Carraro India Limited is a leading player in non-captive transmission systems for agricultural and construction vehicles, benefiting from strong Original Equipment Manufacturer (OEM) relationships with Mahindra, TAFE, and Escorts. The company’s innovative product portfolio, coupled with its export-driven diversification, positions it well to capitalize on emerging trends such as electrification.

Despite these strengths, Carraro India faces several challenges, including sluggish revenue growth, low margins (EBITDA: 7.4%, NPM: 3.5%), and weaker return ratios (RoE: 17.7%, RoCE: 19.4%) when compared to industry peers. Its Price-to-Earnings (P/E) ratio of 64.0x raises concerns about overvaluation, especially considering the company’s smaller scale and lower profitability. Additionally, its reliance on cyclical markets and a single manufacturing base introduces operational risks.

While Carraro India maintains a solid market presence, the concerns over valuation and operational inefficiencies suggest a more cautious outlook. As a result, we assign a NEUTRAL rating to the company.