Schaeffler India Q4 FY25 earnings call

What moved the numbers, as management explained it

• Higher sales and favourable mix contributed ₹115 cr of the ₹407 cr standalone EBITDA, with marginal pull-downs in employee and other costs.
• Capex moderated to ₹82.5 cr, about half the prior-year quarter, as focus shifts to capital efficiency after ~₹1,700-1,800 cr invested over the past 3 years.
• KRSV expansion kept consolidated EBITDA margin 1 pp below standalone at 18.3%.
• Vertical reclassification: one-way clutch moved from Industrial to Powertrain & Chassis; OES moved from OEM to VLS. Total revenue unchanged. (accounting)
• Working capital still elevated versus prior year; management flagged it as a focus area to bring back to last year's level.

The numbers management led with

• Q1 EBITDA: ₹407 crores at 19.3% (highest ever); +20.2% YoY; +1pp QoQ
• Exports growth: +20% QoQ and +23.2% YoY; export share rose to 15% of sales from 11-12%
• Localization ratio: 76% of sales now manufactured in India (up from 67-68% a few years ago)
• E-axle lifetime order value: EUR 300 million over platform lifetime; series production commenced

Guidance on this call

By business

Balance sheet, capex and funding

• Q1 capex of ₹82.5 cr, about half the level of the prior-year quarter.
• Free cash flow of ₹237 cr in the quarter, up from ₹163 cr in the preceding quarter.
• Capex run rate for the rest of the year to be slightly above the Q1 ~₹80 cr run rate.
• Working capital still elevated vs prior year; target is to bring it back to last year's level.
• Localization at 76% of sales (up from 67-68% a few years ago) across 4 plants.
• Shoolagiri fifth plant to be operational in H2 CY25; no further large spend on buildings this year.

The industry, as management sees it

India GDP moderated to ~6.5%; auto production grew 6.2% with PVs +5.3%, 2/3-wheelers +6%, tractors +19% on good monsoon outlook; industrial core sectors (renewables, off-road, raw materials) showing strong uptick on government infra push; cement +12.3%, steel +6-6.5%. Management views India as a 'bright spot' in the global growth story despite geopolitical headwinds.

Risks management named

• Geopolitical and tariff uncertainty — US exposure so far 'insignificant'
• Working capital % to sales has risen vs Q1 CY24; needs correction
• KRSV (e-commerce) EBITDA still negative; margin recovery work in progress
• CV demand in March was soft despite strong Jan-Feb
• Parent group European restructuring under monitoring; no India impact yet

Not answered directly

• Segment-level margin breakdown (Auto Tech / VLS / BIS / Exports)

Asked for a number, answered without one

• Segment EBITDA margins: CFO declined: "Unfortunately, as a CFO, I would not do that, Harshit."
• Content per vehicle for hybrid and EV platforms: Stated current ICE content at ~EUR 50/vehicle; has not started measuring for hybrid/EV; will share in succeeding quarters.

Every question, with its answer

1. 1. Exports geography and sustainability

   Saumil, Kotak

   Question. On exports, can you detail the geography and segment drivers of the strong QoQ and YoY growth, and the sustainability and order book visibility over the next 2-4 quarters?

   Answer, Hardevi Vazirani, Director, Finance and CFO. Export growth is mainly from Asia Pacific — Southeast Asia, Japan, Korea — plus some new countries in Europe. Product group is primarily industrial bearings, same as past. We are cautiously watching geopolitics; order book visibility is short term but we expect to sustain current performance levels.

   Follow-up. Has recovery still not played through in the traditional export geographies? And could that be further upside if it does?

   Answer. Other geographies where we already play are continuing flat. Yes, if geopolitical situation improves and further recovery happens, we expect better results. We are cautiously looking at world developments and expect to sustain current performance.

2. 2. India industrial demand outlook

   Saumil, Kotak

   Question. On India markets, are you seeing a recovery in government spending or private capex that will support the industrial portfolio?

   Answer, Harsha Kadam, Managing Director and CEO. Yes, we have seen upticks in renewables (wind), off-road and construction equipment riding on government infra focus, raw materials, and power transmission. Wind energy demand was particularly strong in Q1, alongside raw materials and 2-wheelers in industrial. Good project executions are starting in core industrial.

3. 3. E-axle production start and order quantum

   Mukesh Saraf, Avendus Spark

   Question. Is the e-mobility business starting this quarter the e-axle order you mentioned a year ago? Does the EUR 300 million order quantum over a few years still stand?

