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Indian Bearing market size is estimated at Rs 5700 crore. Approximately 41% of this demand is met through imports and the balance through indigenous products. In the domestic market (without imports), the sales of the organized bearing industry in India are estimated at Rs 2500 crore. The organized sector primarily caters to the original equipment manufacturers' (OEM) and end users, which are predominantly automotive, railways and other industrial users. The unorganized sector caters to the low-end replacement market as well as forms the core of the counterfeit products in the market. With a renewed focus on quality & reliability, this market segment is increasingly turning to the organized sector, a sector that was once the domain of the unorganized sector.
SKF Indian and FAG bearings are the two prominent players in the Indian market. SKF India's and FAG's share in the total Indian market is around 30% and 14% respectively. The demand for bearing industry is derived from demand in two key user segments – automotive and industrial sector. The automotive industry is the largest user segment for Indian bearing market accounting for almost 50 % of demand. The fortunes of the bearing industry in India are linked to the growth of the automotive industry. On the back of sluggish demand scenario from the key user segment the Industry as a whole reported a mediocre set of numbers for the quarter ended Mar'09
Industry reports a mediocre performance for the quarter ended Mar'09
The Bearing Industry as a whole reported a mediocre performance as a whole for the quarter ended Dec'08 on the back of sedate demand scenario from the user industries. The Aggregate Net Sales revenue of 7 companies for the quarter ended Mar'09 stood at Rs 767 crore which was 10% lower when compared with corresponding period last year. The Aggregate OPM decreased by 450 basis points to 13.0%. The Aggregate Operating Profit for the quarter under review stood at Rs 100 crore which was lower by 33% when compared with corresponding period last year.
The Aggregate Other Income decreased by 18% to Rs 9 crore. The subsequent Aggregate PBIDT for the quarter ended Mar'09 stood at Rs 109 crore which was lower by 32% on a Y-o-Y basis comparison. The Aggregate Interest expense for the quarter under review increased sharply to Rs 7 crore while the Aggregate Depreciation charge remained flat at Rs 25 crore. The subsequent Aggregate PBT for the quarter under review stood at Rs 77 crore which was 42% lower on a Y-o-Y basis comparison. The Aggregate Tax expense for the quarter under review stood at Rs 28 crore, resulting in an Aggregate PAT of Rs 49 crore, which was 44% lower when compared with corresponding period last year. The Aggregate Net PAT Margin decreased from 10.4% during the quarter ended Mar'08 to 5.6% during the quarter ended Mar'09.
However there has been an improvement in demand scenario seen since March 2009. Demand during the months January 2009 and February 2009 remained subdued on the back of very few orders from industrial side. On the other hand the automotive industry as a whole was busy in reducing the inventory. However a ray of hope was seen in form of revival in demand from the user industries since start month of March 2009. Despite the revival seen in Mar'09, things once again cooled off in Apr'09. The early trends suggest that it is difficult to predict a firm pattern for current year.
SKF India starts construction on Haridwar project
SKF India has started construction work at Haridwar project. The company is investing about Rs 150 crore on the Haridwar Plant and plans to employ more than 200 people. The beginning of work for the new manufacturing site in Haridwar, Uttarakhand has been started. The Uttarkhand plant, which was earlier expected to be completed during the last year, is now scheduled to start in the first quarter of CY 2010. This plant will cater to the automotive market segment in India. Situated over 10 acre, the new bearing factory will have a production capacity of 40 million bearings. Deep Groove Ball Bearings (DGBB) will be manufactured at this site to cater to the demands of the automotive and manufacturing sector. Major Customer for the Haridwar Plant is expected to be Hero Honda. Other customers are expected to be Bajaj, Tata Motors etc
Outlook
Currently the Bearings Industry as a whole is witnessing challenging times, largely due to sedate demand scenario from the user Industry specifically the Automobile segment. As a result of which the Aggregate OPM declined by 450 basis points to 13.0% while the Aggregate PAT declined by 44% to Rs 49 crore during the quarter ended Mar'09.
Although things started to revive from March 2009, once again it cooled off in April 2009. Add to this, if the customs duty on metals is hiked, it will add further trouble to the bearing producers. The early trends suggest that it is difficult to predict a firm pattern for current year. So as to diversify the customer base the companies are focusing also on non-auto segment. There is a committed business agreement for 5 and a 1/2 years between Suzlon and SKF for main shaft bearings and slewing bearings and the Agreement value of the same is 303 Million Euros. Overall we have a neutral view on the sector with a negative bias.
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