Menon Bearings Limited (MENONBE.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q3 and 9 months FY '26 post earnings conference call of Menon Bearings Limited. Today on the call from the management, we have with us Mr. Arun Aradhye, Whole-time Director and CFO; Mr. Aditya Menon, part of the promoter group. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, this is a reminder that this call is being recorded. I would now request the management to detail us about the business performance highlights for the period ended December 2025, the growth perspective and the vision for the coming years. Post which, we will open the floor for Q&A. Over to the management team.

Okay. Thank you. So good afternoon, everyone. Wish you all a very happy and prosperous new year. And also thank you for post earnings call to discuss our performance for the third quarter and 9 months ended on December 2025. I'm pleased to share Q3 FY '26 has been a strong quarter for the company, reflecting healthy demand across key segments and continued improvement in profitability. On a consolidated basis, revenue for the quarter stood at INR 76.9 crores, representing a 32% year-on-year growth. Total income was INR 78.5 crores, also up by 32%. Profitability saw a sharp improvement with profit before tax at INR 12.4 crores, up 69% and PAT at INR 9.3 crores also up 69%. Earnings per share for the quarter increased to INR 1.65 compared to INR 0.98 last year. For the 9 months period, consolidated revenue reached INR 206.6, an increase of 18% year-on-year. PAT grew by 34% to INR 24.5 crores, reflecting sustained operating leverage and improved efficiency across our business. Looking at the business mix, OEM continues to be our largest segment, contributing about 48% of Q3 revenues. Exports accounted for over 36%, underscoring the strength of our international customer base and diversification benefits. The replacement market contributed around 8%, and we continue to see steady improvement in this segment as well. At the business unit level, Menon Bearings benefited from healthy OEM demand, stable export orders and improved capacity utilization, which supported margin expansion. Menon Alkop delivered stable performance during the quarter with continued focus on higher volume alloy products and customer qualification initiatives. Menon Brakes, while still at an early stage, is progressing as planned, and we expect a gradual ramp-up as customer approvals and volumes increases. On the cost front, raw material prices, volatility remains an area of close monitoring. However, a combination of partial price pass-through, better product mix and operational efficiencies helped us to protect and improve margins during the quarter. Apart from that, we have completed installation of 3.8 megawatt solar -- rooftop solar installations, covering all plants, which will curtail electricity expenses by about INR 2.25 crores per year. As we move forward, we see a stable demand environment across OEM and export markets. With major CapEx behind us, our focus remains on sweating assets, improving return ratios and driving profitable growth. Our subsidiaries continue to add long-term strategies and value and optionality to the business. With that, we will now be happy to take your questions. Thank you.

Thank you, sir. We will start the question and answer session. [Operator Instructions] We'll take the first question from Mr. Bhargav Buddhadev.

Sir, my first question is that, obviously, we've seen a very strong growth in exports. So the share of exports has also now improved to about 36% versus 33%. So if you can spend some time in terms of despite this tariff scenario, how are we managing such a strong growth in exports? If you can just explain that, that would be my first question.

Okay. As I told you last time also in the earnings call, we have already started additional business with one of the major customers from U.S.A., that is Allison Transmission. And that alone business has added value of around 2 point -- more than INR 2.5 crores a month. Apart from that DRiV -- Federal-Mogul DRiV is also there. And other customers also added in the fold of our company so far as exports are concerned. So we hardly have any impact due to the tariffs imposed by the U.S.A. On the contrary, our exports are poised to grow further in future as well.

Sir, the second question is that, obviously, in the last 1 month, we have seen a significant increase in copper prices and also steel prices undergoing some inflation. So in this scenario, how are we poised to basically pass on these to our customers because copper, in particular, has seen a significant rally. So is it fair to say that despite such an inflation, we will continue to maintain our gross margins or EBITDA margins going forward as well?

Yes, very right question. As you know, there is a tremendous volatility so far as nonferrous materials are concerned. The prices are increasing like anything, and it will definitely have adverse impact on the margins. But at the same time, what we have done that our contracts typically allow for partial pass-through. We are in the process of passing the increased raw material cost to the customers, and that is a process maybe depending upon 3 months contract, 6 months contract for revision of rates. So that is a continuous process that we are following. Apart from that, we focus on product mix improvement, yield, then yield optimization and then cost efficiency to mitigate impact. And we are constantly having a vision on the raw material prices and to ensure that through the process improvement and yield improvement our margins will not be affected to the greater extent. Maybe some dent can be there, but it will not have a major impact due to passing off the burden on the customers as well as reduction in the raw material consumption and process improvements.

