The September 2025 quarter results present a complex narrative for NRB Bearings. While headline profit numbers appear impressive, the operating margin excluding other income contracted to 16.47% from 16.58% in Q1 FY26 and 17.19% in Q2 FY25, signalling potential cost pressures or pricing challenges in the core bearing business. More concerning is the dramatic 8.06 percentage point sequential decline in promoter holding to 57.84% in Q2 FY26 from 65.90% in Q1 FY26, following an even steeper 25.45 percentage point drop in the previous quarter. This volatility raises questions about ownership stability at a time when the company needs consistent strategic direction.
The quarter's strong profit performance was significantly aided by other income of ₹14.31 crores, which jumped 52.07% quarter-on-quarter, accounting for over 27% of the operating profit. This dependence on non-operating income to bolster overall profitability underscores the pressure on core manufacturing operations. Nevertheless, the company demonstrated resilience with revenue growth of 4.89% sequentially and 7.86% year-on-year, outpacing the broader auto components sector which declined 8.18% over the past year.
| Quarter | Revenue (₹ Cr) | QoQ % | Net Profit (₹ Cr) | QoQ % | Op. Margin % | PAT Margin % |
|---|---|---|---|---|---|---|
| Sep'25 | 325.20 | +4.89% | 40.63 | +26.61% | 16.47% | 12.73% |
| Jun'25 | 310.05 | -5.84% | 32.09 | -1642.79% | 16.58% | 10.58% |
| Mar'25 | 329.29 | +18.23% | -2.08 | -109.75% | 18.30% | -0.41% |
| Dec'24 | 278.52 | -7.62% | 21.33 | -39.51% | 16.09% | 7.93% |
| Sep'24 | 301.51 | +4.22% | 35.26 | +41.44% | 17.19% | 11.92% |
| Jun'24 | 289.29 | +1.64% | 24.93 | -20.15% | 14.63% | 8.86% |
| Mar'24 | 284.61 | — | 31.22 | — | 16.59% | 11.16% |
Financial Performance: Growth Amid Margin Headwinds
NRB Bearings delivered net sales of ₹325.20 crores in Q2 FY26, representing sequential growth of 4.89% over Q1 FY26's ₹310.05 crores and year-on-year expansion of 7.86% compared to Q2 FY25's ₹301.51 crores. This consistent top-line momentum demonstrates the company's ability to gain market share despite challenging industry conditions. On a half-yearly basis (H1 FY26), the company reported cumulative revenue of ₹635.25 crores, marking an 8.15% increase over H1 FY25's ₹590.80 crores.
However, the revenue growth story is tempered by margin pressures at the operational level. The operating margin excluding other income declined to 16.47% in Q2 FY26 from 17.19% in the corresponding quarter last year, representing a contraction of 72 basis points. This erosion reflects rising input costs and competitive pricing dynamics in the auto components space. Employee costs increased to ₹51.81 crores in Q2 FY26 from ₹48.16 crores in Q2 FY25, growing at 7.58% year-on-year, slightly below revenue growth but still contributing to margin compression.
The net profit margin of 12.73% in Q2 FY26 showed improvement from 11.92% in Q2 FY25, but this expansion was largely driven by the surge in other income rather than operational efficiency gains. Interest costs declined to ₹2.22 crores from ₹3.01 crores year-on-year, reflecting the company's deleveraging efforts, while depreciation rose to ₹13.27 crores from ₹11.57 crores, indicating ongoing capital expenditure and asset base expansion.
Balance Sheet Strength Amid Debt Reduction
NRB Bearings has made commendable progress in strengthening its balance sheet, completely eliminating long-term debt by March 2025. The company's shareholder funds stood at ₹918.17 crores as of March 2025, up from ₹859.91 crores in March 2024, reflecting retained earnings and prudent capital management. This debt-free status positions the company favourably compared to many auto component peers struggling with leverage.
The company's return on equity (ROE) averaged 12.78% over recent years, whilst the latest ROE stood at 14.16%, indicating improving capital efficiency. Whilst this represents moderate performance rather than exceptional returns, it demonstrates management's ability to generate reasonable returns on shareholder capital. The return on capital employed (ROCE) of 14.94% in the latest period, up from an average of 13.26%, further validates the improving asset productivity.
