Ladies and gentlemen, good day and welcome to SKF India Limited Q1 and fiscal year 2027 earning conference call. As a reminder, all participant lines will be 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 an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Ms. Cilvina Pereira, Head of Marketing Communication at SKF. Thank you, and over to you, ma'am.
Good afternoon, everyone. Thank you for joining us today for SKF India Limited investor call for quarter one fiscal year 2026, 2027. With us, we have Mr. Shailesh Sharma, our Managing Director. Our Chief Financial Officer, Mr. Mayank Holani. Our Head Strategy and Business Development, Mr. Prahlada Girishkumar. And our Company Secretary and Compliance Officer, Ms. Mayuri Kulkarni. The purpose of today's call is to share our Q1 results, talk about our performance during the quarter, and answer your questions, if any. Please note that the financial information for corresponding period of previous year, as reported in the presentation shared, has been extracted from the financial statements erstwhile combined entity and may involve some assumptions by the management pertaining to the de-merged industrial undertaking. These were prepared in accordance with the Appendix C of Ind AS 103 business combinations by using the financial information maintained by SKF India Limited.
Before I turn over the call to the management, I would like to remind you that in this call, some of the remarks contain forward-looking statements which are subject to risks and uncertainties, and actual results may differ materially. Such statements are based on management beliefs as well as assumptions made by and on the information currently available to the management. The audience is cautioned not to place any undue reliance on these forward-looking statements and make any investment decision. The purpose of today's call is to purely educate and bring awareness about company's fundamental business and the financial quarter under review. Let me now turn over the call to Mr. Shailesh Sharma. Over to you.
Thank you, Cilvina. Hello, everyone, and welcome to the Q1 of 2026, 2027 financial year investor call. I am Shailesh Sharma, Managing Director of SKF India Limited. Let me start with the presentation with the agenda, which is on slide number three. We will first cover key macro indicators, followed by quarterly results and analysis, and at last some success stories. Then we will take your questions. Moving ahead to the key macro indicators, which is slide number five. Talking about key macro indicators, IIP growth since last couple of quarters has been stable and was 4.8% for Q1 fiscal year 2027. Manufacturing PMI growth stood at 54.4% for June 2026. Automotive production has been an upward trend during last quarters for two and three-wheelers. However, passenger and commercial vehicle declined marginally. Iron and steel production declined during the quarter. Now I will talk about the results of company.
Just go to slide number seven. We are glad to inform our investors that we had a strong year-over-year revenue growth during the last quarter. While quarter-on-quarter it was almost flat. We have a revenue growth of 27% year-over-year with INR 5.9 billion revenue while it was -1% quarter-over-quarter. EBITDA improved by 7 basis points year-over-year while it improved by 540 basis points quarter-on-quarter. Profit before tax is up by 61 basis points year-over-year while it is higher by 527 basis points quarter-on-quarter without exceptional items. For detail now, I would like to hand over to our Chief Financial Officer, Mayank Holani, to take us through the detailed financial performance.
Thank you, Shailesh. Good afternoon, everyone. It is good to be connecting to all of you after the quarter. Now we move to sales performance on slide eight. We achieved a quarterly sales of INR 5.5 billion for Q1 fiscal year 2027, with year-over-year growth of about 22% and marginal drop of 0.7% on quarter-on-quarter. Since last couple of quarters between October to March, we have seen a very high sales growth following GST reforms. Year-on-year sales growth, if you see, is driven by 22% higher volumes. While when we look at quarter-on-quarter variance, volume was 6.3%, while price mix has positively impacted sales by 5.6%. Just to clarify, you will see a note below the slide that these sales figures are purely of the products and does not include the other operating incomes items.
That is why you see a difference between revenue and the sales. Now, moving on to slide nine. In terms of mix, OE accounted for about 62% of our sales for the quarter. Distribution or vehicle aftermarket was about 20%. Exports, 8%, and SKF Industrial, about 10%. So that is how our mix was. Next slide number 10 now. Here you will see a full total P&L summary for the quarter.
