Key Highlights

For FY'16 overall, while vehicle segment sales grew by around 2.3%, Rane group sales grew by around 13%. This was largely due to the outperformance in Passenger car segment, which constitute around 62% of group sales, wherein while the industry grew by 4% in FY'16, Rane group grew by 15%. The outperformance was due to addition of new clients both exports and domestic and higher sales to existing customers. So while BMW was added, sales to Volvo and Maruti increased.

The group also won new clients and higher penetration and new products lead to outperformance in farm segment which grew by 4% for the group, whereas the farm segment industry de grew by around 4% in FY'16.

The group lost sales in 2 W segments as while the industry grew by around 2%, the group's sales to 2W segment de grew by 8% due to limited presence in scooter segment among the overall 2 W sales. However management is trying to penetrate further in scooter segment.

Thus, overall Rane group sales increased by around 12% to Rs 3260 crore largely due to higher sales to passenger car and commercial vehicle segment. International sales also grew by around 10% due to higher sales in US.

The group aims to clock revenue of around Rs 5000 crore by FY'19.

Rane Madras (RML):

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 856 crore, up by 13% YoY. Indian sales, which accounts for 75% of total sales, grew by around 11% while international sales, which accounts for 25% of total sales, grew by 21% for FY'16.

Steering and linkages business grew with strong demand from existing and new customers. BMW was added during the year. However die-casting division saw some headwinds in some products in US, which was sorted out during the later part of the year.

Operating Ebidta margin stood at around 9.2%. Management expects further cost restructuring activities and lower raw material costs to help margins going forward.

Farm tractors segment which accounted for around 25% of revenues continued to perform badly. Some pick up was seen in Mar'16 quarter due to lower base. After 2 consecutive years of lower sales, management expects better performance in FY'17. The segment has better Ebidta margin of around 12-13% as compared to overall 9% Ebidta margin for the company.

During FY'16, the company successfully commissioned the 2^nd Die-casting plant in Hyderabad which produces products for customers in North America and EU markets. Better volumes are expected from H2 of FY'17.

During FY'16, RML acquired Precision Die Casting (PDC) company at enterprise value of around US $8.9 M. PDC was in losses and management had lost interest to do the business. RML has invested around US $ 2 M as equity and further investment planned in next couple of years to ramp up the business, to introduce new products and to increase the reach.

PDC manufactures Steering components, compressor components and other products like fuel filter housing, water pump housing, EGR valve housing etc for North American automotive markets with key customers being Delphi, JTEKT, Nexteer etc. The company has reported net sales of around US $29 M for CY 2016.

Management expects the demand for aluminum castings in US markets will increase. Further PDC will give RML a local manufacturing base and will help further the overall exports of RML to North America. Management expects the business to turnaround in next 18-24 months.

As far as outlook is concerned, the company will continue to introduce new products and expand the range of products in domestic aftermarket business and acquire new businesses with OEM. Internationally, the company would expand the die casting portfolio in EU markets and tap new markets.

Capex for next 3 years will be around Rs 275 crore including the further investment planned in PDC. Management expects ROCE to improve to 20% by FY'19 from current ROCE of 10% for FY'16.

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.

Overall, the 2W segment grew modestly for the company in FY'16 due to lower presence in scooter segment and limited product portfolio. Oil and Gas segment which serves the large valve business of the company also saw a severe de growth due to slowdown in the sector. After market demand was also lower in FY'16.

All these, lead to a 12% de growth in net sales to Rs 342 crore for FY'16. International sales which accounted for around 29% of total sales, declined by 19% due to end of major program for a EU customer in FY'15. However increase in sales to other customers and addition of BMW helped to contend some losses. Going forward further ramp up of BMW sales and higher exports will help the overall sales.

Indian sales which accounted for 71% of total sales was lower by 8% due to limited presence in scooter segment and lower offtake of served models in passenger car segment.

The much awaited restructuring exercise was completed in 2 plants of the company. VRS was rolled out in both the Peenya and Medchal plants. All these affected the margins and thus the profits of the company. Operating Ebidta was lower by around 88% to Rs 4 crore due to the higher restructuring costs, VRS expenditure and other plant rationalization costs.

Sales to BMW EU will be further ramped up during FY'17. Further new business was won from M&M, Renault (Exports) and Volvo which will help overall sales and improve capacity utilization.

Going forward new products and programs will be launched in 2W segment and further new products planned for EU customers. Management plans to increase the sales to Non Auto segment from currently around 10% to 15% going forward with newer applications.

Management expects capex of around Rs 20 crore for this segment with CAGR sales of about 14% 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'16 to around Rs 448 crore. Ebidta margin was around 12.2% in FY'16. The Domestic Sales was around 94% and exports were around 6% of total sales. The management is working on localization of raw materials for new generation cars and also increasing of exports.

Sales growth was achieved on due to new businesses from passenger car segment and 2W segment. New product introduction also helped to overcome the challenges in after market segment.

The company has planned a capex of around Rs 100 crore by 2017-18 to achieve 16% CAGR growth in net sales and ROCE of 25% by 2018-19.

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 13% to Rs 707crore in FY'16. Domestic sales constitute around 85% of total sales and exports around 15%. Strong growth in M&HCV segment and higher adoption of airbags resulted in higher sales. 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 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 60% 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.

Management expects further traction in tractor segment and small CV segment to help margins and profitability going forward. New business opportunities with M&M and Isuzu were evaluated and management expects further additional business from them.

Overall, management expects capex of around Rs 130 crore and sales CAGR of 17% by 2018-19.

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 23% increase in net sales to Rs 766 crore and Ebidta margin of 11.8% in FY'16. Demand was very strong from international customers and the company was able to secure additional businesses in FY'16. The company also launched 4 new products, which was successfully accepted by the market. New products accounted for 16% of total sales for FY'16.

Lower raw material costs and higher volumes helped overall Ebidta margin.

Going forward management plans to further increase the localization of parts and processes. Successful launch of new products for Maruti helped higher sales.

Management expects the JV to grow its sales at CAGR of 20% by 2017-18 with Capex of around Rs 150 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 79 crore, a growth of 40% on YoY basis in FY'16. For FY'17, management expects net sales of around Rs 100 crore as most of the orders are already on hand.

The company established new product line for Boeing F-15 panels. Further commercial production of missile harnesses of a global OEM player started in end of FY'16.

New product line facility was added in Mar'16 quarter which has resulted an increase of average turnover of around Rs 9 crore per month.