Working capital management shows mixed signals. Current assets of ₹828.31 crores as of March 2025 comfortably exceed current liabilities of ₹349.23 crores, providing a healthy liquidity cushion. However, trade payables increased to ₹103.73 crores from ₹96.37 crores year-on-year, suggesting some pressure in managing supplier relationships. The company's book value per share stands at ₹94.75, providing a tangible asset backing to the current market price of ₹282.05.
Margin Pressure and Other Income Dependency
Whilst headline profitability appears strong, investors should note that operating margins (excluding other income) have contracted 72 basis points year-on-year to 16.47%. Other income of ₹14.31 crores contributed significantly to the quarter's performance, accounting for 21.08% of operating profit. This dependence on non-core income sources raises questions about the sustainability of profit growth if operating conditions deteriorate further. The company's ability to pass through cost increases to customers will be critical for maintaining profitability in coming quarters.
Promoter Shareholding Volatility: A Red Flag
Perhaps the most concerning aspect of NRB Bearings' recent performance is the dramatic volatility in promoter shareholding. Promoter stake plummeted from 91.35% in March 2025 to 51.13% in December 2024, then rose marginally to 51.16% in September 2024, before climbing to 65.90% in June 2025, only to decline again to 57.84% in September 2025. This represents an 8.06 percentage point sequential decline and a massive 33.51 percentage point reduction from the March 2025 peak.
Such substantial fluctuations in promoter holding are highly unusual and typically signal either financial distress requiring stake sales, strategic repositioning, or succession planning challenges. The current promoter holding of 57.84% remains above the minimum threshold but is uncomfortably close to losing majority control. The largest promoter entity, Trilochan Singh Sahney Trust1, holds 34.88%, whilst Harshbeena Sahney Zaveri holds 13.60%, indicating a fragmented promoter group structure.
In contrast, institutional investors have shown steady confidence. Foreign institutional investors (FIIs) increased their stake to 14.28% from 14.06% sequentially and 13.74% year-on-year. However, mutual fund holdings declined to 11.30% from 12.89% in the previous quarter and 17.08% a year ago, suggesting some domestic institutional investors are reducing exposure. The total institutional holding of 26.55% provides some stability, but the promoter uncertainty remains a significant overhang on the stock.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Non-Inst % |
|---|---|---|---|---|---|
| Sep'25 | 57.84% | -8.06% | 14.28% | 11.30% | 22.25% |
| Jun'25 | 65.90% | -25.45% | 14.06% | 12.89% | 21.42% |
| Mar'25 | 91.35% | +40.22% | 13.65% | 14.34% | 20.60% |
| Dec'24 | 51.13% | -0.03% | 13.45% | 15.34% | 20.07% |
| Sep'24 | 51.16% | — | 13.74% | 17.08% | 18.02% |
Industry Leadership: Competitive Positioning Analysis
NRB Bearings operates in the highly competitive auto components and equipments sector, where it competes with both domestic and international bearing manufacturers. The company's Indo-French joint venture structure with Nadella, France (holding 26% stake) provides access to advanced technology and global quality standards, positioning it as a premium player in the needle roller bearing segment.
Compared to its peer group, NRB Bearings demonstrates relatively attractive valuation metrics. The company's price-to-earnings ratio of 18.90 times is substantially lower than the industry average of 45 times, suggesting either undervaluation or market concerns about growth prospects. The company's ROE of 12.78% positions it in the middle of its peer group, indicating moderate capital efficiency relative to competitors.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield % | Debt/Equity |
|---|---|---|---|---|---|
| NRB Bearings | 18.90 | 2.82 | 12.78% | 2.54% | 0.11 |
| Sandhar Tech | 24.20 | 2.95 | 8.93% | 0.63% | 0.74 |
| Sundaram Clayton | NA (Loss Making) | 0.36 | 0.00% | 0.33% | 0.80 |
| Rolex Rings | 16.27 | 2.84 | 22.12% | — | -0.29 |
| Carraro India | 33.97 | 6.21 | 10.90% | 0.87% | 0.24 |
| Federal-Mogul Go | 16.48 | 2.21 | 9.19% | — | -0.48 |
NRB Bearings' dividend yield of 2.54% stands out as the highest among its peer group, reflecting the company's commitment to shareholder returns despite recent challenges. The latest dividend of ₹2.50 per share (ex-dividend date October 31, 2025) represents a payout ratio of 26.45%, indicating a balanced approach between rewarding shareholders and retaining capital for growth. The company's minimal debt-to-equity ratio of 0.11 provides significant financial flexibility compared to more leveraged competitors like Sandhar Tech (0.74) and Sundaram Clayton (0.80).
