Schaeffler India Limited, a subsidiary of the global Schaeffler Group, is a leading manufacturer of precision components and systems for automotive and industrial applications. Headquartered in Pune, the company operates across key segments like Automotive Technologies, Industrial Solutions, and Vehicle Lifetime Solutions. With five state-of-the-art manufacturing facilities in India, Schaeffler is known for its innovation, quality, and commitment to localization, supporting India’s transition toward electrification and advanced manufacturing.
Recognition & Brand Reputation
What was said:
Schaeffler India received multiple awards from major customers like Toyota, Honda, and Alstom, and won CSR awards for its sustainability and diversity work.
Why it matters:
This is a strong validation of product quality, reliability, and delivery performance—especially the Toyota award for “Zero Defect Supplies” and “100% On-Time Delivery”. It shows Schaeffler is trusted by top-tier global brands, which is important for long-term contracts and new business.
The CSR awards (like “Jal Samruddhi” for water conservation and recognition for women’s empowerment) show the company is also making a positive social impact, which is increasingly valued by investors and stakeholders.
Macro Environment and Industry Trends
What was said:
- India’s GDP estimated around 6.5% for Q2 CY25, a bit lower than Q1.
- Auto production was flat.
- Cement and steel sectors performed well, driven by infrastructure demand.
- Inflation (CPI) dropped to 2.7%, the lowest since 2019.
Why it matters:
Slower GDP and industrial production suggest a moderate economic environment, not a booming one. However, low inflation is a tailwind—it could lead to higher consumer demand, benefiting sectors like automotive and industrial.
Cement and steel doing well hints at ongoing infrastructure growth, which supports demand for industrial products like bearings.
Automotive Sector Insights
What was said:
- Passenger vehicle production and domestic sales declined YoY in June.
- Exports of passenger vehicles, however, grew in double digits.
- Commercial vehicles showed moderate improvement.
- Tractors saw consistent strong growth for three straight months.
Why it matters:
This suggests a mixed scenario for the auto sector. While domestic car demand softened, export demand is strong—a good sign for component suppliers like Schaeffler. Growth in the tractor segment also benefits their agri-focused product lines.
Financial Performance (Q2 CY2025)
What was said:
- Revenue: ₹2,282 crore (↑10.1% YoY)
- EBITDA: ₹449 crore, margin ↑ to 19.7%
- PAT (Net Profit): ₹296 crore, margin ↑ to 13%
- Free cash flow: ₹287 crore
- Capex: ₹100 crore
Why it matters:
Even in a moderate market, Schaeffler achieved double-digit growth, improved profit margins, and strong free cash flow. Their ability to increase profitability while maintaining cost discipline shows operational excellence.
A jump in free cash flow from a negative base last year is especially impressive—it means the company is generating surplus cash, which gives them flexibility for future investments.
Growth by Business Segments
Revenue contribution:
- Automotive Technologies: strong business wins in hydraulic lash adjusters and heavy-duty clutches.
- Vehicle Lifetime Solutions (Aftermarket): saw higher demand in oils, wipers.
- Bearing & Industrial: grew via new contracts in cement, raw materials, condition monitoring.
- Exports: up 23% YoY, now 16% of total revenue (earlier ~8-9%).
Why it matters:
They’re seeing broad-based growth across sectors, not dependent on one division. Notably, aftermarket and exports are scaling fast—both are higher-margin and more resilient in downturns.
Also, export growth in Asia-Pacific means they are less dependent on Europe/US, making their portfolio more balanced.
Key Operational Updates
New facilities:
- Opened 5th manufacturing plant at Shoolagiri (TN)—Phase 1 started production; future capacity expansion possible.
- Started e-axle production for Tata Harrier EV at Talegaon.
Why it matters:
These milestones show Schaeffler is actively investing in:
- Electric mobility (e-axles)
- Expanding domestic capacity (Shoolagiri)
- Supporting Make-in-India & localization
The e-axle project (with a €300 million lifetime value) marks a major step into EV drivetrain technology, which could transform their future earnings mix.
CAPEX Outlook and Investment Strategy
What was said:
- Parent company (Schaeffler AG) committed €500 million CAPEX in India over 2026–2030 (~₹4,500 crore).
- FY2025 is focused more on capital efficiency (using existing investments wisely) rather than aggressive spending.
Why it matters:
This shows a long-term commitment to Indian operations. They’re being prudent in the short term, investing selectively based on market trends, while keeping large investments ready for the future (like for EVs, hybrids, exports).
Localization & Manufacturing Efficiency
What was said:
- Localization rose to 78–79% in Q2 (from 76% last quarter)
- Capacity utilization > 85% across most plants
- Plants like Savli and Shoolagiri are already operating at high levels
Why it matters:
Higher localization = better margins + supply chain control + import substitution
It also makes them more cost-competitive in domestic and export markets, especially relevant with rising global protectionism.
R&D and Product Innovation
Focus areas:
- Continue R&D investment in ICE, hybrid, and EV technologies
- Developed local competence in sensors, controllers, electronics via Vitesco
- Now capable of delivering across all three drivetrains (ICE, hybrid, BEV)
Why it matters:
Instead of abandoning ICE, they are strategically spreading R&D across all technologies—smart, because India is a multi-technology market. Their readiness in EV & hybrid aligns with future auto trends.
