Thank you. Good morning, and a very warm welcome to all of you to Happy Forgings Limited Q1 FY '27 earnings call.

With me today are Mr. Pankaj Kumar Goyal, our CFO, and Strategic Growth Advisors, our investor relations advisors.

I trust everyone has had opportunity to review our FY '27 quarter one financial statements and investor presentation, which we have filed with stock exchanges. We started FY '27 on a strong note, delivering robust year-on-year growth along with improved profitability.

Revenue for the quarter reached ₹449 crores, while PAT stood at ₹91 crores, marking our highest ever quarterly revenue and profitability, with growth of 27% and 39.2% respectively. Finished goods volumes increased by 23% during the quarter, while realizations per kg improved by 3.2% to ₹253 per kilograms.

Strong volume growth, coupled with higher realizations, underscore the strength of our business model, disciplined execution, and continued focus on value-added growth. On the profitability front, we continued to deliver industry-leading margins.

EBITDA for the quarter stood at ₹141 crores, and EBITDA margin expanded by 275 basis points year-on-year to 31.3%. This marks the fourth consecutive quarter in which we have delivered an EBITDA margin in excess of 30%.

PAT margin also expanded by 178 basis points to 20.4%. As communicated during our previous earnings call, we had witnessed an increase in input costs, and we were engaged in discussions with our customers regarding inflationary pressures on other manufacturing costs.

We have now successfully negotiated price revisions with OEMs and the benefits are expected to fully reflect in our P&L from quarter two onwards. Our capacity expansion program also continues to progress as planned and remains aligned with the strong opportunities we see across our focus segments.

These investments will support our future growth while further strengthening our value-added capabilities. Now turning to our segmental performance.

Commercial vehicles continued to be our largest business segment, contributing 33% of our revenues during quarter one FY '27. The segment delivered healthy single-digit growth during the quarter, with the domestic business registering strong growth of around 18%, supported by robust infrastructure activity, healthy freight movement, replacement demand, and sustained transportation activity.

On the export front, growth was impacted by transit delays due to geopolitical conditions, resulting in higher inventory in transit and lower sales conversion during the quarter. Farm equipment was our second largest revenue contributor during FY '27 -- well, during quarter one FY '27, accounted for 32% of our total revenue.

We delivered growth in mid-20s during the quarter, with the domestic business registering over 20% growth, supported by favorable demand in the domestic farm equipment market. On the export front, we continued to register growth despite a challenging demand environment in the US and Europe.

Tractor demand in these markets remains subdued due to lower farm incomes, high interest rates, weak commodity prices, and cautious farmer spending, resulting in deferred equipment purchases. The industrials segment contributed 16% of our revenue during the quarter.

We achieved around 50% of -- 50% growth across both domestic and export segments. Demand remained healthy across power generation, renewable energy including wind, railways, oil and gas, and digital infrastructure.

The broader capital goods and industrial ecosystem also remained robust, supported by sustained investments from both the government and the private sector. Continued investments in renewable energy, power transmission and grid infrastructure, railway modernization, and the rapid expanding data center ecosystems are expected to support demand going forward.

Off-highway contributed 11% to our revenues. The segment delivered growth of over 40% across both domestic and export segments.

From an end-user perspective, the domestic construction equipment segment registered growth of almost 9% during the quarter, supported by healthy project awards, particularly across roads, highway, and other infrastructure segments. Export markets in the US and Europe also witnessed growth in construction equipment demand.

Passenger vehicles now contributes around 8% to our revenue. The segment delivered growth of more than 70%, with domestic business growing by over 40%, supported by a healthy market demand and increased wallet share.

Most OEMs reported strong performance, while retail demand remained healthy, reflecting the underlying strength of the market. On the export front, revenue more than doubled as we began executing export orders that had been secured earlier.

Our continued focus on value addition is also reflected in our product mix. Machining contributed increased to 90% in quarter one FY '27, compared with 88% in quarter one FY '26.

Furthermore, one of the key strategic developments for our business has been the continued diversification of our revenue mix, as reflected in the increasing contribution from industrials and passenger vehicles. We expect this diversification to gain further momentum, supported by a strong order book representing around ₹950 crores of peak incremental annual revenue potential over the next 2 to 3 years.

