Varroc Engineering Ltd (NSE: VARROC) Q1 2026 Earnings Call dated Aug. 07, 2025
Corporate Participants:
Unidentified Speaker
Tarang Jain — Chairman and Managing Director
Mahendra Kumar — Chief Financial Officer
Bikash Dugar — Head IR and Finance Controller of Business Unit 2
Analysts:
Unidentified Participant
Jyoti Singh — Analyst
Arvind Sharma — Analyst
Vinay Jain — Analyst
Shridhar Kallani — Analyst
Vishakha Maliwal — Analyst
Apurva Mehta — Analyst
Rahul Kumar — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to VARROC Engineering Q1FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing 0 on your Touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Ms. Vishaka Maliwal. Thank you. And over to you Ma’. Am.
Vishakha Maliwal — Analyst
Thanks Avirat. Good evening everyone. From Werock Engineering we have with us Mr. Tarang Jain, Chairman and Managing Director Mr. Arjun Jain, Full Time Director and CEO of Business Unit 1 Mr. Dhruv Jain, Full Time Director and C.E.O. of Business Unit 2 Mr. Mahendra Kumar Group CFO Mr. Bikash Dugar, Head IR and Finance Controller of Business Unit 2 and Mr. Vishal Rawal Group Finance Controller for Business Unit 1. We’ll start the call with brief opening comments from the management followed by the Q and A session. I would now like to invite Mr. Tarang Jain for the opening remarks.
Thank you and over to you sir.
Tarang Jain — Chairman and Managing Director
Thanks Vishakha and thank you Team ICIC securities for hosting the call and good evening to everyone. I’m Tarang Jain here to start with, the Indian economy is showing resilience and momentum. Real GDP growth reached 7.4% in Q4 of FY25 up from 6.4% in Q3 and the full year GDP growth was at 6.5% for FY25. The inflation in India is moderating and in May 25 the CPI dropped to a 75 month low of 2.8%. Considering this, the central bank rate reduced repo rate by 50 basis points to 5.5% in June 25. Globally the the rising tariff barriers, strategic competition and geopolitical tensions are increasing.
Uncertainty for businesses, supply chain resilience and region are becoming key corporate strategies. Amid this uncertainty, the automotive industry is also preparing to deal with these challenges. Despite these uncertainties, we remain confident about the medium to the long term growth prospects of the automotive industry. In terms of automotive production In India during Q1 of FY26, all the segment registered moderate growth. On a year on year basis, two wheelers grew by 0.7%, passenger vehicles grew by 3.4%, commercial vehicles grew by 2.6% and three wheelers grew by 9.8%. In terms of domestic sales, the two wheeler industry registered DE growth of 6% year on year on a quarter on quarter basis Due to the seasonal impact we saw a degrowth in almost all segments other than two wheelers.
Two wheelers grew by 0.9%, three wheelers degrew by 1.5%, passenger vehicles degrew by 11.9% and only commercial vehicles degrew by 13.7%. Before moving to the operation discussion I would like to bring to your notice that the annual report for FY25 is already available on our website and and we would encourage our stakeholders to go through our management letters to the shareholders to understand our progress so far and a future course of action. Coming to the operational performance during Q1 of FY26 the company registered a consolidated revenue of Rupees 20.3 billion with a growth of 6.8% year on year with India operations growing at 7.2%.
Our EBITDA for the quarter was at around 9.5% as compared to 9.1% on a year on year basis. Our PBT before exceptional items and JV profit was at 4.1% of revenue in quarter one FY26 as against 2.8% in quarter one of FY25. We’ve also established a dedicated RD setup in in China to support four wheeler electronics business which has also impacted our employee costs in the quarter. We continue to strengthen our balance sheet. The net debt of the company in Q1 of FY26 was reduced by 3002 million and as a result the net debt to equity is reduced to below 0.3 times.
