A Project Report On Comparative analysis Of Auto-component industry In India
Submitted to Mrs. Neenu Submitted by Yogesh thakker

CONTENTS 1. Preface 2. Acknowledgement 3. Certificate 4. Project Description • Auto-component Industry in India • Big players go high-tech • Government Initiatives

FDI Scenario

• Domestic Sales--How is Indian market performing • Exports • Indian Component Industry is fast emerging as an Attractive OEM/Tier 1 Supplier • Company Profile

Auto Components-Major players

• Data Analysis and Interpretation 5. Conclusion 6. Bibliography

Master of Business Administration is a course, which combines both theory and its applications as its contents of study in the field of management. As part and parcel of this course, every aspirant has to undergo summer training in an organization. The purpose of this training is to expose the student of management sciences to real life situations existing in the organization and to provide an insight into the various functions, who can visualize things, what they have been taught in classrooms. Actually, it is the life force of management. It is in practical training that the effectiveness of management itself is realized. This report is a continuation of that tradition. It is an attempt to present an account of practical knowledge and observations gathered during the analysis. This report includes the information about the premiere companies in auto-component industry

Yogesh Thakker Department of Business administration National Institute of Technology Kurukshetra

I hereby acknowledge the courtesy and prompt response of all those who were requested to contribute their views, readily grant the necessary permission to contact them at inconvenient hours despite the pressure of work. The project report would not have been possible without unstinting support of all the executives of Clutch Auto Ltd. I would like to express my sincere gratitude towards Mr. for giving me this opportunity to experience a whole new dimension in my study curriculum which has not only enriched my knowledge but has also helped me by giving a practical exposure to the corporate world. His invaluable and constructive criticism and continuous encouragement throughout the project helped me to get insight of the working of Clutch Auto Ltd. I am grateful to Mr. Giriraj, Mr. B.S.Panigrahi and all the officers in the organization who were very co-operative and were there whenever I needed them. I would like to express my sincere thanks to Mrs. Aarti Deveshwar and Mr. Vinod Kumar of NATIONAL INSTITUTE OF TECHNOLOGY KURUKSHETRA for guiding me through the project, without her help it would have been difficult for me to complete this project. The training experience will go down as one of the most cherished memories in my life. The officers at Clutch Auto limited and my guide at the college have made me a better person today. I am humbled and feel too small to accept the respect showered on me.

(Yogesh Thakker)


This state of affairs has triggered a lot of cutthroat competition and consolidation in the industry. which are peculiar to India. All is not well with the automobile industry the world over currently with the slowdown that has gripped most of the major economies of the world. The Indian automobile industry is very small in comparison to the global industry. the Indian industry cannot boast of big volumes vis-à-vis global numbers . The industry directly employs close to around 0. The Indian automobile industry is a stark contrast to the global industry due to many of the characteristics. Cost reduction initiatives have come to be the in thing in the global industry today. The prospects of the industry also has a bearing on the auto-component industry which is also a major sector in the Indian economy directly employing 0. The gap between the manufacturing capacity volume and the assembly volume is growing by the day and has worried the manufacturers. Except for two wheelers and tractors segments.25 million people. many automobile factories are being closed down.2 million people and indirectly employs around 10 million people. Towards this direction.INTRODUCTION OF THE PROJECT The automobile industry in the country is one of the key sectors of the economy in terms of the employment opportunities that it offers.

.SCOPE OF PROJECT The scope of project is to identify the premiere players in auto-component industry and to make a comparative analysis of their financial positions as well as future prospects.

OBJECTIVES OF PROJECT 1. To do comparative analysis of the premiere players of auto-component market .

RESEARCH METHODOLOGY The research involves plotting of graphs on the basis of calculation made in the excel worksheets. On the basis of these calculations and charts further conclusions were drawn. The financial data of all the companies taken up for the project have been taken from .yahoofinance.

More interestingly. A closed market with high import tariffs characterized the Indian auto component industry pre 1985. the arrival of Telco. Sundaram Brakes. piston pins. generators. which supply mainly to car industry. In recent years. lower interest rates and better road infrastructure are driving domestic demand for automobiles and. Omax Auto. There are many companies like Ucal Fuel. Bharat Forge. Subros. etc. two largest manufacturers of automobiles in India at that time. Manufacturing vehicles typically involve assembling a large number of components out-sourced from number of ancillaries or component manufacturers. This subsequently led to global Tier I players entering the Indian auto space and the recognition of the potential in the Indian auto component segment. crown wheels and pinions. The major players in the auto ancillary industry can be classified between the ones catering to the two wheeler industry and the four wheeler industry. increasing outsourcing by global automobile majors is creating a huge export opportunity for Indian component manufacturers. etc. • Equipment: Dashboard instruments. MICO. carburetors. etc.The Automotive Component Manufactures Association (ACMA) classifies the auto ancillary industry into the following product segments: • Engine and engine parts: Pistons. . etc. etc. steering gears. therefore. it has captured attention as well as business from leading auto makers of the world. PRICOL. Mahindra & Mahindra led to steadily increasing production. In the 1950s. gaskets. axles. piston rings. Bajaj. it has grown more impressively. etc. horns. voltage regulators. Companies like Munjal Showa. Competitiveness with quality as a theme has been the watchword for the Indian industry and especially the auto component industry ever since the Indian economy was opened up to the world in the early 1990s. the delicensing of the sector led to global auto manufacturers initiating assembly operations in India. fetch double digit growth. starter motors. etc. fuel injection pumps. brake assemblies. ignition coils. • Suspension and braking parts: Leaf springs. components. mainly cater to commercial vehicles/tractors. Industry dynamics The Indian auto components industry started out small in the 1940s supplying components to Hindustan Motors and Premier Automobiles. etc. • Drive transmission and steering parts: Transmission gears. flywheel magnetos. Motherson Sumi. wheels. Rane Brakes. etc. Sundaram Clayton. After 1991. headlights. Lakshmi Auto. wipers. • Others: Fan belts. sheet metal parts. shock absorbers. • Electricals: Spark plugs. While economic revival. 1985-91 saw significant JVs in the Indian auto component segment with Japanese manufacturers. The industry plays a crucial role in the automobile sector. cater to two-wheelers. distributors.Auto-component Industry in India The auto component industry has come of age and now forms an important component of the Indian economy. plastic mouldings.

and their improving global cost effectiveness. witnessed a jump in net profits for the quarter ending in September. ferrous castings. Different segments of the sector such as bearing. Shanthi Gears. either by exporting from domestic facilities or setting up facilities in those locations.45%. outsourcing. heat treatment.90% compared with the corresponding quarter. The company has facilities for manufacturing patterns. is likely to grow at 12-17%. Indian companies are transforming into principal suppliers for the Original Equipment Manufacturers (OEMs) from the after sales market or replacement market. cars.15% compared with the corresponding quarter. 2006. During the June quarter. China. A robust business outlook is expected to drive strong revenue growth for the auto-component industry. During that quarter. Even Indian two-wheeler majors are targeting markets abroad. delivery. exports of automobile components grew around 25% compared to the previous quarter on a YoY basis. Automobile industry. the short to medium term outlook for the domestic auto component producers is positive. thus driving the demand further. Along with this some other key drivers including exports. inorganic growth in developed countries and cost reduction measures on fronts like quality. aluminum castings. Simultaneously. Future Outlook Given the significant scale up of capacities by the domestic majors. the company witnessed a jump in NP at 43. Overall. and replacement market are slowing down competitiveness in global markets in turn boosting the productivity of Indian auto components industry. they are loosing their market share because major automobile companies are being attracted by India. processes.Sectoral Performance The auto-ancillary was the best performing sector among the intermediate goods. Growth in the domestic market would be driven by sustained growth in supplies to OEMs as well as acceleration in the demand from replacement market. During the quarter. Automotive Axles reported marginal improvement in the net profits for the quarter ended June 30. casting. Setting up a new plant by existing companies and out-sourcing by the foreign vendors will result in domestic companies benefiting. During the quarter. To meet the emerging opportunities and challenges. utility vehicles and CVs made in India are increasingly getting acceptance in foreign markets. During first quarter of FY07. clients and markets. which is a key driver of auto-component industry.30% rise in profits and Sales for the quarter rose 35. forging. centrifugal castings of phosphor bronze rings. fasteners. & Taiwan. And exports registered a growth at around Rs 2833 crore compared to around Rs 3530 crore in the corresponding quarter of FY06. Companies that have restricted themselves to domestic business have seen modest growth and flat margins. Y-o-Y. foreign auto majors like Ford and Hyundai are making India its manufacturing base for several models. Indian vendors are diversifying across products. Sales for the quarter rose 31. a year ago. the company reported a 2. fabrications and cutter manufacturing in-house which constitute the major raw materials for gearboxes. Global majors are in a very critical condition. Steel is a . The players are aggressively focusing on new client acquisition. Moreover. the domestic auto ancillaries are well set to sustainable scale up their share of the global auto component pie. design and management. batteries and tyres have grown in a range of 25-40%. And the result came out so far in this quarter is. production of autocomponents increased by 15% YoY. The main reason for boost in export is that the nature of the customer base of overseas market has been undergoing major change. 2006. global automobile majors have announced major investment & domestic automobile companies such as General Motors (GM) and Honda in fragmented auto-ancillary sector.

