RACL Geartech Ltd Management Discussions

Management Perspective

FY 2025-26 represented a defining year in RACLs growth journey. The Company crossed the INR 500 crore revenue milestone while delivering a significant improvement in profitability, demonstrating the strength of its business model and the resilience of its operating strategy. Our export business remained the key driver of growth, contributing nearly 75% of our revenue and reinforcing RACLs position as a preferred global supplier of precision-engineered transmission components. During the year, the Company recorded revenue of 512.42 Crores, EBITDA of 129.16 Crores with a healthy margin of 25.21%, and Profit After Tax of 48.95 Crores, reflecting sustained operational excellence and financial discipline.The year was characterised by heightened geopolitical uncertainty, evolving trade relationships, volatile commodity prices and continued realignment of global supply chains. Despite these external challenges, demand for high-precision, technology-intensive engineering solutions remained resilient, particularly among global OEMs seeking reliable manufacturing partners capable of consistently delivering quality, engineering expertise and supply chain stability.

These structural shifts continued to reinforce Indias position as a preferred manufacturing destination. Global customers increasingly prioritised supplier capabilities over cost alone, placing greater emphasis on engineering competence, manufacturing quality, traceability, localisation and long-term partnerships. For RACL, whose business has been built on precision engineering, process discipline and customer collaboration over four decades, these changing industry dynamics translated into meaningful growth opportunities across domestic and international markets.

During the year, the Company strengthened its position across its core business segments while continuing to diversify its product portfolio and customer base. Export markets remained the primary growth engine, accounting for over 70% of revenue, supported by long-standing relationships with leading global automotive OEMs. Simultaneously, the Company continued to invest in manufacturing capabilities, automation, digitalisation and quality systems to enhance productivity, improve operational efficiency and support future growth.

Management believes that the automotive industry is entering a phase where competitive advantage will increasingly be determined by engineering capability, manufacturing excellence, technological adaptability and the ability to consistently deliver complex, high-value precision components at global quality standards.

Global Economic Environment

The global economy remained resilient but moderated during FY 2025-26 amid geopolitical tensions, evolving trade policies and persistent inflationary pressures. Although inflation eased compared to the previous year, higher interest rates across major economies continued to influence consumer demand, industrial investment and capital allocation, while volatility in energy, logistics and commodity prices remained a challenge for manufacturers worldwide.

At the same time, global supply chains continued to undergo structural transformation. The "China + 1" strategy gathered further momentum as multinational corporations diversified manufacturing footprints to improve resilience and reduce geopolitical risks. This shift strengthened the strategic importance of manufacturing destinations such as India, supported by competitive costs, engineering capabilities and an expanding industrial ecosystem.

The automotive industry continued to invest in advanced manufacturing, digitalisation and next-generation vehicle technologies despite near-term macroeconomic headwinds. OEMs increasingly prioritised suppliers with strong engineering capabilities, manufacturing excellence and dependable global delivery, creating long-term opportunities for precision engineering companies capable of consistently meeting global quality standards.

Indian Economy

India continued to reinforce its position as one of the worlds fastest-growing major economies during FY 2025-26, supported by resilient domestic demand, sustained public infrastructure investment and continued policy reforms. Government initiatives such as Make in India, the Production Linked Incentive (PLI) Scheme and PM Gati Shakti strengthened the countrys manufacturing ecosystem, improved logistics infrastructure and enhanced Indias attractiveness as a global investment and sourcing destination.

The automotive and engineering sectors continued to benefit from increasing localisation, expanding manufacturing capabilities and a growing focus on technology-led production. At the same time, Indias skilled workforce, improving ease of doing business and deeper integration into global supply chains further strengthened its competitiveness as a preferred manufacturing hub for precision-engineered products.

These structural developments created a favourable operating environment for export-oriented manufacturers such as RACL Geartech. As global OEMs increasingly diversified their supply chains and sought reliable long-term partners, the Companys engineering expertise, manufacturing excellence and established international customer relationships positioned it well to capitalise on Indias growing role in the global automotive and precision engineering ecosystem.

Automotive Industry Overview

The global automotive industry continued to evolve during FY 2025-26 as manufacturers balanced investments across electric mobility, hybrid technologies and next-generation internal combustion engine (ICE) platforms. While electric vehicle adoption continued to gain momentum, particularly in China, several global OEMs adopted a more balanced technology strategy, reflected in renewed investments in hybrid powertrains and the launch of cleaner, more efficient petrol and diesel engines. This reinforced the industrys transition towards a multi-powertrain ecosystem, where conventional, hybrid and electric vehicles are expected to coexist for the foreseeable future.