This order book is largely driven by industrial and passenger vehicle programs and is predominantly export-oriented. At the same time, the quality of our order book continues to improve, with higher proportion of complex, precision-engineered, value-added products that command superior realizations and are expected to support further margin improvement while creating a more balanced and resilient business portfolio over the medium term.

Looking ahead, supported by our strong first quarter performance, we remain optimistic about our outlook for FY '27. We continue to expect the business to deliver high teen volume growth during the year, while maintaining EBITDA margins broadly in line with FY '26 levels, with potential for further improvement.

With that, I would now like to invite our CFO, Mr. Pankaj Kumar Goyal, to take you through the detailed financial performance for the quarter.

Good morning, everyone. I hope I am audible to everyone.

Let me now take you through the key financials and operational highlights for the first quarter of FY '27. Revenue from operations for Q1 FY '27 stood at ₹449 crores, registering strong YoY growth of 27%.

On the operational front, we recorded robust volume growth of 23.1% during the quarter, while realizations improved by 3.2% YoY. Gross profit for the quarter stood at ₹273 crores, registering YoY growth of 33.1%.

Gross margin remains healthy at 60.7%, expanding by 276 basis points. EBITDA for Q1 FY '27 stood at ₹141 crores, registering YoY growth of 39.3%.

EBITDA margin improved to 31.3%, expanding by approx 275 basis points, supported by operational leverage and our continuous focus on operational efficiencies. Profit after tax stood at ₹91 crores for Q1, representing YoY growth of 39.2%.

PAT margins remained strong at 20.4%, expanding by approximately 180 basis points. We also added capacity during the quarter by commissioning an another 4,000-ton forging press line, adding 4,080 ton of forging capacity.

Besides this, 7,280 ton of additional machining capacity has been added during the quarter. Our total forging capacity now stand at 1,50,000 metric ton, while machining capacity has increased to 75,200 metric ton.

Capacity utilization stood at 59% for forging and 78% for machining. With that, we are ready to commence the Q&A session.

I'll turn back the moderator to invite the first question. Thank you.

Good morning, Ashish ji and team, and congratulations on good set of results. My question is that we see a renewed growth, which was missing for some time, and Happy coming back to the trajectory of last 5-year, 10-year CAGR.

Can you just help us understand from here on how and what are the things we are doing from a growth front across various parts like industrials, export, passenger vehicles, which makes us confident that the next 2, 3 years growth trajectory would be intact? When I look at all the auto anc companies across the country, you have the highest gross margins, highest EBITDA margins.

On one hand, it's good, but it makes us a little nervous that can that come down? Can you just--

Thank you, Pankaj. On the business side, I can say that all the sectors are doing well.

You have been seeing the numbers coming from commercial vehicles, farm equipment, passenger vehicles, all are looking strong right now. Even on the export side, we are seeing a pick-up in demand.

At the same time, all the initiatives taken by company in the last 2, 3 years with regards to diversification, going into industrials, going into passenger vehicles is also playing out really well, which is supporting the overall business. In spite of subdued demand in some of the areas, we were able to perform on the back of very strong growth coming from some of the areas, some of the developments which we have already taken.

The strong order books of almost ₹950 crores of additional incremental businesses which is there is already in the pipeline, already in the development phase or ramp-up phase, which gives us the strong confidence that the growth will continue. That is there.

The diversification model from light weighting, which was also introduced, and towards the heavy range from 250 kg to 3 ton is coming out well. The capex is on stream.

That will also start contributing from third or fourth quarter of next financial year. We are very hopeful that the new stream of business will start contributing meaningfully from FY '29 onwards.

Overall, things are positive. In terms of our gross margin and EBITDA margin, both the new sectors where the growth is coming up are actually higher in terms of realization.

The products are complex, the requirements are far more stringent, and there is a lot of value addition which is being done in-house, which is leading to higher gross margin because of the requirements in the products. Also, the export products for the pass cars that we are machining and supplying are also high in terms of its gross margin components.

We were also able to take the increases from our customers in the last quarter. The last increase was paid almost 3 years back.

