Varroc Engineering: A ₹35,090 Cr Order Book, But 35x P/E Still Screams
Section 1: At a Glance
Varroc Engineering reported Q4 FY26 revenue of ₹2,368 Cr (₹23.7 bn), a 12.8% jump YoY, with full-year revenue hitting ₹8,890 Cr—9% growth. EBITDA margin held steady at 9.4% for the year; PBT margin climbed to 4.3% from 3.8%. The company’s EV revenue swelled to 13% of FY26 sales and grew 39% YoY. But here’s the knot: a 35.3x P/E on 15.2% ROE, sitting atop a ₹8,958 Cr market cap, is asking serious questions. The arithmetic smells optimistic. On the upside, Varroc locked in its best-ever order intake—₹32,889 Cr of annual peak revenue wins, with 65% tied to EV models—a massive growth pipeline. On the downside, ₹4,952 Cr in net debt (up from ₹2,820 Cr six months earlier due to VRS and working capital), Bajaj Auto still accounts for 46% of revenue, and overseas operations remain a drag. The story is electrifying. The valuation requires faith.
Varroc Engineering, incorporated in 1988, began life as a captive supplier to Bajaj Auto and has since metastasized into a global tier-1 automotive component player. The company operates 37 manufacturing facilities across 8 countries and employs 6,100+ people. In FY25–26, it divested its loss-making 4W lighting operations outside India (a strategic pruning) and has pivoted aggressively toward electrification. Today, Varroc is a leading 2W lighting and powertrain supplier in India, with deepening roots in EV electronics, ADAS, and smart mobility. Think of it as a company midway through a surgical reinvention: still anchored to ICE, but sprinting toward batteries.
Section 3: WTF Do They Even Make?
Varroc’s revenue breaks down across six product lines:
Body Part Solutions (35.2%): Exterior and interior molded parts, tail lamps, dashboards, seats, mirrors—the plastic and aluminum furniture of cars.
ICE Powertrain (25.1%): Engine valves, transmission gears, starters, crankpins—all the mechanical theatre for burning fossil fuels.
Lighting Solutions (16.9%): Headlamps, tail lamps, LCUs, adaptive driving beams—they make 2W and 4W vehicles stop and see.
HMI Solutions (3.9%): Digital clusters, handlebar switches, telematics, TPMS—the buttons and brains you interact with.
Aftermarket (10%): Spare parts, lubricants, accessories sold through 700+ distributors across India.
Geography: 89% India, 11% overseas. Customer: 46% Bajaj, 54% diversified (Hero, Honda, TVS, Yamaha, and emerging EV players). The portfolio is engine-agnostic—designed to work on ICE, EV, or both. Clever hedging.
Section 4: Financials Overview
Figures are consolidated, in ₹ crore.
Metric
Q4 FY26
Q3 FY26
YoY (Q4 FY25)
Revenue
2,368
2,288
2,099 (+12.8%)
EBITDA
229
210
213 (+7.5%)
EBITDA %
9.7%
9.3%
10.2%
PAT
70
-11
23 (+203%)
EPS
₹4.54
-₹0.67
₹1.35
Full-year FY26: Revenue ₹8,890 Cr (+9% YoY), EBITDA ₹830 Cr (9.4% margin), PAT ₹230 Cr (+229% YoY, but that’s off a depressed FY25 base of ₹70 Cr). Annualised FY26 EPS: ₹14.73 (reported). Management cited India operations alone grew profit “more than 40%” YoY—the domestic engine firing hard.
Concall Notes (Jun 2026): Management framed FY27 as inflection: “Yes, we can achieve mid-to-high teens growth.” On margins, they were explicit: “In FY 2027, margins will be higher than what we reported in FY 2026.” Translation: they’re betting volume growth + electronics mix shift (higher-margin) will lift PBT. The order book? “We are confident in” converting it. Long-term ambition: “PBT to 10% in the coming years.”
Section 5: Valuation Discussion — Fair Value Range (Educational Only)
What follows is an educational look at what the numbers imply — not a price target, and not advice.
Method 1: P/E Multiples
Annualised FY26 EPS: ₹14.73 (full-year, locked formula—no multiplication for Q4)
Fair Value Range: ₹400–700 per share (P/E + EV/EBITDA methods). Current price: ₹586. Trading near mid-range suggests the market is pricing a “show-me” story—solid execution required to justify.
Mandatory disclaimer: This fair value range is for educational purposes only and is not investment advice.
Section 6: What’s Cooking—Orders, Drama, Drama
EV Wins (Biggest Story): Varroc secured its best-ever order intake in FY26: ₹32,889 Cr of annual peak revenue wins, with 65% from EV models. The standout? A six-year contract with a global EV OEM to supply AC bi-directional wall chargers (peak ₹439 Cr annual value) manufactured in Romania—a profitable,
