Varroc Engineering Limited has informed the Exchange regarding Investor Presentation on Audited Standalone and ConsolidatedFinancial Results of the Company for the quarter and year ended on March 31, ...
Varroc Engineering Limited Regd. & Corp. Office
L-4, MIDC, Industrial Area Waluj, Aurangabad 431 136 Maharashtra, India
Tel +91 240 6653600 Fax +91 240 2564540
email: varroc.info@varroc.com www.varrocgroup.com CIN: L28920MH1988PLC047335
Vdrroc
VARROC/SE/I NT /2019-20/20
May 27, 2019
To, (l) l~e Manager- Listing _· / r he Listing Depa11111ent1 .'\/ National Stock Exchange of India Limited Exchange Plaza, Plot No. C/1, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400051.
NSE Symbol: VARROC
Dear Sir/ Madam,
(2) The Manag The Corpo BSE Li i(e Phi r , e Jeejeebhoy Towers,
lstlng elation Department,
lal Street, Fort, M umbai-400001.
BSE Security Code: 541578 Security ID: VARROC
Sub: Investor Presentation -Audited Financial Results for FY 2018-19.
Please find enclosed herewith Investor Presentation on Audited Standalone and Consolidated Financial Results of the Company for the quarter and year ended on March 31, 2019.
Kindly take the same on record.
Thanking you,
Rakesh Darji Company Secretary & Compliance Officer
Enc!s.: Investors Presentation.
Investor Presentation
Varroc is the 2nd Largest Indian Auto Component Group(1) with a Global Footprint
• Founded in 1988 in Aurangabad, India by the Jain family
• Successful listing on the Indian Stock Exchanges in July 2018
Two primary business lines:
Leading tier-1 manufacturer and supplier to
1. Varroc Lighting Systems (“VLS”): global supplier of exterior lighting
the Indian 2W and 3W OEMs(4)
systems to passenger car OEMs
2. Varroc India Business: manufacturer and supplier of diverse range
of auto components primarily to 2W, 3W and 4W OEMs
• Strong, long-lasting, growing customer relationships with
marquee auto OEMs globally and in India
• Well-diversified global auto component business across
geographies, products and customers
• Low cost, strategically located global manufacturing footprint
• 41 Operating plus 2 Upcoming Manufacturing Facilities and 16
R&D Centres across 5 continents
• In-house R&D capabilities in India, Czech Republic, China(5), USA,
Mexico, Germany, Italy, Romania and Poland
• ~1,400 R&D engineers(6); 185 patents granted globally(6)
6th Largest(2), fastest growing among
top six global exterior auto lighting
suppliers
INR 125bn FY19 revenue(3)
• Experienced management team supported by reputed Board
• ~13,800 employees across the globe(6)
Note: (1) Based on CRISIL Report - By revenue for FY17. Excludes TVS Motors revenues for Sundaram Clayton and Bosch Ltd. part of Robert Bosch GmbH (Germany). (2) Based on Yole Report – By revenue for CY16. For passenger and light commercial vehicles. (3) Including China (4) Based on CRISIL report; by revenue for CY16 – Sum of Varroc Engineering Pvt. Ltd, Varroc Polymers Pvt. Ltd and Durovalves Pvt Ltd. taken for Varroc. (5) Activities in China are through a 50% joint venture with Beste Motor Co. Ltd. (6) As of Dec 31, 2018. Excluding JVs.
