Rane Holdings Faces Net Loss Despite Strong Revenue Growth Due to JV Warranty Provision

Rane Holdings Limited (RHL) announced its unaudited financial results for the third quarter of FY26 (ended December 31, 2025), revealing a consolidated net loss of ₹39.5 crore. This loss was primarily driven by a substantial warranty provision related to product recall liability at its joint venture, ZF Rane Automotive India Private Limited.

Financial Deep Dive

On a consolidated basis, RHL reported a healthy revenue growth of 23.6% year-on-year, reaching ₹1,539.3 crore. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) also saw a significant rise of 39.5% YoY to ₹116.4 crore. However, the EBITDA margin compressed by 86 basis points to 7.6%, indicating rising costs relative to revenue.

The main blow came from the net loss, exacerbated by RHL's share of a ₹84.63 crore (net of tax) warranty provision booked at the JV entity, ZF Rane Automotive India. This provision, aimed at covering liabilities from a product recall, significantly impacted the JV's financial performance, with ZF Rane Automotive itself reporting a net loss of ₹140 crore, inclusive of its total provision of ₹172.72 crore.

Performance of Key Entities:

• Rane (Madras) Limited (Consolidated): This subsidiary showed strong performance, with revenue at ₹1,019 crore and EBITDA at ₹95 crore, up 37.7% YoY. It posted a Profit After Tax (PAT) of ₹31 crore and secured significant new orders worth ₹135 crore, including ₹75 crore from international markets.
• Rane Steering Systems Private Limited: Reported revenue of ₹519 crore and EBITDA of ₹10 crore, with a PAT of ₹-8 crore. This entity also announced substantial domestic order wins worth ₹345 crore for UV models.
• ZF Rane Automotive India Private Limited (JV): Generated revenue of ₹702 crore and EBITDA of ₹82 crore, with an EBITDA margin of 11.7%. However, it incurred a net loss of ₹140 crore due to the aforementioned warranty provision.

Investor Risks & Governance

The primary concern for investors is the consolidated net loss, directly attributable to the significant warranty provision and product recall liability at the joint venture. While RHL's revenue and EBITDA are growing, the substantial provisioning underscores potential product quality issues or unforeseen liabilities, which could recur. Historically, vehicle recalls by OEMs due to defective auto parts have been identified as a general risk for the Rane Group, potentially creating additional cost burdens and liabilities on investee entities [42, 43].

Past regulatory actions on subsidiaries, such as tax demands and penalties from Income Tax [40] and Customs authorities [38], and CGST [41] for Rane Steering Systems, indicate ongoing compliance challenges, though these are distinct from SEBI penalties or fraud allegations. The company has demonstrated a commitment to corporate governance [19], and no specific instances of fraud or major governance failures were found in the search.

Comparative Lens & Big Picture

While the auto ancillary sector in India is experiencing a demand upcycle, driven by increased vehicle production and exports [27, 28], Rane Holdings' Q3 performance highlights the sector's vulnerability to specific operational risks. The significant provisioning impacting its bottom line contrasts with the generally positive outlook for the sector. Competitors are also navigating challenges like semiconductor shortages and commodity price increases [36].

Peer Comparison

The Indian auto ancillary sector is competitive, featuring major players like Motherson Sumi Systems, Bosch India, Bharat Forge, Uno Minda, Endurance Technologies, and Suprajit Engineering [1, 3]. While many peers are reporting strong results driven by sector tailwinds, Rane Holdings' performance is overshadowed by the one-off provisioning. For instance, Samvardhana Motherson International reported a 16.5% YoY increase in net profit for Q3 FY26 [29], showcasing the varied performance within the sector based on specific company issues.

Peer Comparison

| Company | Q3 FY26 Revenue (Approx. ₹ Cr) | Q3 FY26 PAT (Approx. ₹ Cr) | YoY Revenue Growth | YoY PAT Growth | Key Event / Observation |
| :------------------------- | :----------------------------- | :------------------------- | :----------------- | :------------- | :--------------------------------------------------------------------- |
| Rane Holdings (Consolidated) | 1,539.3 | -39.5 | +23.6% | Net Loss | Hit by JV warranty provision; Revenue & EBITDA strong. |
| Rane (Madras) | 1,019 | 31 | ~+21% (from [20]) | ~+7725% (from [20]) | Strong revenue growth, significant PAT jump, new orders. |
| Motherson Sumi Int. | N/A | ~1,024 | N/A | +16.5% YoY Net Profit growth reported. |
| Uno Minda | N/A | N/A | N/A | Generally strong sector performer, gained in Q3 FY26. |
| Endurance Technologies | N/A | N/A | N/A | Competitor in the auto ancillary space, generally performing well. |

Note: Direct Q3 FY26 PAT figures for all peers are not readily available in the provided search results to match Rane Holdings' disclosed numbers. Comparisons are based on available data and sector trends.