Schaeffler India Q2 FY26 earnings call

Where management's figures differ from the filing

• Revenue: said ₹2,360 cr standalone, +13.9% YoY (consolidated ₹2,434.6 cr); filed ₹2,434.65 cr consolidated, +15.0% YoY. Standalone vs consolidated scope; consolidated ₹2,434.6 cr matches filed figure.
• EBITDA: said ₹476 cr standalone, margin 20.2%, +24% YoY; filed ₹455.94 cr ex-other income, margin 18.7%, +23.6% YoY. Management cited standalone Schaeffler India EBITDA; filed is consolidated excluding other income (different scope).
• Profit after tax: said ₹306.7 cr standalone, +24% YoY; filed Net profit to owners ₹289.26 cr, margin 11.9%. Standalone PAT vs consolidated net profit to owners; standalone excludes KRSV losses.

What moved the numbers, as management explained it

• Gross margin improvement contributed ₹148 cr to Q3 EBITDA growth, alongside planned higher employee and other expenses.
• Intercompany and Exports grew 27.5% in 9M off a low 2024 base (geopolitical-affected order book); Q3 down 4.5% QoQ shows volatility.
• Localization rose to 79%, lifting margins (auto localization 85–90% versus ~60% for industrial bearings; ~40% imports still in bearings).
• Bearings and Industrial Solutions declined YoY in Q3 due to project/tender timing in wind energy and railways, not structural demand weakness. (one-off)
• Fixed-cost absorption improved on better capacity utilization, with Savli plant at ~90% utilization — operating margin better on volume plus absorption.

The numbers management led with

• Localization rate: 79% in Q3 CY25 (vs 78-79% in Q2 CY25); target 80%
• EBITDA margin: 20.2% in Q3 CY25 — first time breaching 20% barrier (vs 19.7% in Q2 CY25)
• Free cash flow: Rs 223 cr in Q3 CY25; Rs 747 cr in 9M CY25

Guidance on this call

Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.

What changed since the Fri 12 Sept 2025 call

By business

Balance sheet, capex and funding

• Working capital ~19% of sales (vs 19.8% same period last year), up slightly due to anticipatory inventory build for post-GST demand.
• Free cash flow Q3: ₹223 cr; 9-month free cash flow: ₹747 cr.
• 9-month capex: ₹267 cr (~4% of sales vs 4.2% previous quarter); focus now on sweating existing assets.
• Capex outlook: 2026 to be better than current year, with a pickup from 2027 onwards.
• Strong cash position; no payment-related issues in wind or railways (reflected in strong cash flow).

The industry, as management sees it

Management sees stable industrial growth averaging 4-4.5% in India; cement and steel sectors growing ~9-10% on infrastructure push; automotive sector expected to see stronger Q4 traction post-September GST reforms, particularly in passenger vehicles. Two-wheeler production projected at ~20 million units. Renewable/wind energy and railways are timing-driven project businesses that show quarter-to-quarter volatility but no structural weakness. Inflation has eased to 1.7% in Q3 and the RBI's stance is supportive of consumer demand recovery.

Risks management named

• Project-timing volatility in B&IS (wind, railways tender cycles)
• KRSV/Koovers e-commerce losses to persist until 2027
• Intercompany export growth dependent on Europe/Americas recovery
• Sheffield-to-Hosur line still being installed; revenue flow late CY25/early CY26

Not answered directly

• EV revenue disclosure (NDA with single customer)
• E-axle localization detail (NDA)
• EBITDA margin guidance for coming quarter/year
• Intercompany export trajectory beyond CY25

Asked for a number, answered without one

• EV/e-axle revenue contribution: Single customer (Tata), bound by NDA; not disclosing numbers separately as agreed with the customer.
• E-axle localization component breakdown: Localizing exactly as agreed with customer; cannot share details due to active NDA.
• Market size of newly launched large-size spherical roller bearings: Cannot reveal as just launched; will update in succeeding investor calls.
• Segment-wise 9M growth within B&IS: All in range of ~4% for B&IS nine months; growth catered collectively by 2-wheelers, off-road, rail, wind.
• EBITDA margin guidance: Avoiding EBITDA margin guidance; too many factors and ~10 sectors; will not give out at this time.
• Traded goods share change Q1 to Q3: Said localization has increased by 3pp YoY (traded goods actually reducing); asked IR to follow up.

Every question, with its answer

1. 1. OEM production ramp-up and margin levers

   Nitin Arora, Axis Mutual Fund

   Question. Are OEMs asking Schaeffler to step up production schedules post-GST cut? And given steady margin improvement, are there further levers as volumes grow on existing capacity?

