SCHAEFFLER — earnings call

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Prepared remarks

CHIEF EXECUTIVE OFFICER · MS. HARDEVI VAZIRANI – DIRECTOR OF FINANCE AND

MS. HARDEVI VAZIRANI – DIRECTOR OF FINANCE AND

CHIEF FINANCIAL OFFICER · MS. GAURI KANIKAR – HEAD OF INVESTOR

MS. GAURI KANIKAR – HEAD OF INVESTOR

RELATIONS · Management

Schaeffler India Limited July 23, 2026 PUBLIC

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Schaeffler India Limited Q2CY26

Questions and answers

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session.

We take the first question from the line of Harshit Patel from Equirus Securities.

Harshit Patel

Sir, my first question is on our industrial segment.

It has recovered well after the dip in the last quarter, but still the growth is very soft at about 5% YoY.

So, my question is, is the portfolio recalibration now complete?

Roughly, how much revenue did you consciously let go?

And when does BIS return to the double-digit growth?

Harsha Kadam

Thank you, Harshit.

And let me talk about the strong performance in the sector.

As you saw the core infrastructure sectors contributing to the infrastructure growth, they've all done well.

And rightfully, we have grown ahead of the market growth there.

Our raw material sector has performed pretty strongly there.

One were to look at quarter-on-quarter or even year-on-year basis.

We have done well in our power transmission sectors as such.

Yes, there has been impact from the wind energy, one from a timing perspective and a few from our contracting process, which is ongoing.

So, we do have a small impact that has come in, which is something we expect we should recover going forward as well.

If you look at industrial, one of the areas where definitely we are increasing our focus is to look at the distribution side, the aftermarket business side as well.

And clearly, that is something, we in the second quarter, we did pretty good in terms of recovering over the preceding quarter, and we are in the right direction to recover.

So, our aspiration is to make sure the industrial business too gets to a double-digit growth rate, yes.

Of course, it has its own set of challenges in some of the sectors.

And we will continue to keep the watch and see how do we get this to also up to a double-digit growth rate.

Harshit Patel

Understood.

Sir, my second question is on the exports, where there has been an outperformance versus our own guidance.

In the first half, we have grown about 28% YoY, which is well above your FY26 guidance of about 10% to 12% growth which itself you had raised from 5% to 10% that you had guided during the fourth quarter.

So, what is sustaining this momentum?

Is this more of intercompany allocation?

Is the China Plus One within the Schaeffler group are there new geographical mandate some gains would have come from the rupee depreciation?

How much of the second half visibility do we have?

And would you like to revise your overall CY26 export guidance further?

And a small follow-up to this, has there been any change in the geography mix between Europe, U.S., Southeast Asia and China for us?

Schaeffler India Limited July 23, 2026 PUBLIC

Hardevi Vazirani

Thank you for your question on exports.

Yes, it is mainly because of intercompany allocations.

So, what is happening is that in the process of localization many capacities are being built up here in India and mainly in Savli.

And the group is trying to leverage on the capacities which are available in India, which we are developing for local market, but there are always opportunities if there is capacity available to serve the intercompany locations worldwide.

And fortunately, the demand from all the regions, Europe, Asia Pacific, China, it has been in the double-digit range, which is leading to the growth that we have reported.

Also, we have to consider that FX is also in our favor, specifically not so much for Europe because there we have rupee billing.

But in other regions like Americas, Asia Pacific, Greater China, we have U.S. dollar billing.

So we are, to some extent, also benefited from that.

We will be careful in future guidance due to the ongoing geopolitical disruptions.

While all-round efforts will be done to sustain this level of momentum close to 15% - 20% growth, but you never know.

We have faced this once in 2023.

So, we are treading very carefully.

But from our side, we want to maintain this.

And the order book is solid for the year.

So very likely, we will maintain it.

Harsha Kadam

Also, I think maybe a good point to add here is we never gave a guidance for the growth.

We said our wish is to contain the exports up to about 20%.

So, there could be in 1 quarter, a surge in orders.

Hardevi Vazirani

Share of business we want to maintain.

Harsha Kadam

It has nothing to do with the growth.

It is to do with the - what is our cap we would like to put at 20% of max exports.

It's good to have a good balance between domestic and exports.

That's what we have...

Hardevi Vazirani

So, to also have the natural hedging against our imports, which is currently working really very well.

Harsha Kadam

Yes.

Moderator · Conference Operator

We take the next question from the line of Raghunandhan N.

L. from Nuvama.

Raghunandhan N. L.

Congratulations, sir, on the strong results and the zero PPM awards.

Firstly, on the aftermarket side.

Generally, for auto components, aftermarket is a stable business, and most peers grow at high single digits in this space.