And like you said, prices are volatile. With some customers, we have 3 months -- like 3 months period of rate increases. As management, we are also sending them every month now because now it's very volatile. Before it used to be like INR 900 to INR 950, but now it's from INR 900 to INR 1,200 a kilo. So that's a lot of cost which we are bearing. So as management, we are also talking to our customers, and we have relation for 20 years. So customers also -- they are also dependent on us. We are also their suppliers. So they are also friendly with us. They have good relation. So they are also what you say, they also try to help us pass the burden like take the burden from us.

As he said, we are in the process of contracting all the customers to see that instead of looking at whatever contracts we have for 3 months or 6 months of provision. It cannot be like that in future. Considering the volatility in the prices, we cannot avoid by the contract that we have already entered with them. We are already talking with them that it will be on a monthly basis instead of 3 months or 6 months.

Because now even the Iran situation, Venezuela situation, it could be more volatile. So the customers also are understanding because you do high engineering, it's big business. They are also understanding. We have a good relation with them. So far, the talks are positive, but we still have to finalize it. Maybe by next quarter, we get a better picture on this, but customers are helpful. They are ready to help us on this, pass on the burden because for 3 to 6 months, we can't bear the burden of price increase. So they are like we have sent them the e-mails last month, had calls with them in December. Some of them have agreed for in January to pass on the burden. Some are still in chats. But they are reasonable. It's not an unreasonable thing that goes on here.

And lastly, sir, on the Brakes business, is there any development because that business can actually become a large business maybe in the next 2 to 3 years. So if there are any updates over there? And that would be my final question.

Yes. Actually, now we are almost reaching INR 1 crore every month in Brakes. We are continuously working on our marketing. There are 2 OEMs. I won't take the names now, but we have gone and had very positive discussions with them. Maybe by next meeting, we can give you more -- maybe business also might start or we'll give you more positive news on that. And regarding railway, we're still in the dynamometer like already start -- ordered the dynamometer, maybe 3 to 4 months for the dynamometer. So maybe by next 1 year, we'll see a more huge growth in Brakes business. Because Brakes -- because we had some -- what do you say, some challenges with the dynamometer, we have already entered the 2-wheeler segment market, where we are doing a big pie chart there already. And after our product quality and everything is going smoothly, we've got a big open order, which we currently are not even doing every month. So we're getting a new line for 2-wheeler segment also. So we are not just waiting for HCV, LCV because there is a little bit break on the railway segment, we are going on -- looking at other avenues where we can -- in the friction material where else we can go. So 2-wheeler also has picked up well. Other customers in 2-wheeler also are now approaching us. But our still main focus is railway and HCV, LCV. So as management and team, we are focusing on that also currently.

Apart from that, one of the auto giants have already contacted us. So we had a detailed meeting with them. And probably, they will visit to our establishment in the next month by 15th of February, wherein we expect -- we are not very sure, but we may expect that additional business of at least INR 1 crore will start with them per month.

Even for the export question you asked for bearings and bush. Now as management, we have taken -- not policy, we have taken a decision. We don't do DDP where we do the delivery to U.S. We are trying to get everything [ ex works ] India because tomorrow, some other war happens or any other external factor should not affect our business. Maybe like we might lose some top line here and there because it won't be billing in dollar rate, it; will be in rupees. But as management, we are trying to do everything ex work. So in the long term, we are not -- tomorrow Trump puts 100% tariff or some other issues happen in the world, which are not in our control, should not affect our supplier. So that also we are doing because you asked how export is increasing. Now we have some customers we don't do [ ex works ] India. We do DDP or their delivery terms. So we are trying to get it changed to our convenience. Maybe top line might come down a little bit. But in the long run, this is a much more sustainable way, a safer way for us to carry on our business ahead.

I think your payment cycle will also improve, right?