   Answer, Harsha Kadam, Managing Director and CEO. Yes, we have started series production and supplies for the e-axle. The delay was because the customer deferred the product launch, which has now happened. We are optimistic about market response and expect to make up for the Q1 underperformance. The EUR 300 million is over the platform lifetime.

4. 4. Railway segment mix

   Mukesh Saraf, Avendus Spark

   Question. On new business wins in railway within industrial (DGBB, TRBs, CRBs) — is this freight or passenger rail?

   Answer, Harsha Kadam, Managing Director and CEO. We have a reasonably good presence in passenger wagons, locomotives and metros where we are very strong (especially metro trains). Freight is an area where we still have some distance to go. The numbers are primarily passenger wagons, metro and locomotive.

5. 5. Group restructuring impact on India

   Mukesh Saraf, Avendus Spark

   Question. At the group level, given the European job cuts and Vitesco merger synergies being slow, could the group be looking to use India as a larger cost/export base?

   Answer, Hardevi Vazirani, Director, Finance and CFO. So far, we have not received any information about lines being shifted. We remain very prudent — any such strategy has to benefit localization and domestic market first. Our double-digit growth shows India remains a different market from Europe.

   Follow-up. Could India export more for the group given their cost focus?

   Answer. Harsha added: in India we have seen no impact from Europe. The market and situation are very different. We remain focused on delivering the value committed, and prudent cost management. We will continue to focus and remain efficient in operations.

   Partly answered.

6. 6. Tariffs and China plus one opportunity

   Ankur Sharma, HDFC Life

   Question. On exports and tariffs, are there any talks of using India as a sourcing hub for exports to the US given the China tariff situation?

   Answer, Hardevi Vazirani, Director, Finance and CFO. The tariff situation is very fluid — first announced, then withdrawn, and US is actively talking to China on diluting tensions. Within Schaeffler, we are not changing strategies to position India as a China plus one for now. If the situation evolves, we will see it in numbers. Harsha added that exposure to US exports was insignificant in the past and is so even today.

7. 7. Auto growth aspiration vs industry

   Ankur Sharma, HDFC Life

   Question. Given auto outlook of low to mid-single digit growth, can Schaeffler still outgrow to double digits in auto?

   Answer, Harsha Kadam, Managing Director and CEO. Yes, the aspiration continues to deliver double-digit growth and stay ahead of the segment. With large PV population still on IC engines, we are localizing more. Focus remains on IC engines, but we are also bringing hybrid products (India responding well to hybrids, localizations already started) and e-axles plus component-level EV offerings. Bandwidth across all portfolios is a Schaeffler strength.

8. 8. Production line relocation and localization

   Harshit Patel, Equirus Securities

   Question. Has the process of shifting bearing production lines from Europe to India concluded? Is more export-oriented capacity still being added?

   Answer, Hardevi Vazirani, Director, Finance and CFO. Let me correct — the shift is not export-oriented, it is for localization. A few years back, only 67-68% of revenue was from own production; today localization is 76% across 4 plants in India. As domestic volumes grew, we relocated lines from Europe to produce and sell in the domestic market. Resultant export is incidental; primary strategy is localization.

   Follow-up. Is the clutch production line moving from Sheffield UK to Hosur underway?

   Answer. Hardevi: As of now, we have not received final confirmation on lines; group recently announced cuts benefitting Vietnam, India, China, etc., but the strategy depends on where it ultimately lands. Harsha added: when localizing, we have the option of new machines or utilizing older ones from underutilized plants — the latter is a wiser, lower-investment approach we remain focused on.

   Partly answered.

9. 9. Segment-level margins

   Harshit Patel, Equirus Securities

   Question. Could you give a flavor on margin levels of various segments — Auto Tech, VLS, BIS and exports — even in ballpark terms or in descending order?

   Answer, Hardevi Vazirani, Director, Finance and CFO. Unfortunately, as a CFO, I would not do that, Harshit.

   Not answered directly.

10. 10. Vitesco India integration and portfolio leverage

    Saif Sohrab, ICICI Prudential

    Question. Has Schaeffler India started to leverage Vitesco India's portfolio (Mechatronics etc.)? And for a system-level order using both, how is revenue split between the two entities?

