Insight from the Plant Visit and Management Interaction
In this edition of LEARNING OF THE WEEK, we’ll discuss some interesting insights shared by the management of Krishna Defence & Allied Industries during our recent visit to their Halol plant.
Right now, the world is experiencing a very tense environment, with geopolitical tensions at near all-time highs. We have two major ongoing wars, many governments are undergoing changes, and many nations are on the brink of war. Having your national military with no dependence on others is paramount. This means it is essential that we are not at the mercy of another nation to buy defense equipment and technology that we use for our military, and this has become more urgent than ever.
Achieving that independence requires people, capital, and capabilities. So, the Indian government decided to open the defence sector in 2001. However, the main impetus was witnessed after 2014 as the government launched initiatives like Make In India, AtmanirbharBharat, Innovation for Defence Excellence (iDEX), Defence Industrial Corridor, FDI Liberalization, and Defence Production and Export Promotion Policy (DPEPP) that supported manufacturing of defence for the country within the country.
This has resulted in the Indian defence sector growing multifold in the last decade to reach a total of Rs. 1.23 lakh crore of annual domestic production value in FY24 alone. During the same decade, defence exports increased by 31x, and India became a top 25 exporter in the world. While our nation is still very much a net importer of defence, we have made huge strides towards achieving defence independence.
One of the beneficiaries of this INDIGENIZATION push is a company called Krishna Defence & Allied Industries. Although it started as a dairy equipment manufacturer, its strong engineering skills helped it shift to defence allowing the company to create advanced technology products that were previously imported and develop new technologies to improve military capabilities. Over the years, Krishna Defence has become a trusted supplier for the Indian Forces and has established a solid reputation.
Recently, we had the opportunity to visit Krishna Defence’s manufacturing plant in Halol and interact with its management team. They explained their current products, how they run their business, and their future plans. This visit was very insightful and helped us better understand how a defence engineering company operates.
But before we proceed, here’s a brief introduction to the company.
Krishna Defence and Allied Industries Ltd.
Krishna Defence & Allied Industries is a defence engineering company that supplies critical components to the Indian Navy for warships and develops unique products for the Indian Army. The company began in 1997 as a dairy equipment manufacturer. In 2006, it entered the defence sector by developing shipbuilding steel sections for the Indian Navy, which were previously imported. This shift was possible due to its strong engineering skills. Today, the defence sector accounts for 94% of the company’s revenue, while dairy equipment makes up the remaining 6%. Krishna Defence continues to innovate through research and development, aiming to reduce import needs for the Indian forces further.
To make it easier to understand, we’ve split what we learned into two parts: product insights, which cover everything about current and new products, and business operation insights, which provide a glimpse into how the company operates. Let’s start with the product insights.
Product Insights:
Krishna Defence and Allied Industries manufactures products like bulb bars for shipbuilding, ballast bricks, welding equipment, and armoured steel. The company is also working on promising new products that are either in the nascent stage or under approval.
1. Bulbars
In shipbuilding, steel sections are used to build parts of a ship, like its hull, providing strength and structure. A particular type of section is the bulb bar, or bulb flat, which has a flat surface with a rounded edge, or “bulb” on one side. This design helps stiffen the ship’s hull, strengthening it against bending and twisting, especially in rough seas. Bulb flats are efficient because they use less material, making ships lighter and easier to maintain. They replace angles and channels in framing and can handle 3x the weight, reducing ship weight and aiding in combat. Bulb bars typically account for 10-15% of a vessel’s weight.
Krishna Defence was the first company in India to produce bulb bars, a process that took about 3-4 years to develop. Previously, these bars were imported from Russia. It is compulsory for the company to procure steel from ArcelorMittal Nippon Steel (AM/NS) or Steel Authority of India Ltd (SAIL) to manufacture bulb bars. It manufactures bulb bars with various specifications to meet the load requirements of different ship sections. However, 95% of its orders are for 10-meter-long bulb bars.
Manufacturing Process – Bulb Bars
With recent approvals, Krishna Defence might have the opportunity to supply bulb bars to the US and Norway.
2. Ballast Bricks
Ballast bricks are heavy materials, often made of stone or metal, used in submarines to ensure stability and balance. Placed low in the ship, they lower the center of gravity, preventing tipping, especially in rough seas. They help balance the weight since propelling devices at the rear add extra weight there, so ballast is added at the front. These bricks are made from special materials and weigh about 2,000 to 3,000 metric tons in each submarine.
Krishna Defence supplies ballast bricks used by the Indian Navy. These bricks are made from special alloys that help submarines or naval platforms remain undetected by sonar, ensuring safe navigation and operations.
Manufacturing Process – Ballast Bricks
- The company develops its own molten steel based on specific qualities required and uses special sand to create moulds which are strengthen using gas.
- Each batch consists of 10 bricks, weighing a total of 300 kg.
