Subros Limited — Q3 FY26 earnings call

Call held 2 Feb 2026

Management summary

Subros reported a strong Q3 FY26 with 15.43% revenue growth and 8.13% EBITDA growth, driven by robust performance in the CV segment and new e-compressor business wins. The company announced significant capex for e-compressor localization, targeting SOP by December 2027. However, margins faced pressure from commodity and forex volatility, and geopolitical tensions remain a watch item for supply chain stability.

Highlights

  • Revenue grew 15.43% YoY to INR 948 crores in Q3 FY26, outperforming industry growth.

  • EBITDA increased 8.13% YoY to INR 87.19 crores, with PBT growing 15.17% and PAT growing 6.08%.

  • Secured e-compressor business from Maruti Suzuki for future EV/hybrid models, with a potential annual revenue scale-up to INR 600-700 crores.

  • CV segment revenue grew 136% in Q3 FY26, driven by mandatory AC N2 and N3 categories.

  • Announced INR 175 crores capex for the first phase of e-compressor localization with an initial capacity of 400,000 units, targeting SOP by December 2027.

Concerns

  • EBITDA margin compressed to 9.23% from 9.85% in the corresponding quarter, primarily due to commodity and foreign exchange volatility.

  • Geopolitical tensions pose risks to supply chain volatility, cost pressures, and delivery timelines.

  • Model mix issues impacted volumes for the largest customer, despite robust overall market growth.

  • Aspiration for 12% margin has been pushed back by at least a year due to market volatility.

Key financials

  1. Revenue ₹948 Cr +15.4%YoY
  2. EBITDA ₹87.19 Cr +8.1%YoY
  3. EBITDA Margin 9.2%
  4. PBT ₹52.75 Cr +15.2%YoY
  5. PAT ₹34.84 Cr +6.1%YoY

What they filed

Q1 FY27: revenue up 17.5%, net profit up 2.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue828 821 908 878 880 +6%948 +15%1,050 +16%1,032 +18%
EBITDA76 76 93 82 68 −11%81 +7%92 −1%81 −1%
Net profit36 33 46 41 41 +14%35 +6%49 +7%42 +2%
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

SegmentRevenueMarket Share
Passenger Vehicle₹846 Cr41%
Trucks₹74 Cr42%
Buses₹12 Cr11%
Commercial Vehicle——

Order book

medium confidence

Inflow this quarter

₹1,252 Cr

The company has secured new business in railway AC installations and e-compressors for EV/hybrid vehicles, with the latter having a potential annual revenue scale-up to INR 600-700 crores.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹175 Cr out of our regular capexes
    • First phase of e-compressor localization for 400,000 units capacity ₹175 Cr
    As the first phase, our investment would be around INR 175 crores and gradually when we do backward integration, the subsequent investments will be planned as the business progress will happen.

Guidance & targets

Capacity

  • E-compressor plant initial capacity Capacity · initial · High confidence 400,000 units
    So we'll be expanding our Karsanpura plant as plant 2 to set up an initial capacity of 400,000.

    — Parmod Duggal

  • Fixed displacement compressor capacity in Gujarat Capacity · High confidence 0.5 million units
    So we'll set up 0.5 million of capacity of fixed displacement compressor in Gujarat in addition to electric compressor.

    — Parmod Duggal

Timeline

  • E-compressor plant Start of Production (SOP) Timeline · by December '27 · High confidence December 2027
    So compressor plant setups will happen. The construction work will finish by end of this calendar year and then installation activities will be there. So as per the customer milestone, the SOP would be by December '27.

    — Parmod Duggal

Profitability

  • EBITDA Margin Aspiration Profitability · pushed back by at least a year · Medium confidence 12%

    Previously 12% → 12%

    our aspiration of that 12% gets pushed by at least a year period now given what is happening and already 2 quarters of?

