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Bearings

Bearings Sector Analysis - Q2 FY2026

The bearings sector, crucial for automotive and industrial motion, sees significant growth this quarter, with strategic expansions and localization, despite cyclical economic sensitivities.

Bearings Sector: Comprehensive Industry Analysis and Schaeffler India Limited Profile

Small Summary

The Bearings sector in India, as illuminated by the performance of Schaeffler India Limited, demonstrates robust growth driven by a dynamic interplay of automotive and industrial demand, coupled with strategic localization and portfolio expansion initiatives. Schaeffler India, a prominent player, has consistently delivered double-digit revenue and profitability growth, with its Q3 CY2025 standalone revenue reaching INR 23,601 million, marking a 13.9% YoY increase. The company's strategic focus on Automotive Technologies and Intercompany Exports has yielded significant gains, while its Bearings & Industrial Solutions segment, though showing more modest growth in the short term, is undergoing substantial portfolio expansion and localization efforts targeting critical industrial applications like steel, cement, and mining. Operating margins have seen consistent improvement, with Q3 CY2025 EBITDA margins at 20.2%, attributed to volume gains and efficient fixed cost absorption. The broader economic landscape, characterized by resilient GDP growth, strong IIP output, and positive trends in key automotive sub-segments (CVs, Tractors, SUVs), provides a favorable backdrop for the sector. However, the sector remains sensitive to economic cycles and raw material price fluctuations, necessitating continuous operational efficiency and strategic agility. Schaeffler's strong free cash flow generation and sustained capital expenditure underscore its commitment to long-term growth and market leadership in motion technology.

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A. INDUSTRY OVERVIEW & MARKET LANDSCAPE

The Bearings sector is a foundational component of the broader industrial and automotive landscape, providing critical elements for motion and friction reduction across a vast array of machinery and vehicles. Its health is intrinsically linked to the performance of key end-user industries, making it a bellwether for manufacturing and economic activity. The Indian bearings market, as evidenced by the operations of Schaeffler India Limited, is characterized by its diverse applications, a blend of OEM and aftermarket demand, and a growing emphasis on advanced technological solutions and localization.

Total Addressable Market Size and Growth Rates

While specific aggregate market size figures for the Indian bearings sector are not provided, the robust financial performance of Schaeffler India Limited offers a strong indication of a growing and substantial market. Schaeffler India's standalone revenue for Q3 CY2025 stood at INR 23,601 million, with a 9M CY2025 revenue of INR 67,523 million. The company has consistently achieved double-digit year-on-year (YoY) revenue growth, with 9M CY2025 YoY growth at 12.7% and Q3 CY2025 YoY growth at 13.9%. This sustained growth across multiple quarters and segments suggests a healthy and expanding total addressable market for bearings and related motion technology solutions in India.

The growth is not uniform across all segments, indicating varying market dynamics within the broader sector. For instance, Schaeffler's Automotive Technologies segment grew by 18.7% YoY in 9M CY2025, and a significant 28.8% YoY in Q3 CY2025, highlighting strong demand from automotive OEMs. Similarly, Intercompany Exports & others, which includes exports of bearings and components, demonstrated exceptional growth of 27.5% YoY in 9M CY2025 and 37.2% YoY in Q3 CY2025, pointing to India's increasing role as a manufacturing hub for global bearing demand. In contrast, the Bearings and Industrial Solutions segment, while a significant contributor to revenue (38% of Q3 CY2025 sales mix), showed a more modest 4.1% YoY growth in 9M CY2025 and a slight contraction of -1.3% YoY in Q3 CY2025. This suggests that while the industrial segment is large, its growth trajectory can be more cyclical or subject to specific project timelines compared to the automotive sector.

Market Structure and Segmentation

The bearings market is highly segmented, catering to distinct customer needs and application requirements. Based on Schaeffler India's reporting, the market can be broadly segmented by end-use industry and customer type:

1. **Automotive Technologies (35% of Q3 CY2025 sales mix):** This segment primarily serves Original Equipment Manufacturers (OEMs) in the automotive industry. It includes components for Passenger Vehicles (PVs), Commercial Vehicles (CVs), Two-wheelers (2W), Three-wheelers (3W), and Agricultural Tractors. Products typically include engine components, transmission systems, clutch systems, and other specialized bearings and motion components. Schaeffler's business wins in hydraulic tensioners (PV), HD Clutches (CV), and continued momentum in Dampers and LV Clutches across PVs and CVs underscore the breadth of this segment. 2. **Vehicle Lifetime Solutions (12% of Q3 CY2025 sales mix):** This segment focuses on the automotive aftermarket, providing replacement parts, service solutions, and maintenance products. It caters to independent workshops, service centers, and individual vehicle owners. The emphasis here is on product availability, range extension, and customer support. Schaeffler's focus on "volume wins for new launches (wipers and center joint support)" and the "launch of automotive lube vending machine" highlights its strategy to expand its aftermarket portfolio and penetration. 3. **Bearings and Industrial Solutions (38% of Q3 CY2025 sales mix):** This is a broad segment encompassing a wide range of industrial applications. It serves OEMs and aftermarket customers in heavy industries, manufacturing, infrastructure, and specialized machinery. Key applications include: * **Heavy Industries:** Steel, Cement, Mining, Power Plants, Pulp & Paper. * **Off-road Segment:** Construction equipment, agricultural machinery (beyond tractors, e.g., excavators, loaders). * **General Industrial:** Manufacturing equipment, machine tools, material handling, and various other industrial machinery. * Products include various types of bearings (e.g., slewing rings, roller and ball screws, CRBs, TRBs, ACBBs), condition monitoring systems, and related accessories (cast steel housings, adapter/withdrawal/hydraulic sleeves). 4. **Intercompany Exports & Others (15% of Q3 CY2025 sales mix):** This segment represents exports of products and components, likely to other Schaeffler group entities or international customers. Its significant growth indicates India's increasing role in the global supply chain for bearings and motion technology.

Key End Markets and Applications

The diversity of Schaeffler India's segments highlights the extensive reach of bearings across critical economic sectors:

  • **Automotive Sector:**
  • **Industrial Sector:**

Geographic Distribution and Regional Dynamics

The data points to a strong domestic market complemented by a rapidly growing export component. Schaeffler India's "Domestic business" showed a healthy 10.5% YoY growth and 5.0% QoQ growth, indicating robust internal demand. Concurrently, "Intercompany Exports & others" segment's exceptional growth (37.2% YoY in Q3 CY2025) suggests that India is not only catering to its internal needs but also becoming a significant contributor to the global supply chain, likely leveraging cost efficiencies and manufacturing capabilities. The establishment of a new manufacturing facility in Savli, Gujarat, specifically for new products, further reinforces the commitment to expanding domestic production capacity, potentially serving both domestic and international markets.

Market Maturity and Lifecycle Stage

The Indian bearings market appears to be in a growth to mature stage, characterized by: * **Sustained Double-Digit Growth:** Schaeffler's consistent revenue growth indicates an expanding market. * **Technological Advancement:** Continuous introduction of new products (e.g., hydraulic tensioners, HD Clutches, slewing rings, roller/ball screws, condition monitoring systems, X-life quality standards) suggests innovation and a move towards higher-value, specialized solutions. * **Localization Drive:** Schaeffler's "localization commitment" and widening of its existing portfolio indicate efforts to reduce import dependency, optimize supply chains, and cater more effectively to local market needs, which is typical of a maturing market aiming for self-sufficiency and efficiency. * **Aftermarket Focus:** The emphasis on "Vehicle Lifetime Solutions" and "portfolio expansion and penetration through range extension" in the aftermarket segment points to a mature market where the installed base of machinery and vehicles creates a steady demand for maintenance and replacement parts. * **Strategic M&A:** The mention of KRSV Innovative Auto Solutions Private Limited (even with initial negative margins) suggests strategic acquisitions to expand capabilities or market reach, a common feature in evolving markets.

Industry Value Chain and Ecosystem

The bearings industry value chain is complex, involving raw material suppliers, component manufacturers, bearing manufacturers, distributors, and end-users. * **Raw Material Suppliers:** Provide steel, alloys, and other materials essential for bearing production. Schaeffler's "Business wins for CRBs, TRBs, ACBBs in raw material sector" implies engagement with suppliers or customers in this upstream part of the chain. * **Component Manufacturers:** Produce specialized parts that go into bearings or related motion technology products. * **Bearing Manufacturers (like Schaeffler India):** Design, develop, and manufacture a wide range of bearings and motion components. They invest heavily in R&D, manufacturing facilities (e.g., Savli, Gujarat), and quality control (e.g., X-life quality standards, Zero Defect Supplies awards). * **Distributors/Aftermarket Channels:** Crucial for reaching end-users, especially in the Vehicle Lifetime Solutions and industrial aftermarket segments. The "automotive lube vending machine" is an example of innovation in distribution. * **End-Users:** Automotive OEMs, industrial manufacturers (steel, cement, mining, power, pulp & paper), and individual vehicle owners.

The ecosystem is also supported by technology providers for condition monitoring systems and advanced sealing solutions, highlighting a move towards integrated solutions rather than just component supply.

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B. FINANCIAL & ECONOMIC PROFILE

The financial and economic profile of the bearings sector, as reflected through Schaeffler India Limited's performance, indicates a robust and improving landscape. The company demonstrates strong revenue growth, expanding profitability, and efficient capital management, all within a supportive macroeconomic environment.

