@manpritaurora and I did some digging into the financials of Sharda’s main competitors in India - Faurecia India, Tenneco India and Tata Katcon (Tata Autocomp JV with Katcon). Here’s a summary of the comparison of the numbers of the 3 companies for FY21 (Tenneco and Faurecia are yet to file FY22 numbers)
A few key points from the above data:
- Sharda is the largest player in the industry followed by Tenneco
- Although Faurecia seems to have really strong margins, it has booked huge depreciation in FY21 so EBIT and PAT are -ve. Payable days are also too high - may indicate cash flow stress?
- This seems to be a high NFAT industry although Faurecia NFAT is low (May be due to recent capex). So Sharda’s high NFAT figure may not be an outlier/cause-for-concern (Needs more digging - How much are trading revenues as % of total? Sharda AR says 50Cr only, but is that all? Concalls seem to suggest higher traded revenues)
- This seems to be a very working capital efficient industry with all players more or less having -ve cash-conversion-cycles
- Non Indian/Asian OEMs seem to be clients of Faurecia and Tenneco (They are leveraging their global relationships I guess)
A few other key points from industry scuttlebutt (thanks to @GourabPaul):
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Industry players seem to be sourcing Oxygen and NoX sensors and Adblue dispensers from the likes of Bosch. They don’t make these in-house. This means emissions players may be restricted to cold-end, hot-end and pipe related mechanical components. This needs to be confirmed with Management.
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Couple of private players seem to have invested in JVs with foreign partners recently to tap into TREM IV, TREM V opportunities such as SM Auto (Has tied up with a Finnish Exhaust systems company called Proventia) and
Mangla Tubes (Has entered a JV with an Italian company called Cornaglia). Need to evaluate how credible their threat of entry is in the TREM IV, TREM V space.
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