Welcome to the 82nd edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 5 companies across 4 industries and RBI’s Deputy Governor’s Keynote Speech.
Regulator
Reserve Bank Of India
Diversified
3M India Limited
Consumer Durables
Blue Star Limited
Financial Service
KFin Technologies Limited
Engineering & Capital Goods
HEG Limited
Ramkrishna Forgings Limited
Regulator
RBI Deputy Governor | A Vision for Responsible AI, Resilient Banking
The Reserve Bank of India is the nation’s central bank, responsible for monetary policy and the regulation of the banking system. It focuses on maintaining financial stability, managing inflation, and promoting inclusive economic growth through digital transformation and prudent oversight.
The Deputy Governor highlights the current financial strength of Indian banks while shifting the focus from balance sheet size to the quality of financial inclusion. This suggests that future regulatory oversight will increasingly prioritise how effectively credit reaches underserved segments rather than just volume growth.
“India’s banking system today is well capitalised, with a capital-to- risk-weighted-assets ratio of 17.7 per cent. It is profitable, with profit after tax exceeding ₹ 4 lakh crore. And it is healthy, with gross non-performing assets down to 1.8 per cent. Stress tests suggest that the system is well placed to absorb adverse shocks. Why does this matter? Because this strength is not an end in itself — it is the capacity that allows the system to support a larger and more complex economy. And here I would enter a caution. The contribution of banking to growth should not be measured only by the expansion of aggregate credit, or by the size of balance sheets. It must also be judged by whom finance actually reaches, whether rising consumer expectations are met, and how banks support the wider economic activity.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
There is a concerning trend where a smaller percentage of new businesses are entering the formal credit system despite overall credit growth. Investors should note that analytical intelligence is currently failing to bridge the information gap for new-to-credit borrowers, potentially limiting long-term market expansion.
“In 2022-23, 52 per cent of fresh businesses entered the formal credit system. By 2025-26, that figure had fallen to 42 per cent — even as outstanding commercial credit grew by fourteen per cent over the year. This did not happen for want of information: lenders today have access to richer data, and to materially stronger analytical capability, than at any point before. It points to something more structural — that our data and our technology may be getting better at serving those the system already understands, faster than they are developing the capacity to understand those it has never served.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The RBI is pushing banks to use alternative data to stop penalising borrowers who lack traditional credit histories. Investors should monitor how well banks adapt their credit models, as those who successfully interpret alternative data will likely capture the next wave of credit growth.
“Where a lender genuinely lacks reliable information about a borrower, the absence of information should not, by itself, be mistaken for adverse information. Treating ‘we don’t know’ as though it meant ‘we know it’s bad’ leads to credit being denied where it need not be. This is precisely where banks must put their technological capabilities to work. So where is that intelligence to come from? Traditional lending leaned heavily on collateral, financial statements and credit bureau history. That world has expanded considerably. Cash flows, GST filings, utility payments, e-commerce records, mobile usage, agricultural and geospatial data — this alternative data offers a genuine opportunity to bring ‘credit invisibles’ into the formal system, and AI can help close that gap.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The central bank defines true banking productivity through improved risk pricing and customer reach rather than just lower cost-to-income ratios. This indicates that banks focusing solely on cost-cutting through AI without expanding their addressable market may face regulatory pressure.
“Productivity in banking is not merely output per employee or the cost-to-income ratio; it is whether the same institution, with the same resources, reaches a borrower it could not reach before, resolves a grievance that would earlier have remained pending, prices risk more accurately. If AI compresses costs without widening reach or improving the customer’s experience, we shall have automated the existing system rather than improved it.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The central bank expects institutions to maintain robust human-in-the-loop systems to mitigate risks when automated models behave unpredictably. For investors, this implies that banks will need to continue investing heavily in skilled personnel, potentially limiting the immediate margin gains expected from AI.
“As adoption of AI increases, banks must retain the judgement, the capability and the alternative arrangements needed to intervene when systems fail or behave in ways that were not anticipated. The ability to remain resilient in such circumstances is itself a critical organisational capability, form of intelligence — the ability to recognise, adapt and respond when the unexpected occurs.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The Deputy Governor warns that operational resilience must be integrated into growth strategies rather than added as an afterthought. This suggests that the RBI will scrutinise rapid expansion plans more closely to ensure underlying tech infrastructure can handle high transaction volumes.