- The company has to maintain a record of producing ballast bricks for 30 years.
3. Welding Equipment
Krishna Defence produces two main products:
1. Welding Wires – Made from a special alloy for high tensile strength and impact toughness, these wires are created by drawing or pulling the alloy. They are used for special purposes on naval platforms.
2. Welding Electrodes – Manufactured from steel powder, these electrodes provide complete shielding of the welding arc, ensuring moisture-free weld joints. They are suitable for all kinds of welding and are mainly used for high-tensile weld joints on critical naval platforms.
During the discussion, the management also shared information about the new products they are working on.
New Products
How is a new product identified? – The company has consultants who are retired officers advising them on developing new products to stay ahead. This has helped them identify multiple new products. They develop products on a no cost, no commitment (NCNC) basis and have gained the trust of authorities.
1. Bukhari:
Krishna Defence has started selling small quantities of the Himtapak, an advanced Bukhari designed by DIPAS (DRDO), the technology of which has been transferred to Krishna Defence for production. It uses a solar-powered DC fan to circulate hot air and includes multiple safety features to prevent hazards. The Himtapak significantly reduces CO2 and black carbon emissions, making it environmentally friendly and preventing hazardous conditions that led to the death or severe illness of many army soldiers in the past.
2. Doors & Hatches:
In partnership with the Dutch company VABO, Krishna Defence is developing fire-resistant composite doors and hatches to replace steel ones on naval ships. These composite products are lighter and more resistant to corrosion than traditional steel, reducing the ship’s overall weight and improving efficiency. Additionally, they offer superior fire protection, preventing fire from entering the vessel for one hour, which provides soldiers with crucial time to evacuate. Currently, these products are getting tested by the Indian forces.
3. Waveoptix Defence Solution Pvt. Ltd.
Wave Optix specializes in technology that converts radio frequencies to optical signals and back, developed by former executives from DataPatterns. This product has proven to be successful and Waveoptix has successfully fulfilled an order worth Rs. 3.5 crore for 40 units, each priced at Rs. 9 lakh. As per the management, the Government of India plans to deploy 6,000 such systems. This technology has enabled India to receive signals from a few countries for the first time.
Notably, L&T awarded this order directly, without a tender process, highlighting Krishna Defence’s growing role in defense electronics and communication technologies. Krishna Defence holds a 25% stake in Wave Optix Solution Pvt. Ltd., which they plan to take to 40%.
Till now, we’ve had all the product details shared by the management that we’ve gathered. Additionally, the management also discussed the company’s operations.
Operational Insights
1. Manufacturing Approach
In our interaction, it was apparent that the company is greatly influenced by Russian manufacturing methods because of Russia’s long experience and reliable design of defense products.
2. Order Book
As of Q2FY25, the company’s order book reached Rs. 283 crore, marking its highest level ever. The company enters into contracts that are either fixed or variable prices, based on the supply period. Short-term contracts, lasting less than 12 months, do not include price escalations, while long-term contracts feature quarterly price adjustments.
3. Focus on Quality
The company identifies itself as an engineering company rather than a product company. It supplies critical products without needing government liaison, thanks to its commitment to not compromising on quality.
4. Value Addition
Krishna Defence increases the value of its raw materials by 3-4x. It buys special steel for Rs. 1.3-1.5 lakh per metric ton and sells it for Rs. 5-6 lakh per metric ton. This shows its skill in creating high-value products from special materials, highlighting their engineering expertise.
5. Capacity Expansion
The company is expanding its bulb bar production capacity by adding another production line to its facility. This new line should be fully operational by June-July 2025, and construction is going in full swing.
6. Guidance
Going forward, the management projects the topline for the company to grow at a CAGR of 40-50% over the next 3-4 years with existing products. Additional growth may come from new products that are either at a nascent stage or are awaiting approval. Further, the order inflow will match the revenue CAGR of 40–50%.
7. Risks
Failure: The management mentioned two types of failure risks: a) technology failure, where new technology doesn’t work and the project is scrapped, and b) market acceptance failure, where a product works but isn’t accepted by the market, leading to failure.
For example, the company developed an anti-ramming product for the overseas market, but it wasn’t accepted and was eventually scrapped. However, for existing products that have been accepted, Krishna Defence has not experienced any rejections in the last 13–14 years, thanks to its strong quality control system.
With that, we’ve shared all the insights from our plant visit and management interaction. We hope these insights provided valuable knowledge and taught you something new. Have a wonderful weekend!
Disclaimer: These insights are based on our observations and interpretations, which might not be complete or accurate. Bastion Research and its associates do not have any stake in Krishna Defence & Allied Industries Ltd. This newsletter is for educational purposes only and is not intended to provide any kind of investment advice. Please conduct your own research and consult your financial advisor before making any investment decisions based on the information shared in this newsletter.
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