The absolute net debt figure was at Rs 4,478 million in quarter one of FY26. We also achieved net new business wins with annualized peak revenues of rupees 2905 million. Our focus will continue to be on timely execution of the new business wins adhering to the best QCDD norms. The near term outlook in India, especially for electric vehicles is challenged due to supply of rare earth magnets. However, at Varrock we are leveraging our supply relationships global footprint and have developed alternative solutions with the help of a strong R and D capability to help the industry and our customers who overcome these challenges at the earliest.
We continue to adopt a positive mindset to find opportunities during this period of uncertainty. As emphasized earlier, we continue to remain focused on revenue growth, improvement in gross margins, control on our fixed costs and optimization of capex and working capital. All of this will enable us to generate a healthy free cash flow going forward in future, also further strengthening the balance sheet and improving the return ratios. I will now ask MK our Group CFO to walk you through the presentation and give more insights into the financial performance, we have uploaded the investor presentation to the stock exchanges as well as on our website.
Thank you.
Mahendra Kumar — Chief Financial Officer
Thank you Darain. Good evening everyone. So let me take you to slide number 7 of the presentation which has the highlights for Q1. So as our CMD explained, we had a 6.8% growth year over year with a revenue of 2028 crores with India operations registering a 7.2% growth. Now in the context of a moderate growth that we saw in the industry, we were ahead by about close to 6 to 7% ahead of the market. In terms of PBT, if you see we were at 4.1% compared to 2.8% in Q1 of last year. EBITDA was at 9.5% compared to 9.1%.
Same time last year the net debt was reduced significantly by 300 crores bringing the debt down to 448 crores as of end of Q1. In terms of the new annual peak revenue for the order that we won in Q1 it was about 291 crores of peak revenue and the revenue from supplying to EV customers grew to about 11% of revenue. Now as we announced earlier, the sale of China JV stake brought us about 340 crores in the month of May. In terms of patents, we filed another 10 patents taking the total to more than 130% on the renewable energy.
We previously communicated to you that there will be a second phase which will be starting in May or June. So that has started in June. It will be ramped up further in the month of the current month also. So with this we’ll be taking the total sourcing from renewable energy to close to 50% going to the next slide about industry performance. So on year over year basis in Q1 the two wheeler grew by just about 0.7% more or like a flat growth. Three wheeler grew by close to 9.8% and passenger vehicle by 3.4. Similarly on sequential basis two wheeler grew more or less again flat at around 0.9%.
All the other segments had a degrowth and then EV two wheeler volumes also on quarter over quarter basis degrew by 6.8% mainly impacted by the rare earth magnet issue and of course some seasonality impact also. But year over year it was strong at about 53% coming to our consolidated financials for Q1 which is there in the next slide. So 6.8% growth in the top line which meant an EBITDA of 9.5% compared to 9.1% in Q1 of last year. The PBT 82 crore. This is without the JV profits which also means about 4.1% in terms of PBT percentage.
You also see an exceptional item of about 61 crores of gain. This is basically the recognition of exchange gains on the JV value investment books like a transfer between FCTR and P and L. So transfer between two. More like a book entry. So with that the PPT is adding up to 144 crores. Another important point to be noted here is we also set up a dedicated RD team in certain overseas locations to support our four wheeler lighting and electronic business. So that is also one of the reasons we see a moderate growth in employee cost coming to the balance sheet items like net debt.
And all 448 crores was the net debt. So in terms of ratios, if you see the net debt to equity it was very healthy at 0.3 and net debt to EBITDA was below 0.6 0.58. The next slide we talked about the revenue breakdown for Q1. We also changed the classification of different businesses to bring in line with the NDO’s characteristics. And this is also the way we are operating our businesses now. So if you see the breakup, the three major segments, the lighting solutions now add up to 18% of the total revenue. Body parts add up to about 34% which are basically the polymer kind of products.
