Schaeffler India Limited (SCHAEFFLER) Q1 2026 Earnings Call Transcript

Ladies and gentlemen, good morning, and welcome to the Schaeffler India Limited Q1CY26 Earnings Conference Call. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Ms. Kauri Kanekar for opening remarks. Thank you, and over to you.

Thank you. Good morning, everyone, and welcome to Shepra India Limited's earnings conference call for the first quarter ended 31st March, 2026. Today we have with us from the management, Mr. Harshad Kadam, our Managing Director and Chief Executive Officer, and Ms. Haddevi Vazirani, our Director Finance and Chief Financial Officer. Mr. Kadam will first take us through our presentation on the results, after which we will open the floor for questions. Thank you, and over to you, Mr. Kadam.

Thank you, Gavri, and good morning to all of you, and a very warm welcome to this earnings call of Schaeffler India Limited, the motion technology company. I would like to briefly take you through my presentation, and as I always do, I would like to start my presentation We also got an award from TBS Mobility, Where this is under the Vehicle Lifetime Solutions vertical of our business, and here again, they awarded us for engaging with them as a strategic partner, and this award is to commemorate the beginning of a good journey with TVS Mobility going forward as such. The third award I would like to draw your attention to is from Rail Analysis, and this is an agency that covers the railway sector specifically, and for the first time, we have been awarded as a very valued supplier for the Indian railways as well as for the metros. Now, specific to point here is our offering under the category of innovation in under-frame components and engineering, specifically pointing to the insulation coated bearings that we have been supplying to Indian railways and the metro applications as such. This enables superior performance and higher reliability of our products there. The next I would draw your attention to is a customer, the largest customer in India, which is Adani Power, and we were awarded for extensive engagement with strong on-the-ground engagement and a deeper distributor, all the distributive network, along with technical engagement with Adani Power for their thermal power plant that was set up in Mundur. And we were recognized for the innovative product that we were able to offer here. The next in line is a valued supplier award coming from ELEEN. And ELEEN, which is an worthwhile voice company. Now, here again, ELEEN manufactures generators for the wind turbine applications. And we have been awarded for outstanding contribution for quality as well as, you know, valued partnership engagement. And this is a testimony of the reliable products that we offer to the wind sector as such. Last but not the least, another award from John Deere, again, in the vehicle lifetime solution space, which is the aftermarket space for outstanding performance and making sure on-time deliveries towards John Deere in the aftermarket space. A platform that we have set with good equations with our customers and credentials with our customers. Let me move on now to take you to the next three items on my agenda of presentation. And I would like to throw some light on the current economy and the industry situation. I asked you to refer to slide number five here. And what you see on slide number five is the economic snapshot of the country. And clearly, the overall outlook of the first quarter for 2026 in India is one of a resilient domestic growth in spite of all the economic uncertainties, the geopolitical conflicts that prevailed in West Asia and also the prevailing trade pressures. Interestingly, if one were to look at the combined index of the 8, it increased by 4 percentage point in January 26, compared to the same index, if one were to look at the Jan 2025 numbers. So the production of cement and fertilizers and coal recorded a very positive growth in January this year, it says. Automotive has been on a strong trajectory of growth thanks to the steps taken by the government in last year pertaining to the GST 2.0 that was rolled out. All in all, inflation has crept up. However, it is still at manageable levels, and I'm sure the fundamental building blocks continue to deliver the numbers that are there in terms of clearly points to the resilience in the economic situation of the country. Yes, the current fee sensitivity with the depreciation of the Indian rupee, while it reduces the overall GDP size in dollar terms, you know, it affects the global ranking, but nevertheless, what is important is to ensure the stability of the growth rate in the country, and I think that it is well-poised, and we are seeing strong traction coming from many of sectors. as we continue. That said, let me move to slide number six, which is going to throw some light. As I already mentioned, you can see here the cement production grew by 8.4%, steel growing by 7.6% in the first quarter, and coal more or less has remained at the same level, where the high focus is on the renewable energy by the government of India, and the electricity generation also grew by about 3%. All in all, all the core sectors showing a positive direction of growth and thereby enabling manufacturers like us to leverage the growth momentum, and we continue to reap the benefits of that and the results of the last quarter's performance is a testimony to that. I move to slide number seven, and I would like to throw some light on the automotive sector performance, which has been on a strong traction footing in this quarter as well. As you can see, the numbers, the two- and three-wheelers, the production volumes have significantly gone up, 2.5 million two-wheelers produced in the month of March alone, yeah, and passenger vehicles too, more than half a million cars produced in the country in the month of March alone. Which has been a clear increase over the last year, same month, if one were to look at the numbers. Talking of commercial vehicles, which was languishing last year, you can see month after month strong production numbers coming out there as well. Tractors, on the other hand, also have seen much stronger traction, and thereby, if you see the automotive sector as a whole, has posted robust growth story for India compared to the last year. I move to the business highlights, and here I would like to draw your attention to slide number nine. Now, as you can see here, we have been able to post a robust growth performance and deliver $2,507 crores in the first quarter, which was a clear 18.8% more than Q1 2025. However, compared to the preceding quarter, we did have a drop of 5.1% compared to Q4 2025. While this was the situation on the top line, we did some course corrections in some of the sectors as we had to calibrate the top line versus the bottom line deliveries as well. So there was some calibration exercises that we have carried out, and the result of that is you see that drop in the top line. Also, some of these sectors, we have seen some liquidity crunch in the market, as a result of which the demand offtake came down a bit in these specific sectors. As you can see, we have been able to deliver 483 crores in the quarter and staying at 19% EBITDA as such. The profit after tax bringing in 319.7 crores, again, remaining compared to the first quarter, which was 12.8%, and stronger free cash flow generation as well. Although it does reduce compared to the preceding quarter of Q4 2025 as well as Q1, but nevertheless, there has been a positive cash flow into the system. While we have judiciously moderated our CAPEX spend