Land acquisition and other project related activities would commence shortly. Similarly. Ministry of Commerce. other inputs like non-ferrous metal. Since mid January 2006. . As part of this policy. However. 25. players move up the value chain. The project has received in-principle approval from the Board of Approval. signed a Memorandum of Understanding (MoU) with the Government of Maharashtra to jointly develop a multi-product Special Economic Zone (SEZ) in Khed Taluka of Pune District. and transport costs have also been increasing. Tata Motors is overhauling its outsourcing policy across all categories of cars. which is aimed at keeping costs under control. the domestic steel prices have been increasing.000 new employment opportunities. increasing exports together facilitated them to cushion the rise in costs. due to quality and price consciousness of auto majors. healthy rise in volumes. Fortunately. The company has already started discussion with few tier 1 component manufacturer of Tata Motors in this regard The company is planning to tie up with an outfit which is likely to be entrusted with for the break assembly of small car. The SEZ is expected to attract investments of about Rs. Hindustan Composites is planning break lining and clutch facing unit near the proposed Tata Motor plant at Singur in Hooghly district of West Bengal. the auto ancillaries are not able to pass on the rise in costs. the company has taken a conscious decision to move away from the multiple vendor models to a single vendor model. fuel. (BFL). Bharat Forge Ltd. The project would be implemented through a Special Purpose Vehicle (SPV) to be jointly promoted by BFL / Kalyani Group and the Maharashtra Industrial Development Corporation (MIDC) in which the two promoters would hold upto 74% and 26% of the equity capital respectively. Government of India.major raw material in manufacturing of parts. and enabled them to maintain margins.000 crores and generate 120.

bn) 500 450 400 350 300 250 200 150 100 50 0 101 72 58 45 38 134 26 164 34 212 45 246 276 Replacement OEM Exports 61 83 FY02 FY03 FY04 FY05 FY06 2000 275 1500 (Rs . bn) 1000 500 0 116 309 116 FY 07 134 346 162 FY 08 207 168 419 296 FY 09 500 FY 10 FY 11 507 915 650 Replacement OEM Exports .Indian auto component industry likely to be $ 40bn in 2015 (Rs.

The world's top car makers turn to India for the nuts and bolts of their vehicles. Riding this success. A number of them source critical components from India. the Indian automobile components industry has emerged as one of India's fastest growing manufacturing sectors. and a globally competitive one. and capitalizing on the spiraling demand of domestic auto companies. with engine parts making up nearly a third of all exports: Electrical Parts 10% Equipments 11% Engine Parts Suspension & Braking Parts Body And Chasis Drive Transmission & Steering Parts 20% 13% 13% 33% .

Ford Motor Company. 75 per cent of which were bought directly by car companies.The India Advantage: Steered here by the country's high engineering skills. Major Export Markets Others 38% North America 36% North America Europe Others Europe 26% In 2006. . 61 billion in 2005-06 to Rs. BMW. components worth Rs.83billion were exported by Indian companies. The original equipment manufacturers (OEMs) include firms like General Motors. 296 billion in 2011-12. a thriving domestic automobile industry and competitive costs. Volkswagen. Bosch. global auto majors are rapidly ramping up the value of components they source from India. MAN (trucks) and JCB (earthmoving equipment) amongst others. with North America a close second at 26 per cent. more than a third (36 per cent) of Indian auto component exports head for Europe. According to the Automotive Component Manufacturers Association of India. established production lines. The industry is poised to jump from exports of Rs. Cummins International.

8 billion.  Dubai-based auto ancillary major Parts International Company has plans to invest approximately $ 3. is planning to start auto component manufacturing in India when it’s OEMs-Isuzu Motor and Nissan Motor--start manufacturing their cars in India.  Japanese electronic major. India's competitive advantage does not come from costs alone. Over 20 OEMs have set up their International Purchase Offices (IPOs) in India to the components.6 million in India over three years. and it isn’t hard to see why:     India is the second largest two-wheeler market in the world Fourth largest commercial vehicle market in the world 11th largest passenger car market in the world Expected to be the seventh largest by 2016 Investments Global auto majors and domestic giants are pulling out their purses and putting their money where the production lines are. This number is expected to double by the year 2010. .  Auto parts maker Robert Bosch of Germany will invest $ 201. This includes setting up a manufacturing facility meant to service exports to CIS and SAARC countries. which belong to the category of high Accepted Quality Level (AQL).7 million to its global production units by 2010. Fiat has exported components worth $ 8. Destination India India is on every major global automobile player’s roadmap. The manufacturing costs in India are 25 to 30 percent lower than its western counterparts.the Bosch flagship in India.  General Motors has decided to increase sourcing of components from Indian suppliers and intends to ship parts worth $ 1000. India enjoys a cost advantage with regard to castings and forgings.4 million in its Indian subsidiaries over two years. but from its full service supply capability.Economic Survey 2006-07 says: The turnover of the auto component sector has grown from $ 3. Hitachi Ltd. In 2005-06. The major destinations of export for this sector are US and Europe.  Fiat India is taking baby steps in becoming a global sourcing hub for components. Bulk of the investment will be in Motor Industries Co Ltd (Mico) -. the sector's exports grew by 28 per cent to reach $ 1.3 million last year to its operations in South Africa.1 billion to $ 10 billion between 1997-98 and 2005-06.

Besides the Greenfield investments. Capex Plans (Rs. In order to rapidly acquire scale. companies are also acquiring capacities closer to global OEMs to gain ready access to a global customer base. mn) Bharat Forge Amtek Auto Rico Auto Omax Auto Sono Koyo Sundaram Fasteners MICO Appolo Tyres Balkrishna Industries Total of above FY05 5587 4192 945 755 261 1259 1001 1911 857 16768 FY06 8714 10120 1324 520 351 861 3637 1558 1183 28268 FY07 2750 3500 1300 600 660 1000 3200 1800 1100 15910 FY08 2650 4000 850 1100 1300 900 3000 3300 1000 18100 FY09E 3000 4000 850 800 1300 500 2500 1000 400 14350 .Big players go high-tech The smaller scale of operations of most Indian auto component companies has meant that the size of global orders currently awarded to them is less than $50m. leading Indian auto component manufacturers are making huge Investments in creating capacity as well as upgrading technology.

technology or quality to meet the needs of these international carmakers. economic liberalization allowed foreign automakers such as Hyundai. . In the 1990s. For example. the auto components industry is poised for a take-off and is one of the handfuls of industries where India has a distinct competitive advantage. Ford. They began to explore the possibility of exporting back these low cost. they realized the cost advantage of manufacturing components in India – typically lower by about 30%. As these companies developed and stabilized their Indian operations. the carmakers had to persuade their overseas components suppliers to set up local manufacturing base in India. On the other hand.GOVERNMENT INITATIVES The opening up of the sector over the last decade has caught the attention of global auto majors as the only market rivaling China in terms of potential market size and growth opportunity. high quality components to their global factories and thus reduce their overall costs. Toyota and GM set up base in India. the high import tariffs and price sensitiveness of the Indian car buyer made it unviable for these companies to import components from their global suppliers. As the automobile industry has grown and matured. Therefore. Delphi followed after General Motors opened its plant in the state of Gujarat in 1995 and Visteon followed Ford in 1998. Infact. the Indian auto components industry has also grown tremendously. and is rapidly achieving global competitiveness both in terms of cost and quality. industry observers think that while Indian automobile market will grow at a measured pace. The local component manufacturers did not have the requisite size.