Schaeffler has done particularly well with more than 20% growth, minimum growth of 20% last 3 years.

But Q2, the growth has come down to 9.9% - 10%.

So, considering that revenue has reached a large size, how do you see this particular segment performing?

Would you say the growth will be stable going forward?

Or because of your efforts in terms of increasing the product portfolio, can the growth reach to higher levels?

Schaeffler India Limited July 23, 2026 PUBLIC

Harsha Kadam

Thank you, Raghunandhan, for that question.

Yes, your observation is exactly our observation, too.

We are well aware of the fact that we definitely can do much more.

What we are seeing is some capacity constraints that we have, which is something that is currently being addressed as I speak.

So, we are trying to bring in more capacity so that we can feed both the OEM requirements and the aftermarket requirements.

So invariably in a high-growth situation, the OEMs end up getting the priority and the VLS kind of takes a second preference.

And that is something we do not want.

We want to definitely prioritize, and we are addressing the capacity gap between that we have been meeting the entire VLS demand.

That is something work in progress right now.

And here again, just to add, it's not just about Schaeffler capacity.

We have work cut out in terms of our own supply chain capacities as well.

A lot of local suppliers are still under development, but I'm sure we will get them all to a closure so that we continue to ensure the entire supply chain is now aligned with the increased to demand situation, both on the OEM side and on the VLS side.

Raghunandhan N. L.

Noted, sir.

On the cost side, trying to understand that many of the auto component and other suppliers have been facing pressures on commodity side and the pass-through happens with some lag.

So just trying to understand how are you managing that situation?

Also on the minimum wage hike, which you spoke about, are you seeing OEMs responding positively?

Do you expect compensation to be given in the coming quarter?

And again, continuing the point on the cost side, other expenses in the opening remarks, you referred to increase in the freight cost and IT cost increases.

So, this elevated level of other expenses, does it have any one-off?

Or should this level continue?

Hardevi Vazirani

So first, I will touch upon the other expenses that you mentioned.

Other expenses have marginally increased.

So, in Q2 of last year, we were at 15.1% of other expenses.

Currently, we are at 15.4%.

So, there is 0.3% increase.

And this 0.3% increase is covering fuel price increases, which we all witnessed.

In Q1, it was only single month March, whereas Q2 is full quarter impact of the fuel prices, which is within the other expenses category.

Second thing is Harsha talked about the capacity constraint at our Hosur plant, which is leading to impact on VLS business because we are prioritizing OEMs.

This capacity constraint is leading to the air freight of incoming material as well as outgoing material.

While all around efforts are being made that volumes are absorbing these levels of unforeseen costs, it is very unlikely that the customer will reimburse, this customer would expect that we are doing some productivity measures, VA/VE, etcetera, to absorb such kind of cost.

On wage increase, we have seen average of wage increase of 10%.

Again, this is not subject to the recovery from the customer.

What is recovered from the customer is indexation of FX, which we are working on currently and very likely in second half of the year, we will see some traction on price corrections and other is on steel price indexation.

Other than that, the customers usually expect that the company will implement productivity measures to absorb the increases.

Schaeffler India Limited July 23, 2026 PUBLIC

Moderator · Conference Operator

We take the next question from the line of Mukesh Saraf from Avendus Spark.

Mukesh Saraf

My first question is going back to the pricing part of it.

We have seen our gross margins expand this quarter QoQ.

Could you give some -- so what I want to understand is how does the pricing work across your different segments?

One is, say, intercompany on exports, how does that work with commodity costs and forex and say, with OEMs and with the aftermarket?

I'm assuming aftermarket price hikes would be easier.

So, if you could kind of just give how the pricing work across these end markets.

Harsha Kadam

So, Mukesh, thank you for the question.

And let me start with the other way around that is with the automotive OEMs.

As you know, the automotive industry works on an indexation mechanism.

And not all commodities are put under that list.

So, there was an earlier question on the Labor Wage Code increases.

Surely, that is not on the list.

So, to get compensated from the customers is not easy at all.

Yes, we are in dialogue with most of the OEMs.

We have already been talking to them, particularly on the input cost increases due to LPG, propane that have gone up because of the situation there in West Asia.

So that is something that is in discussion and these commodities are not in the list, indexation list.

So definitely, the dialogue is going on.

We will see what we can achieve.

And as Hardevi rightly said, in the second half of this year, we expect some positive traction to come there.

We will stay the course there.

So overall, on the automotive side, this is our case.

Now regarding your question on pricing between the segments, I'm afraid that is something I cannot reveal.

Mukesh Saraf

So, I mean -- what I mean is how does the pass-through work across these segments?