Industry Aggregate Revenue Scale and Growth Trajectory

While specific industry aggregate figures are not available, Schaeffler India's financial performance serves as a strong proxy for the sector's health, given its significant presence. The company has consistently achieved double-digit revenue growth, indicating a buoyant market.

**Schaeffler India Standalone Revenue (mn INR):** * Q1 2024: 18,492 * Q2 2024: 20,719 * Q3 2024: 20,728 * Q4 2024: 20,823 * Q1 2025: 21,100 * Q2 2025: 22,821 * Q3 2025: 23,601 * 9M 2024: 59,940 * 9M 2025: 67,523 * Consolidated Q3 2025: 24,346 (includes KRSV Innovative Auto Solutions Private Limited revenue of 748 mn INR)

**Revenue Growth Rates (%):** * **YoY Growth:** * Q1 2025: 14.1% * Q2 2025: 10.1% * Q3 2025: 13.9% * 9M 2025: 12.7% * 9M 2024: 11.6% * Q3 2024: 12.1% * **QoQ Growth:** * Q1 2025: 1.3% * Q2 2025: 8.2% * Q3 2025: 3.4% * Q3 2024: 0.04%

The consistent double-digit YoY growth (averaging 12-14% in 2025) across quarters and the 9-month period signifies strong underlying demand. The sequential growth, while varying, shows a positive trajectory, with Q2 2025 and Q3 2025 demonstrating healthy QoQ increases. The consolidated revenue for Q3 2025, at INR 24,346 million, further expands the company's scale, incorporating the newly acquired KRSV Innovative Auto Solutions Private Limited.

Profitability Levels Across Companies

Schaeffler India has shown a remarkable trend of improving profitability margins, indicating effective cost management and operational leverage from increased volumes.

**Schaeffler India Standalone EBITDA (mn INR) and Margins (%):** * Q1 2024: 3,388 (18.3%) * Q2 2024: 3,848 (18.6%) * Q3 2024: 3,828 (18.5%) * Q4 2024: 3,904 (18.8%) * Q1 2025: 4,071 (19.3%) * Q2 2025: 4,489 (19.7%) * Q3 2025: 4,760 (20.2%) * 9M 2024: 11,064 (18.5%) * 9M 2025: 13,320 (19.7%) * Consolidated Q3 2025: 19.1% (This is lower than standalone, likely due to KRSV's negative margins) * KRSV Innovative Auto Solutions Private Limited Q3 2025 EBITDA Margin: -14.7%

**EBITDA Growth Rates (%):** * QoQ Q1 2025: 4.3% * QoQ Q2 2025: 10.3% * QoQ Q3 2025: 6.1% * YoY Q1 2025: 20.2% * YoY Q2 2025: 16.6% * YoY Q3 2025: 24.4%

The EBITDA margin has consistently expanded from 18.3% in Q1 2024 to 20.2% in Q3 2025, reflecting "better operating margin due to volume and fixed cost absorption." This upward trend in margins, coupled with strong double-digit EBITDA growth (e.g., 24.4% YoY in Q3 2025), indicates robust operational efficiency and pricing power. The consolidated EBITDA margin being lower (19.1% in Q3 2025) is directly attributable to the negative margins of KRSV Innovative Auto Solutions Private Limited (-14.7%), suggesting that while the core business is highly profitable, new acquisitions might initially dilute overall margins during their integration or ramp-up phase.

**Schaeffler India Standalone EBIT (mn INR) and Margins (%):** * Q3 2024: 3,128 (15.1%) * Q2 2025: 3,718 (16.3%) * Q3 2025: 3,920 (16.6%) * 9M 2024: 9,125 (15.2%) * 9M 2025: 10,916 (16.2%) * Consolidated Q3 2025: 15.5% * KRSV Innovative Auto Solutions Private Limited Q3 2025 EBIT Margin: -16.7%

EBIT margins also show a similar positive trend, improving from 15.1% in Q3 2024 to 16.6% in Q3 2025, reinforcing the narrative of improving operational leverage.

**Schaeffler India Standalone EBT (mn INR) and Margins (%):** * Q3 2024: 3,332 (16.1%) * Q2 2025: 3,980 (17.4%) * Q3 2025: 4,129 (17.5%) * 9M 2024: 9,787 (16.3%) * 9M 2025: 11,666 (17.3%) * Consolidated Q3 2025: 16.2% * KRSV Innovative Auto Solutions Private Limited Q3 2025 EBT Margin: -20.1%

EBT margins have also risen, from 16.1% in Q3 2024 to 17.5% in Q3 2025. The net interest income for Q3 2025 was 209 mn INR (up from 204 mn INR in Q3 2024), contributing positively to EBT.

**Schaeffler India Standalone PAT (mn INR) and Margins (%):** * Q1 2024: 2,277 (12.3%) * Q2 2024: 2,535 (12.2%) * Q3 2024: 2,471 (11.9%) * Q4 2024: 2,493 (12.0%) * Q1 2025: 2,654 (12.6%) * Q2 2025: 2,962 (13.0%) * Q3 2025: 3,067 (13.0%) * 9M 2024: 7,283 (12.2%) * 9M 2025: 8,683 (12.9%)

**PAT Growth Rates (%):** * QoQ Q1 2025: 6.4% * QoQ Q2 2025: 11.6% * QoQ Q3 2025: 3.5% * YoY Q1 2025: 16.6% * YoY Q2 2025: 16.8% * YoY Q3 2025: 24.1%

PAT margins have also shown a consistent upward trend, from 11.9% in Q3 2024 to 13.0% in Q3 2025. The strong YoY PAT growth (24.1% in Q3 2025) mirrors the EBITDA growth, indicating that the improved operational performance is flowing through to the bottom line.

**Range of Margins with Median and Outliers:** For Schaeffler India, the EBITDA margins have ranged from 18.3% (Q1 2024) to 20.2% (Q3 2025) over the observed period, with a clear upward trend. The median for the 9 quarters would be around 18.8-19.3%. The outlier for consolidated margins is due to the acquisition, KRSV, which has significantly negative margins (EBITDA -14.7%, EBIT -16.7%, EBT -20.1%). This highlights the potential for margin dilution from strategic investments in nascent or integrating businesses, even if the core business remains highly profitable.

Return Profiles (ROCE, ROE, ROIC) by Company

Specific return ratios (ROCE, ROE, ROIC) are not explicitly provided in the extracted data. However, the strong and improving PAT margins, coupled with efficient capital allocation (as discussed in Capex and FCF below), suggest a healthy return profile for Schaeffler India. The company's ability to generate significant free cash flow (FCF) indicates effective utilization of capital and strong cash conversion.

Working Capital Characteristics and Cash Conversion Cycles

Efficient working capital management is crucial for capital-intensive industries like bearings. Schaeffler India demonstrates active management of its working capital.

**Schaeffler India Working Capital (mn INR):** * Q1 2024: 13,497 * Q2 2024: 15,670 * Q3 2024: 15,683 * Q4 2024: 15,165 * Q1 2025: 15,426 * Q2 2025: 16,238 * Q3 2025: 16,942

**Working Capital (% to sales - based on LTM sales):** * 3M 2024: 18.5% * 6M 2024: 20.2% * 9M 2024: 19.8% * 12M 2024: 19.0% * 3M 2025: 18.5% * 6M 2025: 18.7% * 9M 2025: 19.0%

Working capital in absolute terms has generally increased over the period, from INR 13,497 million in Q1 2024 to INR 16,942 million in Q3 2025. However, as a percentage of sales (likely LTM sales), it has remained relatively stable, fluctuating between 18.5% and 20.2%. The Q3 2025 figure stands at 19.0%. The management notes "changes in anticipation of demand due to GST reforms," suggesting proactive inventory management. A stable working capital percentage amidst strong revenue growth indicates efficient management and good cash conversion, preventing excessive capital tie-up.

Capital Intensity Requirements

The bearings industry is inherently capital-intensive, requiring significant investment in manufacturing facilities, machinery, and technology. Schaeffler India's Capex figures reflect this requirement, with a clear focus on growth and localization.

**Schaeffler India Capex (mn INR):** * Q1 2024: 1,731 * Q2 2024: 1,002 * Q3 2024: 2,076 * Q4 2024: 1,550 * Q1 2025: 825 * Q2 2025: 1,555 * Q3 2025: 843 * 9M 2024: 5,362 * 9M 2025: 2,670

**Capex (% to sales - based on LTM sales):** * 3M 2024: 9.4% * 6M 2024: 8.4% * 9M 2024: 8.9% * 12M 2024: 8.6% * 3M 2025: 3.9% * 6M 2025: 4.2% * 9M 2025: 4.0%

Schaeffler India has undertaken substantial capital expenditure, with 9M 2024 Capex at INR 5,362 million. While 9M 2025 Capex is lower at INR 2,670 million, the company explicitly states that "Capex focus remains on growth and localization." The Capex as a percentage of sales has decreased from around 8-9% in 2024 to 3.9-4.2% in 2025, suggesting that a period of significant investment might have been completed or is being optimized, leading to better asset utilization and free cash flow generation. The establishment of the Savli, Gujarat manufacturing facility for new products is a testament to this ongoing investment strategy.

