Rane (Madras) Q3 FY26: A Steering Gear Maker’s Journey From ₹127 Crore Loss to Actual Profitability
1. At a Glance
Rane (Madras) Limited, a Chennai-based auto component manufacturer established in 1960, delivered Q3 FY26 revenue of ₹1,019 crore (up 21.3% YoY from ₹840 crore in Q3 FY25). EBITDA expanded to ₹95 crore with a margin of 9.3%, up from 8.2% in Q3 FY25. PAT (Profit After Tax) reached ₹31 crore with a 3.0% margin, compared to ₹0.4 crore (0.02% margin) in Q3 FY25. The company’s market cap stands at ₹1,954 crore with a current price of ₹707 per share. Annualized EPS on Q3 basis: ₹11.81 × 4 = ₹47.24. Full-year FY25 EPS was ₹30.50 (standalone), ₹31.10 (estimated consolidated). Stock return over 6 months: -13.6%. Stock return over 3 months: -10.2%. Return over 5 years: +14.6%. This is a company that transitioned from ₹127 crore loss (FY23) to ₹50 crore profit (FY25) through divestment of loss-making operations and a strategic merger of group entities.
2. Introduction: Historical Context and Recent Operational Changes
What Happened (FY23–FY24):
Rane (Madras) Limited reported a net loss of ₹127 crore in FY23 (fiscal year ended March 31, 2023). The primary driver was Rane Light Metal Castings (RLMC), a USA-based subsidiary acquired in 2016, which accumulated losses of over ₹175 crore between FY17 and FY22. The company had invested ₹450–500 crore in this subsidiary between FY16 and FY24 with the expectation of a 4–5 year turnaround period. That timeline did not materialize. Instead, weak demand from a major customer and market conditions led to ongoing losses of ₹40–50 crore annually.
In September 2023, the company divested RLMC to a US-based firm for approximately USD 4.9 million, after infusing USD 16 million to clear the subsidiary’s debt. The divestment resulted in a ₹223 crore impairment charge in FY23 and another ₹122 crore impairment in FY24 as these losses were crystallized.
What Changed (April 2025):
In April 2025, the company completed an amalgamation of two group entities:
Rane Engine Valve Limited (REVL), which manufactures engine valves, valve guides, and mechanical tappets
Rane Brake Linings Limited (RBLL), which manufactures brake linings, disc pads, railway brake blocks, and clutch facings
These companies were merged into Rane (Madras) Limited on a share-swap basis. REVL and RBLL had their own debt profiles and equity structures, but the consolidated entity benefited from:
Unified procurement (reduced material costs)
Consolidated logistics and supply chain (reduced freight)
Elimination of duplicate overhead functions
Broader product portfolio for OEM customers
Financial Impact of the Merger:
Pre-merger (Standalone RML, Mar 2024):
Revenue: ~₹900 Cr
Net Worth: ₹250 Cr
Debt: ₹701 Cr
Debt-to-Equity: 2.8x
Post-merger (Consolidated, Mar 2025):
Revenue: ₹3,406 Cr (includes REVL and RBLL for full year)
Net Worth: ₹663 Cr (improved due to equity contribution from merged entities)
Debt: ₹761 Cr (includes legacy REVL debt; RBLL was debt-free)
Debt-to-Equity: 1.15x
The merger was a structural change, not a growth driver. It did not add new customers or markets; it consolidated existing operations under one legal entity.
Q3 FY26 Performance (Quarter Ended December 31, 2025):
Post-merger, the company’s Q3 FY26 results showed:
Revenue: ₹1,019 crore (up 21.3% YoY from ₹840 crore in Q3 FY25)
EBITDA: ₹95 crore (up 36.8% YoY from ₹69 crore in Q3 FY25)
EBITDA Margin: 9.3% (up from 8.2% YoY)
PAT: ₹31 crore (up from ₹0.4 crore in Q3 FY25)
EPS: ₹11.81
The revenue growth of 21.3% reflects a combination of:
Consolidation of REVL and RBLL operations (higher absolute revenue base post-merger)
Current State (March 26, 2026):
The company operates 17 manufacturing facilities across India and Mexico, serving domestic OEMs (Maruti, Tata, Hyundai, Mahindra, TAFE, John Deere, Hero, Honda, TVS, Bajaj, Royal Enfield, and others) and exporting to 30+ countries. Post-merger and post-divestment of RLMC, the company has a consolidated balance sheet with reduced impairment risk, albeit with elevated leverage that is being addressed through debt reduction initiatives (notably the Velachery land sale for ₹361 crore, announced in June 2025).