looking at the market demand and the portfolio demands, but it does not mean that we are going to cut down our CAPEX. It's just a timing phase that we moderated for the quarter. However, as the customers' projects begin to take and evolve, we are going to continue our investment initiatives. So, overall, I must say it has been a reasonably good quarter performance from our point of view in spite of strong headwinds on the supply chain area, particularly with the Middle East crisis that evolved into the supply chain getting impacted. We have been able to weather the headwinds and continue to deliver and create value for all our stakeholders. I move to slide number 10, which I always pride upon, has been a pipeline of continuity of the business. What you see on the slide number 10 are the business development activities that we pursue diligently. And in the quarter, I am proud to say that in the automotive space, a lot of new businesses that we have secured in the quarter, particularly in the transmission application and heavy-duty clutch applications, as well as the hydraulic cam phases. On the aftermarket side as well, we have continued to expand our portfolio of offerings, particularly on many of the new products which we had to bring in, which had to conform to the BS6 requirement as the market demand went up. Bearings and industrial solutions, too. We had large, big wins in the quarter, particularly in the spherical roller bearings and in the housing area. Some of the large TRBs as well as the CRBs, the raw materials sector. So we have been able to secure strong business wins in the bearings portfolio as well. I move to now the financial highlights, and I ask you to refer to slide number 12. Our revenue from the operations, as you can see in the first quarter, as I already mentioned, 2,507 crores coming in was a clear 18.8% year-on-year growth. But over the preceding quarter, we dropped 5.1% and split the revenue that came in between automotive technologies and the four business divisions that we operate. What you see is the automotive, which encompasses the IC engines and the electric mobility both put together. The first quarter performance grew by 30.8% when compared to Q1 2025, while over the preceding quarter, we did have a marginal drop of 1.3%. Vehicle Lifetime Solutions also posted robust double-digit numbers at 18.1% over last year, but a marginal 0.6% drop when compared to the preceding quarter. Bearings and Industrial Solutions, on the other hand, we did some recalibration here, and as a result, you see over the preceding quarter, there has been a significant drop, which is about 14.3%. However, compared to the last year's quarter, you would find we have still done 4.2% growth. Exports also posted very robust numbers, as you can see, 32.5% compared to last year, and 6.6% over the preceding quarter. By chart, what you see with automotive technologies at about 37%, bearings and industrial solutions at 35%, the vehicle lifetime solutions at 12%, The message here is we continue to sustain the double-digit overall growth momentum. Yes, we did do some small calibrations in some specific sectors, some specific product portfolios, which was a planned activity that we have done so as to ensure that we continue to deliver the top and bottom line in spite of the strong headwinds that we have seen on the supply chain front due to the geopolitical situation. I move to slide number 13, which talks about the earnings quality. And as you can see, the first quarter, our EBITDA, we brought in about 483 growth at 19.3% EBITDA. And the year-on-year growth has been 18.6%. The quarter-on growth, there has been a drop to 4.5% drop. Now, where has this EBITDA come from? The 483, as you can see, is clearly coming from a gross margin improvement has brought in 165 crores into the system. And while we had some employee cost, as well as some other incomes, which were marginally smaller numbers that dropped. The profit of the stats obviously has improved to 319.7 crores at 12.8%, which has again registered a strong year on your growth marginal drop when compared to the preceding quarter. And, you know, we continue to keep the focus with all the countermeasures and the corrective actions that we are registering is exactly in line with what we plan. And we continue to sustain and deliver the positive value to all of stakeholders. I move to slide number 14, which talks about the working capital in the CapEx situation. And I must say that we have been able to do much better in terms of the working capital management. As a percentage to sales, we have registered at about 17.9%. And we will continue to keep our focus and efforts on our inventory levels, as well as the working capitals to make sure that we stay healthy. Talk about CapEx. As I said, we had marginally reduced the investments, but nevertheless, close to 80 crores still continue to be the investment within the quarter. And as a percentage to sales, we are at about 3%, 3.1%. Talk about pre-cash flow. We had a positive cash flow into the system of about 137 crores coming in in the first quarter compared to the Q1 of last year, It was about 237 crores that came in. This was a little bit impacted with some of the liquidity crunch that we have been hearing from our customers in the marketplace as well. I move to slide number 15, which throws light on the performance indicators. I already touched upon the revenue, and what you see here is the revenue growth of year-on-year at 18.8 percent and an EBITDA margin at 19.3 percent with an EBIT margin of 15.8 percent and a profit of the tax of 12.8 percent. And I think we have done a reasonably good result that has been delivered by the teams here. That said, let me move to slide number 16, where I would like to throw light on the consolidated financial results of Shackley India Limited as well as KRSV Innovative Auto Solutions Private Limited. Credit KRSV, on the other hand, delivered a revenue of 78.7 crores in the quarter. Still has to break even when it comes to the profitability side, and it has registered an EBITDA of minus 13.4, and an EBITDA before exceptional items is 15.1%, and the earnings before taxes is minus 19%. Overall, the consolidated result, 2,585.6 crores revenue, 19.1% on the EBITDA registering, and 15.6% EBIT margin at a consolidated level. Moving on, I move to my last slide, slide number 17, which is summarizing our year-on-year growth, double-digit growth momentum we have been able to sustain. I mean, we have seen mixed sectoral speeds, growth rates, automotive performing very strongly in the market. The demand is super strong there. Vehicle lifetime solution as well, we have seen strong demand. Export has really come back again very strongly. Industrial, while the market is definitely positive, we have to do some course corrections along the way. And this has helped us to also register a very sustained earnings quality performance. And we have also increased our localization levels, and our localization levels have reached up to 80%, and we continue to keep the focus on capital efficiency going forward as well. I already touched upon the working capital levels. We will continue to sustain these good levels, and the CapEx remains on track. We will monitor the market demand versus the product portfolio readiness and accordingly keep switching the tracks to make sure that we invest in the market going forward to continue to keep delivering, creating, and delivering the value that we... I come to the end of my presentation. I open it up.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Raghu Nandan from Nuama Research. Please go ahead.

