The automotive component manufacturer has completed the sale of its 50% interest in PPAP Tokai India Rubber Private Limited to partner Tokai Kogyo, aimed at debt reduction and capital reallocation. This move follows a period of softer-than-expected financial performance in the first nine months of the fiscal year 2026.
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PPAP Automotive Limited (NSE: PPAP) has disclosed the sale of its entire 50% stake in its joint venture, PPAP Tokai India Rubber Private Limited (PTI), for a total consideration of INR 100 crore. The divestment is intended to strengthen the company’s balance sheet by reducing debt and providing capital for new investments. Despite this strategic shift, the company’s recent financial results for the quarter ended December 31, 2025, reflect compressed margins and revenue challenges linked to volume deferments by original equipment manufacturers (OEMs).
Key Development: Divestment of PTI
The divestment marks the conclusion of a partnership that began in 2012. Having initially invested INR 48.5 crore in the venture, PPAP realized INR 100 crore from the sale to its partner, Tokai Kogyo Co. Ltd.. The transfer of ownership was finalized on February 13, 2026. Management indicated that the venture had not met long-term expectations and that the exit would allow the company to focus on more sustainable growth drivers.
Financial Performance
PPAP reported consolidated revenue from operations of INR 138.9 crore for Q3FY26, showing a marginal decline compared to INR 139.2 crore in the same period the previous year. EBITDA for the quarter stood at INR 12.5 crore, down from INR 14.0 crore in Q3FY25, while EBITDA margins contracted to 9.0% from 10.0%.
For the nine-month period (9MFY26), the company recorded a consolidated net loss of INR 2.3 crore, compared to a profit of INR 4.6 crore in 9MFY25. Management attributed the softer performance to lower production volumes resulting from the deferment of start-of-production (SOP) dates by certain OEM clients. However, the company continues to maintain a robust unexecuted order book of INR 4,103 crore as of December 31, 2025.
Business Outlook & Strategy
The company’s strategic priorities are centered on diversifying its revenue streams and enhancing margins:
• Automotive Parts: Focusing on increasing content per vehicle through value-added, margin-accretive products and expanding exports to the USA and GCC countries.
• Aftermarket: Aiming to achieve 10% of overall revenue by FY27 with a projected 20% annual growth rate in this division.
• Tooling Business: Increasing capacity to 150 molds annually to improve operating leverage.
• Electric Vehicles (EV): Actively developing dedicated parts and battery packs for the EV segment, which accounted for INR 38 crore of new order wins in 9MFY26.
Guidance and Future Outlook
PPAP has revised its guidance for FY26 downward to reflect recent operational challenges:
• Revenue: Projected at INR 575 to 600 crore, down from the previous estimate of INR 600 to 660 crore.
• EBITDA: Anticipated at INR 60 to 65 crore, compared to the earlier target of INR 75 to 80 crore.
• PAT: Expected at INR 10 to 12 crore, revised from INR 20 to 25 crore.
The company expects Q4FY26 volumes to support the lower end of its revenue guidance, though EBITDA estimates are pressured by under-absorption of fixed costs due to reduced capacity utilization.
Sector and Macro Context
The broader Indian automotive industry showed significant growth in Q3FY26, providing a supportive macro environment:
• Two-Wheeler sales rose 16.9% YoY to 57.0 lakh units.
• Passenger Vehicle sales hit a record 12.76 lakh units, up 20.6% YoY.
• Commercial Vehicle sales grew 21.5% YoY, driven by increased freight activity.
Industry growth has been bolstered by GST rate cuts, personal income tax relief, and successive repo rate reductions by the RBI.
Regulatory Milestones and Segment Updates
PPAP is currently evaluating the potential impact of the new Labour Codes, effective November 21, 2025, which may influence employee benefit obligations in future quarters.
The company’s client base remains diversified, with Maruti Suzuki accounting for 37.1% of revenue in 9MFY26, followed by SMG (10.0%) and Hyundai (13.4%). New supply contracts were initiated during the period for the Tata-Altroz and Maruti-Victoris programs.
Where Does PPAP Automotive Limited Stand Today?
PPAP remains a prominent Tier-1 supplier with 10 pan-India manufacturing facilities and a daily shipment volume of 225,000 parts. It manages over 3,000 SKUs and has been operational for over 45 years. While recent earnings have been impacted by OEM timing shifts and fixed-cost pressures, the company’s INR 4.1 billion order book and strategic divestment of PTI are intended to position it for a recovery driven by high-margin product lines and the expanding EV battery market.