Operator: I now hand the conference over to Ms. Gauri from Schaeffler India Limited. Thank you, and over to you, ma'am.
Gauri Kanikar: Good morning, everyone, and welcome to Schaeffler India Limited's earnings conference call for the third quarter and nine months ended September 2026. Today we have with us Mr. Harsha Kadam, our Managing Director and Chief Executive Officer, and Ms. Hardevi Vazirani, our Director of Finance and Chief Financial Officer. As always, Mr. Kadam will first take us through a short presentation on the results, and then we will open the floor for questions. Thank you, and over to you, Mr. Kadam.
Harsha Kadam: Hi. Good morning, and a very warm welcome to this third quarter and nine-month ending business performance update.
Hardevi Vazirani: Good morning from my side as well.
Harsha Kadam: Let me briefly take you through the presentation. I will be covering 3 broad areas as that is indicated on slide 3 of the presentation. First would be a little light on the economy and the industry. Second would be on the business highlights, the Q3 and 9-month ending for 2026. Lastly, the financial highlights for the Q3 and 9-month ending 2026. Let me draw your attention to slide 4, where I will talk a little bit about the economy. As you can see, a strong performance from an economic standpoint on the Indian economy. The estimated growth was at 6.4 in the Q3, and actually the numbers that are coming out are much stronger than that.
Harsha Kadam: However, that said, in spite of the global uncertainties, the volatility that exists around us today, India still has come out stronger and the International Monetary Fund recently has upgraded its full year growth forecast to average 7% GDP. On the back of a very strong, robust domestic market and also the booming digital services sector as well as the exports business. If one were to look at the index of industrial production, strong manufacturing output in the automotive industry, obviously on the back of the GST 2.0 drive, has helped in terms of meeting the targets as well, and it has reached an all-time high of 7.7% IIP as you can see there. The growth is structurally sound, and it is led by heavy manufacturing and also the utility sector as well as the power and electricity generation sector.
Harsha Kadam: All have done exceedingly well in the quarter. Looking at the automotive production has been one of the stellar performances. As I mentioned already, the GST 2.0 is propelling the growth, bringing in a very strong traction in demand. This is, as you can see from a Q3 year-on-year growth, standing at close to 31%, 32% and a quarter on quarter almost at 23%. Passenger vehicles by far leading the pack with 25% growth and tractor sector too on a muted monsoon performance still at 7% growth. A cautionary trend is on the inflation. As you can see, the consumer price index food prices have started to increase quarter on quarter, and that is the alarming sentiments that are prevailing on the food inflationary increases that have happened. With that, I move to the next slide, which is more focused on the sectors.
Harsha Kadam: What you see is the industrial sectoral performance. Very clearly, on the back of the focus from the Government of India on the core infrastructure sector, we are seeing the core industrial sector such as cement steel doing it pretty well, registering a strong growth there as well. Month over month, as you can see over the previous years in the bar chart, cement production in the country has been consistently growing and the average growth rate almost around 9.3%, as you can see over the last year. Steel, on the other hand, continues to be at the same levels as last year, but marginally again, growing at about 3%. Mining and coal production with a clear focus on renewable energy sector. The coal is something that always fluctuates.
Harsha Kadam: Talk about power generation again, as I said earlier, strong growth in energy demand in the country and which is clearly growing at about 8%. Very strong focus on the renewable energy and overall the energy security that the government is bringing in a focus as such. Moving to slide number 6. A little light on the Automotive Technologies sector performance. Almost all the automotive segments have performed exceedingly well. As you can see, the 2 and 3-wheelers also have grown phenomenally and close to 3 million produced only in the month of September, has consistently shown the growth of the 2 and 3-wheeler business in India. Fortunately, with the festival season split between October and November, some of the strongest growth months are yet to be crossed.
Harsha Kadam: That said, passenger vehicles obviously have been one of the strongest performance with a year-to-date growth of almost 17%, 18% growth, which you have seen there. Again, once again, registering an all-time high production levels in passenger vehicle segment. Interestingly, the commercial vehicle also has registered a very strong 21% growth as you can see month after month continuing to grow. Commercial vehicles has always been a cyclical business, and I guess we have seen the peaks of the business, but we have to wait and watch how it pans out in 2027. But for the moment, this year, commercial vehicles too have registered a pretty strong growth compared to last year. Tractors have been performing as expected. Although on little bit of muted monsoons that we have been hearing about, we still have to track and watch what's going to happen to tractors in the next 3 months.
Harsha Kadam: However, so far, tractors have registered a year-to-date growth of 18% over last year, as you can see in the bar chart. That said, I move to slide number 8, where I would throw light on the business performance. On this backdrop, with all the volatility in the market, the uncertainty in the market, the challenges in the export market, what we were able to bring into the company was a revenue of INR 3,005 crore for Q3, which was a 27.4% growth over the same quarter last year, and a 12.1% growth over the preceding quarter. Almost all the business segments have been able to deliver a double-digit growth rate for us in the quarter. This has resulted into an EBITDA of 18.7% in the quarter of this year, compared to the preceding quarter of 19.1%.
