LG to CEAT: How Xpro India Turns Long Term Relationships into a Business Moat

Synopsis: Despite a 42 percent fall in one year, Xpro India has generated 3,334 percent returns over five years by operating in niche polymer segments, where long approval cycles, high entry barriers, and relationships with clients like LG and CEAT create stable demand and a durable business moat.

In many manufacturing businesses, winning a customer is just the beginning, but in specialised industrial segments, the real challenge lies in getting approved. Xpro India operates in such a space where customer relationship is very important. Operating behind the scenes, the company caters to demanding customers whose products require specialised materials, making supplier selection a careful and time-intensive process rather than a transactional decision.

Xpro India Limited, with a market capitalization of Rs. 2,023.50 crore, closed at Rs. 862.15 per equity share, down by 1.24 percent from its previous day’s close price of Rs. 873 per equity share.

Stock return

Xpro India Limited has delivered returns across multiple timeframes, with a 1-month return of -9.92 percent, a 3-month return of -19.27 percent, and a 6-month return of -27.36 percent. The stock has delivered a -41.68 percent return in the past 1 year and in the longer frame of 5 years it has delivered a return of 3,334.80 percent.

Xpro India manufactures speciality polymer products, with a strong focus on dielectric BOPP films and co-extruded plastic sheets and films. These are not commodity plastics. Dielectric films are precision materials used in electrical and electronic applications, while co-extruded sheets and thermoformed components are designed for specific industrial uses. The company’s portfolio includes sheet applications, thermoformed liners, cast co-extruded films and release films, all requiring advanced machinery and process expertise.

Industries and Customers It Serves

Xpro supplies to a wide range of industries where reliability and performance are critical. Its dielectric films are used in the electrical and electronics sector, particularly in capacitors, transformers and power equipment. The company is a key supplier to white goods manufacturers such as LG, Whirlpool, Godrej, Haier and Voltas, providing inner and door liners for refrigerators and other appliances. It also serves industrial packaging, energy and power equipment, automotive applications, and even supports the tyre industry indirectly through specialised release films supplied to players like JK Tyre, Apollo Tyres and CEAT. This diversified end-market exposure helps balance volumes and reduce dependence on any single sector.

Why Do Relationships Become a Moat?

Xpro operates in segments with structural entry barriers. Manufacturing dielectric and specialised co-extruded films requires high capital investment, sophisticated extrusion and thermoforming lines, and deep technical know-how. Equally important are the long customer qualification cycles. Large OEMs and electrical companies test suppliers extensively before approval, and switching costs are high once a supplier is qualified. These factors limit domestic competition and discourage new entrants, especially in smaller, technically demanding niches.

Once Xpro is approved as a supplier, relationships tend to be long-term and sticky. Customers prioritise consistency, safety and reliability over marginal price differences, particularly in electrical insulation and appliance components. This creates pricing stability, repeat orders and predictable demand. Over time, these relationships turn into a defensible business moat, as competitors find it difficult to displace an established supplier without significant time and cost.

Financials

Xpro India reported Q2FY26 revenue of Rs. 119.91 crore, down 17.2 percent QoQ from Rs. 144.90 crore in Q1FY26 and 10.5 percent YoY from Rs. 133.98 crore in Q2FY25, reflecting a sequential and annual slowdown in topline performance. On profitability, EBITDA improved to Rs. 7.33 crore in Q2FY26, a sharp QoQ turnaround from a loss of Rs. 2.52 crore in Q1FY26, though it remained 45.3 percent lower YoY compared to Rs. 13.4 crore in Q2FY25. 

Net profit stood at Rs. 4.97 crore, marking another QoQ turnaround from a loss of Rs. 5.48 crore, but was 50 percent lower YoY than Rs. 9.94 crore, indicating recovery from operational losses but continued pressure versus last year’s profitability.

Over the past five years, the company has demonstrated strong growth, achieving a revenue CAGR of 9 percent, a profit CAGR of 138 percent, and a price CAGR of 103 percent reflecting its operational performance and market confidence.

A return on equity (ROE) of about 6.56 percent and a return on capital employed (ROCE) of about 7.93 percent, and debt to equity ratio at 0.46 demonstrate the company’s financial position. The stock is currently trading at a P/E of 150x higher as compared to industry P/E of 19.5x.

Shareholding Pattern

As of September 2025, Xpro India has a fairly balanced shareholding structure. Promoters hold a 40.32 percent stake, while the public owns 41.8 percent of the company. Institutional investors include FIIs with 14.44 percent, DIIs with 3.4 percent, and a small government holding of 0.03 percent, and notably, ace investor Ashish Kacholia holds a 3.91 percent stake in the company.

Future Outlook

The company is doubling down on its strengths, especially in dielectric films, by adding capacity in India and setting up a new facility in the UAE. While strategically sound, this expansion has brought short-term pressure on profitability. New lines take time to stabilise, fixed costs come in before volumes ramp up, and overseas operations are still pre-revenue. Currency movements, including euro-denominated supplier credit used for capital equipment, have also impacted near-term financials. These costs, however, are part of a longer-cycle manufacturing transition rather than a deterioration in business fundamentals.

Xpro India today stands at an inflection point. Its business model is built around high entry barriers, specialised products and enduring customer relationships. While earnings may remain volatile in the near term as new capacities stabilise, the underlying strategy focuses on long-term relevance rather than short-term optimisation. Backed by strong customer ties across industries, the company’s moat lies in trust, technical depth and persistence, not in chasing volumes.

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