Divgi Torqtransfer Systems Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives - 5

Deepakwani (COO), Hirendra Divgi (Full Time Director), Jitendra Divgi (Managing Director), Satvinder Singh Sabharwal (Chief Growth Officer), Sudhir Mirjankar (CFO)

Analysts - 9

A Sriram (ithoughtPMS), Darshil Jhaveri (Crown Capital), Karan Gupta (Asit C. Mehta Financial Services), Mahesh Bendre (LIC Mutual Fund), Raj Agarwal (Niveshaay), Raunak Jain (Equirus Securities), Rushit Shukla (Nexus Equity Growth Fund), Sumit Ambekar (Param Capital), Vimal Gohil (Alchemy Capital Management)

Financials & KPIs

Geographic & Segment Commentary

• Transfer Cases: ₹76 crores in Q1 FY27 (+93% YoY), 53% of revenue. Indonesia program for Tata and Mahindra (~70,000 units over 10-12 months) drove ~30% execution in Q1; >50% of this business potentially recurring. Global transfer case market is 14-15 million units annually. Incremental volumes expected through FY27 from pickup trucks, new platforms, and facelift programs; one new global platform program expected to start in FY28.

• EV Transmission (eAxle): Revenue of ₹5.7 crores, subdued due to slower-than-expected transition from imported platforms to localized production at a key OEM. Schedules for remaining FY27 quarters are "extremely strong" — run-rate forecast rising to ₹10-12 crores/quarter vs historical ₹6.5-8 crores. Sigma program progressing toward commercialization; production part approval process (PPAP) approval received from Tata; localization and validation continuing across other programs. Three-wheeler EV reducer product now ready.

• Components & Other: Components at ₹34.4 crores (+83% YoY) with improved realizations and higher precision component mix. Other business at ₹21.54 crores (Nextchat, ALS Synchro, aftermarket). New applications added over last 4-6 months: front-wheel-drive based all-wheel-drive application with content upwards of ₹30,000 per vehicle, and a transfer case for Japan's oldest truck manufacturer.

• Exports: ₹23 crores in Q1 (16% of revenue), annualized ~₹92 crores vs near-zero two years ago. Growth across components and transfer cases; Japanese OEM targeting Gulf region applications using India cost base; Indonesia volumes flow through domestic OEM books but represent export-linked demand. All current export contracts are exclusive sole-supplier agreements.

Company-Specific & Strategic Commentary

• Project Mayflower (US Expansion): Established wholly-owned subsidiary in Greenville, South Carolina at the International Center for Automotive Research (ICAR). Initial team and operations being built; new RFQs received for US sourcing. Initial investment phase directional figure ~$5 million; greenfield approach chosen after due diligence revealed accounting red flags in potential US private acquisitions. USMCA local content mandates driving need for local manufacturing. Earliest SOP: H2 calendar 2028.

• Indonesia/ASEAN Program: 70,000 transfer cases over 10-12 months supporting Tata and Mahindra exports to Indonesia. ~30% executed in Q1; remaining execution may spill 1-2 months into FY28 due to OEM absorption constraints. Management noted this won an order against six formidable global competitors (Toyota, Nissan, Mitsubishi, Isuzu, Great Wall, Photon) with Indonesian government reportedly saving ~$500 million via Indian sourcing.

• India First (Tier-1 Ambition): Positioning to create "India's first generation of genuine Tier-1 companies." Evolution from build-to-print to technology partner model; proprietary products expected to dominate domestic mix. Working with Tata, Mahindra, Force Motors, Ashok Leyland, Aicher, and new entrants like JSW. 60-70% of business expected to remain domestic (increasingly proprietary products), 25-40% exports/global operations.

• Product Pipeline — Automatic & Manual Transmissions: AT programs targeting minimum ₹300-400 crores revenue, positioned as "afterburner" to reach ₹1,000 crore milestone. Working on 8-speed architecture within 6-speed space/weight/cost envelope. LCV manual transmission beachhead contract starting FY28. New assembly line at Shirwal: 400 units/day capacity (~120,000/year) being installed with German automation partner.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

US Investment & India Capex Priorities

• Question: What investment is required for the US facility and what resources are needed for growth over the next 3 years? (Mahesh Bendre, LIC Mutual Fund)
• Answer: Two opportunity types — new RFQs (SOPs towards later timeline) and existing programs where proximity/cost reduction adds value. Initial phase ~$5 million for compact facility in South Carolina near BorgWarner's largest transfer case plant. USMCA local content mandates require local manufacturing presence. India investment will be considerably higher than overseas — Indian market offers higher technology and value-add; domestic proprietary products expected to be 60-70% of mix. Global volumes of 5,000+ units/month expected in mainstream transmission products (MT, AT). (Jitendra Divgi)

Domestic Transfer Case Traction & Export Split

• Question: How is domestic transfer case traction excluding top customers? What are export revenues this quarter? (Vimal Gohil, Alchemy Capital)
• Answer: Mahindra is primary customer, Tata close behind (exporting Xenon/Yoda pickup to Indonesia). Indonesia order is effectively export-linked: 70,000 transfer cases to Indonesia over 10-12 months, though booked as domestic. Exports ₹23 crores (16% of mix), annualized ~₹92 crores; all export contracts are exclusive sole-supplier. Transfer case development done with Force Motors, Ashok Leyland, Aicher; Tata's IVECO acquisition opens global footprint including South America. 4WD demand spans 1.5-14 tonne trucks — general utility, off-road, forestry, mining, defense, construction. Two transfer case models used by Indian Army (world's third largest). (Jitendra Divgi)