Harsha Kadam: The margins did come under pressure due to the increased input costs as a result of the volatility that is existing in the market. Also the West Asia crisis, which has impacted the energy cost and the fuel prices and some of the cascading impacts that it has had on the downstream operations as well. With that, our margins came under a bit of pressure, and hence you see a marginal drop from a 19.1% to an 18%. The profit after tax too came under some challenge with 12.3% in the quarter against the 12.6% over the preceding quarter, having got impacted with working capital increases, some that were planned and some a little unplanned.
Harsha Kadam: Inventories build up that we had lined up in our E-Mobility sector and some challenges also on the price recoveries from our customers due to the inflationary increases, which is still work in progress for us. Also on the account receivable situation, which we still are getting our hands around to address it in this quarter, in the coming quarter. Obviously, with that, we did see some impact of all these coming onto the free cash flow, and we registered only INR 41 crores of free cash coming into the system, which was phenomenally lower percentage as you can see, compared to the preceding quarter as well. But that is something we are focused upon to recover the situation on the free cash flow in the coming quarter, and we will try and deliver in line with our expectations as well.
Harsha Kadam: The good news is our CapEx framework still remains strong. In fact, we did have the highest CapEx spending happening in the Q3, which I will come to in a while. Let me move to slide 9. What has kept us going and the revenue growth that you see is because of a strong pipeline of new business wins. We continue to keep the focus on winning new businesses with our existing customers, as well as with new customer acquisitions that we do. As a result, as you can see in the Automotive Technologies space, we did have a lot of business in the engine application portfolio, such as our lash adjusters, HLA-RFT, the roller tappets, and so on.
Harsha Kadam: We also had some strong business win in the clutch portfolio for the automotive application, passenger vehicles in particular, and also some of the rocker arm assemblies that go into the engine. So we have had some significant business wins which ensures we continue to keep our top-line growth going forward as well. Talking of the aftermarket, the Vehicle Lifetime Solutions as well, new business wins coming from the front-end auxiliary drive, the timing kits, bearings portfolio, and a significant growth in the lubricants, which continues. We have also increased our focus into our INA portfolio of products that we are bringing into the aftermarket space, and this, too, is resulting in our portfolio expansion in the Vehicle Lifetime Solutions space.
Harsha Kadam: Talking about the Industrial division, the Bearings and Industrial Solutions have been consistently focused on increasing and securing our market share in many of the portfolios, cylindrical roller bearings, needle roller bearings, and ball bearings in particular. Whether it is in the Automotive segment or with the high-value solutions, such as the actuators and bottom roller bearings in the industrial automation sector, or for that matter, even within the railway sector with our TAROL portfolio of products and the TRB portfolio of products, we have had some significant business wins. All of this put together secure the pipeline to consistently keep increasing on a revenue growth, and that is how you see us being able to deliver a double-digit growth consistently. That said, I now move to slide number 11.
Harsha Kadam: If one were to look at the total revenue that we generated from our operations, as you can see, INR 3,005 crores coming in the Q3, and which was a clear 12.1% growth over the preceding quarter and a year-on-year growth of 27.4%. This revenue split between the businesses that we operate in, Automotive Technologies clearly grew by 17.3% over the preceding quarter and 34%, 35% over the same quarter last year. While the aftermarket Vehicle Lifetime Solutions grew 2% over the preceding quarter, has also delivered a 22% growth over the Q3 of 2025. The Bearings and Industrial Solutions also has delivered 10.2% growth over the preceding quarter, and as you can see here, 14.7% over the same period last year.
Harsha Kadam: Not to be left behind, our export business, which we call it as intercompany, delivered 12.7% over the preceding quarter and a 46.3% over the same period last year. What has this growth done to the mix of our portfolio? As you can see on the pie chart to the right, our Automotive Technologies still continue to be at about 37% of the revenue. Bearings and Industrial Solutions coming in close second with 35%, followed by our export, which has cropped up from 15% in the last quarter to 17%. And our Vehicle Lifetime Solutions, which is at about 11% of the total revenue cake. With all this, we still continue as a motion technology company to keep that interesting balance of our portfolio mix.
Harsha Kadam: Thereby, we continue to manage the vagaries of the market environment that we operate in, and the balance helps us to keep sailing in a much stronger, in spite of all the headwinds that we come across. With that, I move to slide number 12, talking a bit on the earnings quality. What you see here is the EBITDA performance. As I already shared, in the quarter, INR 562 crores coming into the quarter at an EBITDA level, which is a clear 9.4% improvement over the preceding quarter and an 18% improvement over the same period last year. I must say, reasonably good performance in spite of the challenging market environment and the headwinds that we have been facing.
