Asia’s biggest bead wire manufacturing company, excluding China.
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- About Rajratan Global Wire Ltd
- Journey since inception
- Shareholding Pattern
- Executive Management of the company
- Business Segment of the company
- Manufacturing Facilities
- Cost Structure
- Financial Parameters
- Management discussion and Concall highlights
- Strengths and Weaknesses
Rajratan Global Wire Ltd is a tire ancillary that produces bead wire, high-carbon steel wire with a focus on TBW, which is bronze-coated and used in tires, and drawn steel wire (also known as black wire), which is used in the automobile, construction, and engineering industries. Moreover, bead wire is a critical component used in the manufacturing of tires. Rajratan has well-established and profitable operations based out of India and Thailand.
Rajratan today enjoys approximately 42% market share in India and 28% market share in Thailand.
(C) Shareholding Pattern
(D) About the Executive Management
(i) Mr. Sunil Chordia – Chairman & Managing Director
Mr. Sunil Chordia is the Chairman and Managing Director of the company.
Moreover, he started his career early and joined the family business of iron and steel trading. He is a science graduate and did his MBA (Finance) in 1987. In the year 1990, the family decided to foray into manufacturing pre-stressed concrete wires and pre-stressed concrete strands.
Mr. Sunil Chordia received Rs 1.25 cr as remuneration for FY22, i.e., 0.14% of Net Sales and 1.00% of Net Profit.
(ii) Mr. Abhishek Dalmia – Non-Executive Director
Mr. Abhishek Dalmia is the Non-Executive Director of the company.
Mr. Abhishek Dalmia is the Chairman of the Renaissance Group and one of the most well-known value investors in India. Mr. Abhishek started early with the family’s cement business and gained a solid understanding of building businesses. Post that he pivoted to investing and building out his family office, which started with a hostile bid for Gesco Corporation.
Moreover, he has done his CA from the Institute of Chartered Accountants of India and his B. Com from Shri Ram College of Commerce.
Mr. Abhishek Dalmia received Rs 0.45 lakh as remuneration for FY22, i.e., 0.05% of Net Sales and 0.36% of Net Profit.
(iii) Mr. Yashovardhan Chordia – Non-Executive Director
Mr. Yashovardhan Chordia is the Non-Executive Director and Managing director of Rajratan Thai Wire Co. Ltd. He has done his Bachelor’s degree in Finance and Psychology at the Foundation of Liberal and Management Education (FLAME) Pune.
Before joining Rajratan, he was with a boutique management consulting firm that provided implementation services to mid-sized companies.
(E) Product Portfolio Segment
(i) Tyre Bead Wire
TBW is a drawn steel wire, which is manufactured from steel wire rods with high carbon content. Its surface has a coating of copper or bronze which ensures proper adhesion with the rubber compound. Its application is in all types of tires (tube and tubeless). Moreover, the main function of a TBW is to hold the tire on the rim and to resist the action of the inflated pressure, which constantly tries to force it off. It produces a range of sizes of bead wire.
TBW is the crucial link through which the vehicle transfers the load from the rim to the tire, which prevents vibration during driving. Further, it maintains the safety, strength, and durability of tires. Tires for automobiles, earth-moving equipment, aircraft, cycles, passenger vehicles, two-wheelers, three-wheelers, and truck bus radials have TBW that Rajratan manufactures and supplies.
(ii) High Carbon Steel Wire
These are drawn from steel wires (popularly known as black wire) manufactured from quality wire rods with high carbon contents. The product also plays a vital role in the automobile, construction, and engineering industries. Its usage is for creating springs or high-strength wires.
(F) Geographical Segmentation
(G) Manufacturing Facilities
The company has increased its manufacturing capacity in Thailand by 50% to 60,000MT which will start operational from Q2 FY23. The company is further putting a 60,000MTPA additional facility in Chennai which will be completed by the end of FY23. and will achieve full utilization in 3 years.
(H) Cost Structure of Rajratan Global Wire Ltd
Raw material cost as % of total cost increase from 72.8% in FY21 to 77.2% in FY22.
Revenues from customers of bead wire segment amounting more than 10% in FY22 are Rs. 1188.9 Cr, Rs. 925.7 Cr and Rs. 843.4 Cr.
