💰 Financial Performance

Revenue Growth by Segment

The company operates in a single segment (Automobile components). Revenue from operations grew by 1% in FY25 compared to FY24. In Q2 FY26, the company reported a top-line growth of 11% YoY, driven by production growth in the passenger vehicle and light commercial vehicle segments.

Geographic Revenue Split

The company's market is majorly focused on the Domestic Geography (India). While specific regional percentages are not disclosed, the company has established a new vertical and onboarded a team to focus on increasing business from exports to diversify its geographic footprint.

Profitability Margins

Net Profit Margin for FY25 was 11.02%, a 5% improvement from 10.50% in FY24. Operating Profit Margin for FY25 stood at 14.86%, up 0.76% from 14.10% in FY24. PBT margin for FY25 was 14.7% compared to 14.0% in FY24.

EBITDA Margin

EBITDA margin for FY25 was 14%, up from 12.9% in FY24. However, Q2 FY26 saw margin compression due to a 4% gross profit growth lagging behind 11% revenue growth, primarily because of investments in global business development, M&A teams, and strategy consultants.

Capital Expenditure

The company undertakes regular maintenance capital expenditure (capex) of INR 70-100 Cr annually. For H1 FY26 (period ended September 30, 2025), net cash used in investing activities was INR 182.0 Cr, which includes investments in liquid funds and property, plant, and equipment.

Credit Rating & Borrowing

The company maintains a 'Positive' outlook from credit rating agencies. It has a robust interest coverage ratio of 93.22x as of March 31, 2025. The company has no long-term debt, and its debt-equity ratio stood at 0.05 in FY25, reflecting a 107% increase from 0.02 due to a buyback program reducing equity reserves.

⚙️ Operational Drivers

Raw Materials

Primary raw materials include steel and catalysts (precious metals like platinum, palladium, and rhodium). Catalyst costs are treated as a pass-through to customers, which protects absolute EBITDA but can cause fluctuations in gross profit and EBITDA margin percentages.

Capacity Expansion

The company is India's largest manufacturer of exhausts. While specific unit capacity is not disclosed, it maintains a regular capex of INR 70-100 Cr to sustain and potentially expand its manufacturing capabilities in exhausts and suspension lines.

Raw Material Costs

Raw material costs are a significant portion of the cost structure. Catalyst costs are pass-through, meaning price spikes increase revenue (the denominator) without adding profit, leading to margin percentage compression even if absolute profit is stable.

Manufacturing Efficiency

The company maintains high efficiency with an inventory turnover ratio of 14.04 times in FY25, ensuring minimal capital is tied up in stock.

Logistics & Distribution

Distribution costs are part of other expenses, which rose in Q2 FY26 due to investments in business development and M&A strategy teams.

📈 Strategic Growth

Expected Growth Rate

11%

Growth Strategy

The company is scaling its 'lightweighting' vertical to gain market share and new customers. It is also pursuing M&A opportunities to accelerate growth and has augmented its global business development team to increase export revenue. New technology collaborations in the passenger vehicle suspension segment are also key to its growth strategy.

Products & Services

Exhaust systems (largest manufacturer in India), suspension systems, and lightweighting components for automotive OEMs.

Brand Portfolio

Sharda Motor Industries Limited (SMIL).

New Products/Services

New suspension products and technology collaborations for the PV side are being launched. The lightweighting vertical is expected to be a major revenue contributor by FY30.

Market Expansion

The company is targeting international markets through a dedicated global business development team to reduce its 90%+ reliance on the domestic Indian market.

Market Share & Ranking

Sharda Motor is India's largest manufacturer of exhaust systems for automotive players.

Strategic Alliances

The company has entered into new technology collaborations, specifically for suspension products in the passenger vehicle segment, to enhance its product portfolio.

🌍 External Factors

Industry Trends

The industry is shifting toward lightweighting and more stringent emission norms. Sharda is positioning itself by investing in R&D for these specific areas to maintain its market leadership.

Competitive Landscape

The company faces competition in the suspension and exhaust segments, but its scale as the largest exhaust manufacturer in India provides a cost and relationship advantage.

Competitive Moat

The company's moat is built on its market leadership in exhausts, established relationships with major OEMs, and first-mover advantage in R&D for specialized auto components. These are sustainable due to high entry barriers and deep integration with client supply chains.

Macro Economic Sensitivity

The company is highly sensitive to the domestic automotive cycle and production growth in the PV and LCV segments, which recently grew at 4-5%.

Consumer Behavior

A shift toward premium vehicles with higher component content per vehicle (CPV) is a positive trend for Sharda, as it increases the value of parts supplied per vehicle.

Geopolitical Risks

Geopolitical risks could impact the supply and pricing of precious metals used in catalysts and steel, potentially affecting the company's cost structure.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by automotive emission norms (BS-VI and beyond), state-specific labor and environmental laws, and Ind AS 115 for revenue recognition.

Environmental Compliance

The company runs CSR programs like 'Sharda - Green India Campaign' and 'Sharda Educate', though specific ESG compliance costs are not disclosed.

Taxation Policy Impact

The company paid INR 52.6 Cr in direct taxes (net of refund) in H1 FY26. It is subject to standard Indian corporate tax rates.

Legal Contingencies

The company faces pending direct and indirect tax litigations. It also manages legal compliance risks across multiple states where its plants are located.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the high level of customer concentration; the loss of a single major OEM contract could impact revenue by more than 20%.

Geographic Concentration Risk

The company is heavily concentrated in the Indian domestic market, making it vulnerable to local economic downturns.

Third Party Dependencies

High dependency on the production schedules of major automotive OEMs; any disruption in their manufacturing (e.g., due to chip shortages or strikes) directly impacts Sharda's off-take.

Technology Obsolescence Risk

The transition to Electric Vehicles (EVs) poses a long-term risk to the exhaust system business; the company is mitigating this by diversifying into suspension and lightweighting products.

Credit & Counterparty Risk

Receivables quality is strong, with a 10% improvement in debtor turnover (11.08x in FY25 vs 10.06x in FY24), indicating efficient collections from OEM clients.