Company Background
Kalyani Cast-Tech Limited
was incorporated on 2012. The company commenced its operations with a casting
business, commissioning a casting unit in Rewari, Haryana. Over
approximately a decade, it has significantly grown and expanded its product
portfolio, manufacturing facilities and in-house design capabilities, evolving
into a key player in its sector.
The company is now engaged
in the manufacturing of high-quality castings and specialized cargo
containers, including ISO containers, dwarf containers and coupler
components. The factory is located in Dist. Rewari, Haryana. The company's shares
were listed on the Bombay Stock Exchange (SME Platform) on November, 2023.
Key
Management Personnel and Board of Directors include:
- Mr. Naresh Kumar: Chairman & Managing
Director (also a Promoter). He has over 32 years of experience and
boasts 5+ patents.
- Mrs. Jayashree Kumar: Whole Time
Director.
- Devender Kumar: Non-Executive Director.
- Kumar Sharat Chandra: Independent
Director.
- Sanjeev Negi: Independent Director.
- Amit Kumar: Chief Financial Officer.
- Pankaj Kumar: Company Secretary &
Compliance Officer.
The company's promoters are
Mr. Naresh Kumar, Mr. Javed Aslam, Mr. Nathmal Bangani, Ms. Kamala Kumari Jain
and Ms. Muskan Bangani.
For the financial year ended
March 31, 2024, Kalyani Cast-Tech Limited reported significant improvements:
Key Financial Performance
(in INR)
|
Financial
Metric |
FY2023
(In Cr) |
FY2024 (In Cr) |
Growth
(%) |
|
Revenue from Operations |
₹63.36 |
₹95.11 |
50.2% |
|
EBITDA |
₹11.65 |
₹14.13 |
21% |
|
Profit Before Tax (PBT) |
₹10.76 |
₹13.00 |
22% |
|
Profit After Tax (PAT) |
₹8.05 |
₹9.60 |
19.3% |
|
Basic & Diluted EPS |
₹16.06 |
₹16.42 |
- |
The company maintains adequate
internal financial controls and has not had any significant material orders
passed by regulators, courts, or tribunals impacting its going concern status
or operations.
The company's Chairman &
Managing Director, Mr. Naresh Kumar, has 5+ patents. However, the
company itself has not made any application for registering trademarks
as of the Red Herring Prospectus date. It is in the process of filing an
application for the registration of its logo and corporate name.
Kalyani Cast-Tech Limited
initially focused on casting and manufacturing of railway parts. It has since expanded
to include the manufacturing of cargo containers. This expansion has
contributed to significant growth in the manufacturing of high-quality castings
and specialized cargo containers.
The company is also
exploring opportunities for diversification and entry into the global market.
In this regard, it has engaged a consultant in Dubai to explore the possibility
of setting up a container manufacturing plant in the UAE. This venture
aims to leverage CEPA agreements with various countries. While plans for
diversification are on the drawing board, definitive shapes will be disclosed
later.
Kalyani Cast-Tech Limited
also has a subsidiary, KMT Engineering Private Limited, which was
incorporated in 2024, with Kalyani Cast-Tech holding a 51% stake. This
subsidiary is part of the company's diversification efforts, aiming to benefit
from lower corporate tax and advantages for small-scale industries.
Kalyani Cast-Tech Limited
has a "very big expansion plan for the future". The total
estimated capital expenditure (capex) over the next 4 to 5 years is
projected to range between ₹400 crores to ₹500 crores.
This expansion is intended
to create a facility that will be "one of its kind in the world,"
offering major mining solutions under one roof. Key components of this
facility will include a rail terminal for loading and unloading containers
and other cargo and a wagon factory for the supply of new generation
wagons and containers [New Businesses]. The company anticipates this new
facility will be operational within the next 4-5 years.
Regarding
the funding of this ambitious capex plan:
- It
will be financed through a combination of internal generation, equity,
debts and potentially through Foreign Direct Investment (FDI) mode.
- As of
June 10, 2025, the company has already purchased approximately 144
acres of land for this expansion. They have also placed orders and
paid advances for almost 80% of the machinery required for wagon
manufacturing, without taking any debt yet.