ICE Powertrain adds up to 26% followed by E mobility which is 6%. And the other segments are of course the smaller segments. Aftermarket of course is at around 10% in terms of the overall two wheeler and three wheeler plus four wheeler, two wheeler and three wheeler adds up to 75% and the rest and the business in India is 87% of the total and Bajaj revenue of the total is at around 45%. So in terms of the annual peak revenue we already spoke about, so 291 crores based on the Q1 orderings with 2 and 3 wheelers constituting about close to 67%.
And then Bajaj revenue was only about 38% with most of it coming from non Bajaj customers. And revenue from EV customers was close to 25% and the others are 75. So let me stop here. We’ll be happy to take your questions. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Jyoti Singh from Aryan Capital Markets Ltd. Please go ahead.
Jyoti Singh
Thank you for the opportunity sir. And congratulation on the good show on the pad side though it was exceptional from China. So my question majorly I wanted to understand going forward how will revenue growth will drive. And another on the order win side as mentioned in the presentation, 2905 million. So can you elaborate how the swings align with your long term growth strategy and especially for the EV segment?
Unidentified Speaker
Yeah. So I think from a, I think from a growth perspective, I think you see that we have, we have a relatively healthy order book and of course I think the ambition is to of course keep building this order book further. And in particular in some of the places like you mentioned, in particular with respect to EV models, I think over the last few years I think you will have seen that our order book has lent heavily towards EV models. And I think that is translated also as you will see in this quarter to significant growth from, you know, from, you know, from EV models.
So Q1 of last year we were at around 5%. This year I think we’re at around 11%. And yeah, like I said, I think going forward I think the aspiration is to grow faster than market. We’re in a sluggish market now but the aspiration is still to grow at least at double digit levels going forward as well.
Tarang Jain
So to add on, see we have always said that we want to grow 6 to 8% more than the market. And one is on the Q1 sales and everything where the sales were grew only by 6.8%. But talking about the business wins going forward, definitely we have, I think the Q1 was not so great for us from the point of view of business wins. But going forward the rest of the year we, we are looking at substantial business wins on the EV space whether it’s for two wheeler or in case of four wheeler. Even looking at abroad.
So we are confident that we can kind of declare from Q2 onwards better sales wins numbers. So this we are quite confident going forward because we are quite well aligned with the various customers from our side.
Unidentified Speaker
Just add Jyoti, one more aspect. From this quarter onwards we will be only declaring annual peak revenue, not the lifetime revenue of any business win. So that’s why optically it might look like that the order win which we are reporting is small. But these are annual peak revenue. That is the revenue which can we can do one year. This is not lifetime revenue.
Jyoti Singh
Just one more question on the. Like you mentioned Ottawans from the two wheeler, three wheeler and four wheeler side. So major revenue is coming from the two wheeler and three wheeler side. So if you can give us more insight on the four wheeler business inside.
Tarang Jain
So I think four wheeler when it comes to India our focus is more on, on lighting, four wheeler lamps and our plastic molding business which includes painted parts for various four wheeler customers in India, mainly passenger cars. So this is where we expect a good growth and auto wins in India and abroad also we are in touch with certain customers, especially in America for some new business wins to do more with electronics and that also and also for lighting. So this is also where we are looking at a good, a decent amount of business wins in the foreign markets also.
And I think that we are fairly confident that we will be reporting some good business wins from Q2 onwards.
Jyoti Singh
Okay, thank you sir.
operator
Thank you. The next question is from the line of Arvind Sharma from Citigroup. Please go ahead.
Arvind Sharma
Hi, good evening sir and thank you for taking my question. Sir, please pardon me for questions on the presentation because the format has changed. First would be on the peak revenue which you have highlighted the 2905 million and then you have. We have a chart on top left. Could you please explain how exactly you read this chart please sir?
Unidentified Speaker
Yeah, one second. Yeah, so yeah, so the annualized peak. Revenue is essentially the peak value of the business in the particular year that it achieves its peak value. So generally whenever we quote in automotive, whenever we quote a business, it is not necessarily always based on lifetime revenue but the volume is projected over time. And what we have considered is the volume, the steady state volume at full program ramp up. Right? So that is how we calculate what is the peak annual revenue. The chart on the left.
