Thank you, Rutuja. Good evening, everyone.

On behalf of ICICI Securities, we would like to welcome you all to CIE Automotive India's Q3 CY26 earnings conference call. Today, we have with us from the management team Mr.

Ander Álvarez, Chief Executive Officer; Mr. K.

Jayaprakash, Chief Financial Officer; Mr. Vikas Sinha, Senior Vice President Strategy; and Mr.

Oroitz Lafuente, Global Business Controller. We will start the call with a brief opening remarks from the management team about the quarter gone by, and then we'll proceed to the Q&A session.

Thank you, and over to you, sir.

Thanks, Ronak, and thank you all for joining. Good evening.

Sorry for the late hour. I welcome all of you on this call, as also Ander as CEO.

I will present CIE India results for Quarter 3 and 9 months CY26, calendar year 26. The results of the India operations for Quarter 3 C26, that is the July to September 2026 quarter, are on page 6.

Sales in India were at INR 18 billion, which were 18% higher year-on-year versus Q3 C25, and 9% higher sequentially versus Q2 C26. Market demand in Q3 C26 was robust across all segments, though tractors growth slowed down appreciably compared to earlier quarters.

It must be noted that there is a wide discrepancy in growth reported for the heavy truck segment between different agencies, but even the lower estimate is very good. We expect a relative slowing down in market growth over the next few quarters as the effect of GST cuts diminish.

The India operations achieved an EBITDA margin of 16.3%, the way we calculate, in Q3 C26 versus 17.3% in Q3 C25 and 16.7% in Q2 C26. The margin drop is due to price pressures generated by the conflict in West Asia, mainly in raw materials, energy, and consumables.

In Q3 C26, EBITDA grew 11% year-on-year, EBIT 12%, and EBT 10% in the Indian operations. On page 7, we have the Q3 C26 results for our European operations.

Sales of INR 7.6 billion in Q3 C26 were 4% lower year-on-year versus Q3 C26 and lower sequentially by 15% versus Q2 C26. A sequential drop of 15% in sales between Q2 and Q3 is the seasonal pattern that is normally observed every year, with the annual holiday of 3 weeks in August reducing the number of working days in Q3.

The sales performance is reflective of the underlying market trend. The European auto market is stagnant, and this is coupled with expanding numbers for Chinese imports along with increasing penetration of electric vehicles.

On the other hand, margins were very healthy. The EBITDA margin in our European operations in Q3 C26 was 16.3% versus 14.1% in Q3 C25 and 15.9% in Q2 C26.

Margin recovery is because of last year's restructuring activities. In Q3 C26, EBITDA grew by 12% year-on-year, EBIT by 20%, and EBT by 26% in the European operations.

The bottom line in Europe continues to be robust in spite of a stagnant top line. On page 8, we have the consolidated CIE India Q3 C26 results.

Consolidated sales were INR 25.6 billion, 11% higher versus Q3 C26 and 8% higher sequentially. EBITDA was INR 4.2 billion, EBIT INR 3.2 billion, and EBT INR 3.2 billion again, higher year-on-year by 11%, 14%, and 14% respectively.

This represents a good consolidated performance, especially of the bottom line, which is largely supported by the Indian business. The 9-month C26 results for our Indian operations are on page 10.

Sales increased by 16% versus 9-month C25 to INR 50.7 billion. The double-digit growth was supported by a favorable market in the period.

It could have been higher. A key reason has been the streamlining of our business portfolio at our aluminum vertical.

The EBITDA margin of our Indian operations in 9-month C26 results was 16.9% versus 17.8% in 9-month C25. As explained earlier, the margin was depressed due to cost increases generated by energy and material inflation due to West Asia conflict.

While sales in the Indian operations grew 16% in 9-month C26, EBITDA grew 9%, EBIT 10%, EBT 9%, and PAT 8%. In the medium term, we do expect all the market segments in India to have good growth prospects despite the continuing geopolitical tensions.

We are investing in new orders and projects across all the verticals. In CY26, the overall capex in India will be almost double of last year.

The aluminum division is planning to diversify into four-wheeler HPDC parts, and this will require new lines. Our stampings division is planning expansion at multiple locations to meet the expectation of its two main customers.

Gears and composites have exciting orders in the EV space. Iron castings is running close to full foundry capacity and looking to expand.

Forgings vertical is planning expansion both at its Pune and Hosur plants. On page 11, we have the 9-month C26 results for our European operations.

