Schaeffler India Limited Q2 CY26 Earnings Call Summary

Event Participants

Executives

3 Gauri Kanikar, Hardevi Vazirani, Harsha Kadam

Analysts

6 Mahesh Bendre, Varun Jain, Harshit Patel, Raghunandhan N. L., Mukesh Saraf, Himanshu Singh

Financials & KPIs

Geographic & Segment Commentary

• Automotive Technologies: 35% of revenue; +33% YoY and +3.6% QoQ. Conventional ICE business grew ~20% with the balance from e-mobility. Grew despite 8% QoQ PV production decline on market share gains and new business wins (double clutch for tractors, overrunning alternator pulleys).
• Bearings & Industrial Solutions: 35% of revenue; 5% YoY, +6.5% QoQ. Core metals/raw material (steel, cement, aluminium) and power transmission (8% growth) performed strongly; wind energy and railways lagged due to contract negotiations and tender-based cycles. Secured the highest-value industrial order wins in Q2 (cylindrical roller bearings, DGBBs, spherical rollers, TRBs, tri-plain bearings).
• Vehicle Lifetime Solutions (VLS): 12% of revenue; +9.9% YoY with double-digit QoQ growth. Growth below the 20%+ run-rate of the last three years due to capacity constraints at Hosur, with OEMs prioritized; REPXPERT vans revived after a two-year gap covering ~8,000 km; INA product portfolio expansion underway.
• Exports: 17% of revenue; +24% YoY in Q2 and ~28% YoY in H1. Driven primarily by intercompany allocations leveraging Savli capacity; demand from Europe, Asia Pacific and Greater China all double-digit; USD-billed regions benefit from FX tailwind.
• Koovers (KRSV): ₹79 crores revenue in Q2, exactly on plan; EBITDA remains negative as focus is on scaling operations; impacted by ₹5.6 crores sales-cutoff accounting adjustment and ~₹3 crores founders' bonus provision.

Company-Specific & Strategic Commentary

• E-Mobility & Market Share Gains: E-mobility is a key growth driver within Automotive Technologies alongside ~20% conventional ICE growth; company grew 3.6% QoQ while PV market output fell 8% QoQ.
• Capacity Expansion & Capex: CY26 capex of ₹400–500 crores on track with ₹175 crores deployed in H1; machinery orders placed for H2; Shoolagiri and Savli plants central to localization and export capacity; Hosur capacity constraint being addressed to serve both OEM and aftermarket demand.
• New Business Wins: B&IS recorded its highest-value industrial order wins in Q2; automotive wins in double clutch (tractor segment) and overrunning alternator pulley with prestigious customers.
• Customer Quality Recognition: Zero PPM award from Toyota Kirloskar; additional awards from Voith Turbo, Sandvik Mining, John Deere, Denso India and Escorts Kubota; CSR recognition for tribal community development projects.
• Inventory & Working Capital Strategy: Planned inventory build-up in specific sectors/customer accounts to manage evolving geopolitical risks and market demand; management has a clear plan to normalize in H2.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Industrial Segment Growth Path

• Question: Is the portfolio recalibration complete? How much revenue was consciously let go, and when does B&IS return to double-digit growth? (Harshit Patel)
• Answer: Core infrastructure and raw material sectors are strong; power transmission grew ~8%; wind energy impacted by timing and ongoing contract negotiations; increasing focus on distribution/aftermarket; aspiration is to get the industrial business to double-digit growth. (Harsha Kadam)

Exports Outperformance

• Question: H1 exports grew ~28% YoY vs the 10–12% guidance — what sustains this? Is it intercompany allocation, China Plus One or rupee depreciation? Any guidance revision or geography mix change? (Harshit Patel)
• Answer: Primarily intercompany allocations leveraging capacities built at Savli; demand from Europe, APAC and Greater China all in double digits; USD billing provides FX benefit; order book is solid so 15–20% momentum is likely sustainable, but caution warranted due to geopolitical disruptions. No formal growth guidance was issued — only a cap of ~20% of business as exports to maintain domestic/export balance and natural hedging against imports. (Hardevi Vazirani, Harsha Kadam)

