Carraro India Limited — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Carraro India reported a positive start to FY26 with a 4% YoY revenue growth to INR 492.9 crores and a maintained 11% EBITDA margin. Growth was driven by domestic 4WD axle demand and recovering exports, despite softness in agricultural drivelines and backhoe loaders. The company secured new projects and advanced strategic initiatives, including a high horsepower transmission prototype and a new teleboom handler axle project.

Highlights

  • Revenue from operations grew by 4% year-on-year to INR 492.9 crores, driven by volume growth in domestic and export markets.

  • EBITDA margin was maintained at 11% for the quarter, reflecting focus on cost efficiency and operational discipline.

  • Exports grew 5% year-on-year, indicating early recovery after two soft quarters.

  • Achieved a new milestone in May 2025, producing nearly 4,000 units of four-wheel-drive axles, the highest ever in a single month.

  • Successfully completed a prototype for high horsepower transmissions for an export customer, with series production slated for Q2 FY26.

Concerns

  • Indirect exports of agriculture drivelines continued to remain soft during the quarter.

  • The backhoe loaders segment witnessed a softening trend in domestic demand compared to last year.

  • The gears and spares business saw a marginal decline, with limited upside expected in the near term.

  • Domestic sales in construction degrew slightly due to the introduction of TREM V regulation.

Key financials

  1. Revenue from Operations ₹492.9 Cr +4%YoY
  2. Total Income ₹499.9 Cr +5%YoY
  3. EBITDA ₹54.8 Cr
  4. EBITDA Margin 11%
  5. PAT ₹29.1 Cr

What they filed

Q1 FY27: revenue up 10.4%, net profit up 6.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue437 445 441 489 582 +33%565 +27%603 +37%540 +10%
EBITDA42 31 44 47 51 +21%54 +74%62 +41%42 −11%
Net profit22 14 23 29 31 +41%28 +100%41 +78%31 +7%
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

medium confidence
  • Capex ₹10.1 Cr
    • New telescopic handlers axle production
    • High performance new transmission range for agriculture applications
    • Grant incremental capacity for FY26 sales
    During Q1, we deployed INR101 million in capital expenditure. This was mainly to support three areas. Number one, new telescopic handlers axle production. Number two, high performance new transmission range for agriculture applications. And three, grant incremental capacity for FY26 sales.
  • Debt Debt disclosed
    In addition, we continue to maintain a strong balance sheet, and this allows us to fund our operations, support our strategic investment, and to remain agile in responding to opportunities in the market.
  • Liquidity Liquidity disclosed Company maintains a strong balance sheet to fund operations and strategic investments.
    In addition, we continue to maintain a strong balance sheet, and this allows us to fund our operations, support our strategic investment, and to remain agile in responding to opportunities in the market.

Guidance & targets

Revenue

  • FY26 Revenue Growth Revenue · FY26 · High confidence 8% to 12%
    Looking ahead for FY26, we are confident about delivering results as guided in our Q4 FY26 (Errata: Actual word to be read as Q4 FY25) earnings call. We expect FY26 revenue growth in the range of 8% to 12%.

    — Balaji Gopalan

  • Long-term Revenue Target Revenue · FY28-29 · High confidence EUR 350 million (INR 3,300-3,400 crores)
    We are looking at touching EUR350 million by FY28-29, which translates to roughly INR3,300 crores to INR3,400 crores.

    — Balaji Gopalan

  • FY26 Revenue Target Revenue · FY26 · High confidence EUR 215-220 million
    Otherwise, we should be crossing EUR215 million to EUR220 million in terms of revenue for this financial year.

    — Balaji Gopalan

  • Overall Revenue Growth (Conservative Estimate) Revenue · this year (FY26) · Medium confidence 7% to 10%
    So, that is where we are seeing a conservative kind of estimate that we will grow around 7% to 10% this year in overall revenue.

    — Ashok Rai

Profitability

  • EBITDA Margin Improvement Profitability · next two to three years (annually) · High confidence 100 bps (1%) incremental EBITDA
    On margins, our goals remain to move towards adding incremental 1% EBITDA, that is 100 bps, every year for the next two to three years.

    — Balaji Gopalan

Localization

  • Localization Percentage Localization · next three years · High confidence 86% to 88%
    And finally, higher localization where we are targeting 86% to 88% localization over the next three years.

    — Balaji Gopalan

Market Growth

  • Tractor Domestic Market Growth Market Growth · this year (FY26) · Medium confidence 7% to 9%
    And we are expecting that this market is expected to touch at least 7% to 9%. It will grow this year.