    — Parmod Duggal

What to watch in Q4 FY26

Margin recovery from commodity/forex stabilization

next quarter
Current 0.5-0.75% QoQ margin compression due to volatility
Target Stabilization and recovery of margins

Why it matters

Directly impacts profitability and the company's ability to achieve its long-term margin aspiration.

Once the commodity and currency get stabilized, the impact will be over.

Risks & concerns

  • Commodity and Foreign Exchange Volatility

    high

    Caused 0.5-0.75% quarter-on-quarter margin compression, with full recovery dependent on market stabilization.

    Management acknowledged

  • Geopolitical Tensions

    medium

    May impact supply chain volatility, cost pressures, freight costs, shipping routes, and delivery timelines.

    Management acknowledged

  • Model Mix Shift

    low

    Shift from SUVs to small cars post-GST rationalization affected volumes for the largest customer, but not market share.

    Management acknowledged

Q&A highlights

7 direct
Margin profile of new EV compressor business Direct
margins will be comparable to our existing business. We'll not be able to compromise on the margin side. But still, there is a time to review this whole market situation going forward.

Clarifies that new EV business margins are expected to be in line with existing business, not necessarily superior, despite being a premium product.

Asked by Arjun Khanna

Royalty arrangement for EV compressor business Direct
So royalty arrangement would be similar to our existing products. So there will not be any differential. So right now, also, we are paying royalty in the range of 3% to 6% variably on different contracts. So this would be also following the same. There will not be any special royalty additionally other than that.

Confirms that the royalty structure for the new EV compressor business will be consistent with existing products, allaying concerns about additional related-party transactions.

Asked by Arjun Khanna

Impact of model mix on volumes for largest customer Direct
So it is model mix issue because suddenly, due to this GST rationalization, there is a mix change. Earlier, it was more on SUV, suddenly small car also started selling sales.So the volume is all about the last week of sale and then subsequently production and then inventory holding at the other time. So from our share of business point of view, there is no major change point with our largest customer also. So it's only impact of model mix.

Explains that volume discrepancies with the largest customer are due to a shift in model mix (SUV to small cars) post-GST rationalization, rather than a loss of market share.

Asked by Arjun Khanna

Annual revenue potential from e-compressor facility Direct
So as a peak, it would be roughly INR240 crores INRINR250 crores from the 1these 3 models only. But if as the facility we are going to set up is for 400,000. So gradually, even if we apply this in the running models of EV and hybrid also this electric compressor, this revenue can scale up to INR 600 crores to INR 700 crores.

Provides a clear long-term revenue potential for the new e-compressor facility, indicating significant future growth from this segment.

Asked by Mihir Vora

Gross margin compression and raw material impact Direct
So there are 2 aspects to that. So as you know that quarter 2, quarter 3 commodity prices were on the upside...So the impact on, I'll say, quarter-on-quarter basis is between 0.5% to 0.75%. Since the market is volatile in commodity and foreign exchange, we need to see the margin growth on a contribution side more because that is directly reflected through the revenue growth and so, but material cost definitely will be one of the elements which may be impacting the gross margin in that proportion.

Explains the reasons for margin compression (commodity and forex volatility) and quantifies the quarter-on-quarter impact, highlighting that recovery is dependent on market stabilization.

Asked by Mihir Vora

Delay in achieving 12% margin aspiration Direct
Yes, yes. Because the commodity and the currency is backed by reimbursement from the customer, definitely it will have slightly over the quarter impact. Once the commodity and currency get stabilized, the impact will be over. Rather the way commodities prices are now reducing, definitely, the gap which we are incurring since last 2 quarters, which is around 0.6% to 0.7%. ... But yes, there would be some time gap, but we'll catch up to that for sure.

Confirms that the 12% margin aspiration is delayed by at least a year due to external factors, providing a realistic timeline for investors.