Unidentified Speaker
The chart on the left speaks about that. At the end of calendar year. The first bar shows that the end of FY25, what is the business the annual peak revenue which will SOP in FY26. So that is 840 of or 8400 millions and then on the out of that how much SOP has already been done in Q1 that is around 3800 million the peak revenue of that. And then in Q1 we have further won more business and all those things. So that 8400 now has increased to 8500. Whose SOP will start in FY26. Similarly the graphs are for FY27 and FY28.
Arvind Sharma
Correct. So this 3800 number, the SOP is 1Q FY26. Shouldn’t it be equal to the 2905 number? Because this is the peak revenue order that we have won. How do we read these two numbers?
Unidentified Speaker
2905 is the order which we have won in this quarter and the business which SOP has started that peak revenue will be 3800 million.
Arvind Sharma
Got it, got it. Thanks so much. Secondly, you change the methodology. Just a small accounting question. When you given the revenue breakdown for 1 KFY 26 is a 3% overseas revenue. However, when we go down, which we are thankfully, you know, thanks so much for sharing the previous data. There is no mention of the others business, the 3%. So where is 3% accounted for in the previous quarter, sir?
Unidentified Speaker
So that is accounted. This 3% is our IMS business in Italy. So that is accounted in our ice power trend.
Arvind Sharma
Got it. Thanks. Thanks so much. And just one final question if I may ask. Given the debt has gone down, definitely FCF should have been good. So what exactly drove the FCF this quarter? Yeah, the net debt reduction, sir.
Unidentified Speaker
Yeah, net debt reduction is a combination of FCF as well as the realization from China sale.
Arvind Sharma
Got it, Got it. Thank you so much. That’s all from my side. Thanks so much.
operator
Thank you. The next question is from the line of Vinay Jain from Karma Capital. Please go ahead. Yeah.
Vinay Jain
Hi. Good evening sir. Thank you so much for the opportunity and congratulations for a decent set of numbers against a challenging macro, at least on the domestic front. So I had just two questions. Basically when I look at the consolidated and standalone numbers. So at the standalone level, if we see which is largely now our India operations, so to say, we currently are at around 11% plus EBITDA margins and almost 6.5% PBT margins vis a vis at the console level as you said, it’s at around 9 and a half and 4.1% PBT. So this difference which is there, is it largely the loss which is coming from the overseas business for us?
Mahendra Kumar
Yeah, that’s right. So it’s a combination of the IMS business in Italy plus the other overseas businesses which we have, as we explained in the previous calls, the overseas business are going through some kind of a transition now because we are rebuilding the order book. But most of the order book will get converted into will start converting into sales starting from next year. Middle of next year we will see a Gradual revival there for the current year.
Vinay Jain
We should expect this sort of a run rate to continue. Is that understanding correct?
Mahendra Kumar
Yeah, correct. Because the good news from the new order wins. And orcs will only happen next year by second half of next year.
Vinay Jain
And so once that comes on board, once the execution over there starts, what kind of margin trajectory are we looking for? Especially the overseas business?
Mahendra Kumar
I think we don’t want to give any guidance. But yeah, it should look better than obviously what it is right now. But let’s wait for some time and then talk about it.
Vinay Jain
But on a full year basis FY27 should be able to break even on the OC’s business.
Mahendra Kumar
Yeah, it should be moderately profitable also. So it should be better than break even.
Vinay Jain
Understood. And just one bookkeeping question. What would be the gross debt as.
Mahendra Kumar
Of the quarter end it was about 825 crores. We also about close to 377 crores in cash. And cash.
Vinay Jain
Okay. But do we eventually like envisage to repay this debt with the cash which is there on books?
