Goodluck India Limited (530655) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Goodluck India Limited Q2 FY '26 Post Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Vinay Pandit from Kaptify Consulting. Thank you. And over to you, sir.

Thank you. Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q2 and H1 FY '26 Post Earnings Conference Call of Goodluck India Limited. I would like to hand over the call to Mr. Mahesh Chandra Garg, Chairman. Along with him, we also have Mr. Ram Agarwal, Chief Executive Officer; and Mr. Sanjay Bansal, Chief Financial Officer, on the call. I would now hand over the floor to Mr. Garg, Chairman and Managing Director. Over to you, sir.

Thank you for joining us today. I would like to begin by sharing our perspective on the broader macro and micro front and industry environment that has shaped the quarter gone by. The second quarter of FY '26 has been one of the very challenging period for steel and engineering industry in the recent years on 3 critical fronts: demand, pricing and operations. The industry has faced considerable headwinds Domestic steel price in India fell to a 5-year low by October '25 with hot-rolled coil prices ranging from INR 47 to INR 48 per tonne, nearly 7% down, lower than April price hike. The decline came amidst rising imports mainly from China and continued expansion in domestic production. The resulting inventory buildup we export and muted consumption forced steelmakers to reduce prices to clear stock and sustain throughput even as the demand from infrastructure construction industry remained steady but moderate. Adding to these external pressures, the quarter saw an unusually prolonged and heavy monsoon and early monsoon that disrupted project execution across many sectors. While the government capital expenditure program remains robust, however, we have not yet seen a significant materialization of this spending translating into enhanced steel demand on the ground. We do, however, expect that momentum to pick up in the coming quarters as the project execution takes place once. On the global front also, environment remains complex. Geopolitical tensions continue to influence trade flows from the prolonged Russia-Ukraine conflict and tariff war all over the world as Trump Administration in United States, parallel trade policy discussion between India and EU. EU is our one of the very important trading partner and the U.S. are shaping the sentiment and long-term opportunity for Indian exporters. Amid these headwinds, Goodluck India has shown a resilient business model and focus despite the tough macro backdrop, we have delivered healthy operational performance, EBITDA margin improving by around 2.2 points year-on-year and volume growing close to 10% in Q2 and ] full year ] basis. This highlights the company's ability to sustain momentum through efficiency and innovation. Looking ahead, we continue to deepen our presence in high-value engineering and defense manufacturing. Our subsidiary, Goodluck Defense, has commenced production on 150 mm artillery shells, making an important milestone, even continuing India's defense self-reliance ambition. Plans are already underway to enhance capacity from current 1.5 lakh to 4 lakh tonnes because of continuous inquiries and demand visibility for this item. In summary, while the near-term environment remains uncertain, the company's focus on value-added segments and operational excellence definitely positions Goodluck India strongly for the next phase of growth. In conclusion, I want to extend my heart to our stakeholders for their trust and encouragement. We will continue our journey to sustainable growth and innovation in times to come. Thank you once again. I will hand over now to Mr. Ram Agarwal, CEO, to brief you further.