Asked by Mayur

Commercial Vehicle segment growth and content per vehicle Partial
So both statements correct. Truck AC, when it will happen, the content per vehicle is going to be 4x, more than 4x. So that's how truck 9 months, we could able to do around INR180 crores as against I think the last year was roughly around INR 70 crores or INR 75 crores. ... So impact during this year is practically, so far, is only 4 months. So we will see the full year impact, which will be coming in practically next year where the whole year we'll be using this N2, N3.

Clarifies the significant increase in content per vehicle (4x) due to mandatory AC in N2/N3 trucks and explains that the full-year impact of this mandate will be realized in the next fiscal year.

Asked by Annamalai Jayaraj

New business wins in PV segment and Mahindra EV Direct
So passenger vehicle, our existing customers are growing quite rapidly. So we are increasing our business in Mahindra. So we already secured 2 or 3 platforms for future that will start SOP from next year onwards. ... So we are in Mahindra EV also, but not on full system, but on a few selective components. So we are there in all 3 platforms of Mahindra.

Highlights new platform wins with Mahindra for future PV models, including involvement in Mahindra EV, indicating continued growth and diversification within the passenger vehicle segment.

Asked by Annamalai Jayaraj

2 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Subros Limited reported a robust Q3 FY26, with revenue growing 15.43% year-on-year to INR 948 crores. EBITDA for the quarter stood at INR 87.19 crores, reflecting an 8.13% growth, though the EBITDA margin was 9.23%. Profit Before Tax (PBT) increased by 15.17% to INR 52.75 crores, and Profit After Tax (PAT) grew 6.08% to INR 34.84 crores, despite an exceptional item booking of INR 8.08 crores for gratuity and leave encashment.

E-Compressor Localization and Capex Plans

The company announced a significant strategic move towards localizing e-compressors for EV and hybrid vehicles, securing business from Maruti Suzuki for future models planned for 2027-2029. An initial investment of INR 175 crores is earmarked for the first phase of this localization at the Karsanpura plant, targeting an initial capacity of 400,000 units with Start of Production (SOP) by December 2027. This facility is projected to eventually scale up annual revenue to INR 600-700 crores. Additionally, 0.5 million units of fixed displacement compressor capacity will be set up in Gujarat.

Commercial Vehicle Segment Outperformance

The Commercial Vehicle (CV) segment demonstrated exceptional growth, recording a 136% increase in revenue during Q3 FY26, primarily driven by the mandatory AC N2 and N3 categories. The company's market share in the truck AC market remained strong at 42%. Management noted that the full-year impact of the N2/N3 mandate, which significantly increases content per vehicle (4x), will be realized in the next fiscal year as the current year's impact was limited to four months.

Margin Dynamics and External Headwinds

Despite overall growth, EBITDA margins faced compression, declining to 9.23% from 9.85% in the corresponding quarter. This was attributed to volatility in commodity prices (aluminum, copper, PP, steel) and foreign exchange rates, which resulted in a 0.5-0.75% quarter-on-quarter impact. Management indicated that while efforts are ongoing for cost optimization, full margin recovery is contingent on market stabilization. The company's long-term aspiration for a 12% margin has been pushed back by at least a year due to these external factors.

Passenger Vehicle Market Share and New Business

Subros maintained a strong 41% market share in the passenger vehicle thermal market during the quarter. The company is actively expanding its business with existing customers, notably increasing its presence with Mahindra. Subros has secured 2-3 new platforms with Mahindra for future models, with SOP expected from next year onwards, including involvement in Mahindra's EV segment for selective components across all three platforms.

Railway Business Expansion and Geopolitical Risks

The railway business continues to be a strong growth vertical, with Subros bagging a INR 52 crores tender for annual maintenance contracts for railway AC installations, to be executed over the next three years. The company is also participating in tenders for Vande Bharat. Management acknowledged geopolitical tensions as a potential risk, which could impact supply chain volatility, cost pressures, freight costs, and delivery timelines, and is preparing mitigation strategies.

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