Financial Year 2025-26
Pursuant to Regulation 34(3) read with Schedule V(B) of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015
Corporate Snapshot
| Field | Detail |
| Founding year | 1983 |
| Listing | BSE: 532740 ? NSE: LOKESH MACHCINL29219TG1983PLC004319 |
| Reporting period | 1 April 2025 to 31 March 2026 (FY26) |
| Revenue from operations, FY26 | ?208.56 crore |
| Total income, FY26 | ?209.62 crore |
| Profit before tax, FY26 | ?5.31 crore |
| Profit after tax, FY26 | ?3.86 crore |
| EBITDA, FY26 | ?38.25 crore (margin 18.34%) |
| Total assets, FY26 | ?495.89 crore |
| Net worth, FY26 | ?228.30 crore |
| Credit rating | ACUITE BBB-/A3; CARE BBB-/A3 — investment-grade; both removed from rating watch during FY26 |
| Statutory auditors | M/s Brahmayya & Co., Chartered Accountants |
| Manufacturing units | 6, across Hyderabad (Telangana) and Ranjangaon—Pune (Maharashtra) |
| Registered office | B-29, EEIE Stage II, Balanagar, Hyderabad — 500 037, Telangana |
(Stat pills: 42+ years of legacy; 6 manufacturing units; 541+ employees; 7+ export countries; 5,000+ clients)
Design / data note: stat pills shown here in single-color flat fill for the draft; final layout to render as rounded pills over facility imagery, per the visual brief already agreed with the design team.
Key Financials
A year of held ground and reopened doors.
FY26 was the last full year the Company operated under the OFAC designation imposed on 30 October 2024. Revenue reset as blocked US-dollar and euro channels foreclosed export end-markets, restricted imports, denied procurement by some MNCs and suspended supplies to a principal Auto Component customer for most of the year. Beneath the headline, the operating base was rebuilt: the Machinery division grew against the prior year, defence deliveries scaled, promoter capital was infused, and — with the delisting effective 30 June 2026, three months after the FY26 year-end — the constraint that shaped the year was formally lifted shortly after it closed (Section 3.6).
Revenue Reflects the Sanctions Reset
Revenue from operations stood at ?208.56 crore in FY26 against ?228.32 crore in FY25, a decline of 8.7 per cent year-on-year, and against approximately ?294 crore in the pre-sanctions reference year FY24 — a cumulative reset of close to 29 per cent from peak. The fall was concentrated in the Auto Component division, where supplies to its principal customer were suspended for most of the year; the Machinery division grew over the same period. Total income, including other income of ?1.05 crore, was ?209.62 crore.
(Chart: Revenue from operations (? crore) — FY24 (pre-sanctions, approx.) ~?294 cr; FY25 ?228.32 cr; FY26 ?208.56 cr. Annotations: 8.7% YoY decline, FY25 to FY26; ~29% cumulative reset from FY24 peak)
EBITDA Held Through the Downcycle
EBITDA, derived as profit before tax plus finance costs and depreciation less other income, was ?38.25 crore in FY26 against ?28.50 crore in FY25. The EBITDA margin recovered to 18.34 per cent from 12.48 per cent, as a favourable shift towards higher-realisation machine configurations and stringent expense control offset a lower revenue base. On the same bridge, combined finance costs and depreciation held broadly stable at an estimated ?34.0 crore against ?29.1 crore in FY25 — the margin recovery was earned at the operating level, not through lower financing or depreciation charges. Employee costs fell in absolute terms as the workforce was right-sized through the year (Section 10).
(Chart: EBITDA (? crore) bars — FY25 ?28.50 cr, FY26 ?38.25 cr; EBITDA margin (%) line — 12.48% ? 18.34%)
Profitability Turned Firmly Positive
Profit before tax rose to ?5.31 crore from ?0.89 crore, and profit after tax to ?3.86 crore from ?0.54 crore, a near seven-fold increase off a low base. The net profit margin improved to 1.85 per cent from 0.24 per cent. Basic and diluted
(Footer: Statutory Reports; Lokesh Machines Limited — page 29)
earnings per share stood at 1.95 against 0.28 in FY25. The tax charge of 1.45 crore comprised 0.14 crore for earlier years and 1.31 crore of deferred tax, with cash tax minimal for the year.Balance Sheet Positioned for Reopening
Total assets grew to 495.89 crore from 427.87 crore, a 15.9 per cent increase driven almost entirely by working capital - inventories up 23.6 per cent and trade receivables up 71.3 per cent to 69.21 crore - rather than by fresh capital expenditure, which actually fell 57.5 per cent to 15.89 crore as the Company held back on plant investment during the sanctions period (Section 8.4). Net worth rose to 228.30 crore from 212.82 crore, aided by the preferential-allotment proceeds raised during the year. Borrowings, working-capital and term, stood at 169.43 crore. Operating cash flow was negative at 13.39 crore as the receivables and inventory build absorbed cash - a position the Company expects to unwind as blocked channels reopen and stock converts to dispatches (Section 8.5).
(Chart: Total assets — FY25 ?427.87 cr, FY26 ?495.89 cr; Net worth — FY25 ?212.82 cr, FY26 ?228.30 cr. Annotation: Inventory-led working-capital build: inventories +23.6% to ?169.18 cr)
1. Industry Structure and Developments
1.1 Macroeconomic Backdrop
The Indian economy remained among the fastest-growing major economies during FY26, supported by sustained government capital expenditure, steady private-sector investment and stable domestic demand. The Companys performance is more directly shaped by conditions in the Indian capital goods, machine tools, automotive and defence manufacturing sectors than by global macroeconomic trends, and the discussion below is focused accordingly. Index of Industrial Production data through the period showed capital-goods output growing at a double-digit pace, a domestic tailwind against which the Companys sanctions-era constraints stand out clearly.