Good day, everybody. This is Ram Agarwal. Thank you for joining us today. Following the Chairman's remarks, I would like to share our strategic perspective and outlook as we move ahead in this exciting phase of transformation, not just for Goodluck India but for the industries and the nation we proudly serve. The world today is undergoing a fundamental shift, moving decisively towards energy security and defense self-reliance, the 2 basic pillars that define the stability and progress of any nation. On one hand, renewable energy is rapidly replacing fossil fuels, global commitment under COP mandate, achieving net zero carbon emission by 2050 and India is working relentlessly towards this goal. At Goodluck, we are fully aligned with this transition. We are augmenting our capacity for solar support structure, including tracker tubes and systems to cater to both domestic and export markets. These investments are not just about capacity, but capability, ensuring that we are part of the green energy revolution. Over the coming years, we are targeting a revenue contribution of INR 500 crores to INR 600 crores from this segment alone. On the defense front, the world today is witnessing significant geopolitical realignment. Economic and strategic boundaries are being redrawn and every nation is strengthening its defense preparedness. India's defense export market, which stood at INR 23,000 crores last year, is projected to reach INR 50,000 crores by 2030. European Union too has committed 2.5% of its GDP towards enhancing its defense capabilities. Clearly, the global demand for defense products and ammunition is poised for a massive surge over the next 4 to 5 years. Yes, Goodluck is also there. Goodluck is proud to shoulder this responsibility for our nation. With the commissioning of our artillery shell manufacturing plant of 150,000 shells per annum, we have taken a major step towards. We plan to expand this capacity to 4 lakh shells within the next year. Alongside, we are establishing new machining centers to leverage our strong engineering and technical capabilities in manufacturing critical components for missile and aerospace applications. These initiatives will significantly strengthen our presence in India's defense ecosystem and open new global opportunities. As you know, we continue to build on our growth trajectory. Our strategic partnership in Goodluck India Limited with BrahMos Aerospace Thiruvananthapuram Limited, BATL, and Axiscades Technologies Limited on the Advanced Medium Combat Aircraft program is another important milestone. We have filed an expression of interest for participation in AMCA program, focusing on enhancing India's aerospace capabilities. In addition, we are proud to share that we have met our investment obligation under the UP Nivesh initiative for which we have signed a Memorandum of Understanding with the Government of Uttar Pradesh. Another important area of our focus is our hydraulic tube segment. This plant, which commenced operation in January 2025 has been performing well. And once we achieve around 80% capacity utilization, there are plans to augment capacity by an additional [ 50,000 ] MT per annum. This expansion will allow us to serve a wider range of applications across construction equipment and automotive system. Infrastructure, it remains the backbone of India's growth journey, making life easy for its countrymen. To achieve our national objectives in energy and defense, we must continue to build a strong physical and digital foundation with roads, railways, power transmission and telecom network. The government's relentless focus in this area provides enormous opportunities and luckily, Goodluck is actively catering to all the 4 segments. Recognizing the good demand, our management is planning to scale up capacities further to ensure we can continue meeting customer requirements efficiently and competitively. At Goodluck, our focus remains clear. We are invested in sectors that will define India's future. Our strength lies in market and product reshuffling, which has always been our USP. This adaptability has helped us stay resilient even during periods of global volatility. When faced with same disruption, we pivot towards alternative markets and products that can be manufactured within our existing infrastructure, ensuring continuity and stability in growth. Growth may be limited by headwinds, but we are able to keep our heads above the water. We also recognize that our people are the real driving force behind this journey. Skill development, talent acquisition and retention remain core priorities for us. As we modernize our infrastructure and expand into new product lines, we are continuously investing in our workforce to ensure that we are equipped with right technical and leadership capabilities. On the CSR front, we at Goodluck believe that growth must go hand in hand with social responsibility. Country has given us the opportunity to service people, and we are committed to give back meaningfully. Our initiatives, including supporting material establishment, providing needs for underprivileged, supplying quota for animals and offering educational assistance to bright students from economically weaker background to help them pursue higher education and build their careers. We strongly believe that building a prosperous society is as important as building a successful company. To conclude, our company is one of the balanced growth, innovation and responsibility. We are building an organization that is not only financially strong, but also socially conscious and future ready. As we move forward, our focus on renewable energy, defense, infrastructure and advanced engineering will continue to drive value for our stakeholders. Thank you for your continued trust and support. Together, we will make Goodluck a name synonymous with strength, sustainability and focus. Thank you. Now, I hand over it to Mr. Sanjay Bansal, CFO.

Good morning, everybody. At the outset, I, Sanjay Bansal, CFO, on behalf of Goodluck, welcome you all for joining us for the conference on performance of the company in quarter 2 and first half of financial year 2026. Regarding Q2 performance standalone, the sales was increased to INR 991.38 crores as against INR 976.21 crores during Q2 of previous year, registering a growth of about 2%. However, sales volume have increased by 9.5% during Q2 of the current fiscal as compared to previous year Q2. EBITDA for the quarter stood at 9.72% of sales at INR 96.10 crores as against INR 73.44 crores during Q2 of financial year 2025. The PAT before exceptional item, net of tax, stood at INR 41.30 crores, registering a growth of 19.43% on year-over-year basis. The performance of the company in H1 of current financial year 2026, the sales has been increased by 5%. EBITDA margin has improved to INR 191.88 crores with EBITDA margin at 9.72% of net sales as against 8% during H1 of financial year '25. However, PAT margins have been increased to INR 81.44 crores as against INR 82.54 crores during first half previous year. Earnings per share has been at INR 11.95 per share in Q2 of current financial year as against INR 13.80 per share during Q2 of previous year. However, the earnings per share of the company in H1 of current fiscal year for standalone was at INR 24.57 per share. On financial front, our interest costs have marginally gone up due to increase in current assets during first half of current half year as compared to previous year-end date. Also, employees and salary benefits have increased due to annual increments and new recruitments as compared to previous period. Thank you very much. Now, we are open for Q&A.

