Schaeffler India's September Quarter: Revenue Up 27.4%, Half of a 1.1%-of-Sales Cost Hit Not Yet Recovered

Schaeffler India's standalone revenue from operations was ₹30,058 million (₹3,006 crore) for July-September 2026, up 27.4% on a year earlier. EBITDA was ₹5,617 million (₹562 crore), up 18.0%, so the margin was 18.7% against 20.2% a year earlier and 19.1% in the June quarter. The Chief Financial Officer said the raw-material price effect is about 1.1% of quarterly sales, 50% of it recovered from customers and 50% under negotiation, against a history of recovering 80% to 85%. Free cash flow was ₹408 million (₹41 crore) against ₹2,232 million a year earlier. The company gives no rupee figure for the cost hit and no recovery by customer.

The idea in one sentence

A supplier whose plants are full and whose volumes are surging should be able to pass costs on; Schaeffler India's quarter tests that, and on the company's own account the answer so far is half.

The fact that breaks the assumption

Harsha Kadam, Managing Director and Chief Executive Officer, said on the 29 October call: "The plants are at full capacity utilization levels." ([TR], p.8). Demand is strong in the company's own numbers: the deck puts domestic business up 24.0% and exports up 46.3% year on year ([IP], p.12). Yet the margin fell, and the company's own explanation is input costs, with recovery from customers still in progress. Hardevi Vazirani, Director of Finance and Chief Financial Officer, answered a question on how much cost inflation had been recovered: "So gross margin is impacted largely because of the input prices, that is the raw material price. And as a percentage of quarterly sales, it is around 1.1% approximately. And 50% of it is already recovered. And 50% of it is currently under negotiation stage with several customers. Historically, we have been able to recover approximately 80% to 85% of such price increases" ([TR], p.8).

Two comparisons are easy to mix up. Against the June quarter the margin slipped 0.4 points, from 19.1% to 18.7%, the step the CEO describes ([TR], p.4). Against the September quarter of 2025 it fell 1.5 points, from 20.2% ([IP], p.15). EBITDA in rupees grew 18.0% while revenue grew 27.4%.

One concrete thing, followed: the 1.1%

The question, from Krupashankar of Avendus, asked for "the percentage of cumulative cost inflation which has been recovered so far" ([TR], p.8). The CFO answered as a "percentage of quarterly sales"; the call does not say whether the 1.1% is the quarter's cost or a running total, or what price it is measured against.

Applied to this quarter's revenue (our arithmetic, a scale and not a company figure), 1.1% is about ₹331 million (₹33 crore); the half not yet recovered is about ₹165 million (₹16.5 crore), or 0.55% of revenue. At the historical 80% to 85%, the unrecovered part would be about ₹50 million to ₹66 million (₹5 crore to ₹7 crore). The shortfall against the company's own history is therefore ₹10 crore to ₹12 crore for the quarter, about 0.33 to 0.38 points of margin (our arithmetic).

On timing the CFO said "it takes close to 4 to 6 months for the recovery. And mostly, it is retrospective effect", and "we are still negotiating for whatever inflation erosion of margin you see, 80%, 85% will be recovered." ([TR], p.12). The CEO's list of what weighed on profit after tax includes "Some challenges on the price recoveries from our customers due to the inflationary increases, which is still work in progress for us" ([TR], p.5). The press release quotes him: "Earnings quality was marginally impacted by rising input costs and weakening INR, but our mitigation measures helped us manage the impact partially." ([PR], p.3).

The mechanism: recovery is negotiated, after the cost arrives

The Q2 call (held 23 July, transcript filed 28 July) describes how pricing works. Mr. Kadam: "As you know, the automotive industry works on an indexation mechanism. And not all commodities are put under that list." On the cost increases from West Asia, "input cost increases due to LPG, propane that have gone up because of the situation there in West Asia", he said these "are not in the list, indexation list", so "the dialogue is going on" ([T2], p.12). The CFO said what is recovered from customers is "indexation of FX", which was still being worked on with traction "very likely" in the second half, and "steel price indexation"; that for air freight caused by the Hosur capacity constraint "it is very unlikely that the customer will reimburse"; and of a wage rise averaging 10% that it "is not subject to the recovery from the customer" ([T2], p.11). The CEO said the LPG and propane cost increases were not on the indexation list and were "in discussion" with OEMs, and that "some positive traction" was expected in the second half ([T2], p.12).