The increases has also happened from the last base, which will also help us in keeping up the margins going forward as well. Thank you.

Thank you for taking my question, and congratulations on a great set of numbers. The first query is regarding the realizations.

Sir, you did allude to in your opening remarks that the settlement has been done. The benefit would come in from the second quarter onwards.

Is that the right way of understanding the opening comments, sir?

Thank you, Arjun. Part of it has come in Q1.

I can say that almost 30% of that has come in the Q1. If you see our export business and domestic business, on the export business the cost increases have been supported by the currency gains because many of our export projects are the currency is not pass-through, we are kind of contributed that the currency gain also supported over there.

The 100-odd crores of the domestic business, I can say, over there, roughly we were able to take on only 2% increases in the first quarter, but roughly more than 4.5%, 5% has been kind of taken. Some OEMs they have passed on from Q2 onwards.

You can say that the full impact is not there in the Q1, and it'll start coming from Q2 onwards. These increases have been passed on from the last base, which was settled 3 years back, it is not

an

increase which is coming up only for one quarter or so, it's going to be permanent. Right.

Perfect. Very helpful, sir.

Sir, the second query was regarding--and you have mentioned this in the result presentation also--regarding our captive solar power project. We have mentioned it should start--it's on track and should contribute from FY '28.

We were anticipating that it would come at the end of this calendar year, possibly we would see some benefit in the fourth quarter?

Yes, you are right. We are hopeful that the project will be on stream from January onwards, and a large part of the capex is already done.

All the clearances have been obtained, just some work on ROW, right of way, is going on. Once the ROW work is completed, we'll be in a position to power up.

I think January is the time. Normally, Jan, Q4, Jan to March is normally in terms of it's colder winter months in north, we have taken it from

April, but

some bit of the power generation will start coming in from Q4 onwards.

Sure. Just a final question.

You did allude to the newer businesses which we are scaling up FY '29 onwards. If we look at the trajectory of it, it's seemingly a higher margin profile business.

Given the outlook we have for FY '27, benefits say from solar, etc., coming '28 onwards, our EBITDA margin, you do believe at current we should be able to protect this 30% plus going forward?

Yes, I'm very confident that we should be achieving that, because we'll be having a benefit of 1%, 1.5% from power as well. I'm quite confident that we should be seeing upward of 30% going forward.

Sure. Thank you for this, and wishing you all the best going ahead.

Thank you, sir.

Thank you.

Thanks for taking my question. Sir, my question was on the quarterly numbers which we reported.

Now when we see the segment-wise growth, the CV segment, in terms of our revenue number, grew only around 7%, while the industry volumes were up around double digit. What was the thinking there?

Did we shift some of our lines to higher content product in terms of industrial/off-highway? Some understanding there that why did we grow less than the industry here?

Yes. Thank you, Mihir.

The industry volumes for commercial vehicle in terms of production for domestic grew at almost 10% for the production volumes, if you see. Over there, we have grown by almost 18% in domestic market.

It was in the export market that for us the business degrew by almost 12% because most of our European contracts and the contracts for Turkey are on the basis of DDP basis, delivered duty paid to the plant. Because of the geopolitical condition, as already explained, almost a month of deliveries were pending because of the longer route and also because of the delays in transit.

All right. That's not more of export led right now.

Sir, currently, given we're talking about exports, what kind of issues are we facing on the freight right now, as there has been some cost increase and container availability issue? How do we see this issue going ahead, how are we managing it?

You're right. The cost of container has gone up roughly from $2,000 to almost $6,000.

A large part of it, the contracts that we have, it's kind of a pass-through or it is around 75% pass-through. We will be taking around roughly around 15%, 20% hit in terms of the incremental cost which is there.

We are discussing right now that roughly if it is 6,000, we are hopeful to cover around 4, 4,500 from our customers. For some customers, we also have full recovery as well.

All right. Okay.

Okay.

Sir, lastly, just question overall onto the business, will you be able to give the export mix across segments like in commercial vehicle, farm, off-highway, and industrials?

Yes, just give me a minute. Commercial vehicle is around 7%, passenger vehicle is around 50% of our revenues, farm equipment is around 5%, off-highway is again 5%, and industrials is 9%.