Mahendra Kumar
Yeah, yeah. Obviously there are certain restrictions also on bringing the money into India. We need to consider the tax implications and all those other things. So that’s what we are working on. Plus we’ll also be using some cash overseas also for. For our R D purposes also.
Vinay Jain
Okay. So sorry, sorry. Please go ahead.
Mahendra Kumar
No, no, that’s it, go ahead.
Vinay Jain
Yeah. The last question was on this litigation which is ongoing with plastic omium in netherland codes. So if you could just give any update on. On the same side.
Mahendra Kumar
Yeah, so it’s still in early stages. As we indicated earlier, we actually filed a legal suit against plastic omnium for violating certain supply agreement conditions. So then subsequently they also raised a few claims against us which we are disputing. And of course this may go through the arbitration process. We will update you more on this in the coming quarters.
Vinay Jain
Got it sir. Yeah. Thank you so much.
operator
Thank you. The next question is from the line of Sridhar Kalani from Access Securities Ltd. Please go ahead.
Unidentified Participant
Thank you for the opportunity. Hello sir, I just wanted to have some few questions. Firstly regarding the order book which states 290 crore annual peak revenue. If you could share a number excluding Bajaj, what would this number be? Hello.
Unidentified Speaker
Yeah, one second. Bajaj was 45% of this new order bill.
Unidentified Participant
Okay. So from the 290 crore 45% constitutes the peak annual order. All right. And.
Unidentified Speaker
Sorry, Bajaj was 38.4%. Is given. In slide 12 of our presentation. Bajaj was 38.4 percent.
Unidentified Participant
In the new order win also.
Mahendra Kumar
Yeah, yeah. This slide is all about new order wins.
Unidentified Participant
Only this. Yeah, right. And in the e mobility space. Just wanted to understand because of the non availability of rare earth magnets which basically for HRE motors, how well do we have expertise on the LRE motors as well and are we is it in the production pipeline for us?
Unidentified Speaker
Yeah, so from a design readiness perspective, I think along with our customers, both on existing and future programs, we are already either on LRE or on in some case rare earth free motor magnet, ferrite based magnet motors. Having said that, I think there are still topics around achieving the supply even for LRE magnets or in general magnets from China. So of course, you know we work with, we work with our different supply partners in China to build that pipeline. But yes, you know, I think even for the LRE there are definitely the logistics are not as easy as they used to be.
Unidentified Participant
Okay, so is the understanding correct? There is some supply chain issue with the LRE motors, but we are prepared on the R and D and technology front given availability of light resources.
Unidentified Speaker
Yep, yep. I mean in fact there are some, I mean there are some rare earth applications which we have completely de risked to. Not necessarily on e powertrain, but on other electrical products we make. There are certain rare earth applications we have already de risked and started supply. Also with, you know, with ferrite based magnet solutions, even with the lre, I think we have made some level of progress in terms of actual supply. Having said that, like I said, I think getting magnets from China in general is logistically harder than it used to be. Is not to say that magnets don’t come, magnets do come.
But the focus right now is to make sure we build a pipeline that is strong enough to really cover existing demand and also potential backlog demand.
Unidentified Participant
Any disruptions that we could face in the quarter two or second half of FY26.
Unidentified Speaker
I think in terms of total vehicle production, I think our customers are already talking about what is the level of disruption in Q2. Having said that, I think despite that disruption, our focus would be that as supply chain becomes more streamlined to really be able to recover the backlog also as quickly as possible.
Unidentified Participant
Understood. And you just mentioned that in America’s there is possibility of we winning the lighting solutions. So just needed some clarity. Are you talking about North America or South America over here?
Unidentified Speaker
No, we did not say that. We said with electronics there is potential in the Americas and even there we’re talking about North America.
Unidentified Participant
Okay.
Unidentified Speaker
So again to Be further clear, we. Mean North American customers. It does not necessarily mean the supply location is North America.
Unidentified Participant
Okay, got it. And with Bajaj coming up with a host of new products in the pipeline in the current year in the KTM160 segment, the EV, two wheelers and three wheeler. And so how well are we placed with these orders and if you could share any content numbers or directionally our position with these new launches in the coming next quarters.
