Detailed Narrative
Strong Q3 Performance and Bullish Outlook for Indian Auto Sector
Sandhar Technologies reported a robust Q3 FY26, with revenue from operations growing 24% and 9-month revenue growing 26%. The Indian auto industry experienced a landmark year in 2025, with Q3 seeing highest ever sales across passenger vehicles (12.76 lakhs), 2-wheelers (5.7 million), 3-wheelers (2.15 lakhs), and commercial vehicles (2.90 lakhs). Management expressed a very bullish outlook for Q4 FY26 and Q1 FY27 for both the auto component industry and the broader auto segment.
Existing Business Shows Margin Expansion and ROCE Improvement
The company's existing India operations demonstrated strong performance, with revenue growing by 14.5%. The EBITDA margin for this segment improved significantly from 10.5% to 11.9%. Furthermore, the annualized Return on Capital Employed (ROCE) for the existing business increased from 16.3% to 21.1%, indicating enhanced operational efficiency and capital utilization across all segments.
Overseas Business and New Projects Turnaround Expected
The overseas business incurred a cumulative loss of INR25.81 crores for the 9-month period, while new projects sustained a loss of INR24.98 crores, totaling INR50 crores. Management attributed overseas losses to translation effects from Euro and Dollar fluctuations, and reclassification of bill discounting to clean debt. However, significant operational and financial restructuring has been undertaken, with expectations for both overseas operations and new projects to turn profitable from April 2026, targeting 9-10% operating margins for overseas.
Sundaram ADC Business Poised for Growth Post-Consolidation
The Sundaram ADC business reported INR82 crores in revenue for Q3 FY26, operating at an EBITDA breakeven of INR5 lakhs. The company is in the process of switching its plant to its own premises, expected to be completed by April/early May 2026. Post-consolidation, management targets an EBITDA margin of 7-7.5% in FY27, escalating to 9.5% within the next three years, with revenue projected to reach around INR500 crores in FY27.
EV Business Ramping Up, Smart Locks Adoption Slower
Sandhar's EV business, focusing on battery chargers and motor controllers, has generated INR12 crores in revenue to date, with INR5.5 crores contributed in Q3 FY26. The company anticipates dramatic improvement in performance for the next full year and expects to be close to breakeven in FY27. In contrast, the smart locks business is experiencing slower-than-expected adoption due to high prices, with projected market share of less than 2-3% in FY27, though supplies for Hyundai electronic mirrors are set to begin on April 1st.
Capital Allocation Focused on Debt Restructuring and Strategic Capex
The company undertook significant debt restructuring in its overseas operations, converting costly bill discounting into clean debt and managing translation losses from currency fluctuations. Debt repayment from overseas earnings is expected to commence from April 2026. Routine capex for overseas operations was INR18-20 crores. The new Sundaram plant is nearing completion, with trials scheduled for early April and full facility movement within April, indicating strategic investments to support future growth.