Rico Auto Industries Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record revenue, margin noise: FY26 revenue hit an all-time high of INR2,477 crores (+12% YoY), but reported EBITDA margins were depressed by INR30 crores in nonrecurring Labour Code and lag settlement charges.
• Adjusted margin base is 10.25%: Excluding one-offs, full-year EBITDA margin was 10.25%, and management expects to build from this floor in FY27 as 75% of customers by value shift to monthly raw material settlements.
• INR2,500 crore order book provides visibility: New program wins over a 5-year life, combined with ~40 product launches ramping up, underpin a confident FY27 revenue target of INR3,000+ crores.
• Exports and new businesses are the growth bets: Exports are guided to grow 32% in FY27 and double in two years, while Railway and Defense are targeted to add INR150 crores combined, though both are early-stage and unproven.
• What to watch next quarter: Whether Q1 FY27 EBITDA margin prints at the promised 10%+; the pace of past lag-loss recovery; and any hard numbers on Railway and Defense margins.

Revenue Growth & Order Book

• FY26 performance: Revenue grew 12% YoY to INR2,477 crores, the highest ever, driven by healthy domestic and export demand and the ramp-up of new programs.
• Segment split: The aluminum business contributed 88% of revenue (INR2,155 crores), while ferrous made up the remaining 12% (INR322 crores).
• Export trajectory: Exports rose to 16% of revenue in FY26, and management guided for 32% export growth in FY27, primarily to Germany and the U.S.A., with a target to double exports to these markets in the next two years.
• New order book: The company secured new orders worth approximately INR2,500 crores over a 5-year program life, with INR500 crores of incremental revenue expected in FY27 from programs launched this year and new ones being launched.
• Product launch pipeline: Around 40 product launches are underway from investments started two years ago; revenues will start flowing this year and peak next year, with impact visible from the end of Q3 to Q4.
• FY27 revenue target: Management expects to cross INR3,000 crores in FY27, up from INR2,480 crores in FY26.
• Industry tailwinds: FY27 industry growth estimates are 5%-7% for passenger vehicles, 6%-8% for 2-wheelers, 4%-6% for commercial vehicles, and 9%-10% for 3-wheelers, with 2-wheeler EV penetration expected to improve to 7%-8%.

Arvind Kapur: "Unless, of course, the global -- the geopolitics which is happening and that brings about some disaster, I think we are ready to reach the levels that we are talking of now."

Margin Walk & Recovery

• Reported vs. adjusted: Q4 FY26 reported EBITDA margin was 7.1% (7.6% per later reference), dragged by a INR3.6 crore Labour Code impact and an INR11 crore lag settlement impact; excluding these, the adjusted Q4 margin was 9.8%. Full-year reported margin was ~9%, or 10.25% adjusted after stripping out INR11 crores (Labour Code) and INR19 crores (lag settlement).
• Lag settlement fix: 75% of customers by value have agreed to move to monthly raw material price settlements, which will eliminate the lag impact going forward and protect the 10.25% adjusted margin base.
• Past loss recovery: Negotiations to recover the INR19 crores of past lag losses are ongoing; any recovery will flow directly to the bottom line, but management did not assign a probability or confirm full recovery in FY27.
• Margin levers: Beyond the settlement fix, management is reviewing the entire portfolio for low-margin products and renegotiating with customers to improve product profitability, which is expected to push margins beyond the 10.25% adjusted FY26 level.
• FY27 margin guidance: EBITDA margin is expected to be higher than 10.25%, starting from Q1 itself at 10% plus.

Naveen Sorot: "So we expect that we should see an improvement in the overall margin levels as well going beyond 10.25% that we have achieved last year, if we exclude the onetime impact."

New Business Verticals

• Railway: RDSO approval has been received, the first lot was dispatched 4-5 days ago, and 3-4 component/assembly approvals are in hand with more expected in about two months. FY26 revenue missed the INR60-70 crore target because approvals took longer than expected; FY27 target is INR100 crores.
• Defense: The company is currently manufacturing shooting ranges and adding more to the portfolio this year, with a FY27 revenue target of INR50 crores and an aim to double that in the next two years.
• Margin opacity: Management declined to provide current margin data for Railway and Defense, asking for 1-2 quarters before disclosing, though they stated margins are "obviously better than the auto margins."
• Machine tools: The company has begun selling CNC machines (14-axis, 16-axis, 5-axis, 8-axis) externally after previously making them only for captive use; the first external sale was completed very recently, with more figures expected next quarter.

Arvind Kapur: "We've just started supplying. So give us some time. They are obviously better than the auto margins, but give us 1 or 2 quarters, and we'll actually tell you about the margins."

Capacity, Capex & Balance Sheet

• Capacity utilization: Iron and aluminum plants are running at 65%-75% overall, with smaller machines at 95%; higher-tonnage machines have freed capacity available for new components.
• Hosur facility: Investment is progressing, with the facility expected to be operational from September 2026, catering to hybrid and EV programs.
• Tamil Nadu subsidy: The company received approval for an approximately INR39 crore subsidy from the Tamil Nadu government, accruing from the current fiscal year for the next 10 years.
• Working capital: Working capital days improved sharply to 7 days from 33 days last year, with cash flow from operations at INR331 crores.
• Debt reduction: Leverage is on a downward gliding path, with INR110-120 crores in annual repayments planned over the next three years.
• Land sale: No timeline is committed; management stated it could happen in six months if the right price is received, but they will not sell otherwise.

Arvind Kapur: "If it happens, it will happen in 6 months also. If it doesn't happen -- If we don't get the right price, we are not selling it."

Guidance & Commitments

Key Metrics