If you do prices from 180 days, it will come down to 30 days. There is a great amount of saving on account of interest as well as the total turnover of inventory.

So as management, we are taking big decisions. But in our industry, how it is, our suppliers are bigger than us and our customers are bigger than us. So it's a challenge to get it done. So Mr. Aradhye is on his best to get this done. And probably we are going to conclude in the next week only.

We'll take the next question from Raghav Maheshwari.

Congratulations on a great set of numbers. Sir, my first question would be around the capacity utilization this quarter.

In Menon Bearings, bushing and washers, we are around 90% and in aluminum, aluminum castings, we are around 65%. And Brakes, we are around at 60%, 65%. So there is still a lot of room for future expansion. Like we can -- like what numbers we have given for 2027, we don't have to go for a major new investment capacity.

Right. Okay. And sir, building up a question that the last participant had about the tariff on Menon Bearings like on the tariff in India. So sir, Menon Bearings Products are subjected to the 50% tariff, right?

Some products are most now the new law has come for HCV and LCV. That is like trucks, they are waived off the tariffs. So a lot of places, we are not like where the tariff doesn't apply to us. Wherever the other areas the tariff apply to us, majority of the tariff is burned by our customers. We also pay a small count. Our customer also helps us with that.

So I will little -- clarify about that a little more. So far as our new business, we have started additional business with Allison. Earlier the tariff was 50%, now it has reduced to 25%.

And on that 25% also because of good relation and we have supported them during tough times, they share the burden with us.

And sir, marginal expansion that we have seen, now we are standing at around 20.5% for this quarter. Sir, I wanted to know what drove this margin expansion this quarter?

See, benefited from strong execution, healthy OEM demand and stable export orders. While we may not see the same growth rate every quarter, we believe the current run rate is sustainable. Over the medium term, we expect growth to be in line with industry trends supported by exports, new customer additions and gradual improvement in the replacement market. While we could maintain and we will be maintaining the growth -- the similar growth in future as well in terms of volumes as well as in the margins, we have taken proactive steps to see how we can counter volatility in the prices of raw material. A number of actions have been already taken by the management, which will definitely result in reduction in the raw material cost by about INR 60 lakhs to INR 70 lakhs per month which will be -- actually the burden of raw material prices per month will be around INR 70 lakhs, but this month, we will be able to reduce it due to process improvement by about INR 55 lakh to INR 60 lakh. And from the next month, it will be around INR 75 lakhs to INR 80 lakhs. All actions have been already taken. And with this, we are sure that we will maintain the same margins, which are sustainable in future as well.

And Raghav, to add to this, like if you're following our company or these calls for the last 1, 2 years, we've been telling about a strong order book, and we always said like it will be coming in third and fourth quarter and next year also. So whatever parts we developed for the last 2 years, we are benefiting those fruits now. Those new orders are coming in now and the SUVs are starting. So from the next quarter, you'll see similar growth for the next 1 year, 1, 1.5 years.

Yes. Do we have a number, sir, on order book?

It is -- for this year, what we project that whatever order book position, if we consider that, we may reach up to INR 295 crores and next year, maybe around INR 350 crores and next year, INR 425 crores.

That is the order book size, right?

Yes, right.

And what is the execution time line for this?

Right, like next 2 years. See, this year, we are going to finish around INR 290 crores. Next year, we're going to do around INR 340 crores.

INR 350 crores.

A little bit conservative. So when the results come, you guys are a little bit more happy.

We'll take the next question from Arnav Sakhuja.

Congrats on a strong set of results. So my first question is, in the PPT, we've mentioned that we're planning to double the Alkop capacity from around 1,440 to 2,880 in the next 2 years. So I just wanted to understand, would we fulfill these orders in the future by potentially increasing wallet share from existing customers? Or would we try onboarding new customers to fulfill this demand?

Yes. Actually, a lot of -- we have already developed around 60 parts. Currently, wallet share from 1 customer, but it's not like 1 customer -- there are 2 customers actually, but we are not only doing India. We are doing their plants in Germany, their plants in U.S., their plants in South America. So you can -- it's like a new customer, but the main brand is like John Deere. We are doing John Deere U.S.A., John Deere, Europe, John Deere, South America. So that's one place. At the same time, we are doing continuous efforts to get new customers also. So there are new customers that are coming in because the quality of our product, the criticality, which we are able to achieve. So we are doing both at the same time. But this current growth is from current customers. But when I say current customer means John Deere India is a complete different group with a certain turnover. John Deere Europe is a certain group with like INR 10,000 crore turnover. John Deere U.S. is a huge company, again, separate. So it's like new customers for us.