Our gross margin for the quarter is about 1% lower year-on-year, while quarter-on-quarter it is higher by about 6.5%. This variance in gross margin from previous year has been a composite impact of price mix and inflation, while we have been able to quite significantly maintain the margin from last year and rather improve it the EBITDA level. EBITDA for the quarter is almost flat, 7 basis points improvement, while from last quarter it is about 540 basis points higher.
As mentioned during the investor call for last quarter, profitability for Q4 fiscal year 2026 was impacted by certain one-off factors, including those related to de-merger, and this has now returned to a very normal levels last. Profit before tax for the quarter is 14.3%, which is around 60 basis points higher year-on-year and about 650 basis points higher quarter-on-quarter. Though if you exclude the exceptional items in previous quarter P&L, profit before tax increase is about 527 basis points versus March quarter. This brings us to the end of financial part of the presentation. I will now request Shailesh Sharma to talk about some of our success stories during the quarter. Over to you, Shailesh. Thank you.
Thank you, Mayank. Acquiring new business is always exciting story, and I am glad to inform that we have got a very good wheel end business from one of the customers which we were working since last couple of years. After so many audits, finally we have been rewarded the business, which is a large passenger vehicle manufacturer who is looking for a localization of their bearings. SKF went through the customer engagement and value-based selling and provided entire techno-commercial proposal during the program. We got this business, which will start from Q4 2028, but nomination was important to get it now to prepare ourself. It will definitely benefit SKF because it is a wheel end offering. This is the very first business which we have won with this customer, which is laying a strong foundation for our long-term engagement.
For customer it is a win-win because customer was looking for a localized content and it is a global supplier which will eventually benefit SKF also going forward. Next. Getting recognition from customer always excite us and we got these two good recognition in the last quarter from our two esteemed customers. One is Suzuki Motorcycle, it is for Best Delivery Award and another from Degree Torque Transfer Solution for our technical supplier partnership. We are delighted to receive these two prestigious awards. In our CSR initiative, we engaged with Special Olympics Bharat to identify talent in India from different part of India, the boys who are intellectually challenged. We send them to Sweden for Gothia Cup, and I am very glad to inform that this team won bronze medal after defeating Finland. Before that they played six matches with a different European country.
That was a good moment of proud for us. Another success story is related to decarbonization. All the three plants have been achieved more than 98% renewable energy sourcing. Group has given the certificate as decarbonized plant for all the three plants of SKF India Limited, Pune, Bangalore and Haridwar. Same our green initiative and our green manufacturing strategy, we are working on water neutralization where Bangalore site has achieved water positivity by 2x . That means we are giving 2x water to Mother Earth than what we are consuming. Similarly, Haridwar site has also achieved same thing by 2.57x. Pune plant, we are working on it and will inform when we achieve water positivity.
We had a good customer engagement at Maruti Suzuki India Limited in the form of tech show, where we displayed both our wheel end and drivelines solutions. 400+ people came and visited our stall there, and for both IC and EV applications. We saw a lot of interest in our low friction hub bearing units and e-drive conductive brush ring solution. This has given a good opportunity for us to engage and look for some better opportunities for business going forward. With that, we end our presentation, and we can start question- and- answer. Thank you.
Thank you so much, sir. Ladies and gentlemen, we will now begin with the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Mumuksh Mandlesha with Anand Rathi Institutional Equities. Please go ahead.
Yeah. Thank you, sir, for the opportunity, and congrats on a good set of results, sir. Sir, firstly, just on the understand how the gross margin movements sequentially. So this quarter's 51%, in Q4 quarter's 44.5%. Can you just help understand what are factors that drive the gross margin? On the commodity inflation and price hike, if you can update how much was the inflation and price hike between Q1 and how much can one expect in the Q2 quarter as well?
Okay. Hi, Mandlesha. Thanks for your question. You see gross margin evolution, if you see from March- June quarter, it has been, one is the mix factor, which plays the role significantly. So that has been there. Second thing on the inventory evaluation also had an impact on the gross margin. Right?