1.2 Indian Machine Tool Industry
The Indian machine tool industry, spanning metal-cutting and metal-forming machinery, continues to expand on the back of Production-Linked Incentive schemes, the Atmanirbhar Bharat programme in defence production, and ongoing capacity investment across automotive, general engineering, railways and heavy engineering. As a domestic manufacturer of CNC machines, Special Purpose Machines and related automation systems, the Company is a direct participant in, and beneficiary of, this import-substitution and capacity-expansion trend.
| Segment / Division | Key product offerings | Relevance to Lokesh Machines |
| Metal cutting – CNC machines | CNC turning centres, vertical and horizontal machining centres, drill & tap centres | Core product line of the Machine Tools division; principal source of order-book intake. |
| Special Purpose Machinery (SPM) | Finish cam & crank boring, finish barrel boring, transfer lines, custom machining | Area of established market position; higher average realisation per unit. |
1.3 Sector-wise Demand Drivers
Automotive Demand from OEM and Tier-1 component manufacturers remains the largest addressable market for the Companys machine tools and auto-component businesses. Volatility in automotive capital-expenditure cycles, and the Companys historical customer concentration, are addressed under Customer and Revenue Concentration (Section 2.5) and Risk Management (Section 7).
Defence manufacturing Government policy continues to reserve a portion of defence procurement for domestic manufacturers and to encourage indigenous production of small arms, ammunition components and precision defence assemblies — directly relevant to the Companys Defence division, which manufactures indigenously developed small arms and holds DGQA quality-assurance registration.
Aerospace, general engineering and railways Indigenisation in aerospace is creating demand for high-precision machining and additive manufacturing; general-engineering clusters in South and West India provide a base of non-automotive intake; and railway rolling-stock modernisation supports demand for special-purpose and precision machining equipment.
Renewable energy and electric vehicles The transition to electric vehicles is generating demand for precision-machined motor housings, battery enclosures and structural components. The Company executed development and commercial supply orders for EV drive-train and battery structural components during the year, and views this as a growth area for both the Auto Component and Machine Tools divisions.
2. Business Overview and Operational Performance
2.1 Company Profile
Lokesh Machines Limited ("LML" or "the Company"), established in 1983, is engaged in the design, development
2.2 FY26 in Review: Operating Under, and Emerging From, the Constraint
The year was operated in full under sanctions; the constraint was lifted three months after it closed.
During FY25 the Companys operations were affected by its designation on 30 October 2024 on the Specially Designated Nationals and Blocked Persons (SDN) list maintained by the U.S. Office of Foreign Assets Control (OFAC), Department of the Treasury, under Executive Order 14024. The designation restricted foreign-currency transactions and led to the temporary suspension of business with certain customers, including Mahindra & Mahindra in the Auto Component division, and required the Company to rely more heavily on non-dollar-denominated and domestic trade channels for a period.
Through FY26 the Company pursued customer and supply chains diversification, promoter capital infusion, and a formal legal petition for reconsideration before OFAC (Section 3). It expanded non-automotive revenue streams and scaled defence deliveries. The designation remained in force for the whole of FY26 and was removed only with effect from 30 June 2026 — three months after the FY26 balance-sheet date of 31 March 2026, within the first quarter of FY27 — so the full FY26 result reported in this Analysis was earned under the sanctions regime in its entirety, with the benefit of reopened channels accruing only from FY27 (Section 3.6). The extent of revenue and margin recovery is set out in Section 8.
2.3 Divisional Performance
Machine Tools Division
The Machine Tools division designs and manufactures CNC turning centres, vertical and horizontal machining centres, and Special Purpose Machines (SPM) for finish cam and crank boring, fine boring and transfer-line applications, alongside laser-based hybrid additive manufacturing systems developed with RRCAT and five axis machines developed with IIT Madras (Section 11).
Its customers span automotive OEMs and Tier-1 suppliers, general-engineering clusters in South and West India, and, increasingly, aerospace, defense and railway rolling-stock manufacturers.
Built on the Companys four-decade manufacturing history and an established position in cam and crank borers, fine borers and finish milling machines, it is the Companys core product line and principal source of order-book intake (Section 4.1).
Order intake across CNC turning centres and vertical and horizontal machining centres was supported by demand from non-automotive engineering clusters in South and West India. The Company maintained its focus on customised high-precision boring, milling and transfer-line SPM systems at higher average realisation, and continued development of indigenous Laser-Based DED hybrid additive machines in partnership with RRCAT and five axis machines developed with IIT Madras. Shop-floor automation, tooling standardisation and cycle-time reduction remained the operational priorities.
Auto Component Division and Forgings
This division manufactures precision-machined auto components and from FY26, forgings; supplying automotive OEMs and Tier-1 component manufacturers.
Recently commissioned hot-forging lines at the Pune facility extend the division into forged components for automotive and industrial clients, and it has begun executing development and commercial supply orders for EV drive-train and structural components, positioning it within the electric-vehicle transition described in Section 1.3. The divisions concentration in a small number of automotive OEM customers was the direct channel through which the OFAC designation constrained FY26 revenue (Section 2.5).
The Company onboarded new Tier-1 automotive and industrial clients to reduce dependence on legacy relationships affected by the OFAC designation, entered the forings segment through initial orders from clusters in Pune and Western India, and executed development and commercial supply orders for precision EV drive-train and structural components. Its recently commissioned hot-forging lines are the source of new component opportunities.