Like for exports with the parent, is there -- is there like every quarter kind of a reset with respect to how forex is moving and raw material costs are moving?

Or is that annual?

Just to get some sense on this quarter, your gross margins have gone up.

So just trying to understand what are the different variables in these margins?

Hardevi Vazirani

So, when we talk about the intercompany exports, it is at arm's length pricing principles.

Transfer prices are determined and that true-up is done at end of the year in December.

So, this is the general methodology, and which is followed by every company, and it is as per the OECD guidelines.

Mukesh Saraf

Sure.

So, understand that part of it.

Okay.

And just coming back to the industrial business.

I think this is something that you have got many questions about, it's kind of remained -- when I look at the non-mobility side of it, the Bearings and Industrial segment within the non-mobility business, it remained at this INR 400 crores kind of a number now for last six to eight quarters.

So just is there some -- I mean could you give some sense if our market shares have however remained stable in this period and it's only an end market kind of issue.

Sometimes it could be railway, sometimes it could be aftermarket.

But market shares overall, have kind of remained stable in this segment?

Schaeffler India Limited July 23, 2026 PUBLIC And secondly, in your opening remarks, you had mentioned about some large order wins in terms of value in this Industrial segment.

So, if you could give some more color on that, if that would kind of change the trajectory on this number?

Harsha Kadam

So, Mukesh, just to get a clarification, your question was towards the non-mobility sector, is it?

Mukesh Saraf

Yes, non-mobility

Harsha Kadam

Okay.

So, as I already mentioned, one of the core industrial sectors, the raw material sector, which is the core metal industries and the continuous process industries that we cater to, whether it is steel, aluminium, cement, we have seen strong traction in the quarter, correct.

And obviously, just because of the growth in the infrastructure sector that's already happening.

We have seen pretty good traction there.

We've been doing well.

We've been localizing a lot of parts to cater to this sector.

So there, we are well on track, and it is working well.

Industrial automation as a sector, yes, we are doing good.

Can we do better?

Definitely.

And that is something we are looking at what the new product portfolio that we have to add to get into this sector.

The power transmission sector, we are pretty strong there.

We have been very good there as well, good growth in the second quarter.

We had almost close to 8% growth there as well.

So overall, when you look at the non-mobility sector and purely the OEM side, certainly we have done well.

We are doing well there.

Maybe the distribution side of the business is something we see more opportunities there, and that is clearly on our radar to exploit and move forward there more.

Hardevi Vazirani

Rather, I would just say that our industrial non-mobility side, we have grown double-digit.

Harsha Kadam

Yes, yes.

If you look at it purely double-digit growth overall is in the non-mobility side.

The automotive side of the bearing business is a little under pressure.

Mukesh Saraf

Right, right.

So okay.

I was just looking at the non-export also.

So obviously, the industrial some non-mobility includes exports, which has grown really well.

But I do get your point here.

We look forward to some more improvement there.

Moderator · Conference Operator

We take the next question from the line of Mahesh Bendre from LIC Mutual Fund.

Mahesh Bendre

Sir, my questions have been answered.

Thank you so much.

Moderator · Conference Operator

We take the next question from the line of Himanshu Singh from Baroda BNP Paribas.

Himanshu Singh

Sir, again so my questions were also on the industrial segment.

Could you just help us understand which segments have performed or improved over the last quarter?

And how do you see like the other segments which are underperforming to kind of ramp up and help us grow in the double digits?

Schaeffler India Limited July 23, 2026 PUBLIC

Harsha Kadam

So, thanks Himanshu for the question.

I already said that we had a strong traction in the second quarter over the first quarter.

If you look at the numbers, we did have a strong growth in the core metal industrial sectors, and which is the crux of the industrial sector.

And that is where we saw good growth.

And we have also seen good growth in the power transmission sector.

And there are a few sectors where there has been a lag.

This has nothing to do with us.

It's more to do with the railways, for example, is more tender-based working.

So there, we have not seen any much of a growth yet in the quarter over the preceding quarter.

Yes.

Wind energy, I did already talk about it.

Yes, we are going through some contract negotiations with some of our customers there.

And these are global contracts that we get into.

So, wind energy has seen a dip in terms of revenue in the second quarter for us.

But however, that is a matter of time when that's going to be resolved as well.

Himanshu Singh

Okay.

Thank you, sir.

And just on the order wins, you mentioned that the Bearings and Industrial Solutions got the highest order wins.

And also, I can see that in the automotive sector, which is currently not doing so well.

So, when do you see this automotive also coming into the growth trajectory and like that will -- that should ideally help you grow in the double digits?

Harsha Kadam

Yes.

Good question.

Automotive has been one of the challenges, yes.