[Operator Instructions] First question is [ Agrim Kanogo ] from AK Investment.

I have a few questions. So the first question is on the revenue expectations for 2027 and our expectation as well.

Your voice is not clear. Can you please see?

Sir, can you please give us the expectation for revenue and margin for the year '27?

For this year or for the next year?

For this year and '27, yes. Next year and this year.

As we have already told that we are for a long-term growth of 15% to 20%. And in long term, we are going to maintain it. So the turnover of this year and the next year financial year should be in that line only.

Okay. And the margins?

Margins are nearly -- margins are -- this quarter, we have clocked 9.72%, and we hope margins to remain in the same space.

Okay. Same space. And one more question regarding our new subsidiary. When will the operation begin?

Operation began in October itself, October this year only.

Okay. And one final question, sir. Now that we have received the license for artillery shell in one, what is the potential for revenue? Like what kind of revenue are we expecting from that license?

In artillery shell division, we have established the division for 150,000 shells, and we are augmenting its capacity to 4 lakh shells per annum. So the combined revenue should be in the range of INR 1,000 crores.

Next question is from Deepak Pandey from Sagun Capital.

Sir, question is on the volume growth this quarter. Are we seeing improvement this quarter or there is more [back room ] ahead in terms of exports and domestic demand?

Demand, as far as demand is concerned, H1 was definitely low. But H2, as usual also, because it is a busy season, demand is good. Demand, we are having good orders. And since the rains have withdrawn, now the project demand has also come. Government targets have to be completed in the last quarter. So, H2 is likely to be -- I should say, it should be a better one from this H1.

Got it. And sir, there were some debottlenecking plans that we had to increase 50,000 tonnes capacity. Can you throw some light there and under which vertical will it be coming in?

Sir, the debottlenecking is a regular exercise which we have been taking. As far as you are talking of that 50,000 tonnes capacity that we were talking about the hydraulic tubes. Hydraulic tubes plant, we had commissioned in January, and it is likely that by this year-end, by this financial year, say, March '26, it should ramp up to 70%. And we plan to raise the capacity to next level of 50,000 tonnes once it gets 80% capacity utilization. And in the other units, this bottlenecking is a regular exercise. It is going on, which is increasing EBIT quantity every quarter.

Got it. And sir, the expansion in the defense vertical and the AMCA project that we are trying to bid, is that something that is going to come under Goodluck India? Or is it going to come under Goodluck Defense?

Sir, as far as this AMCA program, this AMCA program we have bid under Goodluck India and as far as the capacity augmentation of the shells, that is under Goodluck Defense & Aerospace, a subsidiary of the company.

Got it. And the funding part, INR 500 crores CapEx that we are trying to put in, can you give me the split between equity and debt for that?

Sir, for that, we are planning, the project should be almost INR 400 crores to INR 500 crores, and it will be a mix of debt and equity. Near the program, we will update you.

Okay. And what would be the peak capacity post that 4 lakh shells defense vertical?

It should be almost 90%, 350,000 to 360,000 shells when both the capacities are augmented.

Got it. And sir, on the hydraulics plant, I think you gave some comment. I missed that. What was the capacity utilization in Q3, given it is almost 1 year since commercialization?

Sir, this has only been commissioned in January 2025. And due to this tariff and these geopolitical headwinds, we were expecting that the 70% capacity utilization must have come, but it has been delayed by a quarter. And we hope by March '26, we will be getting the production ramp up to 70%.

Next question is from Monil Nilesh Gada from Equentis.

Just a question on lines the first one was asked. I wanted to ask how much revenue we will be realizing from Goodluck Defense in this year, FY '26 and then subsequent year FY '27?

Sorry, your voice is not clear. There is some astounding sound in your background.

Am I clear now?

Yes, please. Yes, now.

I was asking how much revenue are we expecting from Goodluck Defense in FY '26 and FY '27?

In FY '26, we are expecting only INR 100 crores revenue. And in the next year, we are expecting the full revenue from this capacity, which should be almost INR 300 crores.

