NDRAUTONSEAugust 10, 2022

Ndr Auto Components Limited

4,914words

151turns

10analyst exchanges

5executives

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Management on call

Pranav Relan

WHOLE TIME DIRECTOR, NDR AUTO COMPONENTS LIMITED

Rajat Bhandari

EXECUTIVE DIRECTOR AND

Vinod Kumar

CFO, NDR AUTO COMPONENTS LIMITED

Sanjeev Kumar

FINANCIAL ADVISOR, NDR AUTO COMPONENTS LIMITED

Supriya Madye

KIRIN ADVISORS PRIVATE LIMITED

Key numbers — 38 extracted

Rs. 232 crore

nce in Suzuki Gixxer and Suzuki Access. For FY22 the Company has achieved consolidated turnover of Rs. 232 crore and net profit of Rs. 14.89 crores. Now I will brief you with the group companies. First is Bharat

Rs. 14.89 crore

ccess. For FY22 the Company has achieved consolidated turnover of Rs. 232 crore and net profit of Rs. 14.89 crores. Now I will brief you with the group companies. First is Bharat Seats Limited, The Company owns 2

28.66%

es. Now I will brief you with the group companies. First is Bharat Seats Limited, The Company owns 28.66% stake in Bharat Seats Limited which carries on the business of NOR Auto Components Limited August

Rs. 11.91 crore

lies carpet set for automobiles and motorcycle seats. The Company posted a profit after tax of Rs. 11.91 crore during the financial year 2021-22. Second is Toyo Sharda India Private Limited. The Company owns 5

50%

e during the financial year 2021-22. Second is Toyo Sharda India Private Limited. The Company owns 50% stake in Toyo Sharda India Private Limited which carries on the business of manufacturing car sea

Rs. 2.61 crore

e business of manufacturing car seat lifter and recliner. The Company posted a profit after tax ofRs. 2.61 crore during the financial year 2021-22. Third the Company own 50% stake in Toyota Boshoku Relan India P

INR 7,756 billion

become the third largest in the world by 2025. The auto ancillary market is anticipated to reach INR 7,756 billion by FY2027 expanding at a compound annual growth rate of 15.35% during the financial year 2022 to t

15.35%

is anticipated to reach INR 7,756 billion by FY2027 expanding at a compound annual growth rate of 15.35% during the financial year 2022 to the financial year 2027. Key growth drivers of the industry are:

40.46%

in years to come. For Q 1 FY23 of the qualitative business the Company reported revenue higher by 40.46%. EBITDA increase up by 34.38%, PBT at Rs. 4.95 crores up by 73.68%, PAT at Rs. 4.12 crore up by 73

34.38%

3 of the qualitative business the Company reported revenue higher by 40.46%. EBITDA increase up by 34.38%, PBT at Rs. 4.95 crores up by 73.68%, PAT at Rs. 4.12 crore up by 73.1%, EPS is now 6.81 against 3

Rs. 4.95 crore

ative business the Company reported revenue higher by 40.46%. EBITDA increase up by 34.38%, PBT at Rs. 4.95 crores up by 73.68%, PAT at Rs. 4.12 crore up by 73.1%, EPS is now 6.81 against 3.97 in the correspondi

73.68%

any reported revenue higher by 40.46%. EBITDA increase up by 34.38%, PBT at Rs. 4.95 crores up by 73.68%, PAT at Rs. 4.12 crore up by 73.1%, EPS is now 6.81 against 3.97 in the corresponding quarter. On

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Guidance — 20 items

Key growth drivers of the industry are

opening

“• • • • • • The enforcement of the BS- VI standard of safety and addition is anticipated to help the export market expand during the forecast period for the benefit of auto component player in India.”

Vaibhav Sharma

“Majorly we are around 30%, 35% of our contribution to the Maruti I think that will be correct?”

Vaibhav Sharma

“What will be net selling your sales to the Maruti in which model you have the highest?”

Vaibhav Sharma

“So, to Toyota you will be supplying direct?”

Pranav Relan

“We are going to be supplying to the seat maker which in tum we will be supplying to Toyota.”

Vaibhav Sharma

“The padding and the foams will be added by another your associate company?”

Vaibhav Sharma

“So, in the two wheeler segment it will be same as four wheeler you are providing frames and cover and the padding and other things will be taken care by another company?”

Sanjeev Kumar

“In Bangalore, we are also at 90% capacity and Gujarat we will be setting out which will get operational in March 2023 we will be reaching our capacity of 80% to 90%.”

Sanjeev Kumar

“Vaibhav Sharma; So, I think we have some kind of pre-order arrangement with our buyers, so if in Gujarat that we are planning in 80% to 90% that will be booked so I think you had pre-arrangement with Maruti and Toyota?”