   Answer, Harsha Kadam, MD & CEO. OEMs are bullish on demand post GST reforms but the September timing gave little time to switch. Kadam expects stronger product-side traction in coming months. On margins, focus is on sweating already-installed capacities. Domestic business (~85% of mix) is the highest-priority growth lever; all new business wins shown are domestic. Exports will be pursued opportunistically.

2. 2. B&IS slowdown — structural vs timing

   Mukesh Saraf, Avendus Spark

   Question. B&IS growth has decelerated from double-digit in Q1 to low-single in Q2 to a YoY decline in Q3. Is this structural (private capex weakness) or just one/two sectors?

   Answer, Harsha Kadam, MD & CEO. It's timing, not structural. B&IS has significant project-based business — sectors like renewable/wind, railways and tenders show quarter-to-quarter seesaw effect. Industrial growth in India averages 4.5% and pace is unchanged; YTD B&IS growth of ~5% is in line with market.

   Follow-up. Any concern on private sector capex that could keep B&IS weak for some time?

   Answer. Not at all. Industrial growth is averaging 4.5% annually and pace is the same; it's purely a timing issue.

3. 3. Capex outlook CY26

   Mukesh Saraf, Avendus Spark

   Question. Capex guidance for next year given parent's EUR 500 mn over 5 years commentary?

   Answer, Hardevi Vazirani, Director Finance & CFO. Capex in CY25 emphasized capital efficiency. CY26 capex will be better than current year; the real pickup comes from CY27 onwards.

4. 4. EV revenue disclosure

   Mukesh Saraf, Avendus Spark

   Question. Auto Tech grew 28% — how much is EV? Will India break out EV separately?

   Answer, Hardevi Vazirani, Director Finance & CFO. EV being a single customer, numbers are not disclosed separately as per agreement with the customer.

   Not answered directly.

5. 5. Export growth sustainability

   Abhishek Ghosh, DSP

   Question. Export growth — is it only base effect or also bunching? How to view CY26 given tariffs?

   Answer, Hardevi Vazirani, Director Finance & CFO. Intercompany export growth is mainly low-base. Economies outside India grew only 3-4%. US tariff not impacting yet; order book from USA remains solid.

6. 6. Vitesco synergy

   Abhishek Ghosh, DSP

   Question. Vitesco integration — is it contributing to new wins and improving margin profile?

   Answer, Harsha Kadam, MD & CEO. The new wins shown are from Schaeffler India Limited entity. Vitesco portfolio is being pursued with a unified team and is winning, but results are still reported under Vitesco as a stand-alone entity.

   Partly answered.

7. 7. E-axle order book phasing

   Raghunandhan N. L., Nuvama Research

   Question. E-axle lifetime order book EUR 300 mn — what is the duration? Is it evenly spread or back-loaded?

   Answer, Harsha Kadam, MD & CEO. Number is correct. Revenue is NOT evenly spaced — it aligns to customer's ramp-up plan. NDA prevents further disclosure.

   Partly answered.

8. 8. Localization trend

   Raghunandhan N. L., Nuvama Research

   Question. Localization trend — Q2 was 78-79%, where is Q3 and beyond?

   Answer, Hardevi Vazirani, Director Finance & CFO. Q3 also at 79%. Direction is 80%; whether it lands in Q4 or next year is to be seen.

9. 9. Aftermarket share shift from GST

   Raghunandhan N. L., Nuvama Research

   Question. Does GST reduction help gain market share from unorganized in replacement market? Share of unorganized?

   Answer, Harsha Kadam, MD & CEO. GST cut benefits customers (lower vehicle prices → more demand). On market share shift, can't comment yet. Volume growth will follow as OEM production rises.

   Partly answered.

10. 10. Sheffield-to-Hosur clutch line

    Harshit Patel, Equirus Securities

    Question. Has the clutch line shift from Sheffield (UK) to Hosur completed? Is the output domestic or export?

    Answer, Hardevi Vazirani, Director Finance & CFO. Relocations are progressing. Revenue impact expected late CY25/early CY26. 80% of output is for domestic; rest for export. Shift was driven by capacity constraints.

11. 11. Localization split by portfolio

    Harshit Patel, Equirus Securities

    Question. Localization split between automotive portfolio vs bearings portfolio?

    Answer, Hardevi Vazirani, Director Finance & CFO. Auto localization 85-90%. Bearings/industrial — 40% imports due to project volumes not always being high enough for local production.

12. 12. Traded goods mix and margin drivers

    Himanshu Singh, Bank of Baroda BNP Paribas Mutual Fund

    Question. Traded goods rose from 16.6% to 19.8% — yet margins improved. Why and sustainability?