All right. All right.

Sir. Got it.

Thanks. That's all from my side, sir.

Good morning, sir. Am I audible?

Yes.

Yeah. Thank you.

Just I have two questions. First, I just want to know this 14,000-ton press now how it is progressing, now what kind of revenue potential we can expect from that 14,000 press, any sector related to that for a particular 14,000 press?

So 14,000-ton press line is almost 65%, 70% utilized on the industrial business and on the commercial vehicle businesses. We still have some capacity available for which we are already received the orders and the order books are already there, which will be progressing well going forward as well.

Plus, we have also added 10,000-ton press line, which was also added in last quarter. Some parts which we were doing on 14,000-ton press line can be shifted to 10,000-ton line to create more capacity on the heavy line.

If we shift those components, we should be looking at a bigger capacity going forward as well, around 30% open capacity you can say. For the new projects that we are gaining in hand, we will be utilizing this press line.

Respect to. Secondly, when can we expect this 18,000 vertical upsetter line to be operational?

FY '27?

Yes, we'll probably start adding from Q4 of this financial year. It is already under commissioning right now, and hot trials will start from Q3 onwards.

Sir. Lastly, I just want to know any change in the working capital cycle?

I'm just asking in terms of debtor days as on June 2026.

Can you repeat your question once again?

No, I just want to know this debtor days as on June 2026. Now I just want to know whether we have in fact seen any change in working capital cycle.

The receivable days not really, there is no big change. No, it has been improved, in fact.

There is no big change.

Okay. Thanks.

Inventory has gone down, overall, there is an improvement in the working capital days.

What is the inventory days, number of days as on June 2026?

Inventory days. 50 days as on date.

Okay. Thanks.

Thank you. That's it from my side.

Hi. Am I audible?

Yes.

Yeah. Thank you.

Sir, firstly, congratulations on a very good set of numbers. My question is that in one of the previous calls, when our order book was around ₹800 crores, you had provided a detailed order book breakup between different end-user industries.

Could you please help us bifurcate the current ₹950 crore order book in the similar manner? I understand your point that the order book is dominated by PV and industrials and specifically exports, but if you can break this entire ₹950 crore order book in terms of each end-user industry, that would be helpful.

Okay. Thank you.

We have almost 35% to 40% of the revenues planned from the industrials segment. We have the order books from industrials you can say around 40%.

Pass car is in the range of 25% to 30%. Commercial vehicles is again in the range of 25% to 30%.

There are you can say others, where we have off-highway and some farm businesses. Roughly 60% of this order book comes from exports, and 40% is domestic.

Understood. Sir, thank you.

Sir, another question on our ₹650 crore capex program. I wanted to understand the standalone plant-level gross and EBITDA margins.

I understand on a blended or consolidated level, we will benefit from solar power plant, etc., but my question is more on the gross and operating-level margins solely for this new plant, which is focused on industrial segment.

Ma'am, we are not actually making plant-level margins as such. Particularly for the new capex which is planned, the realizations are high, and the gross margins are range of higher of 80% on a full machined component basis, if we supply 80%, 85% on a full machined crankshafts.

On the forged crankshafts coming out of the line, it'll be around 65% kind of a gross margin, 60%, 65%. That's kind of a margin profile on the higher horsepower category that we are talking about.

Roughly around 50% of the margins translates into EBITDA margin. You can assume that the margin profile for the new business.

Okay. Understood.

That was helpful, sir. Just one last question, if I can.

Currently, what percentage of our export revenue is contributed by Europe? With the European OEMs looking to kind of outsource a certain part of their production to countries like India, have you seen any increased inflow of orders in the recent times from European region?

Yes, on the European region, we are quoting a lot of large projects that we are seeing right now. The maturity takes time because they also have a supply base in Europe.

It is taking some time. Yes, the inquiry flow is very strong right now from the Europe.

Today, Europe accounts for around 60% of our exports.

Okay. Understood.

Thank you so much, sir. All the best.

Thank you for the opportunity for a follow-up. Just two questions.

Ashish ji, when you look at the company, every 5-year block you make a pivot. This time the pivot looks like exports and PV.

