Varroc Engineering (VARROC) Q1 24/25 earnings summary

Executive summary

• Q1 FY25 revenue grew 5.2% year-over-year to INR 18,989 million, led by 11.3% growth in India operations, despite overseas headwinds.

• Profitability declined with EBITDA margin at 9.1% (down from 10.0% YoY) and PBT margin at 2.9% (down from 3.6% YoY), impacted by start-up costs for new Maharashtra plants and negative operating leverage overseas.

• Net debt reduced by INR 668 million to INR 9,160 million, with net debt to equity improving to 0.59.

• Lifetime new business wins in Q1 exceeded INR 7,959 million, with over 48% from EV customers.

• India Ratings upgraded long-term rating to AA- and short-term to A1+.

Financial highlights

• Consolidated revenue for Q1 FY25 was INR 18,989 million, up 5.2% YoY; sequentially down 3.8% from Q4 FY24.

• EBITDA margin stood at 9.1% for Q1 FY25; EBITDA was INR 1,724 million, down 4.3% YoY.

• PBT margin was 2.9% in Q1 FY25, down from 3.6% YoY; PBT was INR 560 million, down 14.2% YoY.

• Net debt at INR 9,160 million, reduced by INR 668 million from March 2024.

• ROCE (annualized) improved to 16.3% from 12.0% as of March 2024.

Outlook and guidance

• Management expects margin improvement from H2 FY25 as cost reduction initiatives and renewable energy sourcing take effect.

• Revenue ramp-up from new order wins and EV volumes is expected to support growth for the rest of FY25.

• Phase-II investment in renewable energy (14 MWp) approved; Phase-I (36.6 MWp) to be commercialized in Q2 FY25, targeting INR 200 million annual savings and 45,384 tons CO2 reduction.

• Overseas business recovery is anticipated over the next 1–2 years, with India margins set to improve in the near term.