Varroc Engineering Q2 FY27 results: net profit down 47.1% to ₹33.47 crore, revenue up 33.6%

How did Varroc Engineering perform in Q2 FY27?

Varroc Engineering reported consolidated Q2 FY27 revenue of ₹2,948 crore, up 33.6% from ₹2,207 crore in Q2 FY26 and 11.9% from ₹2,634 crore in Q1 FY27. Total income was ₹2,952 crore for the quarter. EBITDA rose 26.7% year on year to ₹257.13 crore, but the margin declined to 8.7% from 9.2%.

Profit before tax fell 15.6% to ₹77 crore from ₹91.19 crore, while tax rose 53.4% to ₹44.12 crore from ₹28.76 crore. The company reported a net profit of ₹33.47 crore, down 47.1% from ₹63.26 crore, and basic EPS fell to ₹2.15 from ₹3.99. Profit attributable to owners was ₹32.83 crore.

Against Q1 FY27, revenue rose ₹313.69 crore and EBITDA rose ₹35.24 crore, while the EBITDA margin increased to 8.7% from 8.4%. PBT fell 31.9% to ₹77 crore and net profit fell 56.9% to ₹33.47 crore; basic EPS declined to ₹2.15 from ₹5.06. On the standalone basis, revenue was ₹2,667.15 crore and PAT was ₹118.78 crore, with PAT before exceptional items of ₹67.65 crore.

What changed in Varroc Engineering's costs and profit?

Total expenses increased 32.7% year on year to ₹2,812 crore. Cost of materials was ₹2,003 crore, up ₹570.52 crore or 39.8%, while other expenses rose ₹130.88 crore or 39.2% to ₹464.75 crore. Employee cost increased 8.1% to ₹269.58 crore, depreciation rose 7.3% to ₹88.60 crore, and finance costs edged up 1.5% to ₹32.33 crore.

Other income rose ₹1.24 crore or 46.6% to ₹3.90 crore. The company recorded an exceptional charge of ₹63.10 crore in Q2 FY27, against no exceptional item in Q2 FY26 and Q1 FY27. Tax increased ₹15.36 crore or 53.4% to ₹44.12 crore.

Against Q1 FY27, total expenses rose ₹284.41 crore, led by cost of materials, which increased ₹316.63 crore to ₹2,003 crore. Other expenses rose ₹37.63 crore, employee cost rose ₹2.13 crore, depreciation rose ₹4.28 crore and finance costs rose ₹1.68 crore, while other income fell ₹2.30 crore. The exceptional charge was ₹63.10 crore, against no exceptional item in Q1 FY27.

How did the first half of FY27 go?

In H1 FY27, Varroc Engineering reported consolidated revenue of ₹5,582 crore, up 31.8% from ₹4,235 crore in H1 FY26. Total income rose 31.8% to ₹5,592 crore, while EBITDA for the quarter and half-year comparison was not provided for H1.

PBT fell 19.0% to ₹190.11 crore from ₹234.59 crore, and PAT declined 34.9% to ₹111.17 crore from ₹170.68 crore. Basic EPS was ₹7.21, down from ₹10.87, a decline of 33.7%. On the standalone basis for the quarter, revenue was ₹2,667.15 crore and PAT was ₹118.78 crore, with PAT before exceptional items of ₹67.65 crore.

What do the balance sheet and cash flow show?

At 30 September 2026, total assets were ₹5,680.88 crore, up from ₹4,874.69 crore at 31 March 2026, while total equity rose to ₹1,904.24 crore from ₹1,818.18 crore. Borrowings increased to ₹807.79 crore from ₹737.70 crore, and cash was ₹123.62 crore versus ₹124.98 crore.

Inventories rose to ₹1,139.16 crore from ₹933.11 crore, trade receivables increased to ₹1,007.87 crore from ₹734.54 crore, and trade payables rose to ₹2,022.93 crore from ₹1,521.97 crore. H1 FY27 operating cash flow was ₹349.82 crore, compared with ₹365.86 crore in H1 FY26; investing cash flow was -₹352.31 crore against -₹24.77 crore.

Financing cash flow was -₹0.71 crore in H1 FY27, compared with -₹335.71 crore in H1 FY26. Capital expenditure was ₹294.91 crore for H1 FY27, up from ₹216.86 crore in H1 FY26. The company reported net debt of ₹5,547 million in the investor presentation, compared with ₹5,268 million in Q1 FY27.

How has Varroc Engineering done over the last 8 quarters?

Revenue rose in each of the last eight quarters. It was highest in Q2 FY27 at ₹2,948 crore and lowest in Q1 FY26 at ₹2,028 crore. The latest quarter also recorded the highest EBITDA margin in the series at 8.7%, while the lowest was 9.0% in Q3 FY25.

