RACL Geartech Limited

RACL Geartech delivered a robust Q3 FY26, with standalone turnover reaching ₹134 crores, marking a 22% year-on-year growth compared to ₹109.75 crores in Q3 FY25. EBITDA grew by 33.21% to ₹33.41 crores, with the EBITDA margin expanding to 24.93% from 22.86% in the prior year. Profit Before Tax (PBT) saw an impressive 92% increase to ₹19.65 crores, reflecting enhanced operational efficiency and reduced finance costs, partly due to fresh funds raised and long-term debt repayment.

The company has outlined a CAPEX plan of ₹77.45 crores for FY27, with significant allocations towards strategic initiatives. Approximately ₹34 crores are earmarked for replacing an aging 35-year-old heat treatment plant at Gajraula, while ₹9.17 crores will be invested in a new heat treatment setup and rooftop solar at the Noida unit. These investments, totaling around ₹34-35 crores for production capacity and the rest for backward integration/replacement, aim to boost capacity, reduce operating costs by transitioning from LPG to electricity, and align with green manufacturing goals.

RACL Geartech announced a new Electric Power Steering (EPS) project for trucks in partnership with ZF Rane, targeting an American OEM. This marks the company's entry into the American truck segment and represents a strategic diversification from its existing passenger car EPS business. While initially a pilot project with lower volumes, management views it as a significant gateway to future opportunities in the commercial vehicle and 'off-highway' segments, leveraging its expertise in gearbox manufacturing and its second project for the American market.

The company successfully commenced a new two-wheeler high-premium project in January 2026, having been nominated in September. The customer has already requested an increase in volume from the initial 10,000 units to 20,000 motorcycles, indicating strong demand. Additionally, the Venus plant, dedicated to BMW nominations, is now ready with infrastructure and trial runs complete, preparing for SOP by the end of the current year and full contribution in FY27-28, with 50% additional space reserved for new projects.

Management highlighted the upcoming EU FTA, effective January 2027, as a significant catalyst for India's position as a preferred partner for European Union companies. RACL's established presence in Europe, with three warehouses and 16 years of operations, provides a competitive edge in attracting new business. This strategic positioning is expected to drive long-term growth, despite the inherently long decision-making cycles of European conglomerates, as the overall situation looks promising for business between the EU and India.

For FY27, RACL Geartech targets a revenue of ₹565 crores (+/- 5%), representing approximately 17% growth over FY26. Management emphasized a conservative approach to guidance, stating it reflects customer expectations and market realities, and is used to justify CAPEX rather than aggressive forecasting. While acknowledging potential for upside if customer demand exceeds current projections, the company aims to maintain an 18-20% growth trajectory, supported by new project ramp-ups and ongoing capacity enhancements.

The company anticipates a reduction in government export benefits, leading to an estimated loss of approximately ₹1 crore from the next fiscal year, due to a 50% cut in benefits. While this change will impact profitability, management noted that industry bodies like the FAE Federation of Exporters are engaging with the government for a review of the policy, suggesting potential for mitigation. The foreign exchange fluctuation in Q3 FY26 had a minimal impact, estimated at only 1% difference.