Detailed Narrative
Strong Gross Profit Growth Outperforms Industry Amidst Modest Revenue
Sharda Motor reported Q4 FY25 revenue of ₹749.85 crores, marking a 6.6% YoY increase, while full-year FY25 revenue grew modestly by 1% to ₹2,836.57 crores. Management emphasized that gross profit growth was a better indicator, with full-year gross profit increasing by 11% YoY to ₹740.32 crores, significantly outperforming the PV industry's 3-3.5% growth. Full-year EBITDA grew 9.7% to ₹396.37 crores, with margins expanding to 14% from 12.9% in FY24, demonstrating strong operational performance despite revenue fluctuations.
Strategic Focus on New Verticals: Lightweighting and Exports
The company is actively diversifying its revenue streams by establishing a lightweighting vertical in FY25, which currently contributes 9-10% of revenue. Sharda Motor aims to increase its revenue from off-highway, CV, and LCV segments to 80% from the current ~45%. A significant export award for CV emission components, valued at $7 million annually with a $40 million lifetime order, is set to commence production in Q4 FY26, targeting an addressable market of $1.1 billion in Europe and the US.
Capacity Expansion and New Product Launches to Drive FY26 Growth
Sharda Motor plans a CAPEX of approximately ₹75 crores for both FY26 and FY27 to support capacity expansion, particularly for lightweighting and new customer locations in Western India. Key growth triggers for FY26 include new lightweighting programs, the Chakan Plant-3 suspension plant coming into production (Q3/Q4 FY26), and new orders for temperature control pipes (starting Q3 FY26) for CEV norms. These initiatives are expected to drive outperformance against industry growth.
Navigating Regulatory Changes and Global Market Shifts
While the TREM-V norms for tractors remain scheduled for April 2026, management acknowledged ongoing industry-government discussions and potential time adjustments. The company is prepared with technology access and is leveraging its expertise to support OEMs' export programs that require similar emission standards. The global shift towards new emission norms (2026-2030) and the 'China plus one' strategy are creating significant new sourcing opportunities for the company, particularly in the US and European markets.
Shareholder Returns and Capital Allocation Strategy
In line with its commitment to rewarding shareholders, the company successfully completed a buyback program in FY25. The Board has now approved a 1:1 bonus share issue and declared a dividend of ₹32.5 per share. Management emphasized a focus on high ROCE for new businesses and is actively exploring inorganic growth opportunities through technical agreements, joint ventures, and acquisitions, with a dedicated team in place to pursue these avenues.
Catalyst Business Model and Margin Management
Management clarified its catalyst business model, noting that while some catalysts are provided free of cost by OEMs, others are procured by Sharda Motor at no profit, serving primarily as an inventory carrying cost. The company's policy is to minimize this model due to its impact on revenue as a growth indicator. The increase in depreciation was attributed to the new lightweighting plant, while other expenses included consultants for global business, M&A efforts, and minimum wage adjustments, all contributing to the overall cost structure.