Chief Executive Officer / India
Choices that cost revenue first and returned independence later
- Revenue, year to March 2026
- ₹6,240 Cr
- 63 per cent transmission parts for petrol and diesel vehicles, 9 per cent electric-vehicle components
- Largest customer's share of revenue, 2025–26
- 31%
- Down from 38 per cent in 2021–22; the board's ceiling is 30 per cent by March 2028
- Core production roles made permanent at Chakan I
- 386
- Of 420 planned under the four-year settlement signed in March 2024
Decisions & consequences
01Choosing gears and shafts over a complete electric axle
In mid-2022 Kavirath's strategy team, supported by our executive chairman, proposed a ₹1,400 crore programme to build complete electric axles for two-wheelers and small cars: motor, inverter and reduction gearbox in one unit, through a joint venture with a European motor specialist. Industry studies showed that most of an electric drivetrain's value sat in the motor and power electronics, and our gearbox revenue would decline as electric vehicles grew. If we stayed a gear maker, we risked becoming a smaller company.
I argued for a different plan. We had no competence in motors or power electronics, our largest customers were developing electric axles with their own partners, and a complete axle would put us in competition with the vehicle makers we supplied. I proposed ₹620 crore in two stages for the parts where our skills transferred: precision reduction gear sets, rotor shafts and aluminium motor housings. Each stage would proceed only when customer nominations covered 60 per cent of its capacity. The chairman thought the plan too cautious, and our head of strategy resigned some months later, partly over the decision. The board approved my plan, with a commitment to review systems integration again in 2025.
We gave up visible opportunities. A start-up vehicle maker offered a complete-axle programme worth about ₹300 crore over its life, and we declined it. In 2024 a shortage of grinding and noise-testing capacity at Hosur delayed two launches and deferred ₹45 crore of revenue, because I had staged capacity too tightly.
By March 2026 we had spent ₹540 crore. Electric-vehicle revenue grew from ₹38 crore in 2021–22 to ₹560 crore in 2025–26, from nine vehicle makers, and return on capital in the electric lines reached 11 per cent against our 15 per cent hurdle. When the purchase subsidy for electric two-wheelers was reduced in mid-2023, two customers cut schedules by a third for several months; because our commitments were staged, we had not built for volumes that did not arrive. The 2025 review confirmed that we should remain a component specialist.
I would do two things differently. I would have kept a small motor-integration team to understand the systems our parts go into; I underfunded it. And I would have ordered grinding machines, which take more than a year to arrive, before the second set of nominations was confirmed.
Declining a below-cost programme from our largest customer
In late 2022 our largest customer, a passenger-vehicle maker that had bought from Kavirath for thirty years, invited quotations for gear sets for the six-speed manual gearbox of a new sport utility vehicle. The seven-year programme was worth about ₹1,100 crore in revenue over its life. The customer already accounted for 38 per cent of our revenue. The price it wanted, after the customary annual reductions, was about 9 per cent below our fully costed price, and it was also asking for a 4 per cent price-down across existing parts.
Our head of sales recommended accepting both and recovering margin through productivity. The executive chairman was concerned about a relationship his father had built and about the capacity at Chakan II that the programme would fill. I recommended declining the new programme at that price, offering a value-engineered design at 5 per cent below our own price, and negotiating the price-down on existing parts against steel indexation, which our contracts with that customer did not yet include. My analysis showed that the programme would earn a return on capital of about 7 per cent over its life, below our cost of capital, and would take the customer above 40 per cent of our revenue.
The board supported the recommendation. The customer awarded the programme to another supplier. Chakan II ran at 64 per cent utilisation for five quarters, and we carried about ₹26 crore of fixed cost that the volume would have absorbed. Relations with the customer's purchasing team were cool for a year. We agreed a 2.5 per cent price-down on existing parts in exchange for quarterly steel indexation.
We filled Chakan II with tractor drivelines for export and electric reduction gears. The customer's share of our revenue fell to 31 per cent by 2025–26. EBITDA margin rose from 11.6 per cent in 2022–23 to 13.3 per cent in 2025–26. The board now receives return on capital by customer every quarter and has set a 30 per cent ceiling on any single customer by March 2028.
