Divgi Torq — Q3 FY26 earnings call

Call held 13 Feb 2026

Management summary

Divgi TorqTransfer Systems reported a strong Q3 FY26, achieving its highest ever quarterly total income of ₹96.3 crores, driven by robust performance in the Transfer Case and Components segments. The company secured a significant 70,000-unit order for Indonesian pickup trucks, reinforcing its export strategy. While the EV Transmission segment faced slower-than-expected growth and low capacity utilization, management outlined plans for new product launches and improved utilization in the coming quarters.

Highlights

  • Q3 FY26 Total Income was the highest ever at ₹96.3 crores, reflecting 67.48% YoY growth and 9% sequential growth.

  • 9M FY26 Total Income of ₹261.4 crores marked a 48.52% YoY increase, surpassing full-year income levels of FY24 and FY25.

  • The Components segment delivered robust performance, growing 117% in 9M FY26, primarily driven by exports.

  • Secured order confirmations for 70,000 incremental Transfer Case units for Mahindra and Tata's Indonesian pickup truck programs, to be delivered by FY27.

  • Exports contributed 17% to total income in 9M FY26, progressing towards a medium-term target of 20-25%.

Concerns

  • EV Transmission business performance remains below initial expectations, with overall EV market volumes largely flat.

  • EV segment capacity utilization currently stands at a modest 20-25%.

  • A financial impact of ₹76.5 lakhs was recognized in Q3 FY26 due to regulatory changes under newly notified labor codes.

Key financials

2 periods

Q3 FY26

  • Total Income
    ₹96.3 Cr
    YoY +67.5% QoQ +9%
  • EBITDA
    ₹23.4 Cr
    YoY +72.1% QoQ +6%
  • EBITDA Margin
    24.3%
  • PAT
    ₹11.8 Cr
    YoY +126.9% QoQ +10.3%
  • PAT Margin
    12.2%
  • Regulatory Impact
    ₹0.765 Cr

9M FY26

  • Total Income
    ₹261.4 Cr
    YoY +48.5%
  • EBITDA
    ₹64.4 Cr
    YoY +46.4%
  • EBITDA Margin
    24.7%
  • PAT
    ₹31.4 Cr
    YoY +65.3%
  • PAT Margin
    12%

What they filed

Q1 FY27: revenue up 90.3%, net profit up 177.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue54 53 58 72 83 +54%91 +72%108 +86%137 +90%
EBITDA11 9 9 14 17 +55%18 +100%22 +144%37 +164%
Net profit8 5 5 9 11 +38%12 +140%15 +200%25 +178%
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.

Segment breakdown

  • Transfer Case
    58% YoY Growth (9M FY26)
  • EV Transmission
    11% YoY Growth (9M FY26)
  • Components
    1.2% YoY Growth (9M FY26)
  • Exports
    17% Share of Total Income (9M FY26)

Order book

high confidence

Total value

70,000 units

as of 2025-12-31 quantified

Inflow this quarter

70,000 units

Execution

This production is expected to commence in calendar '26, but most of it will happen in FY '27. ... it will conclude before the end of financial year FY '27.

Composition

  • Transfer Case Systems (product) 70,000 units 100%
  • Indonesia (geography) 70,000 units 100%
The 70,000-unit order for Indonesian pickup trucks is incremental and represents a significant milestone in supporting Indian OEMs' global expansion.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Investment to modernize capability and for continuous training and education
    • Building capacities and capabilities slightly ahead of the curve
    • Modernizing productivity for assembly lines
    This clearly reflects the consistency, momentum, and execution strength we have built over the last couple of years through a combination of investment to modernize our capability and the capability of our people through continuous training and education. ... We have consistently followed a philosophy of building capacities and capabilities slightly ahead of the curve.
  • M&A Toyota Tsusho India Private Limited Joint venture · Closed

    To further strengthen relationship and sell/distribute top management and transmission solutions and products to Japanese companies worldwide.

    Helps in global distribution and market penetration, especially in Eastern Hemisphere.

    Additionally, to further strengthen this relationship, we have an exclusive distribution agreement with Toyota Tsusho India Private Limited, a member of the Toyota Tsusho Group, which in turn is a member of the 17 companies that make up the Toyota Group globally.

Guidance & targets

Revenue Growth

  • Long-term CAGR Revenue Growth · over 5 years with FY '20 as base year · High confidence 12% to 15%
    Given this sustained momentum, we believe it is realistic now to say that we will achieve our long-term growth aspiration of delivering 12% to 15% CAGR over 5 years with FY '20 as our base year.

    — Jitendra Divgi

Export Share

  • Share of total income Export Share · medium-term · High confidence 20% to 25%
    Exports continue to steadily increase its share in the overall total income mix. In 9 months of FY '26, exports contributed around 17% of total income, and we are progressing well towards our medium-term target of 20% to 25%.

