Bosch Q3 FY26 earnings call

Bosch Limited announced the acquisition of Bosch Chassis Systems India Private Limited (RBIC) for INR 9,068.70 crores, primarily funded through internal accruals. This strategic move aims to consolidate mobility solutions and strengthen Bosch Limited's portfolio, creating a unified powerhouse for vehicle motion management systems. The transaction is expected to close by the end of Q1 FY27, subject to shareholder approval, and is seen as a natural progression given RBIC's improved profitability.

The acquisition is projected to significantly enhance Bosch Limited's financial profile. On a pro forma FY25 basis, consolidated revenue is expected to increase by 22% from INR 18,000 crores to INR 22,000 crores, and EBITDA margins are anticipated to improve from 12.8% to 13.9%. The deal is also expected to result in approximately 5% EPS accretion for FY25. Management emphasized RBIC's strong profitability and market leadership in safety and braking systems as key drivers for this accretive and complementary asset.

Bosch Chassis Systems India (RBIC) demonstrated robust financial growth, with revenue increasing at a 17% CAGR from FY23 to FY25, reaching INR 4,000 crores in FY25. The company's EBITDA margin expanded significantly from 12.8% to 19.3% over the same period, with net profit margin also improving from 8.1% to 13.9%. RBIC is a market leader in safety and braking systems for both 2-wheelers (approximately one-third of revenue) and 4-wheelers, with growth driven by regulatory tailwinds, shifting consumer preferences, and OEMs' focus on safety.

The acquisition will be funded using Bosch Limited's existing cash and internal accruals, with no new debt. The company reported approximately INR 10,000 crores in cash and investments as of September, and after the INR 9,000 crore payment for the acquisition, expects to retain about INR 1,000 crores in cash balance. Management confirmed that the combined entity will remain well-equipped with cash and highly cash generative. A small preferential allotment of INR 8.8 crores was included to align with the Bosch Group's philosophy of maintaining shareholder 'skin in the game'.

The combined entity's growth will be propelled by the increasing penetration of advanced safety systems, regulatory mandates (like ABS and ESP), and the evolution of braking systems for electric vehicles, which require new solutions due to the absence of vacuum. RBIC's portfolio is largely powertrain agnostic, making it suitable for both EV and ICE vehicles. Management also highlighted potential new revenue opportunities from upcoming legislation, such as the ABS mandate for 2-wheelers below 125cc, and continuous technological upgrades in braking systems.

RBIC has established a strong domestic manufacturing footprint with three state-of-the-art facilities and a high degree of localization, which has been a key factor in its margin expansion. Bosch Limited plans to leverage its international production network and modular production approach to optimize investments and ensure fast ramp-up of new lines, with RBIC's capex typically ranging between 1.5% and 3.5% of total net sales. While no synergies were factored into the initial business case, management will actively explore potential operational and cost synergies during the post-merger integration phase, which is expected to take 6 to 12 months.