Welcome to the 83rd edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 6 companies across 6 industries
Consumer Durables
Borosil Limited
Healthcare
Orchid Pharma Limited
Building Materials
Welspun Corp
Engineering & Capital Goods
KRN Heat Exchanger
Retail
Khazanchi Jewellers Limited
Auto Ancillary
RACL Geartech
Consumer Durables
Borosil Limited | Small Cap | Consumer Durables
The company is engaged in the business of manufacturing and trading of Scientific and Industrial Products (SIP) and Consumer Products (CP). SIP consist of laboratory glassware, instruments, disposable plastics, liquid handling systems and explosion proof lighting glassware. CP consist of microwavable and flameproof kitchenware, glass tumblers, tableware and dinnerware, Appliances and Storage products
[Concall]
The bulk of Borosil’s price hikes hadn’t flowed through in Q1, creating scope for margin recovery as higher realizations kick in.
“If we compare this with respect to the West Asia conflict impact probably, so the price that has compensated in the first quarter is very less. That’s about a couple of crores versus the overall impact of about INR12 crores in the overall affairs of the sales. So I think we have to wait and watch probably once the price is passed on. So there will be some lag that we will see. In the coming quarters, I think you will see the impact.”
— Anand Sultania, Chief Financial Officer
After several years of heavy manufacturing and renewable-energy capex depressed returns, management expects higher utilisation and margins to materially lift ROCE.
“Borosil has been investing heavily into capex in the last 3, 4 years. If you look at maybe the last 3 years, we have increased our capacity on Opalware furnace. We have invested into borosilicate glass furnace. We have been heavily investing into solar. So all of this is a subset of that. I think going forward, as we enhance our capacity utilization and improve our margins, I think we should definitely look at basically 20% to 24% ROCE margins on the business.”
— Anand Sultania, Chief Financial Officer
BIS-related disruptions forced Borosil to both hold additional inventory and invest in domestic manufacturing, temporarily inflating capital employed.
“So just to add to Anand’s point, if you notice over the last 1.5, 2 years, a lot of inventory we had to build on account of BIS challenges, which happened in Hydra also, which happened in our appliances business also. And in both the cases, we have ensured to move production to India manufacturing.
So on the one side, we had to build inventory. On the other side, we had to also invest in manufacturing. So that’s one of the major factors which is contributing to a lower ROCE.”
— Rituraj Sharma, Chief Executive Officer
The newly commissioned 20 MWp Bikaner solar plant with battery storage materially increases Borosil’s renewable-energy penetration.
“Building on this momentum and with the introduction of Green Energy Open Access Regulations 2025, we commissioned a third captive solar power plant in Bikaner during Q1 FY27 with a capacity of 20-megawatt peak integrated with battery energy storage systems. As a result, solar power now meets about 61% of our overall energy requirement.
We are further evaluating opportunities to set up an additional 6.5 megawatt peak captive solar plant at Borosil Limited and another 3 to 4-megawatt peak plant at Stylenest India Limited to meet the power demand of our Hydra facility.”
— Rituraj Sharma, Chief Executive Officer
Competition from Chinese borosilicate glassware remains a structural challenge, with the anti-dumping investigation still underway.
“You’re right. Actually, this is what last quarter also we had shared. And unfortunately, this continues to happen. And despite depreciation of the rupee as well as the shipping freight rates going up, I would say, in the market, we are not seeing much of a difference as far as the Chinese dumping is concerned. If that answers the question.”
— Rituraj Sharma, Chief Executive Officer
Management defended continued capital allocation by pointing to the company’s long-term growth track record and the time required to create new categories and domestic manufacturing capacity.
“And if you look at our journey, we have been having a CAGR of more than 21% over the last 10 years. The business has shown this kind of a growth. And then we also like in the call itself, we said one of the challenges was the BIS, for example, and we had to now put up a manufacturing plant for the double wall vacuum bottles, etc. So this does need capital. And in terms of production, the ramp-up happens, it has its own cycle.”
