Q3 CY26 Financial Performance - India Operations

  • Sales: INR 18.0 billion, representing an 18% year-on-year (YoY) increase from Q3 CY25 and a 9% sequential increase from Q2 CY26.
  • EBITDA Margin: 16.3%, compared to 17.3% in Q3 CY25 and 16.7% in Q2 CY26. The margin compression was attributed to price pressures from the West Asia conflict, impacting raw material, energy, and consumable costs.
  • Profit Growth: EBITDA grew 11% YoY, EBIT grew 12% YoY, and EBT grew 10% YoY.
  • Market Context: Demand was robust across most segments, though tractor growth slowed appreciably. Management expects a relative slowdown in market growth in subsequent quarters as the effect of GST cuts diminishes.

Q3 CY26 Financial Performance - European Operations

  • Sales: INR 7.6 billion, representing a 4% YoY decrease from Q3 CY25 and a 15% sequential decrease from Q2 CY26. The sequential drop is a normal seasonal pattern due to a 3-week holiday in August.
  • EBITDA Margin: 16.3%, a significant improvement from 14.1% in Q3 CY25 and 15.9% in Q2 CY26. Margin recovery was credited to restructuring activities undertaken in the previous year.
  • Profit Growth: Despite stagnant sales, EBITDA grew 12% YoY, EBIT grew 20% YoY, and EBT grew 26% YoY.
  • Market Context: The European auto market is stagnant, facing pressure from expanding Chinese imports and increasing electric vehicle (EV) penetration.

Q3 CY26 Consolidated Performance

  • Sales: INR 25.6 billion, an 11% increase YoY and an 8% increase sequentially.
  • Profitability: EBITDA was INR 4.2 billion (up 11% YoY), EBIT was INR 3.2 billion (up 14% YoY), and EBT was INR 3.2 billion (up 14% YoY).

9M CY26 Financial Performance

  • India Operations: Sales were INR 50.7 billion, up 16% YoY. EBITDA margin was 16.9% (vs. 17.8% in 9M CY25). PAT grew 8%.
  • European Operations: Sales were INR 25.7 billion, up 7% YoY. EBITDA margin improved to 16.0% (vs. 13.4% in 9M CY25). PAT grew 44%.
  • Consolidated: Sales were INR 76.4 billion, up 12% YoY. EBITDA margin was 16.6% (vs. 16.3%). PAT was INR 7.3 billion, up 17% YoY.

Strategic Updates and Operational Highlights

  • Order Inflow: Year-to-date (9M CY26) new order intake was INR 9.7 billion in India and approximately INR 3.0 billion in Europe, spread across all verticals.
  • Capex & Expansion Plans: CY26 overall capex in India will be almost double that of the previous year. All verticals are planning expansions:
  • Aluminum: Diversifying into 4-wheeler High-Pressure Die Casting (HPDC) parts, requiring new lines.
  • Stampings: Expansion at multiple locations for its two main customers.
  • Gears & Composites: Exciting new orders in the EV space.
  • Iron Castings: Running near full capacity and looking to expand; a new foundry project for an American customer started supply in mid-October after a 6-month customer-driven delay.
  • Forgings: Planning expansion at Pune and Hosur plants; one press is being transferred from Mexico to the Hosur plant for receipt in Q1 2027.
  • Europe Restructuring & Market Dynamics: The GKN contract in Mexico was renegotiated, resulting in a 20% volume reduction but a contract duration extension. One press from this facility is being moved to India. The European performance is also affected by a ~5% reduction in turnover due to EV adoption. Management expects market consolidation and positions CIE as a potential winner.
  • Pass-through Negotiations: Negotiations with customers for pass-through of non-raw material cost increases (energy, gases, consumables) are ongoing, with partial recognition in Q3. Management expects most agreements to be settled by the end of the year.
  • Other Income: The significant jump in other income was due to the recognition of a grant income in the aluminum business after receiving final approval.

Management Outlook

  • India: Growth prospects remain good across most segments (excluding tractors) despite geopolitical tensions. The company is investing heavily to support new orders and projects.
  • Europe: The market is expected to remain flat. The company is focusing on protecting margins, adapting to the new scenario, and competing for a larger share in the anticipated market consolidation. Potential EU quotas on Chinese hybrid imports (capped at 350,000 units per year vs. 800,000 sold YTD) could benefit European OEMs and, consequently, CIE.
  • Capital Allocation: The strategy has shifted from inorganic growth (due to high valuations and lack of suitable targets) to aggressive organic growth, funded by existing cash reserves. A stock repurchase is not currently being considered.

Participants

Management: Mr. Ander Alvarez (CEO), Mr. K. Jayaprakash (CFO), Mr. Vikas Sinha (SVP - Strategy), Mr. Oroitz Lafuente (Global Business Controller).

Moderator: Mr. Ronak Mehta from ICICI Securities Limited.