RACL Geartech Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Earnings surge on export-led volume: Standalone revenue grew 16.2% YoY to ₹122.84 crores, while PBT jumped 139% YoY as existing projects ramped and KTM restarted production.
• Margins held above 24% for a second straight quarter: EBITDA margin reached 24.25%, up from 21.06% a year ago, driven by operating leverage and a richer product mix.
• A second nomination from a new domestic OEM signals deepening wallet share: The win, for a high-volume transmission program starting July 2027, proves the first project built enough trust for the customer to award follow-on business before mass production even began.
• The balance sheet is rapidly deleveraging: Total debt fell 28% to ₹218 crores in H1, funded by preferential allotment proceeds and strong cash generation of nearly ₹30 crores.
• What to watch next quarter: Whether the KTM ramp sustains past the Christmas lull, the pace of BMW parking-lock pre-series conversion into FY27 production, and any concrete defence-sector engagement following the Jabalpur exhibition.

Revenue Drivers & Project Ramp-Up

• No new project contributed this quarter: growth came entirely from existing programs that should have delivered last year now converting, plus a strong domestic pickup and a favourable base effect.
• KTM restarted on 22 July after a 6-8 month stoppage and is ramping, though still facing supply-chain challenges from its global supplier base. Past two months of parts pickup were good; management expects this year to reach 40-50% of past peak levels, with a much stronger showing in 2026.
• BMW parking-lock pre-series is running with good volumes, but series production starts only next year. Separately, BMW's auto-shift mechanism is seeing demand far above plan: customers want 100% fitment, BMW can currently deliver 60-80%, creating a structural tailwind for the component.
• TVS RTX 310 launched globally in Italy with all products from RACL; production started in November with a couple of hundred units. Volume is expected to pick up in 2026 after the model-year change lull.
• Norton's 1.2-litre bike is planned for a May 2026 India launch, with all parts supplied by RACL.
• Business model resilience: the company is spread across 2-wheelers, 3-wheelers, tractors, trucks, off-road vehicles, AC scooters and snow scooters. Even in its worst year, management estimates it would have grown 15-17% absent the KTM bankruptcy.

Gursharan Singh: "Everything will never go smooth, something will remain resilient. Something will decline even with the same customer... something will grow something right now like their 1.3 liter bike is selling like hotcakes."

New Business Wins & Customer Development

• Second nomination from a large premium 2-wheeler OEM: the order covers transmission parts for a gearbox assembly in a new engine category not currently on the market, classified as high-volume business. SOP is expected from July 2027 at the Gajraula plant.
• First project with the same OEM has been successfully developed, samples submitted, and testing is underway at the customer end; mass production is expected shortly, adding incremental revenue.
• The customer relationship is entirely new since 2025: management described an intensive courtship involving at least 20 visits from the customer's side and countless trips by RACL's team, calling it a "very-very long strategy."
• Technical collaboration with AARK Engineering GmbH (Germany) moves RACL from "built to print" to "concept to print": the customer now specifies vehicle, power and output required, and RACL designs the product from inception, including prototyping, virtual simulation, testing and validation. The company is already talking to customers to take this forward.

Gursharan Singh: "Now with this new technical collaboration arrangement with the German company AARK Engineering GmbH, so in our business language we call it concept to print. Now a customer will not give us the drawing, he will say again look this is a vehicle. This is the power. This is the output required."

Margins & Forex Mechanics

• EBITDA margin expanded 319 bps YoY to 24.25%, and has now been maintained above 24% for two consecutive quarters. PBT margin nearly doubled from 6.38% to 13.13%.
• An analyst flagged a potential understatement of EBITDA: forex losses flow through other expenses (inside EBITDA), while forex gains go to other income (below EBITDA). Management uses pre-shipment credit in foreign currency as a natural hedge, limiting risk to 1.5 months, and argued formal hedging would cost 200-250 bps per year unnecessarily. The company will evaluate separate disclosure with its statutory auditor but made no commitment.
• Euro impact in H1 was about ₹8-10 crores on the non-operating side, though foreign-currency borrowings partially offset the gain.

Balance Sheet & Capital Allocation

• Total debt reduced from ₹305 crores to ₹218 crores, a 28% decline, as preferential allotment proceeds were used to pay down both long-term and short-term debt. Cash from operations grew nearly 50% YoY to ₹29.87 crores in H1.
• Capex discipline is explicit: the marketing team tells customers "we don't have the capacity, this is our price," provides a sample, and only builds the plant once the customer tests and commits. This safeguards against debt that does not generate returns.
• FY26 capex is pegged at about ₹50 crores, possibly slightly lower; FY27 capex is still being compiled and requires board approval before disclosure.
• Net debt-to-equity target is to stay below 1x. Management stated net debt will always reduce.
• Fixed-asset turnover should improve because new projects are not highly capital-intensive and domestic business gestation periods are shorter. The last major capex cycle (BMW) is already working; when production starts it will generate strong operating cash flow.

Gursharan Singh: "Our marketing guys are telling very clearly. Look, we don't have the capacity. This is our price. We have integrated setup. We'll give you a sample by that time you test your sample, we'll create the plot."

Diversification Beyond Automotive

• Defence manufacturing is an active exploration: RACL participated in a defence manufacturing conclave at Jabalpur (November 7-9, 2025), received what management called a fantastic response, and engaged with multiple industry stakeholders. One director (Brig. Bedi) attended with the marketing team.
• Non-automotive steps were taken six months ago and management expects fruits "in coming time." Defence participation could lead to high-tech drones or other products.
• The long-term ambition extends to robotics: management floated the idea of making an entire humanoid, but explicitly framed it as a 10-year vision, not a near-term plan. For the next three years, all energy and focus is on growing the automotive business to a certain level.
• In automotive, the company has already moved up the value chain from a normal component supplier to a system supplier doing design and validations. The AARK collaboration extends this further to full product design from concept.

Gursharan Singh: "We have something since you talked about ambition, so of course ambition is why to just gears, why can't we make the entire humanoid right? So that's we shouldn't be always work with it is not one year to where it is 10 years."

Europe & End-Market Outlook

• Management believes Europe has reached a plateau in 2024 and 2025; any move from here should be positive, driven by political stability, infrastructure spending, defence projects and energy-sector investment. Defence demand is expected to boost logistics and truck volumes.
• Euro appreciation of 6-7% against the dollar is read as a signal of European economic resilience. In commercial trucks, things are "looking up."
• H2 FY26 is expected to be better than H1, and this outlook does not factor in any contribution from new projects.
• KTM's recovery should see the coming year "looking very good" after this year's 40-50% partial recovery. Bajaj also plans to launch KTM's big brands in India, which could add domestic volume.

Guidance & Commitments

Key Metrics