Varroc Engineering (VARROC) Q2 25/26 earnings summary

Executive summary

• Q2 FY26 consolidated revenue reached INR 22.7 billion (Rs. 22,073 million), up 6.1% year-over-year, with India operations growing 7.9% despite rare earth supply issues impacting growth by ~4%.

• Net debt reduced to INR 3,800 million by Q2 FY26, with net debt to EBITDA at 0.47 and net debt to equity at 0.22.

• ROCE improved to 23.6% in Q2 FY26 from 12% in FY23.

• Over 14 new patents filed in H1 FY26, bringing the total to more than 130.

• Board approved unaudited standalone and consolidated financial results, reflecting the merger of Varroc Polymers Limited.

Financial highlights

• Q2 FY26 EBITDA margin at 9.1% (Rs. 2,018 million), down from 9.7% YoY, with PBT before JV profit at 4.1% (Rs. 912 million); PAT was Rs. 633 million.

• H1 FY26 revenue was Rs. 42,349 million, up 6.4% YoY; EBITDA at 9.3% margin; PBT at 4% margin.

• Net debt at INR 3,800 million; INR 3,680 million reduction in H1 FY26.

• CapEx of INR 186 crores (Rs. 1,860 million) in H1, mainly for new Thailand facility.

• Exceptional gain of Rs. 612 million from disposal of China JV investment in H1 FY26.

Outlook and guidance

• Expecting improved performance in Q3 as rare earth supply normalizes.

• Overseas business turnaround anticipated from H2 FY27, with new business wins in electronics and lighting.

• CapEx for FY26 to be around INR 500 crores, with next year returning to normal levels of INR 250 crores plus INR 50-100 million for overseas expansion.

• Increased R&D investment, especially in China, focusing on lighting, ADAS, and intelligent cockpit.

• Ambition to double revenue by 2030 and achieve PBT above 10%.