“As banks grow — as their reach, their transaction volumes and their delivery arrangements expand — their capacity must keep pace. Systems that perform well at today’s volumes may behave quite differently at tomorrow’s scale, and that calls for timely upgrades: in technology, in processes, in oversight — all of which innovation can help deliver. Banks should focus, in particular, on the functions critical to their resilience and on those that matter most directly to their customers. Resilience, I would argue, should be built into the design of growth — not bolted on after the expansion has already happened.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The RBI is identifying systemic risks arising from the concentration of many banks using the same third-party technology and data providers. This could lead to future regulations mandating provider diversification, which may increase operational costs for banks heavily reliant on a single tech stack.
“Where several institutions lean on the same data sources, the same models, the same technology providers or the same infrastructure, a single error or disruption can affect them all together. Prudence, in such a world, requires effective challenge, limits on undue concentration, and credible alternatives. The intelligence needed here cannot be assembled within any one institution— it has to be pooled.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The regulator is mandating clear human accountability for all automated decisions that negatively impact customers. This move ensures that banks cannot use black box algorithms as an excuse for poor conduct, reinforcing the need for transparent AI frameworks.
“Wherever a decision materially affects a customer — a loan declined, a limit reduced, an account restricted, a claim denied — there must be a route to a person with the authority to look again. A machine may reach the decision; a person must own it. If a bank cannot say who that person is, it has not deployed a model — it has delegated its accountability.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
The RBI emphasises that boards must have the technical literacy to oversee complex AI systems and aggregate risks across the organisation. Investors should assess board compositions to ensure they possess the necessary expertise to manage the convergence of technological and financial risks.
“The Board and the top management carry the ultimate accountability — for the decisions taken, for the assumptions those decisions rest on, and for the consequences that follow. Governance intelligence lies in their ability to convert the information flowing in from across the institution into a coherent strategic view. Its purpose is not to pull governance into day-to-day execution. It is to see where institutional capability or risk appetite is falling behind changing needs, and where separate weaknesses, each individually manageable, might combine into something larger.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
Mandating the disclosure of automated interactions is a step toward maintaining consumer trust in the digital ecosystem. For banks, this requires careful management of customer perceptions as they transition from human-led to machine-led service models.
“A customer dealing with an automated system is entitled to know that this is what they are dealing with. Disclosure of that fact is not a courtesy; it is the basis on which a customer decides how much weight to place on what they are told, and what to do next. Second, wherever a decision materially affects a customer — a loan declined, a limit reduced, an account restricted, a claim denied — there must be a route to a person with the authority to look again.”
— Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India
Diversified
3M India Limited | Mid Cap | Diversified
3M India is a subsidiary of the global science-based technology company 3M, specialising in diversified segments such as industrial, automotive, healthcare, and consumer goods. The company operates three manufacturing facilities in India and focuses on leveraging its global R&D expertise to serve the domestic market.
The company achieved a 19% revenue increase, marking over a year of consistent quarterly growth across its entire business portfolio. This indicates robust underlying demand for its products despite a challenging macroeconomic environment.
“Look, first of all, the revenue growth that we’ve seen this past quarter—about 19%—is very strong. It is now five consecutive quarters of growth that we’ve demonstrated, and it’s across all our business groups. So the demand is there, and it’s a reflection of the work that our teams have been doing.”
— Aseem Joshi, Managing Director
Profit margins were squeezed by rising raw material costs and unfavourable foreign exchange movements due to a high reliance on imports. Management has implemented price hikes to offset these costs, with the full benefit expected to appear in upcoming quarters.
“Now, as far as margins are concerned, yes, we have been impacted by raw material inflation, a little bit by the labour portion as well, but also by FX. Keep in mind, we do import a lot of the raw materials that we use in our products manufactured in India, and FX has been a large driver of impact. We do think that over time this will stabilise. We have taken pricing actions, and those are starting to flow through. Already in this quarter, we’ve seen some impact of that, and we’ll see the full pricing impact flush through in following quarters.”
— Aseem Joshi, Managing Director
Instead of using financial derivatives to manage currency risk, the company is shifting toward local manufacturing to reduce its dependence on imports. Investors should note that this transition is a long-term project that will take several quarters to meaningfully impact the bottom line.