Got it, sir. And would we plan to moving the AMCA program under Goodluck Defense anytime soon or will it run parallelly in Goodluck India itself?

AMCA Program is under -- we have just given the EOI. So it depends on the government when they come out, to whom they will issue the RFQ. For that, criteria is there in the tender. So, we have to just wait when government gives it.

Yes. But the larger question was, will it continue realizing the revenue in Goodluck India or will it be Goodluck Defense?

It will be in Goodluck India.

Got it. And do we plan to -- so currently, we hold around 80% from Goodluck Defense? Do we plant to completely acquire it going ahead?

No, it is a subsidiary, 79% subsidiary of Goodluck India itself today.

Yes. So, do we plan to acquire it completely? Or will it be running as 79% subsidiary only?

No, we don't plan to acquire it fully. It should run as per the market process.

Got it. And when will we be spinning it off as IPO?

Pardon?

Will we be spinning it off as an IPO for Goodluck Defense?

It is under planning. We will let you know near the time.

Next question is from Himanshu Dugar from Stylus Holdings.

On the first -- just the clarification on the previous comment you made. So, when you mentioned INR 100 crores expected revenue from the Goodluck Defense business, that consists of -- based on total production for this year, which will be for the 4 months or it is driven by delayed sales because you just got the approval?

So, this is what we have given the INR 100 crores. This is the sale what we will achieve in this from October to March, March '26. And this will be certainly on the sale of the shells.

Right. Broadly, what is the -- if I think about this financial year, if you could just give us a number around what could be the capacity utilization for the hydraulic pipes capacity as well as the shell capacity, sir?

Hydraulic capacity this year by March '26, it should be 70% and in shell capacity, it will be almost 30%, 35% capacity utilization because it has only started in October.

So, this will happen by the fourth quarter or by March -- for the full year, you are saying this number will be there? Just wanted to clarify on that. By March 2026, you will reach 70% utilization, is that the right understanding?

Yes. Your understanding is correct.

Okay. So currently, it is much lower, but gradually, you will scale it to -- so you're expecting to gradually scale it to 70% by March. Currently, say, for this last quarter, sir, if you could just mention what was the rough percentage of production from there?

It was almost 50%, and it will ramp up now in this third quarter and fourth quarter. And I hope that it will reach 70% by March '26.

Got it. Just the last point on this, sir. When you look at the realizations then because if you're saying 60% volumes would have come for these hydraulic pipes, then we would have ideally expected a bump in the realizations as well. But currently, we are not seeing much improvement in that. If you could just highlight what is the differential pricing or is there some benign environment right now?

So basically, you want to know that in hydraulic tubes, whatever capacity we have just ramped up, in that our realization part you want to know?

No. My question is around the realization for the hydraulic pipes and even the pipe segment in general?

Sir, I'd like to add, I think there should be clear understanding. Geopolitical tensions are easing. Cost is subsiding. There is an agreement between China and America. Construction activity will pick up. So, construction industry all over the world will pick up. So, we are expecting a good demand for our hydraulic tubing.

So this year, realizations are lower than last year. I'm talking about price realizing what you're realizing, is that like significantly lower versus last year?

No. Absolutely, no. Price may not have improved, but definitely, it was not lower. It is our specialized product and we had a good demand. In spite of geopolitical tension for hydraulic tubing, we had no problem of demand, but demand was not as good as we are expecting.

Understood. So you're saying the volumes are picking ahead, but the realization is largely the same versus the March '25 financial year? Is that right?

Yes. Margins will also improve. With the easing of the tension, margins will also improve and the capacity utilization will also increase.

Just last question on the realization for the defense business. So this shell, you just mentioned INR 1,000 crores of total revenue that is possible. But with 1.5 lakh tonnes, won't that -- overall, the revenue amount I'm taking, the turnover here will be much higher or it will be around INR 1,000 crores only once you are stabilized?

Basically, with the first 150,000 shells, our peak revenue will be INR 300 crores and the margins will be 30% to 35% EBITDA margins. With the augmentation of the capacity and reaching to 4 lakh shells and the other allied products, the peak turnover will be INR 1,000 crores and EBITDA is likely to be 30% to 35%.

Okay. So, that will happen after the additional capacity?

Yes. The addition of capacity will take almost 1 year from today. And after that, the augmented capacity will give us a turnover of INR 1,000 crores.