Government of India.8. which stood at No. emission and performance standards. There is no local content regulation in the auto industry. Auto majors have announced massive investment plans which will push the country’s car production past the psychological 2 million mark by the end of fiscal 2006-07. will move two steps ahead.4 million units now. Among other initiatives that have been affected in 2006-07 are:  Reduction in the duty of raw material to 5-7. The engineering export promotion council under the aegis of Ministry of Commerce and Industry. Robust production India’s car production capacity is in for a US$ 2 billion boost.5 per cent from the earlier 10 per cent.  Setting up of the National Automotive Testing and R&D Infrastructure Project (NATRIP) at a total cost of € 290. India. Automobile Export Trends 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 Total Cv's M&HCV's utiltiy vehicles total passenger motorcycles grand total total two wheelers 2001-02 2002-03 2003-04 2004-05 2005-06 Domestic Sales--How is Indian market performing? .35 percent in April-July 2006 when compared to April-July 2005.85 million for enabling the industry to usher in global standards of vehicular safety.11 among global car producing nations.35 million).FDI SCENARIO The Government of India allows automatic approval for foreign equity investment up to 100 per cent for the manufacture of auto components. Even at 2 million. It will be neck and neck with Brazil’s 2-million capacity at No. The automobile industry witnessed a growth of 19.  Finalization of the Automotive Mission Plan (AMP) 2006-2016 for making India a preferred destination for design and manufacture of automobile and automotive components. Manufacturing and imports in this sector is free from licensing and approvals. up 70 per cent from 1. past UK (1.6 million) and Canada (1. as is evident from this year’s production trends. over the years has been engaged in promoting exports of engineering goods including auto parts.

 The cumulative growth of overall sales of passenger vehicles during AprilSeptember of 2006-07 was 20. compared to the corresponding period last year.  Three wheeler sales grew at 19.90 per cent. Goods carriers grew by 26.11 million vehicles last year (2005).12 percent and mopeds at about 6. India achieved the sales of 1.16 per cent and passenger carriers grew at 15.84 per cent during April-September 2006. Automobile Production and Sales 10000000 8000000 6000000 4000000 2000000 0 Production Production Domestic Sales Exports 2001-02 2002-03 2003-04 2004-05 2005-06 5410468 6248838 7290456 8527173 9716718 Domestic Sales 5225788 5941535 6810537 7897629 8910224 184680 307303 479919 629544 806494 Exports .  Utility Vehicle (UVs) sales grew at 12. Domestic sales have been growing at a clipping pace:  Passenger car sales rose by 22. over the same period last year. the production of passenger cars in India increased by more than 100 per cent. the two wheeler market grew by 15. During the last six years (200-06). wider selection and the ready availability of car loans is driving the Indian car market through the roof.  Motorcycles grew by 18.78 per cent during the April-September 2006 period. the commercial vehicles segment grew at 36. Growth of Medium and Heavy Commercial Vehicles was 39. Light Commercial Vehicles also performed well with a growth of 32.53 percent over April-September 2005.  Overall.  Overall.53 per cent.86 percent. scooters at 0.85 per cent during the same period.49 per cent during the AprilSeptember period of financial year 2006-07. over the same period last year.92 per cent.96 per cent.73 percent.Increased affluence.

338 vehicles were exported in September 2006. a 58. two-wheelers and commercial vehicle exports grew at 27. Vehcile Exports are Rising (Qty in 000 Nos) 600 500 400 300 200 100 0 180 72 11 2002-03 265 129 17 2003-04 166 30 2004-05 176 41 2005-06 367 513 2 wheelers Cars & MUV's CVs . a total of 89. According to the Society of Indian Automobile Manufacturers (SIAM).80 per cent.15 per cent.07 per cent jump as compared to the same month last year.Exports India is fast emerging as a manufacturing base for car exports. While passenger vehicle exports grew at 13.

4 6. BMW.8 1 .2 1 0 .4 0 30 20.6 0 7 . lifestyle cars like S8 and RS4 early next year.1 0 00 20.significant growth in auto component industry in both domestic and export market production value ($bn) 12 10 8 6 4 2 0 2000-01 Production Value ($bn) 10 8.4 2001-02 2002-03 2003-04 2004-05 2005-06 1 . The year 2007 will also mark Audi's entry into merchandising in Indian car bazaar.9 4.6 0 . . the Italian marquee Lamborghini is also planning to enter the country.2 0 20.2 0 10 20.4 1 . Audi. Now.5 0 6 .3 0 20 20. • • • • Mercedes. Porsche.5 0 40 0 2 . spanning everything from affordable hatchbacks to mid-size models to super luxury high-end cars and SUVs.4 0 .7 3. Bentley and Rolls Royce are already here.4 1 . German luxury car maker Audi AG is preparing to drive into India a range of sporty.6 0 50 Foreign players in India Calendar 2006 has seen the entry of many high-end brands into the country.7 1 1 .8 0 .6 1 .7 5. The Italian marquee plans to launch the Gallardo.6 20. GM plans to bring in a sporty variant of the Chevy Optra to add to its existing line-up. The Indian automobile market will see at least 30 new launches. General Motors launched Aveo this year.

74 billion) in 2003-04. 84. the automotive industry's turnover. is estimated to have exceeded Rs. the automobile industry grew at a compound annual growth rate (CAGR) of 22 per cent between 2000 and 2006. shows high growth obtained since 2001.000 crore in 200203. Eicher Motors Daewoo Motors India Hindustan Motors Hyundai Motor India Ltd. The data obtained from ministry of commerce and industry.00. 50.000 crore ( USD 22. Annual growth was 16.000 crore. the turnover of the automobile industry exceeded Rs. General Motors India Ford India Ltd.0 per cent in April-December.02 in automobile production continuing in the first three quarters of the 2006-07. With investment exceeding Rs. the growth rate in 2005-06 was 15. Telco TVS Motors Swaraj Mazda Ltd .Following India's growing openness. 59. which was above Rs. easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry. the arrival of new and existing models.1.518 crore in 2002-03.1 per cent. Including turnover of the auto-component sector. 2006. Major Manufacturers of Automobiles in India           Maruti Udyog Ltd.