Unidentified Speaker
Of course I don’t want to comment on customer specific launches but I think broadly in terms of content that we have shared in the past. On a two wheeler we have. On a two wheeler EV we have the ability to place anywhere between 30 to 35 thousand rupees worth of content. Similarly on a three wheeler EV it is a little bit higher than that between 35 to 40 thousand rupees piece of content. In the one hundred and fifty cc plus segments, our ability to place content is. It depends of course, you know, it depends really on what is the technology level of each individual model.
But that ability would be somewhere between 15 to 20,000 rupees. As we go lower to the 100cc, 110cc, it reduces because the technology level in those platforms is a lot lower there. I would say probably around 8,000 rupees, 7,000 rupees.
Unidentified Participant
Understood. And sir, any comments on your direction how we are seeing the two wheeler and passenger vehicle market being placed in the domestic space? What is your thoughts or any guidance if you could share us with regards to the production levels in general and capacity utilization at your plants?
Tarang Jain
Now see here, I would just like to say that, see it’s very difficult nowadays to predict what’s going to happen going forward. There’s so many uncertainties and because of the geopolitical issues and it impacts also the volumes in India, you know, for example, the rare earth magnets, you know, is definitely a dampener on the EV production, you know, at least in the short term alternate solutions are found. Now Q1 for us actually from a volume growth angle was quite a surprise for the Indian market. So I can only say that the coming season, normally when the season is there, maybe September, October, the couple of months, we will see definitely an increase because of the season.
But other than that it’s very difficult to predict the volumes. Even nowadays customers are not really giving us any, you know, forward directions on the volumes very clearly because even they don’t know what’s going to happen, you know. So for us to comment, you know, whether you know, Q2 or Q3, you know, is going to be much better is very difficult to say except during the season time where we feel it should be, it should be higher volumes.
Unidentified Participant
Thank you, thank you so much for your patients answer. Thank you so much.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Rahul Kumar from Baikaria. Please go ahead.
Rahul Kumar
Yeah, hi, thanks. Just to the re how much of the sales or volumes were impacted in the last quarter and do you expect the resolution by let’s say next quarter end? This quarter end?
Unidentified Speaker
Yes, I think we started to see some level of impact towards the, you know, towards the back half of Q1. I mean the absolute very end of Q1. I think we had a decent stock position before that and you know, like I said, like I said with the previous question, I think in terms of the de risking of design, in terms of the adaptation of manufacturing lines, you know all this work both for current as well as future programs is done. In some cases we have already not necessarily just in terms of E powertrain but we use rare earth magnets in other places also in other products also.
So in some places the de risking is executed in supply is also already begun. Having said that with magnets I think the supply chain is definitely more complicated than it has been in the past. Even though we are looking to import what is restriction free non restricted grades. So the focus now is really to make sure that as and when magnets arrive we are able to convert quickly and recover potential backlog.
Rahul Kumar
Okay, second question. I think you mentioned about some new order wins which are expected in from quarter two onwards. Can you tell us which segment are they? Is it Indian two wheeler review space or international or something else?
Unidentified Speaker
I think speaking of India, I think our focus continues to be on continues to be on E mobility lighting and high end electronics. And I think it is a similar focus globally as well also. So the expectation is that through the balanced portion of the year we should be executing, we should be executing a significant uptick in order wins also.
Rahul Kumar
Okay, understood. Last question. I think if I look at just your India business, I think the gross margins were pretty strong. I think this quarter at 35%. What exactly drove this?
Mahendra Kumar
If you are comparing with the previous quarter, Q4 generally has certain special items like we also had higher level of tool sales plus there were also certain year end inventory taking adjustments etc. So that actually reduced the gross margin. But so that’s why if you compare it last quarter yes, there was an improvement.