Thank you, sir, for the opportunity. Congratulations once again on stellar numbers. Firstly, on the demand side, for the industrial space, can you indicate how do you see the outlook for CY26, and how do you expect key categories like wind, railways, off-road, and others to do for you?

Yeah, thank you for that question, Rabu, and as I said, in spite of the strong headwinds that we are facing on our supply chain front due to the evolving situations in the Middle East and West Asia, we have continued to keep our focus. We started off our crisis management team meetings on a daily basis to secure the supply chain continues to stay intact. Now, that said, will the situation continue in the succeeding quarter? Well, I think it's a crystal ball question, the way it is evolving. All I can say is that as an organization, me and my team, we are prepared, well prepared, to ensure that we continue to manage and sustain the numbers that we have been delivering. Our focus will remain there. As we see, we do not see major concerns in terms of delivering the numbers that we are committed to deliver this year. Of course, it would require a lot of monitoring as well as agility on our part, and I can assure you that our team is well prepared and they are fully aware of the current situation.

Noted, sir.

On the automotive technology side, we've had an extremely strong growth at 31%, And when we compare with the underlying automotive production growth, which is at 15%, there has been a strong outperformance. You have been increasing your valid share.

As I already said, the traction in the automotive sector has been very good and strong. And since we are present in all platforms, all kinds of technology platforms, whether it is the ICE engine or the hybrid technology or even in the EOS pretty active, I must say when one looks at the ICE application or the ICE engine application, I think almost all the product portfolios have done very strong in the first quarter for us, Clearly pointing to a good traction in the automotive space. So, hybrid two has definitely done well. Clearly, we see that the automotive sector demand trend should continue the way it is, and we believe that it will remain robust going forward as well. So, we are optimistic on that front when it comes to the automotive sector.

