Revenue and Profitability Trends
Over the four-year period ending June 2022, Kennametal India’s net sales exhibited variability, with a notable dip in fiscal 2020 followed by a robust recovery. Sales declined from ₹945.20 crores in June 2019 to ₹705.00 crores in June 2020, reflecting the impact of challenging market conditions. However, the company rebounded strongly, achieving ₹990.70 crores in June 2022, surpassing pre-pandemic levels.
Operating profit margins have shown a commendable improvement. The operating profit margin excluding other income rose from 15.36% in June 2019 to 18.06% in June 2022, indicating enhanced operational efficiency. Correspondingly, the profit after tax (PAT) margin increased from 9.56% in June 2019 to 11.52% in June 2022, underscoring stronger bottom-line growth.
Profit after tax surged significantly from ₹33.90 crores in June 2020 to ₹114.10 crores in June 2022, more than tripling in two years. Earnings per share (EPS) followed a similar trajectory, rising from ₹15.41 in June 2020 to ₹51.86 in June 2022, reflecting improved profitability and shareholder value creation.
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Cost Structure and Expense Management
The company’s expenditure profile reveals prudent cost management amid fluctuating raw material prices. Raw material costs decreased sharply in 2020 but rose again to ₹293.90 crores by June 2022. Purchase of finished goods and employee costs also increased steadily, reflecting business expansion and inflationary pressures. Despite these cost increases, total expenditure excluding depreciation remained well controlled relative to revenue growth, supporting margin expansion.
Depreciation expenses rose moderately from ₹28.00 crores in June 2019 to ₹35.70 crores in June 2022, consistent with capital investments and asset base growth. Interest expenses have been negligible in recent years, with the company reporting zero interest in June 2022, indicating a debt-free or low-debt capital structure.
Balance Sheet and Asset Quality
Kennametal India’s balance sheet has strengthened steadily. Shareholders’ funds increased from ₹523.00 crores in June 2019 to ₹646.30 crores in June 2022, supported by rising reserves. The company maintained zero long-term borrowings throughout the period, reflecting a conservative financing approach. Total liabilities rose moderately but remained manageable relative to assets.
Net block of fixed assets expanded from ₹183.80 crores in June 2019 to ₹214.60 crores in June 2022, signalling ongoing capital expenditure to support growth. Capital work in progress also increased, indicating investments in future capacity. Current assets remained robust, with inventories and sundry debtors rising in line with business scale. Cash and bank balances fluctuated, ending at ₹64.40 crores in June 2022.
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Cash Flow and Liquidity Position
Cash flow from operating activities showed volatility, with a low of ₹33.00 crores in June 2020 and a peak of ₹166.00 crores in June 2021, before settling at ₹49.00 crores in June 2022. The company experienced negative net cash inflow of ₹65.00 crores in June 2022, primarily due to increased investing and financing outflows. Investments in fixed assets and capital work in progress have been significant, reflecting a focus on long-term growth.
Despite fluctuations, Kennametal India maintained a healthy liquidity position, with closing cash and cash equivalents at ₹63.00 crores in June 2022. The company’s zero debt status further supports its financial flexibility and risk profile.
Summary
Overall, Kennametal India’s historical performance reveals a company that has navigated market challenges effectively, returning to strong revenue growth and improved profitability post-2020. Its conservative capital structure, steady asset base expansion, and disciplined cost management underpin a solid financial foundation. Investors may find the company’s improving margins and earnings growth encouraging, though attention to cash flow trends and capital expenditure will be important for future assessment.
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