    Answer, Harsha Kadam, Managing Director and CEO. Vitesco has its own manufacturing plant in India doing good business. Post-acquisition, Vitesco in India remains a different company under the Schaeffler umbrella. We do leverage Vitesco's electronics, sensors and software capabilities to raise customer value, but at arm's length because we are a listed entity. In front of the customer, both come from one brand, combining mechanical and electronic strengths.

    Follow-up. For an e-axle system order, would Schaeffler India book it and arm's-length with Vitesco, or could the whole order go to either entity?

    Answer. Harsha: It depends on the project, customer and supply chain model — location of the customer, who has capabilities, who has the strength. We operate at arm's length as two different companies.

11. 11. Capex moderation rationale

    Sonal Gupta, HSBC Asset Management

    Question. You mentioned capex moderation — is this due to global or domestic slowdown, and which segments are turning weaker than expected?

    Answer, Hardevi Vazirani, Director, Finance and CFO. Capex reduction is not due to demand — we grew double-digit YoY. It is because in the last 3 years we invested aggressively close to ₹1,700-1,800 cr; the 5th plant at Shoolagiri will be up in H2 CY25. Major building/infrastructure spend is done in Savli, Talegaon, Hosur. Focus now is capacity utilization and machinery installation. Investment will be lower than last year but not drastically so, and the momentum continues into coming years.

12. 12. Content per vehicle across ICE/hybrid/EV

    Sonal Gupta, HSBC Asset Management

    Question. On content per vehicle — can you give an idea of ICE vs hybrid vs e-axle realistic content values, given hybrids are a big area going forward?

    Answer, Harsha Kadam, Managing Director and CEO. For PV, content per vehicle is ~EUR 50 today. Hybrids are in addition to IC engines, so content rises. We have not started measuring this yet because it requires dissecting hybrid vehicle part numbers. For pure BEVs, component-level content is lower than system-level offerings like e-axle which is much higher. As numbers grow, we will share specifics in coming quarters.

    Follow-up. Are we working with Japanese OEMs in hybrids? Do we have e-axle as a system offering or mainly component offerings in hybrids?

    Answer. Harsha: We are strongly engaged with Japanese customers for hybrids. Already in series production of components for hybrid applications at Hosur. On all hybrid platforms the Japanese are launching, our presence is already there. As volumes grow, we can take up local investments rather than importing.

13. 13. China capacity spillover risk

    Samyak Jain, Marcellus Investment Managers

    Question. Could excess capacity in China flow into India if Chinese exports to the US/global are tariff-constrained? Implications on sales and margins?

    Answer, Hardevi Vazirani, Director, Finance and CFO. Tariff situation is fluid; group is looking at China plus one and India as an exporter, but our own US share within total exports is not high so no major adverse impact. If group plans to shift China production to India for export, that strategy is yet to evolve. Harsha added: the assumption that Chinese capacity flows to India does not connect — Schaeffler China is also big with local demand. China plus one is about making India a hub, not about capacity shifting from China. The group has a task force monitoring all impacts across raw materials and finished goods.

    Partly answered.

14. 14. Full-year capex guidance and segment split

    Vimal, Alchemy Capital Management

    Question. What is the capex expectation for the full year, given the lower Q1 print? And within Bearings & Industrial Solutions, what is the auto bearing share?

    Answer, Hardevi Vazirani, Director, Finance and CFO. Q1 capex was close to ₹80 cr. By year-end, it will be slightly above the run rate — slightly more in coming quarters. Decisions depend on capacity utilization and capital efficiency evolution. Within bearings, auto bearings is close to 17%.

    Follow-up. What is the outlook for pure industrial bearings in India for domestic given wind and railways doing well — should we see high-teen growth in CY26?

    Answer. Harsha: Industrial production growing 4-5% sets the base; the rest depends on us becoming more competitive. More localization = more competitiveness = more market share; bearings will grow better than industrial index. Not an economist, but watching customers, we see strong demand in wind, infra-related sectors, and exports by wind gearbox manufacturers. Optimism that demand will continue as India targets ₹7 trillion economy by 2030.

15. 15. Export sustainability vs inventory push

    Rakesh Jain, Axis AMC

    Question. On the export growth, is some of this inventory positioning ahead of tariffs, or recurring in nature?

    Answer, Hardevi Vazirani, Director, Finance and CFO. No, we will not resort to such measures to increase inventory, given the tariff situation is not realistic currently. The revenues we have recorded should be thought of as recurring in nature, or better.

Topic by topic, in the order it was spoken

In their words