This article first appeared on GuruFocus.
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Revenue from Operations: INR 5,447 million, up 10% year-on-year.
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Total Income: INR 5,587 million, up 12% year-on-year, including a one-time provision write-back of INR 88 million.
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Domestic Revenue: INR 3,795 million, up approximately 26% year-on-year, contributing around 70% of total revenue.
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Export Revenue: INR 1,652 million, down approximately 14% year-on-year.
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EBITDA: INR 579 million, up 6% year-on-year, with an EBITDA margin of 10.4%.
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Profit After Tax (PAT): INR 314 million, up 8% year-on-year, with a PAT margin of 5.6%.
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Agricultural Vehicles Segment Revenue: INR 2,559 million, up 15% year-on-year.
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Construction Vehicles Segment Revenue: INR 2,264 million, up 4% year-on-year.
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Raw Material Localization: Approximately 74%.
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Revenue from operations grew 10% year-on-year to INR 5,447 million, driven by strong domestic demand.
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Domestic revenue increased approximately 26% year-on-year, with robust growth in agriculture and construction equipment segments.
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Backhoe loader driveline sales to OEMs grew 18% year-on-year, outperforming the broader market’s 14% growth.
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Commenced serial production for a Turkish customer in the higher horsepower transmission business, with development for an Indian customer on track for FY28.
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Engineering services business gained momentum, with the Montra Electric project progressing and new customer discussions underway.
Negative Points
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Export revenue declined approximately 14% year-on-year due to geopolitical disruptions and supply chain challenges.
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EBITDA margin fell to 10.4%, impacted by higher energy and raw material costs and labor availability constraints.
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Raw material localization dropped to 74% due to temporary imports to address supplier shortages, though expected to normalize.
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Global markets face headwinds from geopolitical uncertainties, particularly in West Asia, affecting demand and logistics.
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Turkish market volatility and subdued European demand pose risks to export growth, with potential delays in cost pass-through affecting margins.
Q & A Highlights
Q: How do you see the ramp-up of the Tele-boom Handler and backhoe loader export business for FY27, given the logistical challenges in the last quarter? A: Mr. Ashok Kumar (Director, Sales and Business Development) stated that while logistics issues impacted the previous quarter, demand from export markets is expected to remain on the higher side. The Tele-boom Handler demand is stable and increasing step-by-step, and there are “green shoots” of further demand from Latin America for backhoe loaders. Mr. Davide Grossi (CFO) added that the export volume dip is a “one-off” and should be “back on track” from Q2.
Q: Can you provide an understanding of the potential ramp-up for the higher horsepower transmission business with the Turkish customer for FY27 and FY28? A: Mr. Ashok Kumar explained that since the start of production (SOP) in the previous quarter, volumes will grow steadily, but the Turkish market is volatile due to inflation. While the lower horsepower segment is stable, the higher horsepower segment is growing but fluctuating. Dr. Balaji Gopalan (MD) added that the trend line is positive on a quarter-to-quarter basis, despite minor fluctuations.
Q: Will the increase in raw material and energy costs be a complete pass-through to customers, and what is the margin range for FY27? Also, why did localization drop to 74%? A: Mr. Davide Grossi (CFO) stated that Carraro is “fully insulated” from commodity fluctuations, but there is a time lag. The target is a “zero-sum game” where all pricing is passed through, though there may be quarter-to-quarter margin fluctuations. Dr. Balaji Gopalan (MD) clarified that the localization drop is not structural but due to importing components to cover temporary shortages from local suppliers. He expects localization to normalize and return to the original target of 86-88% as the supply chain stabilizes.
Q: Within the 10% revenue growth, what is the component of metal price increase versus organic volume growth? A: Dr. Balaji Gopalan (MD) stated that the price increase component is very small due to the four-month pass-through lag. The growth is primarily volume-driven, with volume growth estimated to be in the range of 8% to 10%.
Q: How is the 4-wheel drive penetration trend progressing, and are there any new customer wins? A: Dr. Balaji Gopalan (MD) confirmed that 4-wheel drive technology has passed the test of market acceptance in India and is gaining momentum. He expressed no doubt about reaching the 30-40% penetration target. Regarding new customers, he noted that Carraro already covers almost all tractor manufacturers in India (36 customers). He advised analysts to look at the two new prototypes being developed as the bellwether for future revenue, rather than just the existing customer base.
Q: What are the top two to three execution priorities for the next few quarters? A: Dr. Balaji Gopalan (MD) outlined four key priorities: 1) Recovering all costs passed on to suppliers by negotiating with customers to achieve a “zero-zero” cost-price balance; 2) Debottlenecking and expanding capacity to meet market demand and the INR 3,500-4,000 crore FY30 target; 3) Focusing on internal efficiency to ensure higher revenue translates to higher margins; and 4) Increasing localization back to the original target of 86-88%.
Q: What key financial risks do you anticipate in the coming quarters, and what measures are being taken to manage margins and cash flow? A: Mr. Davide Grossi (CFO) identified the main risk as ensuring that growth is profitable and sustainable. He emphasized monitoring the order book to ensure demand is real and sustainable before investing. The company is focused on controlling supply chain tensions and inflation, recovering costs from customers, and ensuring growth generates healthy cash flow without creating working capital tension, especially given the significant capex plans.
Q: Where do you see the company’s EBITDA for FY27, given the Q1 margin of 10.4%? A: Mr. Davide Grossi (CFO) stated that if the situation stabilizes, the company expects to deliver year-on-year top-line growth in the range of 10% to 20%. If the company successfully bridges the gap on price increments and inflation, it could increase overall EBITDA versus last year by “probably half a point.” However, he noted it is too early to give a more accurate estimate due to too many moving parts.
Q: Can you quantify your exposure to China, and is it a meaningful growth market? A: Dr. Balaji Gopalan (MD) clarified that China is not a significant market for Carraro India. The Chinese market is catered to by Carraro China, and the product configuration is completely different. Exports to China are negligible, “hardly a percent or something like that,” and consist of sporadic small orders rather than regular annual quantities.
Q: Can you explain the labor availability constraints that impacted EBITDA, and will this repeat? A: Dr. Balaji Gopalan (MD) clarified that Carraro India itself does not face labor shortages, as its full-time employees live near the factory. The constraint is “collateral damage” from its suppliers, who depend heavily on migrant labor for processes like casting. This has led to increased costs and overtime. He noted the market is stabilizing, and the company is mitigating this by supporting suppliers and recovering the enhanced costs through customer price discussions.
Q: How is the export revenue split across agriculture and non-agriculture, and how does Turkish lira volatility impact the program? A: Mr. Davide Grossi (CFO) provided the export split for Q1 FY27: Construction equipment was INR 871 million, Agriculture was INR 424 million, and other categories were INR 357 million. Mr. Ashok Kumar noted that the Turkish market is in turmoil, with order flow not encouraging, but the new customer program should offset the expected market decline. He also noted that European agricultural markets remain subdued, while the U.S. market is good but with delayed decision-making due to inflation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
