One additional short term overhang on stock is export trade receivables amounting to ₹339.07 Cr as per March 26 financials. Altough company is claiming it will recovered in normal course of business but until same is received it is a short term overhang.
The reasons are much more than just FII selling and lower DII.
For that you need to look beyond screener, go through corporate announcements, go through numbers and annual reports, subsidiary filings and connect more dots.
I’ll point out few obvious issues I had found in middle of FY26 (which is why data is limited to FY25)
Improving receivable days but worsening receivables aging. In FY25, they Rs. 164 Cr of receivables were older than 6 months, of which Rs. 45 Cr was older than 1 year. (Against total receivables of Rs. 338 Cr)
Cumulative EBITDA to CFO conversion from FY21-FY25 - ~21%, which is why the Company has raised equity capital in multiple rounds to conduct capex.
Missing MD’s signature in Subsidiary’s filing as flagged by Prudent Parrot.
You will also not find power and fuel expenses in their operating expenses, you can give benefit of the doubt that its probably included in COGS, but when you look at Giga Joules used disclosure in the statutory filings and back calculate rough estimate of the cost, it would come as ~Rs. 19-20 Cr of FY25, which is less than 4% of standalone revenue. (Using Standalone revenue here as the BRSR disclosures were reported on a Standalone basis)
(source : Page 100, AR25 of Balu Forge)
For a forging and machine heavy company, this seems very low, especially when you see players like Happy forging and M M forging had power and fuel costs as ~7% and 9% of standalone revenue respectively in FY25)
Same for standalone employee benefit expense which was 2% of standalone revenue for Balu forge while 9% and 10% respectively for Happy Forging and M M forging.
You’ll also find questionable director appointment, be it for UAE subsidiary or for their own Company. some minor accounting and business questions as to why freight and forwarding cost reduced in FY24 when there was a red sea crisis, especially for an export driven Company.
Beyond this there’s the involvement of operators in the stock in the past, with or without knowledge of management but I’ll not comment whether this is a red flag or not.
5 Likes
The Q4-FY2026 presentation tries to answer some of the questions raised here
Regarding freight costs:
Regarding power and fuel costs
On employee costs
A lot of other FAQs are answered in their quarterly presentations. I and a few others have sent them emails, and they confirm some of these things. The hiring trends are corroborated to some extent from LinkedIn.
Whether or not you believe their answers is up to you. But AFAICT, there is nothing really out of place here.
Once a bad reputation gets attached to a company, every little nit gets amplified manifold.
Additionally, there are third-party confirmations you can get from their shipping volumes. And IMO, very importantly, I think most people are forgetting that their plants had to be certified for NATO by India’s defense department, with an in person team, across many parameters, including finances, quality control, and others. I have posted the details and linked to the DoD’s criteria for the NATO certification in this thread previously. While most of India can be quite corrupt, I expect that the defense department, especially due to NATO involvement in this case, hasn’t been bribed to provide the certification.
7 Likes
A funny thing is happening across the market where people keep analyzing forging/casting companies, but never include Balu in their analysis. Every tiny company gets mentioned, but not Balu. Balu is a pariah. If you mention that you are holding it, you can be ridiculed. Everyone will keep pointing out the same things over and over again about why Balu is bad.
Paraphrasing Peter Lynch and Jiten Parmar (and many others): you make a ton of money if you invest when you are ashamed of admitting that you own the company. Like buying an infra company in 2009.
I reserve the right to be completely wrong on this.
[Not investment advice, not a buy/sell recommendation]
[disc: holding, increased allocation during the recent crash]
3 Likes
Thanks for sharing this, I did not have a look at Q4 FY26, but we had released this newsletter back in January 2026, so it seems that our questions were forwarded to management and have rightfully answered partially.
Although I do not agree with the numbers presented still and the fact that they had to address to this form of reply through investor presentation instead of conducting conference call indicates they are still afraid of certain follow up questions. Ofcourse there is my personal bias against the management here.
Also by pointing out these inconsistencies , I did not mean the plants and factories do not exist, in fact, they have been regularly allowing institutional investors for plant visit.
The concerns were from perspective of minority shareholder where I feel the numbers historically haven’t been presented consistently and the chain of events indicate some corporate misgovernance which will never be revealed unless a formal investigation takes place.
My assumption is that they will clean their reporting from AR26 onwards.
