increases kicking in and an exit from low-margin business.

Product mix: Engine remains core, but axle and driveline are part of the growth plan

The company continues to be engine-heavy in its revenue mix, but it is also building out driveline and axle as scalable growth categories. In Q1 FY27, engine revenue was about INR 39 crore, driveline about INR 11 crore, and axle about INR 6.7 crore. The presentation’s mix chart placed engine at 60% of sales, driveline at 18%, axle at 10%, and other at 12%.

The call commentary emphasized that the portfolio is positioned for a fuel-agnostic future. Management stated that electrification risk is highest for passenger-car engine components and that the company has low exposure there. It also stated that driveline and axle products are platform-agnostic, and much of the engine exposure is in heavy commercial vehicles and industrial off-road engines, which management believes have longer staying power.

OEM focus and business mix optimization: phasing out non-fit revenue

A central theme in the presentation is business mix optimization. Management stated that around INR 40 crore of non-fit business was phased out in FY26. The company is now in Phase 4, described as resource re-allocation, with capex budgets aligned to core customers, capacity allocated to high-volume businesses, and engineering effort focused on the core portfolio.

This shift is visible in the OEM revenue trend shared in the deck. OEM revenues rose to INR 40.7 crore in Q1 FY27, which management said represented 31% year-on-year growth and 9% quarter-on-quarter growth. It also highlighted this as the fourth consecutive quarter of OEM revenue growth.

Alongside OEM mix, the company introduced a metric it plans to track going forward: revenue from new business, defined as business launched in the last three years. For Q1 FY27, new business revenue was INR 13 crore, representing 22% of total revenue. Management positioned this as an indicator of platform refresh and long-term revenue continuity.

Exports, which had dipped in mix during Q4 FY26, recovered to 16% in Q1 FY27 from 11% in Q4 FY26. Management stated that new high-volume export business is replacing legacy non-fit business, and that it expects better growth potential and margins from this reset.

Capex: capacity and OEE, funded by a debt-accrual mix

Kalyani Forge is planning INR 30 crore of capex in FY27. The presentation described the purpose as capacity increase and OEE improvement. It also indicated that 60% of capex is allocated to future growth areas such as driveline and axle, as well as ramp-up and new business. The capex plan by product group in the deck showed allocations across engine, driveline, and axle.

On the call, management added more operational color. It disclosed forging installed capacity of close to 20,000 tonnes, with utilization in the 50% to 60% range. Machining, however, is the tighter constraint. Management stated machining capacity is around 1.8 lakh pieces per month with 90% to 95% utilization, and that it plans to increase this to 3 lakh pieces per month by the end of FY27.

Wheel hubs were a major focus of investor questions. Management stated wheel hub samples are in progress and cited about INR 20 crore of annual revenue potential. It also said a new wheel hub line installation is in progress and that it is using existing CNC machines from recently phased-out businesses, plus procurement of select special-purpose machines. The line is expected to be operational by the end of Q2 FY27.

Funding strategy was stated explicitly on the call. Management said FY27 capex will be funded by a combination of debt and internal accruals, with a policy of 75% debt funding and 25% internal accruals.

What to watch from here

The quarter’s margin expansion and ROCE improvement make the execution narrative easier to validate, especially since the company has been emphasizing profitability and capital efficiency as core KPIs. Deleveraging also improved, with debt to EBITDA at 2.51x in Q1 FY27 versus 3.53x in Q1 FY26.

At the same time, the business remains working-capital intensive, even after improvement, with cash conversion cycle at 148 days. Management discussed actions such as inventory tightening, structured collections, payment term improvements, and use of bill discounting facilities to improve cash flows.

For investors tracking the company’s next steps, the near-term focus points are clear from management commentary: execution of machining capacity expansion, ramp-up of wheel hub programs, continued OEM revenue scaling, and sustaining margin improvements while inflationary pressures persist in indirect materials. Management also mentioned evaluating an equity raise in the future, including promoter participation, potentially for debt repayment, though it did not quantify timing or size.

The quarter’s underlying theme aligns closely with the presentation tagline of moving from decisions to gains. For Q1 FY27, the gains are measurable: a higher margin profile, improved ROCE, and a clearer mix strategy centered on OEM growth and new business conversion.