SKF India — Q4 FY25 earnings call

Call held 30 Jun 2025

Management summary

SKF India delivered a solid FY25 performance, hitting the ₹5,000 crore revenue milestone while maintaining healthy margins and return ratios. The primary focus of the call was the strategic demerger of the Industrial and Automotive businesses to enhance agility and capital allocation. Management provided a clear roadmap for capacity expansion and localization, targeting a listing of the new entity by the end of 2025.

Highlights

  • Annual revenue reached ₹5,000 crores with a 10% CAGR over the last 4 years.

  • EBITDA margin maintained at 17.2% for FY25, within the historical 16-19% range.

  • Industrial segment contributed ~₹3,300 crores (66% of total revenue).

  • Announced significant Capex of ₹500-600 crores for Automotive and ~₹800-950 crores for Industrial by 2028-2030.

  • Demerger process on track with NCLT meeting scheduled for July 14, 2025, and listing expected by December 2025.

  • Strong return ratios with ROCE at 29% and ROE at 22% for the fiscal year.

  • Guidance for next 3 years: 10-12% growth in Automotive and 8-10% in Industrial.

Key financials

  1. Revenue ₹5,000 Cr +10%YoY
  2. EBITDA Margin 17.2%
  3. PBT Margin 11.5%
  4. ROCE 29%
  5. ROE 22%

What they filed

Q1 FY27: revenue up 27.3%, net profit down 47.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue399 559 493 462 496 +24%577 +3%595 +21%588 +27%
EBITDA63 106 123 74 58 −8%82 −23%33 −73%88 +19%
Net profit94 110 203 119 106 +13%62 −44%-20 −110%62 −48%
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

Share of Revenue
₹5,000 Cr Total
  • Industrial ₹3,300 Cr 66.0%
  • Automotive ₹1,700 Cr 34.0%

Guidance & targets

Other

  • Demerger Listing Timeline Other · by December 2025 · High confidence December 2025
    our internal target you can say is somewhere October-November we get the NCLT approval and by December we want the new entity to get listed also.

    — Ranjan Kumar, Company Secretary

Revenue

  • Automotive Growth Rate Revenue · next 3 years till '28 · Medium confidence 10-12%
    Next 3 years till '28, we expect growth in automotive to be in the 10% to 12% range

    — Mukund Vasudevan, Managing Director

  • Industrial Growth Rate Revenue · next 3 years till '28 · Medium confidence 8-10%
    industrial to be a little lower, 8% to 10% range.

    — Mukund Vasudevan, Managing Director

Margin

  • EBITDA Margin Profile Margin · next 3 years · High confidence 17-19%
    Margins, we continue to over the next 3 years, we will continue to maintain a strong 17% to 19% profile.

    — Mukund Vasudevan, Managing Director

Capex

  • Automotive Capex Capex · between '25 to '30 · High confidence ₹500-600 crores
    which would be the range of about Rs. 500 to Rs. 600 crores CAPEX between '25 to '30.

    — Alagesan Thasari, Director Automotive

  • Industrial Capex (New Plant + Lines) Capex · by 2028 · High confidence ₹800-950 crores
    expect to spend Rs. 350 to Rs. 450 crores on just channel expansion... but also setting up the new plant, which is another Rs. 450 to Rs. 500 crores, which will be done by 2028.

    — Mukund Vasudevan, Managing Director

Risks & concerns

  • Transfer Pricing Margin Volatility

    medium

    Quarterly margins fluctuate due to regulatory norms requiring specific margins between trading entities, though they normalize annually.

    Analyst acknowledged

  • Execution Risk of Plant Reorganization

    medium

    Moving 3 lines from Bangalore to Pune and building a new plant by 2028 involves significant logistical and construction complexity.

    Both acknowledged

  • Macroeconomic Sensitivity

    low

    Industrial growth is heavily tied to infrastructure spend and 'China Plus One' trends, while Auto depends on EV penetration and SUV demand.

    Management acknowledged

Areas of evasion (1)

  • Specific margin splits between direct and aftermarket segments were not provided due to 'clouded' data.

Q&A highlights

3 direct
Revenue Potential of Capex Direct
That would help us push our existing capacities almost by in the range of 1.3 to 1.5x.

Quantifies the asset turn and revenue potential of the massive upcoming Capex cycle.

Asked by Unidentified Participant

Margin Volatility and Transfer Pricing Direct
The reason for the volatility is in the margins is primarily because there is a little bit of while norms require us to maintain a certain margin between the trading entity, the seller and the buyer... There's a little bit of quarter-on-quarter change, which we finally catch up at the end.

Explains the recent margin fluctuations as a timing issue related to transfer pricing regulations rather than structural business weakness.

Asked by Unidentified Participant

Plant Shifting Disruption Direct
No, the plant shifting will be in 2028. So two years we will need for construction of new plant... I do not think any big disruption will happen.

Addresses concerns regarding operational downtime during the reorganization of manufacturing lines between Pune and Bangalore.

Asked by Unidentified Participant

2 min read 5 chapters

Detailed narrative

Strategic Demerger Rationale

The demerger is driven by the need for independent management focus and tailored capital deployment for the distinct Industrial and Automotive segments. Industrial requires smaller batch sizes and quicker resetting times for diverse customers, whereas Automotive demands high-volume efficiency and longer innovation cycles. The split aims to accelerate both growth and profitability by allowing each entity to respond more agilely to its specific macro drivers, such as infrastructure spend for Industrial and EV penetration for Automotive.

Industrial Segment Expansion and Localization

The Industrial business, currently at ₹3,300 crores, is poised for growth through a new ₹450-500 crore plant in Pune dedicated to DGBBs and tapered roller bearings by 2028. Management plans to increase localization from the current 30% to 35-40% over the next 3-5 years. Additionally, export share is targeted to rise from 8% to approximately 13%, leveraging India as a global manufacturing hub under the 'China Plus One' strategy.

Automotive Segment SUV and EV Focus

Automotive growth is being led by the SUV trend and increasing EV penetration, where SKF holds a healthy market share despite low overall market penetration (under 5% for 2-wheelers). The segment is seeing share gains in the 2-wheeler and 3-wheeler categories, with passenger vehicle wheel-end share increasing from 19% to 22%. A Capex of ₹500-600 crores is planned through 2030 to support these growth drivers and new safety regulations like ABS.

Manufacturing Footprint Reorganization

The company is reorganizing its three main plants in Bangalore, Pune, and Haridwar. Bangalore will become 100% automotive, with three existing lines moving to Pune to consolidate industrial manufacturing. Pune will eventually house two distinct plants—one for Automotive and one for Industrial. This reorganization, coupled with a 55:45 manpower split between the two businesses, is designed to optimize manufacturing efficiency for their respective customer profiles.

Financial Outlook and Margin Stability

Despite recent volatility attributed to transfer pricing norms in the trading business, management is confident in maintaining a 17-19% EBITDA margin profile. Revenue growth is guided at 10-12% for Automotive and 8-10% for Industrial through FY28. Post-2028, management expects faster growth in Industrial as the new plant capacity comes online and localization benefits begin to reflect in the margin profile.

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