Rico Auto Industries Limited (RICOAUTO) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Ricoh Auto Industries Limited Q4 and FY26 earning conference call. As a reminder, all participant line will be in listen-only mode, and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Before we begin, This conference call may contain certain forward-looking statements about the company, which are based on belief, opinion, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. From the management we have with us today, Mr. Arvind Kapoor, Chairman, CEO, and Managing Director, Mr. R.K. Meglani, Executive Director, Mr. Kaushalendra Verma, Executive Director, Mr. Naveen Siroth, Chief Financial Officer. I now hand the conference over to Mr. Kaushalendra Verma, Executive Director from RICO Auto Industries Limited. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us for the RICO Auto Industries Limited Q4 and FY26 earning conference call. We are pleased to report that Ricoh Auto Industries achieved its highest revenue during FY26, supported by healthy domestic and export demand, operational improvements, and ramp-up of new programs across business. We are OEM suppliers, and our export business in US and Germany is growing despite of ongoing geopolitical issues. Our export to the US and Germany will grow to 2x in the next two years. Let me begin with the brief overview of the microeconomic environment which continues to remain supportive for the automotive sector. Despite global uncertainties, India continues to remain one of the fastest growing major economies globally with GDP growth projected at around 7% for FY27. Strong domestic consumption, government structure, expanding and continued focus on manufacturing and localization continue to support growth across sectors. Moving to the automotive industry, the passenger vehicle segment witnessed healthy growth during FY26 with production volume increasing by around 9% to an all-time high of approximately 5.5 million units. While EB adoption also accelerated with electric passenger vehicle penetration, increasing to around 4.2% during FY26 from 2.6 in the previous year. The two-wheeler segment also delivered strong performance during the year, with production volumes growing by around 12% to approximately 26.6 million units, surpassing the previous industry peak. Electric two-wheeler adoption also continued to improve with EV penetration increasing to around 6.5 percent during F526 from 5.4 percent in the previous year. Looking ahead to F527, the industry is expected to maintain healthy growth momentum with passenger vehicles expected to grow by around 5 to 7 percent. Two-wheelers by around 6% to 8% and commercial vehicles by around 4% to 6% and three-wheelers by around 9% to 10%. EV penetration in the two-wheeler segment is also expected to improve further to around 7% to 8%, which continues to create opportunities across hybrid and EV-related platforms. Talking about Ricoh, the business environment remained positive during the year, supported by healthy domestic demand and ramp-up of new programs across businesses. During the year, Almonium and other raw material prices remained volatile due to fluctuation in the global commodity market. However, healthy demand conditions and customer pass-through mechanism helped us to manage the impact with limited effect on margins. We are under discussion with our customer to renegotiate our RM settlement cycle and also discussing renegotiating on the components which is impacting our margin. We are also reviewing our entire portfolio of our business, specifically identification of the low margin products, and we'll be negotiating with our customer to improve product profitability. We also continue to strengthen our business pipeline with new orders across customers including Toyota, Maruti Sujiki, Hero, Bosch, Cummins, and Norbramse. These programs across transmission, braking system, engine, and EV-related applications provide good visibility and are expected to support future growth over the coming years. Apart from the automotive business, we are also seeing increasing traction in railway and defence. Supplies have started improving gradually, and these businesses are scaling up, utilizing our existing manufacturing infrastructure and engineering capabilities. Now, I would request our CFO, Mr. Naveen Saurak, to take you through the financial performance of the company. Thank you.