You can treat it as a new customer.

Because we get vendor code different for John Deere Europe, John Deere USA, John Deere in South America, in Brazil. It's like a new customer, but the brand name is same, but we get a vendor code different for all locations. So it's a mix of both. I don't know how to explain that. But yes.

Okay. I kind of got your point. So my next question is, in the PPT, you mentioned a couple of strategic investments that the company is undertaking for cost saving, one of which you mentioned in the opening statement as well, which is a INR 2.55 crore cost saving because of the solar installation. So what would be the total cost saving if you add all the various ventures that you are undertaking?

See, one thing is electricity charges or power charges for 1 year, we are 100% sure that we should be able to curtail the expenditure on electricity by INR 2.25 crores per year. Apart from that, due to the process improvements improved yield in the raw material, we should be able to save at least INR 8 crores of per year.

And at the same time, we're doing a lot of technical innovation and investments where we are not dependent on that much manpower. As going forward, manpower don't get scarce, like also the PF all the -- like the salaries are getting increased like month by month, which is not -- which is not given to us by the -- like the customers.

We cannot pass on that.

So we are doing a lot of technical innovations to try to reduce manpower in the future. So which benefits will come by next year -- next to next year. So that's all the different things which we are doing, like technological innovation where we are not dependent on manpower too much.

Wherever automation is possible to avoid rejection as well as improve the productivity. That is definitely going to help us so far as productivity is concerned and which in turn will result in the reduced cost per item or component in the long run.

Congrats again on strong set of numbers.

Thank you Arnav.

We'll take the next question from Disha.

Am I audible, sir?

Yes, yes.

Yes. So just a couple of questions. Firstly, what is the total amount of CapEx we've incurred till now for this year? And what are we planning for the Q4 and for FY '27?

You see, so far as this year is concerned, we have already completed CapEx of around INR 15 crores. Additionally, for next years what we have envisaged is around INR 20 crores.

Next 2 years you're saying, INR 20 crores, right?

INR 20 crores.

And last 2 years, we have done around -- like Mr. Aradhye said, last year, INR 15 crores, before that we did INR 15 crores. So the major CapEx of building, land acquisition, all that has been completed. This INR 20 crore is just more technology, machine, more value addition what we can do to our products.

What we have to know -- what we have to do now is to sweat the assets.

Yes. So the main investment has been like we have done it. Yes, somewhere.

All right. And you mentioned -- so like the Brake segment, we are seeing a lot of growth potential. So I think the current revenue mix around Bi-metal is around 74%, 22% from Alkop and 3% from the braking system, right, for this quarter. So how do you see this product mix or the revenue mix changing going ahead?

You see since the -- across all the segments, what we foresee that for this year, it will remain more or less constant. But next year, it will change. Maybe it can be about 65% to 68% in Bi-metal, about 25% to 28% in Alkop and remaining in Brakes.

Bi-metal is a parent company. It's been there from 1993 and Alkop is from 2008, 2010. And Brakes is 2 -- this is a baby company, 2 years old. So that's why the pie also looks similar. So -- but we are doing efforts where Menon Brakes and Alkop will contribute more to the total pie chart.

All right. And what's the margin split between all these 3 sectors?

See margin so far as EBITDA margins are similar in Alkop. But Aluminum as well as in Bearings it is similar. So far as Brakes is concerned, it is less because we have just started and recovery that is in process as soon as we increase the volumes, what we foresee what we have given for the next year is comparatively a conservative figure. But from about 12% to 13%, it may go up to 18% next year.

For the brake segment.

Yes.

And what is the overall margin guidance for the next year?

Next year margin is around 21% to 22%. Maybe next year, it is 21%. And next to next in '28, it should be 22%.

And where do we see for this year on a consol basis?

It is 20%.

20% margins for an overall consol basis?

Yes.

We'll take the next question from Sucrit Patil.