Dishan Jain

“And the second question is on the margins like currently if you look at it is around 25% gross margin in the Ql FY23, so is it sustainable going forward or do you think there will be change in those margins?”

Risks & concerns — 2 flagged

The automobile industry witnessed laggard since FY20I9 due to weak sentiments and tightening of liquidity in non-banking and other lending institution.

— Sanjeev Kumar

So, I think from what I heard a significant part of our business is coming from market, so is this relationship exclusive or are we not allowed to approach other customers and how do we manage the risk of having such a large part of our business from a single customer if you can throw some light on that?

— Dhwanil Desai

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Q&A — 10 exchanges

So, I have three to four questions regarding business of the Company and on the financial. I will start with the business part as you told you are demerged from the Sharda Auto Components (Sharda Motor Industries Limited), so are we only doing the seating business or any other business also from Sharda that we are taking care of?

Pranav Relan

So, at the moment we are only doing the seating business. I see you are mainly supplying to Maruti Suzuki, so what kind of supply arrangements that we have and how much did we supply them in last financial year if you can throw some light on that? So, last financial year we supplied about 75% of our business to Maruti Suzuki four-wheeler and about 20% to 25% went to the two wheeler segment. So, 75% of your business in terms of number of seats or anything that you can give idea like Maruti has sold around 161akh cars in FY22, so how much number of sets or seats that we have provided to them? Ab

In NCR we have got a total capacity of 6,50,000 sets in Bangalore we have got a capacity of 2,50,000 sets and in Gujarat up to March 2023 we will have a capacity of2,50,000 sets.

Dishan Jain

And the second question is on the margins like currently if you look at it is around 25% gross margin in the Ql FY23, so is it sustainable going forward or do you think there will be change in those margins? No, I think it is sustainable going forward and we are likely to expand this.

I just wanted to know at the full capacity including the Gujarat plant what kind of tum over we can do in the FY24?

Pranav Relan

Sorry can you repeat that. Including the Gujarat plant at the full capacity were on the 90% capacity in all the plants what kind of revenues we can do in the 23 and 24? I do not think we can give numbers at the moment, but I think we will be growing at least 30% to 40%. And the next question is regarding the new product, so what kind of new products are you planning to do? Please again repeat your voice is not clear. I am saying in the presentation, in the press release you are talking about the new products? We are looking to add body in white to our portfolio. We have acquired very small bus

Pranav Relan

So, our relationship is very strong as we have already in an associate company that is a joint venture between Maruti Suzuki and us. Going forward there is no I mean we can obviously approach other customer and we are working towards that as well. NOR Auto Components Limited August 10,2022 So, the idea is to kind of increase the shares of other customers and derisk our business, is that the part that we are seeing for our Company next three to five years? So, we want to add new customers and we also want to add new products. So, other than the one that you mentioned we have more products in th

Sir, couple of questions like we have been observing that there is premiumization happening at every product customization and premiumization happening like seating system having airflow system, seating system having adjusting and particularly you mentioned that let us say we are not present in Innova or Fortuner, so is it that we do not have the capabilities to manufacture the high end premium products or we do have and we plan to explore and get into that and related question to that is like how do we like obviously one is the volume growth which the OEMs will do, how do we plan to increase

Pranav Relan

So, we have the complete technology for seat ventilation, seat airbags. So, I do not think that is the problem. In terms of adding content per vehicle we are looking to add a lot of BIW part that we are in discussions with Bellsonica to expand the association with them. And content per vehicle increment is not possible in the seating business right. So, right now whatever we are giving it is a full-fledged package which includes all the technologies which are involved to them? NOR Auto Components Limited August 10,2022 No, As the OEMs start updating their product our content per vehicle for th

For the next 2-3 fiscal years is about 20 crores an annum.

San deep Mane

And what is our asset turnover ratio sir? 6.5 times right now for the FY2I-22. And what is the dividend distribution policy ofthe Company? So, at the moment it is 10% to 15% of that. Sir, are we planning to spend on the distribution network? No, nothing on the distribution network no plans. Sir, can you tell me what is our ROE and ROCE? So, our ROE for last year was 7.5% and ROCE was 9.13%. For this quarter our ROE is 9.13% and ROCE is 11%. NOR Auto Components Limited August 10,2022

Sir one thing wanted to understand was this Bharat Seats which is an associate company is also in a similar business or there is a difference between what we do and what they do and ifthere is no difference than some of the parts that we supply to them is there any cleaner structure that we are thinking about in terms of direct supply you talked about new Bangalore plant probably directly supplying to Toyota, but for the existing plants will it always go through the associate company and if so why such arrangement?

