This article first appeared on GuruFocus .
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Revenue:Topline significantly down compared to plan due to unforeseen headwinds, with a 30-40% hit on transfer case revenue.
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EBITDA:Maintained above 20% despite the topline hit.
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Segment Performance - Transfer Cases:Revenue hit of 30-40% due to quality and logistics issues at two growth customers (MG Motor and Mahindra).
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Segment Performance - Synchro Business:Significant reduction as Toyota transitions from ICE to hybrid regime.
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Segment Performance - EGEA Drive (EV business with Tata):In pilot production during Q1, with significantly higher numbers expected in Q2.
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New Business Awards:Announced INR 220 crore lifecycle new business from Mahindra for a new last mile mobility EV product, plus new awards for four-wheel drive and component applications.
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Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Despite a significant drop in topline, EBITDA margin remained above 20%, demonstrating the underlying strength of the business model.
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The company has secured new business awards worth approximately 720 crore rupees, including a 220 crore EV transmission order from Mahindra and a new four-wheel drive vehicle model.
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The new facility at Shirwal is coming on stream, with state-of-the-art equipment including a high-power transmission dynamometer, enhancing validation and development capabilities.
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The EV transmission business with Tata Motors is ramping up, with no quality issues in the first 2,000 units and positive feedback, and capacity for 10,000 units per month.
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The company is benefiting from the 'China plus one' sourcing strategy, with new export orders from BorgWarner for Ford, Chrysler, Toyota, and Audi applications, and a strong pipeline of opportunities.
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The company has a rich product portfolio and customer diversification, including new components for Toyota's hybrid models and Mahindra's three-wheeler EVs, reducing dependence on any single segment.
Negative Points
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Q1 FY24 revenue was significantly down due to unforeseen headwinds, including quality and logistics issues at two growth customers (MG Motor and Mahindra), leading to a 30-40% hit in transfer case sales.
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The Toyota business is undergoing a transition from ICE to hybrid, resulting in a significant reduction in synchronizer revenue, with only about 40% recovery from new hybrid content.
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Export business has been impacted by geopolitical issues, particularly the Russia-Ukraine war, leading to a halt in UAZ business, and the company does not expect recovery in FY24 or FY25.
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The new facility at Shirwal faced issues with imported equipment from South Korea, which may delay the full ramp-up of EV production.
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The company's growth in the near term is dependent on the normalization of customer schedules, which may take longer than expected, especially for MG Motor due to logistics issues from China.
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The company has not yet secured business for Maruti Suzuki's Jimny, as the OEM has chosen to go with imported content, limiting potential growth in that segment.
Q & A Highlights
Q: Can you provide a timeline for the execution of the four new orders totaling around ?720 crore, and are there more orders in the pipeline due to the China Plus One sourcing strategy? A: Jitendra Divgi, Managing Director, explained that the BorgWarner business will start ramping up in January, with revenue kicking in from Q4 of this fiscal year and peaking next financial year. The Mahindra component business is ramping up rapidly and should reach steady state by September or October. The new four-wheel drive product and the EV transmission award from Mahindra will start in the final quarter of this year, with benefits driving growth in FY25. He also confirmed a rich pipeline, with approximately ?300 crore worth of business under development and launch, and even more in the quoting stage, spanning new customers like Ashok Leyland, JCB, and European EV companies.
Q: What caused the significant drop in revenue during Q1 FY24, and was it related to any quality issues with your products? A: Jitendra Divgi clarified that the drop was due to unforeseen headwinds, including quality and logistics issues at two customers (Mahindra and MG Motor) that were not related to Divgi's products. Hirendra Divgi, Executive Director, emphasized that the quality issue at Mahindra was on their engine side due to another supplier, leading them to ration engine production to more profitable models. Additionally, the Toyota business is transitioning from the old ICE regime to a new hybrid, which reduced synchronizer volumes. The company expects the situation to recover in Q2 and return to normalcy from Q3 onwards.
Q: What is the outlook for the export business, which declined significantly in FY23, and how will the IPO funds be utilized? A: Jitendra Divgi stated that the export decline was due to geopolitics (Russia/China) and life cycle changes in North America. The company has quoted on over ?200 crore of new export business and expects to breach the ?100 crore mark by next year. Regarding IPO funds, Hirendra Divgi explained that the primary raise was revised from ?200 crore to ?180 crore due to timing and supplier delivery constraints. The unspent funds are committed to CapEx rollout for this year and next year, as per SEBI guidelines, and are on track. The funds will be used to fill the new Shirwal plant with equipment and support new business awards.
Q: Who are your key competitors in India and globally, and what is the competitive landscape for your products? A: Jitendra Divgi stated that in the four-wheel drive segment, the company is without peer in India, with competition primarily from Japan and the US. In EV transmissions, there is competition from Indian component makers, but Divgi's ability to design, develop, and manufacture complete transmission solutions sets it apart. He noted that the company is currently India's largest EV transmission system maker with the largest capacity. The company is also developing a dual-clutch automatic transmission, which will be a game-changer, with one other credible competitor in India. The strategy is to maintain a diverse product portfolio to avoid being cornered by competition in any single segment.
Q: What is the potential revenue from the Tata Motors contract, and what is the capacity in place? A: Jitendra Divgi confirmed that the company has put in place capacity for almost 10,000 EV transmissions per month, covering three different models (Tiago, Tigor, and Punch). The average price realization on these transmissions is between ?10,000 and ?11,000. This represents the current awarded business with Tata, with additional opportunities being pursued.
Q: What is the impact of the Toyota business transition from ICE to hybrid, and how will you compensate for the lost revenue? A: Jitendra Divgi explained that the company used to supply four synchronizer parts to Toyota with an aggregated value of close to ?8,000 for a volume of about 10,000 per month. As Toyota transitions to hybrid, Divgi now supplies a sun gear with a price realization of about ?300, with current volumes of 12,000 going to 16,000 next year. This represents about a 40% recovery of the lost revenue. However, the company has secured an exclusive arrangement with Toyota Tsusho, a $70 billion company, to reach out to the universe of Japanese OEMs, and has opened an office in Seoul to connect with Korean OEMs like Hyundai.
Q: Is the company considering opportunities in the bus segment, given the government's focus on electrification? A: Jitendra Divgi stated that the bus segment is currently not in focus due to the reward-to-effort ratio being less attractive compared to the passenger car and light commercial vehicle markets, which are global. He emphasized the need to prioritize the company's most precious resourcethe energy of its peopleon opportunities that will help realize the promise to shareholders. The company is focusing on cars, SUVs, and light commercial vehicles, including three-wheelers, where the EV market is evolving rapidly.
Q: Will the company supply components for Mahindra's upcoming EV models, such as the Thar EV? A: Jitendra Divgi confirmed that there is a lot of work going on in the background on EV models, not just for the Thar but also other models at Mahindra. He stated that the company will make the necessary disclosures at the right time.
Q: Is there any update on the business with Maruti Suzuki for the Jimny model? A: Jitendra Divgi stated that there are no updates on the Jimny business. The discussions were through Toyota, but Suzuki or Maruti has at this juncture preferred to go ahead with their imported content.
Q: What is the status of the Russia (UAZ) business, and can we expect any revenue from it in FY24? A: Jitendra Divgi clarified that due to the continuing war and sanctions, the UAZ business has not returned and is not part of the recovery plan until March. It is not even in the budget for FY25. He emphasized that it would not be prudent to jeopardize the company's prospects in the US and Europe by violating sanctions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