EVEN GROWTH Opposing the belief that the growth in automobile industry has catered only to the top income-stratum of society.2 times increase in passenger cars. After a temporary slump during 1998. two-wheeler output continues to dominate the volume statistics of the sector.8 % in the first three quarters of 2004-05. In 2003-04. TATA motors Government has liberalized the norms for foreign investment and import of technology and that appears to have benefited the automobile sector. such exports registered robust growth rates of well over 50 per cent in 2002-03 and 2003-04 each to exceed two and.2 million in 1998.99 to 7. with both production and domestic sales of motorcycles increasing at faster rates than for scooters in the current and previous years. The industry has adopted the global standards and this was manifested in the increasing exports of the sector.99 and 1999-00. Export growth rates have been high both for motorcycles and scooters. mopeds have registered low or negative growth. there is a greater preference for motorcycles followed by scooters. Growth of exports of 32. In the two wheeler segment. Between 1998-99 and 2003-04.3 million in 2003-04. for every passenger car turned out by the sector.a-half times the export figure for 2001-02. .8 times compared to the 2. there were 7 two-wheelers produced. output of commercial vehicles has grown 2. The production of total vehicles increased from 4. However. Furthermore. the fastest growth in volumes has come from commercial vehicles as against passenger cars.

the auto components industry is poised for a take-off and is one of the handfuls of industries where India has a distinct competitive advantage. the Indian auto components industry has also grown tremendously. Singapore Brazil . design and engineering capabilities and large pool of low cost. Many Indian firms are working on at least $300-million worth of automotive engineering design services (AEDS) projects and expected to be a-billion industry by 2010. Several global automotive players have moved their R&D to India outsourcing research and design elements of the automotive products. As the automobile industry has grown and matured. which is growing at a spanking rate of over 16 per cent.The road ahead Exciting times lie ahead for the Indian automotive component industry. R&D expenses as a percentage of net sales was 0.78 per cent in auto components in 2004-05. Besides the burgeoning demand from global auto majors. driven by a rising consumer base and affordable loans The opening up of the sector over the last decade has caught the attention of global auto majors as the only market rivaling China in terms of potential market size and growth opportunity. and is rapidly achieving global competitiveness both in terms of cost and quality. technically skilled and English speaking engineers. there is also the domestic car industry. industry observers think that while Indian automobile market will grow at a measured pace. T h e F u tu re Au to m o tiv e Gro w th P o ten tia l is H u g e T h e in d ia n p a sse n g e r a r mak re t is fa r from be in g satu ra ted per c apita c ar penetration in 1000 50 0 4 8 0 4 8 0 4 40 1 8 0 1 47 1 3 0 12 2 90 27 13 12 10 10 Thailand Sri Lanka Indonesia Philippines China 7 India 600 500 400 300 200 100 0 USA UK Japan Germany Malaysia S. Also India scores over other countries like China and Thailand and has gained acceptance of global OEMs on account of its quality. Infact.Korea Mexico Indian auto industry has established one of the largest export hubs for most of the global players.

worth US$ 34 billion in 2006. TVS. Satyam. two-wheelers and commercial vehicles.)  Design Houses (Dilip Chhabria Designs. Infension Technologies. etc. Neilsoft. Eicher. etc. The Indian auto industry. This is driven by shorter product life cycles and increasing number of variants combined with the need to strengthen brands in the highly competitive overseas markets. The changing scenario of the Indian auto industry in the context of facing challenges and availing of opportunities in the global markets concerted efforts are needed to create a significance place in the increased integrated value chain across the geographical reasons. Technology and Branding are important for the Indian auto Industry.Four different types of players are offering these services:  Captive Centers of global OEMs (GM. . TCS. Wipro. etc. etc. That number is likely to see a significant boost.)  IT Services companies (Infosys. has grown at a CAGR of 14 per cent over the last five years with total sales of vehicles reaching around 9 million vehicles in 2005-06. Delphi. The auto industry urgently is to be expanded in regard to increase investment and local resources to match potential. Bosch. given that the first half of 2006-07 has already witnessed a staggering growth rate of 17. In addition. One of the key imperatives for Indian auto companies would be to increase spending on R&D and Brand building to remain competitive on a global basis.86 million vehicles.12 per cent. if this trend continues.) The nature of projects is limited largely to CAD/CAM and modeling and analysis but eventually Indian companies could design the entire concept with sketches and detailed depiction of all vehicle features. clocking an annual growth rate of 20 per cent. According to industry experts. Geometric Software. Ford. Domestic car sales for the April-September 2006 period stood at an impressive 4. including cars. Significant capital is required for capacity expansion and fuelling acquisitions. There is a significant gap between Indian firms and leading global OEMs. sales could touch 10 million by March 2007. Investments should be made in both OEM and auto components businesses so as to create a low cost model capital and operations profitable at low scale.)  Subsidiary of Indian Auto Companies (Mahindra & Mahindra. the Government’s announcement to cut excise duty on small cars will soon see auto India emerging as the world's largest manufacturing hub for small or compact cars.

5 10 26 Africa America Asia Europe 36 16 Middle East Oceania Others .Indian Component Industry is fast emerging as an Attractive OEM/Tier 1 Supplier Composition of Exports in 2006 0.5 10 1.

bought 70 per cent stake in Zelter GmbH. their quest for technology and a search for new markets. in order to establish a presence in mainland Europe. Amtek Auto. .1990 O E M / T ie r 1 35% A f te r m a r k e t 65% 2006 Afte r m a r k e t 25% O E M / Tie r 1 75% Acquisitions & JV Abroad Indian companies' overseas acquisitions have been driven by their desire to be among the largest and least-cost producers. transmission and suspension parts. assemblies and systems. In July 2006. a manufacturer of automotive components such as engines.

Jeco Holding AG. USA 21% in Fuji Autotech France Value (Rs. one of the top five forging companies in Germany. UK GWK. cr) 261 41 35. for euro 140 million and subsidiary of Scholz AG. UK Wundsch Weidirge. Global Acquisitions Acquired By Bharat Forge Bharat Forge Bharat Forge Bharat Forge Sundaram Fasteners Sundaram Fasteners Sundaram Fasteners Amtek Group Amtek Group Amtek Group Tata Auto Component UCAL Fuel Systems Sona Koyo Steering Systems Target Imatra Kilsta AB.9 per cent stake in Jeco Holding AG. Germany Precision Forging Unit of Fana Spicer.7 . makes gearboxes. Following the acquisition of South Korea’s Daewoo Commercial Vehicle Co. in March 2004 by Tata Motors for $102 million and Bharat Forge’s acquisition of German firm Carl Dan Pedinghaus GmbH for euro 29 million. Germany Sigma Cast. hubs. Germany Amtec Precision Products Inc.4 157. through its subsidiary agreed to acquire 67. engine and axle pans. US CDP Aluminiumtechnik Carl Dan Peddighous 76% JV with Bleisthal Produktions of the three largest manufacturers of turbochargers housing in the world. which focuses on the truck. Sweden federal forge.9 NA 157. UK Unit of Textron Deutshland Beteilingungs Zelter.5 20 11. bus and trailer market.5 NA 42 NA 126 27. Mahindra & Mahindra. for an enterprise value of euro 28 million.

sumo victa. CAL is the only standalone clutch company in the world. which is testimony to its technology capability. components and spares for the automotive sector. all operating either as joint ventures or as technology partners or license arrangements. baleno. It also caters to the passenger vehicle and replacement demand and its clientele includes Tata Motors. Ashok Leyland. omni. The Company is working regular on modernization and expansion programs and to improve the productivity and quality of its products. Escorts Tractors. Its clientele includes TELCO. During the year 2002-03 the Company got patent for EZ N LITE for heavy commercial vehicles in US and this will give an edge over competitors and is expected to result in substantial business increase in the years to come. alto. commercial vehciles . Maruti Udyog. among others. Escort Tractors and State Transport Undertakings. BEML. Maruti Udyog. in addition to export market. The company is concentrating on increasing its capacity for the existing range of vehicles. press tempering and semiautomatic reveling machines. The company manufactures clutches. DCM Toyota. indigo.Clutch Auto (CAL) was incorporated in May 1971 in New Delhi. Toyota. gypsy. Products are upgraded with imported equipment like induction hardening. wagon-R and Zen (old model) TATA indica. promoted by Vijay Krishna Mehta. Clutch is a technology intensive business dominated by 6 players in the world. esteem. a technocrat entrepreneur. CAL has been associated with production of clutch plates and clutch assemblies and other related components Products offered • Diaphragm organic clutch assembly • Cover organic clutch assembly • Cover ceramic clutch assembly Range is 160-352 mm CAL is present in OEM as well as Replacement market. Ashok Leyland. spacio. CAL has at present following OEM’s purchasers • • • • • • • MARUTI UDYOG LIMITED TATA MOTORS ASHOK LEYLAND MAHINDRA & MAHINDRA PUNJAB TRACTORS LIMITED INTERNATIONAL TRACTORS LIMITED EICHER TRACTORS CAL is also present in replacement market and is catering to the following company’s vehicle • • Maruti800. TAFE. Clutch Auto Ltd (CAL) is the largest supplier of clutches to the commercial vehicle and tractor segment in India. BEML and state transport undertakings.

