Lakshmi Mills Company Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

1 V. Senthil, Chief Financial Officer

Analysts

7 Divyam Doshi, Krish Mehta (NM Holdings), Lakshmi Narayanan, Manish Goyal, Prabhat (Navneet Family Office), Rahul Kumar Mishra, Ritwik Sheth

Financials & KPIs

Geographic & Segment Commentary

Textile Machinery Division (TMD): Revenue of ₹482 crores grew 16% YoY on the back of a secured order book of ₹3,200 crores (active ₹2,400 crores) backed by 10% customer deposits. Order book composition is ~70% projects and 30% unitary machines, with uptick driven by Gujarat, Odisha, and Madhya Pradesh state policies including spinning subsidies, plus FTA benefits. Demand recovery expected to be gradual rather than sharp, given two years of sluggish spindle installations.

Advanced Technology Center (ATC): Revenue of ₹60 crores grew 30% YoY with 90% export mix and 20% composite/80% metallics split; order book stands at ~₹1,000 crores for execution over 3-3.5 years. Margins benefited this quarter from favorable product mix (more assemblies vs components). New facility with ₹150 crores capex for land and building underway, timeline 18-24 months, to support scaling.

Machine Tool Division & Foundry (MTD): Revenue of ₹343 crores grew 37% YoY but declined 3% sequentially; ~56% of revenue from automotive, balance from EMS, general engineering, and others. The J-Series machining centers (6 models, J1-J6) have good market acceptance, with the J2 model particularly well received in the EMS segment. Margin decline was due to lower operational leverage from reduced top line; the division has capacity to run 15-20% higher.

International Subsidiaries (LMW Global/China): LMW Dubai reported turnover of ₹51 crores with a loss of ₹5.6 crores and order book of ₹22 crores; LMW China turnover was ₹11 crores (vs ₹76 crores year ago) with a loss of ₹7 crores and order book of ₹128 crores. Export orders are primarily LC-based with short-cycle delivery.

Company-Specific & Strategic Commentary

New Business Expansion: Board passed enabling resolution to evaluate entry into 6 new divisions including pharma, specialty chemicals, EV, and Advanced Technology Center; management clarified this is exploratory at this stage with material decisions to be communicated to shareholders.

Cost Optimization Program: Operating expenses grew only 4% YoY against 25% revenue growth, driven by tight cost controls including a VRS exercise in Q1 FY27; management committed to maintaining disciplined cost structure despite improving demand outlook.

Product Launch - AutoWinder: Successfully supplied initial units in South India with positive customer feedback; further rollout orders expected to be booked by Q4 FY27.

Supply Chain Resilience: Developed sourcing alternatives and inventory buffers (4-5 months material pipeline visibility) to mitigate Middle East tension impact on helium, gas, sheet metal, and transport costs.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Expansion into New Divisions (Divyam Doshi)

• Question: What triggered the plan to expand into 6 new divisions including pharma and specialty chemicals, which seem unrelated to existing business?
• Answer: This is an enabling resolution to evaluate multiple options including EV, Advanced Technology Center, pharma, and chemicals; any significant material decisions will be published and informed to shareholders (V. Senthil).

Domestic Textile Order Book & Demand Outlook (Lakshmi Narayanan)

• Question: How secure is the order book and what visibility exists for domestic textile demand given tariff fluctuations and industry noise?
• Answer: Order book is secure as it requires 10% deposit; deliveries have shrunk from 14-15 months to shorter timelines. Positives include new state policies (Gujarat including spinning subsidies, Odisha, Madhya Pradesh), improving FTA benefits, and India's competitive energy cost advantage for exported yarn. Steep order inflow was seen in the last quarter; management expects gradual spindle absorption recovery, not a sharp uptick (V. Senthil).

Order Book Composition & Customer Profile (Lakshmi Narayanan)

• Question: Are orders concentrated among >1 lakh spindle companies, and is it modernization or greenfield? How sustainable is this given rising interest rates?
• Answer: Order book split is ~70% projects and 30% unitary machines; unitary includes modernization over 1-2 years and productivity upgrades. In weak years, full greenfield capex is rare unless integrated back-to-back units. Government schemes (TUF, PLA) target large integrated players to compete at scale with China, but value exists across the ecosystem—converters, integrated mills, and spinning-only players. Management does not disclose customer-specific details (V. Senthil).

