Magnitude of price increases required from OEMs for input cost inflation

Ranges between 6%-7% to 15%-20% on the value-addition/gross margin portion for legacy products depending on age and commodity.

Specific quantification of the Q2 mark-to-market/inventory impact from dropping aluminum prices

Declined to quantify exact impact citing staggered procurement contracts and shipments, but clarified it is higher consumption COGS rather than MTM loss, tapering off by Q4.

Target closing EBIT margins for the Aluminum segment for FY27/FY28

Refused to give precise forward margin percentages due to commercial sensitivity, but noted margins will return to normal levels as OEM price talks conclude.

Craftsman Auto Q2 FY27 Earnings Call — Analysis (NSE: CRAFTSMAN)

Craftsman expects margin recovery and self-funded capex post reaching ₹1,850 Cr EBITDA next year, driven by capacity expansion in stationary engines and aluminum.

2 Nov 2026 · Analysis by Alpha Inflection

Result quality: watch — Margin pressure. Management sentiment: optimistic.

The take

Q2FY27 Gross Debt ₹3,618 Cr ( +₹278 Cr QoQ ) . New guidance — FY30 stationary engine revenue ramp $100 million . New story: Data Center & Stationary Engine Opportunity .

Results

Net debt stood at ~₹3,000 Cr (gross debt ₹3,618 Cr) with H1 gross profit growth of ~30% YoY, impacted by elevated aluminum input costs and interim raw material mark-downs.

Financial highlights

Craftsman Auto Q2 FY27 reported figures
Metric	Value	Change	Basis
Gross Debt	₹3,618 Cr	+₹278 Cr	sequential · Q2FY27 · vs Mar-26 ₹3,340 Cr
Net Debt	₹3,000 Cr		point_in_time · Q2FY27 · Sep-26
H1 Capex	₹1,100 Cr		none · H1FY27 · First half run rate
QIP Proceeds Raised	₹2,000 Cr		point_in_time · FY27 · FY27 YTD
Alloy Wheel Capacity Utilization	70%		point_in_time · Q2FY27 · Past couple of months

Guidance

Guided to reach net debt-to-EBITDA of 1.7x-1.8x in FY27 and an inflection point of ~₹1,850 Cr EBITDA in FY28 for self-funded capex, with stationary engine revenue peaking at ~$100M by FY30.

What management committed to

[Craftsman Automation] expects stationary engine revenues [for data center backup power] to reach 30% of $100M by FY28, 50% by FY29, and peak at around $100M run rate by Q3/Q4 FY30. — $100 million, FY30
[Craftsman Automation] will reach an EBITDA inflection point of around Rs. 1,850 crores next year [FY28], enabling self-sufficient funding of capex and maintenance capex. — Rs. 1,850 crores, FY28
[Craftsman Automation] expects consolidated net debt to EBITDA to be at 1.7x-1.8x by the end of FY27. — 1.7x-1.8x, FY27
Consolidated capex for Q3 [FY27] will be between Rs. 500 crores and Rs. 600 crores, with Q4 capex moderating sharply. — Rs. 500 crores-Rs. 600 crore, Q3FY27
[Craftsman Automation] will maintain a top-line growth path of 15% CAGR in real terms (unadjusted for inflation). — 15% CAGR, next 3, 4, 5 years

Key themes

Capacity scale-up, price resets, and stationary engine growth

How the narrative shifted

Data Center & Stationary Engine Opportunity: Management views AI data center power demand as a multi-year tailwind for heavy stationary engines, driving a low-incremental-capex growth phase.
OEM Price Resets and Low-Margin Exits: Craftsman is pruning negative EBITDA contracts at Sunbeam and resetting legacy prices by 6-20% on value addition to restore margin health.
Aluminum Margin Transitory Headwinds: Higher energy and aluminum costs plus safety stock inventory created short-term margin drag that will fade across Q3 and Q4.
Capital Allocation Discipline Overseas: Management explicitly rejects large overseas capex or M&A, keeping foreign operations asset-light and focused on domestic manufacturing hub advantages.

Operational commentary

Stationary engine order ramp-up for data centers expected to deliver ~$100M peak revenue by FY30, with phase 2 brownfield expansion requiring minimal incremental capex.
DR Axion Plant-2 has commenced trial production with a strong order book.
Sunbeam transformation on track; exiting low-margin/loss-making legacy orders post-festive season to lift margins.
Active negotiations underway across OEM customers for price rationalization on legacy products and aluminum/energy cost pass-throughs.
German subsidiary running profitably on large engine foundry work; plans to add a modest captive machine shop (₹20-30 Cr) rather than pursue foreign acquisitions.

Analyst Q&A

Q. Magnitude of price increases required from OEMs for input cost inflation
Ranges between 6%-7% to 15%-20% on the value-addition/gross margin portion for legacy products depending on age and commodity.
Q. Specific quantification of the Q2 mark-to-market/inventory impact from dropping aluminum prices
Declined to quantify exact impact citing staggered procurement contracts and shipments, but clarified it is higher consumption COGS rather than MTM loss, tapering off by Q4.
Q. Target closing EBIT margins for the Aluminum segment for FY27/FY28
Refused to give precise forward margin percentages due to commercial sensitivity, but noted margins will return to normal levels as OEM price talks conclude.

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