PPAP Automotive Limited — Q3 FY26 earnings call

Call held 16 Feb 2026

Management summary

PPAP Automotive reported a return to profitability in Q3 FY26 with a PAT of INR6.61 lakhs, driven by operational stabilization and strategic initiatives. The company successfully divested its 50-50 JV stake for INR100 crores, which will significantly reduce debt and fund future capex. Despite Q3 revenue being flat YoY at INR138.9 crores due to model-specific demand softness, the aftermarket and lithium-ion battery businesses showed strong growth and turnaround signs. Management provided positive FY26 guidance, projecting INR575 crores revenue, INR58 crores EBITDA, and INR8 crores PAT.

Highlights

  • Consolidated PAT of INR6.61 lakhs for Q3 FY26, indicating gradual operational stabilization and improving cost absorption.

  • Successful divestment of 50-50 JV stake for INR100 crores, which will reduce net debt and interest costs by almost 30%.

  • Aftermarket business delivered over 30% year-on-year growth, driven by distribution network expansion and product portfolio.

  • Lithium-ion battery pack business achieved the highest monthly sales in its history in Q3 FY26, showing a turnaround and expected significant reduction in operating losses.

  • FY26 revenue projected at approximately INR575 crores, EBITDA at INR58 crores, and PAT at INR8 crores (excluding JV gain).

Concerns

  • Consolidated revenue for Q3 FY26 at INR138.9 crores, broadly in line with the previous year, reflecting softer-than-anticipated performance in the automotive segment.

  • 9M FY26 consolidated PAT stood at a loss of INR225 lakhs, impacted by softer volumes in Q1 and continued investments in growth initiatives.

  • Q3 FY26 performance was subdued due to demand softness from particular OEMs and model-specific issues (e.g., Maruti, Tata Curvv, Honda models underperforming expectations).

  • Capacity utilization was low and manpower costs were high in Q3 due to anticipated higher volumes that did not materialize.

Key financials

2 periods

Q3 FY26

  • Consolidated Revenue
    ₹138.9 Cr
  • Consolidated PAT
    ₹6.61 lakh

9M FY26

  • Consolidated Revenue
    ₹392.47 Cr
    YoY -3.5%
  • Consolidated PAT
    ₹-2.25 Cr

What they filed

Q1 FY27: revenue up 29.4%, net profit up 705.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue141 135 142 111 133 −6%129 −5%163 +15%144 +29%
EBITDA18 15 16 10 13 −26%12 −22%18 +14%12 +24%
Net profit6 3 4 -0 2 −65%1 −76%31 +722%2 +705%
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.

Order book

high confidence

Total value

₹752 Cr

as of 2025-12-31 quantified

Composition

Mix 2 products
  • EVs 5.1%
  • Non-EVs 95%

Share of order book by product

The order book for the automotive business is robust, with a significant portion from non-EVs and passenger vehicles, but also includes growing EV and 2-wheeler segments.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹37 Cr this quarter · ₹55 Cr (FY26) planned
    • First phase of EPDM rubber business at Chennai facility (includes building) ₹30 Cr
    • Expansion into EPDM rubber category (second line)
    So the building is already ready. I think by April, it should get the final touches done. We have already ordered the machinery for that plant, which will again get installed by April. And this was all part of our capex plan for this year. We had already decided this in the beginning of the year, and we have started expanding into this category. For your information, this is the second line for EPDM rubber, which we are we'll be setting. We already have one infrastructure, which we had invested about 2 years back, already existing in the Greater Noida facility, which we are already using to cater to similar products for OEMs.
  • Debt Debt disclosed Maturity: Long-term loans to be repaid over the next 2-3 years as per schedule.
    • Repayment Proceeds from JV stake sale to be utilized to reduce net debt, leading to an almost 30% reduction in interest cost. ₹100 Cr
    Basically, our target is that the long-term loans that we have in the company, that will basically according to whatever the schedule is of repayment, those will get repaid over the next 2 to 3 years that we are not going to repay early.
  • M&A Tokai Kogyo Company Limited Joint Venture Divestment · Closed · Consideration ₹[object Object] (cash)

    Misalignment on long-term strategy and zero return on INR48.5 crores invested capital.

    Strengthens balance sheet, enhances financial flexibility, and improves overall financial health. Removes a drag on consolidated financial performance.

    Pursuant to the agreement, all requisite formalities have been duly completed. The company has received the full consideration of INR100 crores for the sale of its shareholding. And accordingly, the shares held by PPAP have been transferred to the JV partner. Further, the nominee directors of PPAP on the Board of the JV company have tendered their resignations with effect from 13th February 2026 and shall have no liabilities or obligations in respect of the JV company thereafter.

Guidance & targets

Revenue

  • FY26 Revenues Revenue · FY26 · High confidence INR575 crores
    We remain confident of achieving our stated revenue guidance with financial year '26 revenues projected at approximately INR575 crores with an estimated EBITDA of INR58 crores.

