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Banco Products which is into manufacturing Gaskets and Radiators, held its Analyst Meet on 27/05/10 and was addressed by CMD Mr. Vimal Patel.
Key highlights
- Broadly on product wise basis, 75% of sales come from Radiators and the remaining from Gaskets. Within Radiators, broadly about 47% sales goes to industrials including construction, earthmoving and mining equipments including cranes, forklifts, Bacho loaders, dumpers and such others, water coolers, Agri equipments, engines, coolers etc, 40% goes to Automotive industry except the passenger car industry , 4% goes to railways and the remaining to various other industries. Gaskets are predominately sold to two wheelers and passenger cars market.
- On user industry wise basis, Auto constitutes about 55% of its sales, 25% are from earth moving construction equipments, 10% from railways and the remaining form others.
- Nearly 67% of total sales are domestic and the rest are export sales predominately (about 80%) to EU regions. Within domestic sales, OEMs constitute about 85% and the rest would be the after sales market. In exports, replacement market is almost 100%.
- According to the management, during FY'10, the entire growth in net sales was driven by better volumes, more value added products and without any price increases. For example as more and more technology norms and efficiency norms are required in automotive industry, it requires more complex and technology strong gaskets and radiators. Further in commercial vehicle industry as single axle becomes multi axles vehicles, more value added gaskets and radiators are required.
- Domestically there is no Chinese competition in OEM's. Tata Tayo, Anand are some of the competitors domestically. In after sales market, they do face some competition form China.
- The OPM jumped from about 19% in 2007 to about 27% in 2009-10. This was a combination of better product mix, higher volumes, single sourcing raw material strategy etc. The company has 3 plants in Baroda and 2 dedicated assembly unit, one for Tata Motors and other for M&M, Maruti, Bajaj and Hero Honda respectively.
- The company has invested about US $ 3.5 M in Tanzania subsidiary which will manufacture portable alcohol and will start commercial operation by the end of FY'11. The management continues to remain bullish on this business.
- The company further acquired 100% stake in NRF, a Netherland based company which is into heat exchangers business. Infact, NRF used to be a customer of Banco and Banco used to sell them gaskets and radiators. The products of NRF are different in terms of technology and reach as compared to Banco's gasket and radiators. Broadly, 50% of NRF business is radiators, 25% are other heat exchangers for automotive industry and the remaining are the heat exchangers used in Marine industry. The company paid about Euro 17M to acquire NRF, which reported net sales of about Euro 64 M, EBIDTA of Euro 5.1 M and PAT of Euro 2 M. It is a debt free company and has strong book value of Euro 34 M.
- NRF was up for sale, as its parent, went into trouble in EU and applied for bankruptcy. The bond holders ordered to first sell off all the profit making subsidiaries and this is how NRF was acquired by Banco.
- Almost all of the sales of NRF is from EU region. Irrespective of the current turmoil in EU, the management expects the company to continue to do well. They have plans of cost cutting, outsourcing, exchange of technology, newer markets etc which would ensure better performance from this company.
- The management is also confident of its exports business which constitutes about 33% of its business. Since, the exports are by and large for replacement market, during such circumstances in EU, the demand for replacement will be more than for OEM's.
- The company continues to do capex of about Rs 20 crore for up gradation of technology and newer products. The company has current debt of about Rs 95 crore, however net debt stands about negative 4 crore.
- Copper constitutes about 22% of its total raw material, Aluminum about 39%, steel sheets about 11% and remaining are the other metals.
- The company never hedges its forex risks. According to the management, it ensures that in a particular deal, whatever the impact of forex gain or loss happens in exports are effectively passed on the consecutive deals in exports. Further it also imports its raw material, so to that extent they have some natural hedge.
- Overall, the management continues to expect about 20-25% topline growth from its existing business. The growth from NRF and Tanzania subsidiary will be additional.
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