Pranav Relan

Bharat Seats does the seat assembly and the seat foams and NDR does the seat covers and seat metals. So, there is a clear bifurcation of what we do in each of the companies. So, we will supply for the existing plant we will supply it through Bharat Seats and they will do the assembly and then supply to the OEM that is how it will work? Yes that is the current model. And that is how it will work for the new expanded capacity in Gujarat plants also? Yes. So, except for this Bangalore new capacity where we are supplying to Toyota directly I think almost everything will be with the structure? No,

Sir couple of follow up questions one Ijust wanted your thoughts on the capital allocation policy as of March I see that the Company has decent sum of cash and considering the CAPEX plan or expenditure outlay which you mentioned is around 20 crores which I think can be easily funded from the current cash flows, so how do you plan to utilize this huge cash prize?

Pranav Relan

We are in very active discussions to expand the content and maybe to look at some acquisition or some joint ventures, but that will take at least two to three quarters for anything to materialize we are reserving capital for that at the moment. And sir one more point like the Gujarat plant, which is coming up, is it specifically for the Maruti export plants? NOR Auto Components Limited August 10,2022 That is for the Maruti plant yes. So, sir like from an opportunity point of view in the foreseeable future like do we see NOR think in the lines of having some competitive edge in the seating syst

I had two follow up questions so as you said you are selling from Wagon R till the Highrider range, so the seating price will be different, so what is the average seating in the said price any idea if you view on that?

Pranav Relan

I do not think we can reveal that. I think we have Customer contract 'not to reveal that at the moment. So, some questions related to numbers what will be our working capital cycle? 30 to 45 days. And related to the margin front is there any chance to improve the margins from current margin profile? As a new plant kick in and our new models kick in our margins are likely to expand. NOR Auto Components Limited August 10,2022 Why are we in this special arrangement with Bharat Seat, are we not in position to supply to Maruti directly or is there prior arrangement that we are carrying on? So, Bhar

I thank you NOR the total management and everyone for joining this call. If you have any queries please write it to us at info@kirinadvisors.com. I thank you once again to everyone for joining this call.

Sanjeev Kumar

Thank you everybody.

Speaking time

Pranav Relan

Vaibhav Sharma

Moderator

Jagvir Singh

Dhwanil Desai

Ankur Shah

Sanjeev Kumar

Sandeep Mane

Supriya Madye

Key growth drivers of the industry are

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Opening remarks

Supriya Madye

Thank you. Good morning ladies and gentlemen. I thank everyone for joining the first conference call of NOR Auto Components hosted by Kirin Advisors to discuss the performance of the first quarter of FY23. Now I would like to welcome management team of NOR Auto Components. Today we have with us Mr. Pranav Relan - Whole Time Director, Mr. Rajat Bhandari - Executive Director and Company Secretary, Mr. Vinod Kumar - CFO and Mr. Sanjeev Kumar - Financial Advisor. Now I hand over the floor to Mr. Sanjeev Kumar for opening remarks. Over to you, Sir.

Sanjeev Kumar

Thank you. Hello everyone. First I hope everyone is in good health. I welcome you all to the first conference call of NOR Auto Components Limited to discuss the performance of the Company during the first quarter ofFY23. It is a great pleasure to have you all on call. Before we discuss the performance of the Company for the first quarter of FY2023, let me brief you about NOR Auto Components Limited. NOR Auto Components is a flagship company of the Rohit Relan Group. The Company was incorporated in March 2019 with a view to demerge the automobile seating business of Sharda Motor Industries Limited. The company is engaged in the business of manufacturing, seating solutions like frames and trims to four-wheeler and two-wheeler vehicles. We have three plants right now. One is located at Gurgaon Haryana second is at Pathreri Haryana and third is at Bengaluru. They all are catering to Maruti Suzuki, Toyota Boshoku and Suzuki Motorcycle India Private Limited. The management and the senior lea

Key growth drivers of the industry are

• • • • • • The enforcement of the BS- VI standard of safety and addition is anticipated to help the export market expand during the forecast period for the benefit of auto component player in India. Foreign players prefer India because it is a cost-effective location for manufacturing which works well for the auto ancillary markets. The demand for automobile is expected to remain upbeat with rising per capita income. Improvement in road structures and national connectivity would drive the demand for the automobile sector. The old vehicle scrappage policy 2021 will further provide impetus to automobile demand. As auto ancillary is directly linked to the automobile industry it will witness a sharp rise in demand. The Future looks promising ..... Automobile demands are back on the track post pandemic. We are seeing good demand for vehicles popping up. We are completely focused on our future growth prospective and have outlined capacities expansion program. We are also looking for putting

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