Thank you, sir. Good evening, everyone. I would like to highlight that the growth during the quarter and the year was supported by healthy domestic as well as export demand, ramp-up of new programs, and improved business across our key segments. A consolidated Q4 FY26 highlight, revenue student INR, student 677 CR in Q4 FY25, including an export of 102 CR. EBITDA stood at INR 47.8 CR with EBITDA margins of 7.1%. PAD stood at INR 6.9 CR. On a consolidated FY26 highlight, revenue stood at 2477 CR, up 12% year-on-year, and the highest-level annual revenue for the company, which includes an export of 395 CR. EBITDA tour at 223 CR with EBITDA margins of 9%. Pat stood at INR 52.4 CR as compared to INR 19.2 CR last year. I would also like to highlight that there were a couple of non-recurring impacts that had impacted the profitability in the current financial year. One, the labour code impact, which is almost 3.6 CR in Q4 and 11 CR for the entire year. Further, there was a lag settlement impact, which was 11 crores for Q4 and 19 crores for the entire financial year. On the lag impact, as KV sir has already highlighted, that we are renegotiating with the customers to bring the RM settlements on a monthly basis, and I am glad to share that 75% of the customers by value have already accepted our request. On the segment-wise performance, aluminum business revenue stood at 2155 CR during FY26, contributing around 88% to total revenue. Ferris business revenue stood at 322 CR during FY26, contributing around 12% to total revenue. Exports for FY26 stood at 16% as compared to 15% last year. On CapEx side, the investment in Husur is progressing as planned. The facility is expected to become operational from September 2026 onwards and will primarily cater to hybrid and EV related programs for key OEM customers. Along with that, the company has also received an approval from Tamil Nadu government for a subsidy of around 39 CR, which will start accruing from current financial year and will be available for the next 10 years. The company has also secured a new order worth approximately 2,500 crores over a program life of five years, providing strong visibility for future growth. On the balance sheet, we continue to maintain focus on working capital management and cash flow generation during the year. Working capital days improved to seven days from 33 days last year, while the cash flow from operations to 331 CR during FY26. Net debt as on March 26 stood at 686 CR as compared to 653.1 CR last year. Looking ahead, we remain optimistic on the business outlook supported by healthy domestic as well as improving exports, strong order pipeline, and increasing participation across hybrid and EV platform. Thank you. Now we are open the floor for questions.

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 handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. A reminder to all participants, you may press star and want to ask questions.

A reminder to all participants, you may press star and want to ask questions.

Till the questions come in, we can just add a little here. The railway business is coming up fast, and RDSO has given us approval, and more components are also getting approved. And, in fact, the first lot was dispatched just about four or five days back, and they should continue even further. And we are hoping to do pretty well as far as the railways are concerned. Even in the defense, we are pushing the defense, and besides whatever we are manufacturing, that's mainly the shooting ranges, we would also be adding more to the portfolio. This will be for this particular year. The exports would grow by almost about 15-20% this year, and primarily to Germany and to USA. And the domestic market will also go up this year. Unless, of course, the global geopolitics which is happening and that brings about some disaster, I think we are ready to reach the level that we are talking of now.

Thank you. The first question is from the line of Deepak Podar from Sapphire Capital. Please go ahead.

Some audible, sir. Thank you very much, sir, for this opportunity. So, just first of all, I wanted to understand, I mean, there's something on the margin front. I mean, fourth quarter, we saw a sharp decline in our EBITDA margins, an even cross margin. So, what are the key factors that affected it, and how should one look at your growth and margins for FI27?

So, Deepak, as I admitted in my initial speech, there were two non-recurring impacts which are there in our profitability. So, if we look at on a console level for Q4, the impact of labor code is almost 3.6 CR and a lag impact of 11.22 CR. So, if you include these and look at the EBITDA, the EBITDA margin from 7.6% rises to 9.8% for the Q4. Similarly, if you look at...

Can you just repeat, this 3.6 crore's impact was on labor code? 3.6 crore's impact was on labor code in Q4. And the lag setting impact of raw material is 11 CR for Q4. On raw material? That is the...

So, if you include these non-recurring impact which is there in Q4, I guess the EBITDA which is currently appearing at 7.6% will rise to 9.8. And similarly, if you look at the entire year, currently the EBITDA is hovering at around 9 percent, wherein the impact of labor code is 11 CR, and the impact of lag settlement of raw metal is around 19 CR. So if you exclude these one-time impact, the margin increases from 9 odd percent to 10.25 percent.

