Sandhar Technologies Limited

Sandhar Tech reported a strong Q2 FY26, contributing to a consolidated revenue growth of 29% for the period. The India business demonstrated robust performance with revenue from operations growing 33%, operational EBITDA up 24%, and operational PAT increasing by 28%. In contrast, the overseas business saw a 2% revenue growth but experienced a 12% decline in operational EBITDA and a 29% drop in EBT, although its losses halved quarter-on-quarter. All five joint ventures are now PAT positive, collectively growing revenue by 68.57%.

The company's profitability in H1 FY26 was significantly impacted by new projects, including the acquisition of Sundaram-Clayton and new facilities in Pune and South India, which collectively caused an 8.07% drag on the EBITDA margin. Additionally, the machining business incurred INR 3.14 crores in costs. These factors resulted in a total profitability impact of INR 11.21 crores, leading to a reported H1 EBITDA margin of 8.5%, which management stated would be 10.44% on a normalized basis^📎.

The European market's volatility and translation losses due to currency movements have affected the overseas business. To counter this, management is focusing on three key areas: enhancing operational efficiency, reducing costs, and expanding the customer base by moving to new clients. They also mentioned financial re-engineering efforts. The company expects to mitigate H1 losses in H2 FY26 and aims to restore overseas margins to their historical 12.5-13% levels from next year.

The Sundaram-Clayton business contributed INR 198 crores in revenue during H1 FY26, with Q2 revenue at INR 102 crores and margins nearing 5%. Management projects that Sundaram-Clayton's EBITDA margins will improve to 9-10% starting from April '26. This improvement is contingent on the relocation of the plant to the company's own premises and the deployment of two new machines, which are expected to be fully operational by that time.

Sandhar Tech has planned a total capex of INR 300 crores for FY26, which includes investments in Sundaram-Clayton and overseas projects. While major capex for die casting and sheet metal is largely complete, future capex for new projects is expected to be incremental, around INR 40-50 crores per project. The company's debt stood at INR 858 crores as of September 2025. Despite term loan repayments of INR 45 crores in H1, total debt is expected to remain around INR 850-900 crores due to increasing working capital requirements driven by business growth.

The company aims to achieve an overall EBITDA margin of 11% within the next two years, with a specific target of 10.5% for FY27 and efforts to reach double-digit margins by the end of FY26. Key growth drivers include the EV segment, which is targeted to generate INR 15 crores in revenue for FY26, and continued expansion in ADC. The company also aspires to achieve an 18% pre-tax ROCE, indicating a focus on capital efficiency alongside growth.