Tube Investments of India Limited

Tube Investments of India reported strong financial performance for Q3 FY26. Standalone revenue grew by 12.67% YoY to ₹2,152 Crores, with PBT before exceptional items^📎 increasing by 26.42% YoY to ₹268 Crores. The annualized ROIC improved to 49% from 43% in the prior year. On a consolidated basis, revenue rose 20.55% YoY to ₹5,801 Crores, and profit before associate/JV, exceptional items^📎, and tax was up 17.56% YoY to ₹502 Crores. The company also declared an interim dividend of ₹2 per share for FY2025-2026.

Management provided a candid assessment of its new ventures, acknowledging 'mistakes' and underperformance in certain segments, particularly TI Clean Mobility. Despite delays, the company remains committed to these 'TI2 plays,' viewing them as valid long-term opportunities. The 3xper project has faced significant delays, over 18 months, due to regulatory permissions for its Andhra Pradesh facility, though all consents are now secured, with production expected to start in the next three months. TI Medical is challenged by a limited number of acquisition targets in India, making scaling difficult.

The core engineering business demonstrated robust growth, with revenue increasing by 18.65% YoY to ₹1,438 Crores and PBIT up 25.64% YoY to ₹196 Crores. This growth was primarily driven by strong domestic demand and capacity expansions, with the company expecting its new plants to be fully booked by the next year. The Metal Formed division saw modest revenue growth of 2% YoY to ₹408 Crores and PBIT growth of 15% YoY to ₹46 Crores, with management attributing slower growth to weak European export markets and challenges in the railway business.

The Mobility Business (EV) turned profitable this quarter, reporting a PBIT of ₹4 Crores compared to a loss of ₹0.8 Crores last year, with revenue growing 28.87% YoY to ₹183 Crores. Management indicated a continued incremental investment of ₹500-750 Crores from the parent balance sheet into the EV business, despite breakeven being pushed out by 1-1.5 years. The strategy focuses on cost reduction and strengthening channel relationships for three-wheelers, while for small commercial vehicles and M&HCVs, the focus is on product competitiveness and developing use cases, particularly in segments like cement. Heavy vehicles and three-wheelers are expected to reach breakeven first within 12-18 months.

Shanthi Gears experienced a decline in revenue by 25.95% YoY to ₹117 Crores and profit by 34.28% YoY to ₹23 Crores. Management attributed this to a 'challenge' in the order book and a 'little bit of slowdown.' However, they view this as a 'temporary nature' and expect a revival within the next one or two quarters, emphasizing their philosophy of maintaining margins even during slower periods.

Export performance for the engineering business was hampered by external factors. The US market remains challenging due to a persistent 50% effective duty under Section 232, with no immediate indication of its reduction. European demand was also noted as weak, impacting the Metal Formed division. However, management sees Europe as a 'huge opportunity' for substantial growth and ramp-up in the next 12-15 months, contingent on the resolution of trade barriers and the implementation of the EU FTA.