Varroc Engineering (VARROC) Q1 25/26 earnings summary

Executive summary

• Q1 FY26 consolidated revenue was INR 20.3 billion (Rs. 20,276 million), up 6.8% year-over-year, with India operations growing 7.2%.

• EBITDA margin improved to 9.5% from 9.1% year-over-year; PBT before exceptional items and JV profit rose to 4.1% of revenue from 2.8%.

• Net debt reduced by INR 3,002 million to INR 4,478 million, with net debt-to-equity at 0.3.

• Net profit after tax for the quarter was Rs. 1,074.20 million, up from Rs. 696.76 million year-over-year.

• Annualized peak revenue from new business wins in Q1 was INR 2,905 million, with revenue from EV customers rising to 11% of total.

Financial highlights

• EBITDA for Q1 FY26 was Rs. 1,919 million (9.5% margin), up from Rs. 1,724 million (9.1%) year-over-year.

• PBT before JV and exceptional items was Rs. 822 million (4.1% margin), up from Rs. 533 million (2.8%) year-over-year.

• Net profit margin improved to 5.30% from 1.79% year-over-year.

• Net debt at Rs. 4,478 million as of June 30, 2025, down from Rs. 7,480 million at March 31, 2025.

• Exceptional gain of Rs. 612 million recognized from exchange gains on JV value.

Outlook and guidance

• Management targets 6%-8% growth above market rates and double-digit growth despite a sluggish market.

• Focus on debt reduction, prudent capital deployment, and less capital-intensive investments.

• Overseas business expected to remain weak through FY 2026, with profitability anticipated from the second half of FY 2027.

• Sourcing from renewable energy expected to reach 50% of total.

• Management is contesting several legal and tax matters and expects to defend its position.