Stock markets have been in a turmoil for over a month now. Of the sectors worst hit, the auto sector is certainly one, with the BSE Auto index down 18 per cent from its 52-week high in early January. Meanwhile, benchmark Sensex is down a relatively lower 15 per cent from its 52-week high in early December 2025. However, shares of large-cap auto components supplier Bosch have corrected a steeper 23 per cent from their 52-week high in September last year. This, despite the company posting decent growth while maintaining margins, if not improving.

At current price, the trailing P/E ratio works out to 34x; 41x, based on adjusted trailing twelve months earnings. The adjustments pertain to gain on sale of a part of ‘Energy and building technology’ division in Q1 FY26, amounting to ₹556 crore (net profit in FY25 was about ₹2,000 crore, for context). At 41x, the P/E ratio syncs with its 10-year average of 41x, after adjusting for disruptions caused due to volatile earnings during the pandemic.

The Indian auto industry now enters FY27, after witnessing a flamboyant FY26—especially in the second half, after GST rate rationalisation. Vehicle production growth in FY26 until February is expected to be a ballpark 11 per cent over FY25, and could well be the growth rate for the whole FY26 as well. This is higher than 9.6 per cent in FY24 and 9.1 per cent in FY25. This sets a high base for FY27. Further, the war in the Gulf could mean sustained higher prices of crude oil and other commodities that go into the production of a vehicle. Some OEMs have already announced price hikes, which could discourage buyers. This forms the rationale for our tempered expectation of 6-7 per cent production growth in FY27.

Taking cues from FY24 and FY25, where the auto components industry’s revenue growth largely tracked vehicle production, the auto components market could grow by a similar 11 per cent in FY26 and 6-8 per cent in FY27, to about ₹8 lakh crore. Historically, Bosch has maintained about 2.5 per cent share in the overall auto components market. Assuming this continues in FY27, the P/E based on FY27 EPS works out to 42x. Hence, there may not be any meaningful upside to the stock.

Though there may not be a robust demand environment, the future has a few opportunities for Bosch to capitalise. Among others, these include the upcoming JV with Tata Autocomp Systems (discussed below), a flurry of new launches expected from passenger vehicle OEMs and the upcoming CAFE 3 (Corporate Average Fuel Efficiency) norms. These norms entail more stringent tailpipe emissions and so OEMs may have to work with suppliers such as Bosch (fuel injection systems and ECUs are a key offering; these parts regulate the amount fuel consumed) to figure out solutions. For the moment, there is little visibility on whether these tailwinds can translate to earnings growth. Therefore, readers invested in the stock can remain invested, while closely tracking developments on these fronts. Readers should also be cognizant of downside risks due to the sector’s cyclicality.

Business

The India-listed Bosch enjoys rich parentage. Its ultimate parent is the Germany-based Robert Bosch GmbH, whose consolidated revenue is €91 billion or ₹10 lakh crore. It operates in 60 countries and employs about 4.2 lakh personnel (TCS’ headcount is about six lakh, for context), of whom about 87,000 (20 per cent) are into R&D. The German parent is not listed. Thus, the India-listed entity has access to rich research expertise and a desirable brand name that is almost synonymous with auto components. This comes at a cost though, as royalty expense accounts for 2-2.5 per cent of revenue.

The German parent has 14 group companies in India, churning out a turnover of close to ₹40,000 crore—half of which is contributed by the listed entity. Five of these 14 are subsidiaries/ associates/ JVs of the listed entity and the rest are ultimately controlled by the German parent. With that context, we’ll focus only on the listed entity.

In FY25, Bosch made a turnover of ₹18,087 crore and ₹14,469 crore in 9M FY26. Two segments namely, Mobility solutions and Consumer goods roughly account for 90 per cent and 10 per cent of revenue, and earn margins of 14 per cent and 6 per cent (EBIT over segment revenue).