2.4 Order Book Position (including after 31 March 2026)
The order book as of 12 August 2026 stood at 271.00 crore, significantly exceeding the whole of the previous financial years revenue and providing multi-quarter visibility over and above the first quarters billings. Defence order inflows included an order of 58.21 crore received on 15 July 2026 from the Ministry of Defence (Army) for 7.62 mm medium machine gun upgradation kits.
| Order book component | Amount (? crore) | Share |
| General Purpose Machines | 103.00 | 38.0% |
| Defence | 98.00 | 36.2% |
| Special Purpose Machines | 37.00 | 13.7% |
| Forgings | 30.00 | 11.1% |
| Job works | 3.00 | 1.1% |
| Total order book (12 August 2026) | 271.00 | 100.0% |
(Bar chart: General Purpose ?103 cr ? 38.0%; Defence ?98 cr ? 36.2%; Special Purpose ?37 cr ? 13.7%; Forgings ?30 cr ? 11.1%; Job works ?3 cr ? 1.1%. Annotation: Total order book, 12 August 2026: 271.00 crore - vs FY26 revenue of 208.56 crore)
2.5 Customer and Revenue Concentration
The Companys revenue mix shifted markedly during FY26 as a direct consequence of the OFAC designation. The Components segment - which houses the Auto Component division and its principal OEM relationship - contracted to 14.70 crore from 79.41 crore, falling from approximately 34.6 per cent of segment revenue in FY25 to approximately 7.0 per cent in FY26, as supplies to the principal customer (Mahindra & Mahindra) were suspended for most of the year under the designation.
The Machinery segment correspondingly rose to over 93 per cent of segment revenue in FY26 from around 65 per cent in FY25, restoring a Machine Tools/SPM/Defence-led revenue base that is inherently more diversified across customers and end-markets than the Components segments OEM-concentrated model.
The Auto Component division restored from the first quarter of FY27 (Section 2.2) with a diversified customer base, is expected to partially reverse this concentration shift going into the new financial year.
The Companys stated mitigation for customer concentration — active diversification into new Tier-1 automotive clients, entry into forgings, and EV component supply (Sections 4.2 and 7) — is aimed at ensuring the Components segments recovery does not reproduce its prior single-customer dependence.
3. Update on OFAC Designation and Subsequent Delisting
This section sets out, in factual sequence, the designation of the Company on the OFAC SDN List, the Companys response, and its subsequent removal. It should be read together with, and reconciled against, the Companys stock-exchange filings on the matter.
3.1 Designation
On 30 October 2024 the Company was designated on the OFAC SDN List under Executive Order 14024 (the Russia-related sanctions programme), in connection with allegations concerning exports of machinery classified under the Common High Priority Items List. The Company consistently and strongly contested the basis of the designation. The designation blocked the Companys property and interests in property within U.S. jurisdiction and restricted dealings with U.S. persons, constraining foreign-currency transactions and leading to the temporary suspension of business with certain customers, including Mahindra & Mahindra in the Auto Component division.
3.2 The Delisting Path - Twenty Months from Designation to Removal
| Date | Event |
| 30 October 2024 | Designated on the OFAC SDN List under Executive Order 14024; the Company contests the basis from the outset. |
| 2 November 2024 | Company intimates the stock exchanges, stating it was unaware of any dealings with sanctioned entities or individuals. |
| December 2024 | Wind-down licences expire; the Company engages law firms in India and U.S. and pursues a delisting petition. |
| 6 June 2025 | OFACs Reconsideration Team issues the first questionnaire. |
| 20 August 2025 | Company files comprehensive narrative responses to the first questionnaire. |
| 23 September 2025 | OFAC issues a second, follow-up questionnaire. |
| 5 November 2025 | Company files comprehensive responses to the second questionnaire. |
| 30 June 2026 | OFAC removes the Company from the SDN List; all blocked property unblocked. |
| 8 July 2026 | Ministry of External Affairs, Government of India, confirms the delisting. |
(Timeline: 30 Oct 2024 — Designated on OFAC SDN List; 02 Nov 2024 — Stock exchanges intimated; 15 Dec 2024 — Blank Rome engaged; delisting petition pursued; 06 Jun 2025 — First OFAC questionnaire; 20 Aug 2025 — First questionnaire responses filed; 23 Sep 2025 — Second OFAC questionnaire; 05 Nov 2025 — Second questionnaire responses filed; 30 Jun 2026 — Removed from SDN List; 08 Jul 2026 — MEA confirms delisting. Annotation: Twenty months from designation to removal (spacing shown is sequential, not to scale))
3.3 Management Response and Legal Recourse
3.4 Delisting and What It Restores (event subsequent to 31 March 2026)
The Companys petition was successful. OFAC removed the Company from the SDN List with effect from 30 June 2026, and all property and interests in property blocked solely on account of the designation stand unblocked; the Ministry of External Affairs confirmed the removal on 8 July 2026.
The removal restores three things for the business:
3.5 Current Position and Outlook
As at the date of this report the Company is no longer subject to OFAC SDN designation. The pace and extent of restoration will depend on individual counterparties and banks own compliance re-onboarding processes and is not entirely within the Companys control.
Management will continue to work with legal counsel to strengthen internal sanctions-compliance protocols, including enhanced customer and transaction due diligence,
The Board and Audit Committee will monitor the compliance framework and the normalisation of international business in subsequent reporting periods.
The Company continues to work closely with counsel to maintain full, ongoing compliance with OFAC regulations and other applicable international trade laws.
3.6 Subsequent Event: Confirmation of Delisting (Event After the Reporting Period)
The Companys designation remained continuously in force throughout FY26 (1 April 2025 to 31 March 2026) and is accordingly reflected in full in this years reported results. OFACs determination to remove that designation was communicated only by letter dated 30 June 2026 - three months after the balance-sheet date - and is therefore treated as a non-adjusting event after the reporting period under Ind AS 10, disclosed here in the Management Discussion and Analysis and, in the statutory format required by Section 134(3)(l) of the Companies Act, 2013, as a material change under "Material Changes and Commitments" in Section 33 of the Boards Report.
Subsequent to the FY26 balance-sheet date, OFACs Reconsideration Team confirmed the Companys removal from the SDN List by letter dated 30 June 2026; the Company notified the stock exchanges of the removal on 1 July 2026; and the Ministry of External Affairs, Government of India, separately confirmed the unblocking of the Companys property and interests in property on 8 July 2026.
Public reporting on the matter has described this as Indias first successful OFAC delisting under the 2024 Russia-related sanctions programme, out of an original batch of 21 Indian parties designated under Executive Order 14024. The Companys shares were reported to have moved higher following the announcement, consistent with the markets reading of the delisting as a de-risking event.
