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Halonix Ltd Investor Presentation

JULY 2010

Disclaimer
This Presentation has been prepared by the company management on the basis of estimates of the management and information available from published sources. Thi s Presentation is not intended to provide the basis for any investment decision or advice and should not be co nsidered directly or indirectly as a recommendation by the officers or the management of the company. The information contained in this Presentation is selective and not independently verified and is subject to updating, expansion, revision and amendment. This Presentation includes certain statements and projections wi th respect to the anticipated future performance of the Company and as to the market for the company s products. Such statements reflect various assumptions made by the Management of the company ( the Management) concerning anticipated results, which assumptions may or may not prove to be correct. No representatio n is made as to the accuracy of such statements.

Contents
I. Company overview
i. ii. iii. iv.

Key milestones Re-structuring Plants and products overview Business overview

II.

Industry overview

III. Growth strategy IV. Financial highlights

I. Company overview

Company overview
Market leader in automotive halogen bulbs in India with over 50% market share in passenger vehicles and over 80% in motor cycles Globally competitive and the largest manufacturing facility in I ndia with over 20 years of manufacturing excellence and institutionalized product and proce ss knowledge The manufacturing facilities are approved by both domestic and i nternational OEMs such as Maruti, Tata Motors, Hyundai, Hero Honda, Bajaj Auto & TVS Motors. Manufacturing facilities in both domestic tariff area and specia l economic zone meeting diverse customer requirements Existing capacity of over 60 mn units p.a. in auto halogen bulbs, to be increased by ~25mn unit s over next 3 years Strong International presence with exports to more than 75 count ries. Overseas operations in Europe with over 15% market share in the after market Sustainable competitive advantage - superior process engineering, quality products, skilled man power and lead time in terms of approval for the products by the OEMs Comprehensive product portfolio of halogen bulbs for the automot ive industry

I. (i) Company overview Key milestones

Key milestones
Incorporated in collaboration with Phoenix Electric Japan Quality certification

New product HS1 Expansion


Dehradun unit (2002) 59D Noida (2004)

E1, RWTUV, Germany Maruti/ Tata

Domestic OEM approvals

1991-94

1995-2001

2002-2006

2007-2010

New products

H3,H1, H7,H8, H9 and H11 Capacity increase

Acquisition of controlling stake by a leading global private equity fund, Actis MOU with Innorex - technology transfer for LED assembly

Increase from 1 mn units p.a. to 4 mn units p.a.

Strong execution capabilities


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I. (ii) Company overview Restructuring

Re-structuring
Existing Separation of General Lighting Resultant structure

Promoters

Public

Promoters

Public

Promoters

Public

66.06%

33.94%

66.06%

33.94%

66.06%

33.94%

Halonix Ltd Auto Lighting General Lighting

Halonix Ltd Auto Lighting

Halonix Ltd Auto Lighting

100%

100%

100%

X
Halonix Technologies Ltd (HTL) Halonix Technologies Ltd (HTL) General Lighting Halonix Technologies Ltd (HTL) General Lighting

I. (iii) Company overview Plants and Products overview

Manufacturing process
Tube Cutting Length Checking Bridge Making Process Mount Making Process

Bulb Forming process

Sealing Process

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Large automated manufacturing facilities


Unit Location
Noida SEZ (59A/D), Noida (A1), Dehradun#

In Phases from 1992 to 2010 ( In progress)

Established

Exports OEM, Exports After Market (AM), Domestic -OEM, Domestic After Market( AM) ,Domestic OEM

Market

Auto halogen lamps: H1, H3, H4, H7, H8, H9, H11, HS1, M5,

Products

Current capacity p.a

Over 60 mn pcs

Some OEM approvals

Bajaj, Ford, GM, Hero Honda, Hyundai, Maruti, M&M, Tata Motors

# As part of the Company restructuring, the production lines of Dehradun plant are being shifted to Noida A1

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Products overview
Bulb Bulb H4 H4 H1 H1 H7 H7

Bulb

Description

Dual filament

Single filament with high beam

Single filament with low beam

Vehicles

Four Wheelers

Four wheelers

Four wheelers

Application

Head lamp

Head lamp

Head lamp

Markets

Domestic (OEM/AM) Exports (OEM/AM)

Exports (AM)

Exports (AM)

Volts

12 and 24

12 and 24

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Products overview (cont )


Bulb Bulb 9000 series 9000 series H3 H3 H8/H9/H11 H8/H9/H11

Bulb

Description

Base designed to prevent corrosion Single/ double filaments to suit all requirements

Single horizontal filament Visibility during fog by bright yellow lights

Single filament lamps Have a special base which prevents from corrosion

Vehicles

Four wheelers

Four wheelers

Four wheelers/ Two wheelers

Application

Head lamp

Fog lamp

Head lamp/ fog lamps

Markets

Exports (AM)

Domestic (OEM) Exports (AM)

Exports (AM)

Volts

12 14

12 and 24

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Products overview (cont )