Harsha Kadam: Now, if one were to look at the split of where this EBITDA came in from, a gross margin improvement brought in about INR 192 crores within the quarter, and this has been primarily due to the efforts of recovering some of the inflationary input cost increases that have happened, and we have been successful to recover. Is this all? No, it is not. This is still work in progress, and we are still on the way to recover the entire increases that have happened. On the other hand, we did have some employee cost increases that have come in marginally at about INR 44 crores and some other income issues that have come in at about INR 62 crores.
Harsha Kadam: That said, we have been able to sustain and hold on to our profit after tax, although at a decimal percentage point level, there has been a drop over the preceding quarter from a level of 12.6%. The profit after tax came down to 12.3% in the quarter, bringing in about INR 370 crores. That said, which is also still a double-digit improvement over the preceding quarter. Year-on-year, as you can see, it is close to 21%. So while from a summary point of view, the earnings quality was impacted marginally, mainly coming on the back of the input cost increases, predominantly from fuel prices and of course the effects foreign currency exchange rates as well. That said, I move to slide number 13. What you see is the increase in working capital, which has gone up and as a percentage of sales has crept to almost 19% levels.
Harsha Kadam: Yes. The reason for this is, we did have some planned increases as well, because our localization projects, we have to continue to service the customers, and this is something we wish to bring it back under control as soon as possible. There is a clear focus on how do we want to address the working capital increases, and we will try to do this going forward now. That said, free cash flow, which I already mentioned at the beginning of my presentation, but yes, this is an area where we still have to do a lot more work. In this quarter of Q4, our work clearly cut out to keep the focus on working capital management and the free cash flow recovery as well.
Harsha Kadam: That said, on the CapEx, as you can see clearly in the Q3, we have invested INR 182 crores in the Q3 alone, and this has complemented the overall performance, which were a little muted in the first 2 quarters. Our commitment to invest for the future growth of Schaeffler India stays the course. That said, let me move to slide number 14, which gives you the overall indicators. As you can see, I already talked about the 27.4% year-on-year growth and the 12.4% quarter-on-quarter, bringing in an EBITDA margin of 18.7% and an EBIT margin of 15.7%, with a profit after tax of INR 370 crores. Our CapEx invested INR 182 crores and with a free cash flow of INR 41 crores in the quarter. Translate that to the 9-month period.
Harsha Kadam: What you see is a 21.4% growth over last year at a 9-month period, with an EBITDA margin of 19% and an EBIT margin of 15.8%, a similar strong profit after tax margin of 12.5%. Our CapEx stands at a level of INR 357 crores month to date, 9-month period, with a free cash flow of INR 274 crores. Moving to slide number 15, this slide gives you the split between the subsidiary company, KRSV Innovative Auto Solutions Private Limited, which brought in INR 83.7 crores of revenue in the quarter, with still a negative EBITDA of -17.6% and an EBIT of 19.4%. At a consolidated level at Schaeffler India Limited, that brings in a revenue of INR 3,089 crores in the quarter at 17.7% EBITDA and with an EBIT of 14.6%, as you can see here. With that, I come to my last slide, which is slide number 16.
Harsha Kadam: Our commitment to generate value to all our stakeholders is clearly still our focus, remains our focus, and we continue to deliver a double-digit growth momentum year-on-year across both our domestic and on export businesses. Yes, we did face some challenges, and there is this work in progress on the margins recovery, and we clearly keep our focus to recover the situation in this quarter, fundamentally which is coming on the back of the West Asia crisis. Working capital, as I did already spell out that some of it is planned and some of it has happened now due to the challenges in terms of our sourcing options, which we are addressing it, and this too, we should get it under track in this quarter. As always, we remain committed to deliver our stakeholders the results that we always tend to deliver.
Harsha Kadam: With that, I come to the end of my presentation. Over to you, Bhavya.
Gauri Kanikar: We can begin with the question and answer session please. Nazee?
Operator: Yes. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. A request to all the participants to limit their questions to the performance for the quarter and nine months ended September 2026. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Krupa Shankar from Avendus. Please go ahead.
Krupa Shankar: Hi. Good morning, and thank you for the opportunity. My first question is on the gross margin. While it was mentioned over the previous calls as well that there will be certain price hikes which will be taken in the H2. Just wanted to get a sense around what is the percentage of cumulative cost inflation which has been recovered so far, and what are the measures taken for this further recovery in the Q4? That will be my first question.
Hardevi Vazirani: Thank you for your question, Krupa Shankar Ji. So gross margin is impacted largely because of the input prices, that is, the raw material price. As a percentage of quarterly sales, it is around 1%, 1.1% approximately, and 50% of it is already recovered, and 50% of it is currently under negotiation stage with several customers. Historically, we have been able to recover approximately 80% to 85% of such price increases, and we are very confident that the sales teams will succeed this time as well.
Krupa Shankar: Understood. The second question was on the inventory build-up. I did hear that, actually, I think you did mention that the inventory build-up was due to an unplanned part in the E-Mobility business. I just wanted to double-click on that and check if there are any. Is it due to any customer schedule cuts or any program delays? Any comments on that?
