Kalyani Forge hits 14-year profit high but management narrative slips
The auto components maker posted a record ₹9.32 cr profit, yet contradictions in interest cost and receivables reporting raise questions about management's credit control.
— 1 earlier story on Kalyani Forge Ltd. →What's new
- FY26 net profit reached ₹9.32 cr on flat revenue of ₹238 cr.
- EBITDA margins expanded 220 bps to 13.3%, with a 20% target set for next year.
- Management admitted interest costs were capitalised term loans, not working capital optimization.
Why this matters
While operational efficiency is improving through the shedding of low-margin business, the management's shifting explanation for rising interest costs is a red flag. Investors should weigh the new OEM contracts against the company's struggle to maintain consistent credit control discipline.
What we're watching
- Revenue growth as new SKF and Schaeffler contracts ramp up from Q1.
- Whether the company hits its 15% EBITDA margin floor in the coming quarters.
- Any further slippage in receivables beyond the current 120-130 day target.
The full read
Kalyani Forge delivered its best profit in 14 years for FY26, reaching ₹9.32 crore. The company achieved this by dumping ₹40 crore of low-margin business, which helped lift EBITDA margins by 220 bps to 13.3%. Revenue remained flat at ₹238 crore. Management is now targeting a 20% margin within a year, pinning hopes on new contracts with SKF and Schaeffler that begin ramping up this quarter. They also plan ₹30 crore in capex, mostly for driveline and axle growth. Yet, the narrative is not entirely clean. A consistency check revealed that rising interest costs were not due to working capital optimization as previously claimed, but were instead retroactively capitalized term loan interest. Receivables have also stretched due to unexpected stocking commitments. These contradictions undermine the company's earlier claims of improved credit control. The next test is whether the new OEM contracts can actually deliver the promised ₹300 crore revenue ceiling without further balance sheet surprises.
Questions answered
- What drove the record profit despite flat revenue?
- Kalyani Forge shed ₹40 crore of low-margin business and improved its EBITDA margin by 220 basis points to 13.3%.
- What is the new guidance for EBITDA margins?
- Management has set a 15% EBITDA margin as the new floor and is targeting 20% within the next 12 months.
- What contradictions were found in the management's reporting?
- Management previously attributed interest cost increases to working capital optimization, but later revealed they were actually term loan interest costs being retroactively capitalized.
- How much is the company spending on capex this year?
- The company plans to spend ₹30 crore in capital expenditure, with 60% of that amount allocated to growth areas like driveline and axle production.
Story so far
All notes on KALYANIFRG →- 26 May 2026 · 11:55 AM IST Kalyani Forge hits 14-year profit high but management narrative slips
- today Kalyani Forge posts Q4 profit, but auditor flags books for third year