Automotive Axles Limited — Q4 FY26 earnings call

Call held 20 May 2026

Management summary

Automotive Axles Limited reported a strong Q4 and full-year FY26, driven by robust market demand and successful new product ramp-ups, leading to significant revenue growth and sustained profitability. The company is actively expanding capacity with Phase 1 & 1A completion by December 2026 and is strategically focused on heavy-duty and export markets, while managing cost pressures through efficiency and customer agreements. Despite short-term market softening, the outlook for FY27 remains positive with industry volumes expected to stay above 400,000 units.

Highlights

  • Q4 FY26 revenue grew by 18% QoQ to ₹664.3 crores and 18.5-18.7% YoY, indicating strong market demand.

  • Full-year FY26 revenue increased by 5% YoY to ₹2177.7 crores, reflecting overall business growth.

  • EBITDA margin for Q4 FY26 stood at 12.4% (₹82.5 crores) and PAT margin at 8% (₹53.9 crores), demonstrating sustained profitability.

  • The commercial vehicle industry (above 7.5 tons) grew 16% in FY26 to approximately 480,000 vehicles, with expectations of 400,000+ units in FY27.

  • New products launched during the year saw good ramp-up and conversion, contributing to top-line growth.

Concerns

  • Investment income was slightly lower in Q4 FY26 at ₹5.5 crores due to geopolitical situations and interest rate cuts.

  • Employee benefit expenses for Q4 FY26 were ₹47.3 crores, with about 8% being a one-off due to leave encashment settlement.

  • Market softened slightly in April and May, leading to capacity utilization of 70-80% compared to over 90% in Q4 FY26.

Key financials

2 periods

Q4 FY26

  • Revenue
    ₹664.3 Cr
    YoY +18.5% QoQ +18%
  • EBITDA
    ₹82.5 Cr
  • EBITDA Margin
    12.4%
  • PAT
    ₹53.9 Cr
  • PAT Margin
    8%
  • Material Cost
    ₹451.8 Cr
  • Employee Benefit Expenses
    ₹47.3 Cr
  • Other Expenses
    ₹88 Cr
  • PBT
    ₹72.3 Cr
  • Other Income
    ₹5.5 Cr

FY26

  • Revenue
    ₹2,177.7 Cr
    YoY +5%
  • EBITDA
    ₹269.2 Cr
  • EBITDA Margin
    12.4%
  • PAT
    ₹164.3 Cr
  • PAT Margin
    7%

What they filed

Q1 FY27: revenue up 5.7%, net profit up 27.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue495 531 560 489 462 −7%562 +6%664 +19%517 +6%
EBITDA51 57 63 48 48 −6%64 +12%77 +22%60 +25%
Net profit36 40 46 36 36 +0%39 −2%54 +17%46 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹70 Cr
    Raman K.: "last year, we spent about INR30 crores vis a vis INR70 crores in the coming year also, we are expecting because the major spend are we going to complete the phases that we had already spoken about. So, we'll be almost similar range of capex spend will be there in the upcoming year as well."
  • Liquidity Liquidity disclosed Generated ₹3 crores of cash net of investments in FY26.
    Raman K.: "And instead of all that, we were able to generate net of investments, INR30 crores of cash that we have generated in the last financial year."

Guidance & targets

Revenue

  • Top line revenue Revenue · next 4 to 5 years · Medium confidence ₹4,000-5,000 crores
    Kishan Kumar Udupi: "aspirational target of INR4,500 crores to INR5,000 crores top line over the next 4 to 5 years"

    — Kishan Kumar Udupi

Capacity

  • Capacity expansion Phase 1 & 1A Completion Capacity · end of December 2026 · High confidence Completion
    Nagaraja Gargeshwari: "Phase 1 and 1A, that's what we call is that capacity will be completed by end of December '26."

    — Nagaraja Gargeshwari

Volume

  • Overall TIV (Total Industry Volume) Volume · FY27 · High confidence 400,000+ vehicles
    Nagaraja Gargeshwari: "The industry, as such, is in a very stable 400-plus scenario every year. And the next year as well, we are expecting it to be 400 plus."

    — Nagaraja Gargeshwari

What to watch in Q1 FY27

Capacity Expansion Phase 1 & 1A Completion

By end of December 2026
Current Ongoing
Target Completed

Why it matters

Completion of this phase is crucial for meeting future demand and achieving aspirational top-line growth targets.

Nagaraja Gargeshwari: "Phase 1 and 1A... will be completed by end of December '26."

Risks & concerns

  • Inflationary pressures on costs

    medium

    Management is confident in offsetting potential inflationary pressures through productivity improvements and efficiency gains.

    Management acknowledged

  • Lower investment income due to geopolitical situations and interest rate cuts

    low

    Other income was lower in Q4 FY26 at ₹5.5 crores, but management noted investment income is in recovery.

    Management acknowledged

  • Market softening in Q1/Q2 FY27

    low

    April and May saw market softening, leading to 70-80% capacity utilization, but this is considered a typical Q1/Q2 trend, with the broader market remaining stable.

    Management downplayed

  • Industry cyclicality

    low

    The cyclicality of the industry has narrowed, with variations within 5% until last year, and consumption is expected to continue.

    Management downplayed

  • Product cannibalization due to transition to tractor trailers

    low

    The shift from multi-axle rigid vehicles to 4x2 tractor trailers will lead to product cannibalization but not a loss of business, as the company has products to cater to this trend.

    Both managed

Q&A highlights

7 direct
Technical fees paid to Meritor HVS Direct
Raman K.: "So see, overall, see the technical fee is anywhere in the range between 4% to 4.5% depending on the mix of revenue that we have.

