Schaeffler India's export guidance contradicts itself; capex jumps without explanation
Management shifted export targets from 5-10% to 10-12% to 15-20% in six months, then denied giving guidance. Capex flagged at ₹675 cr, up from ₹400-500 cr plan, with no revised budget.
What's new
- Q2 CY26 revenue ₹2,681 cr, up 17.5% YoY; EBITDA margin 19.1%.
- Automotive technologies grew 33% YoY despite 8% drop in PV production.
- Capex spend implied at ₹675 cr for FY26, well above ₹400-500 cr guided in April.
- KSV revenue ₹79 cr with negative EBITDA; break-even expected in 2029.
Themes from the call
Demand
Automotive technologies gained share with 33% growth; bearings and industrial grew 5% YoY, with metals and power transmission strong but wind and railways weak.
Margins
Gross margin improved ₹147 cr but input costs, FX, freight and IT costs squeezed EBITDA; price corrections under negotiation, traction expected in H2.
Capital allocation
Capex increased to about ₹675 cr (from ₹400-500 cr) for capacity and localization; working capital rose to ₹2,029 cr on deliberate inventory build, pressuring free cash flow.
Guidance watch
- Exports: aim for 15-20% growth but no formal guidance; desired export share capped at 20% of total business.
- KSV EBITDA and cash flow break-even expected in 2029; no interim milestones.
- Free cash flow to recover in H2 as inventory unwinds.
Risk flags
- Export guidance inconsistency raises credibility concerns; management's denial of prior guidance may alienate investors.
- Capex increase from ₹400-500 cr to about ₹675 cr was not reconciled; unclear if FY26 budget was revised upward.
- KSV remains EBITDA-negative with no path to breakeven before 2029; accounting adjustments obscure true profitability.
- Working capital build of ₹2,029 cr limits free cash flow conversion; inventory normalization is key.
Key quotes
-
"We never gave specific growth guidance. We stated our desire to contain exports at up to 20% of our total business."
— Schaeffler India management, Jul 2026 call -
"We expect to break even on an EBITDA and cash flow level in 2029."
— Hardevi Wazani, CFO (on KSV profitability)
The brief
Schaeffler India delivered a strong quarter: 17.5% revenue growth, market share gains in automotive technologies despite a weak passenger vehicle market, and a 19.1% EBITDA margin that held up under cost pressure. But the call was dominated by two unresolved contradictions.
First, exports. In February management saw 5-10% growth. In April it became 10-12%. In July the target was 15-20%. Then management said it had never given specific growth guidance. The numbers are good (exports grew 24% in Q2) but the shifting goalposts and the explicit denial of prior ranges damage guidance credibility. The street needs to know which range to trust.
Second, capex. In April the annual plan was ₹400-500 crore. In July, after spending ₹175 crore, management said it would consume another ₹500 crore, implying about ₹675 crore for the year. No revised plan or explanation was offered. The jump suggests either a change in scope or poor initial forecasting; neither is reassuring.
Meanwhile, KSV continues to burn cash: revenue of ₹79 crore with negative EBITDA. Management expects break-even in 2029. That is a long wait with no interim milestones.
Schaeffler's underlying business is solid. But the inconsistency in communications and the unexplained capex increase are the kind of noise that makes investors question the rest.
Schaeffler's numbers are good, but its guidance discipline is not. Two contradictions in one call make the rest of the story harder to trust.