💰 Financial Performance

Revenue Growth by Segment

Total revenue from operations reached INR 1,309.06 Cr in Q2 FY26, representing a 5.2% YoY growth and 2.0% QoQ growth. The Industrial segment was the primary driver with 13% YoY growth, while the Automotive segment remained flat or saw a slight decline during the same period.

Geographic Revenue Split

Exports account for approximately 8% of total revenue (INR 104.7 Cr). Within exports, the Industrial segment contributes 5%-5.5% (approx. INR 65-72 Cr) and the Automotive segment contributes 2.5%-3% (approx. INR 33-39 Cr). The remaining 92% of revenue is derived from the domestic Indian market.

Profitability Margins

Net Profit for Q2 FY26 stood at INR 105.49 Cr, down from INR 118.21 Cr in Q1 FY26. Net Profit Margin is approximately 8.06%. Profitability was impacted by exceptional demerger costs of INR 25.74 Cr.

EBITDA Margin

PBT (before exceptional items) was INR 166.36 Cr, a 31.1% increase YoY from INR 126.88 Cr, but a 12% decline QoQ. PBT margins dropped by 530 basis points (5.3%) YoY due to a combination of demerger-related restructuring costs, increased employee expenses, and foreign exchange fluctuations.

Capital Expenditure

The company incurred INR 25.74 Cr in non-recurring restructuring costs during Q2 FY26 specifically for the demerger process, covering IT infrastructure, professional services, and employee benefit transitions. Planned CAPEX for separate entities post-demerger is not explicitly quantified in INR Cr.

⚙️ Operational Drivers

Raw Materials

The company primarily consumes components for manufacturing bearings and related parts. Specific raw material names like high-grade steel or specialized alloys and their individual percentage of total cost are not disclosed in the provided documents.

Capacity Expansion

The company is undergoing a structural expansion through the demerger of its Industrial Undertaking into a separate entity, SKF India (Industrial) Limited. Post-demerger, assets and liabilities are being split, with 53.12% of the cost of acquisition attributed to the new Industrial entity and 46.88% retained by SKF India Limited (Automotive focus).

Manufacturing Efficiency

Manpower is being reallocated to optimize efficiency: 55%-60% of the workforce will be assigned to the Automotive business, while 40%-45% will remain with the Industrial business.

Logistics & Distribution

The company utilizes a distribution-heavy model for its Industrial aftermarket business, which constitutes 50% of the Industrial segment's revenue.

📈 Strategic Growth

Expected Growth Rate

6%

Growth Strategy

Growth will be achieved through a 'One Legacy, Two Futures' demerger strategy, separating Industrial and Automotive units to improve agility. The Industrial segment is focusing on 'Fit-for-India' products and expanding its service business (plant maintenance), which has consistently grown at double-digit rates. The demerger is expected to be completed with listing in Q4 of the calendar year.

Products & Services

The company sells bearings, related components, and plant maintenance services. The Industrial business is split 50% between direct sales to OEMs and 50% to the aftermarket via distributors.

Brand Portfolio

SKF

New Products/Services

The company is launching 'Fit-for-India' products specifically for the Industrial segment to capture local market share. The service/maintenance business is also being scaled as a high-growth vertical.

Market Expansion

The company is targeting growth in the Industrial OEM and aftermarket sectors. Post-demerger, SKF India (Industrial) Limited will focus exclusively on industrial growth drivers over a 3-4 year perspective.

Strategic Alliances

The company operates as a subsidiary of Aktiebolaget SKF (AB SKF), which provides global technical and brand support.

🌍 External Factors

Industry Trends

The industry is shifting toward specialized service-based models (maintenance and plant reliability) and localized product development ('Fit-for-India'). The company is positioning itself by splitting into two pure-play entities to better track these distinct sectoral trends.

Competitive Landscape

The company competes in the precision bearings market. Key competitors are not named, but the company focuses on 'authorized distributors' to combat counterfeit competition.

Competitive Moat

SKF maintains a moat through its century-long brand legacy, specialized precision engineering in bearings, and a robust distribution network (50% of industrial revenue). The service business creates high switching costs for industrial clients.

Macro Economic Sensitivity

The company is highly sensitive to the Indian Industrial production index and Automotive sales cycles. Industrial growth of 13% YoY suggests strong sensitivity to domestic manufacturing activity.

Consumer Behavior

Industrial customers are increasingly moving toward outsourced maintenance services, which SKF is capturing through its double-digit growing service division.

Geopolitical Risks

Export revenue (8% of total) is subject to international trade dynamics and geopolitical stability in regions served by the parent SKF group.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS 108 for segments and Ind AS 105 for assets held for sale). The demerger is regulated under Sections 230-232 of the Companies Act, 2013.

Taxation Policy Impact

The effective tax rate for Q2 FY26 is approximately 25%, with a tax expense of INR 35.13 Cr on a PBT (after exceptional items) of INR 140.62 Cr.

Legal Contingencies

The company successfully navigated the NCLT Mumbai Bench process for its Scheme of Arrangement, receiving the certified order on September 24, 2025. No other major pending court cases or values are disclosed.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the successful operational separation and independent listing of the Industrial entity in Q4. FX volatility and the stagnation of the Automotive segment (0% growth) are key business risks.

Geographic Concentration Risk

High geographic concentration in India, which accounts for 92% of revenue (INR 1,204.36 Cr).

Third Party Dependencies

The company depends on its promoter, AB SKF, for 45.85% shareholding and global brand/technology alignment.

Technology Obsolescence Risk

The company is addressing digital transformation through its demerger, incurring INR 25.74 Cr in costs partly for IT infrastructure separation.

Credit & Counterparty Risk

The company reported excellent cash flow generation with a 13% YoY increase, suggesting high-quality receivables and strong counterparty credit management.