My name is Sucrit Patil from Eyesight Fintrade Private Limited. Am I audible?

Yes.

Yes. So I have 2 questions. My first question is as global auto and industrial demands shift towards electrification and lightweight components, how do you see Menon Bearings evolving its product portfolio to stay ahead of the competition? Could you share your vision for how the company plans to integrate new technologies and expand into emerging markets over the next, say, 1 to 2 years? This is my first question. I'll ask my second question after this.

Okay. Basically, so far as Bi-metal bearing is concerned -- sorry, Bi-metal division is concerned, it will not have any impact on this industry, our industry because we are not into car segment. And whatever EV is coming, that is in the segment of passenger vehicles more, not in heavy vehicles or off-road vehicles, where we are very strong and we don't have any stake so far as passenger vehicles are concerned. So it will not have any impact on us. So far as EV is concerned and emerging market, so we are concentrating more on that through Menon Alkop, our subsidiary company, which will be explained better by Mr. Aditya.

Yes. So like Mr. Aradhye said, in engine bearing also, we are not in passenger cars. We are in HCV, LCV, tractors, transmission, earth moving equipment, these kind of -- these kind of -- our parts go to these kind of vehicles where electrification won't come in the next 5, 10 years because it's high power, high HP required. So in that way, we are very good. Also, like we make bushes. So we are trying to get PTFE bushes, not only for engine application, but other applications also like air conditioning, fridges, other areas. And like Mr. Aradhye said, to -- even electrification is coming and electric vehicles are coming through our Menon Alkop division, we are already developing parts for different electric companies that Tier 2 supplier to Tesla through concentric pumps. We do some parts for Porsche E-Mobility through Eaton transmission. We even do electric parts for TACO Prestolite. It's a Tata Motors company, subsidiary company. So that goes to Tata Punch and Curvv. We do electric motor covers for them. So we are also through Menon Alkop entering the electric -- joining the electrification. So that's our answer.

So apart from that we are in the process of engaging one of the major customers for PTFE bushes, which are required for EVs. We are to that -- and the business volumes are to the tune of almost INR 1.25 crores a month. We have not finalized. The samples are under process, and we'll see what happens with. That will be in the interest of the company as well. And we are very sure that we should get that business, which will come in from the next year.

My second question is regards to finance and margins. With rising raw material cost and currency fluctuations impacting exports, what forward-looking steps are you taking to sustain margin expansion while continuing to invest in capacity and R&D. Specifically, how do you see operating leverage and cost efficiency playing out in the next coming quarters?

See, as I already told you that so far as electricity charges are concerned, we should be able to bring it down by INR 2.25 crores per year. Apart from that, whatever initiatives that we have taken proactive measures that we have taken so far as process improvement and raw material yield is concerned, which again will save us around INR 8 crores to INR 9 crores per year. Apart from that, whatever automation that we are going to do, that will definitely help us in reducing rejection further so that more and more quantity is available for sale, that will again help in reduction in the total cost of the company. With this and with the increased volumes so far as exports are likely to grow further. As I already told you that we are in the meeting with one of the major customers for business of bush. The volumes are likely to grow, which will definitely help in recovering the overheads. So more and more overheads will be absorbed by taking the measures to curtail the expenditure on raw material, electricity and to curb the expenditures which are wasteful. The steps have been already taken. And with this, we are very sure that we should be able to not only sustain the margins, but we are looking forward to see how we can improve the margins further.

We'll take the next question from Himanshu Upadhyay.

Congrats on good numbers. I had 2 questions. In the previous quarter, we had spoken about potential business from a competitor for U.S. aftermarket where they had sent some 800 parts if I am not mistaken. You said that management will take some time to decide on that business, whether we'll go forward or not. Any thoughts have you made on that business? And what are your thoughts now post this quarter?

Okay. We are in the process of verifying the feasibility of all these parts. We cannot go ahead with 800 parts at the same time. But at the same time, we are verifying which are having the more volumes with better pricing and which will add better number to our total numbers. See, Himanshu, we are selecting those items only. But at the same time, we have to understand that we can develop not more than 4 to 5 items or parts per month. So considering that, we are concentrating on the parts which are having more value addition with more volumes. And one by one, we are going to have this productionized over a period of time.