“Currently, as a company, we do not hedge. Our strategy is to look at doing more local production and local sourcing as a way to reduce exposure to FX. That work is already underway, and we anticipate that—while it’s not something that will happen immediately—it will take a few quarters before we start seeing results. In the meantime, we’ll continue to work with our customers and suppliers to try and mitigate the impact of this cost increase.”
— Aseem Joshi, Managing Director
Roughly 60% of the company’s cost base is currently tied to imports, making it highly vulnerable to currency fluctuations. Management plans to use its three Indian factories to increase local content over the next two years to provide more margin stability.
“That’s right, Alex. About 60% of our costs are imports, and we are very cognizant that this exposes us to FX variations. There is a thought process on figuring out which products we can localise. We operate out of three factories in India: one in Pune, one in Bengaluru, and one in Ahmedabad. In each of these, we have identified products where we can increase the level of localised content. Now, that will take time, but we do expect that 60-odd per cent to start coming down substantially in a couple of years. We don’t have a specific target number, but we do expect it to reduce.”
— Aseem Joshi, Managing Director
Localisation efforts are limited by the local availability of high-grade raw materials required for 3M’s specialised products. Management is evaluating localisation on a product-by-product basis to ensure quality standards are not compromised.
“As far as whether it’s a conscious effort, yes. As I mentioned, we have specific products that we’ve identified, and we’re working on reducing our dependency on imports for those. Keep in mind, in some cases those raw materials aren’t easily available in India or aren’t of the grade that we require. So it has to be evaluated case by case, but we do have a focused program to reduce this dependency.”
— Aseem Joshi, Managing Director
Beyond its traditional markets, the company is targeting high-growth sectors like electronics, data centres, and the emerging semiconductor industry in India. These segments are viewed as critical drivers for the company’s growth over the next three years.
“Now we see increasing opportunities in new areas. You mentioned electronics; we also see data centers as an upcoming opportunity, and down the road, semiconductors should pick up as well. So there is a lot of excitement in terms of what is possible in India.”
— Aseem Joshi, Managing Director
A new lab and sampling centre have been established in Bengaluru to support the rapid growth of the electronics manufacturing sector in India. This infrastructure allows the company to partner more closely with tech clients and speed up the product adoption cycle.
“To talk about electronics for a moment: when you think about electronic products, each of them requires adhesives, films, temperature management solutions, and abrasives. Those are all products that 3M makes, many of which are produced in India. So we are very excited about those prospects, and we are putting our teams and lab capabilities in place to support that growth. For instance, in electronics, we’ve set up a new lab in Bengaluru that allows customers to come in, view our products, and sample them quickly. We also have a sampling center set up to respond to customer requirements very fast.”
— Aseem Joshi, Managing Director
While material cost volatility makes exact forecasting difficult, the management expects pricing adjustments to lift margins in the very near future. The next quarter will be a key test of the company’s ability to successfully pass costs on to the market.
“It’s hard to predict exact timelines because of the uncertainty in material costs. However, I would expect the pricing actions we’ve taken to start fully flowing through by the following quarter, which should start nudging margins upward.”
— Aseem Joshi, Managing Director
Consumer Durables
Blue Star Limited | Small Cap | Consumer Durables
Blue Star is a leading Indian provider of cooling solutions, including residential air conditioners and commercial refrigeration systems. It also maintains a significant presence in mechanical, electrical, and plumbing (MEP) services for large-scale industrial and commercial infrastructure projects.
Management dismisses the idea that high heat alone can drive air conditioner sales if rural income is hit by a bad monsoon. Investors should watch for potential consumption weakness in Tier 3-5 towns despite the rising temperatures.
“I have stated this earlier: going by history, India is an agricultural and rural economy. A poor monsoon will result in weak demand across Tier 3, Tier 4, and Tier 5 towns. While temperatures shooting up may create some demand, that will not compensate for the overall slowdown in the economy if the monsoon forecast shortfall of 15% holds true. So, I am not a believer that a delayed monsoon is going to help the cooling industry at all.”
— B Thiagarajan, Managing Director
The company faced significant input cost pressure and initially lost market share while trying to protect profitability. Management has since shifted focus back to volume growth to prevent inventory buildup, showing the delicate balance between price and volume in the AC sector.