Bulb Bulb HS1 HS1 M5 M5 Stop & Tail Stop & Tail

Bulb

Description

Dual filament Wattage is higher than H4

Dual filament

Safety lamps that glows brighter when the break is pressed

Vehicles

Two wheelers

Two wheelers

Four wheelers

Application

Head lamp

Head lamp

Stop & tail lamp

Markets

Domestic (OEM) Exports (OEM)

Domestic (AM) Exports (AM)

Domestic (AM)

Volts

6 and 12

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12

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Research & development


Pioneering work in lamp optimization for generating 30% more illuminance Patents filed by the Company Research on product improvisation based on OEM feedback Introduce state of the art technology products simultaneously with global players + 30 all season H4 lamps 24 V single coil design - H4 H13 lamps Designing HS1 lamps for withstanding vibrations

Line leaders -6 Sigma black belt certified 20 Quality circles and workforce uses 7QC tools

Manufacturing & Process engineering

Testing & Validation

High quality equipments imported from Germany for optical photometry Low PPM defect levels at customer end

Design & development integrated with production - time to market 3 months

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I. (iv) Company overview Business overview

Extensive sales and distribution network


OEM
Customer connect - key account management and good relationships with the OEMs Excellent relationships with Tier 1 suppliers Tie ups with logistics companies JIT deliveries

Domestic
After market (including private labeling)
180 exclusive dealers for own brand sales across India with substantial market share Preferred supplier for leading after market players also

OEMs

Ongoing relationships with major International OEMs and Tier 1 suppliers

Exports
After market (including private labeling)
Presence across five continents Representatives in Iran, USA, Greece , Chile, Saudi Arabia, Italy, Belgium etc

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Domestic OEM business


The manufacturing facilities are accredited with OEMs in India for their domestic / export vehicles in OE fitment segment

Other major players include Philips and Osram, who import from their global manufacturing base

With the Indian auto revolution & more global auto players putti ng up manufacturing base in India, the Company is already in process of accreditation with the new entrants Some of the recent approvals which would help the Company s growth going forward are

Nissan India domestic sale 2009 Hyundai India export sale in 2010 Tata Motors Supplies for Nano

Source: Company

Head start in having OEM approvals which has a long lead time
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Domestic - after market


Strong presence in the after market segment

J&K 16 HP 16 Punjab 16 Haryana 16 Delhi 4 Rajasthan 12 UP (W) 16 UP (W) 11 Bihar 8 Gujarat 12 Jharkhand 10

The Companys brand is sold through 180 exclusive first level distribution outlets Private labeling for various leading players in India Supplies to OEMs for their after market use

Assam

Key products - in the aftermarket are


M.P. 8

W.Bengal 9

Four wheelers H4 Two wheelers M5 and HS1 Stop & Tail lamp

Maharashtra 20

Orissa 10 Chatishgarh 3

A.P. 6

Customers are quality and price conscious, giving the Company an edge over unorganized players

Exclusive Distributors

Karnataka

Tamil Nadu 6 Kerala 3

Quality products with a pan India distribution network resulting in a significant market share
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Exports
The manufacturing facilities are approved by International OEMs The Company has presence in Europe through offices and warehouse s which helps in meeting customers requirement on short notices Over 20% of Exports are under own brands and balance being sold under Private labeling Key products being exported - H4, H7, H8 and H9 The Company exports to 75 countries globally European markets constitute significant share of the total expor t revenues for the Company

Major automotive aftermarket players in Europe are the customers of the Company Products of the Company enjoy over 15% share of European after market segment Germany, France and Luxembourg are the key markets for the Compa ny

Ramping up its export capacity to cater to large demand of its p roducts in the international markets

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Exports (cont)
Company is enhancing its product portfolio and expanding its pre sence in other geographies

Product portfolio to include high value added 9000 series haloge n bulbs for US markets Enhance its supplies to OEMs in process of obtaining empanelment from major International OEMs Strengthen customer relationships Create higher visibility by participation in Auto industry trade shows

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Fiscal incentives

Excise duty

Plant 59A and plant 59D 100% excise duty exemption on export sales due to presence in Noida export processing zone

Custom duty

Plant 59A and plant 59D 100% custom duty exemption on imports due to presence in Noida export processing zone

Income tax

Plant 59D Exemption u/s (10 AA) of the Income Tax Act due to presence in Special economic zone 100% - up to FY10 50% - FY11 to FY15

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II. Industry overview

Automotive lighting
Lighting

Exterior lighting

Halogen lamps High Intensity Discharge lamps (HID) Light Emitted Diode (LED) Incandescent lamps Light Emitted Diode (LED)

Interior lighting

Halogen lamps

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Automotive lighting - head lamps & tail lamps


Typical lamps requirement in a four wheeler is 2 head lamps 2 fog lamps (this is optional) Tail lamps
Head Lamp

