CRAFTSMAN Q2 FY27 Earnings Call: Guides 15% Revenue Growth, $100M Data Center Order Book

CRAFTSMAN held its Q2 FY27 earnings call on October 28, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Strong Real Growth, Working-Capital Heavy Balance Sheet

• ~50% absolute Q2 FY 2026-2027 growth — management itself discounts the commodity-price component, citing 35% standalone real-terms growth on a larger base; capacity additions exceed this growth level, so capex and working-capital days are yet to fully play out.
• Gross debt rose from Rs.3,340 crore (March 2026) to Rs.3,618 crore (September 2026) — despite QIP-funded debt repayment, driven by ballooned working capital on strong top-line growth, higher GST credit, pipeline inventory for new lines/plants, and safety stock of materials.
• Net debt of ~Rs.3,000 crore as of Q2 FY 2026-2027, aided by available cash and capital advances already paid; safety stock expected to dilute in Q3 FY 2026-2027.
• Net debt/EBITDA guided at 1.7x-1.8x consolidated for FY 2026-2027 — management declined to give a forward EBITDA number, noting H2 FY 2026-2027 revenue will be higher and H2 EBITDA is normally better than H1.
• ~Rs.1,850 crore EBITDA inflection expected in FY 2027-2028 — beyond this point the company expects to be self-sufficient in funding both growth and maintenance capex.
• ~Rs.1,100 crore H1 FY 2026-2027 capex executed against the Rs.2,000 crore QIP raised in FY 2026-2027; Q3 FY 2026-2027 consolidated capex guided at Rs.500-600 crore, with Q4 FY 2026-2027 capex possibly minimal as longer-term projects push into FY 2027-2028 onward.
• No specific end-FY27 net debt target — management said it is in a "build-up stage" and the Q4 FY 2026-2027 exit rate will indicate the FY 2027-2028 trajectory.

One-Time Q2 Hit; Price-Reset Negotiations Ongoing

• Aluminum segment EBIT margins declined almost 6.5% in Q2 FY 2026-2027 — management attributed the hit to over-ordering of aluminum during price panic and the Middle East crisis to protect customer product lines; some customers even asked Craftsman to supply aluminum for onward passing to their other suppliers.
• Impact trajectory: "very minimum, almost no impact" in Q3 FY 2026-2027 and no impact in Q4 FY 2026-2027 — management characterized the Q2 hit as one-time and clarified it is a consumption cost increase (higher COGS), not a mark-to-market loss, so it will not reverse into better Q3 FY 2026-2027 margins.
• Price-correction discussions with customers are still ongoing — differences cannot be booked until concluded; these discussions span the entire aluminum supplier community and the OEMs, not Craftsman alone, and specifics cannot be shared due to sensitivity.
• Compensation expected over Q3–Q4 FY 2026-2027 — most customers are open to discussion on the inventory built during the raw-material shortage and subsequent sudden price drop; the margin correction is characterized as temporary.
• Management did not confirm the analyst's suggested 12-13% normal run rate for the aluminum segment — margins should return to normal only at unchanged commodity prices, as no margin can be earned on the higher aluminum price, and "some moderation will be there" (period unspecified).
• ~45% H1 FY 2026-2027 aluminum growth (analyst-cited figure) — management said commodity pass-through between Q1 and Q2 FY 2026-2027 was "very marginal," so growth should be taken as mostly real (volume-driven).

Price Resets Are the Bulk of the Margin Recovery

• Price increases of 6-7% up to 15-20% on the gross margin/value-addition portion (not top line) under discussion across almost all OEMs, varying by customer, product, commodity and order vintage (period unspecified); legacy products with uncorrected pricing and contracted volumes require a "big reset."
• Margin bridge: powertrain plants are not suboptimal, with operating leverage and new-product pricing offsetting rising consumable costs (cutting tools, oil, power, labor); in aluminum, not all plants are at optimum utilization, with ramp-up pre-operative costs, aluminum commodity and gas/energy drags — "if not for these two things, margins would have been at least equal, if not better."
• Pass-through stance: management will secure pass-through where customers are fair but finds it "very difficult to accommodate" customers not allowing commodity pass-through — serving such customers as in the past is "very risky"; margins eaten away "will be corrected."
• Sunbeam turnaround: Q3 and Q4 FY 2026-2027 expected to look better; low-margin products are exiting over the next couple of months (H2 FY 2026-2027) after festive-season support, with top line possibly reducing but absolute margins improving since some exited business is negative on EBITDA itself; new orders from new customers expected in FY 2027-2028.
• Tractor segment guided to contract over Q3-Q4 FY 2026-2027 — the rest of powertrain is expected to grow; energy costs (mainly gas) and the aluminum spike caused a "ripple" in Q1 and Q2 FY 2026-2027.
• H1 FY 2026-2027 gross profit grew ~30% YoY (analyst-noted) — management is confident YoY growth continues for the next 2-3 quarters (Q3 FY 2026-2027 through Q1 FY 2027-2028), driven by past investments, the existing product pipeline, approved products and plants coming on stream.

