Schaeffler India Q2 CY25 earnings call

Where management's figures differ from the filing

• Revenue: said INR 2,282 cr Q2 CY25 standalone (+10.1% YoY); filed ₹4,527 cr Q1 FY26 consolidated (+114.9% YoY). Filed figures appear to reflect post-Vitesco merger combined entity while call discussed standalone; transcript references Vitesco integration via arm's-length model.
• EBITDA excluding other income: said INR 449 cr Q2 CY25 standalone at 19.7% margin; filed ₹822.96 cr Q1 FY26 at 18.2% margin. Filed figure includes combined entity with Vitesco operations consolidated which dilutes margin vs standalone Schaeffler at 19.7%.

What moved the numbers, as management explained it

• Volume plus gross margin drove EBITDA; gross margin alone contributed INR 128 cr to the EBITDA bridge while other income/expenses net was a strain.
• One-time other expenses for new plant tooling, operating supplies, coolants and e-mobility tooling hit P&L but absorbed by stronger gross margin. (one-off)
• Non-operating income rose on group company project support costs charged out under group transfer pricing policies.
• Mix shift toward exports (16% from 11-12%) and continued localization to 78-79% supported EBITDA margin expansion from 19.3% to 19.7%.
• Capex moderated to INR 100 cr from prior Q1 run rate of INR 82 cr, with major plant investments largely complete; CY25 capex aligned to plan.

The numbers management led with

• 5-year India capex commitment from parent: €500 million over 5 years from 2026 until 2030 (~€100 million per year)
• Tata Harrier e-axle lifetime order book: €300 million lifetime order size
• Localization rate: 78%+ in Q2 CY25, up from 75-76% prior quarter
• Capacity utilization across plants: ~85% consolidated, all plants above 80%; Savli plant lines at ~90%

Guidance on this call

What changed since the Wed 30 Apr 2025 call

By business

Balance sheet, capex and funding

• Capex INR 100 cr in Q2 vs INR 82 cr in Q1; major plant capex largely complete; CY25 plan intact.
• Free cash flow INR 287 cr in Q2 vs INR 237 cr in Q1; turned positive vs same period last year which was negative.
• Working capital sustained at same levels as preceding quarter; remains a high focus area.
• Capacity utilization ~85% across plants with some above 90%; localization at 78-79% leveraging existing capacity.
• Parent committed €500M India capex over 2026-2030 (~€100M/year); CY25 capex aligned to existing plan.
• Shoolagiri plant capex INR 330 cr total; most done last year with INR 40-45 cr this year for machinery and building.

The industry, as management sees it

Management sees a mixed macro and auto backdrop: GDP estimate for Q2 at ~6.5% (slightly lower QoQ), CPI inflation at 2.7% (lowest since 2019) seen as a positive consumption signal, core infrastructure sectors (cement, steel, power generation) trending positively but mining a laggard. Within automotive, two-wheelers are seasonally moderate, passenger cars challenging with declining domestic production (June below prior June) but exports doubling, commercial vehicles subdued, and agricultural tractors strong for 3 consecutive months. Industrial outlook is constructive on railways (transformation from tendering to private coach manufacturing) and wind (production equipment up, though Q1 stocking absorbed Q2 demand).

Risks management named

• Volatile market situation requiring agile capex pacing decisions
• Koovers (KRSV) subsidiary continues to post negative EBITDA (-15%) and EBIT (-16.8%) margins
• Geopolitical and Europe/Americas market uncertainty could impact export order book beyond FY25
• Sluggish passenger vehicle domestic production in Q2 (June below prior-year June)

Not answered directly

• Plant-level revenue potential (Shoolagiri)
• Plant-level asset turnover
• E-axle content per vehicle
• Automotive Technologies segment revenue split
• e-mobility customer-specific projects beyond Tata Harrier

Asked for a number, answered without one

• Asset turnover for Shoolagiri plant investments: Hardevi declined, saying plant-wise revenue performance is not disclosed due to interdependencies between plants and processes.
• E-axle potential content per vehicle: Kadam declined, citing NDAs with customers preventing any disclosure of e-axle component value.
• Annual revenue run rate for €300M e-axle lifetime order: Kadam said it depends on Tata Harrier performance in the market; not able to commit an annual run-rate number yet.
• Auto Technologies revenue split across PV/CV/tractor: Kadam declined due to non-disclosure agreements with OEM customers preventing segment-specific revenue disclosure.
• Revenue potential for Shoolagiri plant: Hardevi declined, stating interdependencies between plants preclude plant-wise revenue performance disclosure.