Vehicle architectures also continued to become more sophisticated, driven by premiumisation, stricter safety regulations and increasing consumer expectations. The growing adoption of advanced transmission systems, electric power steering, lightweight chassis technologies and performance-oriented drivetrains has significantly increased the engineering content per vehicle, creating sustained demand for high-precision, value-added automotive components.

India also witnessed a notable shift towards premium mobility. Rising disposable incomes, changing consumer preferences and a growing enthusiasm for leisure and performance motorcycling continued to drive demand in the premium twowheeler segment. Domestic and international OEMs expanded their premium motorcycle portfolios, while exports from India strengthened the countrys position as a global manufacturing hub for mid-sized and premium motorcycles. This trend presents significant long-term opportunities for precision engineering companies with specialised capabilities in transmission systems and drivetrain components.

At the same time, global OEMs continued to consolidate their supplier base, increasingly favouring partners with strong engineering capabilities, manufacturing excellence, product development expertise and reliable global delivery. As vehicle complexity continues to increase across all propulsion technologies, suppliers capable of consistently delivering high- quality precision-engineered components are expected to play an increasingly strategic role in the global automotive value chain.

RACLs Strategic Position

RACL has established itself as a trusted global manufacturer of precision-engineered transmission solutions, serving leading automotive OEMs across premium motorcycles, passenger vehicles and industrial applications. Over the years, the Company has built a diversified business portfolio supported by deep engineering expertise, advanced manufacturing capabilities and long-standing customer relationships. With exports contributing more than 70% of revenue, RACL continues to strengthen its position as a preferred supplier to global customers seeking high-quality, technology-driven manufacturing partners.

During FY 2025-26, the Company continued to expand its presence in high-value automotive segments. While premium motorcycles remain a key pillar of the business, RACL further strengthened its footprint in the passenger vehicle segment through increased participation in steering systems, chassis applications and advanced drivetrain components. As global OEMs increasingly focus on lightweighting, enhanced vehicle dynamics and higher safety standards, these product categories are expected to witness sustained long-term demand, creating significant opportunities for precision engineering companies with proven technical capabilities.

The Company also continued to strengthen its engineering ecosystem through strategic collaborations and customer partnerships. The collaboration with ARRK Engineering GmbH, Germany, marks an important step in enhancing RACLs product development capabilities and expanding engagement with global OEMs from the early stages of the product lifecycle. By combining engineering expertise with advanced manufacturing capabilities, the Company is well positioned to deliver integrated solutions that create greater value for customers while supporting long-term growth across automotive and adjacent engineering sectors.

Supported by continued investments in technology, automation, manufacturing excellence and product development, RACL remains focused on increasing value addition, diversifying its business portfolio and strengthening its position as a globally competitive precision engineering company.

Financial Performance

During FY 2025-26, the Company delivered a robust financial performance, driven by strong operational execution and sustained customer demand. Total standalone income increased by 19.9% to 500.22 crore, supported by growth in both operating revenue and other income. Revenue from operations rose by 14.5% year-on-year to 477.76 crore, while export sales grew by 15.5% to 336.11 crore, continuing to contribute nearly 70-75% of the Companys operating revenue. Domestic sales also recorded a healthy 18.5% growth, reflecting balanced expansion across both domestic and international markets. The Companys operating profitability strengthened significantly during the year, with EBITDA increasing by 31.3% to 126.35 crore from 96.22 crore in FY 2024-25, while the EBITDA margin improved from 22.5% to 25.26%, reflecting higher operating leverage, an improved product mix and continued focus on operational efficiencies. Profit Before Tax increased by approximately 80%, while Profit After Tax grew by 82%, demonstrating the Companys ability to translate revenue growth into stronger earnings despite a challenging macroeconomic environment.

The year also marked continued progress in strengthening the Companys long-term strategic position. RACL Geartech deepened relationships with existing customers while expanding its presence across international markets, particularly in Europe, which continues to be its largest export destination. Supported by a strong financial performance, a diversified customer base and continued investments in technology and manufacturing excellence, RACL Geartech remains well positioned to capitalise on emerging opportunities in the global automotive industry and create sustainable long-term value for all its stakeholders.

Risks and Opportunities

The automotive industry continues to operate in an increasingly dynamic environment shaped by geopolitical developments, evolving trade policies, persistent inflationary pressures, raw material price volatility and currency fluctuations. Elevated inflation across several global economies continued to influence input costs, labour expenses and consumer demand, while higher interest rates impacted investment decisions and vehicle affordability in certain markets. At the same time, rapid technological advancements and increasing product complexity continue to redefine customer expectations and competitive dynamics across the automotive value chain.

