Financial Performance and Segment Growth
Schaeffler India delivered a strong financial performance in Q2 CY26, with consolidated revenue reaching ₹2,760 crores. The standalone revenue of ₹2,681 crore was primarily propelled by the Automotive Technologies division, which registered a 33% YoY growth. This outperformance was notable as it occurred despite an 8% drop in domestic passenger vehicle production during June.
Profit after tax (PAT) for the quarter stood at ₹337 crore. While gross margins expanded sequentially, the bottom line faced marginal pressure from increased employee costs following the implementation of new Labor Codes and higher freight expenses. The company reported a healthy TTM EPS of 80.19, reflecting a 23.8% growth.
Strategic Focus on Exports and Localization
- Export Momentum: H1 export growth reached 28%, leading management to raise the full-year target from 12% to nearly 20-25%.
- Natural Hedging: The company aims to cap exports at 20% of total revenue to maintain a balanced natural hedge against imports.
- Industrial Wins: Secured significant orders in the raw material sector (steel, cement, aluminum) and power transmission.
- Localization Strategy: Ongoing efforts to localize products in the industrial bearing segment to improve cost-competitiveness against commoditized imports.
- Vehicle Lifetime Solutions: Despite capacity constraints at the Hosur plant, the VLS segment grew 9.9% as the company revived its REPXPERT training vans.
Management Outlook on Capex and Subsidiaries
Management remains committed to its CY26 capex plan of ₹400-500 crore, focusing on expanding manufacturing capacities to sustain double-digit growth. Approximately ₹120 crore is earmarked for automotive projects, ₹170 crore for automotive technologies, and the remainder for bearings and industrial solutions. Regarding its subsidiary, KRSV Innovative Auto Solutions (Koovers), the entity recorded ₹79 crore in revenue but continues to operate at a loss.
Management expects Koovers to reach EBITDA breakeven by 2029 as it scales operations. The company is also monitoring monsoon patterns closely, as tractor demand remains a critical component of its business volume.
Sector Dynamics and Macro Environment
The broader economic environment showed mixed signals, with India's Q2 GDP estimates hovering between 6.5% and 7%. While core sectors like cement and steel grew at 6% over the last year, coal production saw a decline in line with carbon neutrality shifts. Schaeffler noted a marked slowdown in the passenger vehicle segment, yet managed to gain market share by growing 3.6% against a market drop of 8%.
The industrial automation sector is identified as a high-potential area where the company seeks to enhance its product portfolio. Input cost volatility remains a primary concern, particularly for commodities not covered under standard OEM indexation lists.
What to Watch
- Impact of delayed monsoon on the tractor segment and rural demand for bearings
- Successful implementation of price corrections in the second half of the year to offset LPG and propane cost hikes
- The pace of capacity expansion at the Savli and Shoolagiri plants to resolve current VLS supply constraints
- Progress of contract negotiations in the wind energy sector which saw a temporary revenue dip
- Sustainability of the current 28% export growth rate amidst global geopolitical volatility
Management Perspective
We have seen a very sluggish growth there for a couple of reasons. One is the Automotive Bearing business is more commoditized. So, we carefully choose where we are very competitive and we are working towards the strength there... we will be able to get back strongly in the game in the Automotive Bearings business as well.
