Tube Investments of India · risk themes across the available quarters.
Bear-case history
Cycles business revenue fell 24% YoY to INR 187 crore with PBIT declining to INR 2 crore from INR 9 crore. Management acknowledged weakness but provided no specific turnaround timeline or strategy to address the demand deterioration in this segment.
Management explicitly deflected questions on EV revenue traction, citing difficulty in providing quarterly guidance for nascent businesses. Three-wheeler and truck launches are in early stages with revenue expected to 'pick up in coming quarters' but no specific targets provided despite INR 1,000 crore invested.
Railway sector orders expected by 'end of Q2' but no orders received yet. Management admitted 'we've just not seen that demand hit the ground yet' in terms of actual order flow for TI's fabrication and structural wagon businesses, creating timing uncertainty for this growth avenue.
Analyst questioned the pace of optic lens business ramp-up from development to commercial stage. Management acknowledged 'the technology is fairly complex' and customer is helping with process setup, but could not provide a definitive timeline for commercial operations or revenue contribution.
Management explicitly acknowledged that supply chain for EV components (electronics, control units, battery cells) is largely sourced from China, creating vulnerability to geopolitical disruptions and logistics delays. A customer order of 50 trucks already experiencing slight supply chain lags.
Analyst raised concern about lack of material progress in electronics (lens, camera modules) segment despite acquisition to save licensing time. Management admitted progress is 'a bit slow' and the 'jury is still out' on whether they can break into the Chinese-dominated supply chain.
Three-wheeler EV business performance is dependent on EMPS scheme continuation and potential FAME III announcement. Without subsidy, unit economics become challenging, particularly for price-sensitive markets.
Railway margins under pressure due to selective participation in tender business. Combined with PV segment slowdown (50% of metal formed revenue), this created the single-digit growth quarter. Management expects resolution in 1-2 quarters.
Management admitted the previously guided operational break-even for the EV passenger and truck segments will not be achieved in FY2026. The lack of FAME III policy support and slower-than-expected volume ramp-up continues to weigh on profitability in what remains a loss-making division.
The e-truck division has near-zero gross margins currently. While management cited indigenization and volume ramp as the levers for margin recovery, the timeline for meaningful improvement remains uncertain amid increasing competition from larger OEMs entering the segment.
An analyst explicitly asked about media reports regarding a family issue within the Murugappa Group and its potential impact on minority shareholders. Management declined to comment, stating family matters are not discussed publicly. This leaves uncertainty unresolved for investors.
While steel prices have increased, management acknowledged that the recovery from customers (pass-through) is yet to happen and will be fully realized only in the next 1-2 quarters. This creates a timing mismatch where input costs have risen but pricing power hasn't been fully exercised, temporarily compressing margins.
Mobility segment revenue declined 22% YoY to INR 177 crore with PBT at INR 3 crore vs INR 10 crore. Management acknowledged the business is going through a demand slump with no near-term recovery visible.
Analyst raised concern that market typically assigns 50-70% discount to holding companies. Management deflected, stating focus is on business growth first before capital structure optimization.
Previously announced INR 1,000 crore order book was in OpEx model; management pivoted to CapEx-only sales, requiring longer customer trials. Volumes just started ramping after product re-engineering.
TI CMPL requires additional INR 1,000 crore investment by March 2024; fund raise is in process. Market may face dilution pressure from EV unit valuation uncertainty.
Railway business (15% of MFD revenues) facing pricing issues with margin under pressure. Management has stopped quoting for tenders impacting margins and is controlling the business until corrective actions take effect.
Bajaj and Mahindra have emerged strongly in the e-3W segment. While TI maintains ~24-25% market share in South, intensifying competition could pressure pricing and market share gains in new geographies.
Passenger vehicle (PV) and heavy commercial vehicle (HCV) industries underperformed, impacting engineering and metal formed product revenues. These segments were beyond management's control despite gaining share in two-wheelers.
CE registration and regulatory processes for medical device exports causing slower growth (only 4% YoY). Management expects 1-2 more quarters before certifications complete and export momentum builds.
GST reduction on ICE vehicles (INR 20,000 price advantage for three-wheelers) is driving ICE growth faster than EV, with highest impact on three-wheeler segment.
7-8 players now active in electric HCV market, though TI maintains 50%+ market share. Pricing pressure and market share defense remain concerns.
Q2 saw ~10% slowdown in US business (4-5% of total revenue) following tariff increase to 50%. OEM-supplied segments remain sticky, distributor markets affected.