    — Sudhir Mirjankar

Product Launch

  • SOP for Japanese OEM Transfer Case Product Launch · FY '28 · High confidence First half of FY '28
    we are developing a transfer case for one of their iconic pickup truck platforms with SOP expected to begin in the first half of FY '28.

    — Jitendra Divgi

  • SOP for new EV Transmission product (120-kilowatt) Product Launch · April 2026 · High confidence April of 2026
    And as of now, indication that we have is that SOP will be in April of 2026.

    — Jitendra Divgi

Strategic Decision

  • US Manufacturing Footprint Evaluation Conclusion Strategic Decision · Q1 FY '27 · High confidence End of Q1 FY '27
    We expect this evaluation will reach some preliminary logical conclusion by end of Q1 FY '27.

    — Jitendra Divgi

Contract Conclusion

  • Automatic Transmission Contract Conclusion Contract Conclusion · July 2026 · Medium confidence July 2026
    Directionally, we hope to conclude a contract by July 2026, which would give us approximately a launch date of sometime in calendar 2028, which would be FY '29.

    — Jitendra Divgi

Capacity

  • Transfer Case Production Capacity Capacity · next 12 to 15 months · High confidence 8,000 to 9,000 units a month
    we will have the capacity to go up to almost 8,000 to 9,000. Yes, 9,000 units a month. And we believe that gives us the ability to support our customers over the next 12 to 15 months.

    — Jitendra Divgi

Capacity Utilization

  • EV Capacity Utilization Capacity Utilization · within 3 months · High confidence 40% to 60%

    From 20% to 25% today

    So my sense is that the capacity utilization by another 3 months should improve to about 40% to 60%. So in other words, we'll go from the very low of 20% we had a year ago to we could be doing more than 50%.

    — Jitendra Divgi

  • EV Transmission Capacity Utilization (overall) Capacity Utilization · eventually · Medium confidence 70% to 80%
    our ability to reach out into global markets with EV transmissions will take our capacity utilization to eventually more than 70%, 70%-80%.

    — Jitendra Divgi

Revenue

  • Revenue Target Revenue · Low confidence INR 1,000 crores
    we are a little disappointed that we are not yet on the path to INR1,000 crores. That is going to depend upon picking up a contract in any one of our -- 1 or more of our 4 verticals.

    — Jitendra Divgi

What to watch in Q4 FY26

US Manufacturing Footprint Evaluation Conclusion

by end of Q1 FY '27
Current Ongoing evaluation
Target Preliminary logical conclusion

Why it matters

Indicates progress on global expansion strategy and potential for new market entry.

We expect this evaluation will reach some preliminary logical conclusion by end of Q1 FY '27.

Risks & concerns

  • Slower EV Market Penetration

    medium

    EV Transmission performance is below initial expectations due to the slower pace of EV penetration and range anxiety impacting customer adoption, leading to gradual volume improvement rather than front-loaded.

    Management acknowledged

  • Global Uncertainties and Trade Tariffs

    medium

    Ongoing global uncertainties, including tariff-related actions in the United States, pose challenges, though the company sees a competitive advantage against Chinese competitors.

    Management acknowledged

  • Competitive Response to Market Share Gains

    medium

    Gaining business at scale may lead to price pressures and competitive responses from other players in the market, impacting profitability.

    Management acknowledged

  • OEM Vehicle Testing Delays

    low

    The ramp-up for the new EV transmission product has been slower than anticipated due to 'hiccups' faced by the OEM in their vehicle testing.

    Management acknowledged

Q&A highlights

6 direct
Components Business Outlook and US Tariffs Direct
Our principal competitor for precision manufacturing is actually China... China faces today a duty of almost 60% on equivalent components, which is why I said that we have an overwhelming decisive advantage against China.

Management explained how US tariffs on Chinese goods create a competitive advantage for Indian component manufacturers, driving export growth.

Asked by Mahesh Bendre

Mahindra/Tata Indonesian Order Incremental Nature and Sustainability Direct
it is absolutely 35,000 each. It's an incremental order of 70,000 units. ... it will conclude before the end of financial year FY '27.

Confirmed the 70,000-unit order is incremental and for 100% 4-wheel drive vehicles, providing clear volume visibility for the Transfer Case segment until FY27.

Asked by Karthi

Long-term Revenue Aspiration of INR 1,000 Crores Partial
we are a little disappointed that we are not yet on the path to INR1,000 crores. That is going to depend upon picking up a contract in any one of our -- 1 or more of our 4 verticals.

Management clarified that the INR 1,000 crore revenue target is an aspiration dependent on securing a large order in one of their key verticals, indicating it's not a near-term certainty.

Asked by Karthi

Toyota Tsusho Exclusive Distribution Agreement Direct
we have an agreement with Toyota Tsusho. And I can take the liberty to use the word exclusive because our understanding is that in the realm of Japanese OEMs, we will use Toyota Tsusho as our marketing and distribution agent.

