Balu Forge Hammers Out a New Identity in Defence and Precision Engineering

Balu Forge is now the first Indian company to gain an indirect foothold in a high-trust, high-barrier NATO-linked supply chain, having signed a five-year MoU with a NATO-affiliated entity. This gives the company five years of revenue visibility and opens up further scope to extend its supply of 155mm ERFB/BT, 105mm, 120mm and 81mm caliber variants. It also serves as a potential gateway to additional NATO-affiliated buyers.

Balu Forge has acquired high-specification used plants from Ursus (Poland), Thyssenkrupp (France) and Mercedes-Benz (Germany), and refurbished them in-house. It has complemented these with its own heavy forging assets, including an 8,000-tonne press, a 25-tonne hydraulic hammer, and 7-axis and 11-axis machining capabilities. The company has also recently acquired one of India’s largest ring rolling lines, which unlocks high-margin markets such as wind, aerospace and defence, space, and nuclear power.

Defence: The New Growth Engine
The commercial case for defence is visible in realisations. Defence empty shells fetch approximately ~Rs 600-650 per kg, against ~Rs 475-525 for heavy industrial and large commercial-vehicle components and ~Rs 245-250 for smaller agricultural parts. Qualification cycles are long, which supports customer retention and revenue visibility. Policy conditions are favorable as India's defence budget has roughly tripled over the past decade to ~INR 7.85 lakh Cr, domestic defence production reached ~INR 1.78 lakh Cr in FY2025-26, and defence exports reached a record INR 38,424 Cr.

Moving from Announcing Orders to Delivering them

Delivery of Multiple lots of 152mm empty shells shows that earlier order is now converting into revenue. Quality approval for the 155mm ERFB shell, achieving a Total Indicated Runout forging tolerance (TIR) of 3mm and machined wall tolerance of 0.3mm along with new orders for 105mm empty shells from a large Indian Government Defence unit validates the company's process capability, standard of its manufacturing facilities and foothold in the high entry barrier marked as it takes around 6 - 12 months time to obtain this certification.

The company received further approval for jet engine components to the aerospace sector marking the company's entry into one of the most quality-intensive segments of precision engineering. The company has secured an order for large components weighing over 450 kg from one of the largest oil and gas companies in USA strengthening Balu Forge’s presence in the global energy supply chain and demonstrates its ability to meet the demanding requirements of leading international customers. Lastly the company has received purchase order from one of the largest Czech Republic-based Armoured vehicle manufacturers known for vehicles used across defence, mining and quarrying, construction, and drilling.

Robust Financial Performance increasing the visibility of transformation

Revenue compounded at roughly 40% annually over 5 years to INR 1,107 Cr in FY26, but earnings expanded considerably faster. EBITDA & PAT grew about 69% and 72% respectively. This divergence reflects a richer product mix and greater value addition per kilogram rather than volume growth alone. Fixed assets and CWIP rose from approximately INR 16 Cr in FY22 to INR 765 Cr in FY26 however, the company imports machinery under MOOWR customs scheme which reduces the depreciation and helps to sustain the PAT margins. while net debt-to-equity remained at 0.02x.

About the Company

Founded in 1989 and headquartered in Belagavi, Balu Forge Industries began as a forging house supplying agricultural and commercial-vehicle components. Over the past four years it has deliberately moved up the value chain, evolving into an integrated precision engineering company that designs, forges, machines and delivers qualified assemblies from a single platform. The company now serves more than 80 countries, with over 25 global OEM relationships and 180-plus approved products.

Valuation Outlook

At a trailing twelve-month (TTM) EV/EBITDA of 21.2x and PE of 20x, Balu Forge trades at a discount to its peers. Bharat Forge trades at a TTM EV/EBITDA of 34.9x and a PE of 119.4x. Happy Forgings trades at a TTM EV/EBITDA of 35.7x and a PE of 50.3x. Compared with both, Balu Forge is available at a cheaper valuation.

Disclaimer - Informational only. Not investment advice.
GoIndia Advisors LLP | SEBI Registered Research Analyst | Reg. No. INH000020040 | BSE Enlistment No. - 6518