SKF India Industrial Q4 FY26: Sales rise, margins reset after demerger costs

SKF India (Industrial) Limited closed Q4 FY26 with a clear shift back to operating momentum. Revenue from operations reached 9,457 MINR, up 9.8% quarter on quarter, as OEM demand and inter company sales more than offset a decline in distribution. Profit before tax came in at 900 MINR and the profit before tax margin stood at 9.5%, improving sharply versus the prior quarter as one time demerger related charges eased.

The quarter also delivered a notable cash flow swing. Net cash flow from operations rose to 2,370 MINR from negative 238 MINR in Q3, supported by working capital movement and other operating drivers. Net working capital improved to 18.7% of sales, down from 21.5% in Q3. The combination of stronger sales, lower exceptional drag, and better cash generation framed the quarter as a normalization step after demerger related volatility.

Growth engine: OEM and inter company sales lead the quarter

The top line story in Q4 was mix and channel performance. Quarterly revenue rose from 8,610 MINR in Q3 to 9,457 MINR in Q4. A bridge of the quarter on quarter change shows that OEM contributed the largest uplift at plus 796 MINR. Exports added plus 78 MINR, SKF India contributed plus 175 MINR, and other revenues added plus 73 MINR. Distribution was the one weak spot, declining by 275 MINR.

This pattern is also visible in segment growth rates. OEM grew 20.1% quarter on quarter and became the largest channel at 50% of the sales mix. SKF India grew 25.7% and other segments grew 23.3%. Exports grew 18.9% and remained 5% of mix. Distribution fell 8.5% and ended at 32% of mix. In practical terms, the quarter leaned into project and platform linked OEM demand and internal group business, while the distribution channel stayed softer.

The quarterly sales series reinforces that Q4 carried forward an improving trajectory through FY26. Revenue from operations was 8,206 MINR in Q1, 8,131 MINR in Q2, 8,610 MINR in Q3, and 9,457 MINR in Q4. The quarter on quarter growth pattern moved from flat in Q2 to steady improvement in Q3 and Q4.

Margins normalize as demerger expenses step down

SKF India (Industrial) has been operating through the after effects of demerger related activities, and the income statement has carried unusual items across recent quarters. The Q4 margin improvement needs to be read in that context.

Profit before tax margin rose to 9.5% in Q4. The company noted that during the quarter ended December 31, 2025, it accounted demerger expenses including IT cost, professional services, stamp duty, and estimated transfer premium payable to statutory authorities for transfer of registration of land acquired under the scheme, aggregating to 1.8 BINR, classified as exceptional items. In the quarter ended March 31, 2026, the company accounted demerger expenses for IT cost aggregating to 183 MINR, included in other expenses.

The PBT bridge from Q3 to Q4 makes the same point. Q3 profit before tax is shown as negative 671 MINR in the bridge, followed by exceptional items of 1,801 MINR, then smaller movements across gross profit, employee costs, IT cost related to demerger, depreciation and other items, and finance income. The end point is 900 MINR profit before tax in Q4. While the bridge includes multiple lines, the key driver is the reduction in one time drag compared with the immediately preceding quarter.

The quarterly margin series highlights how volatile results were around these items. Q1 profit before tax was 971 MINR with a margin of 11.8%. Q2 was 1,014 MINR at 12.5%. Q3 turned negative at -877 MINR and margin of -7.8%. Q4 returned to positive at 900 MINR and 9.5%. This pattern points to a business that is profitable in its core, but still reporting through demerger linked accounting noise.

Cash conversion improves, but working capital mix is shifting

The second major change in Q4 was cash flow. Net cash flow from operations jumped to 2,370 MINR, and the company reported cash conversion of 263%. The operating cash flow bridge starts with profit before tax of 900 MINR, adds non cash items of 96 MINR, includes net working capital movement of 479 MINR, tax of 298 MINR, and others of 598 MINR to reach 2,370 MINR.

Working capital indicators improved at the headline level. Net working capital declined to 6,241 MINR from 6,732 MINR, and net working capital as a percent of sales improved to 18.7% from 21.5%.

Under the surface, the components moved in different directions.

Accounts receivable rose to 8,280 MINR and increased to 24.8% of net sales from 23.6% in Q3. Inventory rose slightly to 5,358 MINR but improved as a share of net sales to 16.0% from 16.9%. The largest swing came from accounts payable, which increased to 7,396 MINR and rose to 22.1% of net sales from 19.0%.