2
Well Diversified Auto Component Business Across Geographies, Product Groups, Customers and Segments
FY19 Consolidated Revenue: INR 120 bn 100% China JV FY18 Revenue: INR 10 bn(1)
Revenue Split by Geography
Revenue Split by Products(3)
FY19, %
FY19, %
0.8%
17.9%
1.1%
34.6%
Europe
India
North America
Asia Pacific
(1)
Others
5.0%
6.9%
12.0%
15.7%
45.6%
60.4%
Consolidated Revenue Amount Split by Customer(3)
Revenue Split by Segment(4)
FY19, %
%
18.4%
11.8%
11.4%
34.8%
6.6%
7.7%
5.4%
4.0%
3.0%
34.1%
62.9%
(5)
Bajaj
Customer A
(5)
Customer B
(5)
Customer C
(5)
Customer D
(5)
Customer E
(5)
Customer F
(5)
Others
• Diversified business in
developed and emerging markets with strong India presence
• Comprehensive range of engine agnostic products
• Diversified customer
relationships; no customer has >20% share
• Presence in fast growing India 2W and Global PV lighting segments
Lighting
Polymer
Electrical
Metallic
Others
(2)
4W
2/3W
Others
Note: (1) 50% China revenues not included in FY19 (JV accounted under equity method). (2) Includes IMES and Triom and other parts of the India business. (3) Based on MIS data; Customer A is an American multinational car manufacturer, Customer B is a large British car manufacturer, Customer C is an American electric car manufacturer, Customer D is an international automotive manufacturer and customer E is a large European car manufacturer. (4) 4W – 4-wheeler (includes PV), 2/3W – 2/3-wheeler; data for FY18 (5) Bajaj and Honda are customers of the India Business; Customer A, B, C, D, E are mainly the customers of the global lighting business.
3
Varroc – The Transformation into a Global Auto Component Group
Acquired Forging company, IMES, Italy,
Acquired Visteon’s global PV lighting business (now VLS)
Investment in manufacturing facilities in Brazil and Morocco
Acquired 90% stake in auto
accessories manufacturer
LOI with Heraeus, Germany for 2W catalytic converters in India
Team Concepts (India)
0 9 9 1
7 0 0 2
2 1 0 2
START
Polymer Business
5 0 0 2
2W and 3W catalytic converters
1 1 0 2
4 1 0 2
Acquired Tri.o.m (Italy),
- 2W
lighting
PE Investments by Omega TC Holdings and Tata Capital
Acquired 50% in Varroc TYC Corporation (China)
Established a JV in Romania for manufacturing of Electronic Components
7 1 0 2
Acquired PV Lighting business in Turkey
2 0 1 8
Development of Electronic Fuel-Injection Technology for 2W in India
Varroc Engineering Limited listed on the Indian Stock exchanges (BSE & NSE).
4
Vision, Mission and Values
Vision : To be a Rs 200 billion supplier of innovative solutions for transportation and allied industry in 2020
• Core business sectors will be exterior lighting and two-wheelers mobility
• Be a partner of choice for vision, mobility and emission technologies
• Be the fastest growing player in our core sectors
• Be among the Top 3 players in the global lighting business
Mission
Bring leading edge technologies to the mainstream markets with high quality, cost competitive solutions
By delivering customized solutions with superior service with speed, agility, creativity and,
Fostering an environment that empowers employees and encourages the pursuit of excellence
Values
We consider our core values of Sincerity, Humility, Integrity, Passion and Self-discipline (SHIPS) as essential to continue to grow our business
5
Varroc — Key Strengths
Comprehensive Solution Provider to OEMs
• End-to-end services across design, development and
delivery
• Wide range of products across polymer, metallic and
electrical segments
• Ability to cross-sell to meet customer requirements
5
Global Footprint Servicing key Auto Markets
• India Business has Pan-India presence enabling
proximity to customers. Plants located in all major auto hubs
• VLS business has Strategically-located manufacturing
1
in low cost locations. Footprint covers major PV markets
Long Standing, Growing Customer Relationships
• Strong long-standing relationships with
marquee OEMs across high-end and mass market segments
• Expansion of business with key customers
4
Wide Range of Product Offerings
2
• Diversified product portfolio covering a wide
range of technologies
• Cost effective, cutting edge technology products
to premium and mass market PV OEMs
3
Robust in-house Technology, Innovation & R&D Capabilities
• Nimbleness, flexibility and cost consciousness enables developing products
with shorter turn-around time.