Revenue Quality (Recurring vs One-time, Contract Length)

The revenue quality for Schaeffler India appears to be a healthy mix of recurring and project-based income. * **Recurring Revenue:** The Vehicle Lifetime Solutions segment (aftermarket) inherently provides recurring revenue streams from replacement parts and maintenance services. Similarly, long-term supply agreements with automotive and industrial OEMs (Automotive Technologies, Bearings and Industrial Solutions) also contribute to recurring revenue. * **Project-based/New Business Wins:** The mention of "business wins" for specific products (hydraulic tensioners, HD Clutches, slewing rings, roller/ball screws) suggests a component of revenue derived from securing new projects or contracts, which might have varying lengths. * **Intercompany Exports:** This segment likely involves stable, long-term supply arrangements within the global Schaeffler network.

The balanced portfolio across OEM, aftermarket, and exports provides a diversified and resilient revenue base, mitigating risks associated with over-reliance on any single customer type or project.

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C. COMPETITIVE STRUCTURE & DYNAMICS

The competitive structure of the bearings sector in India, while not fully detailed by the single company data, can be inferred through Schaeffler India's strategic actions and market positioning. It suggests a market with significant competitive intensity, where differentiation through technology, quality, and localized solutions is paramount.

Number of Players and Market Concentration

The provided data focuses solely on Schaeffler India Limited, making it impossible to determine the exact number of players or the overall market concentration. However, the global bearings market is known to be dominated by a few large multinational players (e.g., SKF, FAG (part of Schaeffler), Timken, NSK, NTN, Koyo), with a significant presence of domestic players in various segments. Given Schaeffler's comprehensive product portfolio and strong financial performance, it is likely a leading player in the Indian market, particularly in the premium and specialized segments. The need for continuous "business wins" and "portfolio expansion" implies a competitive environment where market share is actively contested.

Market Share Distribution

Specific market share percentages are not available in the provided data. However, Schaeffler India's substantial revenue (Q3 CY2025 standalone revenue of INR 23,601 million) and its diverse segment contributions (Automotive Technologies: 35%, Vehicle Lifetime Solutions: 12%, Bearings & Industrial Solutions: 38%, IC Exports & Others: 15%) indicate a significant market presence across various end-user industries. Its consistent double-digit growth suggests it is either gaining market share or growing in line with a rapidly expanding market.

Competitive Intensity Assessment (Porter's 5 Forces Style)

1. **Threat of New Entrants (Moderate to Low):** * **Barriers to Entry:** High. The bearings industry requires significant capital investment (Capex for manufacturing facilities, R&D for product development), advanced technology, specialized engineering expertise, and stringent quality control (e.g., X-life quality standards, Zero Defect Supplies). Establishing a brand reputation and extensive distribution networks (especially for aftermarket) also takes time and resources. * **Localization Commitment:** Schaeffler's focus on localization strengthens its position against potential new entrants who might struggle to replicate local manufacturing and supply chain efficiencies. * **Acquisition Strategy:** The acquisition of KRSV Innovative Auto Solutions Private Limited could be a strategy to consolidate market position or acquire niche capabilities, further raising the bar for new entrants. * **Conclusion:** While some smaller players might enter niche segments, the overall threat for large-scale, diversified bearing manufacturing is relatively low due to high capital and technological barriers.

2. **Bargaining Power of Buyers (Moderate to High):** * **OEMs:** Large automotive and industrial OEMs are sophisticated buyers with significant purchasing power, often demanding competitive pricing, high quality, and just-in-time delivery. "Business wins" imply a competitive bidding process. * **Aftermarket:** While fragmented, large distributors or service chains can exert some pressure. However, brand reputation (e.g., Schaeffler's quality awards) and product availability (e.g., range extension, lube vending machines) can mitigate this power. * **Standardized vs. Specialized Products:** For highly specialized bearings (e.g., slewing rings, roller/ball screws, X-life quality SRBs), buyer power might be lower due to fewer alternative suppliers. For more commoditized bearings, buyer power would be higher. * **Conclusion:** Buyers, especially large OEMs, possess moderate to high bargaining power, necessitating continuous innovation, quality, and cost efficiency from bearing manufacturers.

3. **Bargaining Power of Suppliers (Moderate):** * **Raw Materials:** Steel and other alloys are critical inputs. Fluctuations in commodity prices can impact profitability. "Business wins for CRBs, TRBs, ACBBs in raw material sector" could imply strategic engagement with raw material suppliers or customers who are also raw material producers, potentially influencing supply chain stability. * **Specialized Components:** Suppliers of highly specialized components or manufacturing equipment might have some bargaining power. * **Localization:** Schaeffler's localization efforts aim to reduce dependency on international suppliers, which could mitigate supplier power over time. * **Conclusion:** Supplier power is moderate, primarily driven by commodity price volatility and the availability of specialized inputs.

4. **Threat of Substitute Products or Services (Low to Moderate):** * **Direct Substitutes:** For most applications, bearings are fundamental and have no direct substitutes. Alternative friction reduction technologies are often niche or not universally applicable. * **Technological Evolution:** Advances in materials science or alternative motion technologies could pose a long-term threat, but this is typically a gradual evolution rather than a sudden disruption. * **Integrated Solutions:** The move towards "industrial lifetime solutions" and "condition monitoring systems" suggests a shift from merely selling components to providing integrated services, which could be seen as a form of value-added substitution for traditional maintenance practices. * **Conclusion:** The threat of direct substitutes is low. The primary "substitute" might be alternative design philosophies that reduce the number of bearings needed or extend their lifespan, which the industry actively addresses through product innovation (e.g., X-life quality).

5. **Rivalry Among Existing Competitors (High):** * **Growth Drivers:** The Indian market is growing, attracting intense competition. * **Differentiation:** Companies like Schaeffler differentiate through product innovation (hydraulic tensioners, HD Clutches, slewing rings, roller/ball screws), quality standards (X-life), and application-specific solutions. * **Strategic Initiatives:** Constant "business wins," "portfolio expansion," and "localization" efforts are direct responses to competitive pressures. * **Global Players:** The presence of multiple global bearing giants in India ensures high rivalry. * **Conclusion:** Rivalry is high, driving continuous innovation, efficiency, and customer focus.

Entry Barriers and Competitive Moats

The bearings sector has significant entry barriers, which contribute to the competitive moats of established players like Schaeffler India: * **Technological Expertise & R&D:** Developing high-performance, application-specific bearings requires deep engineering knowledge, material science expertise, and continuous R&D investment. Schaeffler's new business wins and product launches (e.g., X-life quality, advanced sealing) highlight this. * **Capital Intensity:** Setting up modern, efficient manufacturing facilities is highly capital-intensive, as evidenced by Schaeffler's substantial Capex and new Savli facility. * **Quality & Reliability:** Bearings are critical components; failure can lead to significant downtime and safety issues. Hence, customers demand proven quality and reliability, which takes years to build (e.g., "Zero Defect Supplies" awards). * **Customer Relationships & Brand Reputation:** Long-standing relationships with OEMs and a trusted brand in the aftermarket are powerful moats. * **Distribution Network:** An extensive and efficient distribution network is crucial for reaching diverse customers, especially in the aftermarket. * **Localization & Supply Chain Integration:** The ability to localize manufacturing and integrate into local supply chains (as Schaeffler is doing) creates cost advantages and reduces lead times, making it harder for new entrants.

Pricing Power Dynamics and Pricing Trends

While explicit pricing trends are not detailed, Schaeffler's improving operating margins ("better operating margin due to volume and fixed cost absorption") suggest a degree of pricing power or at least the ability to manage costs effectively to maintain or expand margins. In a competitive market, significant pricing power is often limited to highly specialized or technologically superior products where alternatives are few. For more standard products, pricing is likely more competitive. The focus on "X-life quality standards" and advanced features implies a strategy to offer premium products that can command better prices.

Consolidation Trends and M&A Activity

The acquisition of KRSV Innovative Auto Solutions Private Limited by Schaeffler India indicates a trend towards consolidation or strategic expansion through M&A. This suggests that larger players are looking to strengthen their market position, acquire new technologies, expand their product portfolio, or enter new segments. While KRSV currently shows negative margins, it represents a strategic investment, potentially for future growth or diversification. This activity is common in maturing industries where scale and breadth of offerings become increasingly important.

Competitive Advantages of Each Player (Schaeffler India)

Based on the provided data, Schaeffler India's competitive advantages include: * **Comprehensive Product Portfolio:** Covering Automotive Technologies, Vehicle Lifetime Solutions, and Bearings & Industrial Solutions, catering to a wide range of applications and customer types. * **Technological Leadership & Innovation:** Demonstrated by continuous "business wins" for advanced products (hydraulic tensioners, HD Clutches, slewing rings, roller/ball screws) and the launch of new, high-quality products (Large-size SRBs, X-life quality, condition monitoring systems). * **Strong Brand Reputation & Quality:** Evidenced by "Best Quality Export Parts Award" from Escorts Kubota and "Recognition for Zero Defect Supplies" from TAFE. * **Robust Manufacturing Capabilities:** Supported by significant Capex and the new Savli facility, enabling localization and efficient production. * **Diversified Revenue Streams:** A balanced mix of OEM, aftermarket, and export revenues provides stability. * **Operational Efficiency:** Consistent improvement in EBITDA and PAT margins due to volume gains and fixed cost absorption. * **Strategic Vision:** Focus on becoming a "leading Motion Technology Company" through portfolio expansion, localization, and integrated solutions.

