This article first appeared on GuruFocus .
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Total Revenue:INR1,050.6 crores for Q1 FY27, up 18.8% from INR884.4 crores in Q1 FY26.
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New Business Wins:Secured new business with a lifetime value of approximately INR2,040 crores during the quarter.
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Acquisition:Successfully completed the acquisition of Hindustan Composites Limited's friction business on a slump sale basis.
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Release Date: August 21, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Rane (Madras) Ltd ( BOM:532661 ) reported a strong 18.8% year-over-year revenue growth in Q1 FY27, reaching INR1,050.6 crores.
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The company secured new business with a lifetime value of approximately INR2,040 crores, reflecting strong customer confidence.
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The acquisition of Hindustan Composites' friction business has been successfully completed, strengthening Rane (Madras) Ltd ( BOM:532661 )'s position in the friction segment and providing scale and capabilities.
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The acquired friction business has higher EBITDA margins (around 11-12%) and is expected to be margin-accretive, supporting the company's goal of achieving double-digit margins.
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The company is actively passing on commodity cost increases to customers and implementing cost reduction initiatives, with expectations of margin improvement in the coming quarters.
Negative Points
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Rane (Madras) Ltd ( BOM:532661 ) faces elevated input costs due to sharp increases in commodity prices and geopolitical tensions in West Asia, impacting margins.
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EBITDA margins declined to 8.4% in Q1 FY27 from 9.5% in Q4 FY26, partly due to a lag in recovering commodity cost increases from customers.
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Rane Steering Systems is expected to have muted EBITDA margins for the current financial year due to legacy low-price orders, with improvement only expected from the next fiscal year.
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The company's growth rate is below the industry average, attributed to technology migration in certain segments and a product mix that doesn't fully align with faster-growing vehicle models.
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The company's debt levels are expected to peak at around INR1,100 crores due to the acquisition and increased CapEx, with a target of reducing debt-to-equity to 0.5 only by March 2028.
Q & A Highlights
Q: What is the status of the acquisition of Hindustan Composites' friction business, and how will it impact Rane Madras? A: P. Padmanabhan, President Finance and Group CFO, confirmed that the business transfer agreement with Hindustan Composites has been successfully completed, with all conditions fulfilled. The acquisition strengthens RML's position in the friction business, providing scale and capabilities. The acquired business has a strong share in commercial vehicles and railways (about 40% of its revenue), which is complementary to RML's existing strength in passenger vehicles and 2-wheelers. The acquired business has accretive EBITDA margins of around 13%-14%, and integration will proceed in phases over 12-18 months to maximize synergies.
Q: With the CapEx plan and the recent acquisition, is the target of net debt to equity of less than 0.5 delayed? A: P. Padmanabhan clarified that the company remains committed to reaching the 0.5 debt-to-equity target by March 2028. The Velachery property sale is in process with phased receipts, and other land parcels will be sold when the right value is obtained. Peak debt is expected to be around INR1,100 crores briefly, but should come below INR1,000 crores by year-end, with the target achieved within 12-18 months.
Q: Why are margins still not picking up despite improving export mix and new business wins, and when will double-digit margins be achieved? A: P. Padmanabhan explained that the current quarter faced significant cost increases across materials, logistics, and energy due to the West Asian crisis. While commodity costs are largely recoverable through back-to-back arrangements, there is a lead-lag effect in recovery. The company is working on cost reduction initiatives and expects margin improvement. The aspiration is to achieve double-digit EBITDA margins on a full-year basis, potentially by Q3, factoring in the Hindustan Composites acquisition.
Q: What caused the sharp margin decline and negative PAT in Rane Steering this quarter? A: P. Padmanabhan stated that Rane Steering's muted EBITDA margins are due to legacy low-priced orders, which will persist for the next 12 months. In the corresponding quarter last year, there were one-time retrospective price increases that boosted results, which were absent this quarter. The company expects margins to improve from the next financial year, with the current year remaining muted.
Q: Why is Rane Madras' growth rate below the industry growth rate of 15-20%? Is the company losing market share? A: P. Padmanabhan clarified there is no loss of market share in any segment. The growth difference is due to technology migration in the LCV segment (mechanical to electric/hydraulic steering) and changes in vehicle model mix, where certain OEMs and models growing faster may have different pack values. The company remains in line with market growth from both technology and served customer perspectives.
Q: What were the professional fees of INR14.5 crores last year, and what benefits are expected? A: P. Padmanabhan explained that the fees were for external agencies assisting with the merger of three companies, restructuring the aftermarket products team, and cost reduction/transformation initiatives. The aftermarket project has already shown improved growth, and cost reduction initiatives will help achieve double-digit profitability. These expenses will continue this year, with full-year benefits expected in FY28.
Q: What is the CapEx plan for the current year, and how will the Hindustan Composites acquisition be funded? A: P. Padmanabhan stated that RML's CapEx for FY27 is INR270-300 crores (increased from earlier estimates due to order advancement), and ZF Group CapEx is around INR250-280 crores. The INR370 crores acquisition will be funded partially by debt, internal accruals, and proceeds from the Velachery land sale. Peak debt is expected around INR1,100 crores.
Q: What caused the sharp sequential margin decline in ZF Rane? A: P. Padmanabhan attributed the decline to an adverse product mix within the Occupant Safety division, which includes steering wheels, seatbelts, and airbags. Seatbelts have comparatively lower margins than airbags, and increased seatbelt sales impacted overall margins.
Q: What is the status of the warranty provision for the Lifetec JV? A: P. Padmanabhan confirmed the provision remains the same as provided in December 2025, at approximately EUR23 million, with only Forex changes increasing it. Discussions are ongoing, and the company is taking steps to mitigate costs, but it is too early to comment on recoverability from vendors or insurance.
Q: Why is the Rane Brake Lining segment not growing despite strong industry growth? A: P. Padmanabhan expressed positivity about the division's growth prospects over the next 2-3 years, driven by 2-wheeler growth, the Hindustan Composites acquisition (railways and commercial vehicles), and aftermarket growth. The aftermarket is a sizable portion of the manufacturing entity, and the company sees significant opportunities in friction-related products.
Q: What is the new "lifetime value" metric for order wins, and how does it compare to previous reporting? A: An unidentified company representative explained that the lifetime value metric is similar to previous per-annum value reporting but benchmarked with peer companies globally. Most projects have a timeframe of 6-6.5 years, and the lifetime value is approximately 6.2-6.4 times the current annual revenue perspective.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
