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Talbros Automotive Components Ltd.

BSE: 505160 Sector: Auto
NSE: TALBROAUTO ISIN Code: INE187D01011
BSE LIVE 15:47 | 14 Dec 262.50 -9.10
(-3.35%)
OPEN

271.40

HIGH

273.45

LOW

261.65

NSE 15:31 | 14 Dec 262.45 -7.95
(-2.94%)
OPEN

273.00

HIGH

273.00

LOW

261.40

OPEN 271.40
PREVIOUS CLOSE 271.60
VOLUME 14878
52-Week high 307.35
52-Week low 119.45
P/E 29.33
Mkt Cap.(Rs cr) 324
Buy Price 0.00
Buy Qty 0.00
Sell Price 262.50
Sell Qty 164.00
OPEN 271.40
CLOSE 271.60
VOLUME 14878
52-Week high 307.35
52-Week low 119.45
P/E 29.33
Mkt Cap.(Rs cr) 324
Buy Price 0.00
Buy Qty 0.00
Sell Price 262.50
Sell Qty 164.00

Talbros Automotive Components Ltd. (TALBROAUTO) - Chairman Speech

Company chairman speech

Dear fellow shareholders

Talbros relentlessly pursued its vision During 2015-16of seamlessly integrating withthe customer supply chains with a focus on enhancing product content per vehicleencapsulated in our positioning of ‘More Talbros’.

During the year under report we furthered this conviction through industry-leadinginnovations as well as strategic product introductions. These introductions advanced thesafety and efficiency of trucks buses passenger vehicles quadricycles tractors andoff-roaders in India and abroad.

This is related to Steering and suspension products (safety quardricycles)

As our industry converges toward autonomous driving and connectivity representing thenext-generation technology breakthroughs we are confident that Talbros will be at theforefront of products that enhance vehicular efficiency and passenger safety.

Driving shareowner value

Talbros delivered earnings per share (EPS) of H7.87.

This performance was not only a recognition of the strength of our business model amongthe investor community but also an outcome of our focus on enhancing enterprise-widesustainability in a business environment that is not only cyclical by virtue of beingdependent on a large number of external economic factors but also highly competitive witha significant part of the market resident with the unorganized sector.

The Company’s consolidated core revenues of around H392 crores in 2015-16 in amarket where the overall passenger and commercial vehicle sales witnessed encouragingrecovery after years of lackluster performance. We believe that we could have done betterin terms of generating higher sales but for two reasons beyond our control: •Slowdown across the European markets

• Change in the business model for Magneti Marelli Talbros that affected revenuesby H15 crores excluding which our year-on-year revenues could have been higher by 5%

What came as a sudden announcement from the Haryana government with respect to hikingminimum wages our total employee cost reported a substantial increase of about H2 croresunder the new Minimum Wages Act effective from 1st November 2015. This impacted our coreEBIDTA which declined by about 0.5% to H38.15 crores during the year; correspondinglyour core EBIDTA margin (excluding other income) declined by 0.35% to 9.74%.

Reduction in interest costs by negotiating better rates with banks and substitutinghigher-cost debt with cheaper rates resulted in our interest charges on the P&Lmoderate by about 5% to H17.7 crores. Led by a lower EBIDTA and a reversal in forex gainof the previous financial year our net profit post tax declined 31% to H9.7 crores for2015-16.

Powering our performance is our three-pillar strategy of technology leadership underour chosen products globalization and excellence in execution. The first represents oursolid positioning as a leading global supplier of a broad portfolio of vehicle safety andefficiency products to original equipment manufacturers (OEMs).

The second includes our expansion to newer customers and newer markets of the world andthe last encompasses our focus on lean manufacturing and deploying world-class engineeringpractices on our shopfloor for continuous material benefits. This is also aided by ourstate-of-the-art centralized R&D establishment that helps drive the benefits ofinnovation and creativity.

Anchored on this three-pronged strategy we announced a 15% dividend for ourshareowners for 2015-16 in continuation of more than 50 years of dividend disbursement.

Accelerating momentum

Our industry is globalizing and responding to increasing demand for safer and moreefficient vehicles. The passenger vehicle and commercial vehicle OEMs face intensecompetitive pressure as they seek to differentiate products that are competitive not justfor meeting local demands but also export applications. These market dynamics provide alarge and high-quality reservoir of organic growth with the potential for strategicextensions for us for years to come.

We trust our ability to supply world-class products that are increasingly in-synch withour customers’ demanding requirements but also indicates product value-addition andnew product incorporation. Today we have a portfolio of about 20000 products.