Every question, with its answer

1. 1. Group capex guidance

   Mukesh Saraf, Avendus Spark

   Question. Recent commentary from Schaeffler Group CEO Mr. Klaus Rosenfeld mentioned investment in India expected to be upwards of €100 million a year, vs the prior INR 500-600 cr run rate. Are we looking to increase capex targets?

   Answer, Hardevi Vazirani, Director, Finance & CFO. Mr. Rosenfeld announced overall €500 million in next 5 years until 2030, averaging out to approximately €100 million starting from 2026 onwards for 5 years. This year's capex plan is intact and we are looking at capital efficiency because we have made close to INR 1,700 cr investment in last 3 years. We will ramp up from next year onwards.

   Follow-up. So next year onwards can it be INR 1,000 crores per year ballpark based on that €500 million number for 5-year period?

   Answer. Yes, we definitely want to continue to invest. However, we will have to closely monitor the market developments, both on the domestic front and export side. Commitment still remains — not going to stop investments, just play with the market. Already have the space and machines needed; will take a call looking at which product lines need investment or localization.

2. 2. Export outlook

   Mukesh Saraf, Avendus Spark

   Question. Exports saw a very strong quarter again with growth even on sequential basis. Any outlook or visibility you can provide? Last time mentioned Asia Pacific doing better — has it further improved?

   Answer, Hardevi Vazirani, Director, Finance & CFO. Based on the order book we will be able to sustain the pattern at least this year. However, how the geopolitical situation and Europe/Americas markets work out will determine next year. This year's order book is secured. Harsha added growth is definitely there in Asia Pacific; dependency on the rest of the world has been moderated to bring balance, and we have succeeded to a large extent in increasing exports into Asia Pacific.

3. 3. Bearings & Industrial growth

   Mukesh Saraf, Avendus Spark

   Question. Bearings and Industrial Solutions business, especially non-mobility side, seems to have flattened out this quarter after 4-5 quarters of 20%+ growth. Anything to read into or just a temporary blip?

   Answer, Harsha Kadam, Managing Director and CEO. Within sectors we performed very well in specific ones: railways did pretty well in Q2, wind energy sector saw strong growth, off-roads with focus on infrastructure and agri industry. Some moderation/tepidness came on the 2-wheeler side. Distribution business in industrial distribution also did pretty well.

4. 4. Vehicle Lifetime Solutions drivers

   Raghunandan, Nuvama Research

   Question. On Vehicle Lifetime Solutions, strong double-digit growth continued. Can you elaborate on efforts helping market share gains, better penetration and new products?

   Answer, Harsha Kadam, Managing Director and CEO. OES demand from OEM customers went up — clear indication aftermarket demand picked up. From our own effort side, some traded goods launched saw strong uptick, particularly oils and lubricants and wiper blades. With sluggishness on OEM side, we were able to better leverage production capacities to feed more into aftermarket, particularly in clutch portfolio.

5. 5. Other expenses breakdown

   Raghunandan, Nuvama Research

   Question. You alluded to other expenses/income in opening remarks. Other expenses seem notably higher YoY — any one-offs? Includes new plant cost? Also strong growth in non-operating income?

   Answer, Hardevi Vazirani, Director, Finance & CFO. On non-operating income side, we supported group companies in specific projects, charged out based on transfer pricing policies. On other expenses side, certain one-time expenses related to new plant (tooling, operating supplies, coolants) and certain one-time expenses for e-mobility tooling. Beautifully absorbed because of better gross margin.

   Follow-up. What would be the sustainable rate for other expenses going forward? One-time impact that would not be there next quarter?

   Answer. Managed overall in the usual range we show quarter-on-quarter and will be able to maintain as we go forward in the year. These are fixed costs that will be absorbed with double-digit growth, so we don't foresee further hiccups in coming quarters.

