RACL Geartech Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Record quarter, broad-based growth: Standalone revenue grew ~22% YoY to ₹134 crores, with all segments contributing and EBITDA margin expanding to 24.93%.
• A ₹77 crore capex bet on cost and carbon: The headline ₹33-34 crore electric heat treatment plant replaces 35-year-old LPG technology, promising lower operating costs, higher uptime, and a zero-carbon process essential for the BMW EV order.
• The order book is diversifying fast: A new ZF electric power steering project opens the US truck market, a premium two-wheeler ramp is accelerating, and the BMW Venus plant is trial-ready, shifting the revenue mix decisively beyond traditional segments.
• KTM recovery is tracking to plan: Dealer inventory has normalised from 200,000 to 20,000 units, and FY28 forecasts are already released and better than the prior year, though management is taking a conservative view.
• What to watch next quarter: The BMW locking program sign-off, the pace of the two-wheeler premium ramp to 20,000 units, and any clarity on FY28 volume estimates for the BMW electric car order.

Performance & Profitability

• Revenue acceleration through the year: Standalone revenue grew 14% QoQ from Q1 to Q2 and ~9% QoQ from Q2 to Q3, with nine-month revenue reaching ₹364.81 crores, up ~13.5% YoY.
• PBT nearly doubled: Q3 PBT jumped ~92% YoY to ₹19.65 crores, with margin expanding from 9.33% to 14.66%, driven by operating leverage and a reduction in finance costs after using fresh funds to pay down long-term debt.
• Q3 margin was an all-time high: Revenue hit ₹130-135 crores versus a normal ₹120-125 crores, and the incremental ₹10-15 crore carried higher profitability; BMW prototyping also contributed.
• Margin sustainability is a balancing act: Management does not go back to customers for inflation-related price increases, so old project margins erode over time; the strategy of layering in new projects at higher pricing to offset that erosion has worked for five to six years and is expected to continue.
• Consolidated trajectory: Consolidated turnover rose from ₹108.7 crores in Q1 to ₹141.7 crores in Q3, with EBITDA growing from ₹26.87 crores to ₹35.15 crores and PBT from ₹11.27 crores to ₹21.37 crores.

Gursharan Singh: "we are really thrilled by the performance of quarter three for the FY2526, and I really look forward that this journey of excellence and consistent growth keeps on going on the same path."

The Heat Treatment Capex: Cost, Carbon & Capacity

• Replacing a 35-year-old asset: The Gajraula plant's LPG-based heat treatment furnace has reached end of life, operating at only 30-40% loading due to downtime and maintenance; the new electric furnace will have a life of roughly 30 years.
• Dramatic operating cost shift: LPG cost has risen from ₹6/kg to ~₹100/kg over 35 years, while electricity has moved from ₹2/unit to ₹7-8/unit, and with solar the effective cost is ₹4-5/unit; the switch will significantly reduce operating costs despite added interest and depreciation.
• BMW EV requirement: BMW electric car parts require non-fossil fuel based manufacturing processes, making the electric furnace a prerequisite for that business, which is expected to start production by end of this year.
• Noida backward integration: An additional ₹9.17 crores is allocated for a heat treatment plant and rooftop solar at Noida, where heat treatment is currently 100% outsourced; insourcing is expected to yield a net gain after interest costs.
• Total heat treatment outlay: ₹33-34 crores at Gajraula plus ₹9.17 crores at Noida, part of a ₹77.45 crore FY27 capex plan; the Gajraula plant is targeted to be fully operational by February 2027.

Prabh Mehar Singh: "we know nobody asked this justification, but as a corporate governance, whatever penny we invest, there might be a certain inclination that, oh, you know, 80 crores is coming into a business. No, because some of the turnover or some of the investment is being put in to create this plant, which will have a life of roughly 30 years for future."

New Business & Diversification

• ZF electric power steering for US trucks: Won a pilot project for ZF's first electric power steering system for trucks, destined for an American OEM; gearbox manufactured in India, electronic integration in Mexico, final assembly in North America; confirmation arrived the day before the earnings call.
• Opens the US commercial vehicle door: The project is small in initial revenue but is the entry point into the US truck segment; once successful in one product category, management expects to add more, and the technology can be offered to other steering makers, de-risking from automotive.
• Premium two-wheeler ramp accelerating: A high-premium two-wheeler project nominated in September started production in January, one of the quickest launches ever; customer demand is so strong post-GST reduction that the customer is asking to double volumes from 10,000 to 20,000 units.
• BMW Venus plant ready: Infrastructure and installation completed, trial runs conducted, fully prepared for SOP by end of this year; the plant has 50% additional space earmarked for new projects.
• Segment mix transformation: Two-wheeler share has declined to 29% not because absolute revenue fell but because commercial vehicles (now 19%, up from ~2% two to three years ago) and recreational vehicles (21%) grew faster.
• Kubota shift to domestic: Kubota, having acquired Escorts, is gradually moving from export to supplying parts to Escorts in India for onward export; the business remains but shifts from export to domestic in the books, improving receivables.

Prabh Mehar Singh: "We are also very happy to announce and why we have put in this call is because we got this only yesterday. So sometimes timing is also very good."

KTM Recovery

• Normalisation on track: KTM production is recovering as per plan, with projections maintained to the last vehicle level; FY28 forecasts have already been released and are better than the previous year.
• Dealer inventory cleaned out: Dealer stock has been reduced from 200,000 motorcycles to 20,000, which is the operating level; old inventories are effectively finished, meaning fresh ordering should resume.
• Bajaj now at the helm: Bajaj is the new manager of KTM and is investing more than ₹8,000 crores; management views Bajaj as a very aggressive company that will not allow KTM to decline.
• Conservative stance maintained: Management has taken a very conservative view in its own planning; if KTM grows beyond that, it comes as upside; FY26 revenue guidance of ₹560 crores plus/minus 5% already embeds the possibility of KTM contributing plus 5 or minus 5 from other customers.

Gursharan Singh: "That is going on as per plan, and in fact, so far, situation is very promising because whatever they projected, they have maintained even to the last vehicle level, so it means that projections and forecast is very, very robust, and now FY28 forecast."

BMW & the EV Opportunity

• Locking program nearing sign-off: The final phase of sampling is underway; an audit team from BMW visits in April for sign-off; the vehicle launch is expected in early 2027.
• Revenue timing: BMW electric car business is expected to start production by end of this year, with at least three months of revenue targeted in the next financial year; FY27-28 will be the first full year for that order.
• Volume uncertainty remains: The customer is still re-discussing volumes, so management declined to provide a revenue estimate for FY28, calling it immature to pass on numbers while volumes are in flux.
• EU FTA tailwind: The India-EU Free Trade Agreement becomes applicable from January 2027 and is expected to bring India into the limelight for European companies; RACL's five warehouses and 16-year presence in Europe give it an upper hand, though strategic supply chain decisions by European firms will take time.

Guidance & Commitments

Key Metrics