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D. OPERATIONAL CHARACTERISTICS

The operational characteristics of Schaeffler India Limited highlight a company focused on efficiency, quality, and strategic capacity expansion to meet growing demand and enhance its competitive edge.

Capacity and Utilization Trends Across Companies

While specific capacity utilization rates are not provided, Schaeffler India's significant capital expenditure (Capex) and the establishment of a new manufacturing facility in Savli, Gujarat, explicitly for "new products," indicate a strategic focus on expanding production capacity. * **Capex for Growth:** The management states that "Capex focus remains on growth and localization." This implies that existing capacities are either nearing full utilization or new capacities are being added to cater to anticipated demand from new business wins and portfolio expansion. * **Savli Facility:** The new facility in Savli is dedicated to manufacturing new products, suggesting an increase in overall production capability and a diversification of the product mix. This expansion is crucial for supporting the growth in segments like Automotive Technologies and Intercompany Exports, which are experiencing high growth rates. * **Volume Gains:** The mention of "volume gains" contributing to improved operating margins suggests that the company is effectively utilizing its production assets and benefiting from economies of scale.

Production Economics and Cost Structures

Schaeffler India's improving operating margins provide insights into its production economics and cost structures: * **Fixed Cost Absorption:** The management explicitly attributes "better operating margin due to volume and fixed cost absorption." This indicates that as production volumes increase, the company is effectively spreading its fixed costs (e.g., factory overheads, depreciation from past Capex) over a larger output, leading to lower per-unit costs and higher profitability. This is a classic characteristic of capital-intensive manufacturing. * **Raw Material Costs:** While not explicitly detailed, the mention of "business wins for CRBs, TRBs, ACBBs in raw material sector" could imply strategic sourcing or engagement that helps manage raw material costs. However, as a bearings manufacturer, raw material costs (primarily steel and specialized alloys) would be a significant component of the cost structure and subject to commodity price fluctuations. * **Operational Efficiency:** The consistent improvement in EBITDA margins from 18.3% in Q1 2024 to 20.2% in Q3 2025 points to ongoing efforts in operational efficiency, process optimization, and potentially favorable product mix shifts towards higher-margin products.

Supply Chain Structure and Dependencies

Schaeffler India's supply chain appears robust and focused on quality: * **Localization:** The "localization commitment" and widening of the existing portfolio strengthen the domestic supply chain, potentially reducing dependency on imports and mitigating risks associated with global supply chain disruptions. * **Quality Control:** The "Recognition for Zero Defect Supplies for the second consecutive year by TAFE" and "Best Quality Export Parts Award by Escorts Kubota Limited" highlight a strong emphasis on quality control throughout the supply chain, from raw material procurement to finished product delivery. This indicates rigorous supplier selection, quality assurance processes, and potentially integrated supply chain management systems. * **Strategic Sourcing:** Business wins for various bearing types in the "raw material sector" suggest strategic sourcing or partnerships to ensure a stable and quality supply of critical components.

Technology Landscape and Innovation Pace

Schaeffler India operates in a technologically advanced sector and demonstrates a high pace of innovation: * **Continuous Product Development:** The company consistently reports "new business wins" for advanced products like hydraulic tensioners, HD Clutches, slewing rings, roller and ball screws, and condition monitoring systems. This indicates ongoing investment in R&D and product engineering. * **Portfolio Expansion:** The launch of "Large-size SRBs, Cast Steel Housings & accessories" and the expansion of the existing portfolio underscore a strategy to cater to evolving customer needs and enter new application areas. * **Advanced Features:** The emphasis on "X-life quality standards," "Advanced sealing, sensor mounts, auto-lubricators, Adapter, withdrawal & hydraulic sleeves" for industrial bearings highlights a focus on high-performance, durable, and intelligent solutions. * **Motion Technology Company:** The stated goal to "build the leading Motion Technology Company" signifies a broader strategic vision beyond just bearings, encompassing integrated solutions for motion and power transmission.

Operational Efficiency Benchmarks

Schaeffler India's operational efficiency is benchmarked by several factors: * **Margin Expansion:** Consistent improvement in EBITDA, EBIT, EBT, and PAT margins over multiple quarters. * **Quality Awards:** "Best Quality Export Parts Award" and "Zero Defect Supplies" recognition are strong external validations of operational excellence and quality control. * **Free Cash Flow Generation:** Significant improvement in FCF, especially in 9M 2025 (INR 7,471 million) compared to 9M 2024 (INR 611 million), indicates efficient operations and strong cash conversion. * **Working Capital Management:** Stable working capital as a percentage of sales (around 19%) despite revenue growth.

Key Performance Indicators (Company-specific and Industry Averages)

For Schaeffler India, key performance indicators include: * **Revenue Growth:** Consistently double-digit YoY growth (e.g., 13.9% in Q3 2025). * **EBITDA Margin:** Trending upwards, reaching 20.2% in Q3 2025. * **PAT Margin:** Also trending upwards, reaching 13.0% in Q3 2025. * **Working Capital (% to Sales):** Maintained around 19%. * **Capex (% to Sales):** Managed efficiently, decreasing from 8-9% to around 4% in 2025. * **Free Cash Flow (FCF):** Strong and significantly improving, indicating robust cash generation. * **Segmental Growth:** Monitoring growth rates across Automotive Technologies, Vehicle Lifetime Solutions, Bearings and Industrial Solutions, and Intercompany Exports provides insights into market dynamics.

Industry averages are not provided, but Schaeffler's strong margins and growth rates suggest it is performing at or above industry benchmarks for leading players.

Asset Efficiency Metrics

  • **Free Cash Flow (FCF):** Schaeffler India's FCF generation is a key indicator of asset efficiency.

The dramatic increase in FCF from INR 611 million in 9M 2024 to INR 7,471 million in 9M 2025 (a YoY change of 1026.1% in Q1 2025, 2224.4% in Q2 2025, and 122.7% in Q3 2025) is a powerful testament to improved asset efficiency and cash conversion. This significant FCF generation, especially with lower Capex as a percentage of sales in 2025, indicates that the company is effectively converting its revenues into cash, which can be reinvested, used for debt reduction, or distributed to shareholders. It suggests that past capital investments are now yielding strong returns. * **Capex (% to Sales):** The reduction in Capex as a percentage of sales in 2025 (from ~8-9% to ~4%) while maintaining strong revenue growth implies that the company is becoming more capital-efficient, generating more revenue per unit of capital invested.

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E. GROWTH DYNAMICS & DRIVERS

The bearings sector in India, as exemplified by Schaeffler India Limited, is experiencing robust growth driven by a confluence of macroeconomic factors, strong demand from key end-user industries, and strategic corporate initiatives.

Historical Growth Trajectory (3-5 year view with specific rates)

While a 3-5 year view is not fully provided, the available data for Schaeffler India covers 9 quarters (Q1 2024 to Q3 2025), offering a clear picture of recent growth. * **Revenue:** Schaeffler India has consistently maintained a double-digit YoY revenue growth trajectory. * Q1 2025: 14.1% YoY * Q2 2025: 10.1% YoY * Q3 2025: 13.9% YoY * 9M 2025: 12.7% YoY (compared to 11.6% YoY in 9M 2024) This indicates an accelerating growth trend in 2025 compared to 2024. * **EBITDA:** Profitability growth has been even stronger, suggesting operational leverage. * Q1 2025: 20.2% YoY * Q2 2025: 16.6% YoY * Q3 2025: 24.4% YoY * **PAT:** Net profit growth has also been robust. * Q1 2025: 16.6% YoY * Q2 2025: 16.8% YoY * Q3 2025: 24.1% YoY

The consistent double-digit growth across all key financial metrics over this period demonstrates a strong and sustained growth momentum for Schaeffler India, implying a healthy underlying market.

Current Growth Rates and Acceleration/Deceleration

  • **Current Revenue Growth (Q3 2025):** 13.9% YoY (Standalone), 3.4% QoQ (Standalone).
  • **Current EBITDA Growth (Q3 2025):** 24.4% YoY, 6.1% QoQ.
  • **Current PAT Growth (Q3 2025):** 24.1% YoY, 3.5% QoQ.

The growth rates in Q3 2025 show an acceleration in YoY revenue, EBITDA, and PAT growth compared to Q2 2025, indicating strong performance as the company entered the last quarter of the year. The 9M 2025 YoY revenue growth of 12.7% is also higher than 9M 2024's 11.6%, suggesting an overall acceleration in the current year.

Volume vs Price Contribution to Growth

The data explicitly states that "Operating Margins improved due to volume gains and fixed cost absorption." This strongly suggests that **volume growth** is a primary driver of revenue expansion and profitability improvement. While pricing power is not explicitly quantified, the ability to absorb fixed costs effectively implies that the company is either maintaining stable pricing or achieving slight price increases, alongside significant volume increases. The focus on "business wins" and "portfolio expansion" also points to strategies aimed at increasing market penetration and unit sales.