“We had a delayed onset of summer, coinciding with rupee depreciation and an unprecedented escalation in commodity prices calling for a price hike of over 13%. We could pass on only around 5%. We were trying to hold on to margins at the cost of market share, and we played that strategy in April, losing tertiary sales market share by 50 basis points. We corrected that because we didn’t want to be saddled with inventory, gaining 10 basis points in May and 50 basis points in June.”
— B Thiagarajan, Managing Director
Profitability in the core cooling segment saw a sharp decline during the quarter due to competitive and cost pressures. Management has set a challenging full-year target of 6.5% EBIT, which relies heavily on efficiency gains and portfolio adjustments in the second half of the year.
“However, as the summer season ended, I think we fell short of expectations. Our margins shrunk, and with a revenue growth of just 13% in Segment 2 (Unitary Cooling Products), EBIT dropped from 5.8% to 2.9%. So, our focus is going to be on how to regain our margins. Q2 will indeed be a short quarter, and nothing much can be done. It is about Q3 and Q4—getting our portfolio right and getting our costs under control so that we are able to deliver around a 6.5% EBIT margin for the full year. That is a Herculean task, but a lot of actions are underway.”
— B Thiagarajan, Managing Director
While consumer AC margins are under pressure, the company is pivoting toward B2B growth sectors like data centres and advanced manufacturing. This strategic diversification into high-tech infrastructure may provide more resilient growth than the retail consumer segment.
“Blue Star has a lot of work to do regarding Unitary Cooling Products. Our focus there is clear: get back margins, even at the cost of market share. On the other hand, we have to look at sectors providing growth. Right at the moment, those are data centers and advanced manufacturing sectors such as EV, solar, and semiconductors. These are our focus areas where we are doing well.”
— B Thiagarajan, Managing Director
Despite a collapse in margins, management maintains that the underlying volume growth for air conditioners remains robust. Investors should distinguish between the industry’s strong long-term growth trajectory and the current short-term profitability challenges.
“The growth story continues. For example, volume growth this summer season (Q1: April, May, June) was 21%, and we grew by around 18% in room air conditioners. The revenue growth for the market was around 25%. It is just that profitability collapsed. I don’t think there is a growth issue at all, and I still maintain that between now and 2030, an 18% CAGR will definitely be maintained. There is absolutely no doubt about it.”
— B Thiagarajan, Managing Director
Management admits that the industry has seen a structural decline in profit margins over time. The expectation for steady-state EBIT has been lowered to 7.5%, reflecting a more competitive and cost-sensitive market environment.
“It is a question of running the business profitably. This is a growing category and not a plug-and-play product like a refrigerator or washing machine, so margins should be attractive. I have mentioned to you a number of times that this was a double-digit EBIT industry, but it keeps coming down. I am still hopeful that it will become a 7.5% EBIT industry.”
— B Thiagarajan, Managing Director
The air conditioning industry is currently facing a situation where manufacturing capacity is twice the size of existing demand. This oversupply is a key reason for the pricing pressure and may lead to prolonged margin compression for all players.
“Right now, there is more supply than demand, with manufacturing capacity available today being double the demand. So growth is not an issue at all. Even for this summer season, as I mentioned, there was 21% volume growth and 25% revenue growth. In fact, these figures could go up when we get final numbers.”
— B Thiagarajan, Managing Director
The company needs significant price hikes to restore profitability, but consumer demand appears sensitive to cost increases. Current sales are being driven by lower-than-average pricing, making future price adjustments difficult to implement.
“As far as price increases are concerned, it is important for us to pass on an additional 6% to 8%—that is the truth. However, I don’t think the market is going to absorb that easily. As I mentioned earlier, this volume growth happened at lower prices. In fact, if you look at consumer invoices, customers purchased air conditioners at prices lower than last April, having absorbed the GST benefit as well.”
— B Thiagarajan, Managing Director
Improving margins will require a shift in product mix because entry-level products dominate the current market. The high reliance on consumer financing and promotional offers further complicates the company’s ability to raise prices directly.
“Right now, passing on a price increase is a difficult task. You have to work on the product portfolio. 80% of products sold are entry-level products, close to 40% are consumer finance-led sales, and freebies like free installation and extended warranties are ongoing. Therefore, you have to figure out ways to rejig the product portfolio to improve margins. This is an aberration due to an unprecedented hike in commodity prices. We are confident that prices will be passed on at some point, but we have work to do to get our portfolio right.”