Rahul Kumar
Okay. And the operating margin in the India business which is 11 now, do we expect this trajectory to now continue for the, you know, next two, three quarters?
Mahendra Kumar
Again we don’t give any guidance, but yeah, man, it should sustain or should even improve. That should be our effort.
Rahul Kumar
Okay. Okay, that’s all. Thank you.
operator
Thank you. Participants who wish to ask questions may press star and one at this time. The next question is from the line of Arvind Sharma from Citigroup. Please go ahead.
Arvind Sharma
Hi. Thank you so much sir for taking my questions. Again, you’ve highlighted the new order wins. Is it possible to share some of the segments where these orders would be there like you shared the segment wise revenue, which ones would see greater share of new order win? The new orders rectifying over next couple of years.
Unidentified Speaker
So it would be really across all segments. Right, so it would be across all segments. I would imagine that the supply into EV models and I think this is called out also, right?
Unidentified Speaker
Yeah. So the supply into EV model is disproportionately higher. So I think 75% of the new order wins. No, sorry, 25. In this particular quarter, 25% of the new order wins are into EV models, 75% are into ICE models. But in terms of product segment, I would say it is relatively evenly split. And I think the leaders would be body parts and lighting.
Arvind Sharma
Got it. So thank you so much. And if I may just clarify once again, sorry for asking this multiple times. When we see the chart, for example in FY27 around 13 billion peak revenue, does it essentially mean that FY27 revenue would be at least 13 billion higher than FY26? Obviously like to like you would have some orders exhausting too. But this is what, how should we.
Unidentified Speaker
Should read it as compared to FY25? At least it should be as compared. To FY25 as compared to FY25.
Arvind Sharma
Got it, got it. Thanks. And one quick question. On the elevated employee cost, you say it was because of RD outside India. Any specific reason for establishing RD outside India? Because the X in A revenue is still quite low. And where exactly is this R and D establishment geographically and this will remain for some time, is it or will it sustain at these levels the employee cost?
Mahendra Kumar
Yeah. So like we explained earlier also I think we look for where exactly the competency lies. So at an overseas markets we see this kind of competence in certain areas. So that’s where we keep adding these are more or less like distributed.
Unidentified Speaker
Maybe there’s something to add that I think we’ve also mentioned that for our overseas locations we are expecting of course to announce new order wins in subsequent quarters. And of course this is also being enabled by some of the. By the R and D that we have by this increase in R and D that we have talked about.
Arvind Sharma
Got it. Thank you so much for answering my question, sir. That’s all from my side.
operator
Thank you. Before we take the next question we would like to remind participants Tariyomi press chart and one to ask a question. The next question is from the line of Apurva Mehta from AM Investments. Please go ahead.
Apurva Mehta
Yes sir. Can you quantify the overseas loss on EBITDA basis and on the TBD business for current quarter?
Unidentified Speaker
Because we find it substantially higher on the overseas business.
Mahendra Kumar
I mean we don’t comment on individual segments, but yeah, I mean you more or less have this standalone and you have the consolidator now. So you can derive.
Unidentified Speaker
But you know, you know, you know on the consolidated there are two Indian subsidies which are extremely profitable also. And if you remove. I don’t know about that. So if you want to just quantify the overseas laws which are specifically to the European side of the business because even the, our, our. The subsidiaries in the Asia subsidies are profitable. So you know what sense it means to continue this business. Is it. You know what kind of ROC we are looking even in next two years time to continue this business. Have we done anything which is.
Which is. Yeah. Because we are investing again more into this overseas business to make it profitable. So does it really make you know sense in next two three years to have a substantial ROC coming from the versus business which are extremely slow thinking?
Mahendra Kumar
Yes, I think we expanded in our previous calls also. So basically we should not come to this kind of conclusion based on the current performance. Like we explained earlier, these businesses were doing well earlier. Then there was some loss of business unexpectedly. So we are now trying to rebuild the order book. So if once. Once everything gets converted into sales starting from second half of next year, you will get to see the result.