Next question is from Shubham Upadhyay from Minerva Capital Solutions.

Sir, my question is regarding the shells only. So, what is exactly the raw material which we are using for the shell, if you can disclose that?

It is the alloy steel only, which is available in India.

It's a commercial product because I was reading up on raw material of shell casing because I think the U.S. Army uses some specialty steel called HF-1. So is this steel which we are using [indiscernible].

It is a specialty steel manufactured by prime producer in India, like Sunflag and JSW.

Okay. And if you can share the price range of this raw material for strategic basis?

Raw materials, we would not like to share.

It being a defense item, we don't want to give much detail. We can't give much details on this issue.

Next question is from Sanyam Shah from Solidarity Investment Managers.

Yes. So the EBITDA margin this quarter, we have already done 9% plus. We did the same last quarter as well. We used to -- so the first question is, do we aim to close this year in a similar band?

Your voice is mixing. We are not able to clearly hear you.

Am I clearly audible now?

Now you are clear, please.

Yes. So sir, we already did 9% plus EBITDA margin in the last 2 quarters. Do we think we can close this year in the similar range?

Yes, we do hope so.

Okay. And sir, on the defense piece, we used to guide for 20% to 25% EBITDA margin earlier. But to the last participant, you just commented it could be 30% to 35%. Sir, what has changed? Is this basis once you have started taking the inquiries? Is this what you are realizing?

Yes. This is what the market -- this market is very dynamic. Because everywhere war is going on, demand and supply, it is a perfect match. But when we have started, then now we are hoping that the margin should be in the range of 30% to 35% EBITDA.

So the inquiries that you are getting, that is in the same range as in 30% to 35%?

Yes.

Okay. Sir, on the capacity expansion, when we put up the 150,000 shells capacity, we did some INR 200 crores to INR 210 crores of CapEx. If we -- which is around INR 14,000 per shell. But this time, when we are expanding to 4 lakh shells capacity -- for the incremental 250,000 shells, we are doing a INR 500 crores CapEx, which is around INR 20,000 per shell. Sir, why is this CapEx per shell has increased?

Basically, this is not only a capacity expansion in terms of shells only. Number one, I should clarify, we are investing before INR 400 crores to INR 500 crores. Number two, this shell, there are 3 parts of this investment, augmentation of capacity. First, we are increasing capacity from 1.5 lakh tonnes to 4 lakh tonnes. Number two, we are putting some ring rolling and press, which will enable us to supply the outer parts of the missile and some aerospace parts, which we have been doing on a shorter scale, on a lower scale in Goodluck India. But now we will be increasing its capacity scale with rolling mills.

Okay. So this not only...

You cannot compare from the last investment.

Got it. Got it. Understood. And sir, when do we expect this capacity to come on stream?

Sir, we hope in next 1 year, it should come.

Okay. And sir, if I take an overall view, with the EBITDA margin in the defense piece now going up to 30% to 35%, sir, is there a revised guidance on the EBITDA margin band 3, 4 years out, what we could do?

My thought process is that we will revise it near the time because we have just started it, and we will be guiding you quarter-by-quarter. But definitely, it is on the higher side. Whatever we had expected, margins are on the higher side.

Next question is from [ Shubham Kari ] from TA Financial Services.

Yes, sir, most of my questions are actually answered. I just had one question regarding the debt level of the company. Right now, we stand at around INR 160 crores of debt, and we plan -- we also plan on raising some amount of debt for the new investment. So, what can be the peak debt levels that the company will be comfortable with?

You see debt level -- long-term debt level is under control. And company will borrow another INR 50 crores to INR 100 crores for expansion plans. So, that is comfortable position for the company.

Regarding the INR 500 crores expansion plan, you plan on borrowing INR 100 crores?

Sir, it is a mix of equity and debt. And we will let you know in the coming quarters, what will be the loan portion. But as Mr. Bansal has said, we are at INR 160 crores today, and we are comfortable with INR 300 crores to INR 350 crores long-term debt.

Next question is from [ Nishita Shanklesha ] from Sapphire Capital.

Yes. So, this is a follow-up question. So, you mentioned that the additional 250,000 of the capacity that will augment the total capacity to 4 lakh tonnes, from that, the shell capacity will increase from 1.5 lakh tonnes to 2.4 lakhs tonnes only. Is that correct?