— B Thiagarajan, Managing Director
Financial Service
KFin Technologies Limited | Small Cap | Financial Service
KFin Technologies is a leading technology-driven financial services platform providing comprehensive services to asset managers and corporate issuers across multiple asset classes. The company operates as a major registrar and transfer agent (RTA) for mutual funds, AIFs, and IPOs, with a growing international footprint in Southeast Asia.
General Atlantic has reduced its stake to 14% but remains a promoter after leading a multi-year product transformation. Investors should note that while the PE firm continues to support the board, further divestment will be driven by their standard investment cycles.
“General Atlantic now holds around a 14% stake after the recent block deal. They continue to remain promoters of the company, and they are long-term players. They actually laid the foundation for the transformation of the company starting from 2020. They invested in 2018 but became very active in 2020. From there, it has been a journey where 36 new products have been launched, and the company is now recognized as a fintech innovation leader in the BFSI sector. General Atlantic has played a key role in handholding the board and management and partnering with us for growth. As for the remaining 14% stake, being a private equity firm, divestment timing depends on their LP/GP cycles. However, they have provided great support, guidance, and direction to the company.”
— Vivek Mathur, CFO
The company emphasises that it operates as a professionally managed entity despite its private equity promoter background. This independent structure ensures that management has the operational freedom to pursue long-term shareholder value without promoter interference.
“It is already a company run by an independent board of directors and professional management. There are only two General Atlantic directors on the board who participate in committee meetings, while day-to-day affairs are handled by management. There is no dependence on General Atlantic regarding the exit or operational freedom of any KMPs or board members. It is run professionally, giving us the freedom to create value for shareholders.”
— Vivek Mathur, CFO
Management clarifies that the promoter’s holding is through evergreen funds, which offers more flexibility in timing their eventual exit. While the exact timeline remains uncertain, the promoter’s current stance is one of continued support for the company’s growth.
“They hold evergreen funds, so divestment timing is up to them. Their stated position is that they are long-term players and continue as promoters. That is a question best directed to General Atlantic, but in our discussions, they remain fully supportive.”
— Vivek Mathur, CFO
The company is maintaining its long-term revenue growth guidance of 18% to 20%, supported by strong performance in international markets. This suggests that recent acquisitions and new vertical expansions are effectively compensating for any domestic market volatility.
“Deals remain active in the pipeline. Overall, including the Ascent acquisition, our revenue guidance remains at an 18% to 20% CAGR. We have seen strong wins across verticals. For instance, non-domestic mutual fund revenue in Q1 expanded significantly year-on-year. International business growth has been strong at 25% to 30%, with Ascent itself growing at 30%. Other segments like AIF and NPS, though smaller, are growing rapidly.”
— Vivek Mathur, CFO
KFintech is aggressively launching global platforms to capture high-value international mandates, particularly in pension and wealth management. The company expects these value-added services to double their share of total revenue, which should drive better profitability over time.
“We have also developed our platform business, launching the global wealth platform, global pension platform, and mFund for global fund administration. The primary window for participating in major international RFPs is between January and March, which should open up larger mandates. We have already secured wins, including a pension mandate in the Philippines and wealth platform implementations domestically and abroad. Our goal is to expand value-added services from 5.5%–6% to 10%–12% of revenue over the next 3 to 5 years.”
— Vivek Mathur, CFO
Domestic mutual fund revenue was briefly impacted by investors shifting focus away from equity toward commodities. However, the record-high SIP inflows provide a strong foundation for steady revenue growth as capital flows return to the Indian equity market.
“There are two key factors. First, mark-to-market dynamics in domestic mutual funds moderated as investor focus temporarily shifted toward gold, silver, and commodity ETFs over the last 6 to 9 months. However, SIP inflows remain robust at over ‡31,000 crore monthly, reflecting strong underlying equity appetite. FII flows that temporarily shifted to East Asian markets are returning to India.”
— Vivek Mathur, CFO
The company maintains a dominant 80% share of mainboard IPO issue value, positioning it as a primary beneficiary of the resurgent primary market. Management projects steady double-digit growth in both its issuer solutions and domestic mutual fund segments despite sector-specific headwinds in IT.