Confirmed the exclusive nature of the partnership with Toyota Tsusho for Japanese OEMs, highlighting its strategic importance for global market access.

Asked by Yash Mehta

Transfer Case Current Volumes and Capacity Utilization Direct
I think we are averaging now about 13,500 to 15,000 per quarter. ... we will have the capacity to go up to almost 8,000 to 9,000. Yes, 9,000 units a month.

Provided specific current production volumes and future capacity targets for the Transfer Case segment, indicating significant headroom for growth.

Asked by Saania Jain

EV Drivetrain Capacity Utilization and Ramp-up Direct
The capacity utilization was most disappointing. It was at around, I would say, 20% to 25%. ... my sense is that the capacity utilization by another 3 months should improve to about 40% to 60%.

Addressed the low current EV capacity utilization and provided a clear short-term target for improvement, linked to a new product launch.

Asked by Saania Jain

Indonesian Order Assembly Location Direct
No. Mahindra currently, I think for South African market, they do it in South Africa. But the rest of the world, where the -- it's possible for them to export completely built units, those are built at their -- the Scorpio pickup is built at their plant in Nashik in Maharashtra.

Clarified the manufacturing and export strategy for Mahindra's global pickup trucks, distinguishing between different markets and production locations.

Asked by Anurag Jain

Total Order Book Quantification Partial
So the other one would be component exports to the United States, Europe, and Mexico. We have very good visibility on what is happening there because we're getting very good RFQs.

While not providing a specific total order book value beyond the 70,000 units, management highlighted strong qualitative indicators for future export orders in Components.

Asked by Karan Gupta

3 min read 6 chapters

Detailed narrative

Record Quarterly and Strong 9-Month Performance

Divgi TorqTransfer Systems achieved its highest ever quarterly total income in Q3 FY26, reaching ₹96.3 crores, a significant 67.48% increase year-on-year and 9% sequential growth. For the first nine months of FY26, total income stood at ₹261.4 crores, up 48.52% from the previous year, surpassing the full-year income levels of both FY24 and FY25. EBITDA for Q3 FY26 was ₹23.4 crores (up 72.06% YoY) with a margin of 24.3%, while 9M FY26 EBITDA was ₹64.4 crores (up 46.36% YoY) at a 24.7% margin. PAT for Q3 FY26 increased by 126.92% YoY to ₹11.8 crores, with a 12.2% margin.

Strategic Export Wins and OEM Partnerships

The company secured order confirmations for 70,000 incremental Transfer Case units (35,000 each) from Mahindra & Mahindra and Tata Motors for their pickup vehicle programs in the Indonesian market. This production is expected to commence in calendar 2026, with most deliveries in FY27. Divgi TorqTransfer Systems will be the sole supplier for these programs. Additionally, an exclusive distribution agreement was established with Toyota Tsusho India Private Limited to sell and distribute products to Japanese companies globally, reinforcing the company's international footprint.

Components Segment Outperformance

The Components segment was a star performer, recording an impressive 117% year-on-year growth in 9M FY26. This growth was primarily export-driven, with export revenues reaching a quarterly run rate of approximately ₹19 crores. Exports now contribute 17% to the company's total income, progressing towards a medium-term target of 20-25%. Management highlighted a competitive advantage against Chinese manufacturers in the US market due to high tariffs on Chinese components.

EV Transmission Segment Update and Outlook

Performance in the EV Transmission business remained below initial expectations, with the market experiencing slower penetration and flat volumes. Current capacity utilization is low at 20-25%. However, a new 120-kilowatt EV transmission product (Project Sigma) is in its concluding development phase, with SOP expected by April 2026. This new product is anticipated to add 3,000 units, with management projecting overall EV capacity utilization to improve to 40-60% within the next three months, and eventually to 70-80%.

Long-term Growth Drivers and Global Ambitions

Divgi TorqTransfer Systems aims for a long-term CAGR of 12-15% over five years from FY20. The company is evaluating the feasibility of establishing a manufacturing footprint in the United States, with a preliminary conclusion expected by Q1 FY27, to deepen global presence and capture growth in North America. Furthermore, efforts are underway to conclude a contract for automatic transmissions by July 2026, targeting a launch date in calendar 2028 (FY29), which is seen as a major opportunity to achieve the aspirational ₹1,000 crore revenue mark.

Transfer Case Capacity and Utilization

The company currently averages 13,500 to 15,000 Transfer Case units per quarter. With ongoing modernization and productivity enhancements, the capacity is expected to increase to 8,000 to 9,000 units per month, which can support customer demand for the next 12 to 15 months. The ramp-up for the Indonesian order is scheduled from February to June 2026, after which volumes are expected to plateau until December.

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