Divgi Torq — Q1 FY26 earnings call

Divgi Torq Transfer Systems reported its highest ever total income of ₹76.8 crores in Q1 FY26, marking a 29% year-on-year growth and 20% sequential increase. EBITDA stood at ₹19.1 crores, up 37% YoY and 31% QoQ, with EBITDA margins reaching 24.9%, an expansion of 148 basis points over Q1 FY25. Profit after tax (PAT) was ₹8.9 crores, reflecting a robust 50% YoY growth and 67% sequential growth, with PAT margins at 11.6%, an expansion of 160 basis points. Gross margins expanded to 62.9%, up 246 basis points YoY, driven by higher volumes and a favorable sales mix.

The transfer case segment demonstrated a sharp rebound, delivering 34% year-on-year growth in Q1 FY26. Monthly average volumes are now on par with FY24 levels after a prolonged period of softness, driven by strong volume offtake from key OEM customers and successful new model launches like the five-door Thar and Scorpio N. This recovery contributed significantly to top-line growth and operating profitability, with gross margins expanding to over 60%. The company has also secured a contract with an estimated life cycle revenue of over ₹800 crores for a global vehicle launch with an Indian OEM, to be executed over seven years starting H2 FY27.

The EV Transmission segment experienced a 9% year-on-year decline in Q1 FY26, primarily due to broader industry challenges^🌐 and heightened competitive pressures. Despite these near-term pressure^📎s, the company anticipates a substantial ramp-up in volumes in the second half of FY26, led by a leading Indian EV manufacturer. Divgi TTS has expanded its product portfolio for EV applications and is developing multiple programs approaching launch, with production volumes expected to scale progressively through H2 FY26. The segment is targeted to achieve annual revenues of up to ₹250 crores.

The Components segment continued its strong performance, registering an impressive 72% year-on-year growth in Q1 FY26, primarily driven by higher export volumes. Export revenues doubled from ₹9 crores in FY24 to ₹18 crores in FY26, now contributing 11% to the overall revenue. The company expects to double its export revenues in FY26 and grow at a CAGR of over 15% for the next three to four years. New programs in this segment are expected to generate annual revenues of up to ₹90 crores, with the overall components business targeted to reach annual revenue levels of around ₹200 crores.

Divgi TTS is actively involved in developing a local state-of-the-art automatic transmission, including dedicated hybrid transmission solutions. Research on a dedicated hybrid transmission (DHT) showed efficiency improvements of over 30% compared to conventional ICE configurations. The company has submitted a commercial quote for an eight-speed dual-clutch automatic to a leading Indian OEM, conducted successful vehicle drive trials, and received strong interest for a proof-of-concept contract within the next couple of months. This initiative aims for deep localization, covering assembly, manufacturing, and design of core sub-technologies like hydraulic control units and dual clutch subassemblies.

The company is actively investigating establishing a manufacturing footprint in the US market due to potential tariff threats and geopolitical dislocations. While no immediate impact on existing component exports to the US is expected due to the highly engineered nature of products and customer reliance, management acknowledges the long-term threat of tariffs leading to inflation and depressed market potential. Divgi TTS is proactively engaging with US customers and strategizing to convert this potential crisis into an opportunity, leveraging its ability to deliver high-value supply chain solutions and maintain competitiveness.