(MENAFN- Live Mint)

Specialized steel and engineering products maker Goodluck India Ltd is looking to invest ₹400 crore to expand artillery shell production at its defence arm at Sikandrabad, Uttar Pradesh, over 12-18 months.

The move comes as the company seeks to diversify its revenue base amid global trade uncertainties fuelled by US president Donald Trump's tariff war. The US has imposed 50% tariffs on Indian exports, making it difficult for businesses to plan their capital expenditure.

The investments in Goodluck Defence and Aerospace Ltd, to be funded through a mix of debt and equity, underscore the Ghaziabad-headquartered company's intent to balance its traditional export-oriented portfolio, largely focused on the auto and engineering segments, with a steady domestic demand from the defence sector.

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Ram Aggarwal, chief executive officer, Goodluck India Ltd, said that the expansion at the defence unit will raise the annual production capacity from 150,000 artillery shells to 400,000 over the next one year. The unit, which came up at an investment of ₹275 crore, is currently under trial run and is expected to generate a revenue of ₹300 crore by March 2027.

Auto-component exports contributed nearly ₹1,000 crore, or 25%, of Goodluck India's ₹4,000 crore revenue last financial year.

Shares of Goodluck India settled about 2% lower at ₹1,262.15 apiece on the BSE on Tuesday.

Currently, defence contributes 2% of the company's total revenues, BOB Capital Markets Ltd said in a report, adding that it aims to achieve a defence revenue of ₹250–300 crore over the next 2 years. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, margins are around 20% in the defence segment, twice that of its current speciality steel and engineering products businesses, which have margins of around 8-10%.

In 2024, the company incorporated its wholly-owned subsidiary Goodluck Defence and Aerospace Ltd to strengthen presence in the defence sector.

India's artillery shell manufacturing has seen the entry of conglomerates like Adanis (Adani Defence and Aerospace), Larsen and Toubro and Bharat Forge, driven primarily by the Centre's push for self-reliance and preference for homegrown players to meet rising demand for advanced munitions.

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“While we've started receiving significant enquiries for artillery shells, the planned expansion also positions us well in sectors less sensitive to external trade fluctuations" Aggarwal told Mint. He, however, refused to share the names of its clients due to non-disclosure agreements.

Aggarwal said that the expansion into“new high margin verticals" is expected to contribute about 10% of the group's revenue over the next four years, or ₹800 crore. Earnings before interest and taxes (Ebit) margins, too, are expected to improve from the current 8-10% to“over 10%" over this four-year period.

According to the September 17 report by BOB Capital Markets, Goodluck India has been a supplier os specialized steel and precision equipment to Hindustan Aeronautics Ltd, Defence Research and Development Organisation, Indian Space Research Organisation, Bharat Earth Movers Limited, Mazagon Dock Shipbuilders Ltd, Walchandnagar Industries, BrahMos Aerospace, L&T Defence, and Godrej Aerospace. The company has been a supplier to various defence programmes that include Pralay and BrahMos missiles.

Last month, Goodluck India signed a tripartite agreement with BrahMos Aerospace Thiruvananthapuram Ltd (BATL) and Axiscades Technologies Ltd to collaborate on the Advanced Medium Combat Aircraft (AMCA) programme. The consortium has since filed an Expression of Interest (EOI) with the Aeronautical Development Agency (ADA), Bengaluru.

Goodluck India has expanded its overall capacity from 364,000 tonnes in FY23 to 500,000 tonnes in FY25, with a utilization of 89%, the BOB Capital Markets report said.

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“Investment in the hydraulic tube plant, located at Sikandrabad, that is (an) import substitution product and increased commitment to defence will yield incremental benefits in the next 2-3 years," the BOB Capital Markets report noted.

CRISIL reaffirmed the company's 'A+/Positive/A1' rating on ₹854.75 crore bank debt, citing working capital management and bank limit utilization as key monitorables.

“Gross current assets (GCAs) stood at 135 days as on March 31, 2025, driven by receivables of 47 days and inventory of 63 days. The group has a diversified customer profile with domestic payment terms of 60-90 days and export orders are secured through payment confirmation after which material is dispatched. With the increase in export sales the payment realization is better. Raw material inventory of 60-80 days is kept which is majorly order-backed. GCAs are expected at 130-140 days going forward," it noted.

Aggarwal said the company has been in“investment mode", and expects improving debt and cash flow as high-margin sales increase.

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