3. Business Model: WTF Do They Even Make?
Rane (Madras) Limited is basically the person who sells you the stuff that keeps your car from turning into a shopping trolley without brakes.
They manufacture automotive steering components (manual steering gears, suspension linkages), brake components (brake linings, disc pads—the things that prevent you from hugging a tree at 80 km/h), engine components (valves, mechanical tappets), light metal castings (hydraulic housings, pump housings, and other aluminum bits), and aftermarket parts you can buy when your current car parts decide to retire early.
The business splits three ways:
Steering & Linkages Division (47% of Q3 revenue): This is their cash cow. They’re the preferred supplier for everyone from Maruti Suzuki to Tata Motors to Mahindra. They supply manual steering systems, hydrostatic gears, and suspension linkages to passenger vehicles, commercial vehicles, farm tractors, and even 2-wheelers. Basically, if your steering wheel works, there’s a 30% chance a Rane component is involved.
Brake & Engine Components (15% + 13% of revenue): After the merger, they picked up Rane Engine Valve (engine valves, valve guides, mechanical tappets) and Rane Brake Linings (brake linings, disc pads, railway brake blocks). This is old-school, mission-critical stuff. Your brakes failing isn’t a feature; it’s a lawsuit.
Light Metal Castings (6% of revenue): They make high-pressure aluminum components like hydraulic pinion housings, pump housings, timing case covers, and transmission housings. This is the business that nearly destroyed them in the USA but is now actually working in India.
Aftermarket & Exports (19% of revenue): They sell replacement parts directly to the aftermarket (your friendly neighborhood auto spare parts shop) and export to 30+ countries including the USA, UK, Germany, and basically everywhere else cars exist.
The revenue mix tells the story: 58% comes from domestic OEMs (the bread and butter), 27% from exports (the survival food), and 15% from aftermarket (the snacks). Within OEMs, passenger vehicles contribute 57%, commercial vehicles 21%, farm tractors 10%, and 2-wheelers 6%.
Think of them as India’s version of a Tier-1 auto supplier who finally realized that losing money on American ventures and domestic expansions wasn’t a business strategy—it was a cry for help.
4. Financials Overview: The Numbers That Actually Make Sense Now
Let’s talk about the P&L, but with clarity that your cousin who became an “financial advisor” on Instagram won’t provide.
Source table
Metric
Q3 FY26
Q3 FY25
Q2 FY26
YoY %
QoQ %
Revenue (₹ Cr)
1,019
840
923
+21.3%
+10.4%
EBITDA (₹ Cr)
95
69
83
+36.8%
+14.5%
EBITDA Margin
9.3%
8.2%
9.0%
+110 bps
+30 bps
PAT (₹ Cr)
31
0.4
21
+7,645%
+47.6%
PAT Margin
3.0%
0.0%
2.3%
+300 bps
+70 bps
EPS (₹)
11.81
20.48*
8.27
-42.3%
+42.8%
The asterisk on EPS for Q3 FY25: That ₹20.48 includes a massive one-time tax credit reversal. The actual Q3 FY25 performance was pathetic (₹0.4 crore PAT). So that 7,645% YoY PAT growth? That’s not artificial. That’s real improvement from “basically broke” to “actually making money.”
What’s actually happening here:
Revenue grew 21.3% because:
Domestic OEM demand across PVs, CVs, and tractors picked up (thanks GST cuts and rural optimism)
International markets delivered 21% growth (steering products are in high demand globally, apparently)
Aftermarket sales jumped 32% (though this isn’t directly comparable due to business restructuring; on a comparable basis, it’s 18% growth)
EBITDA grew 36.8% faster than revenue because of operating leverage—they’re spreading fixed costs over higher sales. Margins improved from 8.2% to 9.3%, a healthy 110 basis point expansion. This is the merger talking. Before the amalgamation, they were scattered across different entities with duplicate costs. Now, they’re consolidated.
PAT grew because not only did EBITDA expand, but interest burden declined. After selling non-core assets and receiving ₹115 crore from the Velachery land sale, debt came down from ₹761 crore (Mar 2025) to ₹780 crore (Sep 2025, but this includes new borrowings for working capital expansion). Net-net: less interest expense.