No, that's fair. Last quarter, during the earnings call, you know, the expectation on exports were more moderate at 5% to 10%, but good to see that we have started exports on a very strong growth of 30%. So how do you see the outlook? Is the outlook improving? Is it surprising to you on the positive side? How do you see the full year, given that there are all these geopolitics issues?

That's a very good question. So, yeah, if we see year-on-year quarter, we see over 30% growth. But if we see over Q4, because we ramped up significantly last year from Q1 to Q4, the growth is at 6.6%. And very likely, if we go run rate of the full year, we will be close to 10% to 12%.

Understood. Thank you for that. On the side, there has been an increase in the commodity costs. Is there a pass-through based on indexation, which happens automatically with the customers? Is there any increase in any of the other expenses like power cost, freight cost, insurance cost? Anything you can comment whether we should be aware of any cost increases which can impact in the coming quarters?

Raghu, as you are aware with the situation in West Asia, clearly has resulted in choking of the supply chains for the fuel has been impacted and the prices definitely have gone up there. So, that means our input cost when it comes to usage of these certain categories of fuel has certainly gone up. What we have done is we have looked at alternate sourcing routes. We have also looked at stocking up some of these items, possibility of looking at compensations coming from our customers. However, I think this is early days because it's just been a month and a half since the inflationary increases have happened. I guess time will tell us how successful we will get in terms of adjusting these cost increases or getting compensation for this.

Thank you, sir, for the details.

Raku, I would like to ask you to please come back into the queue for follow-up questions. Sure.

Thank you so much.

Thank you. We take the next question from the line of Mukesh Taraf from Evendus Park. Please go ahead.

Yes, sir. Good morning, and thank you for the opportunity. Just looking at the bearings business, especially in the industrial segment, I say, I mean, last few quarters, it's kind of remained at this level in kind of plattish to maybe single digit growth or single digit decline. If you could kind of give some sense, is it just weak end market system, or is there some competitive intensity going up with more localized industrial bearing capacity getting built in the country? You would also kind of, in your opening remarks, mention about some calibration exercises in the bearing space, especially. So is this also related to that? So it would help in getting a perspective on this.

Thank you, Mukesh. Vish, I guess you asked the question and answered it to yourself as well, wherein you said there are multiple causes which are contributing to it, not one. Rightfully, yes, what you said is our localization effort still continues because we believe we want to be closer to our customers when we make the product. So that still continues, and I'm happy to share that our localization percentage has actually gone up to 80% now. So we are on the right track there. However, while we are on this journey, we also look at the product mix, the market mix, the application mix. And as I said, we want to continue to deliver the value that we commit to our stakeholders. And if we have to do that, calibration is always a part and parcel of the game. So we will be continuing to do this. So, we decided to do this in the quarter, first quarter, right at the beginning of the year, so that, you know, the rest of the quarters, we are able to sustain these deliverables that we commit. That's my intent.

So, just a follow-up on this, the calibration is because of pricing pressures in the industry. Are you seeing, say, either imports, I mean, are competition importing and supplying at lower cost? Are they producing locally and supplying at lower pricing? And is there a general pricing pressure, and hence you're calibrating?

Well, that is one of the reasons as well that we see our competition is also intensifying their activity within India, and hence it is important that we recalibrate our portfolios as well. Where do we want to focus and how do we continue to grow as well as the profitability development for our organization? So this is something we do every year, and this time we did it in a little more concerted way that we decided to do the correct at the beginning of the year itself.

Got it, got it. In your opening remarks, you also mentioned that some subsectors saw demand of TIC coming down. Would you like to call out some specific end markets, say, CIMA and TIC, or something of that sort, or is that a very general comment that you made?

It was a general comment. Fundamentally, when you look at the mining sector, we have not seen much traction on the mining sector, whereas some of the other sectors, like infrastructure growth, is good. So anything related to infrastructure industry is doing good. We are seeing traction in the cement and steel related to infrastructure. So, the energy sector, we have seen some ups and downs, we have seen renewable energy still going strong. So, there's a bit of bad there. Overall, it can be better if all the sectors were firing on all cylinders, which is not the truth.

I mean, we are supplying the axle to the data heavier, as you had mentioned last year in one of the presentations. We also noted recently, data auto components is having a JV.