Vertical Timelines: Transfer Cases, MT, AT

• Question: Can you provide directional timelines for each growth vertical? (Raj Agarwal, Niveshaay)
• Answer: South Africa shipments expected FY28 (April 2028-March 2029); same period for LCV manual transmission commercialization. Mahindra global pickup truck program starts later this year, continuing over next 3-5 years. EV designs ready from 10kW to 150kW; viewed as potentially better margin business in Western Europe and US (less China dependency, Indian content preference). Cologne and South Carolina offices support global EV sales. AT earliest H2 CY28 — requires dovetailing into OEM cycle plans; minimum ₹300-400 crore revenue potential. (Jitendra Divgi)

Indonesia Execution Status & EV Run-Rate

• Question: How many of 70,000 transfer case units dispatched in Q1? What is monthly EV dispatch run-rate? (Sumit Ambekar, Param Capital)
• Answer: ~30% of contract executed; balance over remaining months with possible 1-2 month spill into next fiscal due to OEM supply chain absorption. Divgi's manufacturing line "two steps ahead of the OEM" — no quality or delivery complaints. EV: Iran war and market scare reinforced local supply chain importance. Schedules from Tata significantly higher; PPAP approval received from Tata but awaiting their vehicle testing completion; run-rate forecast rising from ₹6.5-8 crores/quarter to ₹10-12 crores. Korean EV customer conversations described as potentially "path-breaking" for Korean market entry. (Jitendra Divgi)

Capacity Utilization & Expansion

• Question: What is current transfer case capacity utilization and expansion plans? (Karan Gupta, Asit C. Mehta)
• Answer: Two assembly lines being modernized (20+ years old) with German automation company; new line at Shirwal will have 400 units/day (~120,000/year) capacity and be "world class, second to none." Domestic 4WD demand in India will never exceed 100-200k units given tropical metropolitan conditions — but global potential via Indian OEMs is enormous. Japanese OEMs see India as springboard for Gulf/Middle East, as Indonesia and Thailand cannot compete on cost. Indian demand for 4WD flows indirectly through OEM exports. (Jitendra Divgi)

Margin Sustainability & FY28/29 Revenue

• Question: Can margins sustain at current levels? When can we reach ₹2,000 crore revenue? (Rushit Shukla, Nexus Equity)
• Answer: Management cautioned against extrapolating Q1 margins — "we should not get carried away." Even in weak FY26 (full-year EBITDA 20%), company maintained ~20% EBITDA. Benchmark: 20-22%+ sustainable versus Indian auto industry average of 14-17% over 6-7 years. Mantra: technology-led innovation, product/application diversity, customer/geographic diversity. ₹2,000 crore is long-term potential; first priority is roadmap to ₹1,000 crore across 4-5 verticals of ₹150-400 crores each (exports, transfer cases, EV, MT, AT). Annualizing Q1 revenue (₹560 crores) shows trajectory. (Jitendra Divgi)

Automatic Transmission Technology

• Question: Is the AT a wet clutch DCT? Does it need a new plant? (A Sriram, ithoughtPMS)
• Answer: Two market segments targeted: mass cars (premium hatchbacks — Nexon, Baleno, i20 segment) best served by dual clutch technology optimizing weight/packaging, leveraging India's MT infrastructure; and rear-wheel-drive 2-litre automatic segment where transfer cases have been engineered for all global automatics (GM, Ford, ZF, Aisin, Jatco). None of these automatics are made in India today — long supply chains, inventory pile-up, weak rupee costs. Architecture critical: bringing 8-speed within 6-speed space/weight/cost envelope for future-readiness. Described as contribution to India's automatic transmission ecosystem. First Indonesia export order specification included automatic transmission as future risk. (Jitendra Divgi)

₹2,000 Crore Timeline & Margin Range

• Question: By when can we reach ₹2,000 crore run-rate? Can you narrow the margin range? (Darshil Jhaveri, Crown Capital)
• Answer: Mahindra's stated ROIC target of 18%+ sets industry benchmark; Divgi's Q1 FY27 ROIC ex-cash ~32% against that yardstick. Sustainable EBITDA of 20-22%+ is the fair offering, achieved through complexity and innovation — commensurate margins for the risk taken. ₹2,000 crore is "potential" — first order of business is ₹1,000 crore roadmap. Even a modest AT order of 40-50,000 units would yield ₹400-500 crores. All growth capital spending prioritized toward India given higher technology/value-add domestic opportunities. (Jitendra Divgi)

Key Takeaway

Divgi TorqTransfer delivered a record Q1 FY27 with revenue of ₹141.8 crores (+85% YoY), EBITDA of ₹41.6 crores at 29.4% margin, and PAT of ₹25.2 crores (17.8% margin), driven by transfer case volumes up 93% YoY, components up 83%, and exports reaching ₹23 crores (16% of revenue). The Indonesia program (~70,000 units for Tata and Mahindra) drove ~30% of the contracted volumes with >50% of that business potentially recurring. Management's strategy centers on Project Mayflower — a $5-million greenfield US plant in South Carolina targeting H2 CY28, alongside global EV transmission commercialization, LCV manual transmission starting FY28, and an automatic transmission program targeting ₹300-400+ crores with 8-speed architecture and earliest SOP in H2 CY28. Management guided for 20-22%+ sustainable EBITDA margins and a roadmap to the first ₹1,000 crores across four to five vertive verticals, with an AT order of even 40-50,000 units yielding ₹400-500 crores. Key watch points: EV schedule recovery post-Iran-war demand shocks, Indonesia contract spillover into Q1 FY28, execution bandwidth across simultaneous opportunities, and conversion of US RFQs into confirmed awards.