Key takeaways of the meet

For the first quarter ended June 30, 2013 the sales was up by 5% to Rs 262.81 crore and the PAT was lower by 15% to Rs 35.38 crore.

The company in 2012-13 has outperformed the M&HCV market growth in OEM through increased content per vehicle and increased market share. The average content per vehicle increased to Rs 13200 from about Rs 12954. The company also benefited by the good increase exports and sale of spares which was higher by 34.4% and 16.6% respectively.

The production of commercial vehicles with air-brakes fell steeply by 34%yoy during Q4FY13 and in Q1FY14 the air-brake CV production was lower by 10%. This is due to continuing adverse economic conditions and inflation. The demand for commercial vehicles is expected to continue at the same level going forward in current fiscal.

The company has commissioned its two new plants each at Mahindra World City SEZ (Plant 2) and Barabanki (near Lucknow). With this the number of manufacturing plants of the company increased to six. The company has additional space for the third plant at Mahindra World City SEZ.

WABCO, the parent sources products for its global market from a geography/plant which is cost competitive. The company is centre for excellence within the group and thus parent source that products from India. Thus the export opportunity is strong for the company.

In Q1FY14 the company did an export sales of Rs 75 crore. Typically the exports in December quarter will be lower as the focus in last quarter will be inventory clearance and the pick up in exports will happen only from February of subsequent year.

The price negotiation for exports to parent will commence in December quarter every year. Thus the company enjoys the benefits of the rupee depreciation in its exports to parent. Only from next Jan 1, 2014 onwards the rupee depreciation benefit will be passed on to the parent.

The company continued its focus on introduction of new products to Indian OEMs during 2012-13 such as adjusting valve, exhaust brake assembly (EBA), Automated manual transmission (AMT), New clutch variants, different series of brake chambers, variants in compressors. These new products are expected to increase its market share or content per vehicle and boost growth in tough market conditions in domestic market.

Fall in sales of Anti Lock Braking systems to the tune of 9% to Rs 38.17 crore in 2012-13 was largely on account of sharp decline in truck trailers, which is one of the major customer segments of the company. Currently only 8% of the vehicles in the country are fitted with Anti Lock Braking systems (ABS) as the current regulation warrant only hazardous vehicles such as Oil/chemical tankers etc to be fitted with ABS. But there was expectation for change in regulation making ABS mandatory for high capacity trucks of above 12 tonnes. On materialization of this regulatory change about 70% of the trucks in the country are to be fitted with ABS. This is likely to trigger demand for retrofitment of ABS for next 18 months since date of making ABS mandatory.

ABS of competitor can also be fitted to a truck fitted with the braking system of the company and vice versa. The market is competitive and cost competitiveness is crucial. Currently the company has indigenized all mechanical parts of ABS, which works out about 50% of the cost. The company is working towards indigenization of Electronic components, which accounts for balance 50% of the cost.

In price of ABS depends on the system features required for the vehicle, it may be around Rs 30000.

Currently the company is talking to institutions such as Maruti for installation of ABS for car carriers employed by them.

AMT is not a safety product it facilitates driver comfort. So the OEMs looking at this feature only will go for it.

The company is not the sole supplier for Daimler Trucks/Bharat Benz as the new entrants always have the tendency to rope in two suppliers. Thus it has started with a share of 50% and hope that will be increased going forward mirroring its current market share of about 85% in India.

The company currently has a head count of about 150 in software development centre. The company to offer software services to WABCO globally on cost plus basis.

Effective June 27, 2013, the company become a subsidiary of WABCO Asia Private Limited pursuant to an internal restructuring programme, under which Clayton Dewandre Holding, Rotterdam transferred its entire share holding in the company to its wholly owned subsidiary WABCO Asia Private Limited.

Planned capex for 2013-14 is about Rs 63 crore and of which about Rs 15 crore is for completion of balance work in Barabanki plant, Rs 15 crore for tolling, Rs 15 crore for exports capacity ramp-up.