Auto Components to Defence: How Balu Forge’s Strategic Transformation Could Fuel Future Growth?

SYNOPSIS: Balu Forge is transforming from a precision auto components maker into a defence-focused manufacturer, a fully automated 360,000-shell/year line, and plans to expand forging capacity to 1.5 million tons, targeting 40–45% revenue growth in FY26, leveraging automation and strategic investments for long-term global relevance and operational resilience.

Can a company known for decades of precision auto components suddenly become a major player in defence manufacturing? How is Balu Forge leveraging its engineering expertise, advanced automation, and strategic investments to transition from traditional auto parts to high-tech defence solutions, and what could this mean for its future growth?

Balu Forge Industries Limited, with a market capitalization of Rs. 5,317.15 crore, closed at Rs. 466.45 per equity share, up by 5.68 percent from its previous day’s close price of Rs. 441.4 per equity share. As of December, 2025, Ace investor Ashish Kacholia holds 1.62 percent stake in the company.

Balu Forge Industries Limited, based in Mumbai, manufactures and sells crankshafts and a wide range of forged components including railway wheels, undercarriages, transmission parts, hydraulic motors, brake parts, turbine blades, and empty shells. It serves diverse sectors such as defense, automotive (trucks, buses, tractors, motorcycles), railways, aerospace, marine, oil & gas, e-mobility, and industrial equipment, supplying both in India and internationally to original equipment manufacturers.

Financials

Revenue for Q2 FY26 reached Rs. 300 crore, reflecting a 34.5 percent YoY growth from Rs. 223 crore in Q2 FY25 and a 28.8 percent QoQ increase from Rs. 233 crore in Q1 FY26, supported by strong operational performance and market demand.

EBITDA rose to Rs. 83 crore in Q2 FY26, up 27.7 percent YoY from Rs. 65 crore in Q2 FY25 and 15.3 percent QoQ from Rs. 72 crore in Q1 FY26, indicating healthy margin expansion. Net profit stood at Rs. 65 crore, growing 35.4 percent YoY from Rs. 48 crore in Q2 FY25 and 14.0 percent QoQ from Rs. 57 crore in Q1 FY26, demonstrating consistent improvement in both profitability and operational efficiency.

Over the past three years, the company has demonstrated strong growth, achieving a revenue CAGR of 48 percent, a profit CAGR of 89 percent and a price CAGR of 82 percent, reflecting both its operational performance and market confidence.

A return on equity (ROE) of about 25.4 percent and a return on capital employed (ROCE) of about 31.3 percent and debt to equity ratio at 0.07, demonstrate the company’s financial position. At the moment, the company’s P/E ratio is 21.9x lower as compared to its industry P/E 22.7x.

A Legacy in Precision Engineering

Balu Forge Industries, a 35 year-old precision engineering company, has long been recognized for manufacturing high-quality auto components, including crankshafts, railway wheels and axles, brake parts, and hydraulic motors. With a global footprint supplying over 25 OEMs and exporting to more than 80 countries, the company has built credibility across automotive, railways, heavy engineering, and aerospace sectors. Operating from multiple facilities in Karnataka and the UAE, Balu Forge consistently delivers both semi-finished and fully machined forged components.

Defence: A Strategic Focus Built Over Years

Balu Forge has been actively involved in defence manufacturing for several years. The company is an approved vendor to the majority of India’s 41 Ordnance Factories and has successfully supplied defence forces in two prominent European countries, often as a single-source supplier.

The Indian Government’s initiatives, including the 2020 restrictions on import procurement, have boosted opportunities for domestic companies. Balu Forge has leveraged this policy environment to scale its capabilities and investments. Over the next decade, the company plans substantial capital investment in defence, focusing on artillery, undercarriage parts for armoured vehicles, weapons and ammunition for infantry, and forged & machined engine components. A dedicated ammunition production unit is also planned in partnership with a global defence player.

Balu Forge continues to expand its domestic and international defence customer base, building on a strong foundation of prior supply experience and approvals, positioning itself as a trusted partner in high-precision defence manufacturing.

The Strategic Pivot: Automation and Capacity Expansion

In December 2025, Balu Forge marked a significant milestone by launching its fully automated empty shell production line in Belgaum, Karnataka. This line, producing 360,000 shells annually, is powered by near-100 percent FANUC robotics and is among India’s first fully indigenously built automated defence lines.

The Belgaum facility forms part of a phased expansion plan, designed to roll out multiple high-precision production lines. By internalizing heavy forging capabilities, Balu Forge is reducing dependence on outsourcing and focusing on complex components with high entry barriers and long product life cycles. The line operates unmanned with a cycle time of 55 seconds per shell, showcasing adoption of advanced automation and Industry 4.0 technologies.

Manufacturing and Forging Capabilities

Balu Forge has aggressively expanded its machining and forging capacity. The company is planning to increase machining capacity to 80,000 tons per year and forging capacity to 1,500,000 tons per year. Key capex assets include a 25T closed-die hydraulic hammer, an 8,000T mechanical press, and 7-axis and 11-axis machining systems.

These expansions strengthen the company’s ability to serve defence, railways, and heavy engineering sectors, which have high switching costs, long product life cycles, and stable pricing.

Future Outlook

Looking ahead, Balu Forge targets 40–45 percent revenue growth in FY26, driven by the commissioning of Hattargi Unit 3 and scaling of defence production. Continued investment in automation, R&D, and special engineering capabilities. The long-term strategy emphasizes defence, railways, and heavy engineering, sectors with high barriers to entry and stable margins. Government initiatives, such as MOOWR for imported machinery, provide additional cash flow advantages, while the company’s advanced capabilities position it to capture global defence opportunities.

Key Risks to Monitor

Investors should keep a close eye on execution risks tied to Balu Forge’s large greenfield facilities, the timing and certification of defence contracts, and possible working capital strains during the ramp-up period, as these factors could impact overall performance and cash flow.

Balu Forge is evolving from a mid-sized auto component supplier into a globally relevant, defence-ready precision manufacturing compounder. With robust capacity expansion, advanced automation, and a long-standing focus on defence, the company is well-positioned for sustainable growth, margin expansion, and enhanced strategic relevance over the coming years.

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