• Developing proprietary products with continuous focus on innovative, cost
competitive designs
• Well-positioned to benefit from key trends such as electrification, shared
mobility and emission reduction
6
Low Cost, Strategically Located Global Manufacturing Footprint
40 Operating plus 3 Upcoming Manufacturing Facilities and 16 R&D Centers Across Asia, Europe, Africa, North and South America
Poland
Czech Republic
Romania
Bulgaria
Italy
Morocco
China
India
India
Vietnam
14 Global Manufacturing Facilities across 10 countries (Incl.1 in India) optimizing production and distribution for VLS & Other Businesses
Mexico
Brazil
Corporate Headquarters
VLS Headquarters
Manufacturing plant
Technical / Sales Center
Upcoming plant
R&D Centre
26 Manufacturing Facilities for Varroc India Business Co-location with customers ensures cost effectiveness and efficient delivery
India
Haryana (1)
Rajasthan (1)
Uttarakhand (1)
NCR (1)
Gujarat (2)
MP (1)
`
Maharashtra (15)
Karnataka (2)
Tamil Nadu (2)
• Manufacturing and R&D footprint spread across low cost countries
• Proximity to OEMs leading to cost effectiveness and quicker turn- around times
• Pan-India presence enabling
proximity to customers across key automotive hubs
Note: MP: Madhya Pradesh; NCR: National Capital Region
7
Auto Component Business with Diversified Product Lines
Description
VLS
PV Lighting • Leading global supplier of
exterior automotive lighting systems for PV
Polymer
• One of the largest polymer solution providers to the 2W OEMs with a Pan- India presence
Varroc’s India Business
Electrical • Offers comprehensive
solutions in electrical-electronics components, assemblies for automotive applications and lighting products
Other
Metallic • Supplies precision forged & machined parts for engines and transmissions
• Supplies engines valves
in domestic and international markets
IMES • Manufactures hot steel forged parts for the construction and oil & gas industries
Triom
• High end lighting systems for the global 2W industry
Head Lamps
Rear Lamps
Xenon
LED
Select Product Portfolio
LED
Other Lights
Matrix
Manufacturing Facilities
8 Facilities – Czech Republic (2), China (2), Turkey (2) Mexico & India 2 upcoming Facilities – Brazil & Morocco
Air Filter Assemblies
Mirror Assemblies
Digital Instrument Cluster
CDI
Transmission Assembly
Crankshaft
Undercarriage Links
Drill bit cones & heads
Tail + Blinker
Seat Assemblies
Trims (Interior & Door)
Motor (Starter & Wiper)
Magneto
Connecting Rod
Engine Valves
Gears
Undercarriage Segments
Headlight
Tail Light
15 Facilities – India(1)
7 Facilities – India(1) 2 upcoming Facilities – India
5 Facilities – India(1)
2 Facilities – Italy
3 Facilities - Italy, Romania and Vietnam
Revenue Mix(2)
60.8%
16.0%
10.2%
6.3%
4.1%(3)
Customer Segment
PV
2W, 3W, PV & CV
2W, 3W, PV & CV
2W, 3W, PV, CV & OHV
Earth-moving & Oil-drilling
2W
A diversified product portfolio catering to 2W, 3W, PV, CV & OHV Segments Low-cost strategically located global manufacturing facilities; pan-India presence near major auto hubs
Note: (1) Varroc’s India Business has 25 manufacturing facilities; Pantnagar facility caters to all 3 verticals of Indian business. (2) For FY18. (3) Represents revenue contribution of IMES and Triom only; total contribution of 8 other businesses is 6.7% which includes revenue from IMES, Triom and other India businesses
India Business: Comprehensive Solution Provider to 2W OEMs in India
Diversified Portfolio Catering to 2W and 3W Segments
Wide range of products across Polymer, Electrical and Metallic segments; One-Stop Shop for customers enabling cross-selling
9
VLS: Wide Range of Lighting Product and Technology Offerings
Broad Portfolio of Lighting Technologies for PV OEMs Globally
Headlamps
Xenon
LED
Matrix
Rear Lamps
LED
Other Lights
Electronics
LED Module
Headlamp Control Modules
Projector
• Full portfolio of head lamp and rear lamp providing a wide range of products
• Established presence in key
emerging technologies such as LED, OLED Laser, Matrix
• Quick adoption of new
technology to grow product portfolio
• Customized products for OEMs with long standing relationships
• Providing cost effective, cutting edge technology products
10
Varroc is 6th Largest Global Auto Lighting & 2nd Largest Indian Auto Component Supplier
