RACL Geartech Limited — Q3 FY26 earnings call

Call held 27 Feb 2026

Management summary

RACL Geartech delivered a robust Q3 FY26, reporting significant year-on-year growth in standalone revenue, EBITDA, and PBT, driven by strong operational performance and margin expansion. The company made strategic advancements by securing a new Electric Power Steering project for trucks with ZF Rane, entering the American market, and seeing increased demand for a recently launched two-wheeler premium project. Planned CAPEX for FY27 focuses on capacity expansion and efficiency improvements, including a new electric heat treatment plant, while management maintains a conservative yet optimistic growth outlook.

Highlights

  • Standalone Revenue for Q3 FY26 grew by 22% YoY to ₹134 crores, demonstrating strong top-line performance.

  • Standalone EBITDA for Q3 FY26 increased by 33.21% YoY to ₹33.41 crores, with margin expanding to 24.93% from 22.86% in Q3 FY25.

  • Standalone PBT for Q3 FY26 surged by 92% YoY to ₹19.65 crores, driven by operational efficiencies and reduced finance costs.

  • The company secured a new Electric Power Steering project for trucks with ZF Rane, marking a strategic entry into the American truck segment and diversifying its product portfolio.

  • A new two-wheeler high premium project commenced in January 2026, with the customer already requesting a volume increase from 10,000 to 20,000 motorcycles, indicating strong demand.

Concerns

  • Government's 50% cut in export benefits is expected to result in a loss of approximately ₹1 crore from next year.

Key financials

  1. Standalone Turnover ₹134 Cr +22%YoY
  2. Standalone EBITDA ₹33.41 Cr +33.2%YoY
  3. Standalone EBITDA Margin 24.9%
  4. Standalone PBT ₹19.65 Cr +92%YoY
  5. Standalone PBT Margin 14.7%
  6. Consolidated Turnover ₹141.7 Cr +12.6%QoQ
  7. Consolidated EBITDA ₹35.15 Cr +17.4%QoQ
  8. Consolidated PBT ₹21.37 Cr +32%QoQ

What they filed

Q1 FY27: revenue up 27.7%, net profit up 5.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue102 109 101 100 117 +16%131 +19%130 +28%128 +28%
EBITDA18 25 19 19 24 +34%30 +22%28 +45%32 +70%
Net profit5 8 7 8 12 +141%15 +91%12 +74%9 +6%
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

  • Exports (9M FY26)
    70% Share of Sales
  • Domestic (9M FY26)
    30% Share of Sales
  • Two-wheeler Business (9M FY26)
    29% Share of Sales
  • Commercial Vehicles (9M FY26)
    19% Share of Sales
  • Passenger Car Segment (9M FY26)
    13% Share of Sales
  • Recreational Vehicle (9M FY26)
    21% Share of Sales

Capital allocation

high confidence
  • Capex ₹77.45 Cr Not explicitly stated, but implies internal accruals and debt due to interest and depreciation on new equipment.
    • Heat treatment plant replacement (Gajraula) ₹33.88 Cr
    • Core capacity expansion (Gajraula & Noida) ₹34.5 Cr
    • Heat treatment plant setup and rooftop solar (Noida) ₹9.17 Cr
    So, for the financial year 26-27, we are targeting a revenue plan of 565 crores plus minus 5%, which is growth of about 17% as compared of financial year 25-26. We will be incurring a CAPEX of about 77.45 crores. We wanted to share this bifurcation this time. So out of the 77.45 crores, our heat treatment plant, which is one of the major technologies which is used... So around 34-35 crores go for Capex for production. But for productive use, out of 77 crores, only 34 goes for capacity building, rest all is either for backward integration or replacement.
  • Debt Debt disclosed
    this year probability was very high, as you know that since we raised fresh funds during this year, we paid the entire long-term debt, although not entire, but no entire proceeds of that was used for the used for the finance cost has come down.

Guidance & targets

Revenue

  • Revenue Plan Revenue · FY27 · High confidence 565 crores (+/- 5%)
    So, for the financial year 26-27, we are targeting a revenue plan of 565 crores plus minus 5%, which is growth of about 17% as compared of financial year 25-26.

    — Mr. Jitender Jain

Capex

  • Total CAPEX Capex · FY27 · High confidence 77.45 crores
    We will be incurring a CAPEX of about 77.45 crores.

    — Mr. Jitender Jain

Operational

  • Heat Treatment Plant Operational Operational · FY27 · High confidence February 2027
    It is, we are targeting to make it fully operational by February 2027.

    — Mr. Jitender Jain

Project Timeline

  • BMW Electric Car Project Start Project Timeline · FY27 · Medium confidence End of this year (July/September 2026)
    Yes, it will start on time. It will start end of this year, maybe July, maybe September.

    — Mr. Prabh Mehar Singh

Volume

  • Two-wheeler Project Volume Increase Volume · Ongoing · High confidence 20,000 motorcycles

    From 10,000 motorcycles today

    we did commit for 10,000 motorcycles, but now they are wanting us to at least take to 20,000.

    — Mr. Prabh Mehar Singh

Revenue Growth

  • FY26 Revenue Growth Revenue Growth · FY26 · High confidence 18-20%
    we are maintaining that we will grow between 18 to 20%.

