Varroc Engineering
Cyclical: 2W lighting, deleveraged
- Last close
- ₹837.40
- 29 Sept 2026 · reference
- 1D · 1M
- −1.3% · +1.9%
- price-only
- Weight
- 0.8%
- 31 Jul 2026 · Aug rank —
- Thesis review
- 8 Sep 2026
- Why We Own, p59
Approved description
Varroc Engineering (Aurangabad) is a tier-1 auto-component maker focused on 2W/3W lighting, polymers/plastics, electricals-electronics (including EV traction motors, controllers, chargers, battery-management) and metallic parts, with Bajaj Auto as its anchor customer; after selling its global 4W lighting business (VLS) in 2022 it is India-centric with a Romania electronics plant. EV programmes were 15.8% of Q1FY27 revenue (+87% YoY) and it targets Rs 20,000 cr revenue by FY31 (from ~Rs 8,900 cr in FY26).
- 01Fastest top-line growth in the auto-ancillary peer set: Q1FY27 revenue +29.9% (TTM +15%), FY27 guided +20-25%, riding Bajaj Auto's record volumes (+29% in Q1FY27) and 2W industry at a record 2.17 crore units.
- 02EV content story: EV programmes 15.8% of revenue growing 87% YoY, e-2W volumes +91%; Rs 599 cr annualised net new business wins in Q1 with two-thirds from e-mobility.
- 03Deleveraging done: borrowings fell from Rs 1,390 cr (Mar-24) to Rs 925 cr (Mar-26), net debt Rs 527 cr, ND/E 0.28x, finance cost -15.6% YoY; ROCE ~24% (company) / 19% (screener).
- 04Margin recovery optionality: Q1 EBITDA margin of 8.4% carried ~1.55 pts of one-off drag (commodity under-recovery + tooling); India ops at 10.6% and Romania targeted to EBITDA breakeven by Q4FY27.
- 05Cheaper than peers on recovery earnings: 26.1x FY28e (Buoyant) vs Uno Minda 58.6x, Minda Corp 41.7x and Lumax Auto Tech 39.8x TTM.
Reference close, with results-period markers
- 1Q Sep-25 end · 30 Sept 2025
- 2Q Dec-25 end · 31 Dec 2025
- 3Q Mar-26 end · 31 Mar 2026
- 4Q Jun-26 end · 30 Jun 2026
Quality score, technicals and Buoyant Score
Computing the scorecard…
Latest quarter · Q Jun-26
| Line (₹ cr) | Q Jun-26 | YoY | QoQ |
|---|---|---|---|
| Net Sales | 2,634 | +29.9% | +11.2% |
| Operating Profit | 222 | +15.6% | 0.0% |
| Net Profit | 77 | −26.4% | +11.5% |
Reported vs internal estimate: internal quarterly estimates are not in the supplied package; consensus feed not licensed. YoY/QoQ per PRD §12.5 (transitions, not %, on non-positive bases).
Position and valuation context
General industrial/consumer/IT preset: growth, margins, ROCE/ROIC, working capital, FCF, net debt; P/E, EV/EBITDA.
Valuation range
No headline target on this page; the book quotes the thesis and the risk rather than a target.
What we watch
- Q2FY27 results (Nov-2026): margin normalisation towards 10% as tooling/commodity pass-through completes.
- Romania electronics EBITDA breakeven (targeted Q4FY27) and new EV programme SOPs from the Rs 599 cr Q1 order wins.
- Progress on the FY31 Rs 20,000 cr revenue / 20% international mix roadmap (Equirus investor meet 13-Aug-2026 follow-ups).
- Customer concentration on Bajaj Auto - a slowdown in Bajaj's domestic or export volumes flows straight to Varroc's 2W lighting/EV revenue.
- Margin execution: EBITDA margin has been stuck at 9-10% for three years and slipped to 8.4% in Q1FY27; Romania electronics still loss-making until Q4FY27.
- Reported PAT volatility from one-offs (FY25 PAT Rs 70 cr, Dec-2025 quarter loss Rs 11 cr) makes the TTM PE unreliable; promoter holding at the 75% cap limits float.