— Rituraj Sharma, Chief Executive Officer
Apart from solar savings and higher-value products, portfolio rationalisation is another lever management is using to lift margins.
“So there are a number of factors actually. Like Anand mentioned, one of the things was on the solar savings, which has come in. The other is we have high realization SKUs we have sold and we have better in glassware, Opalware both. I think some of these things have also contributed to our efforts.”
“So in terms of cost reductions also like typically, when you sell a portfolio, then items contributing to a lower gross margin and all getting discontinued is also part of the process. So that’s also part of the cost reduction effort which goes on.”
— Rituraj Sharma, Chief Executive Officer
Healthcare
Orchid Pharma Limited | Mid Cap | Pharmaceuticals
Orchid Pharma is a vertically integrated Indian pharmaceutical company specialized in the development and manufacture of cephalosporin antibiotics and APIs. Following its merger with Dhanuka Laboratories, the company is focusing on complex molecules, backward integration through its 7-ACA project, and high-value drug commercialization.
[Concall]
Orchid chose Jammu for its 7-ACA plant to leverage specific regional cost advantages like cheap electricity, water, and tax benefits. These structural cost savings are designed to make the company’s production globally competitive even against large-scale Chinese manufacturers.
“Yeah, I would say, rather than having plan B, we decided to have a good plan A. And that’s the reason we went to Jammu, get some GST benefit, go into -- go to a state where the electricity cost is the cheapest in India, water is abundantly available, the boiler steam cost is lower due to available of abundant agricultural waste. So, and obviously, we are working aggressively towards improving our overall tighter concentration so that our yields can improve. Our pilot team, pilot plant team, is working towards that. I think the best you can do is use all your resources to improve efficiencies, and that is what our target is.”
— Manish Dhanuka, Managing Director
Management argues that the nature of Chinese competition has shifted from market flooding to profit-seeking, as seen in the recent pricing trends of Pen G. This perspective suggests a more rational competitive environment for Indian players entering the API and intermediate space.
“What he is trying to say is that even in Pen G, the Chinese have not dropped the prices to below pre-PLI s level. If you look at the prices of Pen G, the current prevailing prices are same as they were in 2019 or ‘20. So, because of the PLI, they had increased to probably create a war chest. They were preparing themselves to fight when the PLI companies start their production. And they brought it back to the normal level. Like Mridul said earlier also, now these companies are largely privatized, and we don’t know what future holds for us, but the intent is not as it used to be 20 years back to just flood the market. They want to work on a profitable model. That -- that’s the general belief now for the Chinese companies, and we have seen in other products also.”
— Manish Dhanuka, Managing Director
Scaling fermentation from a pilot plant to a commercial facility involves an 800x increase in capacity, which carries inherent technical risks. Investors should monitor the early 2027 window for the first successful commercial batch to validate the project’s technical success.
“We’ve been successfully been able to commercial -- scale up our existing pilot plant by 20x, and we have to another do about 800x from there to Jammu, but it’s a little unpredictable. We still remain hopeful that we’ll be able to reach full utilization in one year, by the end of one year. Yeah, the first batch, yes [in February/March 2027].”
— Mridul Dhanuka, Whole-Time Director
The company reaffirmed its massive $1.1 billion to $2 billion lifetime sales potential for its new antibiotic asset while emphasizing the long-term nature of the rollout. This clarifies that while the opportunity is large, it will not reflect as a sudden revenue spike in the immediate quarters.
“I would not guide on Advanz Pharma specific -- specifically becoming 10% of our revenue, although I would be happy to see that. So, our long-term guidance on this is remaining the USD 1.1 billion to USD 2 billion that we came up with in 2021. And looking at even the Russia numbers, we remain optimistic that the partners continue to believe that it’s a viable asset. But to actually sell a product and get value out of it is a long-term thing, and things can change over time. So, it would be difficult to say the answer to your question.”