I would change how I communicated. The customer's senior leadership heard about our decision from their buyers. I should have met them myself before the quotation went in, explained the arithmetic and offered the value-engineered design first, not after a rejection.
Settling a dispute at Chakan by making core jobs permanent
In August 2023 a contract worker at our Chakan I plant lost two fingers while loading a hobbing machine. He had worked that line for three years through a contractor, beside a permanent operator paid roughly twice as much. Contract workers then made up 45 per cent of the plant's shop floor: 1,180 people alongside 1,450 permanent employees. Within a day the recognised union, the Kavirath Kamgar Sanghatana, began a go-slow. It demanded permanent jobs for every contract worker in production.
Output fell by about 30 per cent for eleven days. Our largest customer's assembly line came within two shifts of stopping, and we air-freighted parts from Hosur at a cost of ₹3 crore. The plant head and our head of human resources proposed moving two product lines to Hosur and holding firm until the go-slow ended. The executive chairman was inclined to agree. I did not think a plant could be run on firmness when the grievance was largely justified.
I asked for an independent safety audit of every contractor-supervised area, which found weaker guarding and training than in areas we supervised directly. I then proposed that 420 core production roles, those requiring trained operation of a machine, become permanent over three years, filled from contract workers already doing them through a skills test with a fixed pass standard. Other roles would stay contracted, under our own safety system. The union accepted the framework, and in March 2024 it signed a four-year settlement that links part of each wage increase to yield, attendance and safety.
The cost was about ₹34 crore a year in wages at full run-rate, plus ₹19 crore of output lost during the go-slow. By March 2026, 386 of the 420 roles had been filled; 112 contract workers failed the skills test first time, and 71 of them passed after retraining. Reportable injuries at Chakan I fell 58 per cent, first-pass yield rose from 93.1 to 96.4 per cent, and the plant has lost no production days since the settlement.
I would act sooner. The difference between contracted and directly supervised areas was visible in our own injury data for at least two years before the accident. I should also have gone to the plant on the first day and spoken to the workers myself, rather than relying on reports for three days.
Building an export base that no single buyer controls
In 2022 exports were ₹610 crore, 14 per cent of Kavirath's revenue, and 60 per cent of them went to one North American driveline company. That customer then offered a larger programme: gear sets for a pickup-truck transfer case, worth about ₹350 crore a year at peak, which would need a dedicated ₹280 crore line at Satara. Our chief financial officer and our head of exports both supported it. It was quick, profitable on paper and came from a customer who already trusted us.
I proposed a slower alternative. The programme would have taken that customer to about three-quarters of our exports and tied a new line to one vehicle in one market. Instead I recommended setting up Kavirath Europe B.V., a small engineering, sales and warehouse subsidiary near Tilburg in the Netherlands, for ₹46 crore, and pursuing tractor, off-highway and electric two-wheeler customers in Europe whose volumes were smaller but spread across many buyers. The board agreed, with a requirement that the European business break even within three years.
It did not. European customers took longer to qualify us than I had estimated, typically eighteen to twenty-four months from first sample to series supply, and they expected stock held near their plants on long payment terms. Export inventory rose from 48 to 71 days, and the subsidiary broke even in its fourth year, 2025–26. The North American programme went to a competitor, and our existing business with that customer has since declined modestly.
By 2025–26 exports reached ₹1,370 crore, 22 per cent of revenue, from seventeen customers in nine countries, and the largest export customer's share fell from 60 to 34 per cent. When tariff changes in the United States during 2025 raised the cost of our remaining shipments there, the effect on our results was smaller than it would otherwise have been. That was not foresight about tariffs. It was a refusal to let one buyer carry so much of our export business.
I would do two things differently. I would have negotiated consignment terms with European customers before agreeing to hold stock for them, because the working-capital cost was larger than my plan allowed. And I would have given the board a range of qualification times instead of a single estimate, which made the first two years look like failure when they were only slow.