Fastest Growing Among the Top Six Global Exterior Auto Lighting Suppliers(1) Exterior Lighting Revenue CAGR (CY14- CY16)
CY16 Rev. US$ Bn
0.8
27.5%
2.2
2.2
4.9
3.0
1.9
10.2%
7.6%
6.6%
5.2%
4.5%
Lighting System
Automotive Exterior Lighting Market of US$17.8bn in 2016
2nd Largest Indian Auto Component Group(1)
Consolidated Revenue (FY17, INR bn)
434.2
149.0
118.6
96.8
67.2
60.2
(3)
(4)
Large portion of non-auto component revenues (INR 132 bn)
• Concentrated market – top 8 players account for >90% of over-all market
• Long-standing, growing
customer relationships with marquee OEMs
• Low cost, diversified global manufacturing and R&D footprint
• Providing cost effective, cutting edge technology products -----------------------------------------
• India is one of the largest 2W market globally(2); expected to grow at 8-10% CAGR from FY17-20
• Supplier to 2W OEMs who
cover ~85% of total domestic 2W sales
• One-stop shop for 2W OEMs
allowing cross selling
Note: (1) Based on Yole Report for VLS and CRISIL Report. For India (2) In terms of domestic sales. (3) Sundaram Clayton is the holding company of TVS Motors Ltd. which is into sales of two and three wheelers having a revenue of INR 132 bn. Remaining revenue is largely from the auto component space. (4) Bosch Ltd is a subsidiary of Robert Bosch GmbH (Germany).
11
India Business : Continuous Focus on R&D Capabilities; Enhancing Product Portfolio
Additions to Product Portfolio Over the Years
•Polymer Products
•Electrical Products
•Metallic Products
2017
• LED HL
2018
• Electronic
Fuel Injection
2000-2010
1990-2000
• Seats
• Air Filters
• Lighting
• Magneto
• Plastic fan and shroud
• Painted Parts • Interior Molded
• Starter Motor • LED TL
• Molded body
parts
Parts • Mirrors
• Engine Valves
2016
• Paper filter elements
• 6-cylinder crankshaft
2010-2015
• Catalytic
converters
• Transmission
Assembly
• Expanded Forging Business in Europe
Select Offerings
Engine Valves
LED TL
Digital clusters
Paper filter elements
LED HL
• Proprietary products
with continuous focus on innovative, cost competitive designs
• Continuous focus on R&D and product development
• New technology tie ups
for development of catalytic converter and electronic fuel injection systems
• GoI’s DSIR approved
R&D centers
• 450+ engineers located
in 5 R&D centers
Note: GoI: Government of India; DSIR: Department of Scientific and Industrial Research.
12
R&D Efforts Seek to Capitalize on Emerging Trends
Reduction in cost of computing power and EFI requirement make “smarter” products viable
Increased Use of Electronics
Euro V / BS-VI emission norms implemented by India along with the rest of the world will make Electronic Fuel Injection (EFI) necessary on all vehicles
Stricter Environmental Regulation
As the composition of the vehicle changes, the ability to achieve reliability & fuel efficiency will still be prime differentiators
Sustainability, Reliability & Efficiency
Market technology evolution will make stronger connection with end customers viable and provide opportunities around the same
Digitization & IoT
City traffic congestion has made 2W, and particularly scooters, a viable commuting option
Urbanization
Regulation change creates potential for suppliers with robust operational systems to cross sell product lines; core auto themes like light-weighting and affordability will continue to guide OEM decision making
13
Experienced Management Team Supported by Reputed Board
D M & r e d n u o F
t n e m e g a n a M
i
r o n e S
s r o t c e r i D
f o d r a o B
Tarang Jain*^ Managing Director
• Co-founded Varroc in 1988
• Nearly 30 years experience in the automotive industry
• Experienced management team
• Independent directors with experience across
industries & practices
• Strong governance: Big-4 statutory and internal
auditors; independent board committees
Ashwani Maheshwari^ Chief Executive Officer and Whole-time Director • Previously worked as President at Birla Tyres at Kesoram Industries Limited, Senior Vice President – India Business division in ITC Infotech India Ltd
Arjun Jain* Business Head – Electrical –Electronics Division and Whole-time Director • Previously associated with Bain & Co
India Pvt. Ltd.