— Mridul Dhanuka, Whole-Time Director
Management is pivoting away from high-volume, low-margin generic APIs toward specialized products where they can be the sole manufacturer. This structural shift toward higher-value injectables and backward integration is designed to insulate the company’s margins from future industry downturns.
“Yes, I mean, we are trying to work on other products, and we have couple of other products that we manufacture in Dhanuka. We are trying to create a situation where we remain the sole player of those products. Our focus, our strategy is completely different from our competitors, who are more focused on the volume business. We are more focused on the value-based business and more of a diversified portfolio. ...We could see that the generic business of cephalosporin API is going to become a low-margin business, and that is the reason we sought to go for a backward integration and a forward integration. And in that mission only, we decided to set up 7-ACA and the injectable facilities. So, we think we are trying to de-risk ourselves from the traditional API business, which is becoming more competitive.”
— Manish Dhanuka, Managing Director
Orchid intends to supply the raw 7-ACA to domestic competitors rather than competing with them in the finished sterile product market. This B2B strategy allows for faster volume offtake and avoids the lengthy regulatory delays associated with getting sterile product approvals from hundreds of end customers.
“Yes, absolutely. I would not say our sterile can completely consume our 7-ACA capacity, but we are re-engineering our non-sterile capacity so that we are able to convert the product and supply the non-sterile. I think that is a better model rather, you see, I mean, selling a sterile product needs an approval process, which is more long drawn. So, it would make more sense to work with our other players in India. Then there are three, four players, they can take large part of your volume production, rather than getting approval process in 200, 300 customers. It’s better to collaborate with these four manufacturers of sterile who already have the capacity and who already have worldwide approvals. So, I don’t see much benefit of competing and creating overcapacity. We would rather collaborate with them.”
— Manish Dhanuka, Managing Director
Building Materials
Welspun Corp | Mid Cap | Building Materials
Welspun Corp Limited is a leading welded line pipe manufacturing company globally, offering various solutions in line pipes including LSAW, HSAW, and ERW pipes. The company is part of Welspun Group and provides services like coating, bending, and double jointing.
[Concall]
The $1.8 billion order, combined with Welspun’s ongoing US capacity expansion, provides strong volume visibility through FY29.
“With our new capacities coming into place, we are definitely looking forward to close to half a million tons of volume from the next calendar year onward. By the time this order comes into execution, which is in FY28, in the latter part of FY28, we are looking at close to 600,000-700,000 tons of capacity and volume. These are expected to be the peak volumes. From current volumes of 350,000 tons, we are looking at close to 700,000 tons, which is almost 2 times the current volume over the next 2 years.”
— Vipul Mathur, MD & CEO
The order is tied to growing US gas production and the need for additional pipeline infrastructure to evacuate gas from the Permian basin.
“This order is for transporting gas from the Permian field to the Gulf Coast. That is the particular segment to which this order pertains. It is carrying a large volume of gas, in excess of almost 3 billion BC, 3, 3 Bcf of gas, from point A to point B. There is significant demand at this point in time to evacuate the gas because a great deal of drilling is taking place in the Permian. A large amount of gas is therefore coming out, and there is significant demand for pipelines to evacuate this gas from the Permian to the Gulf Coast, for other utility companies, for data centers, or for whatever purpose it might be used.”
— Vipul Mathur, MD & CEO
The $1.8 billion order may not be a one-off. Welspun sees additional large projects developing, although they remain some distance from finalisation.
“To your point about whether there are more such projects, it looks like there are 1 or 2 more projects of this nature, but they are still some distance away from being finalized. That is our assessment of the situation. The underlying fact is very simple: the market is extremely buoyant, and demand is very strong. The right companies will definitely benefit from this. We are at the right place, at the right time, with the right partners, and doing the right things.”
— Vipul Mathur, MD & CEO
Debottlenecking, augmentation and the new greenfield facility should leave spare capacity even after accommodating the mega order.
