Auto ancillary sector revenue grew 12.5% in FY26
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Live Events as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel New Delhi: In FY26, revenue for auto ancillaries grew 12.5 per cent year-on-year, led by healthy volume growth across segments and an improved product mix. According to a research report by Elara Capital, this top-line expansion was accompanied by a 13.3 per cent growth in absolute EBITDA, although the aggregate operating margin remained flat at 13.6 per cent.The report noted that out of the 59 listed auto component manufacturers analyzed in the study, 25 firms reported a contraction in their operating margins.Across segments, the suspension braking and multiproduct categories led the revenue expansion, registering year-on-year growth of 16 per cent and 15 per cent, respectively.
In terms of profitability, tyres, lighting, and suspension segments outperformed with a 17 per cent EBITDA growth, whereas forgings and batteries posted a degrowth of 4 per cent and 1 per cent, respectively."Demand outlook for FY27 is broadly constructive, led by healthy momentum across 2W, PV, CV, tractors and replacement markets in India," the report stated. "Expect EV-linked businesses, electronics/content-rich products and defence/aerospace to outgrow, while global/export demand to be mixed with Europe remaining weak and
North America showing improving trends."However, operational challenges persist as input costs rise. The report identified commodity inflation as a prominent near-term headwind, with most component manufacturers facing a margin drag in the first quarter of financial year 2026-27 from higher costs of copper, aluminum, steel, rubber, crude-linked inputs, freight, and energy.While pass-through mechanisms are largely operational across the industry, recovery typically comes with a lag of one quarter to six months, maintaining near-term pressure on margins
despite recent price hikes.In terms of capital allocation, the aggregate capex intensity stood at 5.9 per cent of sales during the year, while free cash flow generation remained stable at 4.7 per cent.For the upcoming fiscal, the report expects passenger vehicles to expand by 7 per cent and two-wheelers by 8 per cent.The firm concluded that "there are four key reasons for any auto ancillary to outperform OEMs: product expansion, segment expansion, geographic expansion, inorganic expansion."
The BriefWire