The EPS Calculation Trap:
Here’s where most people mess up. The latest quarter shows an EPS of ₹11.81 on a Q3 basis (standalone figures). But Rane operates on FY25 results showing FY25 EPS of ₹30.50 (annual, standalone). The company post-merger is now consolidated, so old comparisons are like comparing your paycheck from 2019 to today after you changed jobs and got a promotion.
For valuation purposes on a forward basis: If Q3 annualized (Q3 × 4) gives us ₹11.81 × 4 = ₹47.24 annualized, the current P/E of 22.7 works out to ₹707 / 31.10 (full-year FY25 consolidated EPS being ₹31.10 estimated). Bit of a stretch? Yes. But they’re improving, and the market is pricing that in.
The Punchline:
A company that lost ₹127 crore in FY23 is now making ₹31 crore in Q3 alone. That’s not a recovery—that’s a resurrection.
5. Valuation Metrics & Current Multiples
Current Valuation Data (As of March 26, 2026):
Source table
Metric
Current
Stock Price
₹707
Market Cap
₹1,954 Cr
P/E Ratio
22.7x
Price-to-Book Value
2.79x
Price-to-Sales
0.53x
EV/EBITDA
8.04x
Dividend Yield
1.13%
What These Numbers Mean:
The company trades at 22.7x its annualized earnings (based on full-year FY25 EPS of ₹31.10). For context, the auto components industry median P/E is 24.1x, meaning Rane trades at a slight discount to sector peers on a P/E basis.
The EV/EBITDA multiple of 8.04x indicates enterprise value relative to earnings before interest, taxes, depreciation, and amortization. This compares to the industry median of approximately 8.0x, suggesting the company’s valuation is in line with peer averages.
Price-to-Book of 2.79x means the stock trades at 2.79 times its net asset value per share (book value ₹254). This reflects the market’s expectation of future earnings growth above the cost of capital.
Dividend Metrics:
Dividend yield of 1.13% on current price. FY25 saw the company resume dividend payments (after zero dividends in FY24 and earlier years) at 26% payout ratio. Dividend per share: ₹8.03 in FY25 (estimated for FY26, TBD).
Risks to Current Valuation:
Macroeconomic Slowdown: If automotive demand slows, EBITDA could contract 10–15%, compressing multiples
P/E expansion/contraction relative to sector median
Return on Equity (current: 8.42%; monitor progression toward 12%+)
Debt-to-Equity ratio (current: 1.16x; management target: <0.85x by FY27)
6. What’s Cooking: News, Triggers, Drama
The Velachery Land Sale (June 2025 Announcement, ₹361 Crore Deal):
Rane (Madras) sold 3.48 acres of prime real estate in Velachery to Canopy Living LLP (a JV between Arihant Foundations and Prestige Estates) for ₹361.18 crore. They retained 1.02 acres for a new office building. They’ve already received ₹130 crore (later updated to ₹115 crore in January 2026 board meeting), with ₹246 crore remaining. This is basically them saying, “Hey, we bought stupid real estate 10 years ago when we had cash. Now we’re smarter.”
The money goes directly toward debt reduction. Expected impact: reduces gross debt from ₹780 crore to ₹640 crore by FY27. That’s a 18% debt haircut. Interest savings? ₹10–₹12 crore annually (at ~5% interest rates).
Management Changes (March 2026):
CS S. Subha Shree, who’s been steering (pun intended) the company through the turnaround, hands over to Mr. Venkatraman effective June 1, 2026. Gowri Kailasam and Aditya Ganesh reassigned as Executive Directors. Translation: smooth succession planning, not a crisis. Boring but good.
Tax Notices (January–December 2025):
The company received show-cause notices from the Income Tax Department:
Jan 2026: Disallowance of ₹7.61 Cr (expected impact ₹2.66 Cr)
Feb 2026: Disallowance of ₹24.01 Cr (expected impact ₹6.04 Cr)
Dec 2025: Tax demand ₹12.23 Cr + equivalent penalty for FY18-19 to FY23-24
Dec 2025: Separate order for FY21-22 (₹0.39 Cr demand + ₹0.04 Cr penalty)
Total potential exposure: ₹10–12 crore (post provisions). The company plans to contest. This is normal auditor theater; happens to mid-cap companies regularly.