“These 3 factors together will not only enable us to service this order but will also leave enough capacity for us to accommodate further orders. We have done this analysis, and we still have considerable flexibility in terms of accommodating any future business that is crystallizing and that we want to pursue. Therefore, capacity is not going to be a constraint. If tomorrow we want to pursue a project and like that particular project, I do not think capacity will be a constraint.”
— Vipul Mathur, MD & CEO
Strong demand and higher capacity utilisation give Welspun the ability to prioritise customers, partners and projects rather than chasing volumes.
“We have always been selective. It is not that there is a shortage of business here; there is enough business in the market. We have always been very selective, and this project has also been worked on for a very long time. We were very determined and focused on pursuing it for 2 reasons. Number one, it is a very prestigious project. Number two, the partners involved in this particular project are companies with whom we have worked very closely in the past.”
— Vipul Mathur, MD & CEO
Fixed-price contracts are backed by raw-material arrangements, while US orders and raw materials are dollar-linked, protecting profitability from commodity and currency swings.
“All these are negotiated contracts, and they are all fixed-price contracts. They are duly and ably supported by the raw material. In any case, these are dollar-to-dollar indexed orders, dollar-to-dollar orders, and US orders to be executed by our US entity. Therefore, in terms of inflation, since all these orders are fixed-price and the raw material is on a back-to-back basis, the possibility of any inflationary factor disturbing the situation is negligible.”
— Vipul Mathur, MD & CEO
The US opportunity effectively needs to be served through Welspun’s local manufacturing footprint because tariffs make exports from India unattractive.
“The second part of your question is whether we can produce something in India and supply it to the US. The answer is no. Given the tariff regimes applicable globally, and especially in the US, that is not feasible at this point in time, nor is it likely to be feasible in the near future.”
— Vipul Mathur, MD & CEO
Management clarified that the win reflects a long bidding and engagement process rather than a sudden spike in US pipeline spending.
“First and foremost, it was not sudden. This has been under discussion for a fairly long time. If you recollect, I have consistently said over the last 2 quarters that we were in discussions regarding some key projects, and this was definitely one of the key projects we had been discussing. So, it was not sudden.”
— Vipul Mathur, MD & CEO
Engineering & Capital Goods
KRN Heat Exchanger | Small Cap | Engineering & Capital Goods
KRN Heat Exchanger and Refrigeration was incorporated on August 25, 2017 and the registered office of the company is located in Rajasthan, India. The company is engaged in the activity of manufacturing and sale of heating ventilation & Air conditioning part & accessories.
[Concall]
Data centers are emerging as a major growth engine for KRN. Q1 revenue from the segment jumped from roughly ₹20 crore last year to around ₹65 crore this year, with exports beginning to contribute meaningfully.
“Regarding data centers, if you look at last year, our Q1 data center business was around 20 crore, whereas in the last quarter we achieved around 65 crore. Therefore, you can say that we increased it almost 3 times. Of the 65 crore, I think approximately 20-30% came from exports. Therefore, around 20% of the 65 crore came from exports.
Exports will now increase, and domestic business will also increase. If we assume only the first quarter, then for the full year, I think our total revenue from data centers, including domestic and exports, will be almost 3-3.5 times higher.”
— Santosh Kumar Yadav, Chairman & Managing Director
The company is preparing for the shift towards liquid cooling in AI data centers, while management believes conventional air cooling will continue to remain relevant.
“Basically, air-liquid cooling may be a major segment in AI data centers, but it will not be the case that air cooling will be discontinued. Air cooling will continue, and liquid cooling will be added. The primary cooling may be liquid cooling, while secondary cooling will only be air cooling. Therefore, our products will continue.
Regarding micro-channel, we are already developing it, and within approximately 1 year from now, this product will be included in our portfolio and we will begin mass production. As of now, we are working on ordering the machinery.”
