Krishna Defence & Allied Industries Ltd - SME play on Shipbuilding

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Few Observations from the Q4 call and press release post that.

  1. Krishna started FY25 with an order book of 187 Cr. Received 2 notably big orders of 105 Cr. & 88 Cr. from L&T and MoD respectively. It ended FY25 with a 195 Cr. Topline, with ~60% contribution ( 117 Cr.) from bulb bars and 40% (78 Cr.) from weld consumables. Outstanding order book is 267 Cr. which goes to say that another 82 Cr. worth of orders were not declared to exchange separately and Qtr end PR is the way to keep track of incoming orders. Mgmt. is guiding for 30-40% kind of earning CAGR. for next 5 years.

  2. Weld Consumables - Beginning of FY25, mgmt. had guided that their weld consumable facility will be up and running by Sep/Oct 25. They delivered like a clock. Mgmt. not only delivered on the facility being ready but also procured order and executed it seamlessly. Mgmt. expected this product line to contribute only 15-20% of the product mix for FY25 (as per Q424 call), but it has now grown to be 40% of the topline in just one year. Company is under going certification process for even higher grade of weld consumables. Given the activity in ship building in India and this being an import consumable product, are we just scratching the surface in terms of market potential ? The last known order is from Ministry of Defense for highly critical platform. Does this mean, the orders from GRSE/MDL/CSL of the world are yet to come to Krishna? The company definitely seems to have winning product in it’s hand. Pick & shovel for ship building theme?

  3. Composite doors JV with VABO : Sea trials are towards end stage and have succeeded. Finalization of contractual terms are in progress which are expected to close soon. Production unit being setup at an expense of 10 Cr. (Half of which will be contributed by Krishna). TAM: Each vessel could have about 5 Cr. of these doors (?). Quite possibly this product line too can go upto 100 Cr. a year type of contribution to topline in sometime.

  4. Role in Oil Tanker Fleet Opportunity: Company is working to get registered with Bureau Veritas, Lloyd’s Register and IRS . India plans to invest 10 USD Billion on oil tanker fleet. Mgmt. commented that these certifications are in preparation for that when & if the opportunity arises.

  5. 20% stake in Bangalore based Conceptia ( a 15 yrs old ship & submarine design company). Idea behind the acquisition is to move up the value chain from just design to become a manufacturer of module or part for the clients of Conceptia. Company does about 60-65 Cr. revenue with 80 odd people.

  6. Autonomous Under Water Vehicle (AUV) : Company had earlier invested (50L) into Planys, an IIT Madras based startup which was into ROV for hull cleaning/cavitation/paint etc. Now in June, the company has made an announcement that it has commenced the construction of countries largest and most advanced AUV, designed by Indian Navy and in partnership with Rekise Marine. NSTL , DRDO Lab seems to be at the forefront of R&D on AUV. The company Rekise Marine is a startup by Maitrai Maka, an [IIT Topper], who started the company straight out from his college (https://www.linkedin.com/in/maitrai-maka/) and who seems to have always had a passion for AUV and won the contest iDEX Adti 1.0 Challenge of Indian Navy in Aug’24. Rekise Marine Wins Indian Navy Contract for Jalkapi AUV - Indian Defence Research Wing

Few other links to appreciate the importance of the project.

NSTL’s High Endurance AUV passes crucial lake trials in Mar25.

Royal Navy orders it’s first crewless submarine (AUV) ‘Cetus’ in December 2022 at cost of 15.4 Million Pounds from UK based MSubs . At 12 Meter length and 2.2 meter diameter and 17 tonne, its one of the most complex crewless submersible operated by European navies, designed and built specially for the Royal Navy by Plymouth-based tech firm MSubs .The goal for Cetus – named after a mythological sea monster – will be to move stealthily through the oceans, monitoring hostile activity, listening out for ships or submarines which may pose a threat to the Fleet, or to key national infrastructure such as deep-sea cables and pipelines.

Cut to Mar’25. The project is launched.

Excalbur - UK's CETUS XLUUV launched by MSubs in Plymouth - Naval News

Herne from BAE Systems : UK’s first AUV ? https://www.youtube.com/watch?v=oSHpLesmDUA

Konsberg seems to be at forefront of such AUVs and growing [pretty strong financially] (Financial results Q1 2025: Strong adaptability and well-positioned for further growth - Kongsberg Discovery)

It definitely came as a surprise that a company of Krishna’s caliber is chosen as a mfg. partner for this project of high importance, given that we have so many other well established shipbuilders.

  1. Waveoptix: (stake increased from 25% to 40%) Company did about 9.9 Cr. topline and 90L PAT and has potential to be a 100 Cr. topline opportunity in 3-4 years.

  2. Company completed 3 yrs of listing on SME. On it’s way to be listed to mainboard and BSE soon.

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