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SKF India Limited (CMP: ₹4880; MCap: ₹24130 crore; Target: ₹5550, Upside: 14%)

ICICIdirect Research 03 Oct 2025 DISCLAIMER

SKF India will demerge Automotive and Industrial business, Automotive business will continue under SKF India ltd. whereas, the Industrials business will be housed under SKF India (Industrials) Ltd. For this it has received NCLT approval for on 26th September 2025 and Company has fixed 15th October 2025 as record date for determining eligibility to receive SKF India Industrials shares in 1:1 ratio. (Effective date is 1st October 2025 for accounting purposes).
The Industrial business (₹2600 crore) contributed 53% of FY25 revenue (₹4920 crore). The business grew at ~16% CAGR over FY21-25. The company has planned investment worth ₹800-950 crore in Industrial business over FY25-30E. Of this ₹350 crore is planned for channel expansion and ₹450-500 crore for new plant in Pune.
The Automotive business (₹1920 crore) generated 39% of FY25 revenues. Automotive business grew at ~15% CAGR over FY21-25.  Q1FY26 was below expectations due to change in two-wheeler models and overall decline in automotive demand. Going ahead, auto demand is expected to pick up pace on account of festive season and GST reforms. The company has also announced capex plans of ~₹500 crore for expansion of manufacturing facilities across Haridwar, Pune and Bangalore over FY25-29E.
Going ahead Industrial and Automotive business are expected to grow at ~8-10% and 10-12% CAGR respectively over FY25-28E. We believe margin pressure on account of one-time event (demerger) is transitionary. We have built in EBITDA margins of 14% and 15.6% in FY26E and FY27E respectively.
The demerger in our view will unlock value for shareholders. With a strong capex programme over FY27E-FY29E, we believe, SKF will continue to deliver steady growth without burdening the balance sheet. We maintain BUY rating with a target of ₹5550 (38x FY27E EPS).

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