Sales increased by 7% versus 9-month C25 to INR 25.7 billion. There was a healthy increase in EBITDA margin to 16.0% in 9-month C26 results versus 13.4% in 9-month C25, thanks to restructuring actions taken in the previous year.

Consequently, EBITDA in the European operations increased by 27% in 9-month C26, EBIT by 35%, EBT by 41%, and PAT by 44%. On page 12, we have the 9-month C26 consolidated results of CIE India.

Sales were INR 76.4 billion, which is 12% higher than 9-month C25. The EBITDA margin was 16.6% versus 16.3% in the corresponding period last year, and PAT 9.5% versus 9.2%.

The point to be noted is the consolidated PAT in 9-month C26 is INR 7.3 billion, which is 17% higher than in 9-month C25. Now we proceed to Q&A.

thank you. Hi, Vikas.

Also, sir, actually, can you give some insights on the order inflow that we have got during the current quarter? Also, in the last call, you have indicated that we started execution of the foundry parts for the American customer.

Can you brief us on that as well? How much was executed in Q3 and the revenue coming from that?

Order book in Q3. Okay.

The order book in Q3 was, let's say, quite healthy, and we got 9.7 billion total in, I'm talking year to date, 9 months, 9.7 billion rupees of new orders in all the the verticals in India and approximately 3 billion in Europe, okay? That's the order book that we have already consolidated in this year, this calendar year 26.

The new orders are spread between all the along all the verticals. Aluminum is one of the important businesses where we are we are growing.

Forgings, we are also growing importantly. That's why we are adding additional presses in our Chakan plant, and we we expect to also expand our machining plant, we will be able to machine all these additional crankshafts that we have been awarded.

That's the the evolution of the new orders. Regarding the our foundry's new Ford project, in Q4 we have not had any any sales to to this in this new project.

The order and the delivery started finally mid of October, during this month we have already started the supply. In the next months we will see in the next quarters you will see the impact of this additional project that has finally started, okay?

We had a delay in the SOP of approximately 6 months, mainly due to the customer-driven delay, not not our responsibility. Finally we started the SOP, and we expect to to have a better growth in our foundry division in the next quarters.

With this new project, we will have our foundry fully booked for next year, I mean once the ramp-up is finished by mid of next year. We will be fully booked in in our Urse plant, we are now planning also a new expansion for our casting division.

Thank you.

Understood. There's a couple of question on the Europe business.

One, in last call, actually, you have mentioned that the Mexican customer, GKN, has deferred the contract and that is the revaluation of the contract. What's happening there now and what is the plan for the excess capacity?

In general, actually, is the underperformance in the Europe business is because of this or is there any other reasons actually for the underperformance compared to the industry?

Yeah. No, this GKN contract that we renegotiated, we have already find the agreement and signed the reviewed contract with GKN.

The volumes has been reduced, but we extended the length of the duration of the contract, this has been already agreed. That means that our current turnover in BillForge Mexico will remain at the current level.

We saw a drop of approximately 20% compared to the previous year, but we will remain with these volumes in the next quarters. With that excess capacity, we had four presses in that plant, now one of the presses is being transferred to India.

We will install this press in our facility in Hosur in the next months. The press is already been dismantled and we will receive it in the Q1 of 2027.

That means that this capacity that we had in Mexico will be transferred to India.

Kishore,

just to...

Please go ahead.

No, yeah, a follow-up on the Europe performance compared to the industry. There's a wide variation in terms of if I calculate it in the euro terms.

Yes. Yes, you are right.

I forgot to answer you this last comment. The European drop, let's say, is driven by this Mexican drop partially, but also during this quarter, the demand because of the flat scenario that we are having and with additional electrification and the growth of the electrification in Europe is let's say, reducing our turnover approximately 5% in the quarter.

This is the situation that we are facing in Europe. Together with the Mexican drop and this additional drop that we had in Europe, we are at least having this new sales level that we expect to maintain in the next quarters.

It is true that the European market behavior it will be flat, and we don't see growth options unless there is a consolidation of the market that we also expect that will happen in the next years, okay? We don't know if it will happen, I don't know, in two, three quarters.

That is not expected, or at least we don't have any information, but in the long run, we will see the consolidation of the market. In that consolidation, we expect to be the winners.

Let's say that the business is profitable, margins are solid. As you can see, the margins improved because after the restructuring in our Italian business, we recuperate again the previous margins.

Let's say that we are now waiting and, let's say, adapting our business to the new scenario.

Kishore, just let me add:

yes,

on the top line we are stagnant and there is some trouble on that. On a YTD basis, we have grown 44% on PAT in Europe.