— Santosh Kumar Yadav, Chairman & Managing Director
Management sees micro-channel as a relatively untapped domestic opportunity, with potentially better initial margins because there is currently no local manufacturer for large commercial applications.
“In terms of total product value, micro-channel will be lower, but the margin will remain the same or be slightly higher because it is a new product for the Indian market. As of now, there is no manufacturer of micro-channel products for commercial applications.
Of course, there are many manufacturers for automobile applications, but for commercial applications, the length is quite high, at around 3 metres, and the width is approximately 1.5 metres. Therefore, there is no manufacturer currently. I think we will be the first manufacturer as of now.”
— Santosh Kumar Yadav, Chairman & Managing Director
Despite geopolitical uncertainty and pressure on HVAC OEM margins, KRN expects its existing margin band to sustain, helped by operating leverage, product mix and incentives.
“I think it will remain the same. In addition, if you consider the other factors, such as the PLI incentive, margins will increase next year for sure.
The main reasons why we maintained our margins this quarter are operating leverage, the product mix from bar and plate and bus air conditioning, and exports. If you look at our main customer in the old facility, it is primarily Daikin. With Daikin, our bottom line is almost fixed, so there is no percentage-based impact on costing.
However, our new customers provide sufficiently better margins compared to our old margins. Therefore, as we add new customers and new products, our margins are slightly higher. This will continue.”
— Management
Middle East disruptions have affected UAE business, but KRN expects North America and Europe to more than compensate.
“This year, the total amount we achieved from the UAE last year will definitely decline. However, we will generate more revenue, particularly from North America, followed by Europe, with the balance coming from the UAE.
Compared to last year, we are going to achieve almost double the revenue. Therefore, the main growth will come from North America.”
— Management
Rapid data-center growth has stretched local manufacturing capacity, giving KRN an opening to win orders despite import duties.
“Globally, particularly in North America, data center growth is very strong, and there is a shortage of heat exchangers. When the same manufacturers are supplying to data centers, they are unable to supply to other applications. Therefore, we have good forecasts and good orders, especially from North America, and this is visible in our export revenue.
I think that for the next 2-3 years, there will be continued strong growth from data centers as well as from other applications. Therefore, this is the right time for us to expand our capacity, and we already have the capacity. Of course, we will benefit from this, and our top line will continue to grow.”
— Santosh Kumar Yadav, Chairman & Managing Director
Management believes existing North American manufacturers cannot immediately meet booming data-center demand, creating a window for KRN to gain customers.
“However, there is a gap between their manufacturing capacity and the market requirement because data center demand has increased significantly over the last year. They have to supply other applications and are able to supply only a certain quantity to data centers.
That is why we have a good opportunity. We already have 2-3 customers on board, and we started working with them approximately 3-4 months ago. If these manufacturers decide to add new capacity, it will take time, perhaps 1-2 years, for their local manufacturing capacity to become available.”
— Management
KRN is setting up capacity closer to South Indian customers, partly at their request, to reduce logistics costs and support further growth.
“For South India, we have received requests from our existing customers because of logistics and the size of the products. They are asking us to establish a facility in South India. That is why we are planning a new facility in South India, particularly to control their logistics costs.
Of course, large OEMs have certain requirements regarding procurement. Once purchases cross certain amounts, they ask vendors to be located nearby. We already have approximately 100 crore of business from Bangalore alone.
The new facility will take at least 1 year from now. By that time, our capacity utilization at this facility will also be almost 80%.”
— Management
KRN expects its recently acquired bus air-conditioning business to scale rapidly, driven particularly by electric buses.
“The bus AC business is currently a 1,000 crore market in India. This year, we are planning to achieve around 10-15% of the total market share through this new venture, and we are on track to achieve that.
The total industry growth is around 20-30%, particularly in electric bus air conditioning. Therefore, I think we will be able to achieve 30-40% year-on-year business growth, particularly from the bus air-conditioning segment.”