Okay. So for the entire year, this figure is 11 crores and 19 crores, right?

That's correct.

So your adjusted margin is 10.25%?

Yes.

As again, 9% last year. And how should one look at the FI27?

Currently, what is happening, there are a couple of renegotiations which are happening across customers, as KV Sir mentioned, that we are reviewing our business, covering all the portfolio, looking at low margin products, and there will be renegotiations which will be happening around those products, as well as supplements of all other conversion costs, which has also seen an inflation, other than the raw metal, which in any case gets settled. So, we expect that we should see an improvement in the overall margin levels as well, going beyond 10.25% that we have achieved last year. If we exclude the impact, one-time impact.

Okay. So, higher than 10.25% is what we would be looking at in FI27. Yes.

If everything else remains as it.

And how should one look at your revenue growth?

So, revenue, I guess, we are just concluding our budget, but if you look at, I guess, in the overall basis, we are expecting to cross 3,000 crores.

And something on the order side, you mentioned 2,500 crores order rate that you have got over five years. So this FI27, this new order will give us 500 crores incremental?

This is basically the program which we have launched this year. The ramp-up will happen for those programs. Plus, we are going to launch companies which will bridge this gap to 500 crores.

So the investments for the current program which have been launched, the investments started actually last year and even the year before that, like getting the land, buildings and all that. But from this year onwards, we will start seeing that everything is actually flowing in. And that's what this year and it will peak next year. So there are always about 40 launches which are taking place at the moment. And all new products, and you'll see the impact coming up in the coming quarters. Oh, actually, end of the third quarter to fourth quarter.

Okay, got it. And then just one last thing, I mean, if the renegotiation which is happening across customers, if it's just in case we do not get the required increase or the escalation that we are looking for, so does that mean that this 10.25% margin is what we would still be able to make or we will see some pressure there?

So, because 10.25% is the situation as is. So, whatever further negotiations that we are able to do, the customer will be over and above this.

We are very confident that the commodities, of course, the other consumer items that we use in our system, which are imported because of the dollar price change, they've gone up. The customers recognize that, and the oil usage that we have, the gas usage we have, and we are already in a discussion with the customer for those.

I got it. That's very helpful, sir. I wish you all the best.

That's it from my side. Thank you.

Thank you.

A reminder to all participants, you may press star and 1 to ask question. Next question is from the line of Parag Thakkar from Fort Capital. Please go ahead.

Hello?

Yeah.

Hello? Yes, we can hear you. Yes, sir. So basically, I just wanted to ask you that this 11 crore, when we are saying it is non-recurring, in Q4 and 19 crore for the full year, it is for the raw material prices which has gone up, which you are negotiating with your customer, right? And you said 75% of that is accepted.

So what we have said is that, see generally what is the practice is to have a prospective settlement which are happening with the customer on a quarterly basis predominantly. So since the raw material is increasing quarter on quarter, we are always doing a catching up job. Now we are re-negotiating with the customer to cut down the settlements on a monthly basis and for that 75% of the customer by value have already agreed to the fact. And the negotiation for the loss which is already happened is permanently going on.

Sir, so this 11 crore for the quarter and the 19 crore for the full year, it will be automatically increased in FY27, right?

So, so this one, whatever price which will move in a monthly basis, which will settle with the customer in a monthly basis. Second, the negotiation is for the loss which is already incurred for the Q4 as well as the entire year. So that discussion is parallel. So, the monthly settlement is already agreed, whereas the recovery of the loss, which was incurred last year, is parallelly going on. So, whatever amount that we are able to negotiate will directly flow to the bottom line.

Correct. Understood. So, but what is the probability that whatever amount right now we are saying, which we have lost in FY26, And so you are adjusting EBITDA margin accordingly. When you say that if you normalize it, then your EBITDA margin would have been, say, 9.5% or whatever. So for the full year. So what is the probability that this 11 crore or for the quarter or 19 crore for the full year will 100% come in FY27 in your back number?