That is a very very significantly good performance, let's keep that in mind also.

Okay. Got it.

Just a follow-up on the India business. You did mention about the high base impact coming in.

How do you see the growth panning out for CIE India? Second is the margins impact and how do you see that pass-through coming through?

Is there any aluminum restructuring happened in Q3 as well, the aluminum vertical restructuring?

I'll answer the last question first. As far as the optimization of portfolio in aluminum, yes, it will go on till at least the mid of next year, because these things take time.

These are not simple things because we cannot let down the customer either. Yes, it will continue.

That's number one. Number two, as far as your question around market situation is there, if you go to page 16 of our presentation, we do have some indicative forecasts where you see the forecasts are more or less much lower than Q3.

Other than tractors, we still think that the other segments will do reasonably. That's what we think the market situation is good in India.

I would say of course the last few quarters have been tremendously good, but it will remain a good situation except maybe for tractors. That's the answer to your second question.

The first question regarding margins, JP, would you want to tell what happens to Indian margins? You asked

about the pass-through, how is this process going on. The pass-through negotiations are ongoing in this moment in the market with all the customers, and we have partially recognized a part of this negotiation because some of the agreements are already closed, and we are, let's say, negotiating the rest of the customers.

We expect that by the end of the year we will have all this pass-throughs already agreed, okay? Sometimes it's not easy because, of course, there are competition, discussions, market share balances.

This is what we are doing, but hopefully let's say that by the end of the year we will have for all the customers already settled.

This pass-through is for

non-raw material.

Non-raw material.

Raw material is indexed, raw material has not any impact, rather than the margin drop is because of the higher value of the raw material. That means that just because of that raw material increase, our margins are affected because we are selling more, but the added value is the same.

That's the explanation. It's just a margin issue.

Got it. Thanks.

I'll fall back in the queue. Yeah.

Hi, good evening. Congrats on India numbers.

I think after a while, we have always intended to achieve this, and we have, congratulations to the team. One, while we look at the forecast, etc., that you pointed to, a very high base was created last year post this GST cuts in September or odd.

Despite that, the projections for next 6 months, at least in our slide, seems to be from flat to maybe 1 + 5% for the larger part of the market. 80% of our business is anyway four-wheeler and two-wheeler.

Even on the production side and the feedback that you're getting, does this match? It seems good growth even on a very high base.

Except for tractors, I'll agree with what you're saying.

Great.

Tractors will possibly be more like what you see in the forecast. Now, these are forecasts from different agencies, including some of your colleagues, the forecasts are what they are.

Yes, except for tractors, maybe the others will maybe not as good as Q3, but yes, I don't think they will be bad. That's my feeling.

Right. Over and above this, a lot of delayed projects for us now has started ramping up or gone into production.

For us, there should be something over and above this.

Yes. Yes, that there is, yes.

[laughs] So, hopefully, I think I talked before about the Ford project that finally started. Yes, we should see certain growth on these new projects that are ramping up, yes.

Right. One, maybe you can explain this other income seems a very big jump this quarter.

That is grant income in our aluminum business. We've got the final approval, so that's been recognized.

Sorry?

Sorry, which income? Grant income?

Grant income. Capital

grant. Okay.

Right. Okay.

Last, a broad one on Europe, right? If we look at revenues in Europe, it does seems to keep getting worse.

I understand it's Chinese onslaught and EVs, etc., but anything that we are doing, and again consolidation is something that plays out when it plays out and we'll gain out of it, but anything that we can do now to kind of capture or arrest this fall? Rupee looks okay because of the currency, but otherwise in euro it's just getting worse.

Yes, in euros, we are talking about -10%, okay? That's the real figure in euros.

The

part of it is coming from the Mexican business that had a drop of 20%, and then it's true that this electrification growth is, let's say, reducing the demand on the internal combustion engine cars, okay? There is a balance, a new market share on the EVs versus the IC.

That's the explanation. The action plan that we are doing, of course, we are fighting for.

Of course, we are entering into certain EV components in our forging divisions, that the volumes and the, let's say, the turnover of these components are much lower than the crankshaft's value because of the weights are lower. That's the explanation of the lower volume turnover generated by these EVs.

Also what we see is that there will be a consolidation, and in certain businesses in Europe, we are already facing this consolidation. Some of our competitors are struggling financially because of the drop of the market during the last years and now especially.

We will see certain new organization, new share of the businesses between the different players in Europe, and we expect to be, let's say, one of the winner companies in this consolidation process, okay? That's how we see it.

In the short term, we are not worried because the business is profitable. We protect the margins.