— Santosh Kumar Yadav, Chairman & Managing Director
KRN is making progress with Indian Railways and other OEMs, with substantially larger installed capacity available as the business ramps up.
“For bar and plate, we are expecting the main revenue to come from the Indian Railways and other OEMs. I think we are now on the right track. This year, we may achieve approximately 40-50 crore of top-line revenue, and growth will continue at perhaps 22% or 30-40% for the bar and plate business. We have capacity of approximately 150-200 crore.”
— Management
KRN has received development orders for locomotive cab AC and plans to use vendor approval as the entry point into larger railway opportunities.
“Last week, we received 1-2 development orders for complete cab air conditioning from BLW. We expect to complete that process within the next 2-3 months. Once we become an approved vendor, we will be able to supply the complete HVAC system, starting with cab air conditioning, followed by the complete HVAC system for Indian Railways.
After that, we will gradually enter Vande Bharat and metro projects, but that will take approximately 1.5 years from now. This new facility will be a complete assembly setup for bus air conditioning and Indian Railways.”
— Management
Retail
Khazanchi Jewellers Limited | Small Cap | Gems, Jewellery & Watches
Khazanchi Jewellers is a legacy jewelry house with over 50 years of experience operating across both wholesale B2B and retail B2C segments. The company is currently executing an aggressive retail expansion strategy to increase its presence in South India and transition its business mix toward higher-margin consumer sales.
[Concall]
The company plans to open up to 10 new retail stores over the next few years to shift its focus toward direct consumer sales. This move is designed to make retail a much larger part of the total business, aiming for 40% of all sales by 2030.
“Regarding the growth outlook for our B2C segment, the B2C business will be the key growth driver going forward, and we have a very aggressive plan to launch 8-10 stores over the next 3-4 years across geographies. These stores will be a combination of our flagship stores and premium boutique minimal jewelry stores offering minimal jewelry and the latest lightweight designs. Our retail expansion is aimed at accelerating our B2C growth and increasing the B2C contribution to approximately 40% of overall revenue by FY2030.”
— Rajesh Mehta, Chairman & JMD
The company is moving forward with its plan to transfer its stock listing from the SME exchange to the main boards of the BSE and NSE. Management expects this transition to be finished within the next two months.
“We are in the process of submitting the application and all the documentation, and we are going to submit the documents very shortly. We believe that the migration process would be completed in another 2 months.”
— Management
The new flagship retail store is currently generating between 30 and 35 crores in sales every month. Management says the store is currently hitting about 80% to 85% of its long-term annual sales target of 500 crores.
“We are matching the target. We had already defined that this showroom would generate revenue of around 500 crores, and we have been working towards and achieving approximately 80%-85% of that. If you are asking for the approximate monthly figure, it is around 30-35 crores.”
— Management
A new digital management system is helping the company track which jewelry items are popular and manage inventory more effectively. This system is intended to be the blueprint for all future stores to ensure efficient operations as they scale.
“We have had a great experience with regard to the ERP implementation in our new showroom. We are able to understand which products are moving fast and what the average customer demand is. Based on that demand, we are modifying our product requirements, reordering levels, and everything else. We are creating a robust ERP system so that it can be replicated for the upcoming showrooms.”
— Management
More customers are trading in their old jewelry for new pieces, which now accounts for up to 20% of total sales. Management is also seeing strong advance demand as they head into the peak wedding and festival seasons.
“Old gold exchange accounts for approximately 15%-20% of total sales. It has increased; last year it was lower. It increased after Mr. Modi’s statement. As the season starts, within 15 days, all the order books are already in execution. There are also upcoming shows in which we are planning to participate. In that case, we have good demand, and the demand is quite feasible.”
— Management
To increase profits in its wholesale division, the company is introducing more expensive items like diamond and high-end traditional jewelry. They are balancing this push for higher margins with the need to keep volumes high for their manufacturing partners.
