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INFORMATION MEMORANDUM –FIEM INDUSTRIES

Automotive Lighting, Signaling Equipments, Rear View Mirrors, Sheet Metal and Plastic Parts

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 Business Overview
Fiem Industries Ltd. (FIEM) was founded and incorporated in 1989 by Mr. J.K. Jain.
• The Company was listed on BSE and NSE in 2006.
• FIEM is one of the leading manufacturers of Automotive Lighting & Signalling Equipments and Rear View Mirrors
in India. FIEM is among first companies in India introducing LED lights in two wheelers.
• FIEM has diversified its product portfolio by entering into LED luminaires for Indoor and Outdoor applications and
Integrated Passenger Information System for Railways & Buses.
• HQ – Sonepat, Haryana, India.

Products Offerings
Automotive Segment LED Segment
• Lamps, Tail Lamps • LED Bulbs
• Rear View Mirrors • LED Tubs
• Plastic Moulded Parts • Solar based LED street lights

Top Clients

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I NVESTMENT H

Investment Highlights of the Business

Top Management
Possess decade of experience in
manufacturing of automotive lighting and
signaling equipment.

Pricing Advantage Components & Products

50% own manufactured components Automotive lighting with
therefore enjoys distinct pricing government approved R&D Centre
advantage over the competitors to launch new lighting products.

Benefits for the

State of Art manufacturing Investor
facility Robust Growth
Nine in India, with world class 16% + CAGR expected in the
manufacturing products near to next 5 years in terms of revenue.
OEM customers to facilitate No 1 Supplier of Auto Ancillary
logistics savings. in India.

Global Partnerships
Entered in JV with Kyowa Co.Ltd Technical capabilities
(2017) and Asian Industry able to customize/improvise
Co.Ltd(2018) for latest tools for products based on the consumers
automotive and to have global need at a competitive price points.
presence.
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 Potential Investors
Segment Wise Revenue Split

11%

9%

6%

74%

Rear View Mirrors Plastic Moulded Others Auto Lamp

• Minda Industries – It’s the major player in this industry with largest market capitalization. It could be a potential investor to leverage the
improved capabilities of FIEM industries to expand and improve the market share.
• Honda – Potential acquisition or Investment by Honda in FIEM Industries will help Honda to create synergies by implementing vertical
integration throughout their supply chain. Further, it can be observed that 41% of the total revenue of FIEM comes from Honda itself.
• Japanese Investors – As per market research most of this segment companies are entering into tie ups with Japanese Companies to make use of
latest technologies. This would help them to make their operations cost effective and make use of manufacturing units within India.

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 Profi

Profitability Snapshot
Profit & Loss
Year FY17 FY18 FY19 FY20P FY21P FY22P FY23P
Revenue ( INR Lakhs)
Revenue 1,13,556 1,27,768 1,44,486 1,66,159 1,94406 2,27,455 2,57,024
300,000 20% YOY Growth % 13% 13% 15% 17% 18% 18%
250,000
15%
200,000
150,000 10% Cost( per revenue) 89% 89% 89% 86% 83% 82% 82%
100,000
5%
50,000
- 0% EBIDTA 12,205 14,521 15,613 23,967 32,575 41,894 45,025
FY 17 FY 18 FY19 FY20P FY21P FY22P FY23P 12% 14% 10% 14% 15% 14%

Revenue YOY (%)

PAT 3,282 5,255 5,549 11,845 17,910 24,470 26,700
60% 6% 113% 51% 37% 9%

EBITDA & PAT Margin

18% 18% During the last three years the company has consistently Grown with a CAGR of
17%
over 9%. Which is expected to increase to 16% in next five years.
14%
11% 11% 11% 11% 10%
9%
7%
4% 4% EBIDTA margin will improve from 11% in FY 19 to over 18% in FYP 23 due to
3%
addition of newer product ranges and increased manufacturing with Japanese
technology.
FY17 FY18 FY19 FY20P FY21P FY22P FY23P
Profit after tax is expected to grow by 113% due new alliances with
EBITDA Margins PAT Margin manufacturing plants in Italy and other parts of Europe. Thereby, improving the
production capabilities.

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 DCF - Valuation
Assumptions
Risk free rate 7.4%
Beta 0.9
Expected return from market 16%
Cost of equity 15%
Cost of debt 12%
Post tax cost of debt 8%
Target debt: capital ratio 30%
WACC 13%
Terminal Growth Rate 3%

Free Cash Flow

35,000
30,000
25,000
20,000
15,000 The above-mentioned assumptions has been used to perform DCF Valuation.

10,000 The free cash flow is expected to grow from Rs 19,670(Lakhs) in FY20
5,000 to Rs 33,246 (Lakhs) in FY23P.
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In FY20 the valuation of FIEM Industries is expected around RS 2,87,665 (Lakhs)
FY20P FY21P FY22P FY23P

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 Trading Comparable Valuation (INR Lakhs)

EV/EBITDA Multiple

EV/Sales Multiple

Equity Value(EV/EBITDA)
• Lumax Industries and Minda Industries are
taken as close comparable for performing
990,552
valuation based on trading comparable.

• The current valuation in FY19 is estimated at

Rs 3,37,974 (lakhs) that is expected to reach
potential valuation of RS 9,85,558 (Lakhs) in
FY23P as per the EBITDA multiple.
343,476

FY19 FY23P 6 7
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 Industry Landscape Porter’s Five Forces
• India Automotive Lighting Market is expected to garner Threat New Entrants Suppliers Power
$3.1 billion by 2022, registering a CAGR of 5.6% from
2016-2022. Lighting is a vital component in automotive • New entrants in auto • All key players in the
vehicles, playing an important role in automotive safety. lighting industry brings industry source raw
innovation and would put material from suppliers. So,
The vehicle consists of different lights to increase the
pressure on FIEM suppliers don’t have much
visibility in darkness and bad weather conditions along Industries to match the pricing power due to low
with the increase in conspicuity. low-price strategy. switching costs for FIEM.
• Key Players in this industry are Lumax Industries,
Minda Industries, FIEM Industries etc. Buyers Power
• India automotive lighting market is projected to grow at
• Buyers need best offering
a CAGR of over 12% by 2023, on the back of at a competitive price.
improvement in vehicle safety standards, advanced Hence, they posses high
features in vehicle lighting systems, and government bargaining power to seek
regulations towards vehicle lighting systems. Moreover, discounts and promotions.
increasing automobile production, as well as vehicle
fleet is further contributing to the growth of India Substitute Threat Existing Rivalry
automotive lighting market. • High power of substitute as • The industry is price
new products meets the sensitive and has strong
customer requirements in internal rivalry among
different ways. existing players. To
succeed, one needs to have
differentiation strategy.

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Key Risks Associated With FIEM
Recommendation
Industries
• FIEM Industries is expected to perform well in next five
Pricing based years. This can be supported with strong profitability
No clarity on competition and EBITDA margins with exceptional revenue growth
when the current might hamper the for next 4 years.
auto slowdown Joint Ventures • However, in FY23 the growth slows down due to
will end. with Japanese intense competition based on pricing war, thus affecting
companies. the performance of the business.
• Currently it’s the right time for the investor to invest in
Government the company because of its strong current valuation
Majority of
policies may between RS 2,87,665 (Lakhs) and Rs Rs 3,37,974
headlamps
market is still
impose more (lakhs).
dominated by
restrictions in the • An investor can expect Investment multiple of around
form of taxes for 3X in next 4 years thus making it an attractive
Halogen and
manufacturing opportunity with a sure shot exit.
HIDS.
units.

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