Key takeaways of the meet

For the period April-July 2014 the company registered a sales of Rs 96.42 crore (compared to Rs 75.33 crore in 4mFY14) translating into a growth of 28%yoy. The company growth so far in FY15 outpaces the industry and this is largely on account of the 2-wheeler customers/models the company supplies doing well apart from strong growth in overall 2-wheeler industry. As the company is gaining market share and gaining new business the growth momentum of 4mFY15 will sustain for rest of fiscal. However the poor monsoon is a key risk to this expectation. The marginal pressure on margin that was witnessed in Q1FY15 is to sustain for rest of fiscal as well.

The company deferred its proposed plan of setting up a manufacturing unit at Malur to supply its products to the new plant of Honda at Narsapura (in Karnataka) as the model it was supposed to supply and manufacture at Naraspura plant has not achieved desired volume. But the company has already acquired the required land and converted it for industrial use. Once the volume justify a new unit the company will go ahead with setting up of new unit.

The company is late entrant to aftermarket and currently the aftermarket sales as proportion to sales is less than 5%. In FY14 the direct sales to after market grew by 25% and that is expected to sustain in FY15 as well. This segment is more profitable than other revenue streams.

The company's exports are largely to Europe and more also largely to non automotive products. The demand for non automotive products in Europe has not yet fully come out of recession. However the company developed good business relationship with a US based company due to its performance and quality & delivery. The company now gained a market share of 70% of that customer's imports. But for this the exports would have declined in FY14.

Capex for FY15 will be about Rs 20 crore largely putting up a new production line in existing units. The company typically adds adequate capacity 6 months ahead of the customer demand.

The company has been identified for development of Electronic Control Unit (ECU) for the Engine Fuel Injection systems jointly with an Italian technical partner. This ECU for EFI is largely used in 4 wheelers and not widely used in India in 2-wheelers. But in markets such as Indonesia the 2-wheeler industry also uses this technology for its proven increase in engine efficiency. The US based customer has also shortlisted the company for this development.

The Indonesia land purchased for setting up a plant has seen significant appreciation in real estate value.