“We have been improving the B2B segment as well. We are expanding our higher-margin products. We have added Kundan Jadau jewelry and diamond jewelry for our B2B segment as well. We have been working to improve B2B margins. We have been working on both sides because volume growth is also very important for the B2B segment, so that we can provide work to all our contract manufacturing units. Accordingly, we have been working on both sides to improve our top line and bottom line in B2B.”
— Management
Bridal jewelry is the main driver of the company’s business, making up about 60% of total sales. Their inventory is heavily focused on specialized traditional designs that are popular for weddings in South India.
“We do not maintain that exact split. However, on a broader basis, approximately 60% of sales come from bridal and related products because we have a large collection of designer, antique Nakash, temple, and other types of jewelry that are intended for bridal use. We also have a large collection of minimal jewelry. Therefore, our overall turnover comes from a blended selection. On a broader basis, we can say that 60% of sales come from the bridal collection.”
— Management
Auto Ancillary
RACL Geartech | Small Cap | Auto Ancillary
RACL Geartech Limited is a leading provider of automotive components in India and is a globally renowned enterprise. It is the auto part suppliers catering as Tier 1 to the biggest Original Equipment Manufacturers (OEMs) and major system manufacturers, who are functioning as Tier 1 manufacturer. Its client domain is spread across the world with dominance presence in Europe, Asia-Pacific and North America.
[Concall]
RACL believes its larger revenue base can now scale faster, with management targeting sustained 15–20% annual growth and another doubling over the next few years.
“Regarding revenue, we always say that we have an ambitious growth plan to grow by 15-20% per year.
Consider that 15% of 100 crores is 15 crores, while 15% of 500 crores is 75 crores. You can understand that, over the next 3-4 years, we will again be targeting a doubling of what we are doing today.
We will definitely grow at a much faster pace. Initially, scaling up a business is always very painful and slow. Once the business becomes stable, however, it can be scaled up much faster.”
— Gursharan Singh, Chairman & Managing Director
After KTM’s financial troubles hurt RACL’s volumes, management says the customer has recovered and its 2027 production plans look strong.
“I already explained that KTM has bounced back and has almost reached pre-COVID levels. In fact, their Model Year 27 means that the vehicles they start producing from September will be classified as Model Year 2027. They have very good plans for 2027, and the business is back to normal or slightly above normal.”
— Management
Bajaj’s ownership of KTM hasn’t disrupted RACL’s longstanding relationship with the Austrian business; new model opportunities are already coming through.
“We are already exporting to KTM. For sourcing from India, we are already exporting to Austria, and we have been exporting to Austria for the last 15 years. Our relationship is already very well established with them.
For all their new models being launched in Austria, now under the management ownership of Bajaj, we are already receiving new business opportunities from KTM Austria. You are right that, for Bajaj India, if there are any such opportunities, we would be happy to work with them.”
— Management
Commercial supplies began in January, and RACL has quickly ramped towards its initial nomination of roughly 10,000 motorcycle sets per month.
“Regarding Royal Enfield, we conveyed that commercial supplies started from January. We have already completed approximately 8 months of turnover. As we said, we have been nominated for roughly 10,000 sets per month. When I say sets, I mean motorcycles. We are working at that level. We were ramping up earlier and reached a level of 7,500 to 8,000. We are sustaining that level.”
— Prabh Mehar Singh, Chief Operating Officer / Management
RACL sees structural outsourcing opportunities as Indian OEMs move into higher-performance motorcycles requiring more sophisticated transmission components.
“We are now creating a niche of our own through the premiumization of the entire product portfolio of these companies. For example, TVS is now launching motorcycles above 350 cc, which is more than what they did in the past. We are the single source for the entire gear train for all their motorcycles, including the platforms for Norton and the Apaches that are now being introduced.
Similarly, KTM has always been with us. Royal Enfield also took a cue from this and decided to approach suppliers like us. One or two other large motorcycle OEMs that want to expand their presence in the premium segment are also approaching us.”