Sometimes also moves in terms of the seasonal impact also quarter on quarter you see certain movement, but largely it was a mix as well as the inventory revaluation impact, because we follow the FIFO method of inventory, which has an impact. Right. What was your second question? Can you repeat?
Yeah. On the commodity inflation, what we witness this quarter, how much price hikes we have taken, and for the Q2 quarter, how do you see this?
Yeah. Price and commodity inflation, if you see our OEM contracts usually have a clause around the commodity inflation linked to the index, in which we keep working along with the OEMs. Even currently it is a work in progress for the recent round of commodity inflation. I cannot disclose the exact number of it, but that is a work in progress. We will see certain effect of that even in the current quarter as well as we move forward. Hope I answered your question.
Got it, sir.
Thank you.
Just on the gross margin, just to clarify, what current Q1 quarter is that the range one should assume for the full year range or that also-
Sorry, carry on, please.
Basically, or this also will keep little movement based on the inventory revaluation , sir?
See, even historically, if you see this has been the normal gross margin range, right? Based on the mix or certain timing gaps, there could be certain movements within quarter. Because even what happens is when you see the commodity inflation realization, it doesn't happen immediately in the same quarter, right? If there is an inflation, the discussions with the customer take some time, and also depending on individual customer contracts, there could be a lag of one to two quarters. So that's why within quarters you may see certain sometimes fluctuations, but this is kind of normal gross margin range, which has been there historically also.
Got it, sir. Thank you for this.
Thank you, Mumuksh. Sorry to interrupt, but you may please rejoin the queue for more questions. Thank you.
Thank you.
Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participant, we request you to kindly limit your question to two questions per participant, up to two minutes. If you have a follow-up question, you may please rejoin the queue. Our next question comes from the line of Raghu Nandan NL with Nomura Research. Management, please go ahead.
Thank you for the opportunity. Congratulations, sir, for extremely strong numbers.
Yeah.
Your growth is significantly better than peers for the June quarter. Thanks for sharing the segmental sales mix. It is very helpful. Within OEM space, can you indicate how has been the share for two-wheeler, four-wheeler, commercial vehicle, and powertrain business?
Our OEM basically contributes about 62%, as you have seen it, out of which our two-wheeler is about 54%, passenger vehicle is around 31%, and commercial vehicle is about 15%.
Noted, sir. This is very helpful. Would you have the same numbers for last year? Broadly, I wanted to understand the growth.
It keeps changing. Maybe Girish, can you elaborate if you have previous year number?
Sure. It will be range bound, Mr. Nandan, in the sense that the two-wheeler is the largest, and it is range bound between 40%, 48%- 52%. Passenger vehicle is about 28%- 30%, and similarly, the commercial vehicle is about 11% to 12% there.
Noted, sir. Broadly, the growth will mirror the growth which is there in the underlying OEM production data?
Correct.
Noted. In terms of export, there has been a strong pickup. Year-over-year, it is remaining at 8%, but on a quarter-on-quarter basis from 6%, there has been a jump to 8%. Export is something wherein, for us to track also, it is difficult. If you can indicate how you are seeing the outlook for the export market and mainly which regions are driving growth for you, that will be very helpful. Thank you.
Our main focus is on our domestic demand. Export is not a very big pie of our strategy also, as of now. It will remain in this range only, depending upon how some of the solutions where we are stronger or sometime even the capacity shortage in other regions, and they need some support from us. But by and large, the constant demand will be in this range only.
Noted, sir. Before I fall back to the queue, just a last question, if you can-
I am sorry, sir, but can you please rejoin the queue?
I will do that.
Thank you.
Thank you so much.
Our next question comes from the line of Varun Pinto with Negen Capital. Please go ahead.
Hello. Hi, sir. Am I audible?
Yes.