PAT reached its highest level in Q1 FY26 at ₹107.42 crore and its lowest in Q3 FY25, when Varroc Engineering reported a net loss of ₹45.18 crore. PAT was ₹33.47 crore in Q2 FY27, above ₹70.45 crore in Q4 FY26 and ₹77.70 crore in Q1 FY27.

Which businesses drove the quarter?

Automotive revenue was ₹2,870.89 crore in Q2 FY27, with EBIT of ₹110.02 crore and an EBIT margin of 3.8%. The filing did not provide the corresponding year-ago revenue, EBIT or growth figures for this segment.

The Others segment reported revenue of ₹77.04 crore, EBIT of a loss of ₹4.59 crore and an EBIT margin of -6.0%. The filing did not provide the corresponding year-ago revenue, EBIT or growth figures for this segment.

What else did the company announce?

The board approved the unaudited standalone and consolidated financial results for the quarter and half year ended 30 September 2026 on 4 November 2026. It also approved the limited review reports issued by the statutory auditors, and the results were to be uploaded on the company’s website and published in Business Standard and Loksatta.

The company filed an investor presentation with the results. It stated that Q2 FY27 revenue was ₹29,479 million with growth of 33.6% year on year, that H1 FY27 net new business annual peak revenue wins were ₹10,127 million, and that the company had decided to restructure its two-wheeler lighting manufacturing operations in Italy. It also stated that the company planned to acquire a stake in Forsee Power India, which focuses on battery pack systems.

What did the auditors point out?

The statutory auditor expressed a qualified conclusion on the standalone results because, in the absence of sufficient appropriate audit evidence, it was unable to comment on income of Rs. 209.89 million recognised in the previous year from the erstwhile joint venture Chongqing Varroc TYC Auto Lamps Co., Ltd., and its consequential impact, including additional claims and breaches under the Transition Management Agreement. The auditor said its reports for the year ended 31 March 2026, the quarter and six months ended 30 September 2025, and the quarter ended 30 June 2026 were also qualified on this matter.

The auditor drew attention to the arbitration initiated by OPmobility Lighting Holding, France at the ICC International Court of Arbitration over alleged breaches of covenants under a Securities Purchase Agreement. Management believed no provision was necessary, and the auditor said its conclusion was not modified in respect of this matter. It also drew attention to GST Appellate Authority orders, against which the company had filed further appeals, with no adjustments made pending their conclusion.

What did Varroc Engineering's management say?

The CFO gave no formal India EBITDA margin guidance and said the margin should return to prior-year levels by end-FY27 if the macro situation holds and improve further next year. Management said Romania’s overseas business remained targeted for EBITDA break-even by year-end, while net debt was expected to stay around current levels through FY27 and come down by end-FY28.

Management said Italy’s two-wheeler lighting restructuring should complete within about six months, with cost savings beginning in FY28 and one-time shutdown costs having a three-year payback. It also said both the OP Mobility and DYC arbitrations were targeted for resolution before end-FY27, and 4C Power India battery-pack revenue was expected to cross ₹1,000 crore over the next two to three years.

The Chairman and Managing Director said, “While customer recovery mechanisms are in place, there is an inherent time lag between the increase in input costs and their recovery.” The Group CFO said, “Then only can we recognize it because we are very stringent and disciplined on this aspect.” Management identified war-related input inflation, delayed recoveries, restructuring costs and unresolved arbitrations as risks.

How did Varroc Engineering shares react?

The stock initially traded lower after the filing: it was down 5.7% after 5 minutes, 4.2% after 15 minutes and 6.3% after 30 minutes, from the price when the filing appeared. On the reaction day, it closed 0.8% lower than the previous close of ₹790.00. By the next day’s close, it was up 0.4% from that pre-results close.

On the reaction day, the median move for the industry’s other stocks was 1.5%, while the Nifty Microcap 250 rose 2.2%. Varroc Engineering’s reaction-day performance was therefore 2.2 percentage points below the industry median and 3.0 percentage points below the market index. By the next day’s close, the stock was 2.3 percentage points below the industry median, which had risen 2.6%.

Past results-day moves were mixed: 1.4% on 28 July 2026, 1.7% on 18 May 2026, -5.9% on 5 February 2026, 1.9% on 12 November 2025, 0.3% on 29 July 2025, 2.7% on 29 May 2025, 3.6% on 10 February 2025 and -6.5% on 13 November 2024.

How did other Auto Components & Equipments companies do?

Among 57 Auto Components & Equipments companies compared for revenue growth, the median was 32.3%. Thirty peers grew slower than Varroc Engineering and 26 grew faster than the company. Of 58 peers compared for profit, 46 reported higher profit.