The delisting petition was pursued jointly by Indian counsel CMS INDUSLAW and U.S. sanctions counsel Blank Rome LLP, consistent with the engagement described in Section 3.3.
Early indications of operational normalisation are visible in the quarter immediately following the delisting. The Board approved the Companys unaudited results for the quarter ended 30 June 2026 (Q1 FY27) on 12 August 2026, the same date as this Report, with public market reporting describing a sharp year-on-year increase in net profit and a marked recovery in the Components division, consistent with the restoration of the principal Auto Component relationship described in Section 2.5.
As these results pertain to the subsequent financial year, they are noted here for context only and are not incorporated into the FY26 figures reported elsewhere in this Analysis; full commentary followed in the Companys own Q1 FY27 disclosures.
4. Strengths, Opportunities and Threats
4.1 Key Strengths
The Company draws on a set of durable strengths that underpinned its ability to hold operations together through the designation period and that position it for recovery thereafter:
Established market position: over four decades of manufacturing history (since 1983), with an established position in cam and crank borers, fine borers and finish milling machines within the Indian machine tool industry. Diversified product portfolio: three operating divisions - Machine Tools/Automation/Additive Manufacturing, Auto Components/Forgings, and Defence & Aerospace - reducing reliance on any single end-market, evidenced by the Machinery divisions growth even as the Components division was constrained during FY26. Defence sector credentials: AS9100 & DGQA quality-assurance registration and the distinction, per Company disclosure, of being the first private-sector company in India to supply 100 per cent indigenous small arms to the Armed Forces, supporting a growing, policy-favoured order book (Section 2.4). R&D and institutional partnerships: active collaboration with IIT Madras and RRCAT on laser-based hybrid additive manufacturing and 5-axis machining technologies (Section 11), positioning the Company in higher-value, import-substituting product categories. Manufacturing footprint: six manufacturing units across Hyderabad, Telangana, and Ranjangaon-Pune, Maharashtra, providing geographic and capacity resilience. Demonstrated crisis management: successful navigation of a twenty-month OFAC designation to delisting (Section 3), including promoter capital support and customer diversification, evidencing managements capacity to sustain operations and stakeholder confidence through a material regulatory disruption. External validation, with a caveat: the Companys ratings were subject to a rating action during the year tied to the OFAC designation. Both agencies current ratings - ACUITE BBB-/A3 and CARE BBB-/A3 - remain investment-grade, and both removed the Company from rating watch during FY26, which reads as a stabilising signal rather than an unqualified strength.
4.2 Key Growth Opportunities
Defence indigenisation and reserved tenders: government reservation of defence procurement for domestic manufacturers, directly relevant given the Companys DGQA registration and small-arms track record. Atmanirbhar Bharat and capital-goods growth: continued policy emphasis on import substitution supporting demand for CNC machines and special-purpose tooling across railways, power and heavy engineering. Electric-vehicle transition: sustained demand for precision-machined motor housings, battery enclosures and structural components, an area in which the Company has executed commercial orders. Export re-entry: with the OFAC delisting, the foreclosed European and U.S. end-markets and Tier-1 OEM relationships become addressable again as banking channels normalise. Export replication: existing relationships with global Tier-1 OEMs operating in India present an opportunity for the Companys machines and components to be adopted at these OEMs plants outside India, subject to normalisation of international banking channels following the delisting.
Industry 4.0 and automation: rising adoption of automated CNC cells and IoT-enabled predictive maintenance allowing the Company to position higher-value, software-integrated machine tools.
4.3 Industry Threats and Risk Factors
5. Supply Chain
The Companys supply chain spans domestically sourced raw materials — principally alloy steel, copper and aluminium — and a set of imported precision sub-components, including linear guides and motion-control electronics, for which domestic alternatives remain limited.
This dependence on imported sub-components was a direct channel through which the OFAC designation constrained operations during the designation period, given the restrictions on transacting with U.S. persons and the U.S. financial system (Section 3).
The Companys mitigation strategy operates on three fronts:
The Company continues to develop domestic vendors for critical sub-assemblies as a structural response to both cost volatility and the supply-chain risk highlighted by the sanctions period, consistent with the Atmanirbhar Bharat import-substitution trend that also underpins the Companys core growth opportunity (Section 4.2).
With the OFAC delisting effective 30 June 2026, the Company expects the normalisation of banking channels to also ease access to imported sub-components sourced through U.S.-linked supply chains, though, consistent with Section 3.5, the pace of this normalisation will depend on individual suppliers and banks own compliance re-onboarding processes.
6. Outlook and Strategic Priorities
From resilience, to reopening, to recovery
Following the operational disruption of FY25 and the removal of the OFAC designation effective 30 June 2026, the Companys near-term outlook is shaped by the restoration of international banking channels and the resumption of business with counterparties that curtailed dealings during the designation; continued order intake in the Machine Tools division from non-automotive clusters; growth in the Defence division supported by DGQA registration, the HMG licensing recommendation and CAPF and Armed Forces tenders; and diversification of the Auto Component customer base alongside entry into forgings and EV components.
The principal challenges are the pace of normalisation of banking and counterparty relationships, which may take several quarters and is not entirely within the Companys control; continued dependence on the automotive capital-expenditure cycle for a portion of revenue; and execution risk in scaling the Defence division pending tender outcomes.