    — Abhishek Jain

Profitability

  • FY26 EBITDA Profitability · FY26 · High confidence INR58 crores
    We remain confident of achieving our stated revenue guidance with financial year '26 revenues projected at approximately INR575 crores with an estimated EBITDA of INR58 crores.

    — Abhishek Jain

  • FY26 PAT (excluding JV gain) Profitability · FY26 · High confidence INR8 crores
    At the PAT level, the company expects to close financial year '26 with INR8 crores of PAT. This estimate excludes the extraordinary gain arising from the sale of shares in the JV company, which will be accounted for separately.

    — Abhishek Jain

Aftermarket Business

  • Contribution to Top Line Aftermarket Business · Long-term · Medium confidence 10%
    Right now, contribution is 5%. But we our target is -- I mean, target there's no target to -- in terms of percentage contribution to the top line, it will contribute 10%.

    — Abhishek Jain

  • Growth Rate Aftermarket Business · Next year · High confidence 30%
    And next year also, we are expecting this business to grow by again by 30%.

    — Abhishek Jain

  • Monthly Sales Run Rate Aftermarket Business · Current quarter · High confidence INR3 crores

    From INR2.5 crores today

    In this quarter, our target is to make it up to INR 3 crores. And next year, eventually make it up to INR 5 crores MRR kind of situation.

    — Abhishek Jain

  • Monthly Sales Run Rate Aftermarket Business · Next year · Medium confidence INR5 crores

    From INR3 crores today

    — Abhishek Jain

What to watch in Q4 FY26

FY26 Financial Targets Achievement

By FY26 end (next quarter's results)
Current Projected INR575 crores Revenue, INR58 crores EBITDA, INR8 crores PAT (excluding JV gain)
Target Achievement of projected FY26 Revenue, EBITDA, and PAT

Why it matters

These are the key performance indicators for the full fiscal year, reflecting the company's overall financial health and operational efficiency.

We remain confident of achieving our stated revenue guidance with financial year '26 revenues projected at approximately INR575 crores with an estimated EBITDA of INR58 crores. At the PAT level, the company expects to close financial year '26 with INR8 crores of PAT.

Risks & concerns

  • Demand variability and model-specific softness in automotive segment

    medium

    Softer-than-anticipated performance in Q3 FY26 due to demand variability and deferment of planned volumes for new models, particularly from specific OEMs like Maruti, Tata (Curvv), and Honda.

    Management acknowledged

  • Potential implications of renewed labor codes

    low

    The company is evaluating the potential impact of renewed labor codes, which are not yet factored into the current guidance.

    Management evaluating

  • Low capacity utilization and high manpower costs in Q3

    low

    Capacity was built for higher anticipated volumes that did not materialize in Q3, leading to lower utilization and higher manpower costs, impacting EBITDA. However, management notes improvement in Q4.

    Management acknowledged

Q&A highlights

8 direct
Rationale for JV stake sale and technical sourcing from Tokai Direct
So as I explained to you in my opening address, basically, there was a misalignment on the long-term strategy with the JV partner. So that was the first reason why we initiated the stock. And over the years, the amount of capital that we had invested in this company, INR48.5 crores, there was almost zero return coming on that capital. So these were the primary 2 reasons why this transaction was initiated.

Clarifies the strategic reasons behind the significant JV divestment and confirms PPAP's technical independence.

Asked by Raj Mehta

Capex requirement for Chennai EPDM rubber business Direct
See, the first phase of this capex is roughly around INR30 crores, which includes the building also. ... And this was all part of our capex plan for this year. We had already decided this in the beginning of the year, and we have started expanding into this category.

Provides specific investment details for a new growth area and confirms it's within the existing FY26 capex plan.

Asked by Raj Mehta

Utilization of INR100 crores proceeds from JV sale Direct
Basically, our target is that the long-term loans that we have in the company, that will basically according to whatever the schedule is of repayment, those will get repaid over the next 2 to 3 years that we are not going to repay early. Whatever part of working capital we are utilizing, a part of that, we will reduce, still continue to have some working capital being used. And we keep this money in safely with us for doing more of capital expenditure, which will be planned -- decided in this month of March this year. So it will all mostly be utilized for all those purposes. At a net level, you will see almost 30% reduction of the interest cost because of this transaction.

Details the capital allocation strategy for the significant cash inflow, focusing on debt reduction and future capex.

Asked by Tushaar Talwar

Competitive advantage and future of the lithium-ion battery division Direct
So our basic competitiveness to be to put it very, frankly, comes from the fact that we've been in the automotive business for the past 35 years. And we have a sense of how a stable, reliable, quality-focused product can be made. ... So ESS is going to become one of the major focus areas in this. And second, I don't know if you know or not that there is some regulation coming out that all these e-Rickshaws from April '27 onwards have to get mandatory converted from the lead-acid battery to the lithium-ion battery.

Explains the rationale for continuing in a competitive segment, highlighting market shifts and PPAP's core strengths.