Hardevi Vazirani: No, it is actually the other way around. It is an unbudgeted increase in the demand for E-Mobility. We had not planned that such a sharp increase will come in Q3 and Q4, but it has come now, and we have to build up the inventories for Q4. And very likely, these inventories will be sold out. So by December, we will see the correction.
Krupa Shankar: Understood.
Harsha Kadam: Also, our input component level inputs going through the logistical challenges that we are having because of the West Asia as well. We felt it while the market is very bullish here, so it was important for us to shore up the stocks and inventory so that we keep our operations running. The plants are at full capacity utilization levels. We have been able to sustain that only because of a little bit of
Hardevi Vazirani: inventory on
Harsha Kadam: stretch on the inventory that we have here.
Krupa Shankar: Understood. Last question from my side. On the Bearings and Industrial Solutions segment, good to see that we are back on the double-digit growth. Just wanted to check, given that the previous call we had commented that there was a large industrial order, just wanted to check if that has started shipping. Also, adding on to that question, industrial automation has been much talked about over the last year or so. How large is industrial automation within the Bearings and Industrial Solutions today? Regarding the actuators which are made, are these made locally or are they largely imported?
Harsha Kadam: Yeah. Good question, Krupa Shankar. The industrial automation is a pretty important sector for us, and globally at Schaeffler, we have a very strong portfolio there to gain more share into that particular sector. India definitely is also one of the hottest markets. To answer the first part of your question today, if you see the industrial automation sector for us in India is just about 3% of the total. It is not a very big sector. But we see the potential to grow this sector, and one of the challenges we have faced is the portfolio of the products we are importing today. Why? Because the market also needs to give us those economies of scale for us to invest in our full production lines, which we have not done.
Harsha Kadam: But this is something that we clearly are building up in our strategy to see how do we become more competitive in the industrial automation sector, which is predominantly the machine tool industry, the robotics industry, and the humanoid industry. So this is something that is very well on our radar. Right now, the bearing portfolio is something we offer locally manufactured. However, when you talk of actuators, whether it is a rotary actuator or a linear actuator, we still continue to import, and that is something clearly a potential opportunity for us to strategize going forward.
Krupa Shankar: Got it. On that second, the large industrial order, have you started shipping that piece, what we had announced in the Q2 results?
Harsha Kadam: If you can enlighten us on exactly the large industrial order.
Krupa Shankar: Last quarter, we did mention that we have won a large order in the Bearings and Industrial Solutions business. Just wanted to get an understanding that whether we have started supplying that already, or is it expected from the next quarter?
Harsha Kadam: Are you referring to the exports, you mean? Is this for the export or-
Hardevi Vazirani: The business wins side.
Harsha Kadam: The business wins, what I showed, which I show every quarter, is for the domestic market, Indian market, okay? Surely those we have started to ship because we clearly have the time frames. I wouldn't be putting this up on public domain if we are not clear on secured and when the SOP starts, correct. What you see is on the export side, as you can see, there has been a strong traction and demand, particularly in Q3, we see export as a percentage of our total revenue going up to 17%. So that, again, we are fulfilling. These were the two main things which we commented in the last quarter as well.
Krupa Shankar: Understood. Got that. I have more questions. I'll get back in the queue. Thank you.
Harsha Kadam: Thank you.
Operator: Thank you. Next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.
Harshit Patel: Thank you very much for the opportunity. My first question is on exports. They have grown about 46% YOY, much well ahead of the 15% to 20% momentum we have indicated in the past. Could you help us split this between the rupee depreciation and the genuine volume and the new geographical allocations we would have received from the parent? Just a flavor on how this will pan out in the near future.
Hardevi Vazirani: Harshit, just give me a minute. I will just open the relevant file. Okay. If we look at how the development has taken place, we see that Europe continues to lead in the order book, and almost close to 45% of export is to Europe. Next in line is Asia Pacific with 35%, and rest of it is China and Americas. Large portion of it is Europe and Asia Pacific. We have seen good order book coming from Europe and Asia Pacific, and we are able to fulfill with the capacities that are available mainly in the bearing side. The most exports are on the bearing side.
Harshit Patel: Understood, ma'am. Just a small follow-up on that. This quarterly run rate of more than INR 500 crores, do you think this is sustainable? Could we take this as a new baseline for our exports?
Hardevi Vazirani: No, that is not how it is. We get the quarterly order books, and we fulfill that, because there is a 90-day frozen period. The Q4 that we are looking would be slightly lower than that, unless until some surprise comes. At this point of time, we would not say that it is an ongoing way of looking at it. That means it is not a permanent thing.
Harshit Patel: Understood, ma'am.
Hardevi Vazirani: Based on the 90-day frozen period, we look at the order book.
