01 — At a Glance
The Aurangabad Auto Parts Saga: Lost In Translation (And Romania)
- 52-Week High / Low₹695 / ₹365
- Q3 FY26 Revenue₹2,288 Cr
- Q3 FY26 PAT₹77.9 Cr
- Quarterly EPS₹(0.67)
- Annualized EPS (Q3×4)₹(2.68)
- Book Value₹110
- Price to Book4.36x
- Dividend Yield0.21%
- Debt / Equity0.54x
- Arbitration ClaimUSD 66.41m
The Auditor’s Sigh: Varroc closed Q3 FY26 with ₹2,288 crore revenue (+10% YoY), but EPS turned negative at (₹0.67) — yes, you read that right, NEGATIVE. This was a chart-topper quarter that somehow produced a loss. How? They took ₹799 crore in Voluntary Retirement Scheme (VRS) costs, a ₹225 crore labour code adjustment, and somehow managed to lose ₹11 crore in absolute PAT terms. The market rewarded this “leadership” with a -25.4% return in three months. And management is still trying to convince investors that Romania will “turn profitable in FY27.” Sure, guys. And I’m Batman.
02 — Introduction
The Company That Supplies Auto Parts To Everyone Else’s Problems
Varroc Engineering was founded in 1988 as Bajaj Auto’s internal captive, then slowly diversified until Bajaj still owned 45% of their mind share. Today, they make lighting systems, electronics, polymers, and precision components for two-wheelers, three-wheelers, four-wheelers, and even commercial vehicles across 37 manufacturing plants in 8 countries. Sounds impressive. Reads like a mess.
The core issue? Varroc is caught between three impossible dreams: becoming less dependent on Bajaj Auto (their biggest customer at 45% of revenue), fixing their loss-making overseas operations (Romania, Vietnam, Italy are burning cash like tech startups in 2022), and pivoting hard into EV components while ICE demand still exists. It’s like trying to sail three boats simultaneously while all of them are leaking.
The Feb 2026 concall revealed management’s true intentions: cost-cut now, invest in EV tomorrow, hope Romania recovers by H2 FY27, and try not to let the OP Mobility arbitration claim (USD 66.41 million) sink the ship. They even took a VRS hit of ₹799 crore in Q3 to “reset the cost structure.” Translation: we hired too many people, the world changed, and now we’re asking 411 people to leave. Outrageously Indian corporate, honestly.
Management Concall (Feb 2026): “Our EV performance, we have grown by almost 53%” — This is what they led with. Not the ₹799 crore VRS cost. Not the negative EPS. Not Romania burning money. Just the EV growth number. This is the audacity we’re working with.
03 — Business Model: WTF Do They Even Sell?
The Conglomerate That Became A Tire Shop Consultant
Varroc designs, manufactures, and supplies automotive components under five pillars: (1) Lighting Systems (2W/4W headlamps, tail lamps, adaptive driving beams), (2) Electronics Manufacturing Services (high-voltage and low-voltage circuits), (3) Infotainment & Vision Systems (360° cameras, touchscreen displays), (4) ADAS & DMS (driver monitoring), and (5) Smart Mobility (vehicle telematics). Basically, if your car or bike needs electricity, plastic, or algorithms, Varroc has someone working on it. In multiple time zones.
Revenue breakdown H1 FY26: Body Part Solutions 35%, ICE-Powertrain 26%, Lighting 17%, Aftermarket 10%, E-Mobility 6%, HMI 4%, Others 2%. So 53% of revenue still comes from the dying ICE world. Which means if the EV transition accelerates, Varroc’s most profitable product lines suddenly become museum exhibits.
Geographic snapshot: 89% revenue from India, 11% from overseas. Customer mix: 45% Bajaj, 55% non-Bajaj. Which sounds diversified until you realize that single-customer concentration at 45% is why even good quarters feel precarious. When Bajaj sneezes, Varroc’s entire strategy pivots.
Bajaj Dependency45%Single Customer
EV Revenue Mix12.1%9M FY26
EV Growth YoY+38%But Small Base
R&D Spend2.21%Of Turnover
The Elephant in the Room: 45% revenue from one customer (Bajaj) means when Bajaj Executive decides to switch suppliers, Varroc’s Q3 becomes Q4’s obituary. This is not diversification. This is a hostage situation disguised as a business relationship. India Ratings upgrade to IND AA means the agency believes management’s FY27 turnaround story. Smart money wonders if the agency has seen Romania’s utilization rates (management said: “very low”).
💬 How comfortable are you investing in a company where 45% of revenue comes from one customer? Would you sleep better if they split it 25-25-25 across three customers? Comment your threshold.
04 — Financials Overview
Q3 FY26: The Numbers That Hurt