— Management
As OEMs focus their capital on vehicle assembly and expansion, RACL expects more component manufacturing to shift towards specialised suppliers.
“You are right. Eventually, an OEM would like to focus on making the assembly. Assembly is the king of the supply chain, so the OEMs want to retain that commanding position.
If they invest in people and costs to manufacture the components as well, they lose the scale at which customers now want to grow. Earlier, gears and other critical products had to be sourced in-house because there was no credible and established supply chain capable of meeting the requirements for such specific, moderate-volume, batch-type products. I can speak at least in terms of gears.
Therefore, outsourcing is becoming an increasingly important factor. Royal Enfield is investing approximately 6,000-7,000 crores in setting up a new plant near Andhra Pradesh, so its focus will be on manufacturing motorcycles, not individual components. That is the shift you are witnessing.”
— Management
ZF is discussing a similar product with another OEM for China; management says it is early-stage but potentially significant.
“In parallel, although it is still at a very early stage, the customer is discussing a similar product with another OEM for the Chinese market. If that opportunity materializes, it could significantly change everything we have discussed here, but these are still very early updates.”
— Management
RACL is already investing for an electric power-steering programme through ZF that management describes as another potentially large project.
“The other ZF project, which you already know about, is in the electric power steering segment, for which we are now investing. That project is on track, and commercial supplies should start from the end of 2027 or the middle of 2028. It is for an American OEM and is also expected to be a large project for us through ZF.”
— Management
With automotive visibility already established for the next few years, RACL is looking at areas where its precision-manufacturing and traceability capabilities can be redeployed.
“The first area we have identified is aerospace for civil aviation. We feel that this area is growing very rapidly, and the indications are very strong, particularly for Airbus. Boeing does not yet have such a large forecast, but Airbus is progressing in a significant way.
We are therefore considering this as an area where we can utilize our skills because we have well-established capabilities in precision, traceability, ESG compliance, and related areas. We can probably use the same technologies for civil-aviation aerospace applications.”
— Management
RACL believes some of its existing manufacturing technologies can be adapted to emerging robotics and actuator applications, with Europe as the initial target market.
“The second area we are identifying is a degree of diversification in the area of actuators, as you mentioned. We are also trying to diversify to some extent into small micromotors, actuators, and related products. We believe this area also has significant potential.
The third area you mentioned is humanoid technology and robotics. This area clearly has huge demand for gears. Technically, these are still mechanical components, but they involve gears with different concepts and different designs. Some of the technologies we already have are capable of producing components for humanoid and robotic applications.
There is, however, a challenge in this field. Not many Indian manufacturers have entered the humanoid and robotics space, and those that have entered are still at an early stage. Chinese companies would be difficult to compete with because China has a well-established supply chain of its own. Europe is our target area, and we are exploring this opportunity within the European continent.”
— Management
Single-sourcing is a key strength of RACL’s export business and gives it strong revenue visibility once it wins a programme.
“This is the strength of our export business. Leaving BMW aside, in any export business, wherever we supply a component, we remain the sole supplier of that component until the end of the product’s life cycle. This is part of our formal agreement.”
— Management
Management confirmed the sharp increase in European sourcing enquiries, linking it to geopolitical disruption and China+1 diversification.
“Your feedback is correct. There has been a surge in RFQs. However, many times they are not only RFQs; they are also RFIs. Geopolitical conditions are very volatile. Supply chains are being rewritten, and supply and logistics routes are being rewritten. Therefore, there has been a sudden surge.
We are also witnessing this. How far it translates into serious business will become clear only with time. However, it is a positive sign. I should not make this statement, but we can still see that people are looking at India very seriously. We generally refer to this as the China-plus-one policy. Many business realignments are taking place, and we are witnessing the same thing you have described.”
— Management
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Quotes in this newsletter were curated by Meher and Srusti.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.