    Answer, Hardevi Vazirani, Director Finance & CFO. Vazirani disputes the numbers: traded goods have actually decreased YoY as localization rose 3 percentage points. IR will follow up offline. On margins — 12.7% YTD volume growth is driving better fixed-cost absorption (personnel, depreciation, energy) plus intercompany volume is helping underutilized lines.

    Partly answered.

13. 13. GST on bearings

    Rishi Vora, Kotak Securities

    Question. Was GST on bearings already 18%? Any change?

    Answer, Hardevi Vazirani, Director Finance & CFO. Correct, no change on bearings GST at 18%.

14. 14. E-axle localization

    Rishi Vora, Kotak Securities

    Question. E-axle localization status — which parts localized?

    Answer, Harsha Kadam, MD & CEO. Localizing in line with customer agreement. NDA prevents disclosure at component level. On track and investments continuing appropriately.

    Not answered directly.

15. 15. Industrial sub-segment color

    Rishi Vora, Kotak Securities

    Question. Industrial segment — which sub-sectors did well and which declined?

    Answer, Harsha Kadam, MD & CEO. Other than wind (timing difference), all did positive: Industrial Automation, 2-wheelers, off-road, railways and Distribution all did well.

16. 16. KRSV breakeven plan

    Balasubramanian, Arihant Capital

    Question. KRSV breakeven timeline? Is gross margin the issue or SG&A too high? Initiatives?

    Answer, Hardevi Vazirani, Director Finance & CFO. Koovers is a start-up; focus is on expanding dark stores and hubs. Top line is in line with plan; bottom line drag is due to expansion costs. Like any start-up, breakeven is in 4th-5th year of acquisition — likely CY27. Until then, focus is on operational efficiency.

17. 17. B&IS growth strategy

    Balasubramanian, Arihant Capital

    Question. B&IS revenue flat in Q3 despite wins in cement/raw materials — competitive intensity, mix issues, or slow project rollouts? Strategy to reignite?

    Answer, Hardevi Vazirani, Director Finance & CFO. Strategy: localization (cutting imports of bearings from European sister factories), launch new products locally (e.g., large-size SRB in India for first time), and add digital lifetime-solutions tools to bearing offerings.

18. 18. Savli plant utilization

    Mayank Bhandari, Asian Market Securities

    Question. Capacity utilization of the Savli plant / new facility?

    Answer, Harsha Kadam, MD & CEO. It's not a totally new line — existing machines being tooled up for new products. Savli is the best-loaded plant today at ~90% capacity utilization.

19. 19. Wind/railways payment issues

    Mayank Bhandari, Asian Market Securities

    Question. Are there payment-related issues from wind and railways (govt sectors)?

    Answer, Hardevi Vazirani, Director Finance & CFO. Absolutely no payment-related issues from these sectors. Cash flow has been strong.

20. 20. Industrial aftermarket performance

    Mayank Bhandari, Asian Market Securities

    Question. Industrial aftermarket — are we continuing to do well there?

    Answer, Harsha Kadam, MD & CEO. Yes, distribution part of the business grew in Q3 as well.

21. 21. Large-size SRB market size

    Sachin Maniar, 3P Investment Managers

    Question. Large-size SRB market size? Pure import substitution or do competitors also produce locally?

    Answer, Harsha Kadam, MD & CEO. Manufactured at Savli — completely made in India. Market size not disclosed as the product is just launched. Competition exists, that's why we began local production. Will provide updates in future calls.

    Partly answered.

22. 22. More plant relocations from Europe

    Bharat Sheth, Quest Investment Advisors Private Limited

    Question. Earlier plant relocations from Europe to India worked well — is there further room to bring more lines to India?

    Answer, Harsha Kadam, MD & CEO. Yes. Two triggers: if products are no longer made in Europe (as ICE shifts to EV there), and India still grows at 3-4% on ICE. Better to relocate lines than invest fresh. We will evaluate as needs arise.

23. 23. Industrial aftermarket strategy

    Bharat Sheth, Quest Investment Advisors Private Limited

    Question. Industrial aftermarket share initiative — current share vs OEM? Sustainability?

    Answer, Harsha Kadam, MD & CEO. Industrial distribution as % of sales is a numerator-denominator outcome. Intent remains. Strategy: expanded reach, new business models (software tools) to control material flow and reduce inventory at non-strategic distributors.

24. 24. Capex focus and EBITDA guidance

    Rahil S, Sapphire Capital

    Question. Capex focus areas — existing sectors or new categories? And any EBITDA/ growth guidance?

    Answer, Harsha Kadam, MD & CEO. No EBITDA margin guidance given — too many variables across products and 10+ sectors. Want to sustain YTD operating performance.

    Not answered directly.

Topic by topic, in the order it was spoken

In their words