Asked by Tushaar Talwar

Management's capital allocation philosophy and exiting underperforming businesses Direct
So first thing to make it very clear to you is that we are not emotionally attached to any business. Business is business end of the day. We have to give it due time to get matured. And the moment it starts and then we have to take a feedback on, do we continue with it or do we not continue with it. I think with the JV, we took much more time to come to this realization that maybe it wasn't -- I mean, we could have exited the JV earlier than this year. But I think in hindsight, when time is right, only then everything is right.

Provides insight into management's evolving capital allocation discipline and willingness to divest non-performing assets.

Asked by Tushaar Talwar

Reasons for subdued Q3 performance despite automotive sector revival Direct
It is primarily because of demand softness from a particular OEM or for a particular model. What we have analyzed, like there are certain models in Maruti, which were supposed to have higher production numbers, but because of the market, they have reduced. And because of that, our numbers are down because our exposure to those models were higher.

Identifies specific demand-side issues and customer concentration as reasons for the Q3 revenue miss.

Asked by Sania Desai

Order book breakdown (4-wheeler vs 2-wheeler) and 2-wheeler strategy Direct
The 2-wheeler and the other segments, I think would contribute about 5% of the order book. Primarily 95% would be, again, for the passenger vehicle market. ... And if you're talking about all the other segments, we are now broadly -- the mandate given to the team is to focus on mobility rather than only automotive.

Clarifies the composition of the order book and the company's broader 'mobility' focus beyond just passenger vehicles.

Asked by Varun Arora

Aftermarket business contribution and targets Direct
Right now, contribution is 5%. But we our target is -- I mean, target there's no target to -- in terms of percentage contribution to the top line, it will contribute 10%. But like this year, we have grown almost by 30%. And next year also, we are expecting this business to grow by again by 30%. So our current like we started this year with an MRR of 1.5 crores per month, which last quarter, we increased to around INR 2.5 crores. In this quarter, our target is to make it up to INR 3 crores. And next year, eventually make it up to INR 5 crores MRR kind of situation.

Quantifies the current performance and ambitious growth targets for the aftermarket business, a key diversification area.

Asked by Varun Arora

3 min read 5 chapters

Detailed narrative

Strategic Divestment and Capital Allocation

PPAP Automotive successfully completed the divestment of its 50-50 joint venture stake with Tokai Kogyo Company Limited, Japan, for INR100 crores. This strategic move was driven by a misalignment in long-term strategy and the JV's historical drag on consolidated financial performance, yielding almost zero return on the INR48.5 crores invested capital. The proceeds will be utilized to reduce net debt and fund strategic capital expenditure, with an expected 30% reduction in interest costs, strengthening the balance sheet and enhancing financial flexibility. Long-term loans will be repaid as per schedule over the next 2-3 years.

Q3 FY26 Performance and Demand Headwinds

For Q3 FY26, consolidated revenue from operations stood at INR138.9 crores, broadly in line with the previous year, while PAT turned positive at INR6.61 lakhs, compared to a loss in the preceding quarter. However, the 9-month FY26 consolidated revenue declined marginally by 3.5% to INR392.47 crores, with a PAT loss of INR225 lakhs. This subdued performance was primarily attributed to demand softness from specific OEMs and model-specific issues, including underperforming models from Maruti, Tata (Curvv), and Honda, where PPAP had higher exposure. Management noted that capacity utilization was low and manpower costs were high in Q3 due to anticipated higher volumes that did not materialize.

Growth Initiatives and Diversification

PPAP is actively pursuing diversification beyond its core automotive OEM business. The aftermarket business, operated under Elpis Automotive, grew over 30% YoY, targeting 10% of the top line and aiming for INR5 crores in monthly recurring revenue next year. The commercial tool room business maintains healthy utilization, and the industrial products division is expanding into non-automotive applications, particularly in export markets. The lithium-ion battery pack business, Avinya Batteries, achieved its highest monthly sales in Q3 FY26, showing a turnaround with expectations of record sales and reduced losses in the current quarter, driven by market cleanup and the upcoming mandatory e-Rickshaw battery conversion from April 2027.

Capital Expenditure and Capacity Expansion

The company incurred INR37 crores in capital expenditure during the first nine months of FY26, against a full-year plan of INR55 crores. A significant portion of this is allocated to the Chennai plant, where the first phase of EPDM rubber business expansion, costing approximately INR30 crores (including building), is underway and expected to be ready by April 2026. This expansion aims to offer better technological and competitive local solutions to customers and supports the company's strategic flexibility to pursue independent growth initiatives. The company also plans to strengthen financial prudence and governance of its commercial tool room business by operating it under a wholly owned subsidiary, Meraki Precision Tools Limited, from Q4 onwards.

Outlook and FY26 Guidance

PPAP Automotive projects FY26 revenues of approximately INR575 crores, with an estimated EBITDA of INR58 crores and a PAT of INR8 crores (excluding the extraordinary gain from the JV sale). Management expressed confidence in achieving these targets, noting a gradual ramp-up in volumes and normalization of demand trends in the current quarter. Guidance for FY27 will be provided in March 2026 after the Board meeting, following the processing of all required information. The company remains confident that the structural actions taken over the past few years will strengthen operating performance and enhance financial resilience.

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