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SKF India (Industrial) Limited — Q4 FY26 earnings call

Call held 13 May 2026

Management summary

SKF India (Industrial) Limited reported a solid Q4 FY26 with 9.8% QoQ sales growth to INR 950 crores. Adjusted PBT margin reached 11.5%, though impacted by a mix shift towards lower-margin OEM and one-time demerger costs of INR 18.3 crores. The company achieved significant working capital reduction and strong cash flow, while outlining ambitious capex plans for a new Pune plant and long-term margin expansion targets.

Highlights

  • Solid sales growth of 9.8% QoQ, reaching INR 950 crores.

  • Profit Before Tax (PBT) margin improved to 11.5% (excluding one-time demerger expenses).

  • Net working capital reduced by 2.8% QoQ, reaching 18.7% of sales.

  • Significant jump in cash flow, partly due to working capital reduction.

  • Strong OEM growth, particularly in wind (91% QoQ) and rail (12% QoQ).

Concerns

  • One-time demerger-related IT costs of INR 18.3 crores in Q4 FY26.

  • Mix shift towards lower-margin OEM business caused a decline in adjusted PBT margin from 13.1% (Q3) to 11.5% (Q4).

  • Higher employee costs due to full bonus accrual this quarter.

  • Distribution business saw a slight decline due to corrections for outstanding payments.

Key financials

  1. Revenue ₹950 Cr +31%YoY
  2. PBT Margin (Adjusted) 11.5% -12.2%QoQ
  3. PBT Margin (Reported) 9.5%
  4. Net Working Capital % of Sales 18.7%
  5. One-time Demerger Expenses ₹18.3 Cr

What they filed

Q1 FY27: revenue up 18.3%, net profit down 13.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue721 821 813 861 946 +31%971 +18%
EBITDA161 94 108 107 81 −50%88 −6%
Net profit121 72 77 -50 119 −2%62 −14%
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

SegmentDistributionOEM
FY26 Full Year Mix35%51%
Q4 FY26 Mix32%50%

Order book

medium confidence

Inflow this quarter

₹32.5 Cr

Management noted significant order deliveries in wind and metals sectors, contributing to strong OEM growth.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹800 Cr
    • New Pune plant
    • Adding additional channels (DGBB and TRB product lines)
    So, on capex, the overall plan for the between FY26, FY27 to FY29, FY30, we are looking at doing a capex spend of around INR 800 crores plus, which includes a significant chunk of investment on the new Pune plant which we are in the process of setting up.

Guidance & targets

Margin

  • PBT Margin (Adjusted) Margin · by end of calendar year 2026 · High confidence around 13%
    So given the recent demerger expenses, right, by we would say towards the end of this calendar year, we see that mostly normalizing. We should get back to a little more around 13%.

    — Mukund Vasudevan

  • PBT Margin (Long-term) Margin · by '29-'30 · Medium confidence 15% range
    But those kind of are subject to, of course, market conditions. But that's our goal. But near term, we expect to get back to where we were around 13% after the demerger costs are over. In terms of cost escalations, this is very broad numbers right now.

    — Mukund Vasudevan

  • PBT Margin (Aspiration) Margin · up to 2030 · Low confidence 16% to 18%
    So, our aspiration is to get to 16% to 18%, but right now up to 2030, both due to slightly higher OEM mix and a little higher depreciation charges, we see this, we have been conservative here in saying we are going to get to around 15%. More increase is possible, but we can't commit to it right now.

    — Mukund Vasudevan

Working Capital

  • Net Working Capital % of Sales Working Capital · going forward · High confidence 19% to 20%
    we expect in the range of 19% to 20% going forward, 19% to 20% of sales.

    — Mukund Vasudevan

Revenue

  • Sales Growth Revenue · ongoing · High confidence around 8%
    So, the growth will continue to be in the range of I believe we have forecasted around 8%.

    — Mukund Vasudevan

Capacity

  • New Pune Plant Commissioning Capacity · by end of 2028 · High confidence end of 2028
    Yes. So, we expect we expect the new Pune plant to be commissioned by end of 2028.

