Kirloskar Ferrous Q1 FY27: Castings Drive Volumes, Power and Fuel Costs Test Margins

Kirloskar Ferrous Industries Limited entered FY27 with steady topline momentum and a familiar theme: volumes and product mix mattered as much as commodity prices. In Q1 FY27, the company reported standalone revenue from operations of INR 1,771.5 crores, up 4% year-on-year, while EBITDA (excluding other income and before exceptional items) stood at INR 215.7 crores. EBITDA margin held at 12.2%.

Profit after tax was INR 82.3 crores, lower than the prior year quarter. The company also recorded exceptional items of INR 29.3 crores in the quarter, which reduced profit before tax after exceptional items to INR 105.1 crores.

Behind these numbers, Kirloskar Ferrous continued to operate as an integrated ferrous business spanning pig iron, castings, steel, and precision tubes. Management used the call to position FY27 as a year of execution: commissioning renewable energy projects, reducing coke consumption, and building capacity for higher-value castings and oil and gas tubes.

Volumes and realisations: castings strong, tubes weak

The quarter’s operating picture was shaped by contrasting trends across product lines. Castings were the clear positive. Casting sales volumes rose to 41,345 MT in Q1 FY27 versus 34,941 MT in Q1 FY26, a growth of 18% year-on-year. Casting revenue increased to INR 527 crores, up 24%, while realisations were broadly stable at INR 127,535 per MT.

Pig iron sales volumes were lower at 128,737 MT, down 3% year-on-year. Management explained that the decline in external sales reflected higher internal consumption, as the Jejuri plant ran normally this year after having a few days of stoppage in the comparable quarter last year. Pig iron revenue still rose to INR 546 crores, supported by higher realisations of INR 42,383 per MT, up 9% year-on-year.

Tubes were the weak spot. Sales volumes fell to 41,512 MT, down 14% year-on-year and down 19% sequentially. Tube revenue declined to INR 475 crores. Management attributed the softness to a product mix shift. In the absence of high realisation export orders and oil and gas tubes, the company sold more line pipes, which pressured overall tube realisations.

Steel volumes increased year-on-year to 22,633 MT, up 13%, with revenue at INR 168 crores and realisations at INR 74,434 per MT.

The quarterly PAT comparison is not clean because Q1 FY26 included recognition of deferred tax on unabsorbed depreciation and carry forward losses arising from the Oliver and Adidcca merger, as noted in the company’s five-quarter trend slide.

Costs and working capital: power and fuel were the swing factor

The major discussion point in the call was the sharp rise in other expenses. Management said the increase was largely explained by power and fuel costs, with a component driven by higher rates and another by higher volumes. Increased production at Rajpura and normal operations at Jejuri raised consumption, and the unit costs also moved up.

Management also highlighted a regulatory change that reduced a benefit the company used to earn through power trading. The company said it previously generated a benefit from trading the gap between green power and exchange purchases, but that route is no longer available, impacting the overall power cost line.

In response to a question on whether the change affects renewable savings, management acknowledged that it does. The company still expects benefits from solar and wind projects, but indicated that annual savings could be lower than earlier expectations and payback periods could extend.

On working capital, the company’s debtor days increased to 51 in Q1 FY27 versus 46 in Q4 FY26. Inventory days rose to 57 from 45. Gross debt stood at INR 1,156 crores as of June 2026, and net debt to EBITDA (annualised) was 1.29x.

Year-to-date FY27 capex was INR 131 crores, described as focused on efficiency and green energy.

FY27 execution agenda: cost leadership and mix upgrade

Kirloskar Ferrous laid out a clear set of strategic priorities for FY27 around five pillars, including cost leadership, product mix upgrade, market diversification, operational resilience, and sustainability.

The most immediate execution items are energy and coke efficiency projects. The investor deck lists a 35 MW solar project and a 25 MW wind project, both targeted for completion in Q2 FY27. On the call, management said commissioning is expected during the June to September period for the solar plant and the 12 windmills of 2.1 MW each.

On coke reduction and blast furnace efficiency, the FY27 pipeline includes coke bunker heating with flue gases at Hiriyur (targeted Q3 FY27) and a 149 TPD oxygen plant at Koppal (targeted Q4 FY27). Management also mentioned enhanced pulverized coal injection projects and indicated completion of key Koppal furnace projects by February to March.

Product mix improvement is expected to come through higher value castings and a better tube portfolio. The company is developing a two-part foundry line at Solapur aimed at producing large castings. Management indicated commissioning by around October and said the maximum casting size could be about 3 tons. Ramp-up is expected to be gradual, with management indicating utilisation could reach 500 to 600 tons per month within 1 to 1.5 years out of an installed capacity of about 1,250 tons per month.

On tubes, management reiterated the strategic intent to increase higher-margin oil and gas related volumes and premium couplings, while also expanding the addressable market by increasing size capability beyond the current range. However, demand was described as subdued in oil and gas, and export activity was affected by geopolitical disruption.

What management guided for FY27

Management offered selective volume and capex direction.

For pig iron, management said it sees a good opportunity to reach close to 700,000 tonnes for the year, possibly slightly less. For castings, management said it expects more than 15% growth and discussed a range of about 162,000 tonnes increasing to about 188,000 tonnes. For tubes, management did not provide a numeric volume guidance, but expressed confidence in recovery over the remaining three quarters.

On capex, management indicated FY27 spend could be around INR 600 to 700 crores, with higher capex likely in future years as large projects are triggered. It also stated that total projects of roughly INR 3,000 to 3,500 crores may be executed over the next four years.

Key risks and disclosures investors should track

The call included a discussion on a contingent liability disclosed in the annual report. Management said the Government of Karnataka had levied a forest development fee in 2016, which was challenged in the High Court and decided in favour of the company. The matter is now with the Supreme Court, where hearings have been completed and the order is awaited. The contingent liability referenced was about INR 350 crores.

Management also highlighted near-term pressure from high-cost coal. The company typically carries three months of coal inventory, and management said June to August would reflect higher-cost coal in the P&L.

For the tubes business, management acknowledged volatility and competitive pressure. It referred to dumping from China and a subdued oil and gas market, both of which affect realisations and product mix.

Takeaways

Kirloskar Ferrous delivered a stable Q1 FY27 on revenue and EBITDA, with castings supporting growth and pig iron realisations improving. The challenge was cost inflation, especially in power and fuel, which management expects to address through a combination of cost pass-through and renewable commissioning.

The investment case for FY27 hinges on execution. If the solar and wind assets stabilise and the coke and oxygen projects deliver consumption improvements, the company expects EBITDA support. At the same time, the tubes segment remains dependent on a recovery in higher-margin oil and gas and export orders.

The quarter reinforced that Kirloskar Ferrous is in the middle of a multi-year build cycle. Management’s guidance points to higher volumes in pig iron and castings in FY27, with larger capacity expansions and portfolio upgrades planned over the next two to four years.