Now, Well, my answer to that would be that, yes, the complication is what it is out there. What is more important is, do we navigate through and still keep our strategic goal and focus and continue to drive along? I think we are well-placed with the kind of offerings that we bring, yes, to keep our focus on innovation so that we continue to differentiate our offerings with our customers. We do that. So, we are well-aware of what's happening in the marketplace, but we have a strategy also to manage that.

Thank you for listening. All the best.

Thank you. We take the next question from the line of Ankur Sharma from HDFC Life Insurance. Please go ahead.

Yeah. Hi. Good morning, sir. Thanks for your time again. Just going back to the previous question on the slowdown that we've seen on the bearing side. So just trying to get my hands around it. So one, of course, you said there were some supply chain issues. You also mentioned some pricing pressure also because of, you know, high local capacities from a peer. Would also one of the reasons be that demand itself is slowing down? So one is, of course, the supply, the other is competition. But just trying to understand, has demand also slowed down here on the industrial bearings? And if yes, which segments are you seeing that?

We have seen a bit of demand slow down in the aftermarket side of the industrial business. Surely. And there appears to be a liquidity crunch in the market as a result of which the cash flows to our distributor community has been impacted in this quarter. So surely that is something that we are aware of. So that is one of the business sectors where we are seeing some slowdown that has happened. Yeah. Amongst, of course, the slowdowns that have happened in some specific sectors could be in the power transmission or railways has been pretty good as such. There's been no slowdown there as such. And fundamentally, when it comes to bearing portfolios, this is where we see a difference. We have seen a little bit of a shift. It could be a temporary situation because what we have seen in the past and our past experiences, any equity crunch issue is a quarter. The next quarter, it gets corrected.

Yeah, it is seasonal. It is seasonal.

Just on the export side, you know, while what was mentioned was, you know, Q on Q, the growth rate, you know, obviously is down to about 6-8%, 6-7%. And just if you could talk about some of your key end markets, you know, how are you seeing those shape up more in the context, you know, for example, you know, the whole APAC, Southeast Asia getting affected a lot more because of this whole, you know, spike in crude prices and resulted impact on demand. So, if you could just talk a little bit more, what are you seeing on the ground in terms of exposure to some of your key geographies?

Our key geographies that we serve are Europe, China, some Southeast Asia countries, and Americas. And we do not see right now any dip in the chart. The order book for the year is solid. Currently, it's showing 10% growth, minimum 10% growth that we are likely to register. So, at this point of time, we do not see any challenges. In the last two years, we have focused on Southeast Asia business development in exports and if it's been improved now.

Great. That's very helpful. Thank you.

Thank you. We take the next question from the line of Bala Subramaniam from Aryanth Capital. Please go ahead.

Very good morning. Thank you so much for the opportunities. Sir and Madam, on that battery management system side, I think the order vanes is a concrete success. Are these standalone BMS controller vanes, or are they bundled with e-axle or thermal management models? And what is the average content per BMS in that vehicle, per vehicle? Right.

So, Bala, the battery management system, as you rightly pointed out today, it is a standalone unit that we are selling to the customers. Yeah. Now, are we integrating this in the e-Axel? I don't know if that's your question you're asking. As of today, no, but I think going forward, as the e-axle businesses start to evolve, it would probably get integrated within the, you know, the complete scope of offerings, yeah. But as of now, yes, we are selling it as a unit, and that's what the customers want us to do, answer to your question.

Yes, sir. And, sir, average content per vehicle, sir, in the battery management system?

Well, we cannot measure just with battery management, isn't it? Because we'll have to look at what all do we offer on a vehicle. All the products, whether it is bearings, whether it is engine transmission parts, whether it is, if it's a battery electric vehicle, is it a motor, the reducer, the power electronics that goes, everything. So we need to total it up, correct? And that's how we measure. We are not able to measure it combining both the ICE and the battery electric vehicle technology. We need to split them as separately. But it goes without saying, while on the ICE engine we supply a lot of component level offerings, on the battery electric vehicle we have the capability to offer a system level, which is the e-axle, complete with the motor, the reducer gearbox, and the power electronics. The obvious means and value terms, offering is at a much higher value, probably running into five digits. At a component level, it could just be ranging from two digits going up to four digits. That's the way I would explain Triana.

Yes, sir. So, my next question, AX execution exceeded CY25 projections, which is enabling next phase of localization. At the same time, the cheaper imports from Europe under the EU FDA could lead to revisit localization decisions for components where local suppliers are lacking. I just want to understand which are the specific top component categories are the most at risk and being switched back to imports. Because some of the components, local supplier, they are superior. Some of the components, local supplier, they might be lacking. I just want to understand and you can share your thought process on that.

