Top gear: How components maker Uno Minda defied the auto industry slowdown

Two-wheeler and passenger car manufacturers account for 46% and 47% of the total revenue for the automotive systems and components manufacturer. In the June quarter (Q1FY26) Uno Minda’s revenue grew 16% year-on-year to ₹4,420 crore, adjusted for one-off item of prior period incentives received from states with manufacturing plants. This is impressive, considering two-wheeler sales volume (including exports) grew just 9% year-on-year and passenger cars volume (including exports) was almost flat in Q1FY26.

For Uno Minda, 89% of revenue comes from India. Almost all of it is from sales to automobile manufacturers or original equipment manufacturers (OEMs), with replacement sales making up a tiny portion. This insulates it from the impact of US import tariffs as that country accounts for less than 2% of its revenue.

Outpacing the auto industry

Q1FY26 was not an aberration for Uno Minda. The company doubled its consolidated revenue to ₹16,775 crore in the three years to FY25 (post-covid period). Revenue grew at a 26% compound annual rate, at least twice thesales volume growth of the auto industry.

So, how did Uno Minda manage to grow faster than the industry it caters to? By expanding its product portfolio to grab bigger wallet share of OEMs. It has a broad product portfolio that includes automotive switches, castings, seats and acoustics, to name a few. Selling more manufacturing parts per vehicle has worked well. Also, most of its products work with both conventional and electric vehicles.

Uno Minda’s focus was on achieving a healthy return on capital employed (RoCE) rather than increasing Ebitda margin. While Ebitda margin remained in the 10-11% range, RoCE expanded from 16% in FY22 to 19% in FY25. Nonetheless, management is upbeat on margin expansion in the next couple of years as new businessessuch as four-wheeler alloy wheels and airbags stabilise.

The company is likely to incur growth capital expenditure of about ₹1,300 crore in FY26 spread over 13 ongoing projects, with some likely to go on stream this year itself. A significant chunk of the capex – ₹500 crore – has been allocated to products for the two-wheeler EV industry, which is growing faster than conventional vehicles.

Disruption and other risks

On the flip side, Nomura Global Markets Research has flagged some risks. Uno Minda has forged strong partnerships for successful diversification into new products. For example, it has a joint venture with Suzhou Inovance Automotive to manufacture EV components. However, it must ensure these partnerships continue to avoid being disrupted by technological advancements.

Also, its new products categories such as electronic sensors for detecting objects and electric motor controllers are already dominated by global players. This could make it tough to grow.

Plus, valuations are expensive. The stock has already achieved Nomura’s target price of ₹1,304, which is based on 45 times its average earnings-per-share estimates for FY27 and FY28. Uno Minda’s revenue growth rate has declined due to high base and challenging auto industry environment, but any revival in the domestic auto industry, with a likely impetus from GST rate cuts, could be the upside trigger the stock needs.