6. 6. E-axle ramp and exports

   Raghunandan, Nuvama Research

   Question. Congrats on commencement of series e-axle production commenced last quarter, now Phase-2 capex underway. How see ramp-up progress given €300M lifetime order size, annual revenue run rate, and domestic vs export shaping up?

   Answer, Harsha Kadam, Managing Director and CEO. It all depends on how the vehicle performs in the market — already seeing good response in series supply indicating vehicle doing well, but challenging to give a number. On exports, as of now haven't considered — clearly focusing on Indian market as it is waking up. Entire focus on leveraging and growing e-mobility business in Indian market space.

   Partly answered.

7. 7. Localization and Shoolagiri revenue

   Raghunandan, Nuvama Research

   Question. On localization — was 76% last quarter, can we achieve 80% by end of 2025 or 2026? Also revenue potential for Shoolagiri plant from investments done so far?

   Answer, Harsha Kadam, Managing Director and CEO. Localization: yes, were in 75-76% range and in Q2 took it up to 78% and above — currently 78-79%. Will continue focus. On Shoolagiri revenue potential: Hardevi clarified we don't link every plant-wise revenue performance because of interdependencies between plants. At this point will not be disclosing revenue potential for Shoolagiri.

   Not answered directly.

8. 8. Auto Tech segment mix

   Harshit Patel, Equirus Securities

   Question. On Automotive Technologies segment, consistently outgrowing industry volumes in PVs, CVs, tractors etc. Broad breakup of revenues into 3-4 larger segments? Has mix changed in last 3-4 years and how see it evolving medium term?

   Answer, Harsha Kadam, Managing Director and CEO. We normally track in terms of portfolio of products. Giving a specific split may not be appropriate — some areas within mobility have non-disclosures at the customer end binding us not to share specific details. A little tied down because of NDAs customers insisted on signing.

   Not answered directly.

9. 9. Content per vehicle

   Harshit Patel, Equirus Securities

   Question. Previously mentioned PV content per vehicle at €50. What would be the number for CVs and LCVs and how has it improved over years with new product offerings and business wins?

   Answer, Harsha Kadam, Managing Director and CEO. CVs/LCVs content per vehicle was in range of €50-60, was lower. In commercial vehicles started increasing offerings; LCVs in particular doing well — should be in range of €60-65+. On passenger car same story with hybridization driving content per vehicle up. Not yet measuring content per vehicle on EVs because we need necessary volume to come out still.

10. 10. R&D allocation ICE/hybrid/EV

    Balasubramanian, Arihant Capital

    Question. With EV traction, how are we balancing R&D investments between ICE products and new EV technologies? Plans to expand localization for other global OEMs beyond Japanese hybrid platforms? CAPEX allocation for hybrid and EV components?

    Answer, Harsha Kadam, Managing Director and CEO. India is different market with all 3 technologies coexisting. Continue to invest in gasoline — still see CAGR growth year after year, invested in HLA production lines. Already producing for hybrid powertrains with Japanese customers from Hosur plant. Started investing and producing e-axles from Pune. R&D infrastructure in place for gasoline with strong Germany HQ support. Hybrid competence now here in India with Germany support. For e-mobility, no competency 2 years back but built capabilities over last 2 years. Now have electronics capability through Vitesco portfolio for sensors and controllers.

    Follow-up. On CAPEX allocation for hybrid and EV components — €500M over 5 years. Any further target to supply other global OEMs?

    Answer. Working with many other customers on e-mobility platforms with breakthroughs and success, but bound by NDAs. Tata Motors Harrier e-axle was officially gone public so we have permission to talk about it; others we cannot reveal.

    Not answered directly.

11. 11. Export portfolio diversification

    Balasubramanian, Arihant Capital

    Question. Industrial bearings majorly dominates exports. Any plan to diversify export product portfolio especially high-margin auto technologies?

    Answer, Harsha Kadam, Managing Director and CEO. Harsha: have been considering investing in India to manufacture products for both Indian requirements and rest of market. Localization strategy continues — main portfolio is bearings with more new bearings added to local production. Hardevi: limited scope because automotive manufacturers worldwide prefer locally produced parts in their respective countries. Few areas with plans to export but would not be as big as industrial.

