EV Stock Wednesday: Varroc Engineering

The 9AM Show | Wednesday, 26 August 2026

Varroc Engineering Ltd

• Exchange: NSE: VARROC | BSE: 541578
• Stock Price: ₹810.00
• Market Cap: ~₹12,380 crore
• 52-Week Range: ₹462.00 – ₹874.85
• P/E Ratio: ~62.7x
• Dividend Yield: ~0.19%
• Previous Close: ₹812.40
• Data as of: NSE close, 25 August 2026

Varroc Engineering is not an EV pure-play.

That may be precisely what makes the company interesting.

The ₹8,890-crore auto-component manufacturer still earns most of its revenue from conventional automotive components including body parts, lighting, ICE powertrain products, HMI and aftermarket products.

But underneath that traditional Tier-1 supplier identity, something is changing rather quickly.

In FY26, approximately 13% of Varroc’s consolidated revenue came from components supplied to electric vehicles.

Three months later, in Q1 FY27, that number reached approximately 16%.

More importantly, Varroc’s EV-related revenue grew 87% year-on-year during Q1 FY27.

That changes the investment question.

Varroc is no longer simply an auto-component company waiting for India’s EV transition.

It is increasingly becoming a company whose growth is being influenced by that transition.

But there is a catch.

Roughly three-fourths of Varroc’s EV revenue currently comes from Bajaj Auto, according to management commentary during the latest earnings call.

At a stock price of ₹810 and a trailing P/E of roughly 62.7x, investors are therefore paying a substantial valuation for a business where EV growth is accelerating rapidly, but remains highly concentrated around one major customer.

That is the Varroc investment question: Can the company convert its growing EV technology portfolio into a diversified, high-margin business before the valuation runs too far ahead of the earnings?

Why Varroc Matters to India’s EV Story

Varroc occupies a very different place in India’s listed EV universe. It does not manufacture electric scooters. It does not manufacture battery cells. It does not operate charging stations.

Instead, it manufactures many of the components sitting between the battery and the wheels.

For electric two- and three-wheelers, Varroc’s e-mobility portfolio includes technologies such as:

• Traction motors
• Motor controllers
• Battery Management Systems
• On-board chargers
• DC-DC converters
• Vehicle Control Units
• Power electronics
• Connected and HMI systems

Its broader EV exposure also includes lighting, electronics and other automotive components supplied to EV platforms.

That distinction is important.

Varroc’s FY26 investor presentation showed that its dedicated e-mobility product group represented about 6.2% of revenue, while revenue generated from components supplied to EV vehicles was approximately 13% of total revenue.

In other words:

Varroc does not need every EV rupee to come from a motor or BMS.

An electric scooter still needs lighting.

• It still needs switches.
• It still needs electronics.
• It still needs body components.
• It still needs displays and connected systems.

So as a conventional Tier-1 supplier wins more content on electric platforms, its EV exposure can grow beyond the revenue booked under the company’s dedicated “e-mobility” product category.

That gives Varroc a broader electrification play than the headline numbers initially suggest.

The EV Growth Has Become Difficult to Ignore

Look at the progression.

FY26

Varroc reported:

• Revenue: ₹8,890.5 crore
• Revenue growth: 9.0%
• EBITDA margin: 9.4%
• PBT margin before JV profit: 4.3%
• EV-linked revenue: ~13% of total revenue

FY26 consolidated net profit was approximately ₹225 crore, compared with around ₹61 crore in FY25.

Then came Q1 FY27.

Q1 FY27

The top-line acceleration is substantial.

Consolidated revenue grew almost 30% year-on-year, India operations grew about 28.6%, and overseas operations grew approximately 45.6%. But the number All India EV would watch most closely is this: 16%

That is now the share of Varroc’s revenue coming from EV platforms. And that EV revenue grew 87% year-on-year.

For comparison, the number was approximately 13% for FY26 and around 11% in Q1 FY26.

That is starting to look less like an experimental vertical and more like a second growth engine.

The Two-Wheeler Connection Is Particularly Important

Varroc’s DNA is heavily tilted toward two- and three-wheelers. In FY26, approximately 76% of its revenue by vehicle segment came from 2W and 3W, with 4W accounting for the remaining 24%.