So, for the e-mobility or the e-axle offerings that we give to our customers, our supply chain route is through China, not so much from Europe. So, to that extent, we are pretty competitive on the Indian market space. I hope that answers the first part of your question. But if one were to look at some of the, you know, child parts that we have to import, because within India, the supply chain doesn't exist for the special parts, could be magnets, for example. We are still relying on sources from outside of India, yeah. While our localization in terms of manufacturing and producing the E-Axel is well underway, we are already into the phase two of our localization activity. One of the important steps that we are also working on is the local supplier development to start to source locally and cut down our imports as we move forward. So that, too, I would like to say is happening, and it is clearly a part of the phase two of the localization of the E-access. So while we are setting up the manufacturing line here, we are also developing a supplier base to supply locally produced parts. So both are happening.

Bala, I would request you to join back the queue for follow-up questions.

Sure, sir. Thank you, sir.

Thank you. We take the next question from the line of Harshit Patel from Equator Securities. Please, Bahar.

Thank you very much for the opportunity. Firstly, continuing from the last question, since we have already begun phase two of the EXL localization at the supplier level, where do you think we would reach three to four years down the line in terms of the local value added in India? Will you be able to manufacture the entire system, almost 100% localization, in next few years?

Our intent clearly is to source as many child parts as possible from within India, which means our supplier development activities are in full swing. Of course, it also means that we will have to handle our suppliers to meet the engineering specifications that we as a German with the German technology that we come to India have to comply with. So that's clearly a mandate that we have. So while we are on this journey, are we going to get into assembly, to get into modules from our suppliers? Well, that is something we can always explore going forward, nothing to stop us from evaluating a different business model going forward, correct? It all boils down to the competency and capability of a supply base in India. As soon as they get up and get to those levels, I don't see any reason why we cannot also modify our business model.

That's good.

Second question, on the exports, we have posted…

Arshad, I'm sorry to interrupt you, but there seems to be some static coming in from your end. Could you please use your handset? This is better.

Yes, thank you. Secondly, on exports, we have posted an extremely strong growth in 1QCY26 itself, and we have also upgraded our outlook for the whole CY26. So, could you explain what has changed here in terms of end market, user industries, new business wheels? Why is it that we are able to grow faster than what we anticipated earlier?

Yeah, I mean, it is just, you know, our exports is mainly to our group companies. And if they are having the better demand, we get the better order book. So, apparently, it seems and it is not just one region, it is all around. As I spoke earlier, from Europe, from Americas, from Southeast Asia, from China. So, we are getting a good order from our intercompany partners, and this is what is leading to the better outlook.

Thank you very much for answering my questions. I'll come back in.

Thank you. We take the next question from the line of Abhishek Ghosh from DSP Investment Management. Please go ahead.

Yes, thanks for the opportunity. Three questions. First, in terms of the outperformance that we are seeing in the automotive technologies, is that also to do with the integration that we have had with Bitesco, or the benefits of that are yet to come?

No, the benefits of that are yet to come. It is purely our own ICE technology product in the space of clutch systems and engine systems.

It is purely from that.

And so, over the next 12 to 18 months, should one see, you know, some benefits of Vitesco to come through? I'm just saying because now you guys have been, you know, working as a one entity for some time now. So, just in terms of timelines, how should one expect?

So, globally, working as one entity, however, in India, we are still two separate legal entities. We can leverage on their competencies on electronic sites. However, Scheffler India Limited standalone is still to leverage on those competencies. We will see in coming quarters, maybe that on e-mobility side, we will have more synergies, and time will tell. However, there is no legal integration on cards as yet.

And just in terms of, you know, in terms of the cost increase that one is seeing, in terms of how does one see, with a lag, one should see you are able to pass it on to your customers. How have you been in your past experience?

Talk about the price excellence, that means we try to pass on the input price increases. It takes somewhere between 6 months to 18 months to have the full recovery. We have first batch of price increases realizing from Q2 onwards. However, for the full realization, it takes close to six quarters.

And just in terms of the P&L, I see some amount of change in inventory. So, is there an inventory build-up that has happened towards the end of this quarter? Because we don't have the balance sheet for this quarter, but any thoughts on that?

Yeah, there has been an inventory build-up, and the outlook for coming quarters is better.

Okay, thank you so much, and Vishal, all the best.

Thank you.

Thank you. We take the next question from the line of Valun Jain from Dalat Capital. Please go ahead.