the replacement demand for trucks in US. The company has set up a strong distribution network along with product liability cover for overseas market.qualis • Chevrolet. Currently it has 11 patents in USA market. . research and filed for patents and trademarks for a number of products that it developed. high value added heavy-duty clutch segment for class 7 and 8 trucks. 25% of its revenues are on account of exports. high growth is expected to come from the export initiatives taken by the company. ‘Whisper’ and ‘EZ N Lite’ offering interchangeability unit-to-unit. a leading heavy-duty class parts distributor in the US. similarly it has 31 patents in domestic market Patents Overseas USA Mexico Australia Approved Pending 1 1 1 5 Under Filing 5 1 Domestic Trade Marks USA India 15 4 11 7 7 9 2 5 9 2 4 Today. with a population of nearly 4. This proportion is expected to rise and contribute to around 50% of revenues in the next 3-4 years. It has built many innovative products like the ‘Cool Clutch’.  CAL invested in technology. ITL-Sonalika • Eicher-tractors. component-to component with the same serviceability norms and tools. is nearly as high (250. While the domestic market will ensure steady revenues to the company. commercial vehicles • M&M tractors. the company is the only independent component company from India with an independent patents and trademarks portfolio.• Ashok Leyland. It already received orders from Fleet Pride. This is because. The Company increased its capacity for clutch discs and clutch cover assemblies by 122% and 200% respectively in FY05 to meet the growing demand for its products. It plans to be a niche player in the low volume.tavera • Military tanks The company has ventured into the US truck market through the aftermarket route making it the only offshore company to be able to do so.000 units pa) as the demand for new trucks. Hyundai-santro • Volvo buses.5-5mn units. either approved or pending. Toyota. Presently.

30 crore which will be funded through internal accruals Operating margins @ 16% for April December06 To triple revenues to Rs. 650 crores by the end of FY09-10 • Export contribution to rise 50% from current one third at present .• • • • • • • CAL is the number one company in production of clutch plates and clutch assemblies Only company to possess an indigenous know-how of clutch plate production Obtained approval of TATA motors for the entire range of current and future products Exports to 40 countries 56.4 million units Expansion cost to be Rs.41% YOY growth in sales revenue 81% YOY growth in domestic market 71% YOY growth in bottom line Three year expansion plans: Company has following expansion plan • • • • To triple its production capacity to 4 million units by FY10 from current capacity of 1.

Major companies are expected to invest Rs32bn over FY08-09 increasing new capacity. MICO and Balkrishna Industries The major players in Auto-component market are           Amtek Auto Apollo Tyres Balkrishna Industries Bharat Forge MICO Omax Autos Rico Auto Industries Sona Koyo Sundram Fasteners Clutch Auto . We believe. too appear to be scaling up and a slowdown in key global markets and fragile financial health of global OEMs and Tier-I vendors will only accelerate the pace of outsourcing to leading auto component players in Low Cost Countries like India. Amtek Auto and MICO. Exports for leading players. Expect strong earnings momentum for leading players: The expected revenue CAGR is 15% and earnings CAGR is 22% for auto component market over FY07-09 led by strong growth for Bharat Forge. Domestic growth on a firm footing. MICO and Balkrishna Industries over the same period.Auto Components-Major players Auto Components Market Gearing up Strong growth in the domestic automobile industry and a stable 10-15% future growth outlook over the next two years would drive demand for auto components both in the domestic OEM and the aftermarket. exports looking up: It is expected that domestic revenue for auto component companies will remain strong given a stable 10-15% volume growth outlook for various auto segments. Companies are therefore investing aggressively in capacity build-up and technology upgradation. Exports too are in a scale up mode for leading players like Bharat Forge. Amtek Auto has successfully implemented the strategy of acquiring customer base overseas and outsources the labor intensive operations to its low cost Indian facilities. a slowdown in key global markets and the fragile financial health of global OEMs as also Tier-I vendors would lead to higher outsourcing by these players to low cost auto component players in the long term. We expect 15% revenue CAGR and 22% earnings CAGR for our auto component universe over FY07-09 led by strong revenue and earnings growth for Bharat Forge. Building capacity to acquire scale: Lack of scale has prevented Indian auto component players from winning outsourcing deals exceeding US $50m.

Favorable demographics (rising income levels and an increasingly younger population). their domestic businesses too appear on a firm footing with buoyant growth outlook for the domestic auto OEMs.Strong growth outlook for domestic auto OEMs to boost demand While auto component companies retain focus on enhancing their overseas revenues. Strong growth in industrial production. emergence of new growth drivers like organized retail. and the ongoing pace of investments and infrastructure development in the country would drive demand for commercial vehicles. While factors like higher interest rates and a higher base could check growth rates in the near term. along with very low vehicle penetration indicate strong long-term demand prospects for cars and two-wheelers. Domestic Autombile industry is on a firm footing FY05 FY06 FY07 FY08 figures in $ bn FY09 CAGR FY07-09E (%) 1618 13 394 13 2012 13 363 11 291 14 654 12 8587 10 1202 484 10273 11 11 10 Car Sales UV Sales PV Sales MHCVs LCVs CVs Motorcycl es Scooters Mopeds Two wheelers 981 247 1228 212 136 348 5222 984 350 6556 1052 269 1321 221 170 391 6213 992 376 7581 1269 309 1578 294 223 517 7089 976 1078 9143 1427 341 1768 329 255 584 7818 1078 432 9328 . the industry’s prospects nevertheless remain strong.

Amtek Auto Amtek Auto (Amtek) has the twin advantage of presence in both forgings and castings. Exploiting synergies from overseas acquisitions: Amtek has successfully implemented the model of acquiring front-end capacities in proximity to global OEMs in key markets like USA and Europe. and then outsourcing the labour intensive operations to India to reduce the overall cost of production. leading to an 18% consolidated earnings CAGR over the same period.4x FY09E consolidated earnings and 5. . Indian companies have an edge over other low cost manufacturers in the forgings and castings space owing to their superior engineering and design skills. Expect strong 18% earnings growth over FY06-09: Amtek continues to pursue its growth strategy of a mix of organic and inorganic growth. Further. the stock trades at 11. The company expects to increase the share of exports to overseas group companies to 65% in FY07 against 60% in FY06. two key segments in the global outsourcing space. Given Indian companies’ edge over other low cost regions owing to their superior engineering & designing skills and given Amtek’s aggressive capacity expansion plans. expect sustained growth momentum in its revenues and earnings in the coming period. Presence in two key areas of forgings and castings: Amtek’s product portfolio includes a mix of both forgings and castings products (82:18). At Current Market Price (CMP). The expected consolidated revenue CAGR is 24% for Amtek over FY06-09.7x EV/EBIDTA. these processes are highly labour intensive and are being increasingly outsourced by global majors to low cost countries.

7 13.7 11 7. Though the company’s profitability has improved significantly over the last two quarters on the back of softening rubber prices. Apollo is betting big on radialisation picking up pace in the T&B segment and plans to set up a Greenfield plant targeted at T&B radials.8 16.7 12.7 6. Well poised to benefit from higher replacement demand: Replacement demand for tyres in the CV space is likely to witness a surge owing to a strong 24% 5-year CAGR in domestic MHCV sales.5 2. with its leadership position in the truck and bus (T&B) replacement tyre market.5 2 1.5 13.7 EV/EBITDA (x) 14. The Dunlop SA acquisition offers significant synergies to be reaped in terms of access to T&B radial tyre technology.4 RoCE (%) 17.4 Price/Book (x) 4.7 15. Further.Shareholding Pattern Non promoter corporate holding 2% Promoters 32% Institutions 17% Foreign 46% Public & others 3% Key financials (consolidated)* Year to June 30 FY05 FY06 FY07E FY08E FY09E Net sales (Rs m) 16605 26451 40242 45499 51011 Adj.6 31.9 17.3 34. a wider product portfolio and easy entry in new geographies. replacement demand for tyres is also likely to jump as growth in new truck sales moderates over the next two years. is likely to be a key beneficiary of the expected surge in demand in this segment.1 Apollo Tyres Apollo Tyres (Apollo).1 36. is likely to be a key beneficiary of the expected surge in this segment.8 44.7 2. the leader in this space with a share of 35%. .6 19.3 19.7 RoE (%) 23.3 15.1 9.5 11. it nevertheless remains vulnerable to rubber price fluctuations. EPS (Rs) 14.6 % growth 60.6 21 28.4 10.9 18.7 5. Apollo. net profit (Rs m) 1475 2564 3940 4310 4762 Shares in issue (m) 101 122 138 138 138 Adj.7 15.5 PER (x) 26.

