Auto ancillaries FY26: revenue up 12.5%, margins flat

Why FY26 growth expectations matter

India’s auto ancillary sector is entering FY26 with a clearer split between steady demand drivers and near-term volatility in costs and global cues. A research report by Elara Capital points to continued top-line growth, supported by healthy volume movement across vehicle segments and a better product mix. The key investor question is less about whether revenue grows and more about how evenly profitability follows. In the latest dataset referenced by the brokerage, aggregate operating margin stayed flat even as EBITDA expanded. That combination typically signals that pricing, mix upgrades, and operating leverage are being offset by costs in some pockets.

FY26: revenue up 12.5%, EBITDA up 13.3%

Elara Capital said revenue for auto ancillaries grew 12.5% year-on-year in FY26, led by healthy volume growth across segments and an improved product mix. Absolute EBITDA rose 13.3% over the same period. Despite this, the aggregate operating margin remained flat at 13.6%, indicating that gains from mix and scale were not enough to lift margins at the sector level. The flat margin outcome is important because it frames how markets may react to quarterly beats or misses. It also highlights why company-specific execution and product exposure matter more when sector-level margins are not expanding.

Segment trends: suspension, braking and multiproduct lead

Across segments, suspension, braking, and multiproduct categories led revenue expansion. Elara Capital reported year-on-year revenue growth of 16% for suspension and braking, and 15% for multiproduct companies. These categories typically benefit when model refresh cycles and feature additions raise content per vehicle. The report also referenced premiumisation as a driver, which can push more value into higher-spec components. The segment mix matters because it can change the quality of growth, not just the pace of growth.

Profitability split: tyres, lighting strong; forgings, batteries weak

On profitability, the report highlighted that tyres, lighting, and suspension outperformed with 17% EBITDA growth. In contrast, forgings and batteries posted degrowth of 4% and 1%, respectively. This dispersion suggests that cost pass-through, product positioning, and end-market exposure are playing out differently across subsectors. It also indicates why the aggregate margin stayed flat at 13.6% even when several segments delivered strong EBITDA growth. For investors, this kind of spread often pushes attention toward companies with better mix, stronger pricing, or faster-growing platforms.

Q2 snapshot: ancillaries trail OEMs on growth

Analysing Q2 performance of 57 listed auto ancillaries, Elara Capital reported revenue growth of 9.1% year-on-year. This lagged the 16% year-on-year growth posted by listed OEMs, as per the same brokerage note. Production trends in Q2 were supportive: two-wheeler and three-wheeler production rose 11% and 18%, respectively, while passenger vehicle production grew 4%. Commercial vehicles recorded 11% production growth. The data suggests that while production moved up, revenue translation for ancillaries varied by segment and by content intensity.

Q3 and the festive season: demand remains a key driver

Elara Capital expects revenue for auto OEMs, excluding Tata Motors, to rise around 29% year-on-year and 14% quarter-on-quarter, supported by double-digit volume growth across segments linked to a healthy festive season. For auto ancillaries, the brokerage expects revenue growth of about 12.3% year-on-year. The report also cited strong retail momentum in Q3, with passenger vehicle retail growth of 19.2% and two-wheeler retail growth of 19.8%. A separate note in the same set of inputs flagged that a 15% year-on-year growth in the festive season is required to meet the full-year growth estimate. At the same time, commentary pointed to uneven demand recovery and input cost pressure as factors that can keep earnings growth modest.

Megatrends: EV adoption and premiumisation, plus LACE themes

Within Indian auto ancillaries, Elara Capital expects EV adoption to accelerate the premiumisation trend. The brokerage also prefers ancillaries positioned to benefit from other megatrends, including Lightweighting, Active safety, Connected, and Electric, referenced as part of its thematic “LACE effect”. These themes matter because they typically increase content per vehicle, which can help revenue growth even when unit volumes are not accelerating sharply. They can also shift the mix toward higher-value assemblies and electronics-heavy parts. Over time, such shifts can influence which segments show better pricing power and steadier margins.

Market view: stock preferences and valuation context

Elara Capital’s top picks among OEMs include Maruti Suzuki, M&M, TVS Motor and Eicher Motors. In the ancillary space, the brokerage’s preferred names include Uno Minda, Gabriel India, Minda Corporation and Sona BLW Precision Forgings. The note said it remains constructive on two-wheeler and passenger vehicle-linked ancillaries, supported by GST-related tailwinds and a strong festive season. It also added that the Nifty Auto Index’s valuation premium to the Nifty50 remains near median levels, with an improving volume outlook offering scope for further outperformance. Separately, the brokerage identified four drivers for ancillaries to outpace OEMs: product expansion, segment expansion, geographic expansion, and inorganic initiatives.

What stood out in company-level growth and quarterly segment data

In the Q2 dataset, Craftsman Automation (up 65%), Pricol (51%), Lumax Auto (37%), India Nippon Electricals (30%) and Sandhar Technologies (29%) were cited as leaders on year-on-year revenue gains. In another quarterly segment view provided, lighting showed the highest revenue growth at 18.4% year-on-year in Q3, followed by multiproduct at 9.7% and tyres at 8.2%. A separate performance snapshot for Q4FY25 said revenue and EBITDA for auto ancillaries under coverage grew 9% and 6% year-on-year, and 7% and 12% quarter-on-quarter, respectively. The same note linked quarter-on-quarter EBITDA performance to cost control initiatives and operating leverage, with marginal impact from commodity headwinds for some auto OEMs.

Risks and near-term uncertainty to track

The inputs also flag that the ancillary pack may see a subdued quarter in parts of the market because weak global production trends and tariff uncertainty continue to weigh on sentiment. Bharat Forge and Samana Madrasan were mentioned as likely to report weak core performance in that context. More broadly, the narrative suggests Q2 can be “noisy” with mixed signals across segments, and market focus may shift from reported numbers to growth commentary. This reinforces why investors watch both production schedules for Q3 and Q4 and management commentary on costs and demand. It also explains why aggregate margins can remain flat even when top-line growth is healthy.

Key figures at a glance

Conclusion: steady growth, but margins and mix drive outcomes

Elara Capital’s data points to steady FY26 revenue growth for auto ancillaries, with segment leaders in suspension, braking, and multiproduct, and stronger EBITDA growth in tyres, lighting, and suspension. The flat 13.6% operating margin underscores that profitability will likely remain uneven across subsectors, especially where cost and pricing dynamics differ. The brokerage remains constructive on two-wheeler and passenger vehicle-linked ancillaries and reiterates top picks such as Uno Minda, Gabriel India, Minda Corporation and Sona BLW Precision Forgings. Near term, investor attention is likely to stay on festive-season demand indicators, production schedules for Q3 and Q4, and commentary on costs and exports. Any incremental updates around GST-related tailwinds, premiumisation, and EV-linked content gains will be key reference points in upcoming results and management interactions.