Sandhar Technologies: Navigating Growth and Strategic Shifts in Q2 FY26

Sandhar Technologies Limited, a prominent player in the Indian automotive ancillary sector, has reported a robust performance for the second quarter of the fiscal year 2025-26 (Q2 FY26), demonstrating significant growth in its domestic operations while actively addressing challenges in its overseas ventures. The company's consolidated revenue from operations surged by 29% year-on-year, reaching INR 1,270.37 crore. This impressive top-line growth was complemented by a 19% increase in operational EBITDA and a 15% rise in operational PAT, signaling a healthy trajectory despite ongoing strategic investments.

The India business emerged as a key growth driver, with revenue from operations expanding by a remarkable 33%. This strong domestic performance was mirrored in profitability metrics, as operational EBITDA for India grew by 24% and operational PAT by 28%. Management attributed this success to the overall positive trend in the domestic auto industry, particularly the 7.4% growth in the two-wheeler segment. The company's diversified product portfolio, including Aluminum Die Casting (ADC), Sheet Metal, and Vision Systems, played a crucial role in this growth. Notably, the ADC Domestic segment contributed significantly, accounting for nearly 22% of the consolidated revenue, while Vision Systems saw its revenues double, a testament to its expanding market presence.

Strategic Initiatives and Segment Performance

Sandhar Technologies is not just riding market waves; it is actively shaping its future through strategic initiatives and focused segment development. The company's foray into EV components is gaining traction, with commercial invoicing for battery chargers and motor controllers already underway. The pilot for DC-DC converters has received positive responses, and this segment is projected to contribute approximately INR 15 crore to the company's revenue in the current fiscal year. This move positions Sandhar to capitalize on the burgeoning electric vehicle market, aligning with global automotive trends.

New projects, including the acquisition of Sundaram Clayton's unit and the establishment of new plants in Pune and South India, are currently in a ramp-up phase. While these initiatives have a temporary dilutive effect on margins, management expects them to achieve full production by April 2026. Post-stabilization, Sundaram Clayton's margins are anticipated to improve significantly, reaching 9-10%. This long-term strategic investment underscores the company's commitment to expanding its manufacturing capabilities and market share.

Financial Summary (Consolidated - Q2 FY26)

Addressing Overseas Challenges and Future Outlook

The overseas business, primarily in Europe, presented a mixed picture. While revenue from operations grew by 2% quarter-on-quarter, operational EBITDA declined by 12% and EBT by 29% compared to the previous year. This underperformance was attributed to the volatile European market, including geopolitical factors and currency translation losses. However, management has demonstrated a proactive approach, with overseas losses reducing by half quarter-on-quarter. The company is implementing a comprehensive turnaround strategy focusing on operational efficiency, cost reduction, customer base expansion, and financial re-engineering. Management is confident in mitigating the remaining losses in the second half of the fiscal year and restoring overseas margins to 12.5-13% 'very shortly'.

Looking ahead, Sandhar Technologies maintains a positive outlook. Management anticipates a stronger second half of FY26, driven by robust order books and the festive season. The company aims to achieve an overall EBITDA margin of 11% within the next two years, with annual improvements of 10-50 basis points, targeting a double-digit margin by March 2026. Furthermore, Sandhar aspires to achieve a pre-tax Return on Capital Employed (ROCE) of 18%, reflecting its commitment to disciplined capital allocation and shareholder value creation. The planned capital expenditure of approximately INR 300 crore for FY26, primarily for new projects and modernization, is expected to conclude major works by March 2026, paving the way for sustained growth.

Sandhar Technologies' Q2 FY26 performance highlights a company in dynamic transition. Its strong domestic growth, strategic investments in EV and new facilities, and a clear plan for overseas turnaround position it for continued expansion. The management's transparent communication regarding challenges and their proactive measures instill confidence in the company's ability to achieve its long-term objectives and deliver enhanced value to its stakeholders.