Harshit Patel: Understood. My second question is on Bearings and Industrial Solutions. This segment grew about 15% year-on-year and also 10% sequentially. It is a clear step-up in the growth, which we used to post for the previous several quarters, and I think this is also in line with your aspiration of a double-digit industrial growth. Could you help us understand which end markets drove this particular pickup, especially wind after the contract negotiation that you mentioned, I think, a few quarters ago? How was the performance of railways? Is this kind of double-digit growth sustainable going into next year, that is 2027? Thank you. That would be my last question.
Hardevi Vazirani: If we see quarter-on-quarter growth, the areas which grew are mainly two-wheelers, raw materials, wind, and distribution. There are four of those areas where the growth momentum was much above double digit, which ultimately led to overall growth of-
Harsha Kadam: Actually, if you look at the industrial sector, railways is still a lot of tender based, so it depends on which quarter the tenders do come in. Okay? So you would see ups and downs within the railway sector quarter-over-quarter. However, what we have seen is very strong traction in the core industrial sectors, which is the metal, steel, cement, all the metal industries. Wind energy was a phenomenal growth. Obviously, again, depending on how the demand for the wind equipments from the European market and the US market comes in. Because 85% of the wind equipments produced in the country get exported out of the country. But for us, it is only a deemed export for us.
Harsha Kadam: And also when one looks at the industrial distribution, which is the industrial aftermarket, we have seen very strong double-digit growth there as well, clearly indicating that the core industrial sectors have performed very well in the industry as well.
Harshit Patel: Understood, sir. Thank you very much for answering my questions in all the ways.
Operator: Thank you. Next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Nitin Arora: Hi, sir. Thanks for taking my question. Just on that export piece, what Harshit was asking, can you state some drivers of this export pickup? I will just set the context. Because when we look at last one year, given the pressure on the auto OEMs in Europe, you would have seen recently what happened with Volvo as well. When we look at the consolidation of vendors and the auto ancillaries there are really struggling, what we get a feel of from the Indian auto EX. Is it something where you see Schaeffler India is getting very disproportionate business? If you can just give us some ideation here, because the growth has been sharp and your confidence also looks pretty strong on the export. Barring one line, which ma'am said that you cannot predict that this will continue or not.
Nitin Arora: If you can just give a little bit more sense on that.
Harsha Kadam: Yeah. Let me clarify first. Predominantly a large part of our export or most of it is towards the industrial sectors. The portfolio is mainly bearings. Okay, so it is not so much on the Automotive Technologies sector because automotive always have their own captive companies in the location where the OEMs produce. Yeah. This is mainly going towards the industrial sectors. Industrial sectors operating in Europe, in US, in China and Southeast Asia, which are the four markets that we export to. Our largest, as Hardevi already answered, a large 45% of our export business goes towards Europe, and we are seeing traction demand coming from the European market where we have started to feed that market as well. We are also seeing traction in the Southeast Asian market, so that is how we are seeing the growth.
Harsha Kadam: So it is not in the automotive space but in the industrial space.
Hardevi Vazirani: I think just one more point, Nitin, that every year, Q3 usually sees a spike because in December, somewhere around 20th, the group closes billing and our intercompany exports are mainly towards the group companies. So Q3 is usually having a spike.
Nitin Arora: That is why my question was more on that. Do you see this consolidation of vendors in Europe? My question was not towards auto industrial. My question was generic. Is this consolidation happening which is giving us that benefit which can continue? I was asking more from that direction perspective.
Hardevi Vazirani: We do not have any such indications, at least from our group companies.
Harsha Kadam: Yeah. None of it.
Nitin Arora: Thank you. Thank you very much. That was my question. Thanks.
Operator: Thank you. Next question is from the line of Varun Jain from Dolat Capital. Please go ahead.
Varun Jain: Yeah. Hi. Good morning, sir. Couple of questions. Firstly, if I look at your statutory reporting, the segmental EBIT margins you report. In Q3 CY '26 for mobility, it has gone from 13.1% to 12.2%, so they have decreased by close to 100 bps. But in other segment it has increased by 21.1% to 22.3%. This RM inflation is not hitting the mobility and other industrial business equally?
Hardevi Vazirani: In mobility segment, it is hit but lower than the B&IS. The mobility sectors have been able to do the price recovery to a greater extent compared to the B&IS. That's why you see this.
Operator: Hello? Varun?
Operator: Hello, Mr. Jain.
Operator: Mr. Jain, you are not audible. As there is no response, we can move to the next question. The next question is from the line of Lakshmi Narayan from Tunga Investments. Please go ahead.
Lakshmi Narayan: Yeah, thank you. I have two questions. Given the strong cost inflation across Automotive Technologies OE and in industrial in general, you mentioned there is a margin impact. I just want to understand how long it will take to fully feed through Schaeffler's margin, whether it takes a quarter or more. In terms of when you actually handle these engagements with OE, is it these price realizations are granted retrospectively or prospectively? This is my first question regarding the pricing. The second question is that if you look at the growth in the Bearings and Industrial Solutions division, it has moderated. Could you highlight which specific industrial sub-segments or end markets are driving this drag? The third question is related to aftermarket. I just want to understand what are the primary drivers behind the recent pressure in the aftermarket segment. Is it channel destocking, softer demand, or pricing dynamics?