Our reading: costs that sit outside the indexation list are recovered only by negotiation, and negotiation follows the cost, so the income statement carries the gap in the meantime. The 80% to 85% history is management's statement; neither call gives data behind it. The 1.1% is described as a raw-material price effect, so the fuel, freight and wage items discussed on the Q2 call are a separate matter, and the company does not size them.

Exports are priced differently. On the Q2 call the CFO said intercompany exports are "at arm's length pricing principles" and "Transfer prices are determined and that true-up is done at end of the year in December" ([T2], p.12). The statement's "Intercompany Exports & Others" line, which per its footnote also includes scrap sales and other operating income, was ₹5,242 million, 17.4% of Q3 revenue (our arithmetic, [RS], p.7).

What the statement shows, and what it cannot

From the standalone statement ([RS], p.6), as shares of revenue (our arithmetic):

• Employee expense fell from 6.1% of revenue to 5.2% year on year: ₹1,552.5 million against ₹1,431.9 million, up 8.4% on revenue up 27.4%. Against June it rose 2.4% on revenue up 12.1%.
• Other expenses (the line that holds fuel, per the Q2 call) were 14.1% against 14.0% a year earlier: ₹4,249.1 million against ₹3,295.7 million, up 28.9%. Against June they rose 2.6%, and fell from 15.4% of revenue.
• The three cost-of-goods lines (materials consumed, purchases of stock-in-trade, changes in inventories) together were 62.4% of revenue against 60.2% a year earlier and 60.2% in June. The year-on-year margin fall sits in these lines, partly offset by the employee line.
• Rupee gross margin rose. The CEO said "a gross margin improvement brought in about INR 192 crores" and tied it to "recovering some of the inflationary input cost increases" ([TR], p.6). The deck's bridge shows ₹1,921 million. That is a rupee gain on revenue up ₹6,457 million; as a share of revenue, gross profit was 37.7% against 39.8% a year earlier and 39.8% in June (our arithmetic).

The cost-of-goods ratio cannot cleanly show the 1.1%. The change-in-inventories line was a credit of ₹633.4 million this quarter against ₹2,093.7 million in June and ₹1,103.3 million a year earlier, and moves the ratio by itself. Leaving that line out, materials plus purchases were 64.5% of revenue, against 64.9% a year earlier and 68.0% in June (our arithmetic). The statement therefore shows that the margin fell, not how much of the fall is unrecovered input cost.

Segments add a puzzle. Profit before unallocable items as a share of segment revenue (our arithmetic, [RS], p.7): Mobility components and related solutions 13.4% against 13.9% in June and 14.6% a year earlier; Others (Bearings and Industrial Solutions plus part of exports) 22.2% against 21.2% and 22.3%. The CFO told the call "in mobility segment, it is hit but lower than the B&IS" and that "the mobility sectors have been able to do the price recovery to a greater extent compared to the B&IS" ([TR], p.11). Varun Jain of Dolat Capital replied that "the mobility margins have fallen and the other segments, which is industrial has risen. So that would be contrary to what you're suggesting." The CFO's answer was "there is a sales mix within the Mobility Solutions, which is playing its part as e-mobility currently, it is having its developmental costs, etc. which are going in the cost of production. So there is adverse sales mix." ([TR], p.16). The company gives no size for that mix effect, so the segment numbers cannot confirm that recovery was stronger in mobility.