    — Ashok Rai

Market Share

  • 4WD Tractor Market Share Market Share · this financial year (FY26) · Medium confidence 23% to 25%
    this financial year, we are expecting that this should be around 23% to 25% of the market will move to the four-wheel drive.

    — Ashok Rai

  • Non-captive Market Share in 4WD Market Share · Medium confidence 60% to 65%
    Now, as a Carraro, we are maintaining the almost 60% to 65% market share in the non-captive segment.

    — Ashok Rai

  • Non-captive Share in 4WD (41 HP+) Market Share · Medium confidence 35% to 40%
    I'm expecting almost, in the total market, it should be around 35%. 35% to 40% would be non-captive, from 41 horsepower and above.

    — Ashok Rai

Revenue Contribution

  • 4WD Segment Contribution to Carraro Turnover Revenue Contribution · Medium confidence 20% to 25%
    And when it comes to the revenue contribution, we are talking about almost Carraro India's 20% to 25% of our turnover will be in the four-wheel drive segment.

    — Ashok Rai

  • Domestic 4WD Contribution to Carraro Turnover Revenue Contribution · Medium confidence 35% to 40%
    But domestic will be almost 35%-40% of our turnover will be coming from the four-wheel drive.

    — Ashok Rai

Exports

  • Export Stability Exports · Medium confidence stable
    However, with the way the four-wheel drive is growing, and we are expecting at least the export should be stable.

    — Ashok Rai

What to watch in Q2 FY26

Series production of high horsepower transmission

Q2 of this year (FY26)
Current Prototype completed
Target Series production commenced

Why it matters

This is a new high-value product line expected to contribute to future revenue and profitability.

Series production of this high horsepower transmission is set to begin in Q2 of this year.

Risks & concerns

  • Geopolitical environment and monsoon impact on future predictions

    high

    External factors like geopolitical environment and monsoon performance make long-term predictions difficult.

    It's very, very difficult to predict because, you know, both geopolitical environment and how the monsoon fairs in the next year. So there are many, many variables, it's very difficult to predict beyond one year or beyond three, four quarters.

    Management acknowledged

  • Gross margin volatility

    medium

    Management stated that gross margin volatility is common due to product mix variations quarter-on-quarter, not a major structural issue, and aims for structural improvement through localization and new products.

    On the gross margin, I would say volatility was probably seen in Q3 of last year. But if we enlarge a little bit the horizon, we will see that we do not have a major volatility. We are talking about over-variation in the range of 1 to 2 points quarter by quarter. And this is actually quite, let's say, common in our business.

    Analyst downplayed

  • Softening domestic demand in backhoe loaders

    medium

    Domestic demand for backhoe loaders softened, though partly offset by increased traction from Indian OEMs in exports.

    In backhoe loaders, we witnessed a softening trend in domestic demand compared to last year. However, this was partly set off by increased traction from a couple of Indian OEMs who are gaining market share in exports.

    Management acknowledged

  • Soft indirect exports of agriculture drivelines

    medium

    Indirect exports of agriculture drivelines continued to be soft, impacting overall export volumes.

    Even though indirect exports of agriculture drivelines continued to remain soft, overall volumes were supported by strong demand from domestic market.

    Management acknowledged

Q&A highlights

2 direct
Contribution of 4WD to revenue and market size Direct
almost Carraro India's 20% to 25% of our turnover will be in the four-wheel drive segment. ... The tractor domestic market last year was almost 950,000 tractors. So, this year we are expecting that it should cross 1 million.

Clarified the company's revenue mix from 4WD and provided context on the overall tractor market size and 4WD penetration.

Asked by Sriram

Gross margin volatility and India's strategic importance within the Carraro Group Direct
On the gross margin, I would say volatility was probably seen in Q3 of last year. But if we enlarge a little bit the horizon, we will see that we do not have a major volatility. We are talking about over-variation in the range of 1 to 2 points quarter by quarter. And this is actually quite, let's say, common in our business. ... Carraro India is one of the largest plants within Carraro Group in terms of the industrial footprint that we have. And it is a strategy driven by our group that we have created Carraro India as a center of excellence for agriculture transmission.

Addressed concerns about margin fluctuations, attributing them to product mix, and emphasized India's critical role as a center of excellence for agriculture transmission within the global group.