Valuation Analysis: Fair Value in Uncertain Times
At the current market price of ₹282.05, NRB Bearings trades at a P/E multiple of 18.90 times trailing twelve-month earnings, representing a substantial discount to the sector average of 45 times. The price-to-book value of 2.82 times appears reasonable given the company's ROE of 14.16%, though it suggests the market is pricing in only moderate growth expectations. The enterprise value to EBITDA multiple of 12.91 times falls within the fair value range for a company with NRB's growth profile and market position.
The stock's 52-week range of ₹191.45 to ₹314.70 indicates significant volatility, with the current price positioned 10.37% below the high and 47.32% above the low. This wide trading range reflects the market's uncertainty about the company's near-term prospects amid margin pressures and promoter shareholding concerns. The PEG ratio of 0.42 suggests potential undervaluation if the company can sustain its historical growth trajectory, though this metric should be interpreted cautiously given recent operational challenges.
The valuation grade history shows the stock has oscillated between "Fair" and "Attractive" designations over recent months, most recently changing to "Fair" from "Attractive" on October 27, 2025. This suggests the market is carefully reassessing the company's prospects in light of recent results and shareholding changes. Given the company's debt-free balance sheet, reasonable profitability metrics, and attractive dividend yield, the current valuation appears neither expensive nor compelling, justifying a "Fair" assessment.
Stock Performance: Lagging Broader Markets
NRB Bearings' stock performance over the past year has been disappointing, declining 2.74% compared to the Sensex's 4.63% gain, resulting in negative alpha of 7.37 percentage points. The stock's recent single-day surge of 5.14% on November 11, 2025, following the Q2 results announcement, provided some relief to shareholders but doesn't alter the broader underperformance narrative. Year-to-date returns of just 0.21% significantly lag the Sensex's 6.45% advance, indicating persistent investor concerns.
However, the longer-term picture presents a more encouraging story. Over three years, the stock has delivered exceptional returns of 91.94% compared to the Sensex's 34.60%, generating impressive alpha of 57.34 percentage points. The five-year return of 306.12% versus the Sensex's 90.80% demonstrates the company's ability to create substantial shareholder value over extended periods, though recent momentum has clearly faltered.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +2.10% | -0.34% | +2.44% |
| 1 Month | +3.83% | +0.82% | +3.01% |
| 3 Months | +1.95% | +3.19% | -1.24% |
| 6 Months | +19.54% | +4.69% | +14.85% |
| YTD | +0.21% | +6.45% | -6.24% |
| 1 Year | -2.74% | +4.63% | -7.37% |
| 3 Years | +91.94% | +34.60% | +57.34% |
| 5 Years | +306.12% | +90.80% | +215.32% |
Technical indicators present a mixed picture. The stock currently trades in a "Mildly Bearish" trend that began on November 10, 2025, at ₹267.55, having shifted from a sideways pattern. The stock trades below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, suggesting weak momentum across all timeframes. The beta of 1.35 indicates the stock is 35% more volatile than the broader market, categorising it as a high-beta, high-risk investment unsuitable for conservative portfolios.
Investment Thesis: Quality Fundamentals, Governance Concerns
NRB Bearings presents a nuanced investment proposition characterised by solid operational fundamentals offset by significant governance and margin concerns. The company's quality grade of "Good" reflects its healthy long-term financial performance, with sales growing at a 14.25% compound annual rate over five years and EBIT expanding at an impressive 72.65% annually. The debt-free balance sheet, low debt-to-EBITDA ratio of 1.06, and adequate interest coverage of 8.17 times provide financial stability.