Nevertheless, even if the statements from management are correct and there is no malice, do keep in mind that there can be possibilities of receivable write-off in future, as well as further equity dilution looking at cash conversion worsening in FY26 and the Company requiring capital to grow. The historical ROCEs should also come down as the Company cannot consistently conduct capex using distressed assets, as visible in past 2 years where Company invested Rs. 550 Cr to grow their topline by Rs. 650 Cr from FY24-FY26 compared to Rs. 29 Cr invested in FY22-FY24 to grow their topline by Rs. 274 Cr.
I hope you do incorporate these events and possibilities when assessing the Company and the multiple you will be assigning.
Absolutely. Fully aware of the risk, especially because I continue to be an armchain investor as far as Balu Forge is concerned.
One big negative is they dont hold investor calls. It is very important for a company like Balu Forge to have these calls so that investors can clarify their doubts. The management should see this an opportunity to improve their image.
In case someone is writing to the company will request to add this as well.
2 Likes
I have emailed them about this a few times. The promised they would do a call for Q4-FY2026 results, but didn’t.
One thing that has changed recently is that they have hired a new Investor Relations team (Churchgate Partners). They recently did a roadshow and a couple of investor visits as well. However, none of it was for retail investors like us. That said, I’m hoping that the new IR team pushes them to do an investor call.
See minerva bought large chunk last week, does they have crosschecked such above mentioned loopholes?
Does empty shell supply starts delivering numbers from this quarter…..??
Disc. Invested
Ashish kacholia trimmed his stake in a minor way (0.06%) as per June filing. Additionally promoter stake is also down by 90 bps. Will have to check results for q1 but not a good sign
Disc: invested
Why promotors and kacholiya both are selling when what they have talked in past is just about to happen… the whole defence empty shell manufacturing is about to start , 365k shells automatic production line will deliver numbers from this quarter, there is robust demand for shells , margins are also good.
Senior members pls share ur views on 1) wheather it is possible that whole story was planted. 2) promotors behaviour is completly non trustworthy, but by law is it possible that u can do satyam computer like story in 2026? 3)Sunita tools had submitted their prototype shells to NATO affiliation, a month ago. Then why Balu is not able to submit.
Disc. Invested
The announcement that Balu Forge’s board will consider a fresh fund raise on 12 August 2026, along with Q1 FY27 results, is significant because the company only completed a series of preferential issuances over the last year.
Because Balu Forge is in an expansion phase, periodic capital raising can be justified. What gives me some comfort is that management has so far reported deploying the previous funds broadly in line with the stated objectives.
If the raise is well structured and tied to projects that can generate high returns, it could support the long-term growth story. If it’s heavily dilutive without a convincing use of proceeds, I’d become more cautious.
A reasonably priced QIP to quality institutional investors along with strong Q1 revenue growth (30%+ year-on-year) with stable or improving margins will be bullish for the stock.
Disc. Invested
1 Like
Another two important takeaways from results
- Export trade receivable due amounting to Rs 339 crore seems to be realised because it was highlighted in q4 financial in emphasis of matter by auditors but no longer disclosed in June 2026 results.
- Company is buying land worth 22 crore from promoter not able to understand rationale and requirement because company is already having enough land in existing plants for any brownfield expansion.
Disc: Invested
Finally, market is seeing some sense. In a market, where everything is so expensive, Balu is a great opportunity to make some money at reasonable valuations. Only concern would be how company manages debt or equity dilution.
2 Likes
Maybe because Q1 results are unaudtied. Im not sure though.
1 big trackable is execution of empty shells orderbook in Q2.
1 Like
I think if the ongoing high capex and CWIP, results in further sales growth and as if demand rising,
wouldn’t it be reasonable to consider the company in basket?
As all other financial factors are fine
same view bro.
but company not doing concall is the only point for me as I can’t connect with management. But they do physical meet as they have done recently as well as in past and the names were really good with whom they have done the meeting.
2 Likes
everything going in favour of Balu forge… Now if they starts concall then FII/DIIs will come and corporate governance will improve ,hope they will starts it soon.
Whats they have talked in 23-24 exactly same scenerio happened in defence sector, they identified the oppurtunity at right time.
Disc. invested and biased
Balu forge’s major expense in material cost,
But which is gradually reduced since 2021 and so as a results margins are improved,
But still currently material cost accounts for 65%, what if the raw material (steel) prices rise somehow, someway in future? Is this statement true? Is it significant?
Note: as steel prices were on decreasing trend since 2021
FATO: sales/net assets is also poor as compared to some of it’s peers, indicating that it’s not that much efficient