Divgi Torq — Q4 FY25 earnings call

Call held 2 Jun 2025

Management summary

Divgi Torq reported a mixed FY25, with overall revenue declining 12% YoY to INR 240 crores and PAT dropping 39% to INR 24.4 crores, primarily due to a weak transfer case segment. However, Q4 showed sequential recovery with 12% QoQ revenue growth, and gross margins improved to 63%. The company is strategically focused on export expansion, EV transmission growth, and next-generation product development, targeting significant top-line growth and double-digit export contribution in FY26.

Highlights

  • FY25 Gross Margin improved to 63%, up from 61% in FY24, driven by volume-based pricing and higher defense applications.

  • Q4 FY25 total income grew 12% QoQ to INR 64 crores, marking a sequential recovery.

  • FY25 Components segment delivered robust performance, registering a strong 41% YoY growth.

  • Export contribution significantly increased from 1% in FY24 to 5% in FY25, with a target to reach double-digit contribution by end of FY26.

  • Achieved zero unsafe incidences across all 4 plant locations and single-digit customer PPM levels (Bhosari: 3 PPM, Shirwal: 2 PPM).

Concerns

  • FY25 total income declined 12% YoY to INR 240 crores, primarily due to subdued domestic demand in the transfer case segment.

  • FY25 PAT declined 39% YoY to INR 24.4 crores, impacted by lower fixed cost absorption and higher depreciation expenses.

  • Q4 FY25 PAT declined 42% YoY to INR 5.3 crores, also affected by lower fixed cost absorption and higher depreciation.

  • Transfer case segment witnessed a 29% decline YoY in FY25.

  • US tariff uncertainty and broader macroeconomic factors pose risks to export growth and EV segment.

Key financials

2 periods

Q4 FY25

  • Total Income
    ₹64 Cr
    YoY -9% QoQ +12%
  • EBITDA
    ₹14.5 Cr
    YoY -20% QoQ +7%
  • EBITDA Margin
    22.7%
  • PAT
    ₹5.3 Cr
    YoY -42% QoQ 0%
  • PAT Margin
    8.3%

FY25

  • Total Income
    ₹240 Cr
    YoY -12%
  • EBITDA
    ₹58.6 Cr
    YoY -19%
  • EBITDA Margin
    24.4%
  • PAT
    ₹24.4 Cr
    YoY -39%
  • PAT Margin
    10.2%
  • Gross Margin
    63%
  • Return on Capital Employed
    5.6%
  • Return on Invested Capital
    4.2%

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
    0.29 yoy_pct YoY Decline (FY25)
  • EV Transmission
    0.06 yoy_pct YoY Growth (FY25)
  • Components
    0.41 yoy_pct YoY Growth (FY25)
  • Export Contribution
    5% Share of Revenue (FY25)1% Share of Revenue (FY24)

Order book

high confidence

Total value

₹70 Cr

as of 2025-03-31 quantified

Pipeline

qualified rfp

RFQ volumes for exports, discounted to INR 70 crores forecast

Management provided a forecast for export orders, noting a discount from RFQ volumes due to US tariff uncertainty and market softening.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹170 Cr
    Out of the IPO process of capex of INR170 crores, we have deployed INR64 crores till date. INR27 crores was capex spend during FY '25, reflecting our focused and phased approach towards building future-ready capacities.
  • Dividend ₹2.6/share (final)
    Finally, to conclude, the Board of Directors at its meeting has recommended final dividend of INR2.6 per equity share of face value of INR5 each for FY '25. It is subject to approval by members at AGM.

Guidance & targets

Revenue

  • Overall Top Line Improvement Revenue · FY26 · High confidence at least 50% improvement
    But even so, we expect at least 50% improvement in the top line with this new product that we are introducing.

    — Jitendra Divgi

  • Long-term Revenue Goal Revenue · next 2 to 3 years · Low confidence INR 1,000 crores
    My personal focus is to bring about the really big opportunities that will give us a sort of lift for the next 2 to 3 years. And the goal really is to set a path towards that INR1,000 crores goal, which we had set ourselves.