2 1.6 30.6 18.2 12.8 P E R (x ) 20.4 2.4 5.9 24.9 7 29.Dunlop SA acquisition offers significant synergies to be reaped: The Dunlop SA acquisition provides Apollo with ready access to radial tyre technology.923 37.5 RoE (% ) 11.4 E V /E B ITDA (x ) 11 8.8 14 Balkrishna Industries Balkrishna Industries (BIL) is the largest exporter of tyres from India and among the top 10 manufacturers of off-highway tyres globally.4 11.6 11. E P S (Rs ) 17.559 A dj. S a o in P tte h reh ld g a rn G v H ld g o t o in 2 % N nP m te o ro o r C rp ra o o te H ld g o in 4 % In stitu n tio s 2% 7 P m te ro o rs 3% 2 F re n o ig 2% 6 P b &o e u lic th rs 9 % K ey fin an cials (co n so lidated)* Ye a r to M a rc h 3 1 FY0 5 FY0 6 FY0 7 E FY0 8 E FY0 9 E Net s ales (Rs m ) 22.4 6. especially T&B radial technology.4 19. BIL’s strong product development ability and competitive product pricing (arising from low cost advantage) .25526.4 28. net profit (Rs m ) 676 724 1.1 13.8 12 14. The acquisition also provides it with benefits of an extended product line and access to key European markets where the company has negligible presence.483 41.8 % growth -3.1 14.2 RoCE (% ) 9.5 1.7 12.7 1.440 1. This assumes significance in the wake of Apollo’s proposed T&B radial tyre greenfield facility.6 14.9 7.1 14.7 P ric e/B ook (x ) 2.551 S hares in is s ue (m ) 38 38 46 50 50 A dj.5 6.255 32.134 1.4 16.

Given strong fundamentals and compelling valuations (4. superior margins (19.has yielded strong revenue growth (28. . We expect BIL to deliver revenue and earnings CAGR of 23% and 31% respectively over FY07-09.0x FY09 estimates).2% for 9MFY07) and high return ratios (RoE of 33.06).2% for FY06).0x EV/EBIDTA and PER of 7.8% CAGR for FY02.

1 5. BIL has also hiked the prices of its products by 2-3% wef April 2007.3 98.830 814 1.9 1.6 7.2 72 10 33.6 19.8 1. Also.7 16.2 4 25.7 23.880 6.1 56.1 20.427 10. net profit (Rs m) Shares in issue (m) Adj.3 31 38. EPS (Rs) % growth PER (x) Price/Book (x) EV/EBIT (x) DA RoE (%) RoCE (%) 4. BIL plans to spin off the paperboard and textile processing divisions into fully owned subsidiaries so as to focus on each business and improve return ratios in the core tyre business.3 20.1 12 9 7 2.358 575 740 18.4 9.2 19.8 26.3 .445 19.1 42.2 29 23.2 5.7 8. The company’s competitive strength lies in offering a wide range of tyres at competitive prices lower on the back of its strong product development ability and lower labour costs in India.663 12. Further. Superior margins and return ratios: BIL’s margins are expected to expand primarily owing to a recent softening in rubber prices and a planned scale up in the high margin tractor radial tyre segment. The low volume and diverse product varieties as also low capacity utilization levels typical of the segment have triggered exit of large players.3 13. Reiterate Outperformer: BIL has a strong product line up that gives it a jumpstart vis-à-vis new entrants in the OTR tyre segment.8 8. much to the advantage of BIL.6 28.1 33.1 25.3 43.2 25.1 23.9 3. a favorable demand-supply scenario in key global markets Shareholding Pattern Non Promoter Corporate Holding 1% Institutions 12% Foreign 24% Public & others 9% Promoters 54% Key financials (consolidated)* Y ear to M arch 31 FY 05 FY 06 FY 07E FY 08E FY 09E Net sales (Rs m) Adj.BIL – the global OTR player: BIL is among the top 10 manufacturers of OTR tyres globally.128 1.

these efforts would also lead to margin expansion for BFL. .Bharat Forge Bharat Forge (BFL) has emerged the leader in the Indian auto component space with an extensive global footprint. We expect 15% revenue CAGR and 29% earnings CAGR for the consolidated entity over FY07-09. Besides the revenue scale up expected from enhanced capacities. In addition to a diversified revenue mix. BFL is likely to benefit from enhanced focus on new and more specialized segments.

9 7 .4 1 F 0E Y7 4 . Besides increased tonnage.8 0 3 . Expect strong growth momentum: We expect a CAGR of 15% in BFL’s consolidated revenues over FY07-09 aided by a 21% CAGR in standalone revenues.2 4 2 .3 7 1 .0 1 2 0 .4 0 1 .5 5 18 9 22 2 1 .9 2 1 .4 1 2 .1 6 1 .9 1 .3 1 4 .9 4 9 3 3 . These are high value added.9 7 1 .5 7 3 .1 6 3 .0 1 25 3 2 . Focus on diversifying revenue sources: BFL has significantly enhanced its focus on heavy-duty forged components used in non-automotive industries like railways.6 6 4 1 .6 9 3 .5 8 1 . construction equipment. Higher revenue contribution from the standalone entity (vis-à-vis FY07 levels) is likely to lead to margin expansion for BFL going forward.9 8 2 .6 1 .7 5 4 .2 0 1 .1 7 F 0E Y8 4 . E S(R ) d P s %g w ro th P R(x E ) P e o k(x ric /B o ) E /E IT A(x V B D ) R E(% o ) R C (% o E ) K yfin n ia (c n o a d e a c ls o s lid te )* F0 Y5 F0 Y6 1 .4 2 1 6 2 .9 9 2 .6 2 1 . S a h ld gP tte h re o in a rn N nP m te o ro o r C rp ra o o te H ld g o in 1% 0 I s tio s n titu n 1% 3 P m te ro o rs 3% 9 F re n o ig 1% 9 P b &o e u lic th rs 1% 9 Y a toM r h3 er ac 1 N t s le (R m e a s s ) A j.4 0 F 0E Y9 5 . oil & gas and others.0 7 25 3 1 .Capacity utilization to improve significantly: BFL currently is in the ramp up phase of its enhanced capacity and a sharp jump in utilization levels over the next two quarters is expected. product mix too would improve with a higher proportion of machined components.9 1 5 .2 2 .7 3 3 .7 3 4 8 5 4 .9 8 2 .1 9 0 8 2 1 . n t p fit (R m d e ro s ) S a sinis u (m h re se ) A j.1 9 25 3 1 .7 1 .4 9 .7 3 1 8 3 2 . high margin components with tremendous growth potential owing to increasing investments in these sectors.5 6 2 . BFL expects the share of non-automotive business to increase to ~25% in 3-4 years from 17% currently.4 8 8 1 4 1 .