Mobility segment: This includes three businesses — Power solutions, Two-wheeler & Powersports and Mobility aftermarket (their individual share in revenue is not disclosed). Under ‘Power solutions’, Bosch manufactures fuel injection systems, ECUs (electronic control units), VCUs (vehicle control units), BMS (battery management systems), battery packs and energy recovery systems (for hybrids), A/C blower modules and electric refrigerant compressors. Besides, it is currently working with OEMs to develop and test parts for flex-fuel vehicles (can support ethanol blending up to 85 per cent) and hydrogen-based vehicles. It also develops technology for connected vehicle features (such as over-the-air updates, real-time diagnostics, etc.).

Under ‘Two-wheeler & Powersports’, the company manufactures BMS, fuel injectors, ECUs and other sensors. Under ‘Mobility aftermarket’, Bosch caters to the replacement market with key offerings such as spark plugs, wiper blades, batteries, fuel injection system and lubricants, among others.

One can observe that the product portfolio is a mix of ICE/ EV-specific products and not exactly powertrain agnostic.

Consumer goods: Bosch manufactures power tools such as those for drilling, grinding, bolting and also hand tools — pliers, screw drivers and hammers.

Before moving on, there are also a couple of things investors need to note. One, despite manufacturing the above at six locations in India, Bosch still purchases goods from group entities to the tune of 60 per cent of cost of sales. This entails imports from the German parent, subjecting it to additional logistics costs and supply chain disruptions—the kind we are seeing right now. However, going by the steady EBITDA margin (see chart), one can infer that the company is probably compensated for cost overruns by the OEMs.

Two, Bosch earns a meaningful sum from letting out property to group entities, interest income and marked-to-market gains on short-term mutual funds (net cash of about ₹1,600 crore as of H1 FY26). In FY25, the company earned ₹166 crore, ₹395 crore and ₹392 crore respectively, summing up to ₹953 crore. Net profit in FY25 was ₹2,015 crore.

Financials

Between FY22 and FY25, revenue grew at a CAGR of 15 per cent and 7 per cent between FY19 (pre-Covid) and FY25. This compares with 17 per cent and 9 per cent respectively for the auto components industry (readers need to remember that the entire revenue does not come from the mobility segment). It has delivered EBITDA margins consistently in a band of 12-13 per cent and has delivered a CAGR of 22 per cent in profit before tax (before exceptional items) between FY22 and FY25.

Bosch is efficient in converting accounting profit to cash, with the operating cash flows to EBITDA ratio over 90 per cent in FY23-25. The company is free cash flow positive. It generated about ₹1,800 crore in FY25 and about ₹1,083 crore in H1 FY26. It is also debt-free and has net cash of ₹1,600 crore. At 1.6 per cent, Bosch’s dividend yield makes it the highest among major auto ancillary stocks. in the last five years, this has averaged 1.4 per cent in a range between 0.6 per cent and 2.7 per cent. Fixed assets turnover ratio stands at around 10x in the last three years and RoE between 13 per cent and 16 per cent.

In 9M FY26, revenue grew 10 per cent year on year — ‘Mobility solutions’ at 15 per cent and ‘Consumer goods’ at 3 per cent. EBITDA margin was clocked at 13 per cent and profit before tax (before exceptionals) grew 17 per cent.

Upcoming ventures

While Bosch runs an efficient business, its growth so far has not been extraordinary, compared with some peers. However, a JV with Tata AutoComp Systems is expected to come up in mid-2026 to undertake the business of manufacturing e-axles and electric traction motors. These form the heart of an EV like an engine in an ICE-powered vehicle. The fact that EV penetration in passenger vehicles almost doubled to 4.2 per cent in FY26 and that Tata Motors is the market leader in EVs with a market share of about 40 per cent is encouraging.

Further, while not disclosing details, the management hinted that they see an opportunity in certain technology additions that are likely to come up in heavy commercial vehicles. With the upcoming emission norms, if technologies such as flex-fuel and hybrids become mainstream, Bosch could well be in a position to commercialise components which are currently being developed/ tested.

Published on April 4, 2026