However, the investment case is complicated by several factors. The financial trend for Q2 FY26 is rated "Positive" based on record quarterly profit and earnings per share, but this must be weighed against the margin compression and other income dependency. The technical trend remains "Mildly Bearish," whilst the valuation appears "Fair" rather than compelling. The overall Mojo score of 52 out of 100 places the stock in "HOLD" territory, reflecting these mixed signals.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Debt-Free Balance Sheet: Complete elimination of long-term debt provides financial flexibility and reduces interest burden, with debt-to-EBITDA at just 1.06 times
- Strong Long-Term Growth: Operating profit has grown at an impressive 72.65% annual rate over five years, demonstrating operational excellence
- Record Quarterly Performance: Q2 FY26 net profit of ₹40.63 crores and EPS of ₹4.19 represent all-time highs for the company
- Attractive Dividend Yield: 2.54% dividend yield with consistent payout ratio of 26.45% provides income cushion for investors
- Institutional Confidence: 26.55% institutional holdings with FIIs increasing stake to 14.28% signals professional investor interest
- Premium Market Position: Indo-French JV structure with Nadella provides technology edge and quality leadership in needle roller bearings
- Outperforming Sector: Stock decline of 2.74% over one year compares favourably to auto components sector decline of 8.18%
⚠ KEY CONCERNS
- Promoter Stake Volatility: Dramatic 33.51 percentage point decline in promoter holding from 91.35% to 57.84% over recent quarters raises serious governance questions
- Margin Compression: Operating margin (excluding other income) contracted 72 basis points year-on-year to 16.47%, signalling pricing or cost pressures
- Other Income Dependency: Other income of ₹14.31 crores contributed 21.08% of operating profit, raising sustainability concerns about core business profitability
- Bearish Technical Trend: Stock trading below all major moving averages with "Mildly Bearish" trend classification indicates weak momentum
- High Volatility: Beta of 1.35 makes the stock 35% more volatile than the market, unsuitable for risk-averse investors
- Declining MF Holdings: Mutual fund stake declined from 17.08% to 11.30% over the past year, suggesting reduced domestic institutional confidence
- Near-Term Underperformance: Year-to-date return of 0.21% significantly lags Sensex's 6.45% advance, with negative alpha of 7.37% over one year
Outlook: What to Watch
POSITIVE CATALYSTS
- Margin Recovery: Any improvement in operating margins back towards 17-18% levels would significantly boost investor confidence
- Promoter Stake Stabilisation: Clarity on promoter intentions and stabilisation of shareholding above 60% would remove a major overhang
- Order Book Expansion: New client wins or market share gains in the auto components space could drive sustainable revenue growth
- Capacity Utilisation: Higher utilisation of existing capacity would provide operating leverage and margin expansion
RED FLAGS
- Further Promoter Reduction: Any additional decline in promoter stake below 50% would trigger serious governance concerns
- Sustained Margin Pressure: Operating margins falling below 15% would indicate structural challenges in the business model
- Working Capital Deterioration: Significant increase in debtor days or inventory levels would signal operational stress
- Volume Decline: Any contraction in sales volumes despite price increases would indicate market share loss to competitors
"Whilst NRB Bearings demonstrates operational resilience with record quarterly profits and a debt-free balance sheet, the dramatic volatility in promoter shareholding and persistent margin compression create significant uncertainty that warrants a cautious stance."
The Verdict: Hold for Existing Investors, Avoid Fresh Entry
Score: 52/100
For Fresh Investors: Avoid initiating positions until promoter shareholding stabilises and operating margin trends improve. The governance uncertainty and margin pressures outweigh the attractive valuation and dividend yield for new capital deployment.
For Existing Holders: Continue holding given the debt-free balance sheet, record profitability, and long-term growth track record. Monitor promoter shareholding trends closely over the next two quarters. Consider partial profit booking if the stock rallies towards ₹310-315 levels.
Fair Value Estimate: ₹265-285 (representing current trading range; limited upside until governance clarity emerges)
Rationale: The HOLD rating reflects NRB Bearings' solid operational fundamentals and financial strength offset by significant governance concerns and margin headwinds. The company's debt-free status, institutional backing, and premium market positioning provide a floor, whilst the promoter stake volatility and operating margin compression limit upside potential. The fair valuation at 18.90x P/E and attractive dividend yield of 2.54% justify holding for existing investors, but the risk-reward profile doesn't favour fresh accumulation until key uncertainties resolve.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The author and publisher are not responsible for any investment decisions made based on the information provided in this article.