    — Ashish Saraf

What to watch in Q1 FY27

Demerger expense normalization

By end of calendar year 2026
Current INR 18.3 crores in Q4 FY26
Target Significantly reduced/zero

Why it matters

Direct impact on reported profitability and margin trajectory, key to achieving stated margin targets.

So given the recent demerger expenses, right, by we would say towards the end of this calendar year, we see that mostly normalizing.

Risks & concerns

  • Demerger-related expenses

    medium

    One-time expenses of INR 18.3 crores in Q4 FY26 impacted reported margins, though expected to normalize by end of calendar year 2026.

    Management acknowledged

  • Mix shift towards lower-margin OEM business

    medium

    Higher proportion of OEM sales (50% in Q4) compared to higher-margin distribution business (32% in Q4) led to a decline in adjusted PBT margin.

    Management acknowledged

  • FX impact due to rupee depreciation

    medium

    Rupee depreciation impacts imported components and sales, with management attempting to pass on price increases.

    Management acknowledged

  • Escalating raw material costs

    medium

    Projected 3-4% increase in costs, particularly for oil and steel, which the company aims to offset through price hikes.

    Management acknowledged

  • Competitive environment in OEM segment

    medium

    Intense competition in the OEM segment puts pressure on margins, requiring focus on operational efficiency and pricing strategies.

    Management acknowledged

  • Higher employee costs

    low

    Full accrual of bonus in Q4 FY26, unlike the previous quarter, temporarily increased employee costs, expected to normalize by year-end.

    Management acknowledged

Q&A highlights

8 direct
FY26 Full Year Segment Mix Direct
So, if you look at full financial year, our distribution was at around 35% and OEM business was around 51%. Exports were at around 6% and sale to SKF India was at around 4% and other income was around 3%.

Provides a detailed breakdown of the company's revenue sources for the full fiscal year, crucial for understanding business composition.

Asked by Mumuksh Mandlesha

Margin Outlook and Demerger Impact Direct
So given the recent demerger expenses, right, by we would say towards the end of this calendar year, we see that mostly normalizing. We should get back to a little more around 13%.

Clarifies the temporary nature of margin pressure due to demerger costs and sets a near-term target for margin recovery.

Asked by Mumuksh Mandlesha

Raw Material Cost Inflation and Price Hikes Direct
We are expecting to pass on most of it through price increases, some both the FX impact as well as the cost escalations. Obviously, with OEMs, it might be it's a little tougher, those are tougher negotiations.

Addresses the company's strategy for managing input cost pressures and currency fluctuations, indicating pricing power with distributors but tougher negotiations with OEMs.

Asked by Mumuksh Mandlesha

Q4 Gross Margin and Other Expenses Drivers Direct
the big components of other expense cost was one was around royalty and trademark. We had we had to pay a royalty and trademark on our sales, on our higher sales to our group company. So that increased by around INR 60-odd million.

Provides specific reasons for the increase in other expenses, including royalty payments and manufacturing-related costs, which impacted gross margin.

Asked by Viraj

Long-term Margin Targets (16-18%) vs Localization Strategy Direct
So, our aspiration is to get to 16% to 18%, but right now up to 2030, both due to slightly higher OEM mix and a little higher depreciation charges, we see this, we have been conservative here in saying we are going to get to around 15%.

Explains the factors influencing the long-term margin trajectory, including new investments, competitive environment, and the balance between growth and profitability from localization.

Asked by Viraj

Capex Plan and New Pune Plant Commissioning Timeline Direct
So, on capex, the overall plan for the between FY26, FY27 to FY29, FY30, we are looking at doing a capex spend of around INR 800 crores plus... we expect the new Pune plant to be commissioned by end of 2028.

Outlines the significant capital expenditure planned for capacity expansion and the specific timeline for the new Pune plant, indicating future growth drivers.

Asked by Viraj, Yash

Wind Business Traction and Focus Direct
Wind is primarily India, actually. India is now the fastest growing wind market. So, a large portion of the business which we are looking at right now, both in ZF and Suzlon, is India.

Highlights the company's strategic focus on the domestic Indian wind energy market, a key growth area, and its partnerships.

Asked by Krupashankar NJ

Clarification on 'Working as one SKF' Strategy Direct
that's not what we are talking about when we say this is within SKF Industrial, working all the departments working together. So, for example, how does product innovation, the technology team, work with the manufacturing team, work with the sales team?