Organic vs Inorganic Growth Components

  • **Organic Growth:** The significant growth in Schaeffler's core segments (Automotive Technologies: 18.7% in 9M'25; Intercompany Exports: 27.5% in 9M'25) is primarily organic, driven by new business wins, portfolio expansion, and increased demand from end-user industries. The domestic business also shows strong organic growth at 10.5% YoY.
  • **Inorganic Growth:** The acquisition of KRSV Innovative Auto Solutions Private Limited contributes to inorganic growth. In Q3 2025, KRSV contributed 748 mn INR to consolidated revenue. While its current negative margins suggest it's in an early stage of integration or development, it represents a strategic inorganic addition to Schaeffler's portfolio.

Geographic Expansion Opportunities and Progress

  • **Intercompany Exports:** This segment is a significant driver of geographic expansion, showing exceptional growth rates (27.5% YoY in 9M'25 and 37.2% YoY in Q3'25). This indicates that Schaeffler India is increasingly serving global markets, likely leveraging its manufacturing capabilities and cost efficiencies.
  • **Domestic Penetration:** Continued focus on "portfolio expansion and penetration through range extension" in the Vehicle Lifetime Solutions segment (aftermarket) suggests efforts to deepen penetration in the domestic market, including potentially Tier 2/3 cities.
  • **Localization:** The "localization commitment" and new Savli facility also contribute to strengthening the domestic footprint, enabling the company to better serve Indian customers and potentially reduce reliance on imports.

Product/Service Innovation Pipeline

Schaeffler India demonstrates a robust innovation pipeline across all its segments: * **Automotive Technologies:** New business wins in hydraulic tensioners (PV), HD Clutches (CV), and continued momentum in Dampers and LV Clutches. * **Vehicle Lifetime Solutions:** Volume wins for new launches (wipers and center joint support), launch of automotive lube vending machine, and focus on portfolio expansion and range extension. * **Bearings and Industrial Solutions:** New business wins for slewing ring (off-road), business nomination for roller and ball screws and condition monitoring systems (industrial lifetime solutions), business wins for CRBs, TRBs, ACBBs (raw material sector). * **New Product Launches:** Large-size SRBs, Cast Steel Housings & accessories, with features like X-life quality, advanced sealing, sensor mounts, auto-lubricators, adapter, withdrawal & hydraulic sleeves.

This continuous stream of new products and solutions is critical for maintaining competitive advantage and capturing new market opportunities.

Adjacent Market Opportunities

Schaeffler India is actively pursuing adjacent market opportunities: * **Industrial Lifetime Solutions:** The nomination for "roller and ball screws and condition monitoring systems" indicates a move beyond just selling bearings to providing integrated solutions that enhance machinery performance and predictive maintenance. This expands the addressable market from components to services and systems. * **Automotive Lube Vending Machine:** This initiative in the aftermarket segment represents an expansion into value-added services and convenience solutions for customers. * **Motion Technology Company:** The overarching vision to become a "leading Motion Technology Company" suggests a strategic intent to expand into a broader range of motion-related products and services, potentially including electrification, automation, and digital solutions.

Customer Acquisition and Penetration Trends

The company's consistent reporting of "business wins" across various segments and applications highlights successful customer acquisition and penetration strategies: * **PV Segment:** Business wins in hydraulic tensioners. * **CV Segment:** New business wins in HD Clutches. * **Off-road Segment:** New business wins for slewing ring. * **Raw Material Sector:** Business wins for CRBs, TRBs, ACBBs. * **Awards & Accolades:** Recognition from Escorts Kubota and TAFE for quality indicates strong customer relationships and satisfaction, which are crucial for retaining and expanding business.

Macroeconomic Growth Drivers

The broader Indian economy provides a strong tailwind for the bearings sector: * **GDP Growth:** India's GDP has shown resilient growth, with Q3 2025 estimated at 6.4% YoY, following strong quarters in Q1 2025 (7.4%) and Q2 2025 (7.8%). Robust investment and resilient consumption are key drivers. * **IIP (Index of Industrial Production):** Strong output in primary, intermediate, and construction goods directly translates to demand for industrial bearings. Q3 2025 IIP growth was 3.8% YoY, with significant contributions from Mining (6% in August) and Manufacturing (3.8% in August). * **Automotive Production Growth:** This is a critical driver for Schaeffler's largest segment. * Overall Automotive Production Growth (Q3 2025): 6.9% YoY. * CVs: 11.8% YoY growth in Q3 2025, fueled by resilient freight demand. * Tractors: 14.6% YoY growth in Q3 2025, driven by strong rural economy factors. * PVs: 4.4% YoY growth in Q3 2025, supported by SUV demand and discounts. * 2W/3W: YTD CY2025 growth of 6.2%, boosted by festive demand and GST rate reductions. * **Core Industry Growth:** While YTD CY2025 Core Industry Growth is 2.9% (vs 4.8% last year), key sectors like Cement (YTD CY2025 Growth: 9.6%) and Steel (YTD CY2025 Growth: 9.7%) show strong growth, directly benefiting the industrial bearings segment. Coal (0.7%) and Electricity (1.0%) show more modest growth. * **Favorable Rural Economy:** Strong kharif sowing, favorable rainfall, MSP increases, and easing rural income pressures support tractor sales, which in turn drive demand for agricultural bearings.

These macroeconomic indicators collectively create a highly favorable environment for the bearings sector, underpinning Schaeffler India's strong growth performance.

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F. RISK LANDSCAPE

While the bearings sector in India, as represented by Schaeffler India, exhibits strong growth and operational efficiency, it is not immune to various risks. These risks can be broadly categorized into industry-wide systematic risks, cyclicality, regulatory changes, and competitive threats.

Industry-Wide Systematic Risks

1. **Economic Slowdown:** The performance of the bearings sector is highly correlated with overall economic activity. A significant slowdown in India's GDP growth (e.g., Q3 2024 GDP growth was 5.4%, lower than other quarters) or global economic downturns could dampen demand across automotive and industrial end-markets. 2. **Inflation and Input Costs:** While CPI has shown a downward trend (Q3 2025 at 1.7% vs Q1 2024 at 5.0%), "CPI edged up in August due to housing and services, while food prices remained in deflation." This indicates that inflationary pressures, particularly on non-food items or services, could still impact operational costs. Raw material prices (steel, alloys) are a significant component of bearing manufacturing costs, and volatility in these prices can compress margins if not effectively passed on to customers. 3. **Interest Rate Fluctuations:** Changes in interest rates can impact borrowing costs for companies and financing costs for customers (e.g., vehicle loans, industrial project financing), thereby influencing demand. 4. **Geopolitical Risks:** Global geopolitical instability can disrupt supply chains, impact export markets, and lead to commodity price volatility. The strong growth in "Intercompany Exports & others" makes the company somewhat exposed to international market conditions.

Cyclicality and Economic Sensitivity

The bearings sector is inherently cyclical due to its deep ties to capital goods and consumer durables industries: * **Automotive Cyclicality:** The automotive industry (PVs, CVs, 2W/3W, Tractors) is highly cyclical, influenced by consumer sentiment, disposable income, fuel prices, and financing availability. While Q3 2025 showed strong automotive production growth (6.9% overall, 11.8% for CVs, 14.6% for Tractors), past quarters (e.g., Q3 2024 automotive production growth at -2.5%) demonstrate this cyclicality. A downturn in automotive sales directly impacts demand for OEM bearings. * **Industrial Cyclicality:** Heavy industries like steel, cement, mining, and power are also cyclical, driven by infrastructure spending, industrial investment, and commodity cycles. Fluctuations in IIP and Core Industry Growth rates directly affect demand for industrial bearings. The YTD CY2025 Core Industry Growth of 2.9% (vs 4.8% last year) indicates some moderation in industrial activity. * **Investment Cycles:** Capital expenditure by industries drives demand for new machinery, which in turn drives demand for bearings. Delays or reductions in industrial investment can impact the sector.

Regulatory and Policy Risks by Geography

  • **GST Reforms:** Mentioned as influencing "changes in anticipation of demand" for working capital. Future GST rate changes or other tax reforms could impact pricing, demand, or operational costs.
  • **Automotive Regulations:** Changes in emission norms, safety standards, or vehicle policies can impact vehicle production and design, requiring bearing manufacturers to adapt their products and potentially incur R&D costs.
  • **Trade Policies:** Changes in import duties, export incentives, or trade agreements could affect the competitiveness of Indian manufacturers in export markets or impact the cost of imported components.

Technology Disruption Threats

  • **Electrification of Vehicles (EVs):** While not explicitly mentioned as a risk, the shift to electric vehicles could alter the demand for traditional engine and transmission bearings. However, EVs still require specialized bearings for electric motors, gearboxes, and wheel assemblies. Schaeffler's focus on becoming a "Motion Technology Company" suggests an awareness and strategic pivot towards future mobility solutions.
  • **Advanced Materials:** Development of new materials that reduce friction or wear without traditional bearings could pose a long-term, albeit distant, threat.
  • **Additive Manufacturing:** While currently niche for high-performance bearings, advancements in additive manufacturing could eventually impact traditional production methods and supply chains.

ESG and Sustainability Challenges

  • **Environmental Regulations:** Increasing environmental scrutiny on manufacturing processes, waste management, and energy consumption could lead to higher compliance costs.
  • **Supply Chain Ethics:** Demands for ethical sourcing and sustainable supply chains could require greater transparency and investment in monitoring.
  • **Carbon Footprint:** Pressure to reduce carbon emissions across the value chain could necessitate investments in greener technologies and processes. (Not explicitly mentioned in data, but a general industry risk).