This mix suggests the quarter benefited from payables expansion and better inventory efficiency, even as receivables grew with higher sales. For investors, that is worth tracking because a higher receivables ratio can reverse if collections slow, while payables may normalize depending on sourcing terms and volume patterns.

Macro backdrop stays constructive, supporting industrial demand

The presentation frames Q4 in a macro environment where India growth remains firm while inflation has normalized compared with earlier quarters. GDP growth is shown at 6.5% for Q4 FY26 as a projection, following 7.8% in Q1 FY26, 8.4% in Q2 FY26, and 7.8% in Q3 FY26. CPI inflation is shown at 3.1% in Q4 FY26, following 0.8% in Q3 FY26.

Sector data also points to steady industrial activity. Industrial production growth is shown at 4.5% year on year in Q4 FY26, up from 3.9% in Q3 FY26. Steel production is shown at 44.0 MT in Q4 FY26 with 9.7% growth year on year. Construction GDP is shown at 6,640 BINR in Q3 FY26 with 6.6% growth year on year.

For an industrial bearings and solutions business, these indicators matter. OEM demand and project wins tend to follow production trends in sectors like automotive, rail, construction, and heavy industry. The companys Q4 mix shift toward OEM aligns with that macro tone.

Strategy to 2028: ACES and proof points in projects and capacity

SKF India (Industrial) is anchoring its strategy on ACES priorities through 2028.

Accelerate localization focuses on higher volume growth of localized products. Commercial Excellence emphasizes customer centricity and innovation for growth. Execution is framed as building high performance teams. Single SKF highlights collaboration.

The presentation supports these pillars with specific project stories.

In the tractor business, the company reported winning four projects worth 325 MINR. The background is a large tractor OEM expanding its India facility into a global manufacturing hub. SKF described being involved from the platform design stage and creating customer specific offerings including TRBs and CRBs, supplied from its Pune and Ahmedabad channels. The customer benefit emphasized a one stop solution and India origin bearings that create cost and logistics advantages.

In rail, the presentation highlights development of a TBUS opportunity of about 30 MINR per year for local commuter trains. The stated requirement was to support a load increase from 18 tons to 21 tons and a maintenance interval of 1.2 MKm. The SKF solution is described as a unitized solution combining bearings, AB, and seal, with bigger roller size and thicker rings. The value proposition is a compact solution with higher load capacity, extended service life and improved reliability, and the possibility to extend the solution from 130 kmph to 180 kmph trains.

On manufacturing, SKF reported TRB capacity addition in Pune to grow business in agricultural, off highway, after market, and exports to EMEA. The company cited adoption of high speed machines and process optimization, with utilities and abrasive cost reduction through layout and process changes. The impact metrics are specific. Capacity for 110 to 165 MM OD increased from 600T pcs to 880 Tpcs. Cost reduction was stated at more than 18%. Flexibility improved through resetting time reduction of more than 20%. New product development lead time reduced by more than 35%.

These stories connect back to the Q4 mix. A higher OEM share often depends on design in wins and platform participation, while localization and capacity upgrades can support both margin resilience and delivery performance.

What to watch from here

Q4 FY26 reads like a quarter of operational recovery, but it is also a reminder that reported profitability has been shaped by demerger related charges across the year. Investors should separate the one time items from the underlying pattern. The core business delivered strong sequential sales growth and a return to positive profit before tax, while cash flow improved sharply.

The quality of that cash flow will depend on whether the working capital structure holds. Receivables are rising as a share of sales, and payables provided a meaningful benefit in Q4. If OEM momentum stays strong and collections remain healthy, the working capital profile can remain supportive.

Strategically, the ACES priorities are being backed by tangible actions. Project wins in tractors, new rail solutions tailored to higher loads and longer maintenance intervals, and a measured capacity ramp in Pune with stated cost and lead time improvements all point to execution rather than only intent.

The quarters theme is normalization with strategic progress. Q4 shows that once exceptional costs taper, the business has room to rebuild margins and generate cash. The next signal investors will want is consistency: stable distribution performance alongside OEM growth, and a cleaner earnings base as demerger related expenses fade from the P and L.