Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane (Madras) Ltd (BOM:532661, Financial) won orders worth 170 crores during the quarter, indicating strong order booking.
- The EBITDA margin for Rane Holdings consolidated increased by 140 basis points due to cost-saving initiatives.
- 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 revenue by 28% compared to the previous year's quarter.
- Rane Engine Valve showed improved performance with a potential to hit a 10% EBITDA margin in the future.
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 the steering division's demand environment.
- Rane Steering Systems faced a challenging demand environment with a 171 basis point decline in EBITDA margin.
- The company's debt position remains high, with consolidated debt at 1,052 crores, impacting financial flexibility.
Q & A Highlights
Q: Why has the share of profit from the JV declined significantly this quarter, and what are the future expectations for Rane Steering Systems?
A: Harish Lakshman, President, Finance and Group CFO, explained that the margins will remain under pressure due to some profitable businesses coming to an end and new programs being unprofitable. The company is working on cost reduction measures and potential pricing support from customers. The operating loss for the quarter was 12 crores, and the debt has been reduced to approximately 160 crores after a warranty settlement.
Q: What is the impact of the acquisition of the steering wheel business on the financials?
A: The acquisition added a top line of about 45 crores and an EBITDA of 2.5 crores. The business has no loans, so the PBT is also 2.5 crores.
Q: Can you provide details on the one-off provisions impacting Rane Madras' margins?
A: A provision of 12 crores was made for a receivable amount from the buyer of the LMC business, which was due in September but not yet received. Discussions are ongoing, and while the amount is believed to be recoverable, the timing is uncertain.
Q: What are the expected benefits of the merger between Rane Madras, Rane Engine Valve, and Rane Brake Lining?
A: The merger is expected to provide scale, access to new markets, and cost savings. Rane Brake Lining will benefit from increased export opportunities, and the combined entity will have a stronger balance sheet. Debt reduction initiatives are planned post-merger.
Q: What is the outlook for Rane Madras and its various segments?
A: The company remains optimistic about domestic market penetration and export growth. The steering business aims to improve EBITDA margins to 11-11.5%, and the export story remains strong for both the casting business and ball joint and rack and pinion products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
