Varroc Engineering Limited

Consumer Cyclical — Auto Parts · NSE

₹820.20−₹0.20 (−0.02%)

DalalBaazaar Score

58 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by short-term liabilities exceed short-term assets, small-cap size, which brings sharper price swings, a very high earnings multiple, which leaves little margin for disappointment.

In simple words: Strong business and financial position, though profits are falling even as sales grow. Short-term liquidity is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

The 60-second version of Varroc Engineering Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Varroc Engineering Limited provides aftermarket automotive components and solutions in India, the Asia Pacific, Europe, North America, and internationally. It operates through Automotive and Others segments.

IndustryAuto Parts

SectorConsumer Cyclical

Employees5,372

Annual revenue₹8,725 Cr

How does it make money?

Turns over ₹8,725 Cr a year. Of every ₹100 of sales, about ₹3 reaches shareholders as profit, with ₹10 left at the operating level before interest, tax and depreciation. Each of its 5,372 employees supports ₹1.62 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin9.7%

Net margin2.6%

Revenue / employee₹1.62 Cr

Who are its competitors?

The closest listed comparisons in its industry are BOSCH LIMITED, MARUTI SUZUKI INDIA LTD., TVS MOTOR COMPANY LTD, EICHER MOTORS LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

BOSCH LIMITEDP/E 56.9x · ROE 15.9%

MARUTI SUZUKI INDIA LTD.P/E 25.2x · ROE 13.4%

TVS MOTOR COMPANY LTDP/E 56.8x · ROE 35.8%

EICHER MOTORS LTDP/E 34.7x · ROE 23.0%

What is its competitive advantage?Some evidence

ROCE of 20.8% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE20.8%

ROE12.6%

Peer median ROE23.0%

What is the outlook?

6 analysts covering the stock expect revenue to grow about 13.7% and earnings to grow about 45.1% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+13.7%

Est. earnings growth+45.1%

Analysts6

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +28% while net margin moved -121% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+28%

Margin effect-121%

DalalBaazaar Score

58/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ P/E of 63.5x is demanding — it needs sustained high growth to justify
• P/E is close to its own historical median of 58.5x
✗ P/B of 7.04x is a steep premium to book

Quality vs. Valuation

Company Quality

63/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

37/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

63.5x

2Y Median

58.5x

28 monthly readings · mean 76.8x · range 12.3x–169.4x

Sector Median

45.7x

median of 4 sector peers

🟡Currently trading close to its 2y median of 58.5x — the market is paying about what it usually pays for this company.

⚠️Against its sector it trades 39% above the peer median of 45.7x.

vs. its own history

Fair

58.5x median over 28 months · +8%

vs. sector peers

Expensive

45.7x median of 4 peers · +39%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

63.5x

P/B

7.04x

EV/EBITDA

15.8x

PEG

—

Dividend Yield

0.18%

What's Good / What's Bad

🟢 What's Going Well4

Debt is being paid down
Total debt is down 49% over 3 years.
Return on equity is rising
ROE has improved from -84.0% to 12.6%.
Return on capital is rising
ROCE has improved from 14.9% to 20.8%.
High return on capital employed
ROCE of 20.8% is the mark of a business that converts capital into profit efficiently.

🔴 What Needs Attention1

Short-term liquidity is tight
Current ratio of 0.88 — near-term obligations exceed near-term assets.

Red Flags

2 items require attention · 1 high · 1 watch

🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🟡Short-term liquidity is tightFinancial
Current ratio of 0.88 — near-term obligations exceed near-term assets.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 20.8% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Deleveraging frees up earnings
Debt is down 49% over 3 years. Every rupee of interest not paid drops to the bottom line, so profit can grow even if revenue does not.

🔴 Bear CaseWhat could go wrong?

A premium to the sector to defend
It trades 39% above the peer median. That premium needs a reason that persists, or it closes.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Small Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 8%✓ 9.7%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Interest cover stays above 3x✓ 3.7x
How much operating profit can fall before interest stops being comfortably covered.
3Revenue growth stays above 7% a year✓ 8.7% CAGR
Latest reported year was 29.9%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Free cash flow remains positive✓ ₹68 Cr
Profit that never becomes cash eventually stops being profit.
5Debt / EBITDA stays below 2x✓ 1.1x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.