7. Risk Management
The Company maintains an Enterprise Risk Management framework overseen by the Audit Committee and the Board, covering strategic, operational, financial, compliance and emerging risks. The principal risks, with their assessed likelihood, potential impact and mitigation, are set out below.
| Strategic theme | Priority statement |
| Export re-entry | Selectively re-engage export markets and Tier-1 OEM relationships as international banking channels normalise following the delisting. |
| Defence expansion | Pursue growth in the Defence division through CAPF and Armed Forces tenders, leveraging DGQA registration and the pending HMG licensing recommendation. |
| Working-capital optimisation | Convert the inventory build to despatches and tighten receivables to restore net working-capital turnover and operating cash flow. |
| Debt reduction | Apply a portion of internal accruals and preferential-allotment proceeds toward reduction of outstanding borrowings. |
| Margin improvement | Pursue product-mix optimisation toward higher-value SPM and defence products. |
| Customer diversification | Continue reducing customer concentration in the Auto Component division through onboarding of new Tier-1 clients. |
| Capacity and innovation | Evaluate selective capacity expansion at Pune for forgings and EV components, and continue R&D collaboration with IIT Madras and RRCAT. |
| Industry 4.0 / digital manufacturing | Expand adoption of IoT-enabled predictive maintenance and automation across the Companys own manufacturing operations. |
| Supply chain localisation | Continue developing domestic vendors for critical imported sub-assemblies to reduce supply-chain risk (Section 5). |
| Sustainability | Continue investment in renewable-energy adoption and water-recycling infrastructure across manufacturing units (Section 12.1). |
7. Risk Management
The Company maintains an Enterprise Risk Management framework overseen by the Audit Committee and the Board, covering strategic, operational, financial, compliance and emerging risks. The principal risks, with their assessed likelihood, potential impact and mitigation, are set out below.
| Risk category | Nature of risk | Likelihood | Impact | Mitigation |
| Customer concentration | Historical dependence on a limited number of automotive OEM customers for the Auto Component division. | Medium | High | Active diversification into new Tier-1 clients, forgings and EV components. |
| Regulatory / sanctions | Exposure to foreign regulatory action, as evidenced by the FY25 OFAC designation. | Low (post-delisting) | High | Strengthened sanctions-compliance protocols; ongoing engagement with U.S. and Indian counsel; enhanced counterparty due diligence. |
| Raw-material price | Volatility in alloy steel, copper and aluminium prices. | Medium | Medium | Long-term vendor pricing arrangements; domestic vendor development for critical sub-assemblies. |
| Supply chain | Dependence on imported sub-components such as precision linear guides and motion controllers. | Medium | Medium | Vendor diversification; inventory buffers for critical imported items. |
2020-2021 (page header fragment)
| Risk category | Nature of risk | Likelihood> | Impact | Mitigation |
| Foreign exchange | Currency movements on export sales and residual foreign-currency exposures. | Medium | Medium | Natural hedging through domestic sourcing where feasible; monitoring by the Finance function. |
| Interest rate | Changes in interest rates on working-capital and term borrowings. | Medium | Medium | Periodic review of borrowing mix and rates by Finance and the Board. |
| Technology / obsolescence | Rapid evolution of 5-axis, hybrid additive and AI-enabled machining technologies. | Medium | Medium | R&D collaboration with IIT Madras and RRCAT; continuous product development. |
| Cyber security | Exposure of IT/OT systems and design data. | Low–Medium | Medium | IT-security policies, access controls and periodic review by the Audit Committee. |
| Litigation / legal | Exposure to regulatory, contractual or other legal proceedings, including matters arising from the OFAC designation period. | Low | Medium | Engagement of specialised legal counsel; Board and Audit Committee oversight of material litigation. |
| Operational / manufacturing | Plant-level disruptions, equipment breakdown or quality non-conformance. | Low–Medium | Medium | Preventive maintenance programmes; quality systems including DGQA-registered processes for defence products. |
| Human capital | Shortage of skilled CNC programmers, mechatronics engineers and defence-tooling technicians. | Medium | Medium | Structured training programmes; engagement with technical institutes (Section 10). |
| Climate / ESG | Exposure to energy-cost volatility, water availability, and evolving ESG regulatory expectations. | Low–Medium | Low–Medium | Solar rooftop adoption, effluent/water recycling, and monitoring of evolving BRSR requirements (Section 12). |
| Compliance | Non-compliance with SEBI, Companies Act, environmental, labour or export-control requirements. | Low | Medium | Internal audit, Company Secretary oversight, and Board-level compliance certification processes. |
The risk matrix above is reviewed periodically by the Audit Committee and updated to reflect changes in the Companys operating environment, including the resolution of the OFAC matter described in Section 3.
8. Financial Performance Analysis
Disciplined execution through the last sanctions-era year.
The following commentary should be read together with the audited standalone financial statements for FY26. Figures are extracted from the audited financial statements prepared under the Indian Accounting Standards (Ind AS) and are stated in ? lakh unless otherwise noted.
8.1 Statement of Profit and Loss
| Particulars (in ? lakh) | FY26 | FY25 | % change | =25% |
Income |
||||
| Revenue from operations | 20,856.43 | 22,832.16 | -8.7% | - |
| Other income | 105.29 | 144.22 | -27.0% | Y |
| Total income | 20,961.72 | 22,976.39 | -8.8% | - |
Expenses & Pre-tax Profit |
||||
| Total expenses | 20,430.82 | 22,887.38 | -10.7% | - |
| Profit before tax | 530.90 | 89.01 | +496.4% | Y |
Tax |
||||
| Tax for earlier years | 13.89 | - | New item | Y |
| Deferred tax (credit)/charge | 130.87 | 35.33 | +270.4% | Y |
Bottom Line |
||||
| Profit after tax | 386.15 | 53.68 | +619.4% | Y |
| Total comprehensive income | 368.90 | 125.41 | +194.2% | Y |
| Basic & diluted EPS (?) | 1.95 | 0.28 | +572% | Y |
TAKEAWAY
Profitability swung sharply off a low FY25 base while the top line reset on sanctions - nearly every line below PBT moved by more than 100%.
Other income -27.0% - a smaller nonoperating income line; immaterial to the overall result.
Profit before tax +496.4% - off a depressed FY25 base of 89.01 lakh; the recovery reflects genuine operating improvement (Sections 8.1, 8.3), not a base-effect illusion alone.
Tax for earlier years, 13.89 lakh - a new line item in FY26; FY25 carried no comparable charge.
Deferred tax +270.4% - a larger charge tracking the higher pre-tax profit.
