Rane Holdings Limited’s (NSE: RANEHOLDIN) Consolidated revenue for the Chennai-based auto component manufacturer rose 23.6% year-over-year in the third quarter of fiscal 2026. Bottom-line performance was significantly pressured by a substantial warranty provision related to a product recall at a joint venture entity.
The company reported a consolidated net loss of ₹39.5 crore for the quarter ended December 31, 2025, a sharp reversal from the profit recorded in the same period the previous year. While the group achieved robust double-digit growth in consolidated revenue and saw an expansion in operational EBITDA margins, the financial results were primarily impacted by a non-recurring warranty provision at a joint venture.
Earnings Hit
The quarterly performance was primarily affected by a share of an exceptional item recorded by ZF Rane Automotive India Private Limited, a joint venture in which Rane Holdings Limited holds a 49% stake. The joint venture recognized a warranty provision of ₹8,463 lakh for both the quarter and nine-month period ended December 31, 2025, which was reflected proportionately in the parent’s results.
The provision relates to estimated product recall liabilities tied to quality and safety issues in certain products manufactured and sold in prior periods. As an exceptional item, it materially influenced reported profitability for the period, while the underlying charge remains subject to the progression and resolution of recall-related claims.
Product Highlights
The group continues to secure significant new business across its manufacturing subsidiaries.
- Rane (Madras) Limited secured new orders worth ₹135 crore, with ₹75 crore designated for international customers.
- Rane Steering Systems Private Limited won contracts totaling ₹345 crore for domestic utility vehicle (UV) models.
- The joint venture entity, ZF Rane Automotive India, secured orders worth ₹109 crore for occupant safety products and over ₹3 crore for steering products from domestic clients.
Financial Performance
For the third quarter of FY26, consolidated revenue from operations reached ₹1,53,462 lakhs, compared to ₹1,24,056 lakhs in the prior-year period.
Profitability & Margins: Consolidated EBITDA stood at ₹116.4 crore, representing a 39.5% increase year-over-year. EBITDA margins improved by 86 basis points to reach 7.6%. However, the group reported a consolidated net loss of ₹3,951 lakhs, primarily due to the joint venture’s warranty provision.
Earnings Per Share (EPS): Basic and diluted EPS for the quarter was negative ₹35.41, down from positive ₹2.27 in Q3 FY25.
Expenses: Total consolidated expenses rose to ₹1,49,448 lakhs from ₹1,23,436 lakhs a year ago. This includes a one-time impact of ₹618 lakhs in employee benefit expenses related to the notification of New Labor Codes.
Nine-Month Context: For the nine months ended December 31, 2025, consolidated revenue was ₹4,27,466 lakhs compared to ₹2,98,791 lakhs in the same period last year. Net profit for the nine-month period dropped to ₹4,924 lakhs from ₹20,912 lakhs Y-o-Y, though the prior year was bolstered by significant exceptional income from a step acquisition.
Investment Thesis (Bull vs. Bear)
Bull Case
- Strong Revenue Momentum: The group demonstrated a 23.6% Y-o-Y increase in consolidated revenue and continues to win large-scale orders across domestic and international markets.
- Improving Operational Efficiency: EBITDA margins have expanded by 86 bps Y-o-Y, suggesting that core manufacturing operations are becoming more efficient despite inflationary pressures.
- Strategic Consolidation: Transitioning joint ventures into wholly-owned subsidiaries allows for better operational control and financial integration.
Bear Case
- Profitability Volatility: Large, non-recurring exceptional items and warranty provisions (₹84.63 crore net impact in Q3) introduce significant unpredictability into bottom-line results.
- Regulatory Headwinds: The implementation of the New Labor Codes has already increased employee benefit expenses, and further rules/clarifications could lead to additional incremental costs.
- Product Liability Risks: Recurring determining of warranty provisions for specific product lots at subsidiaries indicates ongoing quality control challenges that may impact future cash flows.
New Labor Code Impact
The implementation of India’s New Labor Codes has begun to affect employee-related costs, with the group recording an incremental ₹618 lakh increase in employee benefits expense for the quarter ended December 31, 2025. The charge reflects management’s current assessment based on available guidance and legal advice following the codes’ effectiveness from November 21, 2025. The impact has been recognized as an initial estimate, with the final cost trajectory dependent on further regulatory clarity.
Management continues to monitor the notification of Central and State rules and any additional government guidance, noting that further accounting adjustments may be required as implementation details are finalized. The New Labor Codes comprise four regulations; the Code on Wages, 2019; Code on Social Security, 2020; Industrial Relations Code, 2020; and Occupational Safety, Health and Working Conditions Code, 2020; and their ultimate effect on employee benefit expenses will depend on the definitive rules and compliance requirements issued in the coming periods.
Structural Realignment
Management’s strategy is focused on consolidating holdings and streamlining operations through corporate restructuring. Rane Holdings recently completed the acquisition of the remaining 51% stake in Rane Steering Systems Private Limited (formerly Rane NSK Steering Systems), which is now a wholly-owned subsidiary. Furthermore, a scheme of arrangement has been sanctioned for the demerger of the occupant safety division of ZRAI into a new entity, ZF Lifetec Rane Automotive India Private Limited, effective February 1, 2026. Capital allocation is also visible in the recent issuance of 20,00,000 equity shares by Rane Steering Systems to the parent company on a rights basis, aggregating to ₹5000 lakhs.
Safety Division Demerger
The demerger of the Occupant Safety Division from ZF Rane Automotive India Private Limited into ZF Lifetec Rane Automotive India Private Limited was implemented through a court-approved scheme of arrangement, enabling the business and related investments to be transferred on a going-concern basis. The restructuring preserves continuity of operations and ownership, with Rane Holdings Limited retaining its 49% equity stake in the new entity, consistent with its holding in the original joint venture. The scheme became operationally effective on February 1, 2026, following sanction by the National Company Law Tribunal.
The separation took place during a period of broader group restructuring and alongside a significant warranty provision of ₹8,463 lakh recorded in the original joint venture related to a product recall tied to prior-period quality and safety issues. The demerger forms part of a wider realignment of group structures, including Rane Holdings’ move to acquire full ownership of its former joint venture in steering systems, reflecting ongoing efforts to streamline operations and consolidate business segments within the group.