Key Highlights

At overall group level on a consolidated basis, the management expects net sales of about Rs 5000 crore by 2017-18. The target was about Rs 4500 crore in FY 2016-17 as shared by the management during previous analyst meet. However given the current state of economy and ground realty, things were modified. The group has a turnover of around Rs 3000 crore as on Mar'15 with Ebidta at 9.6%.

For FY'16, management overall expects a muted to sluggish growth in H1 FY'16 while growth will pick up significantly in H2 FY'16. Both CV and Passenger car industry should do reasonably well in FY'16 particularly H2 FY'16, where the growth will be in double digit by the end of FY'16. Exports will also be better than FY'15 as the company got some new export businesses.

LCV de grew by around 20% in Q4 FY'15, as FMCG and white goods industry growth slowed down and last mile connectivity got weakened given the fall in rural consumption in H2 FY'15. Management expects the segment will pick up only gradually going forward.

Farm equipment industry collapsed in H2 FY'15. There are no signs of revival in Q1 FY'16 and unless clarity emerges on monsoon, nothing much can be updated. However, given the dismal performance in H2 FY'15, some recovery can be expected on YoY basis in H2 FY'16. Based on monsoon, further update can be provided.

The group was able to sell surplus land for Rane Engine Valve business and made profit of around Rs 44 crore. The group still has surplus land in Banglore, Hyderabad and put together around 10-12 acres to be monetized before FY'18 for future expansions and growth of the company.

The group is open for inorganic opportunities going forward for newer customers and technologies.

Rane Madras:

Rane Madras manufactures steering & suspension linkage products, steering gear products and high precision aluminum Die Casting products. The company reported net sales of about Rs 755 crore, up by 7% YoY with Ebidta of around 9.1% in FY 2015.

Export business has grown by 13.6%, whereas domestic sales grew by 4.4%. The company is expanding its die casting business in North America and in EU. In the After Market segment, the company introduced several new products which helped it register a growth of 20% over the previous year.

In Rane Madras, about 25-30% of revenues come from farm equipment sector which did very badly in H2 FY'16. This segment generates Ebidta margin of around 13-14% as compared to overall Ebidta margin of around 10% for the company. Hence the margins and net sales for Rane Madras should do well in H2 FY'16 if the farm sector picks up or should improve on YoY basis, if things stabilize.

The company has plans to spend around Rs 280 crore by 2017-18 in Rane Madras with more than 50% of capex towards die casting business. The segment will pick up very fast from 2017-18 onwards and management wants to built up capacities for that. For FY'16, capex planned is about Rs 35 crore.

Rane Engine Valve (REVL)

Rane Engine Valve (REVL) manufactures engine valves, valve guides and tappets for Passenger cars, CV, farm tractors, 2/3 wheelers with market leader in Indian OEM and replacement markets. Management had planned that the restructure exercise of this company will be over in FY'15 however, given the state of economic activity; management expects the restructuring exercise to get complete only in FY'16.

Profits from sale of land were used to clear off the VRS liability that occurred in the past.

The debt equity ratio of the company came down from 2.25 to 1.33 which should be below 1 by FY'16.

Management expects capex of around Rs 80 crore for this segment with CAGR sales of about 14% and ROCE of 20% by 2017-18.

Rane Brake Lining

The company Manufactures and markets safety critical friction material products such as brake linings, discpads, clutch facings, clutch buttons, brake shoes and railway brake block for passenger cars, utility vehicles, commercial vehicles, two wheelers and railways.

It is a Domestic Market Leader with about 38% market share in OE, about 18% in after market and about 13% in Railways.

There was a net sales growth of around 8% in FY'15 to around Rs 415 crore. Ebidta margin was around 10.9% in FY'15. The Domestic Sales was around Rs 388.30 crore and exports were around Rs 28 crore.

The management is working on localization of raw materials for new generation cars and also increasing of exports.

The company has planned a capex of around Rs 120 crore by 2017-18 to achieve 18% CAGR growth in net sales and ROCE of 25% by 2017-18.

Rane TRW Steering Systems

Rane TRW Steering System (RTSSL) is a JV partnership with TRW Automotive USA, which manufactures steering systems, Air bags and seat belts. The Steering gear division manufactures fully integrated hydraulic steering gears, hydraulic pumps, power rack and power steering fluid including plastic reservoir. The JV has a dominant market shares in commercial vehicle steering, passenger car steering and utility vehicle segment.

The JV reported net sales growth of 2.5% to Rs 625 crore in FY'15. Domestic sales stood around Rs 522 crore and exports around Rs 100 crore.

The company has around 20% market share in Airbag business and major customers for the company are Ford and Mahindra group. As per the notification by the Government, Airbags are compulsory in new cars from FY'17 onwards and by FY 2020 every car on roads in India, must have an airbag. Currently, around 35% of Indian passenger car on roads have airbags, which the management expects to reach to around 65% by 2017 and then to around 100% by 2020. There are 5 competitors 3 Japanese, 1 each from EU and US in India, along with the company to tap this big opportunity.

The JV had incurred about Rs 24 crore of capex in FY'15 and has plans of about Rs 44 crore in FY'16 primarily in increasing the capacities. Overall, management expects capex of around Rs 110 crore and sales CAGR of 20% by 2017-18.

Rane NSK Steering

Rane NSK Steering (RNSSL) is a JV with NSK Japan where Rane group has 49% stake. The JV manufactures manual steering columns and electric power steering and is a preferred OE partner to major PC, Commercial vehicle and Multi Utility vehicle manufacturers.

The JV reported a 19% increase in net sales to Rs 623 crore and Ebidta margin of 11.2% in FY'15. Demand was very strong from international customers and the company was able to secure additional businesses in FY'15. The company also launched some new products, which was successfully accepted by the market.

Management expects the JV to grow its sales at CAGR of 25% by 2017-18 with Capex of around Rs 200 crore.

Sasmos Het Technologies

Sasmos is a leading manufacturer of wiring harness, electro mechanical assemblies and unit integration products for defense, marine and aerospace industry. Rane group was able to increase its stake to around 46% in FY'15 in this company.

The company reported net sales of around Rs 56 crore, a growth of 18% on YoY basis in FY'15. For FY'16, management expects net sales of around Rs 82 crore as most of the orders are already on hand.