Clarifies that the 'working as one SKF' strategy refers to internal collaboration within SKF Industrial to enhance efficiency and customer delivery, rather than collaboration with SKF India Limited.

Asked by Krupashankar NJ

3 min read 8 chapters

Detailed narrative

Q4 FY26 Performance Overview

SKF India (Industrial) Limited reported a solid Q4 FY26 with a 9.8% quarter-on-quarter sales growth, reaching INR 950 crores. The adjusted Profit Before Tax (PBT) margin, excluding one-time demerger expenses, improved to 11.5%. The company also achieved a significant reduction in net working capital by 2.8% QoQ, bringing it to 18.7% of sales, which contributed to a notable jump in cash flow for the quarter. Management expressed satisfaction with the strong growth and margin improvement.

Macroeconomic Environment and Sector Performance

The Indian economy continues to be robust, with a projected Q4 FY26 GDP growth of around 6.5%, despite some global softening. Industrial production maintained a healthy year-on-year growth of 4.5%, consistent over the last few quarters. Key industrial sectors relevant to SKF, such as electricity production, iron and steel production (9.7% YoY), and construction (6.6% YoY), showed strong performance, positively impacting the company's business.

Sales Drivers and Mix Shift

Q4 sales growth was primarily driven by robust OEM performance, particularly in the wind sector, which grew 91% QoQ due to orders from ZF and Suzlon, and the rail sector, which grew around 12%. Significant orders were also delivered in the metals segment. Sales to SKF India Limited, driven by automotive business growth, also contributed. The overall mix shifted towards OEM (50% in Q4 from 46% in Q3), which generally carries lower margins, while the distribution business saw a temporary decline to 32% due to payment corrections.

Margin Analysis and Demerger Impact

The reported PBT margin for Q4 FY26 was 9.5%, a substantial improvement from -7.8% in Q3 FY26. After removing one-time demerger expenses (INR 18.3 crores in Q4 and INR 180 crores in Q3), the adjusted PBT margin was 11.5% in Q4, down from 13.1% in Q3. This margin compression was mainly attributed to the mix shift towards lower-margin OEM business and higher employee costs due to full bonus accrual in the current quarter. Management expects margins to normalize to around 13% by the end of calendar year 2026.

Working Capital and Cash Flow Management

The company demonstrated excellent working capital management, reducing net working capital by 2.8% QoQ to 18.7% of sales. This improvement was primarily driven by a reduction in inventory from 16.9% to 16.0% relative to sales. A significant jump in cash flow was observed in Q4, largely due to this working capital reduction and certain tax adjustments. Management anticipates net working capital to stabilize in the range of 19-20% of sales going forward.

Strategic Pillars and Localization Efforts

SKF India (Industrial) Limited's strategy, termed ACES (Accelerate localization, Commercial excellence, Execution, Working as one SKF), is defined through 2028. A key focus is accelerating localization, which involves increasing in-India manufacturing for domestic consumption and enhancing local supplier base. This strategy aims to create a more agile supply chain, reduce costs, and improve product delivery times. Commercial excellence emphasizes customer centricity and innovation, while 'working as one SKF' focuses on internal departmental collaboration.

Key Success Stories and Capacity Expansion

The company highlighted several success stories, including winning a ₹32.5 crore order from a tractor company by providing localized tapered and cylindrical roller bearings from its Pune and Ahmedabad factories. Another achievement was developing a unitized solution for local commuter trains to increase load capacity from 18 to 21 tons. Furthermore, SKF enhanced its tapered roller bearing capacity in Pune from 600,000 to 886,000 pieces, achieving an 18% cost reduction and 20% improvement in flexibility through process optimization and machine upgrades.

Future Outlook and Capex Plans

Management projects sales growth to continue around 8%. PBT margins are expected to normalize to approximately 13% by the end of calendar year 2026, with an aspiration to reach 15% by FY29-30, and a long-term goal of 16-18%. A substantial capex of over INR 800 crores is planned over the next four to five years (FY26-FY29/30), primarily for a new Pune plant and expanding DGBB and TRB product lines. The new Pune plant is expected to be commissioned by the end of 2028.

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