(i) Financial Trend
Company’s revenue has increased at a CAGR of 13.47% while its profit after tax increases at a CAGR of 70.88% in the past 8 years. Moreover its ROE & ROCE has also improved significantly from FY21 to FY22.
Meanwhile, company has also reduced its debt to equity in the past 10 years.
(ii) Du Pont Analysis
Company is consistently improving its PAT margins in the last 10 years. Moreover its Assets to equity improved due to reduction of debt to equity.
(L) Management Discussion & Concalls
- Indian Tyre industry is expecting to witness a demand recovery of 13.5-15% in FY21-22.
- Tyre export in India has also increased by 34% in H1FY21-22 after a decline over the past 5 years.
- Meanwhile, the domestic tire bead wire market has increased from 30,000 MT in 2000-01 to more than 1,20,000 MT at present. Around 80% of the bead wire demand in the country is catered by domestic companies.
- The company is expanding its capacity in the Thailand plant by 50%. As OEM looks to set up a base in Thailand.
- The decline in imports- In the last 4 years imports have declined from Rs 32.8bn in 2017 to rs 12.8bn in 2021. The government has banned tire imports since June 2020.
- Increasing demand- The tire industry is linked with the automobile industry for direct OEM sales. The demand from Original Equipment Manufacturers (OEMs) is directly related to automobile production and sales.
- Government support for the Auto industry- The government has proposed Rs 57,000Cr under the PLI scheme for the automobile industry and Vehicle Scrappage Policy under which we have to do the replacement of old vehicles with new ones.
- Withdrawal of export rebate by China- China has withdrawn an export rebate of 13% on value-added steel products which makes their prices competitive in the global market.
Concalls and Management Commentary
- In Q4 FY22 Margine saw a dip as they were not able to pass on the price increase to its customers as they buy raw material on monthly basis and their sale contract are on a quarterly basis.
- Due to anti-dumping in India. Companies have seen an increase in tire capacity by 20% as compared to last year.
- Moreover, the company does not see any disruption as it is not easy to get approval from the world’s best tire makers.
- As its capacity is increasing they were able to sell its products at a cost similar to China and lower to Vietnam or Malaysia.
- The company sees 25% less demand in Thailand and 10-15% less demand in India during Q2FY23.
- Management’s long-term goal is to get 15% volume growth in the long run.
- Moreover, its aim is to start Chennai plant production by the end of this year and will achieve full utilization in 3 years.
(M) Strengths & Weaknesses
(i) Strong market position in the TBW business backed by the experienced promoter
The group is a leading manufacturer of TBW in India with a market share of about 50%, and is the sole large TBW manufacturer in Thailand. Aided by its large capacity and long track record, the group has been increasing its wallet share with key customers, leading to rise in market share.
The group has established strong relationships with key customers, such as MRF Ltd, Apollo Tyres, CEAT Ltd and Bridgestone Tyres in India, and also has reputed clientele in Thailand, such as Sumitomo Rubber (Thailand) Co Ltd and Kern SRO.
The capacity in Thailand meets local demand from the tyre hub of Thailand and exports to nearby countries. The group derives 17-20% of its revenue from export to Sri Lanka, Vietnam, Finland, Sweden and Indonesia. Diversity in geographic reach and clientele should continue to support the business.
(ii) Comfortable financial risk profile
The capital structure of the group as represented by the debt-equity ratio improved to 0.40 times as on March 31,2022 as against 0.57 times as on March 31, 2021, led by accretion of profit to reserves. The tangible net worth of the company also increased from Rs.225.99 crore in FY21 to Rs.340.96 crore in FY22. The interest coverage ratio (ICR) stood comfortable at 11.83 times in FY22 as against 7.01 times in FY2021, led by a significant increase in operating profit.
(i) Susceptibility of profitability margins to variation in steel prices
The margins are susceptible to changes in steel prices. However, this risk is mitigated to some extent as there is a provision where any change in raw material price is passed on to the customer.
(ii) Exposure to cyclicity in the automobile industry
The auto ancillary segment relies on the automobile growth sector. The demand for automobiles depends on factors like economic growth, fuel prices, income growth, interest rates, and customer sentiments. Thus, any adverse impact of these situations would restrict the growth and credit metrics of industry players.
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