Varroc Engineering Limited – Investor Presentation Summary

Key Operational Highlights

  • Total revenue reached ₹26,342 million in Q1 FY27, representing 29.9% YoY growth
  • India Operations registered 28.6% growth YoY
  • Overseas Operations saw 45.6% growth YoY
  • Revenue from EV models constituted approximately 16% of total revenue in Q1 FY27, growing by 87% YoY
  • Total patents filed by the company reached 135+
  • Net new business annual peak revenue wins in Q1 FY27 totaled ₹5,991 million

Key drivers of operational performance: Strong automotive demand in India with 2W growth of 22.8%, 3W growth of 39.1%, PV growth of 16.8%, and CV growth of 15.2%; EV 2W volume grew 91% YoY; notable business wins in 4W Lighting in Thailand and higher e-mobility volumes from existing customers

Segment-wise Performance

Performance by business vertical: The presentation highlights growth across multiple business segments including Electrical, Electronics, Lighting, Polymer, Metallic, After-market, and Advanced Safety Solutions

Explanation of significant changes in segment performance: Overseas business comprises 2W lighting (profitable despite revenue decline), Advanced Electronics (new business wins converting to sales), and Forging operations

Financial Highlights

Revenue: ₹26,342 million

EBITDA: ₹2,228 million

PAT: ₹777 million

EBITDA Margin: 8.5% (vs 9.5% in Q1 FY26 and 9.7% in Q4 FY26)

PBT before JV and exceptional items: ₹1,132 million (4.3% margin)

PBT before JV and exceptional items %: 4.3% vs 4.1% in Q1 FY26 (20 bps improvement)

YoY/QoQ comparison: Revenue grew 29.9% YoY and 11.2% QoQ; EBITDA declined 100 bps YoY and 120 bps QoQ; PBT before JV and exceptional items margin improved 20 bps YoY but declined 20 bps QoQ

Drivers of financial performance: Lower margin on tooling sales (0.8% impact), lower RE power savings (0.2% impact), casual manpower cost (0.5% impact), and war-related inflationary impact including aftermarket (0.7% impact)

Key Risks: War-related inflationary pressures, supply chain concerns caused by war, elevated crude prices

Geographical Revenue Split

Domestic vs Export/Regional Revenue:

India: 89.3% of total revenue (as per FY26 data)

Global: 10.7% of total revenue (as per FY26 data)

Regional Breakdown: Operations span India, Romania, Vietnam, Thailand, Italy, Poland, China with manufacturing and R&D facilities across these regions

Balance Sheet Snapshot

Net Debt: ₹5,268 million (vs ₹4,952 million as of March 31, FY26)

Equity: ₹18,182 million (as of March 31, FY26)

Net Debt/Equity: 0.27 (as of March 31, FY26)

Net Debt/EBITDA: 0.54 (as of March 31, FY26)

Financial Health Insights: Primary debt increase due to capex investments; significant YoY improvement in EPS and capital efficiency metrics – ROCE & ROE (without exceptional items in FY26)

Capex & Cash Flow Health

Capital Expenditure: Not specified in exact amounts but mentioned as primary reason for net debt increase from ₹4,952 million to ₹5,268 million

Investment Rationale: Focus on capacity expansion and technology upgrades across global operations

Strategic & R&D Initiatives

Investments in Innovation: Global R&D footprint with centers in Italy (focusing on Interior Lighting, Smart Mobility, DMS, ADAS), India (Exterior Lighting, Interior Lighting, Lighting Electronics), and China (Exterior Lighting, ADAS, Intelligent Cockpit); technological product wins including interior ambient lighting, front drive & rear drive inverter electronics for electric PV, bidirectional L2V2 charger

Expected impact on growth: Advanced Electronics and Lighting 4W R&D (including China team) to support growth in overseas business after expiry of non-compete restrictions in October 2025

Strategic Rationale: Extend India market leader position in 2W mobility, lighting, and driver assistance to the world; stay ahead of market in growth and profitability; be the Partner of Choice through superior customer experience

Industry Trends & Business Environment

Macro/Industry Trends: Indian economy remained relatively resilient despite elevated crude prices and supply chain concerns caused by war; growth momentum in automotive demand continued with EV adoption gaining more traction; interest rates were stable; improved demand noted in both urban and rural areas

Impact on Company: Strong YoY industry growth benefited company performance with 2W growing 22.8%, 3W growing 39.1%, PV growing 16.8%, and CV growing 15.2%; EV 2W volume grew 91% YoY

Management Commentary & Growth Outlook

Strategic Outlook: "Create safe, smart and sustainable future mobility solutions for everyone" and "Be the trendsetter in providing mobility solutions that offer the highest value for money to customers"

FY Guidance: Not specifically quantified but focus on volume growth on top of inflation recovery to pave way for profitable growth; sustainable improvement in contribution margins through economies of scale, revenue management and cost efficiencies

Risks and Opportunities: War-related inflationary impacts; continued focus on recovering cost inflation through price increases; growth in contribution margin and less than proportionate increase in fixed costs to result in multiplier effect on PBT through operating leverage

ESG Updates

ESG Framework: Focus on sustainable products, sustainable operations, sustainable supply chain, and community development

Environmental Commitments: ISO 14001 & ISO 45001 certification across all manufacturing plants; 47 energy efficiency projects implemented in FY26 saving 22 million KWH electricity units (equivalent to 16,186 tCO2e); 36% renewable energy contributions with commitment to increase to 50%; 78 million units of renewable energy generated in FY26 (equivalent to avoiding 55,380 tonnes of CO2e); over 90% waste recycled across plants; zero liquid discharge with water evaporation technology; over 45% wastewater recycled & reused

Social Initiatives: Kham River Restoration Project; Varroc Vengsarkar Cricket Academy; partnership with Abhinav Bindra Foundation; young talent sponsorship program; Learn and Earn Program at Varroc Academy; Women's Empowerment programs