SKF India Q1 FY2026-27: Strong growth, margins normalize, and capacity becomes the main plot

SKF India Limited used its Q1 FY2026-27 earnings call to make one thing clear: the business has shifted back to a steadier profitability band after a volatile March quarter, and the next phase of growth will be shaped by capacity additions and execution discipline.

For the quarter ended June 2026 (April to June 2026), revenue from operations was INR 5.878 billion (about INR 587.8 crore), up 27.1% year-on-year and down 1.1% sequentially. EBITDA margin stood at 17.1% and profit before tax margin at 14.3%. Management indicated that Q4 FY26 profitability had been impacted by one-off factors, including items related to the demerger, and that the June quarter is closer to normal profitability levels.

A second number set investors tracked closely was product sales, which the company discussed separately from revenue. Sales were INR 5.512 billion (about INR 551.2 crore), up 22.1% year-on-year and down 0.7% quarter-on-quarter. Management clarified that the sales figure excludes other operating income, which explains the gap versus revenue from operations.

Mix and margins: why gross margin moved sharply

Gross margin was 51.0% in the June quarter versus 44.5% in the March quarter. On the call, the CFO attributed the sequential improvement largely to mix and inventory revaluation effects. Management also reiterated a recurring dynamic in the OEM business: commodity inflation pass-through is linked to index-based clauses, but realisation can lag because customer discussions and contract mechanisms may take one to two quarters. This timing effect can create quarter-to-quarter margin movement even when the company is broadly maintaining profitability over longer periods.

The company’s P and L snapshot underscores the normalization theme. EBITDA was INR 1,004 million (INR 100.4 crore), up 27.6% year-on-year and up 44.6% sequentially. Profit before tax was INR 838 million (INR 83.8 crore), up 32.8% year-on-year. The previous quarter had an exceptional item of minus INR 73 million, which management excluded when discussing like-for-like margin movement.

Note: Figures are as presented by the company in million INR and converted to INR crore.

Segment mix: OEM remains the anchor; SKF Industrial is a swing factor

SKF India provided a clean segment mix disclosure for the quarter based on sales (excluding other operating income). For Q1 FY27, OEM contributed 62%, vehicle aftermarket 20%, exports 8%, and SKF Industrial 10%.

This mix is relevant because management expects the SKF Industrial component to reduce over time. On the call, the leadership repeatedly positioned the company as primarily an automotive business. Sales to SKF Industrial were described as supportive and not a priority growth area. The CFO also highlighted that the industrial entity was carved out only in the December 2025 quarter, making year-on-year comparisons less meaningful.

An additional profitability nuance is that SKF India both buys from and sells to SKF Industrial. Management acknowledged that related-party transactions require a markup. As the company builds its own capacity, it expects the need for traded parts to come down, which could be positive for margins.

Within the OEM bucket, management provided another layer of context. Two-wheelers accounted for about 54% of OEM sales, passenger vehicles around 31%, and commercial vehicles around 15%. They also indicated these shares are broadly range-bound over time, with two-wheelers typically the largest share.

Guidance and the real story: capacity, capex, and the long runway

Investors focused quickly on whether the strong year-on-year growth implies an upgraded outlook. In response, management stated that while 27% revenue growth is strong, they expect full-year revenue growth to be closer to 20%, which is better than the earlier 12% guidance.

Capacity was a central part of this narrative. Management referenced high utilisation, with one investor citing about 93% loading, and the company said it has enough capacity to support growth while also working to add more.

Two capacity levers were discussed:

1. Efficiency and cycle time improvements. The Managing Director stated that the company has already unlocked about 5 million pieces through technological upgrades to assets, with ramp-up in progress.

2. Incremental capacity at the Haridwar plant. Management said new capacity will start in Q4 of the current financial year, but meaningful revenue impact should show up next financial year because commissioning and ramp-up take time.

The capex plan provides the backbone. Management reiterated a broader INR 500 crore capex program, with about INR 170 to 180 crore expected in the current year. On timing, the CFO said the overall program is largely expected to be completed by FY28, with possible spillover into FY29.

Another strategic theme was portfolio rationalization. Management described this as both a manufacturing footprint optimization across the company’s three plants and a commercial pruning of low-profit or loss-making business lines. When asked whether this would materially impact FY27, management said it would not.

EV and new wins: visible, but not immediate

On electric mobility, management drew a clear line between development activity and near-term revenue. The company said the EV-related platform businesses discussed earlier are in development and will come on stream in 2028, more precisely toward the last quarter of calendar year 2028. Another comment suggested ramp-up visibility across vehicle segments beginning around mid-2027, with fuller visibility during 2028. Management did not provide revenue numbers for EV non-wheel bearings and indicated that current activity is in sample and development phases.

The quarter also featured a passenger vehicle wheel-end nomination, which management positioned as strategically meaningful. The customer sought a solution with high localization to reduce forex exposure and mitigate geopolitical supply chain risks. SKF said its offering would be produced from India footprint with over 95% localization. However, management stated that this business would start from Q4 calendar year 2028, again pointing to a long lead time from nomination to revenue.

Sustainability and stakeholder engagement

Beyond financials, SKF India used the presentation to highlight sustainability milestones. The company stated that all three automotive plants (Pune, Bangalore, Haridwar) have achieved decarbonized status with over 98% renewable energy sourcing. It reiterated the broader SKF targets of net zero operations by 2030 and net zero across the value chain by 2050.

On water stewardship, Bangalore was said to have achieved water positivity by 2 times and Haridwar by 2.57 times. Management stated Pune is still in progress.

The company also pointed to market-facing engagement, including participation at Maruti Suzuki India Limited’s tech day, where it showcased solutions for ICE and EV applications and saw interest in low-friction hub bearing units and an e-drive conductive brush ring solution.

What to watch from here

SKF India’s Q1 FY2026-27 message is coherent: growth is strong, margins are back to normal after a one-off impacted quarter, and the next leg depends on capacity creation and reducing reliance on traded volumes.

Management upgraded its revenue growth expectation to around 20% and indicated that a 17% EBITDA margin is a normalized level it expects over the next couple of years. The capex program and the Haridwar ramp-up are the operational proof points that will determine whether this growth can be sustained without margin compression.

At the same time, the company is candid that some of the most discussed growth themes, especially EV platform wins and certain new OEM nominations, are 2028 stories. For investors, the near-term focus therefore remains execution in core automotive bearings, disciplined capacity expansion, and steady margin management through mix shifts and commodity pass-through timing.