“Second, regarding Issuer Solutions and IPOs: while geopolitical uncertainty deferred some activity earlier, momentum has returned. We hold a two-thirds market share in mainboard IPOs and handle 80% of mainboard issue value. While lower corporate action activity (dividends, bonus issues) in the IT sector impacts corporate action fees, fundamentals remain intact. We expect domestic mutual fund revenue to grow at 11%–12% and Issuer Solutions at 12%–15%.”
— Vivek Mathur, CFO
KFintech plans to diversify its revenue mix toward international markets, where fee yields are more than double those of the domestic market. This strategic shift toward higher-margin global fund administration is expected to significantly improve the company’s overall profit margins within two years.
“International business is growing at 30% across our Southeast Asian RTA operations and new platform lines. Currently, domestic mutual funds contribute ~55% of fee-based revenue, value-added services contribute 5.5%–6%, and international business accounts for ~20%. Over the next 3 to 5 years, international business should expand to 30% of revenue, while domestic mutual funds will proportionately shift to ~45%, despite continuing to grow at 11%–12%. This international expansion is margin-accretive because global fund administration yields 6 to 7 bps on AUM compared to ~3 bps in India (and 2 to 2.5 bps in domestic AIFs). Synergies with Ascent will drive scale and enhance overall profitability over the next two years.”
— Vivek Mathur, CFO
Engineering & Capital Goods
HEG Limited | Small Cap | Engineering & Capital Goods
HEG Limited is a leading global producer of graphite electrodes, operating one of the world’s largest integrated manufacturing facilities. The company is currently diversifying into advanced carbon materials for the lithium-ion battery supply chain through a strategic corporate demerger.
Management has provided a clear timeline for the upcoming demerger and listing of its two business segments. This transparency helps investors understand when the graphite and advanced materials businesses will begin trading as separate entities.
“So, the first listed entity—the new company—would be listed, I would say, by the first week of September, and thereon, the graphite company would have to go in for a fresh listing, which would be anywhere between 45 to 60 days.”
— Riju Jhunjhunwala, Vice Chairman
The company is transitioning toward becoming a key supplier for the lithium-ion battery market with an anode plant ready by Q1 FY26. The existence of letters of intent and plans for graphene commercialisation indicates a strategic move toward high-growth green energy materials.
“So Nigel, like I said earlier, I think we are really on the cusp of a bigger energy transition. Now, that can be played in many ways, whether it is renewable energy or lithium-ion battery cells. We’ve taken a position over there of being a leading supplier in the supply chain for the lithium-ion battery space. For that, we are putting up this anode plant, which should be operational by the first quarter of next financial year. Things are progressing well over there; we have a lot of LOIs in place, so we are expecting a good order book starting with the plant itself. Whatever we’ve been talking about so far, we are already discussing internally on how to increase everything in terms of scale over there. When I say Advanced Materials, we are also looking at many other materials such as graphene, things that we have been working on behind the scenes very well in the last two years, and now we are seeing a time when we can actually commercialize those.”
— Riju Jhunjhunwala, Vice Chairman
HEG is consolidating its hydro-power assets into the new Advanced Materials entity to provide cheap, green energy for manufacturing. Because these plants are already fully paid off, they will provide a low-cost power source that boosts the profitability of new battery material projects.
“Just to clarify on the Bhilwara Energy vertical, which is going to be housed under this Advanced Materials business: the listed company currently holds around 40%, but that company will merge with the HEG new entity, and then the HEG new entity would own 100% of that. So that’s a huge backbone support of 20-year-old hydroelectric plants which are supplying green power to us and are fully depreciated plants. So there is a lot of backend support from there as we go along building these new businesses for the future.”
— Riju Jhunjhunwala, Vice Chairman
Management expects its new anode facility to reach full capacity utilisation within just two years of starting operations. This rapid ramp-up suggests strong underlying demand from global battery and car manufacturers who have already tested their products.
“Because of strong confidentiality agreements—since we are working with battery manufacturers and Tier-1 OEMs, and for the last two years, we’ve been doing a lot of supply to them from our pilot plant—the way we see it, in the first year, we should be able to do at least 50% to 60% capacity utilization. Going forward in the second year, we expect 100% capacity utilization for the first 20,000-tonne capacity.”