Yeah. Hi, sir. So, I have a couple of questions. So, starting with, you said the bearing localization has reached 80%. So, what is this localization percentage for spherical roller bearings and cylindrical roller bearings? And this 80% which you said, what is the upper bound of where localization can go? Can it be like 100% or so?

Almost 80% localization is our total revenue. We are talking and not just industrial. Within industrial space, we might be around 60% or so. And there is still enough room for us in the industrial space, specifically bearings, to localize. It can never be 100%, in my opinion, as the technologies evolve. Initial volumes, for example, EXL initial volumes are lower. We cannot bring a complete line only for a handful of bearings. So I don't think in a growing economy like India, where we are participating very actively at double-digit growth, it can never be that we reach 100%.

Okay, and this UK clutch line which you relocated to Osu, so when will it begin production and what is the pace of ramp-up you will see for this?

The Sheffield line.

Okay. Well, the process is ongoing right now as I speak. We are already now contemplating to build a second hall in the Shulagiri plant, which is the, you know, new greenfield project that we started. Correct. So we are on track in terms of the transfer of the lines. Correct. And the machines have started to come in as well. Yeah. What is, of course, needed is to expedite the process in terms of the business acquisition side. More will have to do that. And that is something we are focusing on right now.

More to be acquired. Okay, sir. And this last question. So, I'm already new to this company.

So, just do you guys issue guidance? And if you do, can you give us some revenue and margin guidance

No, Varun, we do not issue a guidance as such.

Okay, no. Any indication of anything, like any color, even if it's not like formal percentages or anything?

The only color I can add is that we want to, we remain committed to deliver the numbers that we say we want to deliver. So, we value our investor.

We will make sure we won't let them down.

Okay, thank you and all the best.

Thank you. We take the next question from the line of Mahesh Pendray, an individual investor. Please go ahead. I'm from LIC Mutual Fund. Sir, my questions have been answered. Thank you so much. Thank you. Thank you. We take the next question from the line of Sudhir Kedia from ValueWise Capital.

Please go ahead. Sudhir, please unmute your line and proceed with your question.

There is no response.

We'll move on to the next question, which is from the line of Viraj from SIMPL. Please go ahead.

Yeah, hi. Thanks for the opportunity. Am I audible?

Yes.

Just a couple of questions. First, starting with the industrial bearing solution business. Actually, you've mentioned four reasons for the weakness in your business. One is the supply chain. Second is the economic crunch in aftermarket and demand slows down. Also, us exiting, you know, some categories which are not profitable as what we think is our threshold. But if I look at two aspects, right, so typically, you know, when you look at the times of stress, you know, When the industry is having either supply issues or in a big deal, like, hey, all you stay.

Vilach, I do apologize to interrupt you, but your audio is not clear.

Yes, I'm sorry.

Is it better now? This is better. Yeah, should I repeat the question or should I?

Yes, please.

Yeah, so my question is, you know, in times of stress, usually you see the business moving to lead leaders, right? But what you're seeing here is, you know, us seeing a negative underperformance in the industry piece. So I'm just trying to understand, because even from a localization point of view, you seem to be much ahead of your MNC peers. You know, so in that sense, from a cost standpoint, from a large, you know, being a large group, from a supply chain, so a liquidity point, you would be much better placed compared to else in the market. So why the, you know, so in that perspective, you know, how should one understand, you know, our performance?

So, see, first of all, when we, the performance of industrial compared to the last quarter is lower, we have to understand that first and foremost, Q1, specifically industrial distribution, the aftermarket part is always lower, because this is the time on 31st March when there is liquidity crunch and they are correcting the inventory level. So, that is the first thing. Second thing is, even though our performance of the market appears lower, but overall, our capacity utilization are not impacted because we are compensated through exports. We export specifically the industrial bearings. So, there is as such no cost pressure because the utilization of lines is happening effectively. And at this point of time, with localization close to 80%, the capacity utilization of plant is well above 80%.

If one has to understand, to put it differently, if one has to understand versus various end markets, you know, what is the kind of growth rate? So forget about the quarter gone by, but if I have to look on annual basis, say aftermarket distribution fees or ageways, when the major segments which we participate, what is the kind of growth rate we would have seen in the industry and how would it have been comparable for us? So that is one. And second is any comment you can give or any color you can give in one of the market shares or the competitive dynamics in each of those segments?

