Bonfiglioli Transmissions, the Indian subsidiary of Italy’s Bonfiglioli S.p.A., has defended its royalty payments and related-party transactions with its parent company ahead of its ₹2,500-crore initial public offering (IPO), saying they provide access to global technology, new products and international markets, strengthening its competitive position.
“We pay royalty for access to global technology, product portfolio, and development capabilities that the group is investing in,” Managing Director Kennady V. Kaippally said.
While the royalty rate is 6% on specified products, the effective rate works out to around 4.4% of revenue, he said. Kaippally noted that 35% of the company’s 2025 sales came from products introduced during the previous three years, with 59 new products launched during the year.
Kaippally said these products benefit from the group’s global research and development (R&D) network, including one of its largest research centres in Chennai.
The IPO of Bonfiglioli Transmissions that designs, manufactures and distributes power transmission and drive solutions is is entirely an offer for sale and will close for subscription on October 19.
Kaippally said the company’s long-term growth strategy remains centred on localisation, operational efficiency and expanding opportunities across manufacturing, infrastructure and renewable energy. He added that Bonfiglioli expects these structural drivers to continue supporting revenue growth and profitability after the listing.
Responding to questions on related-party transactions, Kaippally said imports from group entities have declined as localisation has increased. Purchases from the group have fallen from 15% of procurement in 2023 to 11%, reflecting the company’s focus on sourcing locally whenever it is commercially viable. Exports to 18 group entities account for around 20% of its business.
“We see the related-party transactions as a source of competitive advantage, resulting in significant economic value for the company,” Kaippally said. He pointed to an improvement in earnings before interest, taxes (EBIT) margins from 14.5% in 2023 to 18.4% in 2025, while first-half 2026 margins reached 19.8%.
Explaining why the Indian subsidiary is being listed instead of the parent company, Kaippally said India has become a key market after more than two decades of operations. Bonfiglioli currently holds leading positions across its three business verticals—industrial automation, off-highway equipment and wind energy. The company estimates it has around 25% market share in industrial automation gearboxes in India.
Kaippally also clarified that the transfer of the R&D business into a separate entity in 2024 did not inflate margins. He said R&D expenses were earlier charged back to the parent company with a markup, meaning the restructuring had no economic impact on profitability. Instead, he attributed the improvement in margins to localisation, product mix, operational efficiencies, scale and exchange-rate benefits.
Kaippally said the company would prioritise profitable growth over expansion at any cost. “Operational efficiency and localisation are driving priorities for management, and we’ll continue to focus on that,” he said.
For the full interview, watch the accompanying video
Bonfiglioli defends parent royalty, says localisation and new products will support growth after IPO
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