Can you just spell out your thought process that over the next 3, 4-year period how large export opportunity could be for us across industrials and autos? Also on the passenger vehicles, it's great to see that you have moved to 7%, 8% kind in the mix.

Where do you think, with the visibility being there in the next 3 years, passenger vehicles could also move into? Also is there any other areas where you're working on which could be a more structural in nature, maybe the semiconductor part, maybe the aerospace, which requires high tonnage forgings, or any other places, because what we hear from other manufacturers is Europe is having a tough time in terms of their supplier base.

That large part of the business could move here. Just a broad thought process that in next 3 years how the shape and size of the company will look like will be really helpful in terms of export opportunity and PV particularly.

Thank you.

Thank you, Pankaj ji. We are very bullish on the industrials side.

The heavy line of equipment that we are investing on is one of its kind in the world. It's the second largest in the world.

The entire demand which we are seeing around energy sector and data center, this line will be playing a major role over there. The capacities are not available globally because the implementation of these lines takes around 1.5 to 2 years just to come into production from the date the LC is opened.

It's a very long period. It's a very large construction that we have done.

On the base levels, we have gone down by 80 feet to construct the foundation of this. The execution has taken almost 1.5 year just to prepare its foundation.

Currently we produce up to 200 kg. We are looking at producing parts up to 3 tons.

Some parts that we are quoting on the new projects are worth ₹28 lakhs, ₹30 lakhs apiece, which is almost 1.8 tons in weight. This is largely coming out of the energy sector.

We see that the data center and energy sector will be a large part of the industrials that we'll be catering to once this line is operational. Apart from that, on the heavy side, all other areas for the wind gearboxes, which requires heavy forging, defense, which requires heavy forgings, all other options are available.

Right now, the focus area is energy and data center for us, as we are seeing a lot of inquiry flow over there. Also on the machining side, we are investing.

We can safely say that industrials will double from these levels in next 3 to 4 years. Also the PV, we should be looking at 12% to 15% of our revenues.

Both the sectors put together should be contributing around 45%, 50% to our revenues. That's how we see the business kind of changing.

Within industrials, there are a lot of new industries that we will be catering on. We are quoting a lot of parts on the very heavy requirements for the earth moving sector and mining sector for North American market, which is over 1 ton.

There is a lot of different mix that we'll be seeing going forward. Also playing with a lot of different types of steel grades, that is what we are seeing now.

Thank you for that detailed answer. All this growth which you are targeting, your cash flows are super good, balance sheet is in a great shape, I would assume that most of the growth which you are planning for the next 3 years will be funded by internal accruals.

Is that a fair assumption to make?

As of now, it looks like that we should be able to fund this growth on our own. Cash flows look very strong, and the accruals will be even stronger going forward.

Yes. Also, maybe there is some bridge loan for a year or so for opening up some letter of credit, but most of this will be funded from our own accruals.

Just last one. Any inorganic plans in this entire growth plan over the next 3 years, where you think there are areas of pockets of opportunity which you can't gain organically, and inorganic will be a faster way to go to market?

Any thoughts on that side, or you think organic is the

way to go? We are quite open for this and searching for it specially on the energy and aerospace side where we are new and entering, and also the technology and approval process takes a lot of time.

We are open for that and are seeing the opportunity in that sector. On the farm, CV, and other areas, we are already there.

Plus, the valuations are very expensive, which could be a drain on the return on capital employed. We are being a little cautious on a simpler businesses, but wherever we see that there is a technology involved, we are quite open for it.

That's great. Wish you all the best, and looking forward for great quarters going ahead.

Thank you so much.

Thank you, sir. Thank you.

Am I audible?

No, you're not. Can you come again?

Am I audible right now?

Am I audible?

Sir. My question was on a follow-up on industrials.

As the industrials have increased 16% this quarter, and we are working towards our medium-term target of 30% to 31%, which subsegments do you see as the key drivers?

Just answered Pankaj ji's question as well that data center, energy, mining, and wind are the sectors where the requirement for heavy forgings is already there. All the sectors are also doing really well.

You look at energy, data centers, the growth is phenomenal. It's not that easy to build capacity overnight for this type of businesses.