- For
the railway wagon component, the plan requires a railway line inside
the factory, at least 800 meters long. An in-principal approval for
this plan has been received from Western Railways and the detailed project
report is currently submitted for approval, expected within another month.
- The
net proceeds from the Initial Public Offering (IPO) are primarily proposed
to be used for working capital requirements, up to ₹2,375.00 Lakh
and for general corporate purposes, which will not exceed 25% of the
amount raised through the issue. The entire net fresh issue proceeds are
slated for deployment in the Financial Year 2023-24.
- The
company has not raised any bridge loans to be repaid from the net proceeds
and may use overdraft or cash credit facilities to finance additional
working capital needs until the Issue is completed.
From an operational
perspective, the company's current plant utilization is around 70% to 75%.
Management is confident about achieving 40%-50% top-line growth for the
current financial year (FY25) and expects a 30%-35% growth to continue
for another 4-5 years. This growth projection is based purely on domestic
demand and does not include potential contributions from the planned Dubai
plant, which would be an "additional bonus" if it materializes. The
company has a current order book of INR 110 crores, which they expect to
execute by October. The management states that their strategy involves
innovation not only in products but also in customer engagement and payment
terms, which attracts customers. There is no plan for a dividend or buyback at
this point, as the company is in expansion mode and requires capital.
Long-term
Revenue Potential from Capex:
- The total estimated
capital expenditure (capex) over the next 4 to 5 years is projected to
range between ₹400 crores to ₹500 crores.
- The management
indicated that the revenue potential of this capex could be achieved by multiplying
the capex by 10, implying a potential of ₹4,000 crores to ₹5,000
crores in revenue once the new facility is fully operational and
ramped up.
- The planned wagon
manufacturing unit alone is designed for an annual capacity of
approximately 8,000 units, which at an estimated cost of ₹40
lakhs per wagon, translates to a potential revenue of approximately ₹3,200
crores from this segment alone. However, the ramp-up of this capacity
will be gradual.
In summary, Kalyani Cast-Tech Limited anticipates strong revenue growth
of 30%-35% annually for the next four to five years following FY25, with
a quantum jump expected from FY26-27 due to significant capacity
expansions. The company targets maintaining PAT margins between 9% and 12%.
This growth is projected primarily from domestic demand, with international
expansion considered an additional opportunity.
- Increased
Freight Share for Indian Railways: Indian Railways aims to
substantially increase its share of total freight transportation from
the current 17-23% to 45% within the next 5-6 years [As per
conversation history, not explicitly in new sources, but implied by
efforts to increase commodity basket and efficiency]. This ambitious
target necessitates a significant increase in wagon and container
capacity.
- PM-Gati
Shakti Cargo Terminals (GCT) Policy: Launched on December 15,
2021, this policy aims to boost industry investment in developing
additional terminals for handling rail cargo. These terminals can be
constructed on either Railway or non-Railway land and will all be
commissioned as GCTs.
- Schemes
for Private Investment in Rolling Stock: Indian Railways has
introduced various schemes to encourage private sector participation in
procuring wagons and rakes for freight traffic, including:
- Wagon
Leasing Scheme (WLS): Promotes public-private partnerships
for leasing railway wagons.
- Automobiles
Freight Train Operator Scheme (AFTO): Facilitates private
parties in operating special-purpose rakes for transporting automobiles.
- Liberalized
Special Freight Train Operators Scheme (LSFTO):
Introduced in 2020 to boost railway transportation of non-conventional
cargo.
- General
Purpose Wagon Investment Scheme (GPWIS): Allows entities to
invest in general-purpose wagons for diverse commodities.
Benefits to Kalyani Cast-Tech
from Government Initiatives during Capex:
- Gati
Shakti Cargo Terminal Development: Kalyani Cast-Tech plans to
set up a Gati Shakti Cargo Terminal as part of its major expansion plan.
This directly aligns with the government's policy to encourage such
multimodal terminals.