That puts the company directly in the path of India’s largest EV market by volume. And Q1 FY27 produced a very favourable demand environment.

Management highlighted approximately 91% year-on-year growth in electric two-wheeler industry volumes during the quarter. Varroc’s EV-related revenue simultaneously increased 87%.

The connection is straightforward:

More electric scooters sold
→ more traction motors
→ more controllers
→ more BMS units
→ more chargers and DC-DC converters
→ more lighting and electronics
→ more potential content per vehicle for Varroc.

That is why Varroc deserves to be discussed differently from a conventional auto ancillary company.

But Bajaj Is Both the Strength and the Risk

Here is where the story becomes more complicated.

Bajaj Auto has historically been Varroc’s biggest customer.

For FY26, Bajaj represented approximately 46% of Varroc’s overall revenue, according to the company’s investor presentation.

The concentration is even higher within EVs.

During the Q1 FY27 earnings discussion, management indicated that approximately three-fourths of EV revenue came from Bajaj Auto.

This is simultaneously good news and a risk.

The good news

Bajaj’s electric two-wheeler business has scaled rapidly.

If Chetak volumes continue expanding, Varroc participates through its component relationship.

A strong anchor customer can also provide:

• predictable volumes,
• product-development visibility,
• scale economics,
• validation for new EV technologies.

The risk

One customer influencing roughly 75% of EV revenue creates concentration.

If sourcing decisions change, pricing pressure increases, technology moves in-house, or another supplier wins a major platform, the impact on Varroc’s EV growth could be disproportionate.

Therefore, one of the most important numbers to monitor over the next two years is not merely:

How fast is EV revenue growing?

It is:

How much of EV revenue is coming from non-Bajaj customers?

That number may ultimately determine how valuable Varroc’s EV business becomes.

The Next Phase: Expanding Beyond the Existing EV Customer Base

There are early signs of diversification.

Varroc recorded approximately ₹599 crore of net new business wins measured by annualised peak revenue in Q1 FY27. Management said e-mobility was an important contributor to the wins.

The company also indicated that one additional traction-motor programme is scheduled to begin production during Q2 FY27, while discussions with two more potential customers are at an advanced stage.

That matters.

Traction motors are strategically more valuable than simply supplying commodity components because they sit inside the EV powertrain itself. And Varroc appears to be moving toward a broader integrated architecture.

The company has been discussing higher-voltage and increasingly integrated power-electronics systems, creating the possibility of eventually combining multiple functions into compact integrated units.

If Varroc can move from: individual components

to

integrated e-powertrain systems,

the revenue and content opportunity per electric vehicle increases materially.

Varroc’s Order Wins Are Already Tilting Toward EVs

FY26 provides another strong signal.

Varroc reported its highest-ever annualised net-new-business wins, carrying approximately ₹3,289 crore in annual peak revenue potential.

Around 65% of those wins were associated with EV models.

That does not mean ₹2,000+ crore of EV revenue arrives tomorrow.

“Annual peak revenue” represents the revenue potential once programmes reach full production.

But it tells us something important about Varroc’s future revenue mix.

Today’s company:

~13-16% EV exposure

Future order pipeline:

much more heavily tilted toward EVs

If those programmes reach SOP and ramp as planned, the company’s revenue composition should continue moving toward electrification.

The Financials Are Improving, But Margins Need Watching

This is where the stock-price story becomes less comfortable. Q1 FY27 revenue grew almost 30%, yet EBITDA margin declined from 9.5% to 8.5%.

Management attributed the pressure partly to war-related commodity/cost effects and approximately ₹70 crore of relatively low-margin tooling sales. So the quarter produced an interesting combination:

Revenue ↑ sharply

EV revenue ↑ even faster

EBITDA ↑

but

EBITDA margin ↓

This matters because Varroc is not being valued like a slow-moving traditional component company anymore. At roughly 62.7x trailing earnings, the stock market is already assigning a substantial growth premium.

At that valuation, revenue growth alone is not enough. Investors eventually need:

EV growth + margin expansion + earnings growth. Otherwise, the multiple becomes increasingly difficult to defend.