Profit after tax +619.4% and EPS +572% - both mechanically track the PBT recovery off FY25s thin 53.68 lakh base.
Total comprehensive income +194.2% - tracks PAT plus other comprehensive income items for the year.
Revenue, total income and total expenses each moved within a normal band, all under the 25% threshold - the sanctions-year reset was a revenue-line story, not a swing in cost structure.
Revenue reset 8.7 per cent as sanctions-era channel constraints weighed on the Auto Component division for most of the year. Profitability nonetheless improved sharply: profit before tax rose to 530.90 lakh from 89.01 lakh and profit after tax to 386.15 lakh from 53.68 lakh, on a favourable product mix and stringent expense control, with the tax charge almost entirely deferred.
8.2 Segment Performance
The Machinery division grew revenue to ?194.91 crore from ?150.38 crore and segment PBIT to ?28.94 crore from ?14.57 crore. The Components division contracted to ?14.70 crore from ?79.41 crore for the full year, reflecting the suspension of supplies to its principal customer for most of the period; segment PBIT fell to ?0.32 crore from ?6.66 crore. The relationship was restored at scale from the first quarter of FY27 (Section 2.5).
| Segment (in ? crore) | FY26 | FY25 | % change | =25% |
Machinery Division |
||||
| Revenue | 194.91 | 150.38 | +29.6% | Y |
| PBIT | 28.94 | 14.57 | +98.6% | Y |
Components Division |
||||
| Revenue | 14.70 | 79.41 | -81.5% | Y |
| PBIT | 0.32 | 6.66 | -95.2% | Y |
TAKEAWAY
The two divisions moved in opposite directions - Machinerys growth carried the Company through the Components divisions OFAC-driven contraction.
Machinery revenue +29.6% non-automotive order intake and a favourable product mix absorbed the constrained Components base (Section 2.3). Machinery PBIT +98.6% operating leverage on higher-realisation configurations (Section 8.3). Components revenue -81.5% supplies to the principal customer suspended for most of the year under the OFAC designation (Section 2.5). Components PBIT -95.2% the segment held a small positive PBIT despite the near-total revenue loss.
All four segment metrics crossed the 25% threshold - the OFAC designations impact was concentrated almost entirely in the Components division.
8.3 Cost Management
Total expenses declined 10.7 per cent to ?204.31 crore (FY25: ?228.87 crore), a sharper fall than the 8.7 per cent revenue decline - evidence of active cost discipline through the sanctions-affected year rather than a purely proportional contraction. The cost-head break-up, drawn from the audited Statement of Profit and Loss, shows the discipline was broad-based rather than concentrated in one line:
| Cost head (in ? crore) | FY26 | FY25 | % change | =25% |
Variable & Manufacturing Costs |
||||
| Cost of materials consumed | 118.33 | 134.55 | -12.1% | - |
| Employee benefits expense | 43.45 | 53.16 | -18.3% | - |
| Other manufacturing expenses | 21.06 | 26.61 | -20.9% | - |
| Other expenses | 16.57 | 16.73 | -1.0% | - |
Financing & Depreciation |
||||
| Finance costs | 18.38 | 15.18 | +21.1% | - |
| Depreciation and amortisation | 15.61 | 13.87 | +12.6% | - |
TAKEAWAY
Cost discipline was broad-based - every controllable cost line fell faster than revenue; only financing and depreciation, largely outside short-term management control, rose.
Materials -12.1% 56.7% of revenue, down from 58.9% the largest cost head improved as a share of revenue despite the sanctions-year reset.
Employee benefits -18.3% outpaced the 15.8% headcount reduction (Section 10), consistent with right-sizing weighted toward the lower-activity Auto Component division.
Other manufacturing expenses -20.9% the largest proportional cut among the controllable heads.
Finance costs +21.1% and depreciation +12.6% moved opposite to the cost lines above, on higher average borrowings (Section 8.4) and a larger asset base.
No cost-head variance crossed the 25% Schedule V threshold - all six lines moved within a normal band.
Materials, employee benefits and other manufacturing expenses — these are the three largest and most controllable cost heads — all fell faster than revenue, each by 12 to 21 per cent, and materials cost as a share of revenue improved to 56.7 per cent from 58.9 per cent. Employee benefits expense fell 18.3 per cent, outpacing the 15.8 per cent headcount reduction (Section 10), consistent with the right-sizing being weighted toward the lower-activity Auto Component division rather than an across-the-board cut. Finance costs and depreciation moved the other way, rising a combined 21–13 per cent as higher average borrowings (Section 8.4) and a larger asset base pushed these charges up — together they came to ?34.0 crore in FY26 against ?29.0 crore in FY25, confirming the EBITDA-to-PBT bridge referenced in Key Financials. Set against that increase, the margin recovery documented in Section 8.1 came entirely from cost control above the EBITDA line and from product mix, not from any easing in financing or depreciation charges.
Going into FY27, cost management rests on three levers already identified under Strategic Priorities (Section 6): converting the FY26 inventory build into dispatches to reduce carrying costs; continued long-term vendor-pricing arrangements to contain raw-material cost volatility (Section 5); and product-mix optimisation toward higher-realisation SPM and defence orders, which carry structurally better unit economics than the Auto Component business they are, in part, substituting for.
8.4 Balance Sheet
Total assets grew to ?495.89 crore from ?427.87 crore, a 15.9 per cent increase.
The growth was overwhelmingly a working-capital story: current assets rose 31.6 per cent to ?263.87 crore, led by inventories (+23.6% to ?169.18 crore) and trade receivables, which grew 71.3 per cent to ?69.21 crore from ?40.39 crore.
Non-current assets, by contrast, grew only 2.0 per cent to ?232.02 crore — capital expenditure on fixed assets (including capital work-in-progress) actually fell 57.5 per cent year-on-year to ?15.89 crore from ?37.34 crore (Section 8.5), so the balance sheet expanded despite a pull-back in fresh investment, not because of one.