We adjust the company to the new scenario, and, of course, we are working with the customers to increase our share. That's the situation.

Tough situation, because the European market is a tough environment, but we can say that we are one of the best companies in Europe with the best margins in Europe, so that is also something that market should recognize. Right.

Just to confirm this, GKN reduction, you said this 20% reduction is being shifted to India?

The machinery, the capacity, let's say the assets that we were using for that 20%, has been transferred to India, yes. We will use them in India because right now we are also with certain capacity issues in India.

With those, together with the new presses that we have had, we will increase our output in India.

Not for GKN, for all customers.

Not for GKN. It's a generic press, we can produce any part for any customer in hot forging.

Sir. Any reason why GKN kind of reduce orders for them?

No, the main reason is because GKN was acquired last year by American Axle, and in the new strategy, they had a lot of idle forging capacity in American Axle, they are integrating, they are insourcing partially the products. That's the reason.

They are using their own capacities after joining two companies.

Fair enough. Thanks and all the best.

Thank you.

Thank you. Thanks, Pratik.

Thank you.

Hi, congratulations Ander and team on a good performance in challenging environment. Thanks for the opportunity.

Ander, would like to understand there have been reading in the newspaper that European Union is arrived at some kind of a agreement with China on EV sides. What is your sense, and can you give more color to it?

Regarding EV imports, I guess he's talking.

Okay. Yes, let's say

there are still open discussions on that, and the main, let's say, subject of the biggest change that we have had received in the last weeks has been that European Union is thinking on setting a quota on the hybrids imported from China, okay? One year ago approximately, they set up certain tariffs, big tariffs on EVs.

The Chinese carmakers immediately adapt to the new situation, they start selling hybrid cars, plug-in hybrids, and mild hybrid cars in the European Union. This year, for example, year to date, they have already sold 800,000 hybrid cars in Europe.

The decision on the European Commission, forced by the European carmakers, is that they will set up a quota limit of the imports of hybrid cars from China, and the figure they have set is 350,000 per year. That means that they will sell less than a half than they have already sold in 2026, and this is something that probably will be implemented, and that will be very beneficial for us because all these cars, hybrid cars, they have also all these engine, transmission components that we are supplying to the European carmakers like Volkswagen, Audi, Renault, Mercedes, and so on.

If

out of that we may benefit in a medium term, is that correct understanding?

Is that correct, yes.

Second thing, even in Europe also EV adoption is increasing, how do we really want to play on this EV side of the story in Europe?

Yes, so that is true, because of also the one of the drivers of the EV market share increase has been the huge oil price increase due to the Iran war.

Correct.

Right now the oil prices, the petrol and diesel, are extremely high in Europe. That is moving, together with the cheaper EV car offers that not only the Chinese, but also the European carmakers are offering to the market, now there is a move on that sense.

We see that around 24, 25% of the cars sold in the last quarter are EVs. Of course, as we explained in our previous calls, we are also working with the customers on this EV components.

Of course, in the EV car, the amount of forged components, in terms of weight, is much lower. We are good in and we are working with them in certain aluminum forging components and also some gears and all this kind of components for the EVs.

As I explained before, the turnover coming from this EVs, because of the size of the components are much smaller than the crankshaft, the turnover is less. We are playing importantly, and approximately 10%, 10-12% of the new orders that we have got in this year are for EVs in Europe also.

Great. On India part, Vikas in his opening remark alluded that we are doubling down our capex in India than normal capex.

Then second point, we are seeing some softness on the Indian market. What has led and if you can give little more color how we, apart from industry, how we plan to grow much ahead as earlier we were growing.

This capex is for which, if you can give a little more color, detail on the capex?

That in CIE, now our plan was to grow both organically and inorganically in India. That's why, as we are a foreign-owned company, we had certain cash available for inorganic growth, to be able to acquire Indian companies.

The reality is that the current, let's say, valuation of the companies, and also we in the last 4, 5 years, we have not found a proper fit for this acquisition or for this inorganic growth. The strategic decision for us now is we will go for organic growth, and that's why this year we are going to double, almost, not double, but almost double the capex on growth in the different verticals.

On top of that, for next year, we expect also to be in the same range than this year, because we are thinking on additional expansions, and all the verticals are growing, okay? We are expanding the forging activity.

We are bringing one press from Mexico, but we have ordered two new presses for our Chakan plant. We are also adding an additional press and additional part formers in BillForge in Bangalore.

We are growing our gear division, and we are expanding the building. We are building a new 4,000 square meter plant.

