Varroc Q2 revenue rises 33.6% as EBITDA margin declines

Varroc reported Q2 FY27 revenue of Rs 2,947.9 crore, up 33.6% year on year, while its earnings before interest, tax, depreciation and amortisation (EBITDA) margin declined 20 basis points to 8.9%. Management attributed about 80 basis points of margin impact to unrecovered war-related inflation, although underlying profit-before-tax margin increased to 4.7% from 4.1%.

What drove Varroc's Q2 FY27 revenue growth?

Varroc's Q2 FY27 revenue growth came from both India and overseas operations, with consolidated revenue rising to Rs 2,947.9 crore from Rs 2,207.3 crore in Q2 FY26 and Rs 2,634.2 crore in Q1 FY27. That represented 33.6% year-on-year growth and 11.9% sequential growth.

India operations generated Rs 2,704.6 crore of Q2 FY27 revenue, up 29.5% from Rs 2,087.9 crore a year earlier and 12.6% from Rs 2,405.4 crore in Q1 FY27. Overseas revenue rose 104.1% year on year to Rs 243.3 crore from Rs 119.4 crore, and was 6.4% above Rs 228.8 crore in the preceding quarter.

The market backdrop included year-on-year Indian vehicle-production growth of 16.3% in two-wheelers, 23.7% in three-wheelers, 24.9% in passenger vehicles and 33.9% in commercial vehicles during Q2 FY27. Varroc said electric-vehicle model revenue accounted for about 19% of its Q2 FY27 revenue and grew 130% year on year.

Why did Varroc's EBITDA margin decline in Q2 FY27?

Varroc's EBITDA margin declined to 8.9% in Q2 FY27 from 9.1% in Q2 FY26, a reduction of 20 basis points, or bps. Management said unrecovered war-related inflation had an impact of about 80 bps and cited changes in business mix, while the margin improved from 8.5% in Q1 FY27.

Profit before tax (PBT) before joint-venture profits and exceptional items increased to Rs 140.1 crore from Rs 91.2 crore in Q2 FY26 and Rs 113.2 crore in Q1 FY27. Its margin rose to 4.7%, compared with 4.1% a year earlier and 4.3% in the preceding quarter, representing year-on-year and sequential improvements of 60 bps and 40 bps respectively.

Reported profit included Rs 63.1 crore of exceptional costs in Q2 FY27 for restructuring two-wheeler lighting manufacturing in Italy and past tax-related issues at that Italy lighting entity. PBT including joint-venture profits after exceptional items was Rs 77.6 crore, below Rs 92.0 crore in Q2 FY26, while profit after tax was Rs 33.5 crore compared with Rs 63.3 crore.

How did Varroc's India and overseas operations perform?

Varroc's India operations provided the larger earnings contribution in Q2 FY27, reporting EBITDA of Rs 279 crore and PBT of Rs 185.7 crore. Those figures rose from Rs 240.5 crore and Rs 151.2 crore respectively in Q2 FY26, alongside the 29.5% increase in India revenue.

Overseas operations narrowed their EBITDA loss to Rs 0.5 crore in Q2 FY27 from losses of Rs 10.2 crore in Q2 FY26 and Rs 8.5 crore in Q1 FY27. Overseas PBT remained negative at Rs 24.1 crore, but the loss narrowed from Rs 28.4 crore a year earlier and Rs 26 crore in the preceding quarter.

Varroc said overseas operations comprise two-wheeler lighting, advanced electronics and forging. It said new advanced-electronics business wins were converting into sales, while engineering income and lower research-and-development losses contributed to the improvement; the overseas four-wheeler advanced-electronics and lighting research-and-development EBITDA loss reduced to Rs 17.5 crore from Rs 28.5 crore in Q2 FY26.

What does Varroc's first-half performance and debt position show?

Varroc's H1 FY27 revenue rose 31.8% to Rs 5,582.2 crore from Rs 4,234.9 crore in H1 FY26, supported by 29.1% growth in India operations and 70.7% growth overseas. EBITDA increased in amount to Rs 483.8 crore from Rs 393.7 crore, but the EBITDA margin fell to 8.7% from 9.3%.

Management attributed the H1 FY27 EBITDA-margin reduction of 60 bps partly to about 80 bps of war-related non-recovery and inflation, as well as about 30 bps from higher tooling sales. PBT before joint-venture profits and exceptional items rose to Rs 253.2 crore from Rs 173.4 crore, lifting that margin to 4.5% from 4.1%.

Net debt increased to Rs 554.7 crore at 30 September 2026 from Rs 526.8 crore at 30 June 2026, which Varroc attributed primarily to capital expenditure and delayed war-related recovery. The company said more than Rs 114 crore of customer cash collection related to the war adversely affected H1 FY27 net debt, although net debt to annualised adjusted EBITDA was 0.57 at 30 September 2026, versus 1.29 at 31 March 2024.

What are Varroc's disclosed order wins and expansion plans?

Varroc reported H1 FY27 net new-business annual peak revenue wins of Rs 1,012.7 crore, of which 48% came from electric-vehicle customers. Its outstanding order book was Rs 3,699.1 crore at the end of H1 FY27, compared with Rs 3,509 crore at the end of FY26.

The H1 FY27 order book includes Rs 2,155.7 crore scheduled for start of production in FY27, Rs 1,387.1 crore in FY28 and Rs 156.3 crore in FY29. The order-win mix was 73% from two- and three-wheelers and 27% from four-wheelers and other applications, while Bajaj represented 55% of annual peak revenue wins.

Varroc has decided to restructure its Italian two-wheeler lighting manufacturing operations and to acquire a stake in Forsee Power India, which focuses on battery-pack systems. The disclosed transaction structure includes a 45% equity stake and provides Varroc with board representation and the right to appoint the chief executive officer and chief financial officer, subject to final executed agreements and related conclusions.

Conclusion

Varroc's Q2 FY27 results combined 33.6% revenue growth with a 20-bps year-on-year EBITDA-margin decline, showing that higher India and overseas sales had not fully offset unrecovered war-related costs and business-mix effects. At the same time, PBT margin before joint-venture profits and exceptional items increased 60 bps to 4.7%, while Italy-related exceptional costs of Rs 63.1 crore reduced reported profit.

The next disclosures to watch are the recovery of more than Rs 114 crore of war-related customer collections affecting H1 FY27 debt, execution of the Italy restructuring and conversion of the Rs 3,699.1 crore order book into production. Progress on the proposed Forsee Power India transaction also depends on final agreements and its disclosed operational and financial milestones.