- Wagon
Manufacturing Unit Support: The company's vision to
become the "biggest wagon manufacturer in India" is bolstered by
the growing demand for freight wagons driven by Indian Railways' expansion
and increased private participation.
- Strategic
Alignment and Recognition: The company's innovative
efforts in designing and developing special containers to reduce unit cost
of transportation are aligned with the government's focus on reducing
logistics costs. Their plant was visited by the Minister for Railways,
Mr. Ashwini Vaishnaw, along with 150 railway officers, to appreciate their
innovative ideas. The company positions itself as a "true
ambassador of Make in India initiative" and contributes to
"import substitution".
- Domestic
Market Advantage: Management notes that import of
containers for domestic requirements has been negligible since 2021. This
situation benefits domestic manufacturers like Kalyani Cast-Tech, allowing
them to capture a larger share of the growing Indian market.
- Government Orders for Credentials: The company has taken government orders on a tender basis to establish its credentials in the public sector, even if these orders initially had slightly lower margins. This helps build a track record for future government-related business.
Risks Involved
Investing in Kalyani
Cast-Tech Limited carries several risks that prospective investors should
consider:
- Past
Default: The company
had a past default in payment of interest and repayment of a loan to
Allahabad Bank during FY2019 due to a miscommunication. Although promptly
cleared, any future defaults could adversely affect the company(As per
RHP).
- Creditor
Information: The company
is still in the process of compiling information regarding total
outstanding dues to MSME creditors. An inability to accurately forecast
these amounts could adversely affect business operations and cash flows.
- Future
Funding Requirements: The company's future growth plans may
require additional capital or loans and the terms of such funding could be
prejudicial to existing shareholders.
- Risks
of New Ventures: Any future acquisitions, joint
ventures, partnerships, or strategic alliances could fail to achieve
anticipated benefits, lead to unanticipated liabilities and generally harm
the business.
- External
Factors: The company
is exposed to economic uncertainty, market fluctuations, changes in
government regulations and natural calamities, which can influence market
conditions and business performance.
- Competition: The company faces competition from both Indian and international manufacturing companies, which is expected to intensify with new entrants and existing competitors expanding operations. This may impact financial condition and operations.
My conclusion
·
Kalyani Cast-Tech has established a
commendable track record over the years, demonstrating consistent
performance and reliability in its operations.
·
The management adopts a conservative approach
when providing guidance, which often results in cautious projections;
however, there is a general expectation that the company will meet or exceed
its set targets based on current performance indicators.
·
Kalyani Cast-Tech’s portfolio includes unique
businesses that hold patents, creating a substantial economic moat that
provides a competitive advantage despite intense rivalry within the wagon
industry. This patent protection helps safeguard market share and profitability
against competitors.
·
The promoter's extensive experience in railway
infrastructure-related businesses adds strategic value, leveraging industry
knowledge and networks to support growth and operational efficiency.
·
Currently, the stock is trading at Rs 516, with
a market capitalization of approximately Rs 370 crore. It is valued at a
price-to-earnings multiple of 26, which suggests a reasonable valuation given
its earnings potential and growth prospects. The company maintains an almost
zero debt profile, further enhancing its financial stability and attractiveness
to investors.
·
The capex will be financed through a combination
of internal generation, equity, debts and potentially through Foreign Direct
Investment (FDI) mode. Notably, the company has already made significant
progress on its expansion without incurring debt for this specific capex. They
have purchased approximately 144 acres of land and have placed orders
and paid advances for almost 80% of the machinery required for wagon
manufacturing, all without taking any debt yet.
·
Kalyani Cast-Tech is planning a combination of
organic growth (internal accruals), equity infusion (Preferential issue),
potential partnerships (JVs) and judicious use of debt facilities to finance
its significant capex, with a strong emphasis on maintaining financial
flexibility and minimizing external borrowing for initial stages.
·
Given its classification as a micro-cap stock,
it presents a higher risk profile, making it suitable primarily for investors
with a high-risk appetite who are willing to conduct thorough due diligence.
With thanks
Be and make
1. AR for FY24:
2.
Earnings
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