The Company Making Tools That Cut, Not Hype

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Kennametal India is a 75% subsidiary of Kennametal Inc., a 70-year-old American carbide tool behemoth. They make stuff called “inserts,” “cutters,” and “special-purpose machines.” If you’ve never heard of an insert, congratulations — you are not a machinist, and your life is now slightly less complicated. An insert is a small piece of carbide that gets clamped into a cutting tool, which then shapes metal at 5,000 RPM while your factory’s accountant yells about machine downtime.

Founded in 1938, Kennametal India has been quietly printing money at steady 14% operating margins while the Indian stock market chased memes and blockchain. Their business splits into two parts: Hard Metal Products (87% of revenue, slow and steady) and Machining Solutions Group (13%, fast-growing, highly customized). They export to 45+ countries and supply to 9,500+ active customers. The company is rated AA- by Fitch. No financial drama. No promoter scandals. No “pivot to edtech.” Just carbide tools. Boring? Yes. Profitable? Also yes. And that’s the whole point.

Q3 FY26 delivered the highest operating margin in five quarters — 18% OPM on ₹296 crore revenue. The company is planning a ₹68 crore greenfield capex for its MSG segment, a signal that management sees runway in the precision machine business. The stock has tanked -10.3% YoY because India Inc decided that yield-on-cost is now a four-letter word. Let’s dig into what’s happening under the hood.

They Sell Tiny Teeth for Big Factories

Kennametal India operates two revenue engines. First: Hard Metal Products (87% of FY25 revenue) — carbide inserts, turning tools, drilling tools, milling cutters. Manufactured in Bengaluru, sold to automotive, railways, aerospace, defence, energy, and general engineering. High volume, low customization, steady margins. Essentially, if an OEM or job shop needs to cut or shape metal, Kennametal has a tool for it. They own 51% domestic market share in this category, face competition from Sandvik, Seco, and local unbranded players. But here’s the kicker: their brand is preferred by OEMs in Audi, BMW, VW, Komatsu, and major defence contractors because precision + consistency matters when you’re cutting expensive materials at scale.

Second: Machining Solutions Group (13% of FY25 revenue) — custom-engineered, special-purpose machines. Horizontal machining centres, vertical turning lathes, grinding machines. Bespoke. High ticket. High margin. Sold to aerospace, defence, and tier-1 automotive suppliers who need something not off-the-shelf. Management just approved a ₹68 crore greenfield capex to expand this segment because global defence budgets are up and India’s defence manufacturing localization push is real. The machine is supposed to be operational by FYE27. Translation: revenue inflection in MSG is a 2-year story.

Financially, the model is beautiful: high contribution margins + distributed customer base (top 10 customers = <25% of revenue) + zero debt + working capital negative on growth. The only headwind is working capital intensity (129 inventory days, 59 debtor days) — they have to import 50% of raw materials (tungsten, cobalt, tantalum), leading to stretched payment cycles. But this has never broken the business.

Q3 FY26: The Numbers That Scream Quietly

Result type: Quarterly Results  |  Q3 FY26 EPS: ₹11.1  |  Annualised EPS (Q3×4): ₹44.4  |  Full-year FY25 EPS: ₹50.73

What’s This Precision Tool Company Actually Worth?