The initiatives that we started almost 2, 2.5 years back just after the company went public. It's a complete plant which is getting ready at a site.

These are the sectors which company will be catering to going forward from this plant.

Got it. Sir, your volume growth this quarter was also very good and well ahead of your earlier guidance.

Given this strong demand, should we expect any upward revision on this?

Right now for the guidance perspective, I have taken this, but should be performing better than that.

Thank you.

Hi, can you hear me?

Yes.

Good morning, Ashish and team, and congratulations for a great set of numbers. Ashish, my question is a little bit strategic.

If you see the last few years, we have been on a heavy capex journey, and because castings, forgings, it's an industry that takes time for things to come on stream. As we go higher in terms of capex towards end of FY '27, starting FY '28 is when majority of the capex comes on stream.

On your end sector side, especially passenger vehicles, where you said that you may plan to go up to 10%, 12% of the market, do you think that the benign base that was helping the industry and hence you, would become a challenge also going ahead? Industrials, I agree with you, because there is a lot of tailwinds.

Especially in automobiles, the post-GST cut and the last 2 years that we've seen, the base is starting to become heavier. Even for Happy Forgings, if we see year-on-year, Q1 FY '26 was probably the softest quarter.

Now going ahead, you will be lapping around the strongest quarters that you had posted last year. How do you see Happy Forgings going ahead, especially in terms of asset turns?

Because probably by start of FY '28, our asset turns will be at a trough, and then it will be all the way upwards. The end sectors would probably themselves be at a very high base.

Company is on a capex spree where we are investing ₹350 to ₹400 crores on an annualized basis. See, I'm not worried about the temporary 6 months or 1 year kind of a low asset turn because these are the assets which are built for the future.

The type of business that we are looking at producing for this, it's temporary 6 months scenario if you're looking at a slightly lesser asset turn, it's because on the forging side, we'll be adding a bulk capacity whenever we are adding. When we are seeing a higher set of growth, this capacity is helping us to grow, actually.

If you have a capacity in place, then only you can assure or look forward for this. Even on the pass car side, if we are growing today is because of the capacity which is planned.

Because the growth is coming, our products are approved, we are competitive in the market, and at the same time, we are able to ramp up fast. All these things are kind of helping us out grow this pass car business.

The business is currently coming out of 2, 3 customers. There is a lot of potential for us to grow this business going forward because the customer acquisition has just started.

It's not finished with these three customers.

Understood. On the industrial side, you don't think there is going to be a heavy base or something that's going to affect you, because the tailwinds are much stronger even than passenger vehicle sector, right?

The industrials is a very large sector because there are many industries within it. We call it as industrials.

Though data center, energy, you'll see some companies in business only in energy today. Then the data center requirement, then the mining, wind.

All these sectors are very large in nature, which comes under industrials. With the new line of business coming in, all the doors are open to produce heavy components.

That is the reason all this industry will actually play a role going forward in the years to come.

Okay. Just picking your brains on the acquisition that you mentioned that you're looking actively.

When it comes to acquisition, are you looking at speed to market kind of an acquisition or someone who can give you certifications, approvals? Because assuming that you have a great skill at machining already, and which is what a lot of aerospace components do need.

What would be the nature of that acquisition, if you could dimension that?

We are open for acquisition. We are open for joint ventures as well.

Company is in a phase to acquire technology and produce. Some of the steel like titanium and other grades which are being used on the aerospace side, our experience is not there today.

Sometimes when we are trying to acquire, it's not only this, it's about a lot of metallurgy and know-how, chemistry, which will probably help us. The way to look at is that we should be seeing something that we are not doing today on the energy side or on the aerospace side, which can be probably of support with the existing business, or where it's a machining business where the forgings can be done by us, machining can be done over there, or it's kind of a synergistic fit.

Got it. Thank you so much.

That's all from my side. All the best for the future.

Thank you.

Thank you. To conclude, we are confident that our investments in innovation, capacity, and customer partnerships will drive sustained growth and value creation.

With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries.

For any other further information, kindly get in touch with Strategic Growth Advisors, our investor relations. Thank you.