Net worth rose to ?228.30 crore from ?212.82 crore (+7.3%), aided by ?11.79 crore of preferential-allotment proceeds raised during the year.
Total borrowings (working-capital and term) rose to ?169.43 crore from ?133.73 crore (+26.7%), pushing the debt-equity ratio to 0.74 from 0.63 (Section 8.6); within this, non-current (term) borrowings grew faster (+40.3% to ?71.84 crore) than current borrowings (+18.2% to ?97.59 crore), indicating the Company leaned on longer-tenor debt to fund the receivables and inventory build rather than relying solely on short-term working-capital lines.
The combination of a growing, working-capital-led asset base funded partly by higher borrowings is consistent with a company positioning stock and extending credit ahead of an expected reopening of blocked channels, rather than one facing balance-sheet stress — debt service coverage held broadly steady at 1.05 times (FY25: 1.08 times).
| in crore | FY26 | FY25 | % change | =25% | TAKEAWAY |
Assets |
Balance-sheet growth was a working-capital story, funded partly by higher borrowings — not by fresh capex. | ||||
| Total assets | 495.89 | 427.87 | +15.9% | - | |
| Non-current assets | 232.02 | 227.41 | +2.0% | - | Current assets +31.6% — driven by the inventory and receivables build described in Section 8.4. |
| Current assets | 263.87 | 200.45 | +31.6% | Y | Trade receivables +71.3% — extended credit terms and delayed collections during the OFAC-constrained year (Section 8.6). |
| Inventories | 169.18 | 136.92 | +23.6% | - | Total borrowings +26.7% and non-current (term) borrowings +40.3% — the Company leaned on longer-tenor debt to fund the build rather than relying solely on short-term working-capital lines. |
| Trade receivables | 69.21 | 40.09 | +71.3% | Y | Total assets, non-current assets, net worth, current (working-capital) borrowings and inventories all moved within a normal band, under the 25% threshold. |
Capital & Borrowings |
|||||
| Net worth | 228.30 | 212.82 | +7.3% | - | |
| Total borrowings | 169.43 | 133.73 | +26.7% | Y | |
| — non-current (term) | 71.84 | 51.19 | +40.3% | Y | |
| — current (working-capital) | 97.59 | 82.55 | +18.2% | - |
8.5 Cash Flow Statement
Operating cash flow swung to an outflow of 13.39 crore in FY26 from an inflow of 20.91 crore in FY25, a deterioration of 34.30 crore.
This did not reflect a decline in underlying trading performance: operating profit before working-capital changes was a positive 39.45 crore, comfortably ahead of the reported PBT of 5.31 crore. The outflow was driven entirely by working-capital movements — receivables absorbed 35.69 crore of cash (FY25: released 9.36 crore) and inventories absorbed a further 32.26 crore, partially offset by 15.36 crore released from higher trade payables.
| in crore | FY26 | FY25 | % change | =25% |
Operating |
||||
| Operating profit before working-capital changes | 39.45 | 29.44 | +34.0% | Y |
| Working-capital changes (receivables, inventories, payables) | -52.59 | -4.56 | Outflow deepened >10x | Y |
| Net cash from operating activities (A) | -13.39 | 20.91 | Swung to outflow | Y |
Investing |
||||
| Net cash from investing activities (B) | -15.68 | -37.02 | +57.6% (smaller outflow) | Y |
| — of which, capex (fixed assets incl. CWIP) | -15.89 | -37.34 | +57.5% (smaller outflow) | Y |
Financing |
||||
| Net cash from financing activities (C) | 29.11 | 16.08 | +81.0% | Y |
Net Movement |
||||
| Net increase/(decrease) in cash (A+B+C) | 0.04 | -0.04 | Not material | - |
TAKEAWAY
Operating cash flow swung to an outflow purely on working-capital absorption — trading profitability actually improved, and investing and financing moved to fund the build.
Operating profit before working-capital changes +34.0% — genuine improvement in trading profitability, comfortably ahead of the reported PBT of 5.31 crore.
Working-capital changes deepened sharply — 52.59 crore absorbed against 4.56 crore in FY25, on the receivables and inventory build (Sections 8.4, 8.6).
Net cash from operating activities (A) swung from an inflow of 20.91 crore to an outflow of 13.39 crore — driven entirely by the working-capital movement above, not by trading performance.
Net cash from investing activities (B) improved 57.6% (a smaller outflow) as capex fell 57.5% — the Company scaled back discretionary investment during the sanctions year.
Net cash from financing activities (C) rose 81.0% — preferential-allotment proceeds and higher bank borrowings funded the working-capital build and the reduced capex programme.
The net change in cash for the year was negligible in absolute terms ( 0.04 crore in FY26 against -0.04 crore in FY25) — the story is entirely in the mix of operating, investing and financing flows, not the year-end cash balance.
Investing activities were a net cash outflow of 15.68 crore, almost entirely capex, but at less than half the 37.34 crore spent in FY25 — a second signal, alongside the muted non-current asset growth in Section 8.4, that the Company scaled back discretionary investment during the sanctions year rather than funding an expansion.
Financing activities were net positive at 29.11 crore, supported by 11.79 crore of preferential-allotment proceeds and a net increase in bank borrowings of 35.55 crore, which together funded the working-capital build and the (reduced) capex programme; interest paid of 18.23 crore was the largest single financing outflow, consistent with the higher average borrowings discussed in Section 8.3.
Managements priority for FY27, set out under Working-Capital Optimisation in the Strategic Priorities (Section 6), is to convert the inventory build into dispatches and tighten receivables as OFAC-related constraints ease, which is expected to reverse a meaningful part of the FY26 operating cash outflow.