Investment Checklist

6 / 12 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✓ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✗ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✗ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

5 good · 3 neutral · 3 weak

Market Cap

₹12,533 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

63.5x

Expensive

Expensive — verify against sector peers

P/B Ratio

7.04x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹12.92

Profitable

Profitable on a per-share basis

ROE

12.6%

Moderate

Moderate capital efficiency

ROCE

20.8%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.51x

Low

Conservative leverage

Revenue Growth (YoY)

29.9%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-26.5%

Falling

Profits are shrinking

Dividend Yield

0.18%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

₹68 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

CMP

₹820.2

P/E (Forward)

22.3x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

5.3%

Average

Average margins

Net Margin

2.1%

Weak

Very little revenue reaches the bottom line

Current Ratio

0.88

Adequate

Adequate, but no real cushion

Beta (vs Nifty)

0.33

Defensive

Steadier than the market

52W Range Position

80%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

832.0 / 833.0

Bearish alignment (short < long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

44.9

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹6,796 Cr	₹7,350 Cr	₹8,002 Cr	₹8,725 Cr	+8.7%
EBITDA	₹585 Cr	₹825 Cr	₹797 Cr	₹842 Cr	+12.9%
EBITDA Margin	8.6%	11.2%	10.0%	9.7%	—
PAT (Net Profit)	-₹820 Cr	₹526 Cr	₹61 Cr	₹225 Cr	—
EPS	₹-53.66	₹34.43	₹4.01	₹14.73	—
ROE	-84.0%	35.1%	3.9%	12.6%	—
ROCE	14.9%	20.8%	15.8%	20.8%	—
Total Debt	₹1,806 Cr	₹1,390 Cr	₹1,118 Cr	₹925 Cr	-20.0%
Free Cash Flow	₹88 Cr	₹364 Cr	₹448 Cr	₹68 Cr	-8.2%

🟢 Revenue has grown at 8.7% a year over 3 years.

🟢 EBITDA has grown at 12.9% a year over 3 years.

🟢 EBITDA Margin has risen from 8.6% to 9.7% over 3 years (+1.0 pts).

🟢 PAT (Net Profit) has turned positive, from -₹820 Cr to ₹225 Cr.

🟢 EPS has turned positive, from ₹-53.66 to ₹14.73.

🟢 ROE has risen from -84.0% to 12.6% over 3 years (+96.6 pts).

🟢 ROCE has risen from 14.9% to 20.8% over 3 years (+5.9 pts).

🟢 Total Debt has shrunk at 20.0% a year over 3 years.

🔴 Free Cash Flow has shrunk at 8.2% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹4,875 Cr

Total Liabilities

₹3,057 Cr

Total Debt

₹925 Cr

Cash & Equivalents

₹125 Cr

Operating Cash Flow

₹537 Cr

Capex

-₹469 Cr

Shareholding (proxy)

Institutional Holding

12.2%

Insider Holding

75.0%

Corporate Actions

Dividend Rate

₹1.5

Ex-Dividend Date

07 Aug 2026

Analyst Consensus

Recommendations

4 Buy · 0 Hold · 2 Sell

Target Price (Mean)

₹853.5

+4.1% vs CMP

Target Range

₹540 – ₹1,219

Peer Comparison

Company	P/E	ROE
BOSCH LIMITED	56.9x	15.9%
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TVS MOTOR COMPANY LTD	56.8x	35.8%
EICHER MOTORS LTD	34.7x	23.0%

Recent News

4 mixed2 general

Varroc Engineering vs Nifty 50: 1Y Return +35.09% vs -11.35%

Univest, 13 Oct

Varroc Engineering forms joint venture with Forsee Power for EV batteries

scanx.trade, 16 OctPartnership

🟡Mixed / dependsA partnership, whose value depends entirely on terms that a headline will not carry. Worth reading the filing before assuming either way.

Varroc Engineering (NSEI:VARROC) Stock Forecast & Analyst Predictions

Simply Wall Street, 30 SeptAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Over 140% Return In 5 Years: This Multibagger Stock Jumps Over 11% To Hit 52-Week High After Q1 Results - Should you buy?

NDTV Profit, 07 AugResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Varroc Engineering Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 04 Sept

Varroc Engineering share price jumps 9% to near 1-month high; here's why

Business Standard, 04 FebPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟡Business QualityAdequate12.4/20

🟡Financial HealthAdequate12.9/20

🟢GrowthStrong13.6/20

🟡ProfitabilityModerate8.5/15

🔴ValuationDemanding5.3/15

🟡RiskModerate4.9/10

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 1 high-severity red flag sits above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 8%9.7%
✓Interest cover stays above 3x3.7x
✓Revenue growth stays above 7% a year8.7% CAGR
✓Free cash flow remains positive₹68 Cr
✓Debt / EBITDA stays below 2x1.1x