    — Jitendra Divgi

Volume

  • EV Transmission Segment Growth Volume · FY26 · High confidence at least 50% growth
    But let me assure you that the EV segment will see we are expecting at least a 50% growth at least, the numbers could actually be much more.

    — Jitendra Divgi

Exports

  • Export Revenue Contribution Exports · end of FY26 · High confidence double-digit percentage
    Our ambition is to have or rather, I should say, our forecast is that exports will have a double-digit percentage to overall revenues by the end of FY '26.

    — Jitendra Divgi

  • Export Revenue Contribution Exports · end of FY26 · High confidence double-digit percentage
    With several new contracts secured, we are targeting double-digit export contribution by the end of FY '26.

    — Sudhir Mirjankar

  • Export Revenue Forecast Exports · FY26 · Medium confidence INR 70 crores
    With the numbers which we have right now from customers, the forecast appears to be around INR70 crores, but the only qualification I would add is that with the tumult going on in the US because of the tariff uncertainty, it's very difficult to sort of divine what the numbers will be given that this could lead to some fear of inflation and therefore, the market softening up in the US.

    — Jitendra Divgi

What to watch in Q1 FY26

Export Revenue Growth

next quarter
Current INR 11 crores (late FY25)
Target Progress towards INR 70 crores forecast for FY26

Why it matters

Exports are a key growth driver, and achieving the INR 70 crores target is crucial for overall revenue expansion.

Export revenues have begun scaling significantly and from a very modest INR3.5 crores in FY '24 towards the tail end of FY '25, we got the sort of rising tide and have already registered a sale of around INR11 crores. And this year, we expect a marked and very considerable spike in exports.

Risks & concerns

  • US tariff uncertainty and market softening

    medium

    Uncertainty in US trade policies could lead to inflation fears and a softening market, impacting export volumes.

    With the numbers which we have right now from customers, the forecast appears to be around INR70 crores, but the only qualification I would add is that with the tumult going on in the US because of the tariff uncertainty, it's very difficult to sort of divine what the numbers will be given that this could lead to some fear of inflation and therefore, the market softening up in the US. There is some anxiety over this.

    Management acknowledged

  • Macroeconomic factors and EV adoption challenges

    medium

    Broader macroeconomic factors, infrastructure limitations, and persistent range anxiety are moderating demand in the EV segment.

    The electric vehicle segment, in particular, has faced additional pressure, not only from these macro headwinds, but also due to infrastructure limitations and persistent range anxiety among consumers.

    Management acknowledged

  • Global uncertainties and trade dynamics

    medium

    The company remains alert to global uncertainties, trade dynamics, and varying pace of EV adoption across markets.

    Of course, at the same time, I must emphasize that we are alert to global uncertainties. We know what the levers are in trade dynamics and the varying pace of EV adoption across markets and technologies.

    Management acknowledged

Q&A highlights

3 direct, 1 evasive
Export ramp-up and full-year target for FY26 Direct
So, as I said, we have approval for 8 components. They are coming in, in a sort of phased sequence. With the numbers which we have right now from customers, the forecast appears to be around INR70 crores, but the only qualification I would add is that with the tumult going on in the US because of the tariff uncertainty, it's very difficult to sort of divine what the numbers will be given that this could lead to some fear of inflation and therefore, the market softening up in the US.

Analyst sought clarification on the export growth trajectory and quantified targets, which management provided with caveats.

Asked by Mihir Vora

Impact of US tariff uncertainty on export orders Direct
But having said all this, there is an expectation that with countries of Europe, with India, this whole negotiation that is going on will eventually settle down. And there is an expectation that India will come to some kind of a reasonable settlement and we will try and continue the 2.5% import duty regime that was applicable on Indian exports.

Analyst probed the potential downside risks to export targets due to geopolitical factors, and management provided a nuanced view on the situation and India's competitive advantage.