    — Mr. Prabh Mehar Singh

Profitability Impact

  • Export Benefits Loss Profitability Impact · Next year (FY27) · High confidence 1 crore rupees
    Actually, we'll be losing, I'll say, around a crore of rupees from next year, but it is still a long way to go because FAE Federation of Exporters has already approached the Government of India.

    — Mr. Gursharan Singh

What to watch in Q4 FY26

FY27 Revenue Target Achievement

Next quarter (Q4 FY26 results, and subsequent FY27 updates).
Current FY27 target of ₹565 crores (+/- 5%) announced.
Target Progress towards ₹565 crores (+/- 5%) revenue.

Why it matters

This is a key growth target for the upcoming fiscal year, indicating the company's trajectory and ability to meet its stated goals.

So, for the financial year 26-27, we are targeting a revenue plan of 565 crores plus minus 5%, which is growth of about 17% as compared of financial year 25-26.

Risks & concerns

  • Volatility in global markets and geopolitical situations

    medium

    Global markets are highly volatile, changing daily, and certainty remains a question mark, though India's economy is resilient.

    Management acknowledged

  • Customer volume uncertainty for new projects

    medium

    Customers for new projects like BMW are still re-discussing volumes, and forecasts have inherent accuracy limitations.

    Both acknowledged

  • Impact of reduced government export benefits

    low

    A 50% cut in export benefits is expected to lead to a loss of ~₹1 crore from next year, though industry bodies are seeking a review.

    Both acknowledged

Q&A highlights

5 direct
FY27 revenue guidance and potential for upside Direct
I would like to answer that. So of course, there is never any scope for surprises. That should always be part of how people and how we work. But since we already gave a guidance, the idea behind guidance is not to give guidance, but is to justify why we are bringing in a Capex of 30 to 35 crores... If those things, whatever our customers are telling, if they perform better than what they have told us, then yes, we will be also equally surprised.

Management clarified that guidance is conservative and linked to Capex justification, indicating potential for upside if customer demand exceeds current projections.

Asked by Mr. Jainam Madrecha

Europe market improvement and supply chain implications with EU FTA Direct
First of all, this EU FTA is applicable for January 2027. That is clear. Secondly, I already answered that EU FTA has actually highlighted India's as a potential partner for European Union companies in a bigger way in the coming times. So definitely these situations are very positive looking and promising.

Highlights RACL's strategic advantage due to the EU FTA and its existing European presence, positioning India as a favorable supply chain partner for European companies.

Asked by Mr. Jainam Madrecha

Current year (FY26) turnover projection given 9-month performance Partial
Sir, current year we still have not closed, so maybe after next quarter you can ask this question, because that will be always, but we have already done 360 odd crores until 9 months, so you can... Yes, you are missing the plus 5%, which is in the bracket, and all you're also missing is still to close this year. So, whatever we have done in the last nine months, we still have to achieve three months. So, we are maintaining that we will grow between 18 to 20%.

Provides an implicit full-year FY26 revenue range (around ₹485-500 crores) based on the 18-20% growth guidance, clarifying the analyst's assumption.

Asked by Mr. Piyush Jain

New Electric Power Steering (EPS) project with ZF Rane and future opportunities Direct
First of all, it is a first pilot project. It's not a very high revenue project, but this is opening up a gate in entering the commercial truck business... We already got a second project, and then it opens doors for all future because it's from ZF, as well as from other customers.

Confirms RACL's entry into a new product line (EPS for trucks) and market (American truck segment), highlighting its strategic importance for future diversification and customer acquisition, despite initial low volumes.

Asked by Mr. Rohit Ojha

Impact of government cutting export benefits by 50% Direct
Actually, we'll be losing, I'll say, around a crore of rupees from next year, but it is still a long way to go because FAE Federation of Exporters has already approached the Government of India. Point to be, they will review this process, but yes, if it happens, it will be a loss, yes.

Quantifies a specific negative financial impact (₹1 crore loss) from a regulatory change, although notes potential for review and industry representation.

Asked by Mr. Shashank Kanodia

Q3 margins and normalized margin going forward, including currency impact Direct
That this currency, we cannot keep getting a quarter, but technically currency also more or less not stabilized, so frankly speaking, the further advantage of currencies will not come, but whatever, yeah, so to give you a better to give you a more depth answer I think what we can say is that basically the foreign exchange in quarter three was not that much, maybe 1% difference because of foreign exchange fluctuation... But to give you a more approach-based answer... between having a higher margin, because margin is something which is governed and earned by, you know, a lot of factors.

Clarifies that currency fluctuations had a minimal impact on Q3 margins and that future margin trajectory depends on a multitude of factors, including new projects and cost management (like the heat treatment plant).

Asked by Mr. Shashank Kanodia

3 min read 7 chapters

Detailed narrative

Strong Q3 FY26 Performance and Margin Expansion

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.

Strategic Capex for Capacity and Efficiency

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.

Entry into American Truck EPS Market

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.

New Project Wins and Volume Upside

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.

EU FTA and European Market Advantage

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.

Conservative Guidance and Growth Outlook

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.

Impact of Export Benefit Changes

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.

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