Credit Rating Upgrade (April 2025):
CRISIL upgraded RML’s credit rating from A/Watch Positive to A+/Stable post-merger completion. This signals improved financial risk profile, better debt metrics, and operational stability. Banks are happy. Debt cost might come down 25–50 bps over the next refinancing cycle.
Order Book & New Wins:
Q3 saw wins of ₹115 crore in new orders (₹75 Cr from international customers). The Steering & Linkages division continues to be the crown jewel, dominating orders for steering products. Engine and Brake components also winning incremental orders. Translation: pipeline is healthy; future revenues are lined up.
GST Rate Reduction:
In October 2025, the government reduced GST on auto components from 18% to 5% (effective January 1, 2026). This is a massive catalyst:
Cost savings flow directly to customers, improving affordability
Aftermarket sales should improve (replacement parts becoming cheaper)
Rane benefits indirectly through higher volumes. Conservative estimate: 1–2% incremental revenue lift by FY27.
Mexico Subsidiary Caution (RACM):
Remember the ₹50–60 crore Mexico investment plan? The company received $5 million of the planned $8 million through FY25. Now they’re “proceeding cautiously given the current global scenario.” Translation: US tariff uncertainty, Trump 2.0, and geopolitical volatility are making them nervous. Don’t expect aggressive expansion there. Boring but prudent.
7. Balance Sheet: Asset or Liability? (Spoiler: Getting Better)
Using the latest available consolidated financials (Sep 2025):
Source table
Item
Sep 2025
Mar 2025
Mar 2024
Mar 2023
Total Assets (₹ Cr)
2,408
2,264
2,105
1,178
Fixed Assets (₹ Cr)
661
673
646
393
Net Worth/Equity (₹ Cr)
701
688
663
247
Borrowings (₹ Cr)
811
791
829
531
Other Liabilities (₹ Cr)
896
784
612
400
Key Observations:
Debt Creeping Up (Sep 2025 vs Mar 2025): Borrowings increased from ₹791 Cr to ₹811 Cr. Sounds bad, but it’s intentional: the company borrowed ₹50–60 Cr for working capital expansion (inventory stocking for aftermarket growth) and capex. Once land sale proceeds hit (₹246 Cr remaining), debt will drop to ₹560–600 Cr by end of FY26/FY27.
Net Worth Improvement (Post-Merger): Net worth jumped from ₹247 Cr (Mar 2023, pre-merger standalone RML) to ₹663 Cr (Mar 2025, post-merger consolidated) and now ₹701 Cr (Sep 2025). The merger brought in the equity of REVL and RBLL, plus their clean balance sheets (RBLL was debt-free). This is financial engineering that actually worked.
Debt-to-Equity Ratio: Sep 2025: ₹811 / ₹701 = 1.16x (elevated but manageable) Mar 2025: ₹791 / ₹688 = 1.15x Mar 2024: ₹829 / ₹663 = 1.25x
The ratio is stable despite higher debt because equity grew faster post-merger. Once land proceeds hit and debt drops to ₹550 Cr, the ratio becomes 0.78x—that’s genuinely healthy for a Tier-1 supplier.
Working Capital Days: Sep 2025: 63 days (up from -5 days in Mar 2025). This isn’t alarming; it’s inventory stocking for aftermarket growth. Should normalize by Mar 2026 back to the typical 0–5 days range.
Key Observations:
Working Capital Days: As of September 2025, working capital cycle stands at 63 days (up from -5 days in March 2025). This increase reflects planned inventory stocking for aftermarket segment growth. In prior years, the company maintained a negative working capital cycle (meaning payables exceeded receivables + inventory), which improved cash generation. The 63-day reading is expected to normalize to 0–5 days range by end of FY26 as inventory levels stabilize.
8. Cash Flow: Sab Number Game Hai
The company generates cash from operations and burns it on capex and debt repayment. Let’s see if they’re doing it smartly.
Source table
Item
FY25
FY24
FY23
Operating Cash Flow (₹ Cr)
339
201
130
Investing Cash Flow (₹ Cr)
-174
-288
-173
Financing Cash Flow (₹ Cr)
-173
84
50
Net Cash Change (₹ Cr)
-7
-3
7
What’s Happening:
Operating Cash Flow (₹339 Cr in FY25):
This jumped 69% from FY24 (₹201 Cr) to FY25 (₹339 Cr). Why? Because profitability improved and working capital management got tighter. The company went from losing money to making it, which automatically improves cash generation.
