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Summary: A brutal downcycle halved this stock after its IPO. Now the cycle is turning, but for a cyclical business, the real question is how much of that recovery is already priced in.
A handful of businesses are as brutal as cyclical ones. Let’s take the case of Uniparts. The company, which went public in December 2022, saw its stock quietly halve to nearly Rs 300 in the next two years. Not because its business was broken, but the cycle had.
When the cycle turned, it turned hard. And now that the company is slowly recovering, the question is: Is the IPO, which failed to deliver, finally within reach?
What does Uniparts do?
Uniparts is a manufacturer and supplier of components to some of the world’s largest agricultural and construction vehicle makers.
The company operates across two primary channels. For agricultural players like Deere, Kubota, TAFE and CNH, Uniparts’ core product is the three-point linkage (3PL), which is the mechanism at the rear of a tractor connecting and controlling implements like ploughs and cultivators.
For construction clients such as Caterpillar and Bobcat, precision-machined parts form the bulk of what it supplies. Agricultural equipment accounts for roughly 60 per cent of sales, with construction making up the balance. North America contributes roughly half of the revenue, Europe about 25 per cent and India around 15 per cent.
What went wrong
Post the peak cycle, declining crop prices, depressed farm incomes and high input costs ate into farmers’ purchasing power. The damage was further fueled by supply chain issues.
During the Covid pandemic, dealers had hoarded stock, fearing shortages. When demand eventually softened, they stopped placing new orders and sold the existing stock. Thus, even though the actual fall in end-consumer demand was moderate, the orders flowing back to manufacturers saw a sharp fall. And Uniparts suffered the blow.
Construction equipment followed a similar path. Elevated interest rates weighed on residential housing activity, a key driver of demand for compact machinery. As homebuilding slowed and developers turned cautious, dealers again ran down inventory and froze orders rather than placing fresh ones.
A steady fall
Uniparts saw a consecutive decline in its revenue and profitability from FY23 till FY25
|
|
Mar ‘26 | Mar ‘25 | Mar ‘24 | Mar ‘23 | Mar ‘22 |
|---|---|---|---|---|---|
| Revenue (Rs cr) | 1,170 | 964 | 1,140 | 1,366 | 1,227 |
| Agriculture (YoY change, %) | 18 | -17 | -24 | 12 | 37 |
| CFM (YoY change, %) | 27 | -13 | 3 | 30 | 29 |
| EBITDA margins (%) | 21 | 15 | 18 | 22 | 22 |
| Profit after tax (Rs cr) | 162 | 88 | 125 | 205 | 169 |
| CFM stands for construction, forestry and mining | |||||
Finally, timing made things worse for Uniparts. Historically, the agriculture and construction markets slow down at different points in the cycle, which is why having exposure to both was considered a sensible hedge. The agriculture downturn had been delayed by the Ukraine war, which kept crop prices high and farmers spending. When that tailwind faded, both markets turned down together for the first time in memory, and the hedge that was supposed to protect the business offered no protection at all. The result was stark, as revenue fell more than 15 per cent in two consecutive years.
Turnaround is there, but it’s not all hunky-dory
Though the cycle is turning, the impact isn’t uniform.
Dealers who spent years selling existing stock are now placing new orders, while easing interest rates have unlocked discretionary spending.
However, this doesn’t mean that agriculture overall is on the path to recovery. While small tractors seem to be regaining momentum, owing to farmers replacing ageing machines, large tractors are yet to show any progress.
Recent commentary from Deere and CNH suggests the agricultural cycle is nearing its bottom, with recovery expected to begin in 2026 and gather pace through 2027. Europe is already seeing better traction than North America in this segment, and Uniparts has been winning new contracts with European manufacturers on high-horsepower platforms. When large agri demand eventually recovers, given it has the furthest to rebound from current levels, those wins are where the real earnings uplift could come from.
The picture is very different in construction, where OEMs (original equipment manufacturers) are seeing strong demand and order visibility. Caterpillar recently reported revenues up 38 per cent YoY, with order backlogs up 79 per cent, supported by infrastructure spending, data centre buildout and rental fleet restocking extending through 2028. Deere has also raised its construction outlook to 20 per cent growth in 2026.
The growth front
FY26 revenue grew 21 per cent, and EBITDA margins climbed back above 20 per cent, even as agriculture was still at the bottom of a severe downcycle. A weak prior-year base helped, but restoring margins and winning new market share while a core end market remains depressed is a more durable signal than merely riding a recovery. Management has guided for similar FY27 growth, backed by Rs 225 crore in annualised new business wins concentrated in large agriculture and precision parts, including a new 3PL platform for high-horsepower tractors that has already secured fresh OEM awards.
More than half of Uniparts' revenue now flows through its warehouse-and-distribution model, which carries margins of 25-28 per cent against a blended 21 per cent, capturing both manufacturing and distribution margin in one. The model embeds Uniparts directly into customer supply chains, holding safety stock and delivering just-in-time to assembly lines. The new Mexico warehouse, operational since Q3 FY26, extends this further and is expected to contribute an incremental Rs 100 crore in 2026.
What to look out for
With the worst of the cycle now firmly behind it and a pipeline of new customer programmes rolling out, Uniparts is well placed to make the most of the industrial upcycle ahead.
Being a cyclical business, though, the scope for meaningful re-rating is limited. The market has always understood this character and priced it accordingly. Future returns are therefore more likely to come from earnings growth than multiple expansion. The warehouse model and continued geographic diversification have improved the resilience of those earnings, but a sudden downturn in off-highway capital expenditure can still compress them quickly, as the past two years made plain. Moreover, given the slow-moving nature of its end markets, prolonged geopolitical conflicts could reignite inflationary pressures and push the recovery timeline beyond FY27.
Capital overhang is a key concern for Uniparts. To offer just-in-time delivery to global OEMs, Uniparts ships finished goods from India to its own warehouses in the US and Europe, where inventory sits as safety stock. With inventory days typically ranging between 120 and 150, any reduction in OEM production schedules can leave capital tied up in inventory sitting overseas. This not only strains working capital but also increases the risk of inventory obsolescence and potential write-offs, creating a direct drag on liquidity.
What to watch is whether momentum carries through FY27, whether margins hold as volumes ramp, and how quickly the large agriculture market recovers. That segment is still dragging, and the pace at which it finds its footing will determine whether FY27 is merely a good year or a genuine inflexion point
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