Beyond macroeconomic factors, the availability of skilled manufacturing talent remains one of the key challenges for the precision engineering industry. The increasing adoption of automation, advanced machining and digital manufacturing requires a highly skilled workforce capable of operating sophisticated manufacturing systems. In addition, a significant portion of the Tier-2 and Tier-3 supplier ecosystem continues to face challenges in consistently meeting the stringent quality, process capability and traceability standards expected by global OEMs. As customers increasingly consolidate their supplier base, engineering excellence, manufacturing discipline and supply chain maturity are becoming critical competitive differentiators.

Despite these challenges, the long-term outlook remains favourable. Global supply chain diversification, increasing localisation, premiumisation across automotive segments, rising engineering content per vehicle and growing demand for precision- engineered components continue to create significant opportunities for Indian manufacturers. Supported by continuous investments in technology, automation, workforce development and supplier capability enhancement, RACL Geartech remains well positioned to strengthen its competitive advantage and deliver sustainable long-term value.

Key Financial Ratios

Name	FY 2025-26	FY 2024-25
Current Ratio	1.38	1.05
Debt Equity	0.63	1.30
Interest Coverage	4.26	3.01
Fixed Asset Turnover	1.56	1.42
Total Assets to Debt	3.13	2.12
DSCR	1.74	1.08
Debt/EBITDA	1.75	3.09

Explanation to key Financial Ratios

- Current Ratio - is a key liquidity metric that assesses a companys ability to meet its short-term obligations due within one year. It indicates the adequacy of current assets available to cover current liabilities. The ratio is calculated by dividing Current Assets by Current Liabilities.

- Debt-to-Equity Ratio - measures a companys financial leverage and indicates the extent to which its operations are financed through debt compared to shareholders equity. A higher ratio may suggest greater financial risk. It is calculated by dividing Total Debt by Shareholders Equity.

- Interest Coverage Ratio - evaluates a companys ability to meet its interest payment obligations from its operating earnings. It reflects the margin of safety available to creditors and lenders. The ratio is calculated by dividing Earnings Available for Debt Service by Interest Expense.

- Fixed Asset Turnover Ratio - measures how efficiently a company utilizes its fixed assets, such as property, plant, and equipment (PP&E), to generate revenue. A higher ratio indicates more effective asset utilization. It is calculated by dividing Net Sales by Average Net Fixed Assets.

- Total Assets-to-Debt Ratio - is a solvency measure that assesses the extent to which a companys total assets can cover its total debt obligations. It provides insight into the companys long-term financial stability and debt repayment capacity. The ratio is calculated by dividing Total Assets by Total Debt.

- Debt Service Coverage Ratio (DSCR) - evaluates a companys ability to meet its debt repayment obligations, including both interest and principal repayments, using its operating earnings. A higher DSCR indicates stronger debt-servicing capability. It is calculated by dividing Earnings Available for Debt Service by Total Debt Service.

- Debt-to-EBITDA Ratio - is a leverage metric that measures a companys ability to repay its debt using earnings generated from operations before interest, taxes, depreciation, and amortization (EBITDA). It indicates the number of years required to repay total debt, assuming EBITDA remains constant and is fully utilized for debt repayment. The ratio is calculated by dividing Total Debt by EBITDA.

Conclusion

FY 2025-26 was marked by a dynamic global business environment characterised by geopolitical uncertainties, evolving trade dynamics and changing market conditions. Despite these challenges, the global automotive industry demonstrated resilience through continued investments in technology, operational efficiency and supply chain optimisation. Against this backdrop, the Indian automotive and auto component industry sustained its growth momentum, supported by resilient domestic demand, a favourable policy environment and strengthening manufacturing capabilities.

In this evolving landscape, RACL Geartech Limited delivered another year of strong operational and financial performance, driven by its engineering excellence, customer-centric approach and disciplined execution. Growth in revenue, profitability and exports, coupled with improved operating margins, reflects the Companys ability to adapt to changing market conditions while consistently delivering value to its customers and stakeholders. Continued investments in manufacturing capabilities, process excellence and quality enhancement have further strengthened its competitive position in both domestic and international markets.

Looking ahead, while the industry is expected to continue navigating evolving regulations, technological advancements and global economic uncertainties, the long-term fundamentals remain favourable. Supported by a strong financial foundation, diversified customer relationships and a clear strategic focus, RACL Geartech is well positioned to capitalise on emerging opportunities and continue creating sustainable long-term value for all its stakeholders.