Even on margins, the brakes segment is not attractive. Rane, Sundaram are making single digit operating margins. But in the Q4 FY23 concall, the management said they will make 18 – 19 % EBIDTA margins.
It is not clear on what basis they said they will generate 18-19 % EBIDTA margins, so I wrote to the management. They replied that 18 – 19 % are gross margins. Then when I pointed out that they had earlier said these are EBIDTA margins, they replied that “since the set-up and project is new, other expenses are less and hence there is little difference between Gross & EBIDTA Margins”.
Overall, looking at Rane Brake Linings or Sundaram Brake Linings, brakes does not seem to be an attractive segment to get into.
(Disc.: No positions)
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