1. At a Glance
Kennametal India Ltd is a 75% subsidiary of US-based Kennametal Inc., quietly slicing steel since 1938. It’s profitable, precision-obsessed, and dividend-paying—but with a P/E of 50 and sluggish revenue growth, investors are asking: is this just a solid toolmaker or a sleepy giant in shiny packaging?
2. Introduction with Hook
Imagine a samurai—sharp, precise, old-school. Now imagine that samurai is profitable, debt-free, and pays a neat 50% of earnings as dividends. But also… barely moves. That’s Kennametal India.
- Founded: 1938 (older than Independence)
- Revenue (FY24): ₹1,100 Cr
- P/E: 50x (Valuation sharper than their cutting tools)
- FY24 PAT: ₹110 Cr | OPM: 16% | ROCE: 20%
Legacy meets lethargy. But is a breakout finally brewing?
3. Business Model (WTF Do They Even Do?)
Kennametal India makes hard metal cutting tools, carbide inserts, and machinery for:
- Auto & Engineering
- Aerospace & Defence
- Railways
- Infrastructure & Heavy Industries
Their Bengaluru unit is the manufacturing nerve center. They sell through dealers and industrial clients, serving OEMs and global majors. It’s basically surgical tools for metal.
The biz is not sexy. But it’s dependable—like an industrial SBI.
4. Financials Overview
| Metric | FY24 |
|---|---|
| Sales | ₹1,100 Cr |
| EBITDA | ₹171 Cr |
| Net Profit | ₹110 Cr |
| OPM | 16% |
| ROCE | 20% |
| ROE | 14% |
| Dividend Payout | 60% |
| Debt | ₹2 Cr |
| Other Income | ₹24 Cr |
| EPS | ₹50.28 |
Key Takeaway:
Steady profitability. Lean balance sheet. And boringly efficient.
5. Valuation
At ₹2,318/share, Kennametal is trading at:
- 50x earnings (vs peers’ median ~38x)
- 6.5x book value
- Dividend yield: 1.73%
That’s not cheap. But given consistent margins, near-zero debt, and US-pedigree governance…
Fair Value Range: ₹1,700 – ₹2,200
(Assuming 15–20x sustainable EPS of ₹100–₹110)
It’s not a multibagger rocket. It’s the financial equivalent of a Swiss Army knife—precise, efficient, and durable.
6. What’s Cooking – News, Triggers, Drama
- Jul 2025: Sales Director Prashant Shetty resigns
- Postal Ballot Passed: MD Re-appointed, Related Party transactions cleared
- Capex in Progress: ₹294 Cr fixed assets; small CWIP at ₹12 Cr
- No expansion drama, but whispers of automation & robotics adoption ahead
No wild M&A. No crypto side hustle. Just tools and machines. Steady.
7. Balance Sheet
| Item | FY24 (₹ Cr) |
|---|---|
| Equity Capital | ₹22 |
| Reserves | ₹712 |
| Borrowings | ₹2 |
| Fixed Assets (Gross) | ₹294 |
| CWIP | ₹12 |
| Other Liabilities | ₹196 |
| Total Assets | ₹979 |
Observations:
- Clean balance sheet
- High asset turnover
- Near zero debt — rare in manufacturing
8. Cash Flow – Sab Number Game Hai
| Year | CFO | CFI | CFF | Net Cash |
|---|---|---|---|---|
| FY23 | ₹116 Cr | ₹-45 Cr | ₹-45 Cr | ₹26 Cr |
| FY24 | ₹114 Cr | ₹-23 Cr | ₹-67 Cr | ₹24 Cr |
Insights:
- Strong operational cash flow
- Financing outflow due to dividend payout
- Minimal investment cash burn. No crazy Capex = positive FCF
9. Ratios – Sexy or Stressy?
| Metric | FY23 | FY24 |
|---|---|---|
| ROCE | 17% | 20% |
| ROE | 13% | 14% |
| Debtor Days | 48 | 59 |
| Inventory Days | 149 | 168 |
| Payable Days | 46 | 68 |
| CCC | 151 | 160 |
Analysis:
- ROCE & ROE look solid
- Inventory Days slightly elevated (common in precision tools)
- Cash Conversion Cycle stable but long—typical for cap goods
10. P&L Breakdown – Show Me the Money
| Year | Revenue | EBITDA | PAT | EPS | OPM |
|---|---|---|---|---|---|
| FY22 | ₹991 Cr | ₹179 Cr | ₹114 Cr | ₹51.9 | 18% |
| FY23 | ₹1,077 Cr | ₹151 Cr | ₹88 Cr | ₹39.9 | 14% |
| FY24 | ₹1,100 Cr | ₹171 Cr | ₹110 Cr | ₹50.3 | 16% |
Trend:
FY23 was a dip, FY24 bounced back. But topline CAGR is sluggish.
11. Peer Comparison
| Company | P/E | ROCE % | ROE % | Sales (Cr) | OPM % | Div Yield |
|---|---|---|---|---|---|---|
| Kennametal | 50 | 20 | 14 | ₹1,149 | 15% | 1.73% |
| Jyoti CNC | 72 | 24 | 21 | ₹1,817 | 27% | 0.0% |
| Kaynes Tech | 134 | 14 | 11 | ₹2,721 | 15% | 0.0% |
| Honeywell Auto | 68 | 18 | 13.7 | ₹4,189 | 14% | 0.26% |
| LMW | 167 | 4.5 | 3 | ₹3,033 | 4.6% | 0.19% |
Conclusion:
Kennametal is mature, clean, and consistent. But its growth rates can’t match the flashier peers like Jyoti CNC or Kaynes.
12. Miscellaneous – Shareholding, Promoters
| Shareholder | % Holding (Jun ’25) |
|---|---|
| Promoters | 75.00% |
| FIIs | 0.88% |
| DIIs | 13.72% |
| Public | 10.41% |
| No. of Holders | 11,116 |
Highlights:
- Zero promoter churn
- FII/DII inching up, but small base
- Public float is low—illiquid stock for institutions
13. EduInvesting Verdict™
Kennametal India is like an industrial Rolex. Old, reliable, not flashy. If you’re looking for 30% YoY revenue jumps or IPO-era buzz — look away. But if you want a debt-free, high-margin engineering company quietly compounding under a strong MNC parent, this is worth a closer look.
The price might seem steep (P/E 50), but the company rarely gives discounts—like that one rich uncle who never negotiates with cab drivers. Don’t expect fireworks, but you’ll sleep well owning it.
Will it double in 2 years? Doubtful.
Will it go to zero? Highly unlikely.
Is it fundamentally sound? Hell yes.
Metadata
Written by EduInvesting Analyst | 18 July 2025
Tags: Kennametal India, Industrial Manufacturing, Carbide Tools, Dividend Stocks, MNC Subsidiaries, EduInvesting Premium Research
