Schaeffler India Q1 FY27 earnings call

Schaeffler India delivered a robust Q2 CY26, with revenue growing 17.5% year-on-year to INR 2,681 crores and EBITDA increasing 19% to INR 513 crores, achieving a 19.1% margin. This performance was achieved despite a slowdown in Q2 GDP estimates to 6.5-7% and a creeping Consumer Price Index of 3.9%, which led to higher input costs. The company also noted a significant 8% drop in passenger vehicle production in June compared to May, yet managed to arrest adverse impact through new business wins.

The Automotive Technologies segment was a key growth driver, expanding 33% year-on-year and contributing 35% to total revenue, with both conventional ICE and e-mobility businesses growing by close to 20%. Exports also showed strong momentum with a 24% year-on-year growth, accounting for 17% of revenue, largely due to intercompany allocations leveraging Indian capacities. However, the Vehicle Lifetime Solutions segment grew 9.9% but was impacted by capacity constraints, leading to OEM prioritization.

While the industrial segment (Bearings and Industrial) grew 5% year-on-year, management expressed an aspiration to achieve double-digit growth. They highlighted strong traction in core metal industrial sectors, continuous process industries, and power transmission. Efforts are focused on the distribution and aftermarket side to drive this growth, alongside continued localization of parts to enhance competitiveness.

The company faced increased input costs, including fuel and air freight, which contributed to a 0.3% increase in other expenses. While efforts are made to absorb these costs through productivity measures, full reimbursement from customers is challenging, with only FX indexation and steel price indexation being actively pursued. Working capital increased to INR 2,029 crores, a planned build-up of inventories in specific sectors to service customer needs, which management expects to recover.

The wholly-owned subsidiary, KRSV (Koovers), reported a revenue of INR 79 crores in Q2 CY26. However, its EBITDA remained negative, primarily due to the introduction of sales cutoff accounting policy adjustments (INR 5.6 crores impact) and a provision for founders' bonus (INR 3 crores impact). Management targets for KRSV to achieve EBITDA and cash flow breakeven by 2029, with the current focus on scaling up operations.

Schaeffler India's capital expenditure plan for CY26 is pegged at INR 400-500 crores. As of Q2 CY26, INR 175 crores have been spent, with the remaining INR 250-300 crores expected to be utilized in the second half of the year. The capex is strategically allocated, with approximately INR 120 crores for automotive, INR 170 crores for automotive technologies, and the remainder for Bearings and Industrial Solutions. Sustaining capex is noted to be very small, around 10% of the total.