Financial Performance Overview

  • Revenue Growth: Q2 FY27 sales showed 16% year-on-year growth and 2% quarter-on-quarter growth (excluding other operating income)
  • Profitability Metrics:
  • EBITDA improved by 155 basis points YoY but declined by 255 basis points QoQ to 14.5%
  • Profit Before Tax (without exceptional items) improved by 181 basis points YoY but declined by 252 basis points QoQ
  • Working Capital: Net working capital at 18.8% of sales, representing a 2.9% improvement from same period last year

Sales Performance Analysis

  • Growth Drivers: Volume increase was the primary driver of sales growth with marginal impact from price/mix changes
  • Business Mix (Q2 FY27):
  • OE Business: 66%
  • Vehicle Aftermarket: 19%
  • Exports: 10%
  • SKF Industrial Business: 5%
  • H1 FY27 Business Mix:
  • OE Business: 63%
  • Vehicle Aftermarket: 20%
  • Exports: 9%
  • SKF Industrial Business: 7%

Margin Pressure Factors

  • EBITDA Impact: Margin pressure primarily due to high cost of goods sold from steel price inflation and price increases given to suppliers for value addition components
  • Timing Gap: Price increase negotiations with customers were not concluded in Q2, with expected resolution in Q3 FY27
  • Recovery Expectation: Management expects to recover "largely almost most of it" through customer price negotiations in December quarter

Business Wins and Developments

  • Major OEM Win: Secured business with a major Indian OEM for hybrid transmission technology featuring ceramic bearings and conductive bush solutions
  • Technology Significance: First introduction of ceramic bearing and conductive bush technologies in India for electric vehicle applications
  • Business Allocation: 100% business on bearing positions and approximately 50% on new technology solutions
  • Production Timeline: Start of production expected in Q2 2028

Capital Expenditure

  • FY27 Capex Guidance: INR 200 crore as part of larger INR 500+ crore investment plan for FY26-FY28
  • Recent Announcement: INR 140 crore capex announcement compliant with SEBI disclosure requirements
  • Commissioning Schedule:
  • One channel in December 2026
  • One channel in March 2027 at Haridwar
  • Capacity enhancement in March 2027
  • New channel in July 2027

Market Segment Breakdown

  • Revenue Distribution:
  • Two-wheelers: 45-50%
  • Passenger Vehicles: 25-30%
  • Commercial Vehicles: 15-20%

Other Income Components

  • Q2 FY27 Other Income: INR 29 crore comprising:
  • Rental income from SKF Industrial
  • Services income (global roles, finance shared services)
  • Transfer pricing markup income
  • Treasury income (insignificant, cash balance ~INR 100 crore)
  • Foreign exchange gains
  • Asset sales

Electric Vehicle Strategy

  • Technology Focus: Ceramic bearings and conductive brushes for EV applications
  • Content per Vehicle: Marginal increase expected in EV vehicles compared to ICE due to high-performance requirements offsetting reduced bearing positions
  • Manufacturing: EV components manufactured in Indian plants, with ceramic balls as purchased components

Related Party Transactions

  • SKF Industrial Relationship: Includes product sales/purchases, premises leasing, and common services invoicing
  • Transition Impact: As SKF Industrial transitions out, space will be utilized for own production, expected to be more commercially productive

Forward-looking Statements

  • Revenue Growth Expectation: 15% or upward growth expected in FY28
  • Margin Recovery: Expected to return to above 15% EBITDA margin in current financial year (FY27)
  • Volume Stabilization: Aftermarket business showing signs of stabilization with 7% degrowth in both Q1 and Q2 FY27

Participants

Management Present:

  • Mr. Mayank Holani – Chief Financial Officer
  • Mr. Prahlada Girishkumar – Portfolio Strategy and Business Development Head
  • Ms. Mayuri Kulkarni – Company Secretary & Compliance Officer
  • Ms. Cilvina Pereira – Head, Marketing and Communications

Absent: Mr. Shailesh Sharma – Managing Director (personal reasons)