Hi, sir. Congratulations on a good set of numbers. My first question is around revenue guidance. Sir, in the past, you have guided for about 12% revenue growth. In Q1 itself, we have done about 27%. Is this something that we are expecting to moderate over the next few quarters?
Thank you, Varun Pinto, for asking this question. See, 27% is obviously very good growth. But we expect the revenue growth to be in the range of close to 20%, right? Not much better than the 12% guidance we had given earlier, but around 20%-something, yeah.
Understood, sir. Sir, you had also said that we are somewhere around 93% loading. We have enough capacity this year to achieve this 20%?
Yes.
We are building capacity this quarter four also. Two ways of increasing capacity. One is by improving our cycle time and efficiency. We have already unlocked about five million pieces this year by doing some technological upgradation of our assets, which are in ramping up stage. On top of it, we are also putting channels in our Haridwar factory. We hope we will be able to cover it up.
Understood, sir. Sir, out of the INR 500 crore CapEx that we are doing, about INR 170crore or INR 180 crore is going to come online this year itself, right?
Correct. This is what I said just now, that we are putting capacity in Haridwar.
Yes, sir. This is a backward integration CapEx, or is this growth CapEx for us?
It is primary for reducing our dependency on industrial, where we are trading some volume, but it will also be secondary for our growth. But the entire thing will not come in 2026. It is only Q4, this new capacity will just start. It will take some time to ramp up. Growth will start next year.
Next financial year, you will see the revenue impact of that.
Understood. Sir, lastly, this 17% margin that we are seeing, this is a largely normalized margin, right? This is the range in which we expect the margin to be for the next two years or so, right?
Yes, this is what we expect.
Perfect. Thank you so much, sir.
Some certain things.
Thank you.
Thank you. Our next question comes from the line of Krupashankar N J with Avendus Spark. Please go ahead.
Good afternoon. Thank you for the opportunity. My first question would be on the electric mobility side. We did highlight in the last conference call that we had won multiple orders on the electric mobility side. When do we see this ramping up over the medium term, sir? If you can give some guidance around that will be a help.
Yeah. These are the developmental platforms, the businesses that we referred to in the last quarter. These are the businesses that will come on stream during 2028, more precisely towards the last quarter of the calendar year 2028.
Got it. With respect to your profitability, just wanted to get a sense around the traded piece being elevated, right? While we do see that there is a good portion of sourcing which is also happening from SKF Industrial, can one expect that there will be a transfer pricing-based mechanism on goods sourced from SKF Industrial and sold to SKF Industrial? That would be one of the reasons why margins can be relatively lower. Is that the right thinking, sir?
See, yeah, but on trading part, we have a sales to SKF Industrial, and we have purchases from SKF Industrial also. As you rightly said, in our case of related party transaction, there is a certain markup which has to be applied. Once our own direct capacity builds up and we have production, that will be positive for the margin.
Got it. Last on distribution business, just wanted to get a sense around how you see things progressing over there. Is there any new triggers, any events per se? Because overall, I think, from a disclosure standpoint, things have been looking relatively okay. Any comments around that would be really helpful.
Vehicle aftermarket business has a certain different set of challenges. So far, it's a kind of plateau or a small decline in our revenue. The next five months, we have some different strategy to cover up or recover our volume.
Got it. Pricing-wise anything to provide inputs over there? Any price calculations you have taken?
We needed to give some discount in last two months, which will not continue now. There will be no decline in price mix. It all depends on now how we will be able to pick up our top line.
Thank you very much. Appreciate the response.
Thank you.
Thank you. Our next question comes from the line of Rajit Aggarwal with Nilgiri Advisors LLP. Please go ahead.
Good afternoon, sir. Couple of questions on the EV business. If you can possibly share the revenue from EV non-wheel bearings, and what will be the market share of ours again in the same space, specifically on non-wheel EV bearings.
As we mentioned, these are the businesses that are in the development phase. The full stream production ramp-up is expected across vehicle segment beginning 2027 mid or so, and we will see a full, let's say, visibility of the business numbers sometime during 2028. So at this point in time, I think it is not relevant to really quote those numbers, Rajit.