Supply Chain Vulnerabilities

  • **Global Dependencies:** Despite localization efforts, some specialized raw materials or components might still be sourced globally, exposing the supply chain to international disruptions (e.g., port closures, geopolitical events).
  • **Quality Control:** While Schaeffler has received "Zero Defect Supplies" awards, maintaining this level of quality across a complex supply chain with numerous suppliers is an ongoing challenge and a potential risk if quality standards slip.

Competitive Threats (New Entrants, Substitutes)

  • **Intense Rivalry:** The presence of multiple global and domestic players ensures high competitive intensity. Competitors constantly innovate, optimize costs, and expand their portfolios, requiring Schaeffler to continuously invest in R&D and market strategies.
  • **New Entrants:** While barriers to entry are high for diversified players, niche players with specialized technologies or cost advantages could emerge.
  • **Substitutes:** As discussed, while direct substitutes are limited, technological advancements that reduce the need for traditional bearings or offer integrated solutions (e.g., advanced magnetic levitation in niche applications) could pose a long-term threat.

Customer Concentration Risks

The data does not provide information on customer concentration. However, in the OEM segment, reliance on a few large automotive or industrial manufacturers could pose a risk if one of these customers faces financial difficulties or shifts its sourcing strategy. Schaeffler's diversified segment mix (Automotive, Industrial, Aftermarket, Exports) helps mitigate this risk to some extent.

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G. CAPITAL ALLOCATION & INVESTOR RETURNS

Schaeffler India's capital allocation strategy appears to be well-defined, prioritizing growth, localization, and efficient cash generation, which ultimately supports investor returns.

Capex Trends and Requirements (Growth vs Maintenance)

Schaeffler India has demonstrated a significant commitment to capital expenditure, which is explicitly stated to be focused on "growth and localization." * **Historical Capex:** The company invested INR 5,362 million in Capex during 9M 2024, representing 8.9% of sales for that period. This indicates a period of substantial investment. * **Current Capex:** For 9M 2025, Capex was INR 2,670 million, which is lower than the previous year and represents 4.0% of sales. This reduction, while still significant, suggests that some major investment cycles might have matured, or the company is optimizing its capital deployment. * **Growth-Oriented Capex:** The establishment of the new manufacturing facility in Savli, Gujarat, specifically for "new products," is a clear example of growth-oriented Capex. This investment supports portfolio expansion and caters to anticipated future demand. * **Localization Focus:** Capex is also directed towards strengthening the "localization commitment," which involves setting up or upgrading facilities to produce more components domestically, reducing import dependency, and improving supply chain resilience. This can be seen as both growth and strategic maintenance Capex, ensuring long-term competitiveness. * **Planned Realization:** Management states that "capex realization as planned" is on track, indicating disciplined execution of investment projects.

The strategic deployment of Capex is crucial for maintaining technological leadership, expanding capacity, and supporting the company's long-term growth objectives.

R&D Investment Levels as % of Revenue

Specific R&D investment levels as a percentage of revenue are not provided in the extracted data. However, the extensive list of "new business wins," "portfolio expansion," and the launch of advanced products (e.g., hydraulic tensioners, HD Clutches, slewing rings, roller and ball screws, condition monitoring systems, X-life quality standards) strongly imply a significant and ongoing investment in Research and Development. In a technology-driven sector like bearings, continuous innovation is non-negotiable for competitive advantage. Schaeffler's commitment to becoming a "leading Motion Technology Company" further underscores the importance of R&D in its strategic vision.

Dividend Policies and Payout Ratios

Information regarding Schaeffler India's dividend policies or payout ratios is not available in the provided data. However, strong free cash flow generation typically provides flexibility for dividend payments or share buybacks, depending on the company's capital allocation priorities.

Share Buyback Programs

No information about share buyback programs is mentioned in the extracted data.

M&A Activity and Strategy

The acquisition of **KRSV Innovative Auto Solutions Private Limited** is a clear instance of M&A activity. * **Strategic Rationale:** While the specific rationale for this acquisition is not detailed, it likely serves to expand Schaeffler's product portfolio, acquire new technologies, gain market access in specific segments, or consolidate its position. * **Financial Impact:** In Q3 2025, KRSV contributed 748 mn INR to consolidated revenue. However, it reported negative margins (EBITDA -14.7%, EBIT -16.7%, EBT -20.1%), which diluted Schaeffler's consolidated margins (e.g., consolidated Q3 2025 EBITDA margin was 19.1% vs standalone 20.2%). This suggests that KRSV might be a nascent business, undergoing integration, or requiring further investment before it becomes profitable. This is a common characteristic of strategic acquisitions aimed at long-term growth rather than immediate profitability. * **Future Implications:** This acquisition indicates that M&A is a part of Schaeffler's growth strategy, allowing it to expand beyond organic growth.

Cash Generation and Free Cash Flow Profiles

Schaeffler India has demonstrated exceptional cash generation capabilities, particularly in the most recent periods. * **Free Cash Flow (FCF) (mn INR):** * Q1 2024: -256 * Q2 2024: 1,002 * Q3 2024: 1,002 * Q4 2024: 1,628 * Q1 2025: 2,371 * Q2 2025: 2,868 * Q3 2025: 2,232 * 9M 2024: 611 * 9M 2025: 7,471 * **FCF YoY Change (%):** * Q1 2025: 1026.1% * Q2 2025: 2224.4% * Q3 2025: 122.7%

The dramatic increase in FCF from INR 611 million in 9M 2024 to INR 7,471 million in 9M 2025 is a standout financial highlight. This massive improvement, with YoY growth rates exceeding 100% and even 1000% in some quarters, indicates highly efficient operations, strong profitability translating into cash, and potentially a more optimized Capex cycle in 2025 compared to 2024. Strong FCF provides the company with significant financial flexibility for future investments, debt reduction, or shareholder returns.

Capital Efficiency Improvements

The significant improvement in Free Cash Flow, coupled with a reduction in Capex as a percentage of sales (from ~8-9% in 2024 to ~4% in 2025), strongly suggests enhanced capital efficiency. The company is generating more cash relative to its capital investments and sales, indicating better utilization of its assets and more productive deployment of capital. This efficiency is also reflected in the improving operating margins, where "volume gains and fixed cost absorption" play a key role. The management's commitment to "capex realization as planned" further reinforces a disciplined approach to capital deployment, ensuring that investments translate into tangible returns.

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H. FUTURE OUTLOOK & PROJECTIONS

The future outlook for the bearings sector, particularly as seen through Schaeffler India Limited, appears highly positive, driven by sustained economic growth, continued demand from key end-user industries, and strategic corporate initiatives aimed at innovation and market expansion.

Industry Growth Projections (with timeframes)

While explicit industry-wide growth projections are not provided, the consistent performance of Schaeffler India and the positive macroeconomic indicators suggest a favorable outlook for the bearings sector in the medium to long term. * **Management Guidance:** Schaeffler India's management explicitly states "double-digit YoY growth momentum continued" and that they are "committed to deliver results and drive value as we enter last quarter of the year." This implies an expectation of continued strong growth for the company, which is a proxy for the leading edge of the industry. * **Economic Tailwinds:** The underlying economic drivers, such as "robust investment and resilient consumption" (GDP), "strong output in primary, intermediate, and construction goods" (IIP), and positive trends in the automotive sector (CVs, Tractors, SUVs), are expected to continue supporting demand for bearings. * **Sector-Specific Growth:** The strong growth in key end-user sectors like Cement (YTD CY2025 Growth: 9.6%) and Steel (YTD CY2025 Growth: 9.7%) indicates sustained demand from industrial applications. The automotive sector, with its diverse segments, is also projected to maintain growth, albeit with some cyclical variations.

Based on these factors, the bearings sector is likely to continue experiencing mid-to-high single-digit to low double-digit growth in the coming years, with specialized and high-performance segments potentially growing faster.

Management Guidance Across Companies (Schaeffler India)

Schaeffler India's management provides clear and optimistic guidance: * **Continued Growth Momentum:** "Double-digit YoY growth momentum continued." This suggests expectations for sustained strong revenue growth. * **Improved Profitability:** "Better operating margin due to volume and fixed cost absorption." The expectation is for continued margin expansion or at least maintenance of high profitability levels. * **Strong Cash Flow:** "Free cash flow generation and capex realization as planned." This indicates confidence in the company's ability to generate significant cash and execute its investment plans effectively. * **Overall Improvement:** "Continued improvement in financial and operating metrics." This holistic view suggests a positive outlook across all aspects of the business. * **Strategic Vision:** "On track to build the leading Motion Technology Company." This long-term vision guides strategic decisions and implies continued investment in innovation and portfolio expansion.

