Gabriel India Q1 FY27 earnings call

Gabriel India Limited announced two strategic transactions under 'Project Jupiter'. This includes the acquisition of a 28.99% equity stake in HL Mando Anand India Private Limited for INR 2,231 crores, funded by a mix of equity and cash. Additionally, the company acquired 30% minus 1 equity share in HL Klemove India Private Limited for USD 98.44 million, to be paid in two tranches, funded by internal accruals and debt. These moves are part of the Anand Group's long-term automotive strategy, aiming to create a simpler, more integrated, and future-ready enterprise, building on the successful completion of 'Project Rise' which involved other acquisitions and mergers.

For Q1 FY27, Gabriel India reported a standalone revenue from operations of INR 1,274 crores, marking a 19% year-on-year growth. Standalone EBITDA increased by 7% to INR 107 crores, resulting in an EBITDA margin of 8.4%. On a consolidated basis, revenue from operations stood at INR 1,426 crores, a 15.5% year-on-year growth. Consolidated EBITDA was INR 124 crores, reflecting a 2% year-on-year growth, with an EBITDA margin of 8.7%. Profit Before Tax (PBT) grew 6% year-on-year to INR 133 crores, with margins trending at 9.3%.

The automotive industry showed positive manufacturing activity in Q1 FY27. 2-wheeler production expanded by 23% year-on-year, with scooters growing 32% and motorcycles 18%. Passenger vehicle production rose by 17% year-on-year, led by utility vehicles (SUVs and crossovers) growing 21%. Commercial vehicle production increased by 15%, with LCVs growing 21% and MHCVs 6%. Despite overall industry growth, Gabriel's passenger vehicle segment grew only 5.5% compared to the market's 15%, attributed to model mix issues and reduced wallet share from key customers.

The acquisition of HL Mando Anand India Private Limited, with a turnover of INR 5,886 crores and PAT of INR 358 crores in FY26, is expected to significantly broaden Gabriel's product portfolio in braking, steering, and suspension. The HL Klemove joint venture, focusing on ADAS technology, is seen as a high-growth area with an estimated content per vehicle of INR 20,000 to INR 70,000. Management expects these new entities to contribute significantly to the company's target of INR 50,000 crores turnover by 2030, leveraging existing relationships with OEMs like Mahindra and Tata.

Gabriel India is emphasizing localization efforts for its new ventures, particularly for HL Klemove's ADAS products. Management believes that regulatory changes promoting safety, such as those related to ADAS and Autonomous Emergency Braking (AEB), will positively impact these businesses. The company aims to be a unique supplier in India offering integrated solutions for braking, steering, and ADAS, supported by its engineering centers in India and Korea. HL Mando Anand has already achieved a fair level of localization, with approximately 40% of its business now coming from non-Korean customers.

At the end of Q1, Gabriel India held INR 250 crores in cash, which is being used to fund working capital, capex, and the first tranche of the HL Klemove acquisition. The company plans to raise approximately INR 800 crores of debt, with a total debt requirement of INR 1,000 crores on a short to mid-term basis, and INR 1,600 crores for shareholder approval. Post-transactions, the debt-equity ratio is projected to increase from less than 0.1-0.2 to 1:1. The cost of interest for this new debt is expected to be reflected from the next quarter onwards.