Auto Component Makers Report 12.5% Revenue Growth In FY26 Despite Margin Pressure

India's listed auto component manufacturers reported a 12.5% year-on-year (YoY) rise in revenue during FY26, driven by healthy volume growth across vehicle segments and an improved product mix, according to a research report by Elara Capital.

EBITDA Boost

The stronger top line also lifted aggregate earnings before interest, taxes, depreciation, and amortisation (EBITDA) by 13.3% over the previous year. However, the sector's operating margin remained unchanged at 13.6%. This indicated that higher earnings did not translate into better profitability as cost pressures persisted.

The study covered 59 listed auto component companies. Of these, 25 reported a decline in operating margins during the year despite higher sales. The table highlights revenue growth across product categories.

Profitability trends were also mixed across segments. Tyre, lighting and suspension businesses posted the strongest EBITDA growth of 17%. In contrast, forging companies reported a 4% decline in EBITDA, while battery manufacturers recorded a 1% fall.

Demand Outlook For FY27 Remains Positive

The report said the demand outlook for FY27 remains broadly constructive, supported by steady momentum across two-wheelers, passenger vehicles, commercial vehicles, tractors and the replacement market.

There are expectations that businesses linked to electric vehicles, electronics and content-rich products, along with defence and aerospace, will grow faster than the broader industry. Export demand, however, is expected to remain uneven. Europe is likely to stay weak, while North America is showing signs of improvement.

For the next financial year, there are expectations of passenger vehicle volumes to grow 7%, while two-wheeler sales are projected to rise 8%.

Also Read- Market Midday, 29 June 2026: Sensex, Nifty Under Pressure

Commodity Inflation Continues To Weigh On Margins

The report flagged rising raw material costs as the biggest near-term challenge for component manufacturers. Higher prices of copper, aluminium, steel, rubber, crude-linked inputs, freight and energy are expected to put pressure on margins during the first quarter of FY27.

While most suppliers have price pass-through arrangements with original equipment manufacturers, the recovery of higher costs usually takes between one quarter and six months. That lag is expected to keep profitability under pressure in the near term.

The sector's aggregate capital expenditure intensity stood at 5.9% of sales during FY26, while free cash flow generation remained stable at 4.7%.

Sources:

The Economic Times

The Hindu Businessline