Release Date: May 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane Holdings Ltd (BOM:505800, Financial) achieved its highest ever group aggregate sales of INR7,200 crore, marking an 8% growth over the previous year.
- Revenue from domestic OE customers grew by 9%, and revenue from international customers increased by 4%, with organic exports growing by 15%.
- REVL achieved its highest sales level with a 14% growth in FY24, driven by robust sales growth and enhanced operational performance.
- Rane Break Lining achieved the highest sales for both the quarter and fiscal year, with FY24 sales growing by 10% and export sales by 33%.
- The joint venture with ZF saw a 12% growth in the steering business and a 20% growth in the occupant safety business, with EBITDA margin improving by 33 bps.
Negative Points
- The EBITDA margin of Rane Holdings Ltd (BOM:505800) consolidated decreased by 38 basis points in FY24.
- The demand for the steering and linkage business was impacted due to a drop in passenger cars and the farm tractor segment.
- Rane Madras experienced a decline in EBITDA margin due to lower absorption of fixed costs and certain one-off provisions.
- The export sales for Rane Madras saw a decline in Q4 due to a slowdown in the off-highway vehicle segment in the US.
- Rane NSK's EBITDA margin was impacted due to an unfavorable mix, and the company is working on improving profitability.
Q & A Highlights
Q: Can you talk more about the qualitative benefits of the merger of the three operating entities into one company?
A: The merger aims to create a larger company for future growth, reduce compliance costs, and leverage a stronger combined balance sheet for raising capital at lower costs. There are also tax benefits and potential operational synergies. The merger process is ongoing and will take several more months to complete. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What are your thoughts on utilizing extra resources like the Velachery plant to strengthen the balance sheet?
A: We are focused on reducing debt and will consider utilizing extra resources if required. The Velachery plant is currently used as our corporate office. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What steps are being taken to address recurring warranty claims?
A: We are focusing on improving product development and manufacturing quality. The recent warranty issues are being addressed, and we believe the major problems are behind us. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: Why has there been a decline in export sales in recent quarters?
A: The decline is partly due to the divestment of our US subsidiary. On an organic basis, exports have grown by 15% for the year. The slowdown in Q4 is also due to reduced demand in the off-highway vehicle segment in the US. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: Can you provide more details on the acquisition of TRW Sun Steering Wheels?
A: The acquisition cost INR139 crore and adds to our occupant safety product portfolio. The business has a turnover of INR140 crore with an 8.2% EBITDA margin. We aim to grow this business faster with ZF's support. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What is the outlook for the tractor segment given the IMD's good monsoon forecast?
A: We are forecasting zero percent growth in the tractor segment this year based on feedback from major customers like Mahindra and TAFE. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What is the status of the Mexico plant and the expected revenue generation?
A: The Mexico plant is on track, with revenue generation expected to start in the second half of 2025. Customer audits have been positive, and we are working on securing additional orders. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What is the impact of the US imposing additional duties on steel and aluminum imports from China?
A: The RFQ pipeline has increased due to the China+1 strategy, and we have won some smaller businesses as a result. However, it's still early to quantify the full impact. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What is the outlook for Rane NSK's margins and any required cash infusion?
A: We are working on cost reduction initiatives and new business bookings to improve margins. No equity infusion is planned at this time. (Harish Lakshman, Vice Chairman & Joint Managing Director)
Q: What is the expected return on invested capital for the INR1,000 crore CapEx planned over the next three years?
A: We target a return on capital employed of 20%-plus for our investments, with some projects in the 15% range. (Harish Lakshman, Vice Chairman & Joint Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
