About the Company:
Varroc Engineering Ltd is a global tier-1 (tier-1 companies are companies that directly supply to original equipment manufacturers (“OEMs”)) automotive component group.
Company’s India Business is headquartered in Aurangabad, Maharashtra, India. Company also has an office in Pune and sales offices at Pune, Gurgaon and Japan.
They design, manufacture and supply exterior lighting systems, plastic and polymer components, electricals-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off highway vehicle (“OHV”) OEMs directly worldwide.
Company is the second largest Indian auto component group and is a leading tier-1 manufacturer and supplier to Indian two-wheeler and three-wheeler OEMs (by consolidated revenue for FY2017).
Company is the sixth-largest global exterior automotive lighting manufacturer and one of the top three independent exterior lighting players. From FY2016 to FY2018 company had a compound annual growth rate (“CAGR”) of 12.37% in terms of revenue.
Company has a global footprint of 36 manufacturing facilities spread across seven countries, with six facilities for their Global Lighting Business, 25 for their India Business and five for their Other Businesses.
Company received 41.8% of their revenue in FY 2018 from customers in Europe, 34.7% from customers in India, 22.3% from customers in North America.
Description of Company’s Business:
Company Primarily has 2 business lines, namely
(1) the design, manufacture and supply of exterior lighting for passenger car OEMs worldwide (“Global Lighting Business”)
(2) the design, manufacture and supply of a wide range of auto components in India (“India Business”), primarily to two-wheeler and three-wheeler OEMs.
(3) In addition, they also have a third business line, which includes the design, manufacture and supply of two-wheeler lighting to global OEMs, under carriage forged machine components for OHVs and drill bits for the oil and gas sector (“Other Businesses”).
Revenue Breakdown Across Business Segments:
Revenue Breakdown Across Various Geographies:
Lets Know about Company’s History:
Company had commenced operations with their polymer business in 1990. They initially grew organically in India by adding new business lines, such as electrical division and metallic division. Subsequently, they diversified their product offerings and expanded the production capacity through various investments, joint ventures and acquisitions.
The most notable Acquisitions includes their 2012 acquisition of Visteon’s global lighting business, now known as Varroc Lighting Systems.
Prior to the acquisition of Visteon’s global lighting business, in 2007 Company had acquired I.M.E.S (a manufacturer of hot steel forged parts for the construction and oil and gas industries) in Italy.
And in 2011 they acquired Triom (a manufacturer of high end lighting systems for global motorcycle OEMs) with operations in Italy, Romania and Vietnam.
Let’s take a Look at Company’s Global Lighting Business: (Varroc Lighting Systems)
For their Global Lighting Business, Company has manufacturing facilities located in Mexico, the Czech Republic, China (through China JV) and India, allowing them to serve the North American, European, Chinese and Indian markets, respectively.These markets together accounted for more than 80% of the passenger car and light commercial vehicle (“LCV”) sales by volume.
VLS (Varroc Lighting Systems) has a diversified customer base across nearly all major automotive markets in the world, except Japan and Korea.
VLS has long-term relationships with marquee auto manufacturers across the premium, mid-range and mass market pricing spectrum, including Ford, Jaguar Land Rover, the Volkswagen Group (the “VW Group”), RenaultNissan-Mitsubishi, Groupe PSA, FCA, a European multinational car manufacturer and an American electric car manufacturer.
VLS has sales offices in France, Germany and the United Kingdom and is headquartered in Plymouth, Michigan (United States of America).
Expansion Plans for Lighting Business:
VLS (Varroc Lighting Systems) is in the process of setting up a new manufacturing plant in Brazil, to serve the South American market, and Morocco, to serve the southern European and north African markets. Company anticipates that their manufacturing plants in Brazil and Morocco will commence production in FY2019.
Company has also entered into an agreement to acquire an exterior automotive lighting company based in Turkey was signed on May 30, 2018, with the sale scheduled to complete by the end of June 2018, subject to receiving approval from the Turkish competition authority.
Leading Auto-component players in two- and three-wheeler space:
Management Team:
- Mr. Naresh Chandra (Designation: Chairman and Non-Executive Director)
- Mr. Tarang Jain (Designation: Managing Director)
- Mr. Ashwani Maheshwari (Designation: Whole-time Director)
Special Thanks: We would like to thank Mr. Tarang Jain (Managing Director) of Varroc Engineering Ltd for inviting Markets Guruji Team to the IPO Press Conference & Listing Ceremony.
Positives For the Company:
Very Good Client List.
Company has a Long standing relationship with Bajaj Auto Ltd (“Bajaj”), a leading two-wheeler manufacturer, which has been their customer for the past 28 years and to whom Varroc Engineering been providing components across the product lines.
Company’s other key two-wheeler customers in India include Honda, Royal Enfield, Yamaha, Suzuki andHero. They also export to global two-wheeler manufacturers from their facilities in India, namely KTM and Volvo.
Revenue Contribution from Company’s Largest Customers.(India Business)
Comprehensive Product Portfolio.