We are also expanding the composites site, and we have add several presses. The iron foundry plant is completely fully booked in this moment, and for the next expansion, by 2028, we need to have additional foundry to cope with this orders that we have already been nominated.

That's the picture that we have. We have a big growth expected for the next years.

That's why we are adding capacities diversifying between the different technologies. That I forgot to mention also the stampings, but we are also adding a stamping, one stamping line, and expansion of one of the buildings in Kanhe and also thinking in further greenfield expansions.

Overall, we can say that all the technologies are now preparing for the growth and investing to get this growth that we are all willing.

Bharat sir, that we will have orders booked for all of these expansion plans. It won't be without orders being booked for these expansions.

Okay. Vikas, again, now further to this question, some of our like say Stellantis and ramp-up were not happening.

Now Stellantis itself is putting up a facility in India. How do we see in next 2 years the impact of these on our company?

Stellantis is a tricky case. In many other cases, yes, like Ander mentioned that our export order has been delayed by 6 months, so that will pick up.

Stellantis is a separate case altogether. Yes, they have announced big plans, but on the ground situation is slightly different as far as that order is concerned.

That was affecting our BillForge business, the BillForge four-wheeler business. We are actively looking for other customers there, and I think we are on track as far as that is concerned.

Ander, if you want to add anything.

No, the current orders from Stellantis are more or less the same, at the same level in the last quarter, we were expecting the growth of this orders, but unfortunately the assembly of the different engines that they are doing in India are not growing, we are following them, waiting for them to grow. Of course, our business depends also in the success of our customers, and unfortunately, in this case, we are not getting this growth.

We hope that in the near future, they will be able to grow and to recuperate the lost ground.

Thank you and all the best, sir. Thank you.

Thank you, Bharat. Thank you.

Hello?

Hi, my first question was regarding our India revenue, segmental revenue, and our standalone revenue has quite a bit of a... I'm

Hello, is it clear now?

Yeah. For India revenue, segmental revenue, and our standalone revenue has quite a bit of a difference.

That difference, should one assume, is that CIE Hosur?

Aluminum.

Aluminum. Aluminum has not merged yet?

No, not yet. We're waiting for NCLT approval.

Okay.

What would the margins of each of these divisions be?

Margins of

these divisions?

We don't disclose margins by verticals, because... You have the standalone numbers and you have the India numbers.

You can have a look at that.

Okay. In our standalone, other expenses have gone up 20% this quarter, and even they've been going up.

What would these expenses be?

These are energy, gases, consumables, what we mentioned as the areas where costs have increased and we're working with the customers to get some pass-through out of it.

Okay. My follow-up would be for Ander on a corporate action basis.

Have you considered ever putting the Europe business into the CIE parent to make India operations a little more easier? Second would be to use the stock repurchase program in India the same way you do in your parent company?

That's two big questions, very important questions. That decision belongs to CIE.

I am not now ready to give you a proper answer on that, okay? [laughs] But what you say is make sense, I will transfer this question also to CIE, and we will have a discussion on that, yeah.

Stock repurchase...

Yes, and at this moment, we are not thinking on a stock repurchase in India, mainly because we have decided to go to a strong capex plan to expand our capacities and to expand our businesses in India, we will need this cash for this growth, okay? We were having the cash and the net cash position for the inorganic growth.

Now we have doubts on the inorganic. We don't see any inorganic, let's say, good deal in terms of the money, of reasonable deal, we will go for the organic growth.

That's it.

Any ballpark range on capex in the next 3 years? You said you will double it, but...

No,

this year, what was said, this year will approximately double growth capex from last year as far as India is concerned. Next year would be almost similar to what growth capex we will do in CY26 overall for India.

Yes,

usually we are around 5% of capex, that is the standard we have. In this case, in previous years, we have been a little bit below that.

Now we can think about 8% of sales, something like that.

Perfect, 8% of sales. Great.

Thank you.

Thank you.

Thank you again for the participation in this call. I really appreciate the questions and also the deep and clever questions that you did.

I hope we show the strength of our company and also our willingness to continue our growth journey in India. We have, let's say, reinforced this bet with this additional capex that we are now deploying, and we expect that we will fulfill the expectations of the market and of the investors in the next years.

Thank you to all of you, and as always, I thank to all my CIE India team for this great job, committed job, and I am sure that we will get fantastic results in the future. Thank you, everybody.

Any comment, Vikas?

No. Thanks for joining at this late hour.

We had some logistical issues on our end, but thank you very much. Thank you for your participation and have a great evening.

Have a nice day.