— Riju Jhunjhunwala, Vice Chairman
The company has committed to a large capital expenditure plan of 6,000 crore rupees over three years to capture the battery material market. By targeting Western markets looking for non-Chinese suppliers, the company aims to derisk its revenue stream and capitalise on global supply chain shifts.
“In the next three years, I think we’ll be making a capex of around ₹6,000 crore. That would be funded—I mean, today we are already well funded with around ₹1,500 crore of equity that is there with us, and the balance equity will come from running projects. Around 60% to 70% will be funded out of debt. A lot of these are long-term projects, and we are really seeing a lot of good work on that front. In India, the way it’s growing in the lithium-ion battery space, a lot of companies are putting up cell plants, as you can see. Apart from that, we are quite hopeful that at least 70% of our revenues in the first few years are going to come from exports—exports to the US, Europe, and non-China-based countries where they want product supply from a source outside China. We are going to fulfill that quite substantially.”
— Riju Jhunjhunwala, Vice Chairman
HEG believes the market for anode materials has bottomed out and is positioning itself as a premium, niche alternative to Chinese suppliers. Expecting a price premium and healthy margins indicates confidence in their product quality and competitive advantage in a crowded market.
“20,000 tonnes in the larger scheme of things is a very small capacity if you look at overall Chinese capacities, and we are looking at only four or five customers who will be needed to fill up this kind of capacity. In terms of pricing, yes, prices did come off in the last two years, but now we are seeing all raw material prices strengthening. I think we’ve reached a bottom at which even China is not supplying material today. We, of course, expect to get at least an 8% to 10% premium over Chinese products being supplied, simply because ours will be a more niche, smaller base, and companies looking to buy anode material and other battery materials like graphene are showing a lot of traction and readiness to buy from us. So yes, at today’s levels, we are seeing healthy EBITDA margins on paper.”
— Riju Jhunjhunwala, Vice Chairman
The core graphite electrode business is entering a recovery phase with price hikes planned for late 2024. Tight global supply and a shift toward cleaner steelmaking methods in the West create a favourable long-term environment for existing producers like HEG.
“The graphite electrode space is more cyclical in nature, and what we’ve seen in the last two years is really the bottoming out of a very low cycle. Going forward, as we saw in the first quarter itself, prices are hardening. September onwards, we will start taking some price increases. Going forward, with electric arc furnaces being set up in the US and Europe, and no extra graphite capacity created globally in the last 20 years, I think we should see a very comfortable demand-supply situation for us.”
— Riju Jhunjhunwala, Vice Chairman
Despite rising raw material costs for needle coke, the company expects to maintain its margins by raising prices for its customers. Management believes their competitive cost structure will allow them to outperform global peers who are forced to raise prices even more aggressively.
“More than that. Needle coke prices would move up by around 20%, and the effect of that for us would start coming in the third quarter. But we will comfortably pass on those prices because that applies to all graphite companies globally. If you look at overseas companies leading in the graphite space, they have no option but to go in for price increases, and HEG will be a clear winner out of that.”
— Riju Jhunjhunwala, Vice Chairman
Management is open to international acquisitions but remains focused on its superior low-cost production model in India. Their primary growth driver remains expanding domestic capacity to 115,000 tonnes to capture a larger market share organically.
“I can’t say anything about that right now. When the time comes, we’ll look at that. Really, the cost at which we sit to produce graphite electrodes in India is far superior to theirs. But as and when the situation arises, one can look at such an option. We are more than happy with the way we’ve grown from 80,000 to 100,000 tonnes and now moving to 115,000 tonnes—that itself should take us a long way ahead.”
— Riju Jhunjhunwala, Vice Chairman
Ramkrishna Forgings Limited | Small Cap | Engineering & Capital Goods
Ramkrishna Forgings Limited is a prominent manufacturer of forged products serving global commercial vehicle, railway, and industrial markets. The company is currently executing a strategic shift to diversify its revenue through expansions into passenger vehicles, oil and gas, and aerospace.
The company is leveraging its long-standing expertise in commercial vehicles to break into the precision-heavy passenger vehicle market. This move allows them to use existing manufacturing strengths to capture a new, large-scale customer base.