Aftermarket (VLS) Growth Constraints

• Question: After 3 years of 20%+ growth, Q2 slowed to 9.9–10%. Is this the new stable level or can growth reaccelerate? (Raghunandhan N. L.)
• Answer: Growth is constrained by capacity at Hosur — in high-growth phases OEMs get priority; capacity is being expanded to feed both OEM and aftermarket demand; local supply chain under development; management wants to fully meet VLS demand and considers the current growth below potential. (Harsha Kadam)

Cost Pressures & Pass-Through

• Question: How is commodity pass-through managed? Will wage hikes be compensated? Are freight and IT costs one-off? (Raghunandhan N. L.)
• Answer: Other expenses at 15.4% vs 15.1% last year — a 0.3% increase from full-quarter fuel price impact; Hosur capacity constraint is causing air freight for inbound and outbound material. Customers are unlikely to reimburse — they expect productivity measures (VA/VE); wage increase of ~10% is not recoverable; FX indexation and steel price indexation recovery expected in H2. (Hardevi Vazirani)

Pricing Across Segments

• Question: How does pricing/pass-through work across intercompany exports, OEMs and aftermarket? (Mukesh Saraf)
• Answer: Auto OEMs operate on an indexation mechanism, but not all commodities are covered — Labor Code wage increases and LPG/propane are outside the list, so compensation is difficult; dialogue ongoing with positive traction expected H2. Intercompany exports are priced at arm's length per OECD guidelines with an annual true-up in December. (Harsha Kadam, Hardevi Vazirani)

Industrial Non-Mobility Performance

• Question: B&IS has been flat at ~₹400 crores for 6–8 quarters — are market shares stable? Will the large order wins change the trajectory? (Mukesh Saraf)
• Answer: Raw material and power transmission sectors are performing well; industrial automation needs new product portfolio additions; distribution is the key opportunity. Industrial non-mobility actually grew double-digit — it is the automotive bearing sub-segment within B&IS that remains under pressure. (Harsha Kadam, Hardevi Vazirani)

Koovers Margin Decline & Breakeven

• Question: Revenue is steady at ₹79–80 crores but EBITDA margin worsened from –13.4% to –17.3%. Why, and when is breakeven? (Varun Jain)
• Answer: Two one-offs: a new sales-cutoff accounting policy reduced revenue by ₹5.6 crores, and a founders' bonus provision of ~₹3 crores was booked. EBITDA breakeven is expected in 2029. (Hardevi Vazirani)

Automotive Growth Drivers

• Question: Automotive Technologies grew 31–33% in the first two quarters — is this e-Axle driven and sustainable in H2? (Varun Jain)
• Answer: Conventional ICE business grew ~20% with the balance from e-mobility, which has a timing difference. PV production dropped 8% QoQ while Schaeffler grew 3.6% — growth is driven by market share gains rather than underlying vehicle volumes. (Hardevi Vazirani, Harsha Kadam)

Capex Deployment

• Question: CY26 capex was pegged at ₹400–500 crores with ₹175 crores done — what is the breakup? (Varun Jain)
• Answer: Remaining capex to be consumed in H2 with machinery orders already placed; ~₹170 crores allocated to Automotive Technologies, remainder to B&IS; sustaining/maintenance capex is very small at ~10% of total. (Hardevi Vazirani)

Key Takeaway

Schaeffler India delivered a resilient Q2 CY26 with revenue of ₹2,681 crores (+17.5% YoY, +7% QoQ), EBITDA of ₹513 crores (19.1% margin) and PAT of ₹337 crores (12.6% margin) despite an 8% QoQ fall in passenger vehicle production and rising input costs. Automotive Technologies grew 33% YoY on ~20% conventional ICE growth plus e-mobility, aided by market share gains; exports rose 24% YoY on intercompany allocations; VLS grew 9.9% YoY, constrained by Hosur capacity; Bearings & Industrial grew ~5% YoY but won its highest-value orders. Working capital rose to ₹2,029 crores on planned inventory build-up; H1 capex of ₹175 crores tracks toward the ₹400–500 crores CY26 plan. Input costs, ~10% wage hikes and FX pressured margins, with price corrections expected in H2. Koovers reported ₹79 crores revenue with EBITDA breakeven guided for 2029. Watch items: monsoon impact on tractors, geopolitical volatility and wind contract negotiations.