Naresh Chandra* Chairman and Non-Executive Director • Total Experience: 35+ years in the
automobile industry
• Previously associated with Kaycee
Industries
T. R. Srinivasan Group Chief Financial Officer • Total Experience: ~29 years • Previously associated with Hindustan
Lever Ltd, ATC Tires Private Ltd
Stephane Vedie President and CEO – VLS • Total Experience: 13 years in Automotive
Lighting
• Previously associated with Magnetti
Marelli
Sethumadhavan D. Business Head - Polymer • Total Experience: ~22 years • Previously associated with Assa Abloy, Stanley Black & Decker, Schneider Electric, General Electric and Lucas TVS
Marc Szulewicz Independent Director • Ex-General Manager, Foreign equipment division, Plastic Omnium Management
Vijaya Sampath Independent Director • Lawyer, ex-Group General Counsel
for Bharti Airtel Ltd
Gautam Khandelwal Independent Director • Executive Chairman, Nagpur Power and
Industries Ltd
Vinish Kathuria Independent Director • Co-Founder and President of Rank
software Inc.
Note: * denotes member of Promoter Group. ^ denotes member of Board of Directors.
14
Financials & Share Details
October 2018
Financial Summary : Key Performance Indicators
Revenue Trend last 6 years
EBITDA and EBITDA margin #
INR Billion
INR Billion, %
120
104
96
61
70
82
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
14 12 10 8 6 4 2 0
ROCE & ROE trend*
%
26.0%
20.9%
9.7%
4.7%
1.2%
15.3%
18.0%
16.9%
15.1% 14.2%
11.8% 12.7%
10.1%
9.6%
8.8%
6.9%
7.2%
7.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
Debt to Equity
Multiple (x) 1.5
1.4
0.7
0.8
0.7
0.5
0.3
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
ROCE
ROE
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
*Calculated using reported numbers on a trailing twelve month basis; Return on Equity calculated after considering imputed interest cost & liability portion of CCPS; FY15 and FY16 the ROE fluctuation is due to significant change in imputed finance cost on CCPS # Historical EBITDA margin is as reported / FY19 EBITDA margin is excluding non-operating other income
15
Financial Summary: Income Statement Q4 & FY19
Revenue from Operations - Reported
Revenue from Operations : like-for-like
Other Income - Operating
Other Income - non-Operating
EBITDA : Reported
EBITDA : like-for-like
EBITDA like-for -like%
Depreciation
Interest
Share of net profits of JVs under equity method
PBT - Reported
Tax
Tax rate
PAT - Reported
Q4 FY 19
Q4 FY18
% Change
FY 19
FY18
% Change
31534
29846
31387
29,772
5.7%
5.4%
1,20,365
1,03,785
16.0%
1,19,533
1,00,637
18.8%
(INR million)
226
60
3157
2625
8.4%
1530
259
51
164
7
2639
2,633
8.8%
19.6%
-0.3%
650
258
11,539
10,260
8.6%
371
15
9,179
25.7%
8,715
17.7%
8.7%
1072
247
158
42.7%
4.8%
-67.9%
5,656
3,865
968
315
862
690
46.4%
12.4%
-54.4%
1,480
1,486
-0.4%
5,487
5,158
6.4%
-21
-1%
58
4%
989
19%
651
15%
52.0%
1,500
1,428
5.1%
4,498
4,508
-0.2%
*EBITDA = Profit before share of net profits of investments plus Depreciation plus Finance Cost less Non-operating Portion of Other Income $ like-for-like excludes impact of Interior Plastics business closure in North America and adjusted for comparative launch costs