In Q3 FY26 alone, assume quarterly OCF of ₹85–90 Cr (rough math: PAT of ₹31 Cr + Depreciation of ₹36 Cr = ₹67 Cr, plus working capital timing). Annualized, that’s ₹350–360 Cr of operating cash. This covers their ₹200 Cr annual capex + ₹100–120 Cr debt repayment comfortably.
Investing Cash Flow (-₹174 Cr in FY25):
This is capex + working capital investments. Annual capex is around ₹200 Cr (maintenance + modernization). FY25 saw lower capex because of the divestment of RLMC (USA subsidiary), which freed up cash. They don’t mention “Capex & Growth” as different—it’s bundled as “Annual Capex ~₹200 Cr.”
Financing Cash Flow (-₹173 Cr in FY25):
This is debt repayment, dividend payments, and share issuances (merger-related). The -₹173 Cr means they repaid debt, which is the right thing to do when you’re deleveraging post-divestment.
Summary:
Operating cash flow improved 69% from FY24 (₹201 Cr) to FY25 (₹339 Cr), driven by improved profitability post-divestment of RLMC and better working capital management. Annual capex requirement of approximately ₹200 crore is covered by operating cash flow, allowing room for debt repayment. Debt service capacity (operating cash flow available for debt repayment after capex) is approximately ₹140–150 crore annually under current conditions.
9. Ratios: Sexy or Stressy?
Time to judge the company by standard financial metrics, as if we’re auditors at a consulting firm with too much coffee in our bloodstream.
Source table
Ratio
Sep 2025
Mar 2025
Mar 2024
Industry Median
ROE (%)
8.42
8.0 (est)
8.5
14.4
ROCE (%)
11.9
12.0 (est)
17.0
14.4
Debt-to-Equity
1.16
1.15
1.25
0.80
Interest Coverage
3.17
4.15
2.96
4.5+
Current Ratio
0.88
Not provided
Not provided
1.0+
PAT Margin
3.0% (Q3)
1.03% (FY25)
0.1% (FY24)
3.5%
OPM
9.3% (Q3)
8.9% (FY25)
7.4% (FY24)
8.5%
Return on Equity (8.42%):
Oof. This is a weak spot. While it’s better than the 0.1% disaster of FY24, 8.42% is still below the 10%+ threshold most investors want from auto suppliers. The industry median is 14.4%.
Why so low? Because the company just merged and has a bloated balance sheet with new equity capital that hasn’t fully deployed into earnings yet. Give it 18 months. Once debt comes down from ₹811 Cr to ₹550 Cr and PAT grows to ₹100+ Cr annually, ROE will climb to 12–13%.
Return on Capital Employed (ROCE: 11.9%):
This is also below the 14.4% industry median, but it’s improving. ROCE was in the 8–10% range in FY20–FY21 (the dark ages of RLMC losses). The trajectory is upward.
For Tier-1 auto suppliers with stable OEM contracts, 12–15% ROCE is acceptable. They’re getting there.
Debt-to-Equity (1.16x):
Higher than the industry median of 0.80x, but not alarming for a company in deleveraging mode. Once land sale proceeds (₹246 Cr) hit and reduce debt to ₹550 Cr, the ratio becomes 0.78x. The company has a path to healthier leverage within 18 months.
Interest Coverage (3.17x):
This is the ability to cover interest payments from EBITDA. At 3.17x, it’s workable but not exceptional (industry median is 4.5x+). Concern: If EBITDA dips below ₹350 Cr or interest rates stay elevated, coverage tightens.
Good news: CRISIL still rates them A+/Stable, which means banks see ample coverage for near-term debt service.
Current Ratio (0.88x):
This is liquidity in the short term. A ratio below 1.0 suggests current liabilities exceed current assets. Sounds bad, but in auto manufacturing, this is normal because:
Receivables from OEMs are on 45–60 day terms
Payables to suppliers are on 90+ day terms
Inventory is deployed efficiently
Cash position as of Sep 2025: ₹43 Cr + available credit lines of ₹1,170 Cr (used 71% on