And you are right in pointing out that we have not seen -- we have seen a very sluggish growth there for a couple of reasons.

One is the Automotive Bearing business is more commoditized.

So, we carefully choose where we are very competitive and we are working towards the strength there and we are playing the game hence, from a top line growth perspective, you may see moderated numbers.

However, the focus is also to secure the bottom line, which is super important for us.

And so, it is a very prudent and a conscious effort that we make on the automotive side.

However, clearly, we are trying to adjust through cost competitiveness, how do we get more cost competitive?

Can we localize the products more is something else that we are looking at.

So, we are looking at primarily these two options.

So, once we address them, yes, we will be able to get back strongly in the game in the Automotive Bearings business as well.

Moderator · Conference Operator

We take the next question from the line of Varun Jain from Dolat Capital.

Varun Jain

So, my first question was on the KRSV - Koovers side.

So broadly quarter-on-quarter, the revenue was INR79 crores, INR 80 crores, but the EBITDA margin worsened from 13.4% to 17.3%.

So why was that?

And when is breakeven on EBITDA and cash flow expected?

Hardevi Vazirani

Sorry, did you talk about Koovers as stand-alone, or you are talking about consolidated financials?

Varun Jain

I was talking about stand-alone Koovers.

Hardevi Vazirani

Okay.

So Koovers, we have - there are two special things in Q2. We have introduced accounting policy of sales cutoffs.

So, the numbers that you see on the top line are after adjusting the revenue Schaeffler India Limited July 23, 2026 PUBLIC recognition of INR 5.6 crores, which is impacting EBITDA as well as we have started making the provision for founders’ bonus, which is to be paid next year in the month of May for 3 years, which is leading to this level of margin change.

It is approximately INR 3 crores impact.

Varun Jain

Okay.

And by when do you expect this to breakeven on EBITDA and cash flow level?

Hardevi Vazirani

2029.

Varun Jain

2029.

Okay.

Got it.

Secondly, on the automotive business, we have seen very strong run rate in the first 2 quarters, 31%, 33.3%.

So, what is driving this strong run rate?

Is it because of e-Axle or what?

And is it sustainable in the second half?

Hardevi Vazirani

So, on margin side, we have been maintaining these level of margins for several quarters, right?

You're talking about the growth rate of...

Varun Jain

Yes, yes, Automotive Technologies revenue growth rate was very high.

So, I was asking on that.

Hardevi Vazirani

Okay.

So Automotive Technologies, overall growth rate for -- if we see year-on-year quarter is 33.3%.

And within that, both the conventional business has grown by close to 20% and the remaining growth is coming from e-mobility.

So yes, there is a timing difference for e-mobility, which is -- but also the conventional ICE engine business is also increasing close to 20%.

Harsha Kadam

Also, I think it is good to point out that if you look at the Q2 production numbers of passenger vehicles, it was down 8% over the preceding quarter, 8%.

Whereas our business, we have not dropped 8%.

We have actually improved our market share as well.

We have grown our business there.

Hardevi Vazirani

We grew by 3.6% as against market dropping at minus 8%.

Harsha Kadam

Yes.

So that's an important point to add.

Varun Jain

Okay.

So, this is more driven by market share gains rather than underlying vehicle volumes or higher content per vehicle, mostly it's market share gains.

Am I reading it right?

Hardevi Vazirani

Yes.

Harsha Kadam

Absolutely.

Varun Jain

Okay.

And just last one from my side.

So, I think capex for CY26 was pegged at INR 400 crores to INR 500 crores.

And I think we have done INR 175 crores.

So that would put close to INR 250 - INR 300 crores in the second half.

So, will that be there?

And also, can you tell us the breakup of capex between maintenance, automotive, industrial bearing localization and the Shoolagiri plant?

Hardevi Vazirani

So yes, in the remaining period, we are expecting that we will be consuming the remaining of INR 500 crores.

And accordingly, the orders have been placed for the machinery for capacity Schaeffler India Limited July 23, 2026 PUBLIC and localization.

The breakup is that close to INR 120 crores is in automotive – INR 170 crores is in automotive technologies and remaining in B&IS.

Varun Jain

How much is the annual maintenance capex?

Hardevi Vazirani

For sustaining?

Sustaining it's very small, maybe 10% of capex.

Moderator · Conference Operator

Thank you.

As there are no further questions from the participants, I now hand the conference over to Ms. Gauri Kanikar for closing comments.

Gauri Kanikar

Thank you, everyone, for joining us today.

If you have any further questions, please do reach out to me at [identifier removed].

Thank you and wishing you a good day.

Moderator · Conference Operator

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.

(This document has been edited to improve readability)

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