Okay. As of now, there is no material revenue from that space.
It is in the ramp-up phase. We are in the development phase
Understood
for the samples and other things, yeah.
Out of the announced INR 500 crore of CapEx, how much would be on EV bearings?
I would say much of the investments that are happening in Haridwar primarily for the two-wheelers, I would say to begin with. And some of the driveline, as you were asking previous question, a little bit of that, but majorly it is for the traction motors coming for the two-wheelers.
Okay, sir. Can I ask one more question?
Sure, go ahead.
In your AGM presentation, as part of your strategy slide, there is a mention of portfolio rationalization. Can you throw some light on it? Are we looking to reduce some SKUs, and what will be the revenue or volume impact in fiscal year 2027 of that?
Okay. Portfolio rationalization, there are two parts of it. One is what we make and where we make. We have three factories. To use economy of scale and bring some synergy, we just change our portfolio in different factories. That is one part of it. Another is, of course, our sales mix, where there are certain businesses which are kind of not so profitable or loss makers. We would like to do something about it. That is what we mean when we talk about portfolio.
Okay, sir. No major impact in fiscal year 2027?
No.
No.
All right, sir. Thank you. Thank you so much.
Thank you.
Thank you. Next question come from the line of Raghu Nandan NL with Nomura Research. Please go ahead.
Thank you, sir, for the opportunity again. On the sales to SKF Industrial, there has been an improvement compared to the last quarter and last year. How do you see the trajectory going forward? If you can throw some light on the products being supplied and also the growth prospects which can be expected here.
Okay. Raghu, yes, Shailesh, please go.
By and large, that is not our kind of a segment. Okay? Our segment is purely automotive. Industrial, we are supplying where the industrial doesn't have capacity or something. But going forward, it's not a kind of growth segment for us. Mayank, you can add.
Yeah. When you see last year's growth, that's not comparable because industrial entity business was not carved out last year, right? It came into existence in December 2025 quarter only. As far as the volume is concerned, as Shailesh mentioned, it's not our priority for growth. This is something which over the next few years expected to come down, and we focused that capacity towards serving our automotive customers.
Noted, sir. Thank you for that. How much has been the CapEx spend in Q1, and what is the plan for the entire year?
See, this plan, I won't right now comment on the CapEx for Q1, but largely this year, we are expecting to have a CapEx of about INR 170 crore-INR 180 crore at least in the current financial year.
Noted, sir. And this by 2028, when you say the INR 500 crore CapEx-
Yeah.
It will ideally go up to fiscal year 2029, or could it finish everything by 2028?
Largely, if you look at fiscal year basis, largely it would be over by fiscal year 2028. Maybe some part could spill on to fiscal year 2029, but largely it would be over by fiscal year 2028.
Noted, sir. Just the last one on the vehicle aftermarket demand. Generally, if I take a long-term average, the volume performance here will be in the high single digit kind of a range. How do you see the vehicle aftermarket growth? Are you seeing a higher growth because the share of gray market or the share of imports is reducing? How do you see, taking a three-year, five-year perspective, how should be the growth in the aftermarket?
See, vehicle aftermarket, rather, we have seen some drop in the volume currently. Obviously, the focus is on increasing the share but also protecting the profitability. Vehicle aftermarket is a completely different game when compared to the OE market. You have a lot of competitors, you have the fake products also, and it works in a completely different way. So our focus is to protect the profit margins and then improve the volume. Right now, if you look at for a little bit of from last year, there is a slight reduction, but then we are focusing on improving the share.
Maybe just to add here, what will help us having our. When enough capacity will be there, then it will help the vehicle aftermarket as well.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question, you may press star and one. Reminder, if you have any question, you may press star and one. As there are no further question from the participant, I would like to hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
Okay. Thank you very much for joining. Look forward for continuous engagement. See you next time. Thank you very much.
Thank you.
Ladies and gentlemen, on behalf of SKF India Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.