On January 6, the company announced plans to invest ₹650 crore to expand its heavyweight forged and machine components.
“The move aligns well with our strategy to grow our business in the industrial sector,” Garg said.
The industrial business currently contributes 12-13% to the company’s total revenue and it is expected to reach 25-30% once the new unit reaches full capacity.
Ashish Garg, Managing Director of Happy Forgings, expects production from this new plant to begin in January-March quarter of 2026-27 (FY27), with full operations expected by 2027-28 (FY28).
Garg added, “This capex will definitely help us in entering into different verticals within industrials, like power gen sets, which are used primarily as a backup for data centers, and it also help us for marine application as well as railways and defence.”
Brokerage firm Motilal Oswal Financial reiterated its buy rating on the HFL stock in November with a target price of ₹1,300 per share citing the company’s strong performance in commercial vehicles (CVs) and a positive outlook for domestic tractors as growth drivers.
Healthy order wins in the Industrials and exports segments will further improve its product mix.
The company’s current market capitalisation is ₹9,399 crore and the stock is trading at ₹1.,006 per share. The shares have remained flat over the last year.
These are the edited excerpts of the interview.
Q: What is the typical asset turn that you will get on this investment of around ₹650 crore, what kind of revenue potential and I understand that this could potentially be better margin, better return ratios as well. So in comparison to what you’re currently doing, how much better can it be?
A: We have, yesterday (January 6) announced the capex of ₹650 crore and we are very excited for this investment. The move aligns well with our strategy to grow our business and industrial sector. If you look at our history, we have always grown with enhancing our capabilities in terms of weight range. This move will definitely help us in entering into different verticals, like within industrials, like power gen sets, which are used primarily for as a backup for data centers, and also help us for marine application as well as railways and defence.
The typical asset terms on this project will be in a range of 1-1.2x depending on what portion of material is sold as machine and typically, the return on capital employed (ROCE) will be better than our existing business. The testing periods are a little longer than the current business, so it will take certain time, two to three years to capitalise on the full utilisation of the capacities.
Q: How many years will it take for this new facility, the capex that you’ve just started now? When will it start contributing to the revenue? And once it’s fully on stream, then how do we look at the revenue profile?
A: We anticipate productions to start in January-March quarter of 2026-27 and beginning of 2027-28 (FY28) and it will take two to three years to streamline the production on this capacity, as testing periods are long. You can say that within two to three years, probably we will be running up the revenues from ₹600 crore to ₹800 crore growth on the new facility.
Q: Talking about the funding, it’s a mix of internal accruals and debt as well. If you could just update us, what is the cash level at hand? How much will it be through internal accruals and again, the debt that you already have in the balance sheet, and whether you will be taking any additional for this?
A: Currently, we are net cash, we have ₹250 crore of cash on the balance sheet. We are looking at upwards of ₹300 crore of cash accruals going forward for next two to three years. We won’t be needing enough debt for this, it will be majorly funded through our internal accruals. Besides this, we will be having another capex of ₹300-350 crore on our existing line of business, which is also factored in. So cumulatively, we are looking at over ₹1,000 crore of capex in next three years, and majority of it will be funded through our internal accruals.
For full interview, watch accompanying video
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