Apurva Mehta
Okay. And it would be. It would be really that. It would be ROC accretive businesses. It would be kind of rocs which we are doing in India.
Mahendra Kumar
Yeah, I mean see these are like low capital intensive businesses. So obviously the ROC has to be better.
Apurva Mehta
Okay. And on the EV side are we getting any more wheel and EV order other than plastic components are. Are like general. But any other components we are looking with four wheeler OVS or something like that for ev Maybe just to.
Unidentified Speaker
You know. I think it was maybe two Quarters back that we announced that we’d had a business win with the North American EV OEM for their front drive unit and rear drive unit inverters. So this is something that we’ve already secured. It’s actually from the overseas side, I. Believe. The largest new businessman that we have mentioned, you know, over the last year at least so and so and of course the plan and we are confident of also duplicating this again or replicating this again
Apurva Mehta
on the India side. Any, any wins we are looking for any, any bids we have done and we are confident of winning. On the India side, of course you.
Unidentified Speaker
Cannot comment on RFQs that are still live, but only, only we want to.
Apurva Mehta
Know that are we bidding for some RFQs which are there and you know, we are hopeful of getting some of them or you know, just to get a sense of what, what’s happening.
Unidentified Speaker
Yeah. So for passenger car our products are essentially engine agnostic. Right. So whether it is like from an India perspective, so whether it is lighting, whether it is plastic, whether it is an ICE vehicle or an EV vehicle, we pursue all.
Apurva Mehta
But not on the, on any other than like which we are there in the, on the two wheeler side like motors or traction motors or something like that.
Unidentified Speaker
No. So, so so far passenger car e powertrain we have not looked at to, we have not looked to bid in India.
Tarang Jain
It’s not there on the electronic side, but abroad is where like we have won some of the electronics business with a North American customer that is going to be continuing, you know, with some North American customers going forward on the electronic side where we will see, you know, more winds coming in on the.
Apurva Mehta
Electronic side and that in over the period can be brought in India also.
Tarang Jain
That is for electronics plant in Romania which will see, you know, substantial growth, you know, going forward Today the issues which you mentioned, you know, abroad are there because the revenues are very low. But the competency and capability at the plant level is of the highest order. I mean is world class, the facilities world class. Even our engineering is world class. And with that and that is something we do not want to give up just for a short term, for short term losses. We are confident that going forward the business abroad on electronics for us will do very well.
And so that’s the reason that we want to actually maintain that. Yes, we have to carry on with the losses for a year or so more and then we can, you know, probably see the turnaround.
Apurva Mehta
Great, great, great, great, great, great sir, for you know, explaining us in detail because it was really helpful for us. Thanks. Thanks a lot. Yeah, thanks.
operator
Thank you. The next question is from the line of Ketan Sanghri, an individual investor. Please go ahead.
Unidentified Participant
Thank you for the opportunity. Now that our net debt is down to about 450 crores, can we expect any savings on the interest costs? I’m not sure what that is. But assuming a net debt is a 450, what kind of savings can we expect on the interest cost?
Mahendra Kumar
Yeah. So interest cost should be significantly lower than what we saw last year. In fact, it should be lower than what we saw in Q1 also because most of this repayment happened towards the later part of Q1. But having said that, like how we explained earlier, we continue to generate free cash flow in line with the PBT percentage that we see. There will be some additional investment in land and all which we explained earlier also of close to 150 crores. So between now and end of the year the debt may come down by about 100 to 150 crores.
Then you can compute the average and that should decide the interest cost for rest of the year.
Unidentified Participant
Thank you, sir.
operator
Thank you. Participants who wish to ask Questions may press charn1 at this time. We would like to remind participants that you may press charn1 to ask a question. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Tarang Jain
Thank you ICICI securities and to all the investors once again for joining the call and also for your continuing support. Thank you.
Unidentified Speaker
Thank you.
operator
Thank you on behalf of ICIC securities limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.