Fog Lamp

2 break lights, 2 indicator lights and 2 parking lights

Additionally, as per the regulations, any new car should also have 2 head lamps as spares (known under CMVR) Typical lamps requirement in a two wheeler is

1 head lamp 1 tail lamp


Break Lamp Indicator
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Parking

Domestic automotive halogen bulbs market overview


1 Market size
Market for halogen bulbs is estimated to be ~ Rs. 2,500 mn OEM constitutes about 35% of the total market Market Size FY10 ( Rs mn)

Demand
The growth in the OEM segment is co -related to growth in the auto industry OEMs for their existing models, new vehicle launches and International OEMs launching models in India After market is a result of total vehicles population in the country India is expected to see substantial growth in after market as vehicles sales witnessed accelerated growth from late 90 s

Key players
Philips, Osram and Halonix

Source: Company

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Domestic automotive bulbs market competitive landscape


Particulars Quality standards Supply capability (in nos) Product portfolio OEM approvals Presence in After market Meeting JIT delivery Prices* (high price is denoted as Weak) Manufacturing proximity to OEMs in India
Source: Company Strong Weak

Halonix Ltd

Competitor 1

Competitor 2

Competitor 3

Others

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Domestic - four wheeler industry sales trend


Low penetration rate (CY07) ( 000) Four wheelers sales breakdown (FY10)

Passenger vehicle sales (in mn)

Passenger vehicle sales (in mn)

E 013 0 2 2.3% 201 R 1 CAG

010 2005 2 % 14.3 CAGR

Source: SIAM/Enam research

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Domestic - two wheeler industry sales trend


Low penetration rate (CY07) despite being 2nd largest market
(per 000)

Two wheelers sales breakdown (FY10)

Motor cycles sales Domestic /Exports (in mn)

Motor cycles sales (in mn)

010 2005 2 % 10.0 CAGR

2015E 2010 .5% 13 CAGR

Source: SIAM/Enam research

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Domestic growing after market


Passenger vehicles population* (in mn) Motor cycles population** (in mn)

Total population More than 3 year old More than 5 year old
* assumed useful life of 15 years

CAGR (2010-13 E) 13.4% 13.5% 14.1%

Total population More than 3 year old More than 5 year old
** assumed useful life of 10 years

CAGR (2010-13 E) 12.3% 14.1% 18.1%

High growth in addressable business segments with expanded capac ity would augur good for growth
Source: SIAM/Enam research

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Domestic automotive lighting market outlook


Estimated volume CAGR growth of OEM market for passenger vehicle s ~12% and Motor cycles segment ~13% in India over the next three years (Source: Enam research)

OEMs

Demand for HS1 is expected to move in line with ~ 1 mn pieces per month by end of FY11 due to expected sales of two wheeler crossing ~10 mn p.a. by FY11 (Source: SIAM) Increased demand for combination lamps H1 and H7 (replacement fo r H4) and H3 (fog lamp), which were earlier used mainly in premier cars, now being adopted by most of the car models

The after market in passenger vehicles is expected to be dominat ed by high wattage bulbs namely H4 -100/90 watts in both 12 and 24 voltages Currently, the HS1 after market is ~1.0 mn pieces per annum and is likely to double in the next year. After market demand for HS1 likely to pick up as life of the lamps introduced in Indian markets 6 years ago is expected to end soon

After market

H7 is a lamp with a short life of 2 -3 years. As H7 was introduced recently after market demand is expected to emerge after two years

Source: Management estimates

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III. Growth strategy

Growth strategy
Focus on key markets Product portfolio Strengthen OEM relationships

OEM relationships

Product portfolio

Key markets

Reinforce relationships with OEMS Focus on approvals from International & domestic OEMs Marketing & brand awareness

Planned capacity expansion of H4, H7 & HS1 over next three years Enhancing Product Portfolio

Consolidate market share in fast growing domestic auto markets Establish stronger presence in North America, Latin America and Europe

LED tail lamp assembly Stop & Tail lamps

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IV. Financial highlights

Key historical financials


Performa profit and loss account Auto Lighting Rs. mn Revenues Direct costs: - Material costs - Operating expenses Total direct costs Gross profit S,G & A expenses EBITDA PBT Less: Net taxation PAT 926 81 1,007 728 265 463 346 (26) 320 1,165 107 1,272 873 373 500 335 (15) 320 FY09A 1,735 FY10A 2,145

Financials as per management representation

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Key historical financials


Balance Sheet Auto Lighting Rs Mns` Application of funds Fixed assets - Gross fixed assets (including CWIP) - Net Fixed assets (including CWIP) (i) Net Current assets (excluding Cash and Bank balances) (ii) Cash and Bank balances (iii) Total (I + ii + iii) Sources of funds Capital employed - Networth - Secured Loans Total Capital employed (i) Net Deferred tax (ii) Total ( i+ii) 591 567 1,158 4 1,162 611 636 1,247 13 1,260 1,432 469 621 72 1,162 1,521 521 601 138 1,260 31st March 2009 31st March 2010

Financials as per management representation

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