Uno Minda Targets 18-20% Pre-Tax Returns on ₹5,300 Crore Project Pipeline

Uno Minda is executing manufacturing expansion projects involving investments of approximately ₹5,300 crore and expects them to generate pre-tax returns on capital of 18-20% by their third full year of production, as the auto-component maker scales capacity across alloy wheels, casting, sunroofs and other businesses.

The company expects initial asset turnover of around 1.8-2 times from these investments, although returns and revenue potential will vary depending on the nature of individual projects.

The investment pipeline includes previously announced projects at different stages of execution, commissioning and ramp-up, rather than representing a fresh capital expenditure commitment.

"Our target ROCE is roughly around 18-20% pre-tax," Sunil Bohra, Group Chief Financial Officer of Uno Minda, said during the company's Q2 FY27 earnings call on Thursday.

Bohra said the company expects to achieve these returns by the third full year of production, adding that the target forms part of the criteria used when proposing projects for board approval. "On an average, we do expect our asset turn to be between 1.8 to 2 initially on this CapEx," he said.

Asset turnover measures the revenue generated relative to the capital invested. At an asset turnover of two times, for instance, a ₹100 crore investment would support approximately ₹200 crore in annual revenue once the relevant operating scale is reached.

However, Bohra said asset turnover varies across Uno Minda's businesses, ranging from approximately 1.25-1.3 times in more capital-intensive operations to 2.5-3 times in others. He added that subsequent investments could generate higher asset turnover because land, buildings and other infrastructure would already be available.

The latest investment pipeline is larger than the approximately ₹3,800 crore of announced projects discussed during the company's Q1 FY27 earnings call in August.

In September, Uno Minda's board approved four manufacturing projects involving a combined investment of ₹1,415 crore, including a ₹510 crore aluminium die-casting facility at Hosur, a ₹155 crore two-wheeler alloy wheel expansion at Kharkhoda, an ₹80 crore moulding capacity expansion in Bengaluru and a ₹670 crore manufacturing facility being developed through a joint venture at Chhatrapati Sambhajinagar.

The projects are intended to support higher demand from vehicle manufacturers, expand manufacturing capacity and increase localisation of automotive components.

During the September quarter, the company also approved an additional ₹85 crore investment to expand sunroof manufacturing capacity at Bawal, Haryana, following incremental customer orders. The initial sunroof facility is expected to commence commercial operations by the end of FY27, while the additional capacity is scheduled for commissioning by Q2 FY28.

The ongoing investments are already contributing to capacity expansion across several businesses. In four-wheeler alloy wheels, the company's annual installed capacity has increased to approximately 6.3 million units following debottlenecking measures and commissioning of additional production lines. Uno Minda expects capacity to increase further to around 9 million units as ongoing projects are completed.

Its two-wheeler alloy wheel capacity has also increased to approximately 9 million units annually following the commissioning of four production lines at Bawal. Further investments and commissioning of additional lines are expected to take capacity to around 11.8 million units.

These expansions come as Uno Minda's casting business reported 57% year-on-year revenue growth to ₹1,441 crore during Q2 FY27. Management attributed the increase to higher production, additional customer business and rising aluminium prices, which also contributed to the reported revenue growth.

The large investment programme is also reflected in the company's cash flows and borrowings. During H1 FY27, Uno Minda generated approximately ₹711 crore of operating cash flow. After sustaining capital expenditure of ₹307 crore, the company reported cash generation of ₹404 crore. It separately incurred around ₹500 crore of project capital expenditure during the period.

Net debt increased to ₹2,415 crore at the end of September from ₹2,179 crore at the end of March 2026, an increase of ₹236 crore. Its net debt-to-equity ratio stood at approximately 0.31 times.

Management said sustaining capital expenditure and much of the expansion programme continued to be supported by internal cash generation.

The company acknowledged that commissioning new manufacturing facilities could temporarily increase employee costs and depreciation before the projects reach their intended operating scale.

Bohra said additional capacity could affect employee expenses during the initial ramp-up period, but expects operating leverage to improve as production stabilises. He also indicated that depreciation expenses could rise as more facilities begin operations.

Despite these pressures, the company maintained its FY27 EBITDA margin guidance of approximately 11%, plus or minus 50 basis points. Management expects the new projects to deliver EBITDA profitability broadly in line with the company's existing operations once they mature.

The expansion programme comes amid strong growth in Uno Minda's underlying business. Consolidated revenue increased 38% year-on-year to ₹6,655 crore during Q2 FY27, while EBITDA rose 33% to ₹733 crore.

Profit after tax attributable to Uno Minda shareholders increased 38% to ₹420 crore, supported by higher vehicle production, greater value addition and growth across switches, lighting, casting, seating and green mobility.

The company's green mobility business, covering EV systems and alternate fuels, more than doubled revenue to ₹649 crore during the quarter, reflecting increasing demand for electric and alternative-fuel vehicle components.