$100M Order Book, Phased Ramp Through FY30

• Stationary engine (data center) order book of ~$100 million — management guided a ramp toward this run rate: 30% by FY28, 50% by FY29, with the full run rate reached by Q3/Q4 FY30.
• Revenues expected to start in FY29 and build into FY30, peaking around $100 million — bulk of capex for these long-term prospects is already done; inquiries and the order pipeline for the next level of peak are described as quite strong.
• AI-driven generator demand seen persisting — management believes AI is here to stay and that backup/mainstream generators required for it will continue to grow over the next 5, 7 years.
• High-HP engine Phase 2: inquiries are coming in for next-level capacity, mostly on products already under development, which should improve gestation; interest "is still going strong," but no revenue targets or commissioning timeline were disclosed.
• Phase sequencing confirmed: Phase 1 reaches peak revenue in FY30, after which Phase 2 would begin — Phase 2 will not be capital-intensive since foundry and fundamental machine-shop infrastructure is already in place.

Structural Aluminum Content Growth; India as Powertrain Hub

• EV content impact is mixed: engine parts drop out entirely for Craftsman in EVs, while hybrids actually increase aluminum content; structural-parts adoption (common to EV and ICE) is expected to increase over the next 2-3 years (FY 2027-2028 onward).
• Two-wheeler EV content currently negligible — Craftsman supplies only the alloy wheel for 2W EVs; aluminum structures for lightweighting will come in only if cost economics turn favorable. Management declined to forecast 2W EV penetration, deferring to OEM estimates.
• India has among the lowest aluminum content per vehicle — as a share of vehicle weight, India's ICE aluminum content is less than half, maybe one-third, of developed markets; current platforms are not built for aluminum adoption and OEMs are investing in new assembly lines to lightweight vehicles.
• EV parts strategy shift: management was reluctant to take EV parts a few quarters back due to design-evolution risk; with designs and platforms maturing, it will extend high-pressure die casting, low-pressure, gravity and sand casting to EVs — passenger-car lightweighting is "here to stay."
• OEM outsourcing shift is only starting: the largest OEM in-sources most key aluminum parts, the second-largest keeps a big percentage in-house, and among two-wheeler makers some outsource almost totally while others remain almost totally in-house on machining — rising OEM confidence in the open market is the driver.
• Export hub thesis: Craftsman has received orders from multinational companies planning aggregate exports from India; PV gasoline powertrains 1.5L and below and two-wheelers below 150cc are advantaged for export out of India, giving an advantage for the next 3-4 years (through ~FY 2030-2031) of the growth cycle.
• India manufacturing hub expectation — management expects India to become a manufacturing hub, if not for vehicles themselves, at least for the powertrain, serving underdeveloped markets, South America, Africa and parts of Asia across all OEMs present in India; it also cited India's position as a global power in tractor manufacturing up to 120 horsepower, with OEMs worldwide investing in India for export capacity.

15% FY27 Guide, Multi-Year Growth Path, Selective Expansion

• 15% FY 2026-2027 revenue growth guidance — management said it has "not factored too much auto growth" into it; it still expects auto industry growth to remain quite strong over the next 1-2 years (FY 2027-2028–FY 2028-2029), led by passenger vehicles and two-wheelers on the per-capita GDP inflection and a growing 150cc-and-above two-wheeler segment.
• Growth expected to continue into H2 FY 2026-2027 and across FY 2027-2028 and FY 2028-2029 — with continued powertrain growth and strong aluminum growth; significant capacity has been added, more still being created, and some pipelines not yet full.
• Committed to a 15% CAGR (period unspecified) — some years expected to grow faster; management executed significant H1 FY 2026-2027 capex to cater to a larger customer and end-segment base.
• Aluminum expansion: DR Axion plant 2 has started trial production with a strong order book; new plants are starting up suboptimally and require working-capital infusion, with operating leverage expected to take another 2 quarters (Q3-Q4 FY 2026-2027) to reach a more profitable position.
• German subsidiary kept strategic and small: ~4% of consolidated revenue as of Q2 FY 2026-2027 with a net block of hardly 2-3%; ~Rs.100-130 crore invested to date, with only a small machine shop (possibly Rs.20-30 crore, period unspecified) planned — management said it is "not a fan of investing outside India in a big way because we understand the risks which are associated."
• Critical scale in FY 2026-2027 — in closing remarks, CMD Srinivasan Ravi said Craftsman will reach critical mass in FY 2026-2027, enabling it to cater to larger OEMs including multinational OEMs, and that this scale will help it be "a very stable and growing company for almost the next 5-10 years."
• Selectivity as discipline: the company is more selective on customers and products based on life cycle and profitability, with a better ability to attract larger, more profitable customers for supply within India or outside India; capital goods costs have steadily risen and new projects cannot be done at old prices.