Expected 18% revenue CAGR and 29% earnings CAGR for MICO over CY06-08 led by a surge in both domestic and export revenues. Strong growth prospects: MICO’s growth prospects appear promising in the domestic market in view of increasing focus of Indian OEMs on CR systems-based diesel cars. regulators. MICO currently supplies CRDI systems to leading OEMs like (Maruti Udyog and M&M) and is likely to cater to Tata Motors’ CRDI platforms based on Fiat’s diesel technology (globally. a number of production lines for components like injectors. Already. MICO stands to benefit from Bosch’s global plans. is well placed to capitalize on this opportunity. besides the growth potential in the domestic market. Fiat uses Bosch’s CRDI systems). with Robert Bosch’s global leadership in CRDI systems. single cylinder pumps. etc have been transferred from Bosch’s overseas locations to MICO. MICO is also gaining prominence as Bosch’s global R&D centre and outsourcing hub for many components.000 per share) to facilitate further transfer of critical technology and processes Leveraging on Bosch’s leadership in CRDI systems: CRDI-based diesel systems for passenger vehicles are gaining popularity in India. Thus.MICO MICO is ideally positioned to benefit from the renewed focus of leading Indian OEMs on diesel cars based on the Common Rail (CR) platform. Also. nozzles. . Bosch’s has made an open offer for an additional 20% stake in MICO (at Rs 4. Gaining prominence in Bosch’s global plans: MICO is emerging as a global R&D and competence centre for Bosch Group worldwide as also a manufacturing hub for many components. We believe MICO.

892 39.1 32.1 Omax Auto Omax Auto (Omax) is working on reducing its exposure to Hero Honda.323 54.1 163. Omax plans to undertake chassis manufacturing for Tata Motors’ MHCVs.3 104. net profit (Rs m) 3.5 13.670 3.1 32. would generate annual revenues of Rs2.5 RoE (%) 33.5 122. it expects to derive cost benefits on steel purchases from Omax Steel.1 Adj.1 23.8 23.391 Adj.098 46.9 21.3 28.531 Shares in issue (m) 32. The project.S a h ld gP tte h re o in a rn N nP m te o ro o r C rp ra o o te H ld g o in 2 % In stitu n tio s 2% 0 F re n o ig 8 % P b &o e u lic th rs 9 % P m te ro o rs 6% 1 Key financials (consolidated)* Year to DEC 31 FY05 FY06 FY07E FY08E FY09E Net sales (Rs m) 24.7 36. EPS (Rs) 114.2 PER (x) 33.6 16.9 34.9 8 6.7 29.4 % growth 44.1 5 4 EV/EBITDA (x) 19 17.921 5.169 30.1 -8.4bn besides higher margins vis-à-vis Omax’s current margins.9 31. Omax has lowered its operating cost base in the last few quarters and going forward. Omax also stands to benefit from higher capacity utilization of its two new plants.8 203.1 32. Commencing December 2007.8 23.2 29.6 19 Price/Book (x) 9.257 6.6 23. at full potential.1 32.4 RoCE (%) 42.4 30.6 8. .6 10.350 3.1 24. which accounts for ~62% of its revenues.

5 5.7 16.786 6.8 1.954 8. Sundaram Clayton and Mitsubishi are expected to scale up.3 15.8 8.3 8. would diversify the revenue base. Further. Omax’s supplies to non-Hero Honda clients like TVS.2 1. Omax expects to save 5% on its steel procurement from the newly set up steel plant Omax Steel (one-third of the production to be sourced by Omax).1 -1.3 20.7 16.1 16. which along with higher exports from the Binola plant.1 13.1 18. likely to go on stream by December 2007.8 23.9 5.298 5.2 -1. net profit (Rs m) Shares in issue (m) Adj. EPS (Rs) % growth PER (x) Price/Book (x) EV/EBITDA (x) RoE (%) RoCE (%) FY05 FY06 FY07E FY08E FY09E 5.1 14. S areh ld g P h o in attern N n P m te o ro o r C rp ra o o te H ld g o in 1% 2 In stitu n tio s 4 % F re n o ig 8 % P b &o e u lic th rs 2% 4 P m te ro o rs 5% 2 Key financials (consolidated)* Year to March 31 Net sales (Rs m) Adj.501 9.2 1 5. Cost reduction measures paying off: Omax has reduced its operating costs by pruning the excess temporary labour and switching over to more economical power sources.844 203 201 238 302 345 21 21 21 21 21 9.1 3.4bn on completion by FY10).4 11.5 9.6 1.7 RICO Auto .3 4.9 7.2bn (Rs2.6 19 19.6 26.Diversifying the revenue base: Omax is setting up a new chassis manufacturing unit for Tata Motors at the latter’s Lucknow plant.7 14.5 4. these measures are expected to have yielded net savings of 70bp in FY07. The first phase of the project.6 21.1 5.4 1.8 16. offers an annual revenue potential of Rs1. Expect strong growth momentum: Omax’s diversification strategy is likely to bring stability in revenues as well as margins owing to reduced dependence on a single client – Hero Honda (~62% of revenues in FY07).

FCC Rico (Rico’s 50:50 JV) would.9x and EV/EBIDTA of 4. however. However. Likely slowdown in off-take from two-wheeler players: Rico’s domestic business would be impacted due to sluggish outlook for the two-wheeler industry. by way of a licensing and technological assistance agreement with Teksid Aluminium of Italy. Stock trades at PER of 10. higher contribution from FCC Rico (highmargin business) could offer some respite. While we expect Rico to face margin pressure from Hero Honda. . This project opens up a new growth vista for Rico besides lowering its dependence on the two-wheeler component business. benefit from higher off take from HMSI (~40% of FCC Rico’s revenues) as volumes surge (up 30% yoy in April 2007) post the launch of Shine and the new Honda Unicorn. Rico would supply engine blocks and cylinder heads for Tata Motors’ upcoming small car project.Rico Auto (Rico). FCC Rico (Rico’s 50:50 JV) is likely to witness a revival in offtake from HMSI (~40% of FCC Rico’s revenues) after the launch of Shine and the new Honda Unicorn. would likely be impacted by a slowdown in the domestic twowheeler industry due to a high inventory build up. We expect some margin cushion for the company due to increased contribution from FCC Rico. deriving ~60% of revenues from Hero Honda. plans to foray into Aluminium Engine Blocks and Engine Heads business for passenger cars. Expect 15% earnings CAGR over FY07-09: Expected 13% CAGR in Rico’s consolidated revenues and 15% CAGR in consolidated earnings over FY07-09.8x FY09 estimates. Passenger car components foray – a new revenue stream: Rico. particularly for Hero Honda (60% of Rico’s revenues).

3 6.6 4.3 2.9 17.2 15.4 21.798 7.4 4.1 3.209 11.7 RoCE (%) 31.4 14. Expect strong 29% revenue CAGR and 22% earnings CAGR for Sona Koyo over FY07-09.8 RoE (%) 50.9 16. Sona Koyo is also developing steering columns for CVs to scale up its presence in the segment.1 Sona Koyo Sona Koyo has witnessed significant value growth with the launch of C-EPS systems and higher share of power steering systems in sales mix.7 12.6 3.425 Adj.3 13. It also plans to increase localization level of power steering systems to achieve margin expansion.S a h ld g P tte h re o in a rn In stitu n tio s 2% 0 N n P m te o ro o r C rp ra o o te H ld g o in 2 % P m te ro o rs 4% 6 F re n o ig 1% 8 P b &o e u lic th rs 1% 4 Key financials (consolidated)* As on March 31 FY05 FY06 FY07E FY08E FY09E 2007 Net sales (Rs m) 6. The company is striving to cut its dependence on Koyo in the export markets.9 24.9 Price/Book (x) 4.5 -22.6 EV/EBITDA (x) 6. EPS (Rs) 4.7 15.5 16.5 14.6 3.871 8.1 % growth 33.9 -12.3 10.988 10. net profit (Rs m) 498 439 393 458 518 Shares in issue (m) 107 123 126 126 126 Adj.2 2 1.1 5.9 5.8 1. Improved product offerings leading to value growth: .3 12.2 PER (x) 9.8 16.

