This article first appeared on GuruFocus .
Release Date: May 27, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Varroc Engineering Ltd ( NSE:VARROC ) reported a consolidated revenue growth of 12.8% year-on-year for Q4 FY26, reaching Rs. 23.7 billion.
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The company's EBITDA margin improved to 9.7% in Q4 FY26 from 9.3% in the previous quarter.
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Revenue from supplying to electric vehicles (EVs) constituted 14% of total revenues in Q4, indicating a strong focus on the growing EV market.
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The company achieved its highest-ever net new business wins with an annualized peak revenue of Rs. 32,889 billion, highlighting strong future growth potential.
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Varroc Engineering Ltd ( NSE:VARROC ) reduced its net debt by Rs. 2,528 million from the previous year, showcasing effective debt management.
Negative Points
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Despite revenue growth, the EBITDA margin remains below the double-digit target, indicating room for improvement in operational efficiency.
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The international business, particularly the Romanian operations, is expected to reach EBITDA break-even only by Q4 of FY27, indicating ongoing challenges.
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The Italian forging business may take another year to achieve EBITDA break-even, reflecting continued operational difficulties.
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The company anticipates significant capital expenditure of Rs. 450 to 500 crores in FY27, which could impact short-term cash flow.
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There are ongoing supply chain challenges, particularly with tier-two and tier-three suppliers, which could affect production and sales.
Q & A Highlights
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Q: Can you provide a breakdown of the overseas order book and its expected ramp-up? A: The overseas order book for this year is around 1,400 crore INR. We expect the majority of these programs to start production within fiscal year '27, with full potential realized in fiscal year '28. This includes business wins for our Thailand location, specifically in passenger vehicle lighting.
Q: Are there any plans for significant CapEx in the coming years? A: Yes, there will be significant CapEx this year, both in India and overseas, amounting to approximately 450 to 500 crore INR. This includes investments in land and other options to support growth.
Q: What is the outlook for the international business in terms of break-even? A: The international business, particularly in Romania, is expected to reach EBITDA break-even by Q4 of the next fiscal year. The Italian forging business may take an additional year to achieve break-even.
Q: How is Varroc Engineering planning to capitalize on the growth in the EV segment? A: In the last quarter, 14% of our revenues in India came from EVs. We expect this to increase, especially in two-wheelers and passenger cars. Overseas, our business wins in inverters, interior lighting, and wall chargers are largely geared towards EVs, with significant contributions expected from these segments.
Q: What is the expected impact of the Middle East crisis on margins and supply chain? A: The Middle East crisis has led to inflation and supply chain challenges. However, we have material cost pass-through arrangements with OEMs, and we expect these costs to be compensated. We are largely stable in terms of margin performance despite these challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