Lakshmi Narayan: Because there has been a softness, not one quarter, but a couple of quarters. These are my three questions in terms of pricing and specific things related to bearing segment weakness and the aftermarket. Thank you.
Hardevi Vazirani: Your first question was on the cost inflation recovery and the timing difference that we have.
Lakshmi Narayan: Yeah.
Hardevi Vazirani: It takes close to four to six months for the recovery and mostly it is retrospective effect, and the negotiations continue for four to six months, I would say. Currently we are still negotiating, so whatever inflation erosion of margin you see, 80% to 85% will be recovered. I already replied that it is retrospective. When we talk about which sectors within B&IS have grown, then if I talk about YTD over YTD last year, then we have B&IS grew by 8%, close to 8%. Quarterly growth is 10%, but YTD is 8%. Within that, two-wheeler, off-road, power transmission, and raw materials are the high gainers.
Lakshmi Narayan: I just saw that in spite of material costs going up, the revenues have caught up only 8%, which means that maybe on a volume basis, there has been looks like an erosion in some kind of a market share or you have chosen to get out of some segments. Is that a fair assessment on bearings?
Hardevi Vazirani: No, I think in the last two quarters, Mr. Harsha Kadam had briefed about the calibration of the wind customers where there were some price increase demands. Only that sector we have calibrated and we are focusing only where we create value. Otherwise, we let go the business there.
Lakshmi Narayan: Mm-hmm. Anything related to needle roller bearings where you have slowed down your.
Hardevi Vazirani: No, not at all. In needle roller bearings we have a growth of double digit, almost close to 20%.
Lakshmi Narayan: Yeah. Got it. And on the last question on the aftermarket, please.
Hardevi Vazirani: On Vehicle Lifetime Solutions, we have seen double digit increase if we look at the YTD performance. Quarter-on-quarter, there are timing differences, but we see that we will be able to maintain for full year the double digit growth.
Lakshmi Narayan: Got it. Thank you so much and come back in queue.
Operator: Thank you. Next question is from the line of Ashish from Leo Capital. Please go ahead.
Ashish Konaje: Congratulations on the good set of numbers. I had two questions. The first question would be: how is the overall global demand environment for various parts of the bearing business? Is demand likely to continue to be strong over the next few years? Which segment are seeing the maximum demand momentum? That would be my first question.
Hardevi Vazirani: As far as our business model is concerned, we supply to intercompany partners and we get 90 to 120 days of visibility and not beyond that. I will not be able to comment on the long-term growth here, honestly.
Harsha Kadam: Yeah. Mr. Naren, we do not deal with the customers outside. We deal with our own sister plants outside of India. We just book the orders, manufacture them and supply them as such. For us to track which market or which sector is doing well, it is not easy. It is challenging for us to do that. Yeah.
Ashish Konaje: Based on the orders which we have received for the next 90 to 120 days, which segment is driving this growth?
Harsha Kadam: No, it is not the segment for us. We look at only the product portfolio because the order comes on the product portfolio, not on the segment. If it is cylindrical roller bearings, we get an order for this size to this size of cylindrical roller bearings. Now, who is the end customer? What is the sector? What is the application? We have no visibility to that.
Ashish Konaje: Got it. My second question would be, how does the cost of production compare the Indian operation versus some of the global manufacturing in Europe and other parts of the world? Is India meaningfully cost competitive?
Harsha Kadam: My answer would be yes. Otherwise, why would they source from here?
Hardevi Vazirani: In the past we have seen that at least 25% cost difference is there between the cost of production in Europe and the cost of production in India.
Ashish Konaje: Got it. This growth in export is likely to continue over the long term if that is the case?
Hardevi Vazirani: I would not say growth if there is a strategic move by the group that they consider India to be the competitive market and at the same time they consider Vietnam, Indonesia, Mexico as well. So it is not that they will put all the eggs in one basket.
Ashish Konaje: Got it. Thank you and good luck.
Hardevi Vazirani: Thank you.
Operator: Thank you. Next question is from the line of Karan from IIFL Capital Services Limited. Please go ahead.
Karan Kadmawala: Hi, good morning and thank you very much for the opportunity. My first question will be regarding the Automotive Technologies segment. It has been growing very fast, like almost 30% to 40% Y-o-Y growth. But now since the GST cut will be in the base starting October onwards, do we expect the segment to slow down? If yes, how much can we expect it to grow, like 10%, 15%?