8.6 Schedule V Key Financial Ratios
The table below sets out the eleven ratios prescribed under Schedule V of the SEBI (LODR) Regulations, 2015, comparing FY26 with FY25, grouped by liquidity, leverage, asset management and profitability, with variances of 25 per cent or more flagged and explained in the panel alongside.
| Ratio | FY26 | FY25 | Variance | =25% |
Liquidity |
||||
| Current ratio | 1.47 | 1.35 | +9% | - |
Leverage |
||||
| Debt–equity ratio | 0.74 | 0.63 | +18% | - |
| Debt service coverage | 1.05 | 1.08 | -3% | - |
Asset Management (Efficiency) |
||||
| Trade receivables turnover | 3.81 | 5.14 | -26% | Y |
| Trade payables turnover | 2.73 | 3.74 | -27% | Y |
| Net capital turnover | 2.46 | 4.41 | -44% | Y |
| Inventory turnover ratio | 1.36 | 1.80 | -24% | - |
Profitability |
||||
| Net profit margin | 1.85% | 0.24% | +687% | Y |
| Return on capital employed | 6.17% | 4.71% | +31% | Y |
| Return on equity | 1.75% | 0.26% | +573% | Y |
| Return on investment | NA | NA | - | - |
TAKEAWAY
Leverage financed the working-capital build; profitability and turnover ratios swung sharply off a low FY25 base.
Net profit margin +687% - FY25s 0.24% base was exceptionally low; FY26s 1.85% reflects genuine margin recovery, not only the base effect.
Return on capital employed +31% higher EBIT from expense control and a favourable product mix.
Return on equity +573% the same low-FY25-base effect as net profit margin; FY26s 1.75% reflects PAT recovering off a thin FY25 equity return.
Net capital turnover -44% lower sales combined with a higher working-capital base (the inventory and receivables build).
Trade payables turnover -27% lower purchase volumes and extended supplier credit periods.
Trade receivables turnover -26% the OFAC-related sales impact, together with extended credit terms and delayed collections.
Current ratio, debt-equity, debt service coverage and inventory turnover (-24%) moved within a normal band, all under the 25% threshold. Return on investment is not separately computable on the Companys own disclosure basis.
9. Internal Control Systems and Their Adequacy
The Company maintains an internal control framework commensurate with its size, scale and operational complexity. Internal financial controls are designed to provide reasonable assurance regarding the reliability of financial reporting in accordance with Ind AS and the Companies Act, 2013.
Financial and operational transactions are recorded through the Companys systems with defined access controls and approval workflows, governed by a Board-approved Delegation of Authority framework.
Internal audits are conducted periodically by an independent chartered-accountancy firm covering operational efficiency, financial controls and statutory compliance across manufacturing units, with findings and corrective action plans reviewed by the Audit Committee, comprising Independent Directors, on a quarterly basis.
The Company Secretary and Compliance function monitor regulatory compliance across SEBI, the Companies Act, and labour, environmental and export-control requirements, with corrective actions tracked to closure. A Vigil Mechanism / Whistleblower Policy and information-security measures over financial and design data are in place.
10. Human Capital
Industrial relations across the Companys manufacturing units in Hyderabad and Pune remained stable during FY26. As at 31 March 2026 the Company employed 545 permanent employees (excluding Directors), against 647 as at 31 March 2025, a reduction of 102 employees, or 15.8 per cent, over the year. This right-sizing tracked the lower activity in the Auto Component division during the designation period (Section 8.3) rather than a broad-based reduction, and employee relations remained cordial throughout, with no material industrial disputes reported.
As the Auto Component relationship with its principal customer is restored from FY27 (Section 2.5) and the order book converts to dispatches (Section 8.5), workforce planning will need to track the pace of that recovery; the shortage of skilled CNC programmers, mechatronics engineers and defence-tooling technicians remains a constraint on how quickly capacity can be scaled back up (Section 7).
11. Research and Development
Research and development remained active across both the Machine Tools and Defence divisions during FY26, with total R&D expenditure of 46.50 lakh, entirely recurring in nature with no capital R&D spend incurred during the year. This represented ~0.22 per cent of revenue from operations for FY26 (46.50 lakh against 208.56 crore).
Machine Tools R&D
Thirteen projects were underway or completed during the year:
Defence R&D
Five products — these included a 9x19mm Concealable Carbine, an MMG upgrade kit with mounting tripod, and 7.62x51mm Light, General Purpose and Medium Machine Guns — were productionised during the year, while a 9mm pistol remained under design and development.
R&D Priorities for FY27
The Companys stated priorities are commercialisation of the newly productionised machines; launch of a larger Horizontal Machining Centre (H650) and a Ram-type CNC Vertical Turning Lathe (VTL-1250); launch of the Double Column Plano Miller; and continued development of new weapon platforms — directly supporting both the Machine Tools order-book diversification (Section 2.4) and the Defence divisions growth trajectory (Section 4.2).
12. Environmental, Social and Governance
12.1 Environmental
12.2 Social
Workforce safety, training and development treated as a top priority across all plants (Section 10). Continuing technical skill-development programmes for the manufacturing workforce.
Corporate Social Responsibility spend for the year was 5.00 lakh against a statutory obligation of 24.02 lakh (2 per cent of average net profit for the preceding three financial years), with the unspent balance of 19.02 lakh transferred to the Unspent CSR Account as required under Section 135(6) of the Companies Act, 2013 for allocation to ongoing projects. Full particulars are disclosed in Annexure C to the Boards Report.
12.3 Governance
Board composition includes Independent Directors chairing the Audit, Stakeholders Relationship, and Nomination & Remuneration committees. An active Whistleblower / Vigil Mechanism, together with adherence to the SEBI (Prohibition of Insider Trading) Regulations. A Code of Conduct applicable to Board members and senior management, monitored by the Company Secretary.
13. Disclosure of Accounting Treatment
In preparing the financial statements for FY26 the Company followed the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013, read with the relevant rules. There has been no treatment different from that prescribed under any applicable Accounting Standard during the year under review.
14. Cautionary Statement
Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, operational expectations or regulatory matters may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied due to changes in economic conditions, raw-material prices, government policy, regulatory or judicial decisions (including further developments relating to the OFAC matter described in Section 3), competitive conditions in the machine tools, automotive and defence sectors, and other factors beyond the Companys control. The Company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable law or regulation.
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