You know, let me take the first part of the question. There are some specific sectors, obviously, with the strong localization that we have. We have been growing better than the market as well. Right? There have been some sectors, we believe, when the traction is good, when the demand is also strong, it is also good to do the corrections or recalibration, as I used the word earlier, So that we set the course for a long-term growth story profitably. So it is important that we revisit our portfolios and also try and correct the course, which we decided to do. We started off this activity sometime last year, the Q4 of last year, which now has kind of culminated into it. So this is a well-thought-out strategic step that we take. We have capacities, but we need to use them in the right area and use it to our strengths where we are more competitive and where we can generate more value. That's the strategic purpose here. Just because I have capacity cannot mean that I go out and do business wherever we want, even if it is going to destroy the profitability. We won't do that. Correct? So this is a recalibration effort we have done. Apart from the fact that there have been some sectors, like as Devi already pointed out, our industrial aftermarket saw some lower traction in the quarter. And generally, we see in the first quarter of the year, there's always a slow start and then it builds up. But this year, we have seen a little more lower traction than what we used to see before. And the primary reason for that is the liquidity crunch in the market.

Keep the distribution piece aside. For the other portfolios where we have been the recalibration due to concerns on profitability, what is driving this in the marketplace? Because from a cost standpoint, given that we are much higher of competition in terms of localization, we would have a far better cost proposition than anyone else in the market. Correct me if I'm wrong in my thinking. So in that sense, if we have to recalibrate the concerns on profitability, what is gaining that behavior and who is gaining that share in the market?

Obviously, one of the strategic inputs there is the competition is also intensifying. So it is not that the competition is sitting quiet as well, and we will have to accordingly try and correct the course that we are going on, right? So this is a normal activity that we do, and we did it in this quarter. We try and do this on a smaller basis, you know, at individual account levels. We try and do it along the year, but this time we wanted to do a major correction across. It was required if we have to stay the course of delivering both the top line and the bottom line numbers that we promised. So, we took that strategic course direction. When we take such decisions, obviously, we would look at what is the market situation, what is the competitor situation. Everything is factored in, and we make such decisions.

But just one follow-up on this, has the share gone to other MNC players, or is it more towards local players, or they are organized per se? Is there any color in terms of competitive dynamics you can share? And in which segment are these?

We invest efforts in growing our business. So which competitor is taking it or which competitor is growing is not my forte. I think that you should do the check here.

Okay, thank you.

Good luck.

Thank you. We take the next question from the line of Nilali Kopani from Unique PMS. Please go ahead.

Yeah, hi. Thank you for the opportunity. The question is on exports. When we look at the last two years, the export growth rate has been very, very high. And when we say about calendar year 26, 10 to 12 percent of growth rate. So over a little longer term, how should we look at exports? Is this a one-off and we expect the growth to pick up over the next few years? Just a little broader picture will be very helpful.

About our exports, it is, as I said earlier, a lot of dependency on our intercompany partners, the related parties who are actually booking the orders and reselling. We don't export directly to the end customers. If the order book is good, since we have been doing a lot of localization and the products, specifically when we talk about bearing, the capabilities in India have improved. Thereby, we see more and more order book coming from all the economies of Europe, China, Southeast Asia, et cetera. And we don't have kind of an export strategy to focus only on export growth. Whenever there are idle capacities, those are utilized by intercompany partners for increasing our export. So, it is all depending on the order that we get, like current year's order book is in the space of like around 10 to 12% increase. And we will continue to do so by utilizing our capacities for the global demands.

Right. So I was coming from a similar perspective, right? Is there a focus to shift manufacturing to India or source more from India? And over a period of time, we expect that to pick up? Or there's no such strategy and it's only based on the capacity and the demand that our intercompany has?

So, the group looks at the local demands first. If local demands are better, then the lines are shifted to India, and then the global market is sold out of India. So, it is basically several factors. What is the market demand? And we are the best cost country, ultimately. So, it benefits the group from that perspective also. But it is not for the only intention of export. It is mainly the first focus is localization and the local demand.

We take the last question from the line of Rosita Fernandez from NIO Asset Management. Please go ahead.

Thank you for the opportunity. Actually, my questions are answered, though I wanted to know if there is any color for the CAPEX for this year, 2026.

So, it will be in the range of what we had earlier, 400 to 500 crores investments this year. This is the trend which was the year before last year. Last year, we had rationalized a little bit, but this year, again, we will be picking up and going in that range of 500 crores.

All right, all right. And on the exports front, so the total exports are from the intergroup company is what I understand by the conversation earlier. That's right. Okay. Thank you so much.

Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now have the conference over to Ms. Corrie Kanika for her closing comments.

Thank you, everyone. Thank you for joining us today. If you have any further queries, do reach out to me at gaudi.kannikaritschaffler.com. We can now conclude this call. Thank you once again.

Thank you. On behalf of Schaeffler India Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.