“Ramkrishna Forgings has prominently been in the CV (Commercial Vehicle) space in a very strong way. Today, we are suppliers to all the truck and CV brands across the globe, as well as the Tier-1s who are serving the North American and other markets. So we have already done a lot with CVs, and at the same time, we are trying to expand our base with regard to more products within the CV space. That has always been our core, but as a company, we have also been investing a lot in new technologies and more precision manufacturing. This is one of the primary reasons we have already received very good traction in terms of orders from the passenger vehicle space today.”
— Milesh Gandhi, Whole Time Director
Management is setting realistic timelines for its new ventures, noting that aerospace contributions are several years away while passenger vehicle sales are more immediate. This clarity helps investors understand that the company’s revenue mix will shift gradually rather than overnight.
“Let me start with aerospace. Aerospace is a journey that takes time because of validation and various other processes. That journey has already started for us, and we are on the verge of receiving orders, but it will take at least 2 to 3 years down the line before revenue takes shape. Apart from that, coming to the passenger vehicle segment, we have already received orders from big OEMs in North America. In terms of revenue contribution, we are looking forward to a high single-digit percentage of our total revenue coming from the passenger vehicle segment—whether from North America or India—in the coming years.”
— Milesh Gandhi, Whole Time Director
The company has pushed back its major revenue milestone by one year to account for previous market volatility in North America. This conservative adjustment suggests management is prioritising the quality of growth and operational readiness over meeting aggressive deadlines.
“Basically, there are two things. Last year was not a great year because of the tariff situation in North America, where the market had really slowed down. I think the market has since recovered well and is showing very strong momentum. But when you have a tough year, it forces you to concentrate on what you really aim at. With all our capacities coming online, we want to take a more cautious approach while simultaneously expanding into various sectors. That is the primary reason: we remain optimistic, but we are being cautious and taking an extra year to achieve the 8,000 crore revenue target we are aiming for.”
— Milesh Gandhi, Whole Time Director
The company is currently operating at roughly two-thirds capacity, leaving significant room for volume growth without needing new factories. As more orders come in, fixed costs will be spread over more units, which should lead to improved profit margins.
“Currently, we are utilizing about 68% of our capacity. As we sweat our assets and capacity utilization increases alongside strong market demand, our margins will naturally go up. We are looking forward to better margins and achieving the guidance we have provided for the future.”
— Milesh Gandhi, Whole Time Director
Management aims to reduce the business’s dependence on the cyclical truck market by growing the non-automotive share of revenue to 30%. A more balanced portfolio typically reduces earnings volatility and makes the company more resilient during economic downturns.
“Currently, we are heavily tilted toward the CV side within automotive. We are entering various non-CV sectors, passenger vehicles being one of them, but we should not forget railways. Railways has been a major focus for RKFL (Ramkrishna Forgings), and we have done well there. Currently, railways accounts for around 4% to 5% of our total turnover, and that is an area where we will continue to grow. To answer your question, as our business mix evolves, we expect automotive to account for around 70% of revenue, while non-automotive segments will contribute the remaining 30% in the coming years.”
— Milesh Gandhi, Whole Time Director
The company has completed its major building phase and is now using its cash to pay down debt significantly. Reducing the debt load by 500 crore rupees annually will lower interest expenses and boost the company’s bottom line.
“First, regarding debt: our heavy capex phase is over, and current expenditure is largely routine maintenance capex. In Q1, we reduced debt by at least 100 crore, and for the full financial year, we are targeting around 500 crore in debt reduction.”
— Milesh Gandhi, Whole Time Director
Strong demand in the North American heavy truck market is providing a major boost to the company’s order book. Higher demand for Class-8 trucks directly correlates to more business for the company, helping them fill their newly built production capacity.
“The biggest driver is the strong Class-8 truck market in North America, which we serve. Order bookings in the first 7 months alone reached 223,000 trucks, compared to 218,000 trucks for the entire 12 months of last year. So demand is very strong, and we have robust order schedules coming in from our customer base across North America. At the same time, we are seeing good traction in Europe, and the domestic market also remains healthy. All of this will help us sweat our newly created capacities effectively.”
— Milesh Gandhi, Whole Time Director
Join us on WhatsApp, where we share interesting soundbites from concalls, articles, and everything else we come across throughout the day. You’ll also get notified the moment a new video or article drops, so you can read or watch it right away.
That’s it for now! Your feedback will really help shape how The Chatter evolves. Drop it down in the comments below!
Quotes in this newsletter were curated by Shahid Barmare.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.