Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane Holdings Ltd (BOM:505800, Financial) reported an increase in EBITDA margin by 140 basis points due to cost-saving initiatives.
- The company secured orders worth 170 crores during the quarter, indicating strong order booking.
- Rane Brake Lining continued its market leadership in the passenger vehicle segment and increased penetration in the two-wheeler segment.
- The occupant safety division of the joint venture with ZF Rane grew by 28% compared to the previous year's quarter.
- Rane Holdings Ltd (BOM:505800) received a no-objection certificate for the scheme of amalgamation, indicating progress in corporate restructuring.
Negative Points
- The group's aggregate sales decreased by 4% year-on-year, with revenue from Indian OE customers declining by 3%.
- Export sales declined by 6% due to lower offtake of steering products in the US market.
- The commercial vehicle segment continued to decline, impacting revenues.
- Rane Madras faced a challenging demand environment, with a decline in EBITDA margin by 171 basis points.
- The company is experiencing pressure on margins in the Rane NSK steering systems due to unprofitable new programs.
Q & A Highlights
Q: What is the reason for the decline in share of profit from the JV and the significant drop in margins for Rane Steering Systems?
A: The decline in JV profit is due to increased interest and depreciation costs. For Rane Steering Systems, the margins are under pressure due to unprofitable new programs and the end of life of profitable businesses. The operating loss for the quarter was 12 crores, excluding a one-time income from a warranty settlement. The debt position has improved after using the settlement to pay off loans, reducing the debt to approximately 160 crores. - Harish Lakshman, Chairman
Q: Can you explain the impact of the acquisition of the steering wheel business on the financials?
A: The acquisition contributed a top line of about 45 crores and an EBITDA of 2.5 crores for the quarter. There are no loans in this subsidiary, so the PBT is also 2.5 crores. - Harish Lakshman, Chairman
Q: What are the reasons behind the merger of Rane Madras, Rane Engine Valve, and Rane Brake Lining?
A: The merger aims to achieve scale and operational synergies. Rane Engine Valve has turned around after years of losses, and Rane Brake Lining will benefit from access to new markets and export capabilities. The combined entity will have a stronger balance sheet, and we plan significant debt reduction post-merger. - Harish Lakshman, Chairman
Q: How is the company addressing the challenges in the farm segment and manual steering products?
A: We have a high market share in manual steering but are losing some business as the market shifts to power steering, where our share is lower. We are focusing on maintaining our position and growing the hydraulic business, which is a smaller part of our portfolio. - Harish Lakshman, Chairman
Q: What is the outlook for the company's growth and margins over the next few years?
A: We are optimistic about achieving a 10% CAGR in the domestic market and maintaining strong export growth. We aim to reach an 11% EBITDA margin in the combined business in the coming years, supported by operational improvements and cost-saving initiatives. - Harish Lakshman, Chairman
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