Company has a comprehensive portfolio of products in the markets in which they operate, which allows them to be a one-stop-shop for their customers and to cross-sell the products.
Company’s India Business offers a diverse range of products catering to two-wheelers, three-wheelers, passenger vehicles, commercial vehicles and offhighway vehicles across our business segments of polymers/plastics, electrical-electronics and precision metallic components.
Expansion Plans across different Geographies.
Company continues to expand their manufacturing and R&D footprint, and Currently they are in the process of setting up one manufacturing facility in Brazil and one manufacturing facility in Morocco and intend to set up two manufacturing facilities in India.
Diversified Client base & Low Cost, Strategically Located Manufacturing Facilities.
Company has a global footprint of 36 manufacturing facilities spread across seven countries, with six facilities for their Global Lighting Business, 25 for their India Business and five for their Other Businesses. Given company’s global presence, their revenue stream is diversified both geographically as well as across customers.
In order to achieve these goals, Company has located their facilities primarily in low-cost countries near major automotive markets and have made further investments to expand into new countries such as Brazil and Morocco, which allow them to keep costs low while meeting their customers supply needs across geographies.
Financials of the Company: (Consolidated)
| (in Crores) | FY 13 | FY 14 | FY 15 | FY 16 | FY 17 | FY 18 |
|---|---|---|---|---|---|---|
| Revenue | 4225.3 | 6139.4 | 7038.5 | 8239.5 | 9702.3 | 10417.06 |
| Net Profit | (-26.1) | 42.9 | 16.8 | 369.8 | 303.4 | 450.77 |
Valuation of Peer Group Companies:
| Company Name | Face Value | EPS | PE Ratio | RoNW | NAV |
|---|---|---|---|---|---|
| Varroc Engineering Ltd | 1 | 33.40 | 28.95 | 15.93% | 209.69 |
| Motherson Sumi Ltd | 1 | 7.59 | 41.94 | 17.60% | 61.01 |
| Bharat Forge Ltd | 2 | 16.38 | 40.42 | 16.11% | 100.55 |
| Endurance Technologies Ltd | 10 | 27.78 | 45.43 | 17.98% | 154.47 |
IPO Details:
| Details | Info |
|---|---|
| Issue Opens on | 26th June 2018 |
| Issue Closes on:. | 28th June 2018 |
| Issue Price | Rs.965 – 967 |
| Face Value | Rs.1 |
| Minimum Lot | 15 |
| Minimum Investment | Rs.14505 |
| Issue Constitutes | 13.75% |
| Issue Size | Rs.1955 cr ($288 million) |
| Market Cap | Rs.13036 cr ($1.91 billion) |
| Listing at | NSE & BSE |
| Equity Shares Offered (OFS) | 2,02,21,730 |
| Equity Shares Prior to the Issue | 13,48,11,530 |
| Equity Shares after the Issue | 13,48,11,530 |
Important Dates:
| Finalization of Basis of Allotment | on or Before 3rd July 2018 |
| Initiation of Refunds | on or Before 4th July 2018 |
| Credit of Equity Shares: | on or Before 5th July 2018 |
| Listing Date: | on or Before 6th July 2018 |
Subscription Details:
| (Subscription-Category-Wise (no. of times) Till time : 06:00 PM) | Shares Offered | Day-1 | Day-2 | Day-3 |
|---|---|---|---|---|
| QIB | 40,24,346 | 1.03 | 3.2 | 9.15 |
| NII | 30,18,260 | 0.006 | 0.038 | 2.45 |
| Retail | 70,42,606 | 0.058 | 0.23 | 0.84 |
| Employee | 1,00,000 | 0.0967 | 0.34 | 0.63 |
| TOTAL | 1,41,85,212 | 0.33 | 1.01 | 3.54 |
IPO Valuation Parameters:
| Earnings Per Share (EPS) | Price To Earnings ratio (PE) | Return on Net Worth (RoNW) | Net Asset Value (NAV) |
|---|---|---|---|
| 33.40 | 28.95 | 15.93% | 209.65 |
Grey Market Premium :
| Date | IPO | Price Band | Grey Market premium | Kostak Rates |
|---|---|---|---|---|
| 19/06/18 | Varroc Engineering Ltd | 965 – 967 | 48 – 52 | 700 – 750 |
| Check IPO Allotment Status: |
|---|
Link InTime Website (Click on the below Link)https://linkintime.co.in/PublicIssue/ |
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| Company Contact Info: |
|---|
| Varroc Engineering Limited L-4, MIDC Area, Waluj Aurangabad 431136 Tel: +91 240 6653 700/6653 699 Fax: +91 240 2564 540 E-mail: investors@varroc.com Website: www.varrocgroup.com |
| IPO Registrar Info: |
|---|
| Link Intime India Private Limited C-101, 1st floor, 247 Park, L B S Marg Vikhroli West, Mumbai 400 083 Tel: +91 22 4918 6200 Fax: +91 22 4918 6195 E-mail: varroc.ipo@linkintime.co.in Website: www.linkintime.co.in |