During the year under report we launched a dedicated line for a new product categoryheat shields at our Faridabad plant with a capex of about H8 crores. The primaryrationale for launching this product range was not only to diversify our gaskets businessbut also leverage the process complementariness that heat shields have with gaskets. Thelatter not only enables us to enhance productivity and shopfloor efficiency but alsoallows us to drive double-digit EBIDTA margins that heat shields typically command. Heatshields are a critical part of engine components with their criticality accentuated asmanufacturers focus on bringing the various components under a vehicle bonnet closer andcloser to tighten space to typically provide more roominess in the passenger cabin. As aCompany that is focused on the technology side of the auto component business we createda partnership with SANWA Packing of Japan for heat shields. SANWA is an experienced playerin the business with operations starting in 1945. As in gaskets through our dedicatedheat shield line we have emerged as the largest in the organized heat shield componentbusiness in India.

Moreover with a view to enhance product value-addition we incorporated new technologyto post-coat our gasket products that will not only enhance quality but also allow us toderive higher realisations. We are extensively using locally-made resources for thisforward integration process which saves us foreign exchange completely nullifiesdependence on vendors based abroad and augments our ability to cater to our customerrequirements with speed and surety. Our post-coat gaskets received an encouraging responsefrom our customers. I am also happy to mention that in our gaskets business we receivednew orders from Volvo USA; Basak Traktr Turkey and KhordoIran aligned with our strategy of widening our exports presence and becoming relevant tointernational supply chains.

Performance of our JVs

Our gaskets division including Nippon Leakless Talbros Private Limited constitutesalmost 73% of our revenues. On the domestic OEM front we received fresh orders for allthe three new models of Maruti Suzuki launched during the last financial year includingthe S-Cross Baleno and Vitara Brezza. We also received orders for Yamaha new productlaunches. Overall we witnessed some competitive activity which led us to undertakecertain pricing actions in the second half of the financial year.

At Magneti Marelli Talbros Chassis Systems Private Limited our joint venture signedwith Sistemi Sospensioni S.p.A. we are witnessing good traction with order wins fromlarge OEMs in UK for exports and within India. We have already started supplyingcomponents to Bajaj for its revolutionary Bajaj Qute (RE60 quadricycle) that is beingshipped to export markets. At this JV we have a strong order book in the pipeline for thenext two years both on the exports and domestic front.

Our joint venture Talbros Marugo Rubber Private Limited continues to progress well. Wehave new orders from Maruti Suzuki and Isuzu Motors which provides medium to long-rangerevenue security. We also began exports of anti-vibration products to Japan. Besides welaunched hoses housed in this JV and the year 2015-16 was the first full year of thedivision’s operations.

Overall Magneti Marelli Talbros Chassis Systems Private Limited and Talbros MarugoRubber Private Limited achieved EBIDTA-level breakeven during 2015-16 and we believe thatprofits are not too far in the horizon which will only contribute to enhancingprofitability of Talbros Automotive Components Limited.

Optimism – the road ahead

The Indian automotive industry is truly one of the few large opportunities availableglobally. Though India is the second most populous country in the world vehiclepenetration is a mere 32 per 1000 people (2015) making the country one of the mostattractive auto-markets in the world. The country’s passenger vehicles market isexpected to surge to over 48 million units by 2020 throwing up huge opportunities for theauto components industry. Driven by the government’s thrust on ‘Make inIndia’ coupled with several competitive advantages including relatively cost-e_ectiveand large labour pool India is fast becoming a hub for global vehicle OEMs for sourcingand manufacturing. Additionally a large number of MNCs including Ford Hyundai ToyotaGM and Honda have together committed huge investments to build manufacturing facilities inthe country. Over the long term what I also see as one of the key drivers of growth isthe progression to BS-VI emission standards to address rising pollution. This will surelydrive the need for world-class products aligned with engine types compliant with BS-VI.

Over the short-term the bounties of the Seventh Pay Commission an above-averagemonsoon as forecast by the IMD declining interest rates and relatively low oil prices aresome of the tailwinds that will enable the Indian automotive industry to sustain growth.Besides reform measures taken in core sectors like mining roads infrastructure and ageneral pick-up in the Indian economy bode well for the CV up-cycle. CV ofitake grew indouble-digits in the first quarter of the current fiscal year. Higher industrial growthand higher agricultural output from good monsoons are expected to sustain the demand forfreight transport and demand for commercial vehicles. Besides moves such asde-registering diesel vehicles over 10-years old in the Delhi-NCR region augur well fornew sales. These developments certainly brighten prospects for frontline and niche autocomponent players like us.

Acknowledgements

In closing I would like to thank our hardworking and energetic employees for theirongoing efforts. We thank our customers for giving us the opportunity to earn theirbusiness. We thank our bankers and financial institutions for their continuous support.And we thank you our shareholders for your investment in our company. With your supportwe are pleased to have reached an exciting level in our journey and are optimistic aboutlong-term opportunities that lie ahead.

Sincerely

Naresh Talwar

Chairman