Universal Autofoundry Q2 revenue rises as margin falls to 3.1%

Universal Autofoundry Limited raised Q2 FY27 revenue 12% year on year to Rs 61.5 crore, but earnings before interest, tax, depreciation and amortisation (EBITDA) fell to Rs 1.9 crore and margin declined to 3.1% from 7.4%. Higher raw-material costs, depreciation and other expenses resulted in a Rs 60 lakh loss after tax.

Why did Universal Autofoundry's Q2 FY27 margin fall?

Universal Autofoundry's margin fell because expenses increased faster than sales in Q2 FY27. Revenue from operations rose from Rs 54.9 crore in Q2 FY26 to Rs 61.5 crore, while total expenses rose 19% to Rs 64.6 crore from Rs 54.3 crore. EBITDA consequently declined from Rs 4.1 crore to Rs 1.9 crore.

Higher raw-material prices reduced gross margin by about 250 basis points year on year to 41.0%, according to the presentation. Cost of material consumed increased to Rs 32.7 crore from Rs 32.0 crore, even as production declined 4% to 6,009 metric tonnes (MT). A basis point is one-hundredth of a percentage point.

Depreciation and amortisation increased 35% year on year to Rs 3.3 crore, which the presentation attributes to the ferrous line and the newly commissioned solar plant. Other expenses increased 33% to Rs 16.3 crore, while finance cost rose to Rs 1.5 crore from Rs 60 lakh.

Did Universal Autofoundry improve revenue and utilisation in Q2 FY27?

Universal Autofoundry improved revenue and capacity utilisation sequentially in Q2 FY27, although production remained below the prior-year quarter. Revenue rose 13% from Rs 54.4 crore in Q1 FY27 to Rs 61.5 crore, while utilisation increased from 55% to 57%. Production recovered 5% from 5,725 MT to 6,009 MT.

The year-on-year volume comparison was lower, with Q2 FY27 production at 6,009 MT versus 6,237 MT in Q2 FY26 and utilisation at 57% versus 59%. EBITDA per kilogram declined from Rs 6.5 in Q2 FY26 and Rs 4.6 in Q1 FY27 to Rs 3.2 in Q2 FY27.

The revenue mix moved away from tractors during the quarter. Tractor revenue share fell to 55% in Q2 FY27 from 60% in Q2 FY26, while medium and heavy commercial vehicles (M&HCV) increased to 20% from 17%. Earthmoving rose to 20% from 18%, and construction and other segments reached 6% from 5%.

Exports were Rs 3.2 crore in Q2 FY27, up 29% year on year from Rs 2.5 crore but down 38% sequentially from Rs 5.1 crore. Universal Autofoundry cited geopolitical uncertainty and higher freight-container prices as sources of volatility in export conditions.

Why did Universal Autofoundry remain loss-making despite higher sales?

Universal Autofoundry remained loss-making because the Rs 7.1 crore quarter-on-quarter revenue increase was exceeded by an Rs 8.2 crore rise in total expenses. Loss before exceptional items and tax widened to Rs 2.8 crore in Q2 FY27 from Rs 1.7 crore in Q1 FY27; the company had reported a Rs 1 crore profit on that measure in Q2 FY26.

Loss after tax improved sequentially to Rs 60 lakh from Rs 1.6 crore in Q1 FY27, but it reversed a Rs 60 lakh profit in Q2 FY26. The presentation lists return on equity and return on capital employed as not applicable in Q2 FY27 because the company incurred a loss.

The first-half figures show that the earnings decline extended beyond the quarter. H1 FY27 revenue rose 14% year on year to Rs 115.9 crore, while EBITDA fell 40% to Rs 4.5 crore. EBITDA margin fell to 3.9% from 7.4%, and loss after tax was Rs 2.2 crore compared with a Rs 1.3 crore profit in H1 FY26.

How are investment and borrowings affecting Universal Autofoundry?

Universal Autofoundry's investment programme increased depreciation and borrowings in H1 FY27. Its second solar plant at Churu, with 4.8 megawatts of alternating-current capacity, was commissioned in Q2 FY27 and Rs 25 crore was capitalised. The company says the solar plant and ferrous line affected depreciation.

Long-term borrowings rose to Rs 41.5 crore at H1 FY27 from Rs 30.3 crore at FY26, while working-capital borrowings increased to Rs 37 crore from Rs 31.9 crore. Universal Autofoundry attributed the rise to solar-plant financing and a term loan for equipment upgrades and new machinery.

Property, plant and equipment rose to Rs 92.6 crore at H1 FY27 from Rs 72.6 crore at FY26. Cash used in investing activities was Rs 22.7 crore in H1 FY27, including Rs 23.1 crore spent on property, plant and equipment, while financing activities generated Rs 12.9 crore.

Management plans about Rs 6 crore of FY27 investment in trimming, vertical turning lathe, Sinto and vertical machining centre machines. The equipment is due for installation by the end of FY27, while the presentation expects solar-related cost benefits from H2 FY27.

What targets has Universal Autofoundry set for utilisation and mix?

Universal Autofoundry expects capacity utilisation of 65% from FY27, including Unit 3, compared with an average 54% in FY26 and 57% in Q2 FY27. The company has installed capacity of 42,000 MT annually across three units, including a 12,000 MT annual ferrous line at Unit 3.

Management says higher utilisation is expected to bring scale economies and margin expansion, which remains a forward-looking expectation rather than a reported result. Total solar capacity is 8.4 megawatts alternating current after the Q2 commissioning of the 4.8-megawatt Churu plant, with scale and cost benefits expected from H2 FY27.

Management also aims for M&HCV, construction, engineering and other non-tractor sectors to exceed 75% of revenue within three to five years. Tractors historically represented more than 50% of revenue in FY25 and FY26, while M&HCV, earthmoving, construction and other segments represented 46% combined in Q2 FY27.

Exports are projected by management to account for about 15% of revenue within three years, supported by investment and partnerships in existing export markets. That target follows Q2 FY27 export revenue of Rs 3.2 crore and the company's disclosure of geopolitical and freight-cost volatility.

Conclusion

Universal Autofoundry's Q2 FY27 performance shows that sales growth and a sequential improvement in utilisation did not offset raw-material inflation and investment-related costs. Revenue reached Rs 61.5 crore, but EBITDA fell to Rs 1.9 crore, EBITDA per kilogram dropped to Rs 3.2, and the company recorded a Rs 60 lakh loss.

The next results will indicate whether expected H2 FY27 solar cost benefits and the 65% utilisation target affect margins. Other disclosed milestones are installation of about Rs 6 crore of new machinery by end-FY27, the planned non-tractor revenue mix above 75% in three to five years, and management's target for exports to reach about 15% of revenue within three years.