16
Financial Summary : Segmental Break-up
(INR million)
Revenue
Global Lighting Business
48,198
India Business
Other Businesses
Eliminations
Total
China JV – 100% EBITDA Margin
30,807
3,185
82,189
12,235
Fiscal year ending March 31,*
FY16
FY17
FY18
FY19 (like-for-like)
%
58.6%
37.5%
3.9%
61,242
31,681
3,163
96,085
15,339
%
63.7%
33.0%
3.3%
%
60.9%
35.2%
4.1%
63,211
36,508
4,278
(212)
1,03,785
12,287
72,668
42,744
5,485
(533)
12,20,365
9,470
%
60.4%
35.5%
4.6%
Global Lighting Business
India Business
Other Businesses
Total
China JV
6.5%
8.8%
1.5%
7.2%
13.4%
6.2%
8.8%
5.5%
7.0%
15.3%
7.3%
10.9%
9.3%
8.6%
15.6%
7.1%
10.8%
11.0%
8.6%
11.4%
*EBITDA = Profit before share of net profits of investments plus depreciation plus finance cost less non-operating portion of other income $ like-for-like excludes impact of Interior Plastics business closure in North America, Ind AS 115, start-up costs and launch costs
17
Financial Summary : Balance Sheet
(INR mn)
Assets
Non-current Assets Fixed Assets Others - Non-current Assets Total Non-current Assets Current Assets Current Investments Cash and Bank Balances Others - Current Assets Total Current Assets Total Assets
Equity and Liabilities
Shareholder’s Funds Share Capital Reserves and Surplus Minority Interest Total Shareholder’s Funds
Non-current Liabilities
CCPS Long-term Borrowings Others - Non-current Liabilities Total Non-current Liabilities
Current Liabilities
Short-term Borrowings Others - Current Liabilities Total Current Liabilities Total Equity and Liabilities
Fiscal Year Ending March 31,
2016
2017
FY18
FY19
24,263 4,508 28,771
119 1,772 21,697 23,587 52,459
262 17,366 203 17,832
2,060 5,573 1,392 9,026
6,419 19,182 25,601 52,459
26,881 4,538 31,419
0 3,541 23,644 27,185 58,604
135 21,719 202 22,055
- 7,553 1,044 8,597
7,578 20,374 27,951 58,604
31,480 6,439 37,920
30 3,289 27,285 30,604 68,524
135 28,145 208 28,488
- 6,361 1,944 8,306
5,629 26,102 31,730 68,524
45,593 8,266 53,859
186 1,608 31,877 33,671 87,530
135 30,736 241 31,112
- 5,806 2,347 8,152
12,015 36,251 48,266 87,530
18
Shareholding Details
Shareholding Pattern
Retail & Others 1.7%
Institutional 13.3%
Promoters 85%
Equity Share Information
Share Price (As on 27th May 2019)*
• • Market Capitalization
INR 520.25 INR 70.1 Bn
April to March
Financial Year
•
•
Listing Details Indian Stock Exchange NSE (VARROC.NS)
• Bloomberg Code
* 11.30am
BSE (541578) VARROC:IN
Top Institutional Shareholders *
Axis MF
Nomura
DSP
T Rowe Price
L&T MF
Capital World
IIFL
First State
I Pru MF
Schroders
SBI Life
Kotak MF
Bajaj Allianz Life
Edelweiss
GSA Capital Others Total Institutional holders
2.7%
2.1%
1.8%
1.6%
1.2%
0.7%
0.6%
0.4%
0.2%
0.2%
0.2%
0.2%
0.1%
0.1%
0.1% 1.0% 13.3%
* As on 24th May, 2019 for top 250 portfolios only. Shareholding under multiple portfolios/ plans clubbed together. Stake rounded off to nearest decimal
19
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