Bonfiglioli Transmissions is going public with a ₹2,500-crore offer for sale, closing for subscription on October 19. The listing raises immediate questions about its related-party transactions, specifically the royalty payments to parent Bonfiglioli S.p.A. Managing Director Kennady V. Kaippally defended the structure, arguing that the payments secure access to global technology and product development capabilities that the Indian entity cannot replicate independently.
The numbers reveal a sharp shift in the company's cost structure. While the contractual royalty rate stands at 6% on specified products, Kaippally clarified that the effective rate is approximately 4.4% of total revenue. This isn't just a line item; it’s the gateway to a pipeline where 35% of 2025 sales came from products launched in the last three years. The company shipped 59 new products during the year, leveraging a global R&D network that includes one of its largest centers in Chennai.
Investors watching the margin trajectory will note a significant decoupling from the parent. Purchases from group entities have dropped from 15% of procurement in 2023 to 11%, as localization gains traction. Conversely, exports to 18 group entities still account for 20% of the business. Kaippally pointed to this dynamic as a competitive advantage, citing EBITDA margins that climbed from 14.5% in 2023 to 18.4% in 2025, and hit 19.8% in the first half of 2026. He explicitly rejected the narrative that the 2024 R&D restructuring inflated these figures, attributing the gain to scale, product mix, and operational efficiency.
Why list the Indian arm and not the Italian parent? Kaippally’s answer is market share. After two decades in India, the company claims a leading position in industrial automation, off-highway equipment, and wind energy. It estimates holding around 25% of the industrial automation gearbox market in India. The strategy going forward is clear: prioritize profitable growth. "Operational efficiency and localization are driving priorities for management," Kaippally said, signaling that post-listing expansion will be measured, not reckless.