Emerging Opportunities and Whitespace

  • **Industrial Lifetime Solutions:** The focus on "condition monitoring systems" and "roller and ball screws" represents a significant whitespace opportunity to move beyond component sales into integrated solutions that offer predictive maintenance, enhanced efficiency, and extended machinery lifespan.
  • **Electrification and New Mobility:** While not explicitly detailed, the ambition to be a "Motion Technology Company" positions Schaeffler to capitalize on the shift towards electric vehicles and other new mobility solutions, which will require new types of bearings and motion components.
  • **Advanced Materials and Manufacturing:** Continued R&D into new materials and manufacturing processes (e.g., for X-life quality standards) will open opportunities for high-performance, specialized bearings in demanding applications.
  • **Digitalization:** The "automotive lube vending machine" and "condition monitoring systems" hint at leveraging digitalization for enhanced customer service and industrial efficiency.
  • **Deepening Localization:** Further localization efforts can unlock new customer segments, reduce lead times, and enhance cost competitiveness, particularly in a market as diverse as India.

Transformation Themes and Inflection Points

  • **From Component Supplier to Solution Provider:** The shift towards "industrial lifetime solutions" and "motion technology" indicates a strategic transformation from being purely a bearing manufacturer to a provider of comprehensive motion technology solutions. This is a significant inflection point for value creation.
  • **Localization as a Strategic Imperative:** The strong "localization commitment" is a key transformation theme, aiming to build a more resilient, cost-effective, and responsive supply chain within India.
  • **Sustainability and ESG Integration:** While not explicitly mentioned, global trends suggest that sustainability will become an increasingly important transformation theme, influencing product design, manufacturing processes, and supply chain management.

Long-Term Structural Trends (5-10 year view)

  • **Industrialization and Infrastructure Growth:** India's continued focus on infrastructure development (roads, railways, ports) and industrialization (Make in India initiatives) will drive sustained demand for industrial bearings.
  • **Automotive Sector Evolution:** Growth in vehicle parc, coupled with technological advancements (EVs, autonomous driving), will reshape demand for automotive bearings and related components. The aftermarket will continue to grow with the increasing installed base.
  • **Digitization of Manufacturing (Industry 4.0):** The adoption of smart factories, automation, and IoT will increase demand for precision bearings, sensors, and condition monitoring systems.
  • **Global Supply Chain Diversification:** India is increasingly seen as an alternative manufacturing hub, which could lead to sustained growth in exports for bearing manufacturers.
  • **Premiumization and Specialization:** Demand for high-performance, application-specific, and energy-efficient bearings will continue to grow, driven by the need for greater reliability and efficiency in machinery.

Potential Disruptions on the Horizon

  • **Rapid EV Transition:** A faster-than-anticipated transition to EVs could create a temporary disruption for manufacturers heavily reliant on ICE-specific components, though it also presents new opportunities.
  • **Global Economic Shocks:** Major global recessions or trade wars could significantly impact export volumes and domestic industrial activity.
  • **Technological Leapfrogs:** Breakthroughs in material science or alternative motion technologies could disrupt traditional bearing designs, though this is typically a longer-term risk.

Expected Margin Evolution

Management guidance points to "better operating margin due to volume and fixed cost absorption" and "continued improvement in financial and operating metrics." This suggests that Schaeffler India expects to either maintain or further expand its already robust EBITDA margins (currently 20.2% in Q3 2025). This will be achieved through: * **Economies of Scale:** Continued volume growth leading to better fixed cost absorption. * **Product Mix Shift:** Increased sales of higher-margin, specialized products (e.g., X-life quality bearings, industrial lifetime solutions). * **Operational Efficiencies:** Ongoing efforts in process optimization and cost management. * **Localization Benefits:** Reduced logistics costs and import duties, potentially leading to better cost structures.

However, the initial negative margins from strategic acquisitions like KRSV could temporarily dilute consolidated margins, but the expectation is for these investments to become profitable over time, contributing positively to overall margin evolution.

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I. COMPANY-BY-COMPANY PROFILES

Schaeffler India Limited

**Company Name:** Schaeffler India Limited **BSE Company Code:** 505790 **NSE Company Code:** SCHAEFFLER **Registered and Corporate Office:** 15th Floor, (ASTP) Amar Sadanand Tech Park, Baner, Pune, Maharashtra, India - 411045 **Contact Phone:** +912068198464 **CIN:** L29130PN1962PLC204515 **Date of Presentation:** November 3, 2025 (Q3CY25 Investor Presentation)

**Brief Description:** Schaeffler India Limited is a leading manufacturer of high-precision bearings, engine components, and other motion technology solutions for automotive and industrial applications. As part of the global Schaeffler Group, the company leverages global expertise and technology to serve the Indian market and contribute to global exports. Its diversified portfolio caters to Original Equipment Manufacturers (OEMs), the automotive aftermarket, and various heavy industrial sectors. The company is committed to localization, innovation, and becoming a leading Motion Technology Company.

**Scale Metrics:** * **Revenue (Standalone Q3 CY2025):** INR 23,601 million * **Revenue (Consolidated Q3 CY2025):** INR 24,346 million * **9M CY2025 Revenue (Standalone):** INR 67,523 million * **Sales Mix (Q3 2025):** * Automotive Technologies: 35% * Vehicle Lifetime Solutions: 12% * Bearings & Industrial Solutions: 38% * IC Exports & Others: 15% * **Capacity:** Expanding with a new manufacturing facility in Savli, Gujarat, for new products.

**Financial Performance Summary:**

| Metric (Standalone) | Q1 2024 (mn INR / %) | Q2 2024 (mn INR / %) | Q3 2024 (mn INR / %) | Q4 2024 (mn INR / %) | Q1 2025 (mn INR / %) | Q2 2025 (mn INR / %) | Q3 2025 (mn INR / %) | 9M 2024 (mn INR / %) | 9M 2025 (mn INR / %) | | :------------------ | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | **Revenue** | 18,492 | 20,719 | 20,728 | 20,823 | 21,100 | 22,821 | 23,601 | 59,940 | 67,523 | | *YoY Growth* | - | - | 12.1% | - | 14.1% | 10.1% | 13.9% | 11.6% | 12.7% | | *QoQ Growth* | - | - | 0.04% | - | 1.3% | 8.2% | 3.4% | - | - | | **EBITDA** | 3,388 (18.3%) | 3,848 (18.6%) | 3,828 (18.5%) | 3,904 (18.8%) | 4,071 (19.3%) | 4,489 (19.7%) | 4,760 (20.2%) | 11,064 (18.5%) | 13,320 (19.7%) | | *YoY Growth* | - | - | - | - | 20.2% | 16.6% | 24.4% | - | - | | **PAT** | 2,277 (12.3%) | 2,535 (12.2%) | 2,471 (11.9%) | 2,493 (12.0%) | 2,654 (12.6%) | 2,962 (13.0%) | 3,067 (13.0%) | 7,283 (12.2%) | 8,683 (12.9%) | | *YoY Growth* | - | - | - | - | 16.6% | 16.8% | 24.1% | - | - | | **Working Capital** | 13,497 | 15,670 | 15,683 | 15,165 | 15,426 | 16,238 | 16,942 | - | - | | *% to Sales* | 18.5% | 20.2% | 19.8% | 19.0% | 18.5% | 18.7% | 19.0% | - | - | | **Capex** | 1,731 | 1,002 | 2,076 | 1,550 | 825 | 1,555 | 843 | 5,362 | 2,670 | | *% to Sales* | 9.4% | 8.4% | 8.9% | 8.6% | 3.9% | 4.2% | 4.0% | 8.9% | 4.0% | | **FCF** | -256 | 1,002 | 1,002 | 1,628 | 2,371 | 2,868 | 2,232 | 611 | 7,471 |

**Strategic Priorities and Focus Areas:** 1. **Portfolio Expansion & Innovation:** Continuously introducing new products and solutions across all segments (e.g., hydraulic tensioners, HD Clutches, slewing rings, roller/ball screws, condition monitoring systems, Large-size SRBs). 2. **Localization:** Strengthening "localization commitment" by widening the existing portfolio and establishing new manufacturing facilities (Savli, Gujarat) to cater to domestic demand and improve supply chain efficiency. 3. **Market Penetration:** Expanding reach in both OEM and aftermarket segments, including new launches in Vehicle Lifetime Solutions and targeting diverse industrial applications (Steel, Cement, Mining, Power Plants, Pulp & Paper). 4. **Operational Excellence:** Focusing on volume gains and fixed cost absorption to improve operating margins, as evidenced by consistent margin expansion and quality awards. 5. **Motion Technology Leadership:** Strategic vision to evolve into a "leading Motion Technology Company," implying a broader focus on integrated solutions beyond traditional bearings. 6. **Inorganic Growth:** Strategic acquisitions like KRSV Innovative Auto Solutions Private Limited to expand capabilities and market presence.

**Competitive Advantages and Positioning:** * **Technological Prowess:** Global R&D capabilities and continuous innovation in product design and features (X-life quality, advanced sealing, sensor mounts). * **Superior Quality & Reliability:** Recognized by "Best Quality Export Parts Award" and "Zero Defect Supplies" awards, building strong customer trust. * **Diversified Business Model:** Balanced revenue mix from Automotive Technologies (OEM), Vehicle Lifetime Solutions (Aftermarket), Bearings & Industrial Solutions (Industrial OEM & Aftermarket), and Intercompany Exports, providing resilience. * **Strong Manufacturing Footprint:** Significant Capex and new facilities support capacity expansion and localization. * **Financial Strength:** Consistent double-digit growth, improving margins, and exceptional free cash flow generation.