Inclusion of C-EPS systems in the product range has strengthened Sona Koyo’s portfolio besides leading to significant value growth. Shareholding Pattern Non Promoter Corporate Holding 10% Institutions 4% Foreign 4% Promoters 49% Public & others 33% . With this. attractive valuations: Led by higher value growth from supply of C-EPS systems. expect 21% revenue CAGR and 23% earnings CAGR for Sona Koyo over FY07-09 (after factoring in equity dilution). Expect margin recovery on import substitution: The shift in Sona Koyo’s product mix towards power steerings has adversely impacted its margins due to high import content. Sona Koyo plans to localize 70% of C-EPS components. which should lead to margin expansion. Sona Koyo is also working on developing highly specialized steering columns for HCVs. However. Excellent business prospects. the share of power steerings in total revenues has jumped significantly (55% in FY07 from 28% in FY06).

9 3 3.4 32 13.4 22.397 5.8 58.9 17.9 17.9 4.6 -0.7 P E R (x ) 27.8 28.109 8.7 P rice/B ook (x ) 6.6 10.2 .6 27.1 22.3 11.808 7.9 2.9 1.975 3.6 13.5 26.7 R oC E (% ) 17.K ey fin an cials (co n so lid ated )* A s o n M arch 31 F Y 05 F Y 06 F Y 07E F Y 08E F Y 09E 2007 N et sales (R s m ) 2.3 E V /E B IT D A (x) 16 14.8 14. E P S (R s) 1.8 17.9 6 4 2.5 % growth 37.6 17. net profit (R s m ) 167 165 276 383 459 S hares in issue (m ) 88 88 93 97 103 A dj.545 A dj.3 8 7 R oE (% ) 27.

Exports from the JV Sundaram Bleistahl (74% equity with SFL) would also increase gradually. Consequently. primarily due to operating leverage. . SFL posted impressive 27% consolidated revenue CAGR over FY04-06 despite pricing pressure in key markets. SFL plans to set up a 100% EOU near Chennai by FY08.6x FY09 consolidated earnings and 7.Sundram Fasteners Sundram Fasteners’ (SFL) diversification strategy is paying off. Export volume growth remains strong: SFL has recorded 41% CAGR in exports over FY02-06. While realizations in key product categories like high tensile fasteners and coated metal parts have remained flat. cost of inputs has escalated at a CAGR of 13% over the last five years. aided by contribution from new product lines. Expect 31% earnings CAGR over FY06-09 : Expected 22% revenue CAGR for SFL over FY06-09. stock trades at 10. We expect 24% CAGR in exports for SFL over FY06-09 with exports accounting for 37% of standalone revenues (30% in FY06). At CMP. Realizations capped while input costs rise: SFL faces pricing pressure in the domestic as well as export markets. Despite largely flat operating margins. Exports would scale up further as SFL commences regular production of certain pipeline products. earnings would grow at a faster clip (31% CAGR over our forecast period).4x EV/EBIDTA. Exports scale up and entry into new product segments (pump assemblies and engine components) has generated incremental revenues for the company. SFL’s revenue growth has been primarily volume driven.

8 26. net profit (Rs m) 659 589 897 1.4 6.4 19.5 .6 17 18 18.2 % growth 12.6 Price/Book (x) 4.7 52.317 15.9 -10.1 10 8.9 4.3 26.134 1.6 EV/EBITDA (x) 12.104 20.3 3.6 13.8 4.697 Adj.8 3.899 11.5 15.6 12.1 2.3 5.9 RoCE (%) 18 14.3 10.4 25.381 18.7 15.6 PER (x) 21.8 27. EPS (Rs) 3.S areh ldin P h o g attern In stitu n tio s 1% 8 F re n o ig 0 % N n P m te o ro o r C rp ra o o te H ld g o in 4 % P m te ro o rs 5% 0 P b &o e u lic th rs 2% 8 Key financials (consolidated)* As on March 31 2007 FY05 FY06 FY07E FY08E FY09E Net sales (Rs m) 9.311 Shares in issue (m) 210 210 210 210 210 Adj.2 23.4 RoE (%) 25.1 2.5 7.

PTL. TAFE-Messey Ferguson. It already received orders from Fleet Pride. Company has set up R & D center recognized by Govt. 25% of its revenues are on account of exports. component-to component with the same serviceability norms and tools. We expect this proportion to rise and contribute to around 50% of revenues in the next 3-4 years. Strong Domestic and Export market: While the domestic market will ensure steady revenues to the company.Clutch auto Company is India's largest clutch manufacturer & Exporter today. It plans to be a niche player in the low volume. all operating either as joint ventures or as technology partners or license arrangements. the replacement demand for trucks in US. Escort Tractors and State Transport Undertakings. the company is the only independent component company from India with an independent patents and trademarks portfolio. It also caters to the passenger vehicle and replacement demand and its clientele includes Tata Motors. Tata. Toyota. BEML. Company supplies OE to Maruti. Expect the company to witness a CAGR of 53.Mercedes. . Ashok LeylandIVECO. Company has TS 16949 accredited by TUV. Company also has Largest after market distribution network in India. CAL invested in technology. a leading heavy-duty class parts distributor in the US. ISO 9002. JCBL. we expect high growth to come in from the export initiatives taken by the company. CAL is the only standalone clutch company in the world. The company has ventured into the US truck market through the aftermarket route making it the only offshore company to be able to do so.6% in profits between FY05 and FY08. Sonalika-International Tractors. which is testimony to its technology capability.000 units pa) as the demand for new trucks. Presently. Today. is nearly as high (250. Technology intensive business: Clutch is a technology intensive business dominated by 6 players in the world. Eicher. It has built many innovative products like the ‘Cool Clutch’. ‘Whisper’ and ‘EZ N Lite’ offering interchangeability unit-tounit. It is Major supplier to Indian Defence Establishments. Company is India's largest exporter of clutches. It also provides State-of-the-art testing facility for Clutches. Bajaj Auto. research and filed for patents and trademarks for a number of products that it developed. 85% to Americas. Maruti Udyog. New Holland. QS 9000 and QS 9000: 1998 certifications.5-5mn units. Company has 3 decades of undisputed Leadership history. exports to 40 countries. among others. with a population of nearly 4.3% in sales and 83. This is because. Mahindra. TAFE. The company has set up a strong distribution network along with product liability cover for overseas market. The company increased its capacity for clutch discs and clutch cover assemblies by 122% and 200% respectively in FY05 to meet the growing demand for its products. high value added heavy-duty clutch segment for class 7 and 8 trucks. Clutch Auto Ltd (CAL) is the largest supplier of clutches to the commercial vehicle and tractor segment in India. Escorts. of India. greaves & BEML. Ashok Leyland.

4 10.5 14.348 57 137 248 353 88 133 163 163 26. net profit (Rs m) Shares in issue (m) PER (x) Price/Book (x) EV/EBITDA (x) RoE (%) RoCE (%) 728 -4 88 -384 4 27 25.2 16.3 20.3 25 .9 4.5 6.8 1.351 3.7 19.8 27.5 2.9 11.4 25.5 11.414 2.5 15.8 3.S a h ld g P tte h re o in a rn N n P m te o ro o r C rp ra o o te H ld g o in 3% 9 P m te ro o rs 1% 7 P b &o e u lic th rs 2% 5 In stitu n tio s 1% 1 F re n o ig 8 % Key financials (consolidated)* As on March 31 2007 FY05 FY06 FY07E FY08E FY09E Net sales (Rs m) Adj.1 7.4 6 929 1.4 1.8 26.

The projections made in the study are subject to change as. . foreign exchange rates. this poses a serious threat to the small companies LIMITATIONS 2. which is cyclical in nature. Industry is exposed to market risk from changes in interest rates.1. commodity prices and strong competitive pressures The operations of the auto component industry are directly dependent on the Indian automotive industry.

Potential for synergies between companies 2. Avoid cyclical nature of economy through scale of operations 3.SUGGESTIONS 1. Enter in the export markets as Indian car and other vehicles are gaining acceptance worldwide .

however given the vagaries of the cyclical nature of parent industry and present scenario in European markets. These companies have outperformed the respective benchmarks and are giving healthy returns over a period of time. . the auto-component sector is well poised to grow in future.Conclusion All the companies which have been analyzed in the project are leaders in their respective sectors.

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