Harsha Kadam: Well, that's a question I think the market will tell us what's the speed of growth because, yes, the GST 2.0 was a kind of a kick-starter for the automotive segment and there are news that yes, it's going to kind of find its height and stabilize there. Now, what percentage of that's difficult to guess. But looking at our customers, discussing with our customers, they are predicting that this is going to go well into 2027, at least for some quarters of 2027. That's the indication. But beyond that, we do not have so much visibility.
Karan Kadmawala: Understood, sir. Second question will be, how much is the split between PV, CV tractors, and two-wheelers? What is the sensitivity for us?
Harsha Kadam: I would say, because PV obviously is a stronger play for us because on the engine component side as well as on the transmission side, power transmission, and chassis side of portfolio. Commercial vehicles is something we have started to increase our presence as such. We still have some more offerings for the commercial vehicle sector, which we want to bring to the market. Also what is happening is with the talks of the BS6 now moving towards BS7, likelihood 2029, the entire engine portfolio and the transmission portfolio would go through a revamp. Correct? Because obviously the emission norms would drive changes, so we are gearing up for that as well. Clearly, we are pretty optimistic and bullish the way the passenger vehicle industry and the commercial vehicle sectors are doing. Correct. I think our task is very well cut out there.
Karan Kadmawala: Understood, sir. Lastly, regarding our localization effort, I believe we are close to 80% and very high in Automotive Technologies, but slightly lesser in industrial segment. So it should reflect in falling purchase of traded goods as a percentage of revenue. Right? Right now we are around 20% to 25%. So do we expect this ratio, which is the purchase of traded goods to revenue to fall down in the coming years because of our localization drive?
Hardevi Vazirani: That is the intention. Because the traded goods, as anybody would know, is a low margin business because of the high custom duties and freight, et cetera. Yes, that is the intention that earlier we had kept the target of reaching 80% of localization. We have moved that target now to 85%.
Harsha Kadam: Yeah. Also, I think, if I may add, it is not 25%, we are already around about below 20% of traded.
Hardevi Vazirani: Yeah
Harsha Kadam: business in the quarter. There was a marginal increase compared to the preceding quarter on the traded. But I think we are already there at 20% level.
Karan Kadmawala: Yeah. All right. Thank you, and all the best.
Operator: Thank you. Next question is from the line of Rajiv from Centrilia Infotech. Please go ahead.
[Analyst] (Centrilia Infotech): Hi. Can you hear me?
Hardevi Vazirani: Yes.
Harsha Kadam: Yes.
[Analyst] (Centrilia Infotech): Yeah, hi. Congrats on a good set of numbers, sir. I have two questions. The first one is regarding Schaeffler's global acquisition of Vitesco. As you guys know, Vitesco India is a separate unlisted subsidiary now. So is there any plan of folding that into the listed company in India? From my understanding, they do a lot of power electronics and that kind of stuff, which is a very future-oriented business. As a shareholder here, you could benefit if it gets folded into this company. That is my first question. The second question is related to the shareholding of the parent. There has been some news in the market about the parent reducing the stake from around 75%, 74% that they have currently to something lower through a share sale. Can you comment on that? Thank you.
Hardevi Vazirani: First and foremost, there is no such plan of merger of Vitesco India with Schaeffler India Limited on the card as of now. Absolutely, there have not been discussions on that. So far as the shareholding, whatever you read in the SEBI disclosure that the promoter has planned to come down to two-thirds, which means he is still keeping significant control. That means 68%, close to 67%, 68%. So it is only minor monetization of shares.
Harsha Kadam: I think, Ashish, this is like any shareholder who wants to monetize it, right?
[Analyst] (Centrilia Infotech): Correct.
Harsha Kadam: Only thing is, being the largest shareholder of the company, it is our responsibility to inform the stock exchange. It is a governance matter. We have done our responsibility. We have fulfilled our responsibility. Right. Beyond that, there is nothing that is being discussed, nor thought about, nor talked about.
Hardevi Vazirani: They have just expressed the intent of doing that.
Harsha Kadam: Again, it is an intent. It is not an action that is implemented. We, as a very highly governance-focused company, want to keep everything transparent, so we have informed the stocks. That is about it. Coming back to your previous question, I am sorry, what was that for?
Hardevi Vazirani: Vitesco.
Harsha Kadam: The Vitesco one. Let me clarify that, yes, as you said, these are two different companies, but that does not mean that Schaeffler India Limited is not offering the Vitesco portfolio to its business channels, and we are doing that already. What it means is that Vitesco could still be producing the part, but Schaeffler India Limited is selling the part. To look at it, because in front of the customer, it is one company that is doing the offering and that is Schaeffler India Limited and we stay that course.
[Analyst] (Centrilia Infotech): Can I ask why, if Schaeffler India is selling the Vitesco portfolio, can you elaborate a little bit on why we are not folding that company into our company? Because that would make the most sense, because otherwise, there is a possibility of two group companies competing with each other. If I am correct. Am I reading that correctly, or am I wrong?
