Bajaj Auto held its margin at 20.9%, but two of the supports behind it are weakening

Bajaj Auto's standalone EBITDA margin was 20.9% in the September 2026 quarter, exactly where it was the quarter before. EBITDA is earnings before interest, tax, depreciation and amortisation, and the standalone figure covers the Indian company that builds the motorcycles, scooters and three-wheelers, before KTM and the group's other subsidiaries. The steadiness is the news. Input costs rose faster than the company expected in the first quarter and kept rising in the second, and two of the supports that absorbed them are, on management's own account, doing less as the second half begins.

The cost pressure can be traced through what management has said each quarter. In May it guided that commodity inflation would take 3.5% to 4% of revenue in the coming quarter, with price increases covering about 40% of it. The cost hit came in at 4.5% of revenue, with about half recovered through price. Last quarter added a further 3% to 3.5%. Over the half year, the company said, its price increases covered between half and three-fifths of the inflation, and the rest was absorbed by a bigger quarter spreading fixed costs, tighter control of discretionary spending and a weaker rupee.

The rupee deserves the closest look. The company said in May that it does not hedge and converts export dollars at the market rate. Its realised rate rose to 95.5 rupees per dollar last quarter from 87.1 a year earlier. On nearly $800 million of export revenue, that gap is worth about ₹672 crore a quarter in rupee revenue, calculated from the company's figures before any dollar-priced costs it pays. That is a large sum beside a margin only slightly above its level a year ago. Management credited the uncovered part of the cost increase to scale, cost control and currency together, so the calculation is an upper bound on the rupee's help rather than a measure of it.

For the third quarter, two of those supports look thinner. Management called the inflation outlook very hard to pin down, but estimated that if steel, copper and some proprietary parts stay where they are for the whole quarter, costs could rise by a couple of percentage points of revenue; the price increase taken in the first week of October recovers about 30% of that. Realisations on the rupee in October were below last quarter's rate, and Dinesh Thapar, the chief financial officer, ruled out using price to make up for currency: "If the currency were to be a bit of a headwind, we will not take pricing action." On a further increase after the festive season, he said the company would decide as the quarter unfolds.

The third support is the government's production-linked incentive (PLI) for electric vehicles. Its rate rose through the year and reached the scheme's maximum, 18% of eligible electric-vehicle revenue, which management expects to hold for the second half. Thapar said the electric business had a very good quarter "amplified by the PLI at the highest rate", and that it now adds to the margin of the domestic business while still diluting the company's overall standalone margin of nearly 21%. A rate at its ceiling can keep paying but cannot rise further, and on the scheme's current terms it runs to the end of March 2028.

None of this means the margin has to fall. Steel and copper could ease, volumes are still growing and management has not ruled out another price increase. The group's consolidated accounts, which include KTM and are shown in the tables below, already moved the other way last quarter. For the standalone business, the first-half margin rested on price recovering half or more of the cost increase and on a rupee that kept weakening; the third quarter begins with price covering less and with management saying it will not lean on price if the currency turns.