At a Glance

Greaves Cotton, the veteran in the engine game and now a wannabe EV player, just dropped its Q1 FY26 results. Net profit surged to ₹21 crore (yes, from ₹2 crore last quarter, because miracles happen), and the stock zoomed 7% in a single day to ₹213. But hold your turbo – margins are still modest, ROE is negative, and the company’s working capital looks like it’s on a diet. The board threw in a management shuffle to spice things up – new independent director in, one old guard out in October. Let’s dissect whether this engine maker is firing on all cylinders or coughing up smoke.

Introduction

Imagine being a 165-year-old engine manufacturer and suddenly realizing the world is running on lithium-ion. That’s Greaves Cotton’s existential crisis. While they were happily selling diesel gensets and power tillers, the EV revolution parked itself right in their backyard. Cue the entry into electric scooters and batteries – because why not join the party late and still expect applause?

Q1 FY26 shows some signs of life. The topline is stable at ₹745 crore, operating profit margin improved to 8% (a big jump from 3% last year), and net profit finally looks positive after a string of forgettable quarters. Investors cheered, but only cautiously – this is still a turnaround story, not a done deal.

Business Model (WTF Do They Even Do?)

Greaves Cotton makes engines – the boring kind (diesel, petrol, CNG) that power gensets, farm equipment, and industrial machinery. They also trade power tillers and spares. The company’s bread and butter remains the non-auto engine segment, contributing 61% of revenue in FY24.

But here’s where the mid-life crisis kicks in: the company’s EV arm (Greaves Electric Mobility) is pushing electric two-wheelers and 3-wheelers under the Ampere brand. It’s also dabbling in battery technology and charging infrastructure. Meanwhile, the infra equipment business remains a side hustle.

The business is a mixed bag – stable cash flows from engines, a high-burn EV segment that could either explode with success or implode with losses, and a services arm (spares and maintenance) that quietly makes money.

Financials Overview

• Revenue (Q1 FY26): ₹745 crore (down 9% YoY, because diesel ain’t sexy anymore)
• EBITDA: ₹57 crore (EBITDA margin 8%, thank you cost control)
• PAT: ₹21 crore (vs ₹2 crore Q4 FY25, vs loss of ₹25 crore Q1 FY25)
• Other Income: ₹18 crore (because financial investments are working harder than some business units)
• ROE: -0.43% (still negative – shareholder patience required)
• Debt: negligible, so at least no interest burden party here.

Commentary: Revenue is slipping, but profitability is improving. EV sales are growing but still loss-making. The big question – can they scale EVs profitably before the engine business declines further?

Valuation

Let’s crunch some numbers and add some sarcasm:

1. P/E Method:
   • EPS (TTM) = ₹3.5
   • Industry P/E ~ 35
   • Fair Value = ₹3.5 × 35 = ₹122 (wait, that’s below CMP – awkward!)
2. EV/EBITDA Method:
   • EBITDA (TTM) = ₹165 crore
   • EV/EBITDA (sector avg) = 15x
   • Fair Value = ₹165 × 15 = ₹2,475 crore / Shares (23 crore) = ₹107 (ouch!)
3. DCF Method:
   • Assume cash flows grow 10% annually for 5 years, WACC 10%, terminal growth 3%
   • Fair Value ≈ ₹180-₹200

Fair Value Range: ₹110 – ₹200
CMP ₹213 is running a bit ahead, pricing in EV optimism. Investors, hold your horses (or scooters).

What’s Cooking – News, Triggers, Drama

• Q1 results show margin recovery, stock rallies.
• Management reshuffle – new independent director appointed, old one resigning in October.
• EV subsidiary Ampere launching new models, expects festive sales boost.
• ESOP allotment – employee motivation or shareholder dilution? You decide.
• Upcoming EV policy incentives could be a game changer.

Balance Sheet

Auditor’s Joke: Debt is low, which is cute. But reserves have been shrinking faster than your patience during traffic jams.

Cash Flow – Sab Number Game Hai

Auditor’s Remark: Operating cash flows are negative – the business earns profits on paper but not cash. Investing cash flow yo-yos because of asset buys and sales. Financing is mostly survival mode.

Ratios – Sexy or Stressy?

Takeaway: Ratios scream mediocrity. ROCE at 5% is barely above your savings account.

P&L Breakdown – Show Me the Money

Stand-up Line: Profitability took a long vacation in FY24 and only just checked back in.

Peer Comparison

Observation: Peers like Cummins laugh their way to the bank. Greaves is still in the gym training.

Miscellaneous – Shareholding, Promoters

• Promoters: 55.8% (steady)
• FIIs: 2.5% (not impressed)
• DIIs: 3.5% (lukewarm)
• Public: 38% (retail holding the bag?)

Promoters are stable, FIIs have reduced stakes – they aren’t sipping the EV Kool-Aid yet.

EduInvesting Verdict™

Greaves Cotton is at a crossroads – one road leads to EV success, the other to engine obsolescence. The company has a legacy engine business that still throws cash but grows at a snail’s pace. The EV arm is exciting but burns cash like a bonfire. Q1 FY26 shows early signs of recovery – positive margins, profit revival, and cost control.

SWOT Analysis

• Strengths: Legacy brand, strong distribution, debt-free.
• Weaknesses: Low margins, negative ROE, inconsistent profits.
• Opportunities: EV adoption, government incentives, exports.
• Threats: Intense EV competition, rising input costs, global slowdown.

Final Take: Greaves Cotton is neither a clear winner nor a write-off. It’s a classic turnaround bet – high risk, high reward. The stock’s current price already assumes an EV-driven future. Investors need to decide if they believe in Ampere’s spark or if this old engine is running out of fuel.

Written by EduInvesting Team | 30 July 2025
SEO Tags: Greaves Cotton, EV, Engine Manufacturing, Stock Analysis