The Hi-Tech Gears Ltd FY26: Transmission Under Stress

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1. At a Glance

The company reported FY26 sales of ₹908 Cr, down 2% year-on-year from ₹927 Cr in FY25. Net profit halved to ₹21 Cr from ₹40 Cr. The order book sits at ₹79.5 Cr on an annualized basis — roughly 9% of annual revenue.

A shift is underway: domestic two-wheeler and commercial-vehicle demand has softened, yet international revenue holds at 52% of the mix. The balance sheet carries ₹182.5 Cr of borrowings against ₹504 Cr of equity, down from ₹202 Cr debt a year prior — an improvement.

The margin story is harder to explain. Operating profit dipped to ₹101 Cr (11% OPM) despite flat expenses, while tax jumped to 37% of pre-tax profit versus 36% last year. One wisdom line: when revenue shrinks and debt drops at the same time, something is working — just not revenue.

2. Introduction

Founded in 1986, Hi-Tech Gears is a Tier-1 auto-component supplier, listed on BSE and NSE. It makes transmissions, gears, and precision-forged engine components for two-wheelers, passenger cars, commercial vehicles, and off-highway machines.

Three manufacturing plants sit in India (Bhiwadi, Rajasthan, and Manesar, Haryana). A Canadian subsidiary (Ontario Inc.) operates a facility in Guelph. A US arm (Teutech LLC) operates from Emporium, Pennsylvania.

The company’s customer roster spans both OEMs and Tier-2s: Hero MotoCorp, Mahindra, Tata Motors, Cummins, JCB, Daimler, CNH, Dana, Stackpole, Borg Warner. International clients include American Axle, GKN Driveline, Magna Powertrain, Robert Bosch, and Navistar.

Recent management moves: Vijay Mathur was appointed Executive Director & CFO on May 29, 2026. Prior CFO Kapil Rajora shifted to Chief Compliance Officer in January 2026. The founder and promoter, Deep Kapuria (DIN 00006185), remains Executive Chairman.

3. Business Model: WTF Do They Even Do?

Hi-Tech Gears operates at the intersection of three auto verticals. Two-wheelers represent 29% of revenue; passenger vehicles (including drivelines), 45%; commercial and off-highway vehicles (tractors, construction equipment), 27%.

The transmission business is commoditised. Success hinges on scale, quality, delivery speed, and relationships. The company manufactures gears (sintered, forged, cut), shafts, engine components, and PTO (power take-off) assemblies for OEMs.

Revenue is bifurcated: domestic sales (48%) serve India’s two-wheeler and CV makers; export sales (52%) go to North America, Brazil, Mexico, Europe, and Asia-Pacific. The company taps logistics partners like CH Robinson and HTL Logistics.

The moat is thin — execution, not IP. Winning new OEMs (e.g., CNH, Dana, Stackpole, Harley-Davidson) is laborious. The company reported new-customer wins of ₹1,754 Cr annualised in FY24 and FY25, though the fit and timing of these wins against revenue is unclear. The order book of ₹79.5 Cr, split 38% current customers and 62% new, hints at growth ambition but also urgency — new customers haven’t yet proven sticky.

4. Financials Overview

Figures are consolidated, in ₹ crore.

EBITDA (calculated as Operating Profit of ₹101 Cr + Depreciation of ₹67 Cr) rose 6.8% despite a 2% revenue decline. Operating Profit was ₹101 Cr (11.1% OPM) versus ₹136 Cr (14.7% OPM) in FY25 — a margin squeeze of 360 basis points.

Depreciation consumed ₹67 Cr (up from ₹63 Cr), eroding the bridge from EBITDA to profit-before-tax. Interest dropped to ₹14.9 Cr (from ₹21.4 Cr) due to lower debt.

Tax: The company paid ₹12.3 Cr in tax, yielding an effective tax rate of 37% (versus 36% in FY25). This pushed net profit down 48% to ₹21 Cr.

Consolidation note: The figures above incorporate Hi-Tech Gears Canada’s contribution (segment revenue ₹232 Cr for FY26) and Teutech LLC. Canada’s profit-before-interest was ₹(4) Cr, vs. ₹122 Cr in FY25 — a sharp reversal.

5. Market Expectations & Historical Multiples

This section describes how the market is currently pricing the company and how that compares with its own history and peer group. It is descriptive, not predictive.

Price Referenced: ₹573.65 (12 Jun 2026 close), not live.

The market currently pays 50.4x earnings here, against a peer median of 27.6x — a premium of 82% on the multiple. This is unusual in a capital-goods business with commodity-like dynamics. The company’s own 5-year average P/E is 27.6x, meaning the current multiple is nearly double historical norms.

ROE of 4.17% sits well below the peer median of 13.5%, and below the company’s own 5-year average of 6.45%. This gap suggests either depressed profitability (temporary margin pressure) or capital inefficiency (working-capital drag). ROCE at 6.92% versus a peer median of 15.88% paints the same picture.

The market appears to be pricing in either a recovery in