Varroc Engineering Ltd
(NSE:VARROC)
₹
814.95
-9.3 (-1.13%)
Market Cap: 124.54 Bil
Enterprise Value: 131.74 Bil
PE Ratio: 63.83
PB Ratio: 7.08
GF Score: 82/100 
Q1 2027 Varroc Engineering Ltd Earnings Call Transcript
Aug 06, 2026 / 11:30AM GMT
Release Date Price:
₹737.85
(+2.82%)
Key Points
Positve
- Consolidated revenue grew 29.9% year-on-year to INR26.3 billion, driven by strong growth in both India (28.6%) and overseas (45.6%) operations.
- Revenue from electric vehicles surged 87% year-on-year, now accounting for 15.8% of total revenue, reflecting strong EV adoption and market leadership in e-powertrain.
- Net new business wins with annualized peak revenues of INR5,991 million, including significant e-mobility volume expansions and a 4-wheeler lighting win in Thailand.
- PBT margin improved by 20 basis points year-on-year to 4.3%, with India operations reporting a robust 10.6% EBITDA margin and 7% PBT margin.
- Capital efficiency metrics improved significantly: ROCE rose to 24.6%, ROE jumped to 16.4%, and annualized EPS increased to INR20.3 from INR11.5.
- Overseas losses are sequentially reducing, with expectations of EBITDA breakeven in Romania by Q4 FY27 and a long-term target of 10% PBT in 3-4 years.
- The company maintains a comfortable balance sheet with net debt-to-equity at 0.28 and net debt-to-EBITDA below 0.6, supporting future growth investments.
- Management raised its full-year growth ambition to 20-25% revenue growth, up from earlier mid-to-high teens guidance, reflecting strong demand momentum.
- Appointment of Eric Hammond as CTO brings 25 years of global automotive technology leadership, enhancing capabilities in electrification and software-defined vehicles.
- The company is expanding its customer base beyond Bajaj, with engagements with top EV players and new OEMs, including potential opportunities from Bajaj's takeover of KTM.
Negative
- EBITDA margin declined to 8.5% from 9.5% year-on-year, impacted by war-related commodity price inflation (0.75% impact) and lower-margin tooling sales (0.8% impact).
- The company faced labor challenges in April and May in its own plants and supply chain, affecting EV powertrain volumes and contributing to lower-than-expected growth.
- Net debt increased by INR316 million quarter-on-quarter to INR5,268 million, driven by higher working capital (INR441 million) due to increased revenues and front-loaded CapEx.
- ASPs for EV powertrain products declined by high single digits year-on-year due to product mix changes, potentially pressuring revenue growth relative to volume growth.
- Overseas operations continue to incur losses, with Romania electronics business still not at breakeven, and the company expects to reach EBITDA breakeven only by Q4 FY27.
- The company faces ongoing risks from commodity price volatility and global geopolitical uncertainties, which could impact future margins and recovery timelines.
- Tooling sales in Q1 were significantly higher than normal, at INR70 crores, and carried lower margins, negatively impacting overall profitability for the quarter.
- The company's growth is heavily dependent on Bajaj Auto, which remains a major customer, and despite diversification efforts, the customer mix has not changed dramatically.
- Management refrained from providing specific margin guidance, citing one-time impacts and recovery timelines, which may create uncertainty for investors.
- The company's ambitious INR20,000 crore revenue target by FY31 relies on significant order book wins and execution, with no guarantee of achieving the 10% PBT margin in the medium term.
Operator
Ladies and gentlemen, good day, and welcome to Q1 FY27 Varroc Engineering Limited post results conference call hosted by Equirus Securities. (Operator Instructions) Please note that this conference is being recorded.
I now hand the conference over to Mr. Mihir Vora from Equirus Securities. Thank you, and over to you, sir.
Mihir Vora
Equirus Securities Pvt Ltd - Analyst
Thank you, Operator. Good evening, everyone. We are pleased to invite you to the Q1 FY21 Post Results Conference Call of Varroc Engineering. The management team will be represented by Mr. Tarang Jain, Chairman and Managing Director Mr. Arjun Jain, Whole Time Director and CEO, Business Unit I; Mr. Dhruv Jain, Whole-Time Director and CEO, Business Unit II; Mr. Mahendra Kumar, Group CFO; Mr. Bikash Dugar, Head IR; and Vishal Raval, Head Finance Controller. So without further ado, I now hand over the call to Bikash for the disclaimer.
Bikash, over to you.
Bikash Dugar
Varroc Engineering Ltd - Investor Relations
Yes. Thank you, Mihir.
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