BEAR CASE: where this breaks

• The unrecovered half may be small. On our scale it is about ₹16.5 crore against EBITDA of ₹562 crore, or about 3% of it, and 0.55 points against a 1.5-point year-on-year margin fall (our arithmetic). The company names other causes, fuel and energy, "depreciating INR" ([IP], p.13) and e-mobility cost and mix, and gives no split. A pass-through reading explains at most part of the fall.
• It may be timing, not lost money. The CFO says recovery is "mostly" retrospective and that she is "very confident that the sales teams will succeed this time as well" ([TR], p.8). The CEO says the focus is "to recover the situation in this quarter" ([TR], p.7). If the other 50% is settled back to the cost date, that part of the margin dip (about 0.55 points on our arithmetic) reverses. That is a statement of intent, not a signed price.
• The history may not fit this cost mix. The 80% to 85% is quoted against "price increases" on raw materials. On the Q2 call the CFO called reimbursement of air-freight costs "very unlikely" and said the wage rise is not subject to recovery, while the CEO described fuel-linked cost increases as under discussion with OEMs; those costs are in lines the company does not size.
• The segment gap may be mix. The CFO names an e-mobility mix effect and does not size it; the same call credits an "unbudgeted increase in the demand for e-mobility" for the inventory build ([TR], p.8).
• Exports blur the picture. Exports and others were 17.4% of revenue and rose 46.3%. The CFO said Q3 "usually" sees a spike because the group closes billing in December, and that, for exports, the fourth quarter "would be slightly lower than that unless and until some surprise comes" ([TR], pp.10-11). Transfer prices are trued up at year end ([T2], p.12), so, our reading, the margin on this line may not be final until then. The company gives no margin for it.
• Cash did not follow profit. Free cash flow was ₹408 million against ₹2,232 million a year earlier (down 81.7%) and ₹965 million in June ([IP], p.14); as a share of EBITDA it was 7% against 47% a year earlier (our arithmetic). Capex was ₹1,822 million (the deck's footnote says it includes capital work in progress) against ₹843 million; the CEO said "we did have the highest capex spending happening in the third quarter" ([TR], p.5). Working capital was ₹22,481 million at nine months, against ₹16,942 million a year earlier, up 32.7% on nine-month revenue up 21.4% (our arithmetic, [IP], pp.14-15). The call says "almost 19%" of sales ([TR], p.7) and the slide shows 20.7%; four times Q3 revenue gives 18.7% (our arithmetic), and the documents do not say which basis each uses. The deck attributes the rise mainly to "inventories and overdues" ([IP], p.9); the CEO adds localisation inventory and the e-mobility build.
• Strongest case against our reading. Demand is strong, plants are full, profit after tax rose to ₹3,704 million (12.3% of revenue) and EBITDA grew 18.0% ([IP], pp.9, 13). A company whose margin fell 0.4 points in a quarter when sales rose 12.1% may simply be early in a normal recovery cycle. We cannot refute that; one quarter cannot separate a lag from a ceiling.
• Basis and assurance. The figures are standalone; consolidated EBITDA margin was 17.7% because the subsidiary KRSV lost money at the EBITDA level ([IP], p.16). The auditors' conclusions are limited-review conclusions, not modified; a review is "substantially less in scope than an audit" ([RS], p.4).

Why it costs the reader something

A reader who takes revenue up 27.4% as proof that the company sets prices misses three things in the same documents. EBITDA grew 9.4 percentage points slower than revenue (18.0% against 27.4%); the recovery the company reports is half of a cost hit it values at about 1.1% of sales; and cash generation fell by more than four-fifths from a year earlier while capex more than doubled (our arithmetic: ₹1,822 million against ₹843 million, 2.2 times). Our reading: pricing power shows in how fast and how fully costs come back from customers; this quarter the filings show the half-recovery, not the speed or the end point.

The concrete thing, again

The 1.1% is the number to follow. Half of it, about ₹16.5 crore on our scale, is the part the company says is still under negotiation; at its stated history, most of it would come back. What the filings do not say is which customers, on what terms, by when, or whether the fuel and wage costs outside that 1.1% will come back at all. This quarter's filings show a company at full capacity that has so far recovered half.

Sources

• [RS] Schaeffler India, results for the quarter and nine months ended 30 Sep 2026 and review reports (NSE)
• [PR] Schaeffler India, press release on Q3 and nine-month results (NSE)
• [IP] Schaeffler India, Q3 CY26 investor presentation (NSE)
• [TR] Q3 CY26 earnings call transcript, call held 29 Oct 2026, filed 4 Nov 2026 (NSE)
• [T2] Q2 CY26 earnings call transcript, call held 23 Jul 2026, filed 28 Jul 2026 (NSE)
• Earlier Moat & Margin pieces: Hero MotoCorp, Q2 revenue, EBITDA gap, mix and commodity; daily filing digest, 4 November

Educational research, not investment advice. Every figure above is drawn from Schaeffler India's own filings of 27 October 2026 and 29 October 2026 and its call transcripts (Q3 call held 29 October, transcript filed 4 November 2026; Q2 call held 23 July 2026, transcript filed 28 July 2026), read from the primary documents on 5 November 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: 5.41 (AMBER+, first-pass), read live from the Moat Screener on 5 Nov 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.