**Key Metrics and KPIs Specific to the Company:** * Segmental Revenue Growth (Automotive Technologies, Vehicle Lifetime Solutions, Bearings and Industrial Solutions, Intercompany Exports & others). * Domestic vs. Export Growth. * Working Capital as % of Sales. * Capex as % of Sales. * Free Cash Flow (FCF) and its growth.

**Management Outlook and Guidance:** * Expects continued double-digit YoY growth momentum. * Anticipates better operating margins due to volume gains and fixed cost absorption. * Committed to planned free cash flow generation and capex realization. * Foresees continued improvement in financial and operating metrics. * On track to build the leading Motion Technology Company.

**Recent Developments and Initiatives (Q3 CY2025):** * **Automotive Technologies:** Business wins in hydraulic tensioners (PV) and HD Clutches (CV). * **Vehicle Lifetime Solutions:** Volume wins for new launches (wipers and center joint support), launch of automotive lube vending machine. * **Bearings and Industrial Solutions:** New business wins for slewing ring (off-road), business nomination for roller and ball screws and condition monitoring systems, business wins for CRBs, TRBs, ACBBs (raw material sector). Launched Large-size SRBs, Cast Steel Housings & accessories. * **Manufacturing:** New facility in Savli, Gujarat, for new products. * **Awards:** Best Quality Export Parts Award by Escorts Kubota Limited, Recognition for Zero Defect Supplies by TAFE. * **Acquisition:** KRSV Innovative Auto Solutions Private Limited contributed 748 mn INR to Q3 2025 consolidated revenue, though with initial negative margins.

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J. TABLES

Table 1: Schaeffler India Limited - Standalone Financial Metrics (Revenue, EBITDA, PAT)

| Metric (mn INR / %) | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | 9M 2024 | 9M 2025 | | :------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | **Revenue** | 18,492 | 20,719 | 20,728 | 20,823 | 21,100 | 22,821 | 23,601 | 59,940 | 67,523 | | *YoY Growth (%)* | - | - | 12.1% | - | 14.1% | 10.1% | 13.9% | 11.6% | 12.7% | | *QoQ Growth (%)* | - | - | 0.04% | - | 1.3% | 8.2% | 3.4% | - | - | | **EBITDA** | 3,388 | 3,848 | 3,828 | 3,904 | 4,071 | 4,489 | 4,760 | 11,064 | 13,320 | | *EBITDA Margins (%)*| 18.3% | 18.6% | 18.5% | 18.8% | 19.3% | 19.7% | 20.2% | 18.5% | 19.7% | | *YoY Growth (%)* | - | - | - | - | 20.2% | 16.6% | 24.4% | - | - | | **EBIT** | - | - | 3,128 | - | - | 3,718 | 3,920 | 9,125 | 10,916 | | *EBIT Margins (%)* | - | - | 15.1% | - | - | 16.3% | 16.6% | 15.2% | 16.2% | | **EBT** | - | - | 3,332 | - | - | 3,980 | 4,129 | 9,787 | 11,666 | | *EBT Margins (%)* | - | - | 16.1% | - | - | 17.4% | 17.5% | 16.3% | 17.3% | | **PAT** | 2,277 | 2,535 | 2,471 | 2,493 | 2,654 | 2,962 | 3,067 | 7,283 | 8,683 | | *PAT Margins (%)* | 12.3% | 12.2% | 11.9% | 12.0% | 12.6% | 13.0% | 13.0% | 12.2% | 12.9% | | *YoY Growth (%)* | - | - | - | - | 16.6% | 16.8% | 24.1% | - | - |

Table 2: Schaeffler India Limited - Working Capital, Capex, and Free Cash Flow

| Metric (mn INR / %) | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | 9M 2024 | 9M 2025 | | :------------------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | **Working Capital** | 13,497 | 15,670 | 15,683 | 15,165 | 15,426 | 16,238 | 16,942 | - | - | | *% to Sales* | 18.5% | 20.2% | 19.8% | 19.0% | 18.5% | 18.7% | 19.0% | - | - | | **Capex** | 1,731 | 1,002 | 2,076 | 1,550 | 825 | 1,555 | 843 | 5,362 | 2,670 | | *% to Sales* | 9.4% | 8.4% | 8.9% | 8.6% | 3.9% | 4.2% | 4.0% | 8.9% | 4.0% | | **Free Cash Flow** | -256 | 1,002 | 1,002 | 1,628 | 2,371 | 2,868 | 2,232 | 611 | 7,471 | | *FCF YoY Change (%)*| - | - | - | - | 1026.1% | 2224.4% | 122.7% | - | - |

Table 3: Schaeffler India Limited - Revenue Growth by Segment

| Segment | 9M'25 vs 9M'24 YoY Growth (%) | Q3'25 vs Q2'25 QoQ Growth (%) | Q3'25 vs Q3'24 YoY Growth (%) | Q3 2025 Sales Mix (%) | | :----------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :-------------------- | | Automotive Technologies | 18.7% | 15.9% | 28.8% | 35% | | Vehicle Lifetime Solutions | 10.6% | -8.1% | 7.4% | 12% | | Bearings and Industrial Solutions | 4.1% | 0.8% | -1.3% | 38% | | Intercompany Exports & others | 27.5% | -4.5% | 37.2% | 15% |

Table 4: External Economic Data - GDP and IIP Growth

| Metric (YoY Growth %) | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 Est | | :-------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :---------- | | **GDP** | 7.8 | 6.7 | 5.4 | 6.8 | 7.4 | 7.8 | 6.4 | | **IIP** | 5.1 | 5.2 | 2.6 | 4.0 | 3.6 | 1.8 | 3.8 |

Table 5: External Economic Data - Automotive Production Growth

| Metric (YoY Growth %) | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q3 2025 Share | | :-------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------------ | | **Overall Automotive**| 5.3% | 4.0% | -2.5% | 4.9% | 5.3% | 5.2% | 6.9% | - | | **CVs** | - | - | - | - | - | - | 11.8% | 15% | | **PVs** | - | - | - | - | - | - | 4.4% | 72% | | **Tractors** | - | - | - | - | - | - | 14.6% | 12% |

Table 6: External Economic Data - Core Industry Growth (YTD CY2025)

| Core Industry | YTD CY2025 Growth (%) | Core Sector Weightage (%) | | :------------ | :-------------------- | :------------------------ | | Cement | 9.6% | 5.4% | | Steel | 9.7% | 17.9% | | Coal | 0.7% | 10.3% | | Electricity | 1.0% | 19.8% | | **Total** | **2.9%** | **-** |

Table 7: External Economic Data - CPI (Quarterly Inflation Rate %)

| Metric (Quarterly Inflation Rate %) | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | | :---------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | **CPI** | 5.0 | 4.9 | 4.3 | 5.6 | 3.7 | 2.7 | 1.7 |

Table 8: External Economic Data - Production Volumes (Monthly, select categories)

| Category (mn units/tn/bn KwH) | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD CY2025 Growth (%) | | :---------------------------- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-- | :-------------------- | | **2W/3W (2024)** | 1.9 | 1.9 | 2.1 | 1.9 | 2.0 | 2.0 | 2.0 | 2.1 | 2.2 | 2.3 | 2.3 | 2.4 | | | **2W/3W (2025)** | 2.1 | 2.5 | 2.7 | 2.1 | 1.6 | - | - | - | - | - | - | - | 6.2% | | **PV (2024, th units)** | 474 | 486 | 453 | 433 | 421 | 439 | 437 | 383 | 369 | 444 | 403 | 408 | | | **PV (2025, th units)** | 424 | 403 | 415 | 397 | 365 | - | - | - | - | - | - | - | 4.3% | | **CV (2024, th units)** | 97 | 104 | 95 | 96 | 107 | 101 | 82 | 81 | 81 | 83 | 76 | 77 | | | **CV (2025, th units)** | 85 | 84 | 89 | 88 | 85 | 98 | - | - | - | - | - | - | 5.9% | | **Tractors (2024, th units)** | 93 | 75 | 77 | 72 | 66 | 72 | 93 | 89 | 97 | 95 | 96 | 104 | | | **Tractors (2025, th units)** | 107 | 102 | 93 | 95 | 93 | 115 | 75 | 50 | - | - | - | - | 13.1% | | **Cement (2024, mn tn)** | 37 | 41 | 43 | 37 | 41 | 39 | 36 | 36 | 40 | 41 | 38 | 34 | | | **Cement (2025, mn tn)** | 33 | 35 | 34 | 36 | 36 | 37 | - | - | - | - | - | - | 9.6% | | **Steel (2024, mn tn)** | 14 | 15 | 15 | 14 | 14 | 13 | 13 | 13 | 13 | 13 | 12 | 13 | | | **Steel (2025, mn tn)** | 15 | 15 | 15 | 15 | 15 | 13 | - | - | - | - | - | - | 9.7% | | **Coal (2024, mn tn)** | 107 | 105 | 97 | 99 | 79 | 82 | 84 | 86 | 87 | 81 | 75 | 62 | | | **Coal (2025, mn tn)** | 66 | 69 | 70 | 70 | 91 | 85 | 98 | - | - | - | - | - | 0.7% | | **Electricity (2024, bn KwH)**| 144 | 148 | 136 | 141 | 104 | 101 | 102 | 159 | 147 | 150 | 146 | 145 | | | **Electricity (2025, bn KwH)**| 150 | 154 | 148 | 132 | 134 | - | - | - | - | - | - | - | 1.0% |