Outlook & Summary
- Strong earnings quality and double-digit growth for five straight quarters
- Focus remains on:
- Efficiency
- Smart CAPEX
- Free cash flow
- New business wins
- Management is optimistic but cautious, citing volatile global and domestic markets
Question and Answer Session Highlights
Q
The Schaeffler Group CEO mentioned an annual investment of €100 million in India. Will your CAPEX increase from current levels?
A (Hardevi Vazirani, CFO):
The group has committed €500 million from 2026–2030, averaging €100 million/year. For 2025, we are focusing on capital efficiency after ₹1,700 crore invested over the last 3 years. Higher CAPEX will resume from next year.
A (Harsha Kadam, MD & CEO):
Yes, we will continue investing. However, CAPEX will align with market conditions. We have space and machinery available; investments will depend on product lines and localization priorities.
Q
Exports have grown well—what’s the visibility ahead?
A (Hardevi Vazirani):
The order book for 2025 is secured, so export performance should sustain. However, 2026 depends on how geopolitical and regional markets evolve.
A (Harsha Kadam):
We’re growing significantly in the Asia-Pacific region and balancing exposure across global regions to reduce dependency.
Q
Non-mobility Industrial business seems flat after strong past growth. Temporary?
A (Harsha Kadam):
It’s sector-specific. We performed very well in railways, wind energy, off-roads, and agri sectors. Two-wheeler demand slowed, but industrial distribution performed strongly. It’s a temporary blip, not a structural issue.
Q
You’ve shown strong growth in aftermarket. What’s helping—market share, new products?
A (Harsha Kadam):
OES (OEM Service) demand is up. Our new products like oils and wipers saw strong demand. We also diverted OEM production capacity to aftermarket, especially for clutches. So, it’s both market growth and internal reallocation.
Q
Other expenses increased YoY. Any one-offs? Linked to new plant or e-mobility?
A (Hardevi Vazirani):
Yes, includes one-time expenses:
- Tooling and consumables for the new Shoolagiri plant
- Tooling for e-mobility lines
Despite that, gross margin improved, absorbing the impact.
Q
Non-operating income is up. What’s the reason?
A (Hardevi Vazirani):
It includes project support charges to group companies, billed as per transfer pricing.
Q
You started e-axle supplies to Tata Harrier. What’s the expected annual revenue? Any exports planned?
A (Harsha Kadam):
Difficult to give revenue guidance—it depends on vehicle sales. As of now, we are focused only on the Indian market, no export plans yet.
Q
You were at 76% localization last quarter. Will you reach 80% by CY25?
A (Harsha Kadam):
We’ve already crossed 78% this quarter. Yes, we’re on track to exceed 80%. Localization is critical to competitiveness in India.
Q
What’s the expected revenue potential from your Shoolagiri plant?
A (Hardevi Vazirani):
We don’t share plant-specific revenue projections due to interdependencies and shared capacities.
Q
Can you give a split between PV, CV, and tractors in auto revenues?
A (Harsha Kadam):
We can’t disclose segment splits due to customer NDAs. However, we track product portfolio internally and ensure balanced exposure.
Q
What’s your content per vehicle in CVs and LCVs?
A (Harsha Kadam):
Content is €60–65 per vehicle in LCVs. In CVs, we’ve improved over time. Hybrid and ICE content is also rising. EV content not measured yet due to limited volumes.
Q
How do you balance R&D between ICE and EVs? Also, are you working with other global OEMs?
A (Harsha Kadam):
India is unique with ICE, hybrid, and EVs coexisting. We continue to invest in gasoline, hybrid, and electric tech.
- ICE: Lash adjusters, clutches
- Hybrid: Supplies to Japanese OEMs
- EV: e-Axle production in Talegaon
We’ve also built electronics and sensor capabilities through the Vitesco portfolio.
On OEM partnerships: We are working on multiple EV projects, but can’t disclose due to NDA restrictions.
Q
Any plans to diversify exports beyond industrial bearings?
A (Harsha Kadam):
Yes, we’re leveraging localized capacities for exports. However, automotive exports are limited as OEMs prefer local sourcing in their own markets.
Q
Does the €500M CAPEX include Vitesco India?
A (Harsha Kadam):
No, it’s specific to Schaeffler India Limited. Any Vitesco-related investments would be communicated separately.
Q
How are railways, wind, and raw material sectors performing?
A (Harsha Kadam):
- Railways: Benefiting from privatization of coach manufacturing
- Wind: Sales were strong in Q1 due to pre-building stock
- Power Transmission and Off-roads: Seeing good demand
Even with weak PV sales, new wins helped us outperform the market.
Q
What’s the per-vehicle content value of your e-axle?
A (Harsha Kadam):
We cannot disclose it due to NDA with customers.
Q
Out of ₹330 crore CAPEX at Shoolagiri, how much was spent in FY25?
A (Hardevi Vazirani):
Most of it was spent last year. Around ₹40–45 crore has been spent this year.
Q
What is your plant utilization as of Q2?
A (Hardevi Vazirani):
Utilization is above 85% across plants. Newer plants like Savli are also at high utilization (>90%).
Q
Are exports direct to customers or via group companies?
A (Hardevi Vazirani):
All exports are to Schaeffler’s sister companies worldwide, as is typical in multinational group structures.
Q
How much of Savli plant is utilized? Also, are wind turbine bearings localized or still imported?
A (Hardevi Vazirani & Harsha Kadam):
Savli plant is highly utilized, especially in large-size and wheel bearings.
Wind turbine bearings—some are still imported. However, 27 bearing types were localized in the last year, including several for wind. More localization planned.