The Stock Has Already Re-Rated

At ₹810 on 25 August:

• 52-week low: ₹462
• 52-week high: ₹874.85
• Current price: ₹810

The stock is therefore roughly 75% above its 52-week low and only about 7% below its 52-week high. Market capitalisation is approximately ₹12,380 crore.

For perspective, that is around 1.4x FY26 revenue, but more than 50x FY26 reported net profit and approximately 62.7x trailing earnings based on the latest market data.

The market clearly expects something better than Varroc’s historical earnings profile. The EV transition is one reason why.

Risk Flags

1. Customer concentration

Approximately three-fourths of EV revenue is currently linked to Bajaj. Diversification therefore matters almost as much as growth.

2. Margin conversion

Q1 FY27 revenue increased 29.9%, but EBITDA margin fell to 8.5%. Growing the EV business without improving consolidated margins would weaken the investment thesis.

3. Valuation

A P/E around 62-63x leaves limited room for execution misses. The stock is no longer priced like a conventional low-growth auto-component manufacturer.

4. Net debt has moved higher sequentially

Net debt increased from approximately ₹495 crore at FY26-end to ₹527 crore in Q1 FY27, largely because of working capital requirements and front-loaded capex. Net debt-to-equity, however, remained relatively comfortable at approximately 0.28x.

5. Arbitration and auditor qualification

Varroc’s FY26 financial statements carried an auditor qualification related to ₹20.989 crore of revenue recognised from its erstwhile Chongqing Varroc TYC Auto Lamps joint venture, which is subject to ongoing arbitration with the TYC parties.

Management maintains that it has a strong case, but investors should track the proceedings rather than ignore the qualification.

EV Progress Indicators

Confirmed and measurable

• EV platforms generated approximately 13% of FY26 revenue
• EV contribution rose to approximately 16% in Q1 FY27
• EV-related revenue grew approximately 87% YoY in Q1
• Approximately 76% of FY26 vehicle-segment revenue came from 2W/3W
• E-mobility product portfolio includes motors, controllers, BMS, chargers and associated electronics
• Around 65% of FY26 annual-peak-revenue order wins were linked to EV models
• Q1 FY27 net-new-business wins carried approximately ₹599 crore annual peak revenue potential
• Additional traction-motor customer programmes are progressing toward SOP

What still needs to be proven

• Diversification of EV revenue beyond Bajaj
• Sustained improvement in EBITDA margins
• Conversion of new EV wins into production revenue
• Successful scaling of traction motors and integrated power electronics
• Overseas electronics turnaround
• Earnings growth sufficient to support the current valuation

The All India EV Angle

Varroc illustrates an important shift in India’s EV stock market. The next generation of EV beneficiaries may not necessarily have “Electric” in their company name.

They may be traditional Tier-1 suppliers whose revenue mix quietly changes as the vehicle underneath their components becomes electric. That transition is already visible at Varroc.

In FY26: 13 out of every ₹100 of revenue came from EV platforms.

By Q1 FY27: approximately ₹16 out of every ₹100 did.

And that business grew 87% year-on-year.

The question now is how quickly ₹16 becomes ₹20, ₹25 and eventually ₹30. But there is an equally important second question: Who will those ₹30 come from?

If Varroc reaches that level while reducing dependence on a single EV customer and improving margins, the company’s identity could change substantially. It would no longer be a conventional auto-component manufacturer with an EV division. It would increasingly become an EV technology supplier with a large conventional automotive base supporting it.

That is a much more interesting business.

The Verdict Line

Varroc’s EV story is real. The revenue is already showing it.

EV-linked revenue has moved from roughly 13% of FY26 sales to approximately 16% in Q1 FY27, while growing 87% year-on-year.

The company is positioned in exactly the technologies electric two- and three-wheelers need: motors, controllers, BMS, chargers and power electronics.

But at ₹810 per share and roughly 62.7x trailing earnings, the market is no longer asking whether Varroc can participate in India’s EV transition.

It is already assuming that it will. The next phase is harder.

Varroc now has to prove that EV growth can become diversified, margin-accretive and profitable enough to justify the valuation attached to it.

That is the number trail worth following every Wednesday.

Disclaimer: This content is for educational and market-intelligence purposes only and should not be considered investment advice. Investors should conduct their own research and consult a qualified financial adviser before making investment decisions.

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