Clarifies the percentage of sales paid as technical fees, a key cost component under the new sales agreement.

Asked by Samarth

Export growth strategy and limitations Partial
Kishan Kumar Udupi: "the product line as such in Europe and North America don't allow us to supply the fully dressed axle because the products are different. So it is largely going to be limited to the assemblies, subassemblies and probably child parts.

Details the company's export strategy, highlighting product limitations in certain markets despite strong global demand.

Asked by Samarth

Current capacity utilization and future capex plans Direct
Nagaraja Gargeshwari: "So the last quarter, when I look at it, it was over 90%... So April and May, again, the market has softened a little bit. We are still we generally operate somewhere between 70% to 80% of the capacity.

Provides insight into operational efficiency, current demand levels, and the timeline for future capacity investments.

Asked by Samarth, N Modi

Impact of industry transition to tractor trailers Direct
Kishan Kumar Udupi: "So it will be a cannibalization of some of the products that we have in the rigid axle, multi-axle rigid axle rigid vehicle platform, getting into the 4x2 tractor trailer. And this product, what we have launched with one customer like 3, 4 years ago, now we have launched with all our major customers.

Addresses a structural shift in the commercial vehicle market and confirms the company's readiness with existing products.

Asked by Lakshmi Narayan

Impact of increasing steel and metal prices Direct
Nagaraja Gargeshwari: "We always have a back-to-back agreement with most of the customers when it comes to commodity changes. And this is a standard industrial practice.

Reassures investors about margin protection mechanisms against commodity price volatility.

Asked by Lakshmi Narayan

Strategy for LCV/ICV/SUV market expansion Direct
Kishan Kumar Udupi: "what we have been doing consistently in the past several years in terms of our product strategy that is aligned with how the industry is moving and where our core strength lies... we necessarily don't want to go beyond a certain GBW or GAW level because that requires a lot of investment in the plant and the return on that investment may not be as good as in our core business.

Clarifies the company's strategic focus on heavy-duty segments and its cautious approach to diversifying into lighter vehicle categories.

Asked by Radha

Content per vehicle increase with e-axles Direct
Kishan Kumar Udupi: "The technology or the architecture that we have in the e-axle that is an add-on to the traditional mechanical axle. That means what we are currently manufacturing in terms of the mechanical parts, gears and other things plus the electric motor and other electronics, power electronics.

Provides insight into the technological components of e-axles and the current market readiness for such advanced products in India.

Asked by Radha

Higher employee benefit expenses in Q4 FY26 Direct
Raman K.: "So, that's had a bit of one-offs this time. So, we had some leave encashment settlement and all that happened. So, about 8% of it was a one-off.

Explains the temporary nature of the increased employee costs, indicating it's not a recurring operational issue.

Asked by Saket Kapoor

2 min read 6 chapters

Detailed narrative

Strong Q4 and Full-Year FY26 Financial Performance

Automotive Axles Limited concluded FY26 with robust financial results. Q4 FY26 revenue reached ₹664.3 crores, marking an 18% sequential growth and 18.5-18.7% year-over-year. For the full fiscal year, revenue stood at ₹2177.7 crores, reflecting a 5% overall growth compared to the previous year. The company maintained strong profitability, with a Q4 EBITDA margin of 12.4% (₹82.5 crores) and a PAT margin of 8% (₹53.9 crores), demonstrating its ability to sustain performance despite varying cost structures.

Positive Commercial Vehicle Market Outlook

The commercial vehicle industry, particularly for vehicles above 7.5 tons, experienced significant growth, closing FY26 at approximately 480,000 vehicles, a 16% increase over FY25. This marks a consistent trend of over 400,000 units since FY23. Management anticipates this positive momentum to continue, expecting the overall Total Industry Volume (TIV) to remain above 400,000 vehicles in FY27, driven by factors like GST cuts and an earlier-than-expected replacement cycle.

Strategic Focus on Heavy-Duty and Export Markets

The company's core strategy revolves around the heavy-duty segment, both domestically and globally. While an aspirational top-line target of ₹4,000-5,000 crores is set for the next 4-5 years, expansion into Light Commercial Vehicle (LCV) and Intermediate Commercial Vehicle (ICV) segments is limited, contributing less than 5% of current revenue, due to high investment requirements and better returns in their core business. Exports are identified as a key growth driver, with focus on assemblies, subassemblies, and child parts to align with product line differences in European and North American markets.

Ongoing Capacity Expansion and Capex Plans

Automotive Axles is in the midst of a significant capital expenditure cycle. Phase 1 and 1A of its capacity expansion initiatives are on track for completion by the end of December 2026. The company incurred over ₹70 crores in capex during FY25 and expects a similar level of spend, around ₹70 crores, for FY26. Further capex plans for the next phase of expansion are anticipated to be formulated within the next 6-9 months, based on both domestic and export market demand outlooks.

Effective Cost Management and Margin Protection

The company effectively manages cost pressures, particularly from commodity price fluctuations, through back-to-back agreements with most customers. This standard industrial practice ensures that financials are protected against changes in metal prices. Despite a one-off increase in employee benefit expenses in Q4 FY26 (₹47.3 crores, with 8% attributed to leave encashment settlement), management is confident in offsetting inflationary pressures through continuous focus on productivity improvements and efficiency gains across operations and the supply chain.

E-Axle Technology and Market Readiness

Automotive Axles possesses e-axle technology, which functions as an add-on to traditional mechanical axles, incorporating power electronics. However, the management believes the Indian market is not yet ready for a widespread adoption of e-axles, still predominantly relying on traditional central drive and mechanical axle systems. While the company has 'smart axle' products in its global portfolio, they are not currently applicable to the Indian market, indicating a phased approach to technology adoption based on market evolution.

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