Railway revenue expected to start in Q1 FY27 (delayed from Q4 FY26) as other suppliers' supply chains are not yet ready, while TI is prepared.
Management explicitly refused to provide guidance on when EV segment losses will stem, citing ongoing new product launches. The segment raised INR 460 crore of equity but requires further fundraising, indicating cash burn will continue.
While railway tenders have resumed, management acknowledged increasing competition in the segment with margin pressure in the short term, requiring potential cost reduction measures.
The optical lens business has not scaled beyond pilot stage due to prolonged customer product approval challenges, with management admitting progress has been 'much slower than wanted.'
Analyst questioned sequential EBIT loss at Lotus Surgicals; CFO attributed it to Ind AS intangible asset amortization rather than operational performance, though free cash generation continues.
The PM E-DRIVE incentive benefit has reduced by INR 23,000 per vehicle with eligible vehicle quantum exhausted. Industry-wide profitability challenge as subsidies decline, forcing cost optimization.
Incumbents like Mahindra and Bajaj have entered the three-wheeler EV segment, challenging TI's market share ambitions. Management acknowledges dealer network disadvantage but remains confident on technology and cost advantages.
Moshine (electronics) has failed to scale due to China-controlled supply chains. Optical lens faces limited customer base willing to source at lens level from India, with in-house camera module ambitions stalled by inability to match Chinese pricing.
Engineering exports (35-40% to US) face uncertainty from potential tariff changes. Approximately half of US business is OEM-approved long-cycle products (lower risk), while distributor business faces exposure.
TI Clean Mobility reported ₹164 crore losses in Q3 with break-even pushed beyond initial timelines. Management acknowledged underestimating build-out complexity and committed additional ₹500-750 crore. Three-wheeler segment facing aggressive competition from Mahindra and Piaggio.
Revenue declined to ₹117 crore from ₹158 crore YoY with order book weakness for 4-6 quarters. Management prioritizing margin protection over volume, indicating structural competitive challenges in the precision gears business.
U.S. Section 232 duty remains at 50% with no indication of reduction. European FTA benefits are 12-15 months away and face CBAM/NTB barriers. European market weakness impacting MFPD exports. India domestic growth compensating but limits diversification.
CDMO business 3Xper delayed 18+ months due to Andhra Pradesh facility permissions. Manufacturing capacity now available but certification cycle is lengthy, seeding revenue slower than anticipated.
Q4 revenue dropped to INR 57 crore from INR 81 crore in Q3 due to March primary sales decline from FAME-to-new-scheme transition. FAME subsidies have been reduced without PLI benefits for three-wheelers.
Metal Form PBIT declined to INR 42 crore from INR 45 crore YoY despite 11% revenue growth due to increased competitiveness in railway business. Management acknowledged they are still figuring out the margin recovery path.
IPLT truck business at 70 trucks on road with 35-40 order pipeline; material ramp-up expected only by end of FY25 or early FY26 given customer approval and TCO demonstration requirements in a new concept market.
Other expenses increased substantially in Q4 with management confirming one-time charges including political contributions contributing to margin decline, though exact quantum was not disclosed.
Competitors are introducing lower battery capacity variants (vs TI's 10.2 kWh offering) enabling lower pricing. TI plans to launch refresh version and add battery variants to address this, but margin compression is possible.
New CRSS facility at Nashik has just started with low utilization pending customer approvals (expected 3-4 months). Revenue and margin contribution delayed; utilization was approximately 80% for engineering division excluding this new plant.
CE certification for European exports was expected in Q1 FY26 but has been delayed; management acknowledges the business is not growing to potential. Revenue ramp-up contingent on certification completion.
Export revenue (approximately 15% of total sales) faces short-term uncertainty according to management, though long-term customer relationships remain intact. No quantitative impact disclosed.
HCV EV scaling faces dual challenges: (1) financing requirements of INR 100+ crore per deployment for 50-100 truck orders, and (2) route-specific charging infrastructure setup. Order book is strong but deployment timelines remain uncertain.
Railway business remains in product development stage. Customers must obtain Government of India product approval for Vande Bharat coaches. Management indicated 2-3 quarters before any meaningful revenue materializes—higher-risk waiting game.
Body-in-white supplier takeover was completed mid-Q4, causing 50% production shortfall. Management claims resolution but acknowledged 'teething issues remaining.' Q1 ramp-up trajectory is critical to watch.
Metal Formed Products remains sluggish due to unprofitable railway tender business and Hyundai OEM weakness. Western India facility for Hyundai still in ramp-up phase. Management gave no specific improvement timeline.