12. 12. Capex scope Schaeffler vs Vitesco

    Rishi Vora, Kotak Securities

    Question. Clarification on capex numbers guided by parent — does it also include Vitesco India's capex for e-mobility solutions, or capex specific to Schaeffler India only?

    Answer, Harsha Kadam, Managing Director and CEO. This investment is for India. We have been consistently investing and it is all about Schaeffler India Limited. Any investments that come out from Vitesco etc. you will get to hear about.

13. 13. Industrial segment trends

    Rishi Vora, Kotak Securities

    Question. On quarterly numbers for Industrial segment — color on trends especially across railways, wind and other raw material-related industries?

    Answer, Harsha Kadam, Managing Director and CEO. Railway business done well in quarter; off-road and power transmission also saw strong uptick. Railways — transformation from tendering to privatization of coach manufacturing helping us compete on technology and quality. Wind — production equipment of wind turbines increased in country, but we had built up stocks so already generated sale in Q1. Some product portfolios within auto saw good uptick. Despite sluggish PV production, posted much better number than market growth because of focus on not just acquiring new businesses but realizing them.

14. 14. E-axle content per vehicle

    Rishi Vora, Kotak Securities

    Question. On e-axle business — what can be potential content from this product in future? Not current supplies but in general potential content for e-axle?

    Answer, Harsha Kadam, Managing Director and CEO. These are things I am not at liberty to disclose now because of the NDAs we have in place.

    Not answered directly.

15. 15. Shoolagiri capex phasing

    Mayank Bhandari, Asian Market Securities

    Question. On Shoolagiri capex of INR 330 cr — how much done in last year and how much this year?

    Answer, Hardevi Vazirani, Director, Finance & CFO. Most of it was done last year. This year it is close to INR 40 cr - INR 45 cr so far. Harsha added: machinery, building.

    Follow-up. How much asset turnover should we expect from this number?

    Answer. This is a part that currently we cannot disclose.

    Not answered directly.

16. 16. Capacity utilization

    Mayank Bhandari, Asian Market Securities

    Question. Could you share overall capacity utilization at plants as of Q2?

    Answer, Hardevi Vazirani, Director, Finance & CFO. Our capacity utilization is currently close to 85%. There are different utilization at different plants but all are above 80%. Harsha added: localization rate went up, indicating capacity utilization at high level, definitely better than 85% with some plants doing better.

    Follow-up. On export mix, how much proportion exported to sister entities vs directly to customers?

    Answer. All of it is to our sister companies. Harsha clarified: whatever we say export is all exported to sister companies across the world, that's how multinationals work and we too are no exception.

17. 17. Savli plant utilization

    Saif Sohrab Gujar, ICICI Prudential AMC

    Question. On new Savli plant where good portion of investments had gone into over last 2 years — out of constructed halls, what sort of utilization has already happened and what proportion left to utilize in future? Is the >80% utilization also true for Savli plant?

    Answer, Hardevi Vazirani, Director, Finance & CFO. Yes, true for Savli plant as well. We have built 2 halls there where we have generation C large-size bearings, wheel bearings and angular contact ball bearings. Most of the lines are actually about 90%.

    Follow-up. Of the constructed area, what sort of lines' utilization would have already occurred in terms of installed lines?

    Answer. Confirmed: right now we have built 2 halls with large-size bearings, wheel bearings and ACBBs. Most lines are at about 90% utilization.

18. 18. Wind bearing localization

    Saif Sohrab Gujar, ICICI Prudential AMC

    Question. On localization proposed for domestic content requirement for wind turbine components — implication for domestic bearing industry? Is there imported bearing content that can be replaced?

    Answer, Harsha Kadam, Managing Director and CEO. Localization rate still at 78%, although improved over preceding quarter. Products we continue to import, not just in wind, for other segments too. Wind too has a few bearings we do not make here due to machine limitations. Clear investment plans to bring those sizes of bearings manufactured in India. Last year itself, more than 27 different types of bearings have been localized which were hitherto imported — some of it for wind segment as well.

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