Varroc Engineering Ltd., a global tier-I auto components group, announced its financial results for the period ending December 31, 2024, reporting double-digit revenue growth year-over-year and a strengthened order book in both India and overseas markets.

The company’s CMD, Tarang Jain, attributed the growth to new production programs and highlighted the positive impact of India's economic environment, including tax cuts and interest rate reductions. Despite increased tooling costs, the company maintained its EBITDA margin and improved its pre-tax profit. Varroc Engineering also reduced its net debt and improved its return on capital employed. The company secured significant new business wins, with over half coming from electric vehicle models, and highlighted wins in both overseas and Indian markets.

Financial performance

Varroc Engineering reported revenue of INR 20,753 million for the third quarter of fiscal year 2025, marking a 10.1% year-over-year increase. This growth was driven by new production programs. Tooling sales were significantly higher during the quarter, leading to a one-time impact on gross margins.

Tarang Jain, CMD commented, “The Indian GDP has slowed down little as compared to last year but still remain strong as compared to modest global growth. The rural consumption has remained strong in the past few quarters. The income tax cut by the Govt in the budget and interest rate reduction by the central bank augurs well for India, as it will help in further improving the consumption of the discretionary goods like automobiles.

Despite the impact of higher tooling costs, Varroc maintained its EBITDA margin at 9.2% year-over-year, although it decreased by 50 basis points quarter-over-quarter. The company's pre-tax profit, before exceptional items and joint ventures, improved by 80 basis points year-over-year due to controlled capital expenditure and lower depreciation and interest costs. However, the pre-tax profit declined quarter-over-quarter due to foreign exchange translation losses.

Debt reduction

Varroc Engineering’s balance sheet strengthened, with net debt reduced by INR 1,967 million in the first nine months of fiscal year 2025. The net debt-to-equity ratio decreased to 0.50x from 0.64x at the end of fiscal year 2024. The absolute net debt stood at INR 7,860 million. The annualised return on capital employed reached 19.3% at the end of the nine-month period.

The company’s order book grew stronger in both Indian and overseas markets during the nine-month period. Varroc secured new business wins with annualised peak revenues of INR 10,847 million. Electric vehicle models accounted for more than 55% of these new wins.

Two significant wins in overseas operations include Front Drive & Rear Drive Inverter Electronics for Electric Passenger Vehicles and Interior ambient lighting, both with production starting in fiscal year 2027. A notable win in Indian operations is the order for power electronics, specifically Traction Motor and Controller, for a three-wheeler manufacturer, with production beginning in the next calendar year.

Varroc Engineering’s future strategy focuses on expanding its presence through focused products to drive sustainable growth. The company aims to improve gross margins, control fixed costs, and optimise working capital to deliver value to shareholders.