Balu Forge Industries Limited is undergoing a strategic transformation from precision auto components manufacturing to defence-focused operations, demonstrating strong financial performance and ambitious expansion plans. The Mumbai-based company, with a market capitalization of Rs. 5,317.15 crore, closed at Rs. 466.45 per equity share, up 5.68% from the previous day's close of Rs. 441.40.

Strong Financial Performance in Q2 FY26

The company delivered robust financial results across key metrics during the quarter:

Over the past three years, Balu Forge has achieved impressive growth metrics with a revenue CAGR of 48%, profit CAGR of 89%, and price CAGR of 82%. The company maintains strong financial ratios with ROE of approximately 25.4%, ROCE of about 31.3%, and a low debt-to-equity ratio of 0.07. Currently trading at a P/E ratio of 21.9x, the stock is valued below the industry average of 22.7x.

Strategic Defence Manufacturing Focus

Balu Forge has established itself as an approved vendor to the majority of India's 41 Ordnance Factories and successfully supplies defence forces in two prominent European countries. The company manufactures and sells crankshafts and forged components including railway wheels, undercarriages, transmission parts, hydraulic motors, brake parts, turbine blades, and empty shells.

The Indian Government's 2020 restrictions on import procurement have created opportunities for domestic manufacturers. Balu Forge plans substantial capital investment in defence over the next decade, focusing on:

• Artillery components
• Undercarriage parts for armoured vehicles
• Weapons and ammunition for infantry
• Forged and machined engine components
• Dedicated ammunition production unit in partnership with a global defence player

Automation Milestone and Capacity Expansion

In December 2025, the company launched its fully automated empty shell production line in Belgaum, Karnataka, marking a significant operational milestone:

This facility represents one of India's first fully indigenously built automated defence lines. The company is aggressively expanding its manufacturing capabilities with plans to increase machining capacity to 80,000 tons per year and forging capacity to 1,500,000 tons per year.

Key Infrastructure Investments

Balu Forge's capex strategy includes advanced manufacturing equipment:

• 25T closed-die hydraulic hammer
• 8,000T mechanical press
• 7-axis and 11-axis machining systems

These investments strengthen the company's ability to serve defence, railways, and heavy engineering sectors, which offer high switching costs, long product life cycles, and stable pricing.

Future Growth Targets and Strategy

The company targets 40-45% revenue growth in FY26, driven by the commissioning of Hattargi Unit 3 and scaling of defence production. The long-term strategy emphasizes defence, railways, and heavy engineering sectors with high barriers to entry and stable margins.

With over 35 years of precision engineering experience, Balu Forge supplies over 25 OEMs and exports to more than 80 countries. Operating from multiple facilities in Karnataka and the UAE, the company serves diverse sectors including automotive, railways, aerospace, marine, oil & gas, e-mobility, and industrial equipment. As of December 2025, ace investor Ashish Kacholia holds a 1.62% stake in the company.

Balu Forge Industries shares experienced a strong recovery on January 13, 2025, surging 13.16% in intraday trading after the Income Tax Department concluded its searches at the company's locations. The rally marked an end to a nine-day losing streak that had weighed heavily on the stock.

Stock Performance Recovery

The company's shares jumped to a day's high of ₹499.40, compared to the previous closing price of ₹441.30. This significant gain helped the stock recover nearly half of the 27% decline it had suffered during the nine consecutive days of losses.

Income Tax Department Search Concludes

Balu Forge announced that the Income Tax Department had conducted searches under the Income Tax Act, 1961, at some of its offices and manufacturing units starting January 7, which concluded on January 13. The company emphasized full cooperation with the authorities throughout the process.

Key outcomes of the search:

• No incriminating documents were found or seized
• Business operations and production continued without disruption
• Company provided complete cooperation and documentation
• No material adverse impact expected on financial position

The company stated: "At Balu Forge Industries Limited, we adhere to the highest standards of ethical conduct and legal compliance. Our commitment to transparency and belief in the due process of law remain unwavering."

Ashish Kacholia's Investment Position

According to the September quarter shareholding pattern, ace investor Ashish Kacholia maintains a significant stake in Balu Forge through multiple holdings. His investment is structured through both personal ownership and his investment company.

Long-term Performance Track Record

Despite recent volatility and a 26% decline over the past year, Balu Forge has demonstrated strong long-term performance characteristics. The small-cap stock has delivered substantial multibagger returns across extended timeframes.

The company's December quarter shareholding pattern has not yet been released, which will provide updated information on any changes in Kacholia's holdings or other institutional movements.