Hardevi Vazirani: No, I think-
Harsha Kadam: You are reading it wrong. Why? Because at a parent company level, it is already one company, correct? In India, since Schaeffler India Limited is the only listed entity outside, we still have to go through this process. If you ask me, when will it be done? Will it be done? I have no answers for you today. Okay? But rest assured, in terms of the market, in terms of the customer, in terms of the business, it is one company and we offer the portfolio as such.
Hardevi Vazirani: There is no competitive.
Harsha Kadam: There is no competition at all.
Hardevi Vazirani: Competition at all.
Harsha Kadam: Yeah.
Hardevi Vazirani: Because our products that Schaeffler India Limited produces
Harsha Kadam: Complementary
Hardevi Vazirani: are complementary, not
Harsha Kadam: Yeah
Hardevi Vazirani: I mean, there is no competition. The products are different.
[Analyst] (Centrilia Infotech): Okay, got it. Thank you.
Operator: Thank you. Next question is from the line of Varun Jain from Dolat Capital. Please go ahead.
Varun Jain: Yeah. Hi, I think I got cut off previously. So, ma'am, I had a question on the segmental margins on the statutory reporting.
Hardevi Vazirani: Yeah, I actually answered it already, but I will repeat it. So yes, in the mobility solutions, the impact of input price increase is lower than B&IS. Plus, whatever increase has taken place within mobility, they have been largely been able to recover already. That's why you see this difference.
Varun Jain: But, ma'am, the mobility margins have fallen and the other segments, which is industrial, has risen. So that would be contrary to what you are suggesting.
Hardevi Vazirani: So there is a sales mix within the Automotive Technologies, which is playing its part as E-Mobility. Currently it is having its developmental costs, et cetera, which are going in the cost of production. So there is adverse sales mix.
Varun Jain: When it is adverse, what segments are higher weighted? What are the lower margin segments there?
Hardevi Vazirani: The conventional are always the better margin and the new products which are introduced are always expensive.
Varun Jain: Yeah, got it. And ma'am, my next question was on your export piece. Intercompany exports have been very strong, but my question is that, is it because there is some plant shutdown in Europe or they have lowered the production from some plant and now India is being used as a sourcing base. Is that the reason?
Hardevi Vazirani: No, they have not shut down the plants. There was a plan as group had announced that there were planned relocations to the multiple locations, Mexico, China, Vietnam, India, which has happened over a period of several years. Whatever are the capacities available at each location, they get the order book. India gets its fair share based on the availability of the capacity after serving domestic market.
Varun Jain: But since this plant relocation, it is like a kind of a medium-term thing. This export momentum of 25%, 30%, 35% growth should continue for the next couple of years, at least?
Hardevi Vazirani: No, at least relocations are not happening in a big way in the recent past.
Varun Jain: Okay. For CY 2026, company had guided for INR 500 crore of CapEx. In that, I think for this year, you will exceed that number. Can you tell us the breakup of CapEx in Eaccel versus Shoolagiri Phase 2 versus Savli wind bearings and additional railway like?
Hardevi Vazirani: No, we will be realizing those INR 500 crore shortly, but the breakup cannot be shared.
Varun Jain: Sure. Is there any guidance on what the CapEx will be like in CY 2027, CY 2028? Will it be higher than this?
Hardevi Vazirani: I am averaging close to this number.
Varun Jain: Okay, but can you
Hardevi Vazirani: can be slightly up, but I cannot put an exact number to it because the budgets are still under preparation.
Varun Jain: That is fine, but if you cannot give the breakup, can you tell us some commissioning milestones for Shoolagiri Phase 2, Savli wind bearing expansion?
Hardevi Vazirani: Savli as well as Shoolagiri will continue to have the construction on new halls next year as well. I can only say that.
Varun Jain: Okay. Got it. That is all from me. Thank you, and all the best.
Hardevi Vazirani: Yeah.
Operator: Thank you. Next question is from the line of Apoorva Desai from Kotak Securities. Please go ahead.
Apoorva Desai: Hi team. Congratulations on a good set of numbers. My question is just a simple follow-up on the stake sale numbers. I wanted to understand the rationale between selling that 7% to 8% share. Is there a particular rationale behind it or something, or is it just a normal stake sale that is going on?
Hardevi Vazirani: At this point of time, actually, nothing is known other than what we have already intimated on the SEBI to the exchanges. At this point of time, we are not aware of the intent. It is just that we know that there is an intent of monetization.
Apoorva Desai: Oh.
Hardevi Vazirani: We actually do not have even exact number of shares or percentage.
Apoorva Desai: Okay. All right. Okay, thanks a lot. I will just draw back in the queue.
Operator: Thank you. As that was the last question for today, I now hand the conference over to Ms. Gauri for closing comments.
Gauri Kanikar: Thank you, everyone. Thank you for joining us today. If you have any further questions, please do reach out to me at gauri.kanikar@schaeffler.com. We now conclude this call. Thank you, and have a good rest of the day.
Operator: Thank you. On behalf of Schaeffler India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