So when we say that our EBITDA, if you remove the one-time impact, was actually 10.25%. So that 10.25% remains protected once we have agreed for monthly settlements. If we are able to negotiate on settlement of our last year losses, that will add on to the EBITDA margins that we are currently discussing.

Okay, okay, okay, that is very clear. And for railway and defence, what is the revenue opportunity or addressable opportunity for us over the next two to three years? How should we look at railway and defence playing out for us?

Railways, I think, are moving much faster than the defence because the clearances come at much easier and faster than the defence, but I think the defence requirements are more sensitive and they take a little longer for testing, etc. So does railway also do, they do a lot of testing, but we also do a lot of testing for them in our plants. And we are hoping that this year, in the railways, we should be crossing 100 crores as far as the railways are concerned. And that's what our internal target is, and we should be able to achieve that. Defense is a little slow, and we are targeting, we are trying to see how do we cross 50 crores this year, and next year, in the next two years, how do we double it further. Now, this is on the current system that we are producing as a plan to the defense. But the railways, we are more aggressive, and those places are coming much faster. And as railways are modernizing, and the 200,000 crores are being invested on modernization of the total railways, that includes the lines and the length of lines, etc., etc., we are going to be major participants there.

When we are saying this, current year's revenue of 2480 crores is going to 3,000 crores. So, it is almost around 25% jump, while we are saying that two-wheeler is going to grow at 6% to 8%, and others also are growing at below 9%. Am I audible?

Yeah, yeah, very clear.

So, when OEM sales are growing at below 10%, and we are confident of achieving more than 20% revenue growth, is it coming from the new products, 40%?

Yeah, Parag, the projects we had taken up two years back in last year, where we started investments, and those are factifying now, and those are for the exports as well as the domestic market. So that's there, and those items we are single suppliers to all the customers, and those items are going to see a major growth. And that's both for the exports as well as the domestic market. And so it's a program which we actually started investing a couple of years back, which are rectifying now.

Okay, okay.

We are not talking of just a linear growth, that the customers are growing by 5%, but we are also growing by 5%. But we are saying we are getting the largest share of the market, and also we are picking up newer components like for hybrid and electric vehicles, etc.

Sure, sir. Great. And sir, railway and defence orders are coming at what kind of margin? It should be better than the current automotive margins, right?

We've just started supplying, so give us some time. They're obviously better than the auto margins, but I think give us one or two quarters and we'll actually tell you about the margin.

And sir, one last question was from my side. How should we look about net debt? Is it going to reduce or you're comfortable at current levels?

So if you look at overall, I guess we are hovering at around 3.75 times the leverage. And if you look at repayments which are scheduled over next 2-3 years is almost 110 CR annually. So I guess we are pretty comfortable even with the debt which is there in the books as of today. But we are still seeing a downward gliding path going forward. So 120 roads in any case will get knocked off every year over next 3 years.

Okay. And then one last question just to squeeze in that we had this property also, right, land on which our land is there and we have, there were some discussions that we can, there were some offers, bids in the market for that property. So any update on that if you would like to give?

Well, discussions are carrying on, and last time that we were offered 700 crores, and we had said no to that, and because we were looking for a much better price, a much better value, so that we could actually reward our shareholders, and so we are working on that, and we are getting better offers than whatever we had before.

Okay, okay. And so any timeline you are looking at? Over the next one year, can shareholders expect something?

If it happens, it will happen in six months. If it happens, we don't get the right price. We are not selling it.

Okay, sir. Okay. Thanks, thanks, thanks.

Thank you. A reminder to all participants, you may press star and want to ask questions. Next question is from the line of Hiten Borija from Sequin Investments. Please go ahead.

Yeah, yeah. Good evening, sir. So, my question is, you mentioned we are going to target 100 kudus from railway and 50 kudus from difference this year. Does the question number, what was the

revenue from railway and difference in FI26?

And so also, if you can throw some color and what kind of products or components we are selling to Railway, you can share some thoughts.