Asked by Pranav Doshi

Seasonality of the tractor market and agri-domestic growth split Partial
So, right now we are entering into the peak season. So, normally December, January, those are the period which is a lean period. ... The pure domestic business is actually growing with the percentages that you have pretty much mentioned, but this growth is partially offset by the cooling down that we see on the indirect export front.

Explained the seasonal nature of the tractor market and clarified that while pure domestic agri business is growing, indirect exports are softening, impacting overall agri segment growth.

Asked by Sonal Gupta

Magnitude of high horsepower transmission order wins Partial
We haven't actually bifurcated exactly between higher horsepower versus the other products that we have, because these are all product mix. And that is why we have been struggling with convincing investors not to look at it from a quarter basis. It has to be at an annual basis.

Management indicated that specific quantification of high horsepower order wins is difficult due to product mix and emphasized focusing on annual results rather than quarterly fluctuations.

Asked by Sonal Gupta

Export outlook and feasibility of double-digit growth for FY27 Partial
So collectively, we should be more or less, even though in dropping market, we should be stable or slightly higher in the export side in the next three to four quarters. ... It's very, very difficult to predict because, you know, both geopolitical environment and how the monsoon fairs in the next year.

Management expects exports to stabilize or slightly increase despite a challenging market, but refrained from providing specific FY27 growth guidance due to external uncertainties.

Asked by Mahesh Bendre

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Carraro India commenced FY26 on a positive note, reporting a 4% year-on-year growth in revenues from operations, reaching INR 492.9 crores. Total income for the quarter stood at INR 499.9 crores, marking a 5% YoY increase. The company successfully maintained an EBITDA margin of 11%, translating to INR 54.8 crores, and recorded a profit after tax of INR 29.1 crores. This performance reflects a continued focus on cost efficiency and operational discipline.

Segmental Performance and New Products

Both agriculture equipment and construction vehicle segments demonstrated stable performance. Exports grew 5% YoY, showing early recovery signs, although indirect exports of agriculture drivelines remained soft. The company continued the export ramp-up of new teleboom handler axles, introduced in Q4 FY25, for a major international OEM. A new domestic teleboom handler axle project was secured, expected to be completed by Q3 FY26. A significant milestone was achieved in May 2025 with the production of nearly 4,000 four-wheel-drive axles, the highest ever in a single month.

Strategic Investments and Localization

In Q1, Carraro India deployed INR 10.1 crores in capital expenditure, primarily for new telescopic handlers axle production, high-performance transmission ranges for agriculture, and incremental capacity for FY26 sales. The company is targeting 86% to 88% localization over the next three years, which is expected to drive structural gross margin improvement. A new 800 mm pallet Mazak Machining Center was commissioned in June, enhancing throughput and machining flexibility.

Engineering Services and EV Transition

Demand for engineering services, particularly for high horsepower and tech-enabled platforms, saw growth. A commercial agreement to design an electric tractor transmission was concluded, with the formal contract expected to be signed shortly. This initiative is seen as a new, consistent revenue stream and a step towards potentially supplying electric transmissions to all markets. The company also successfully completed the pilot batch of Continuously Variable Transmission Gearboxes (CVT), marking progress towards commercialization.

Group Strategy and India's Role

Carraro India is positioned as one of the largest plants within the Carraro Group and has been designated as a center of excellence for agriculture transmission. The company benefits from a robust supplier network, infrastructure, and technical competence, making it a natural choice for agriculture transmission products within the group. Carraro India contributes 20% to 25% of the global group's revenue and has received 154 IPs for products sold in India, further strengthening its R&D capabilities.

Outlook and Growth Drivers

For FY26, Carraro India projects revenue growth in the range of 8% to 12% and aims to improve EBITDA margin by 100 bps annually for the next two to three years. Key growth drivers include strengthening domestic demand in agriculture and construction, ramp-up of teleboom handler axle volumes, revenue from engineering services, recovery in gears and spare parts, and higher localization. The company has a long-term revenue target of EUR 350 million (INR 3,300-3,400 crores) by FY28-29.

Tractor Market Dynamics and 4WD Growth

The domestic tractor market is expected to grow by 7% to 9% in FY26, potentially crossing 1 million units. The share of four-wheel-drive (4WD) tractors in the market is projected to increase to 23% to 25% this fiscal year. Carraro India maintains a 60% to 65% market share in the non-captive 4WD segment and expects 20% to 25% of its total turnover to come from 4WD, with domestic 4WD contributing 35% to 40% of its turnover.

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