Asked by Mihir Vora

Timing of 50% sales growth in FY26 (skewed to H2 or from Q1) Evasive
Yes. Be patient and don't steal our thunder for the first quarter earnings call. In good time, we will share everything with you.

Management chose not to provide specific quarterly phasing for the projected FY26 growth, deferring the information to the next earnings call.

Asked by Mihir Vora

Directional outlook for FY26 given Q4 recovery Direct
But let me assure you that the EV segment will see we are expecting at least a 50% growth at least, the numbers could actually be much more. But because this particular product that we are introducing goes on the most attractive segment, we feel of the Indian EV industry.

Analyst sought broader guidance for the upcoming fiscal year, and management reiterated strong growth expectations for the EV segment and highlighted key drivers.

Asked by Kunal Shah

3 min read 7 chapters

Detailed narrative

FY25 Performance Overview and Q4 Recovery

Divgi Torq experienced a challenging FY25, with total income declining 12% YoY to INR 240 crores from INR 273 crores in FY24. PAT also saw a significant drop of 39% YoY to INR 24.4 crores. However, the company demonstrated resilience, maintaining profitability with EBITDA margins above 24% and PAT margins above 10%. Q4 FY25 showed a strong sequential recovery, with total income growing 12% QoQ to INR 64 crores and EBITDA increasing 7% QoQ to INR 14.5 crores, indicating a positive momentum shift.

Segmental Performance and Export Growth

The transfer case segment faced headwinds, declining 29% YoY in FY25, while the EV transmission segment showed modest growth of 6% YoY. In contrast, the components business delivered robust performance with a 41% YoY increase. Exports emerged as a key growth driver, with their contribution to overall revenue rising from 1% in FY24 to 5% in FY25. Management aims to achieve a double-digit export contribution by the end of FY26, with a forecast of approximately INR 70 crores in export revenue for FY26.

Strategic Initiatives and Product Development

The company has expanded its product portfolio and geographical reach, particularly in the US aftermarket and with Japanese and Korean OEMs. Significant progress was made in the EV transmission segment, with new products under development for a comprehensive vehicle range, expected to generate revenue from Q2 FY26. Divgi Torq is also shortlisted as one of three global candidates for supplying gear sets to a leading US OEM in the EV space, highlighting its global competitiveness.

Next-Generation Transmission and Hybrid Solutions

Divgi Torq is actively developing next-generation transmissions, including dedicated hybrid solutions. The company has completed the first phase of a feasibility study for hybrid transmissions, quantifying potential fuel efficiency improvements, and has successfully realized the first prototype. These efforts are aimed at positioning the company as a product leader in powertrain technology, anticipating future emission norms and market requirements in India and globally.

Operational Excellence and Cost Management

The company maintained a sharp focus on operational excellence, achieving zero unsafe incidences across all four plant locations and single-digit customer PPM levels (3 PPM at Bhosari, 2 PPM at Shirwal). Cost management initiatives, including supplier cost savings and Kaizen improvements, resulted in a 1.44% cost reduction relative to sales. Investments in new machinery for export-oriented components have been commissioned, enhancing capabilities and productivity.

Capital Allocation and Shareholder Returns

Out of the total IPO process capex of INR 170 crores, INR 64 crores have been deployed to date, with INR 27 crores spent during FY25. The company remains a net cash entity, committed to maintaining a strong financial position. The Board of Directors recommended a final dividend of INR 2.6 per equity share (face value INR 5) for FY25, subject to shareholder approval at the AGM.

Outlook for FY26 and Long-term Vision

Management is guardedly optimistic for FY26, projecting at least 50% improvement in the overall top line, driven by new product introductions and strong growth in the EV segment. They anticipate a significant spike in exports, targeting a double-digit contribution to overall revenues by year-end. The company also maintains a long-term goal of reaching INR 1,000 crores in revenue within the next 2-3 years, underpinned by strategic initiatives and a robust business development register.

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