The railway we had just started, and the revenue was just about three to four crores last year, but all the approvals have come. There are, I think, 70 different types of assemblies and components that we are working on, and we've got approvals for one, two, three, three or four of them already, and the balance we should get approved in about another two months' time. Their teams are visiting us regularly, and in that, the requirement is huge with the growth that is happening, and once the approval comes, I think that approval should come within 10 or 15 days for the item which we have just, the samples which we have just dispatched. And once those start off, those are huge numbers. And in the defense, we are still struggling around 20 to 30 croods, and we want to cross 50 croods this year.

What kind of products we are supplying to railways?

Basically, these are bearing adopters, SC cast current inserts, which goes into the track.

Railway lines, and the railway line, the, what do you call those?

Track adjusters.

Track adjusters and distance blocks. There are many, many items.

Okay, okay. But, sir, if I'm not wrong, I think you...

Basically, where the investment is minimal, and we are using our current capacities, which are available with us.

Okay, okay. But I think you, in last con-call, you mentioned we are targeting something around 60-70

crores of revenue from railway and repair

in FI 26 itself. So, I think…

No, no. Because in the railways, even though we were ready with the productions, the approvals took a little longer time since now the approvals are there. So, that's why the confidence that we should be around 100 C.

Okay, so now the approvals are in place, yeah.

Yeah, yeah, yeah. It's a constant exercise. We have approvals about five, six different types of component assemblies, and further approvals, as we estimate example, we are getting more and more approvals.

Understood, understood. And your second session is on the capacity. So what is the current capacity utilization as a cube for both aluminum die casting and ferrous capacity?

In the iron side, our capacity utilization is in the region of about 65-70%. And in the aluminum side, it's also in about the same region. And of course, it could vary from the smaller capacity machines where the utilization is close to 95%, and the higher capacity machines, higher tunnel machines, we've been able to free capacities, and there we are We would be adding more components there. This also includes the capacities that we've freed for the capacity that would be required for this year, with the expansion that is taken place and the requirement of both the iron as well as the aluminium components.

Thank you.

A reminder to all participants, you may press star and want to ask questions. Next question is from the line of Deepak Podar from Sapphire Capital. Please go ahead.

Hello, I'm Adib. Yeah, Deepak.

Yes, sir.

Yeah, just one clarification. Now, because this was one-off in the fourth quarter, I just said margin was close to 9.5%, right? I mean, so from first quarter onwards also we'll see that trajectory, right? I mean, that 9.5-10% kind of margin because this was one-off that we saw in fourth quarter.

Yeah, even Deepak, as I said, even the lag settlements are getting agreed with the customer, 75% have already agreed. So we should see the kind of margin going forward starting from Q1 itself.

Okay. So from Q1 itself, we'll see 10% plus kind of a margin. I mean, would that be a fair assumption?

Yeah, that's correct.

Okay. Okay. Okay. Okay. That's it. Yeah. Thank you very much. Thank you.

Thank you. A reminder to all participants, you may press star and want to ask question. A reminder to all participants, you may press star and want to ask questions. As there are no further questions, I now hand the conference over to management for closing comments.

Okay, thanks everyone for joining today's call, and as we committed that, we remain focused for our business growth, and we are basically in a close coordination and discussion with our customers for the recoveries with respect to the RM and the lag impact, and we have already scheduled the monthly registration, which will help to mitigate the lag impact going forward in the year by 27.

So one more thing I'd like to add here is that besides the railways and the defense, we have been making machine tools for a very long time, CNC machines, 14 axes, 16 axes, 5 axes, 8 axes machines. So earlier we would make them only for ourselves, but now since we have created capacity, we have also started selling them in the market. And we've just done a first sale very recently, and hopefully I will be able to give you what would be the total sale that we have this year, but by next quarter I think we'll be able to share with you some figures in that.

Thank you. Thank you. Thank you so much. Thank you so much. Thank you. On behalf of RICO Auto Industries Limited, we will conclude this conference. Thank you for joining us, and you may now disconnect your line.