Marcellus Little Champs: Key success factors for Suprajit Engineering

Saurabh Mukherjea and his Team Marcellus have issued a note explaining the reasons for the success of Suprajit Engineering.

It is pointed out that Suprajit is promoted by Mr Ajith Kumar Rai and started as a single-product supplier (mechanical control cables) to a single client (TVS Motor) in 1985.

Over the years, Suprajit has emerged as the largest supplier (market share of ~65%) of mechanical cables to the domestic 2W segment, enjoying high share of business across all major 2W OEMs.

It has also emerged as a significant supplier to domestic passenger vehicle (PV) OEMs with a rising revenue share from aftermarket and exports (primarily global PV players). A key part of Suprajit’s growth strategy in the recent years has been acquisitions.



Financial performance: Suprajit has delivered healthy financial performance over the years with its revenues consistently outpacing the growth of the underlying Indian automotive market. It has also been able to generate healthy margin and RoCEs and is one of the few auto component companies to do so on a consistent basis.

Further, in the context of the sharp decline in automobile sales over FY19 and FY20 and despite some negative impacts of restructuring efforts at Phoenix Lamps and Wescon, Suprajit’s earnings CAGR of 5% and average RoCE of 19% over FY18-20 stands out in the Indian auto component space.

One of the key success factors for Suprajit is the fact that it has clear cost advantages over its peers.

It has a well-thought strategy/vision of emerging as a global leader in all its product lines i.e. automotive cables, automotive lamps and non-automotive cables. The key to achieving this leadership is to be an efficient low-cost supplier of these products while meeting the customer expectations on quality, delivery and designs.

It is also stated that Suprajit practices Prudent Capital allocation. There is continuous investment in manufacturing capacities. The Company has been proactive in expanding its cable manufacturing capacities leaving little room for its peers to benefit from the market growth. In the last ten years itself, it has organically tripled its cable manufacturing capacities (without accounting for the new additions from the Wescon acquisition) reinvesting nearly 40% of its standalone cashflows in capex (excluding the acquisitions).

There are multiple other reasons give by Team Marcellus as to why Suprajit Engineering is a worthwhile investment candidate.

Click here to read the entire note