ATC Split, MTD Utilization, Order Book Mix (Krish Mehta, NM Holdings)

• Question: Requested ATC composite/metallic and domestic/export split, export vs domestic order book, MTD capacity utilization, and project vs unitary mix.
• Answer: ATC split is 90% export/10% domestic, 20% composite/80% metallics; MTD utilization is 75-80% with potential to push more machines but requires capex for VMC expansion beyond that. ATC order book of ₹1,000 crores is ~90% export (₹900 crores), LMW Global ₹22 crores and China ₹128 crores are LC-based. MTD orders are short-cycle (within 3 months, cash and delivery). Overall order book is ~70% projects/30% unitary (V. Senthil).

ATC Order Book, Margins, and Capex Plan (Manish Goyal)

• Question: What is the ATC order book composite mix? What's the capex plan for capacity? Will margin momentum continue? Is revenue only value addition or product revenue?
• Answer: Order book is ~25% composite/75% metallics; ATC new facility involves ₹150 crores for land and building, 18-24 month timeline. Higher Q1 margins reflect favorable mix of assemblies vs components and will normalize to last year's levels. Revenue split is ~70% with material and 30% without material. ATC order book execution has stabilized over last 4-5 quarters with 90% export mix, enabling commitment of ₹1,000 crores over 3-3.5 years (V. Senthil).

MTD Margins, Pricing, and AutoWinder (Ritwik Sheth)

• Question: Are price increases planned to offset USD/EUR appreciation? Any domestic procurement substitution? AutoWinder feedback and traction? Winning orders from weakened MNC competitors?
• Answer: Current MTD margin decline is due to lower top line (operational leverage), not just currency. India-made component substitution is a constant effort across mechanical, electrical, and electronic parts where fit-for-purpose. Price revision clauses exist for ATC and Foundry and are being evaluated for MTD. AutoWinder supplied in South India with good feedback; more rollout orders expected by Q4 FY27 (V. Senthil).

Middle East Tension Impact on Costs (Rahul Kumar Mishra)

• Question: How is the Middle East crisis impacting raw material costs, commodities, and logistics for TMD?
• Answer: Costs are up 3-3.5% across LPG, helium (for sheet metal processing), gas, and transport. Supply availability was an issue last quarter but has eased; supply chain team maintains 4-5 months material pipeline visibility to ensure uninterrupted machine rollout. R&D and design teams work on ongoing cost mitigation (V. Senthil).

Cost Optimization and ATC Margin Sustainability (Manish Goyal)

• Question: Why did other expenses grow only 4% when revenue grew 25% YoY? What drove this?
• Answer: Tight cost optimization including VRS costs in the current quarter; management maintains disciplined cost framework despite positive outlook for MTD, ATC, and slowly improving textile demand (V. Senthil).

MTD Segment Mix and J-Series Acceptance (Prabhat, Navneet Family Office)

• Question: What is J-Series acceptance in the EMS sector? What is MTD revenue breakup by vertical?
• Answer: MTD revenue is ~56% automotive, balance from EMS, general engineering, and others (further breakup not disclosed). J-Series has 6 models (J1-J6); the J2 model specifically has very good acceptance in the EMS segment (V. Senthil).

MTD Margin Recovery Path, Textile Utilization, ATC Forex Impact (Ritwik Sheth)

• Question: What is required to reach historical 12-14% EBIT margins in MTD? What is textile division utilization? Did ATC margins benefit from USD appreciation?
• Answer: Historical margins were on a smaller ₹300-400 crore revenue base with fewer products; today's larger cost base and varied product portfolio require achieving higher capacity utilization (targeting 15-20% more output) to improve margins—no timeline committed. Textile utilization is ~60%. ATC margins positively impacted by forex last quarter (85 to 95 range), though this quarter's effect was smaller as rates held at 94-96 (V. Senthil).

Key Takeaway

LMW delivered a strong Q1 FY27 with standalone revenue of ₹891 crores (+24% YoY) and PBT of ₹85 crores (+151% YoY), driven by a 37% YoY surge in machine tools and 30% growth in the ATC aerospace division, while textile machinery grew 16% with a secured order book of ₹3,200 crores (₹2,400 crores active). Management is executing a multi-pronged strategy: scaling ATC with a ₹150 crore capex for a new facility backed by ₹1,000 crores of export-heavy orders, maintaining cost discipline (expenses up only 4% vs 25% revenue growth including VRS), and launching new products like AutoWinder with orders expected by Q4 FY27. The board's enabling resolution to explore pharma, specialty chemicals, and EV businesses signals diversification intent, though still exploratory. Watch items include Middle East-driven cost inflation of 3-3.5%, currency translation impact on imported inputs, and the pace of textile demand recovery, which management expects to be gradual—supported by state policies and FTAs—rather than a sharp rebound, with MTD capacity utilization (75-80%) positioned to absorb higher volumes as demand materializes.