Automobile

Uno Minda Ltd – Largest Switch Player in India

Minda Industries Ltd is a diversified auto ancillary supplier and is the largest switch player in India.

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(A) About Minda Industries Ltd

Minda Industries Ltd - Logo

Minda Industries Limited, the flagship company of the N.K. Minda Group is diversified into manufacturing auto components in India.

Started from a small workshop in Delhi by Nirmal Minda's father in 1958 to now has 65 plants in India and 6 plants overseas. The company manufactures lights, switches, Acoustics, seating, casting products, etc.

Moreover, it has around 275+ patents and 250+ design registrations with 75+ R&D technology projects underway. It is also a technology leader in the auto components industry and a leading tier-1 supplier of proprietary automotive solutions to OEMs.

(B) Journey Since Inception

(C) Executive Management of the company

(i) Mr. Nirmal K. Minda - Chairman & Managing Director

Mr Nirmal K. Minda is the Chairman and Managing director of the company.

He has an experience of over three decades of in the Auto Components sector in India. He leads the USD 1.11 billion UNO MINDA Group currently with various other laurels to his name. Further, he has been conferred with the ‘EY Entrepreneur of the Year Award in Manufacturing Category in 2019.

In FY21, Mr Nirmal K. Minda Received a remuneration of Rs 7.73 Crore which is 0.09% of sales and 1.87% of the profit.

(ii) Mr Ravi Mehra - Deputy Managing Director

Mr Ravi Mehra is the Deputy Managing Director of Minda Industries Ltd.

Additionally, he has 31 years of experience in the industry, has rich management experience and has handled roles in strategy, finance, marketing, manufacturing, materials, HR, and product/technology development.

Further, A fellow member of the Institute of Chartered Accountants of India and The Institute of Company Secretaries of India. With 31 years in the industry, he has rich management experience and has handled roles in strategy, manufacturing, materials, HR, finance, marketing, and also in product/technology development.

(iii) Mr. Anand K Minda - Non-Executive Director

Mr Anand K Minda is the Non - Executive Director of Minda Industries Ltd.

Moreover, he has also over 36 years of experience in financial control, reviews, manufacturing, and project management. He has been appointed to the board of members in 2011.

Apart from that, he is also a member of the Company’s Nomination and Remuneration Committee, Stakeholders Relationship Committee, and CSR Committee.

(iv) Ms Paridhi Minda - Whole-Time Director

Ms Paridhi Minda is the Whole-Time Director of the company. She is the daughter of Nirmal K. Minda.

She is a management graduate from Bradford University, London and also has a certification from the London School of Economics in Marketing.

Apart from this, she is also the director on the board of Minda Investments Limited, Minda Distribution and Services Limited, Minda Storage Batteries Private Limited and Minda Katolec Electronics Services Private Limited.

In FY21, Mr Paridhi Minda Received a remuneration of Rs 53 lakh which is 0.00% of sales and 0.12% of the profit.

(D) Shareholding Pattern of Minda Industries Ltd

Minda Industries Ltd - Shareholding Pattern
Minda Industries Ltd - Promoters shareholding
Minda Industries Ltd - Shareholding

(E) Product Segment of Minda Industries Ltd

Minda Industries Ltd - Segments

(i) Switches

Minda Industries Ltd - Switche

Minda is the largest manufacturer by volume of 2w automobile switches in the world.

However, it has become a leading and preferred supplier of off-road vehicle switches in India through manufacturing reliable cost-effective and innovative products with a total market share of 67%.

Meanwhile, its products on the 4W side include audio & cruise switches, door lamp switches, HVAC, power window switches, mirror switches, panel switches and lever combination switches. The 2W switch products include handlebar assemblies, CBS, off-road switches and other customized switches.

(ii) Lighting

Minda Industries Ltd - Lights

It is one of the leading automotive lamp manufacturers in India, developing new technology affordable products for two, three, four-wheelers and off-road vehicles and is growing at a rate of 25% CAGR.

The company is India’s third-largest automotive lighting player with an overall market share of ~20%. Additionally, its capabilities on the lighting side span the product life cycle from design to aftermarket, backed by R&D facilities in India (for PV), Spain (for 2W) and Taiwan.

(iii) Acoustics

Minda Industries Ltd - Horns

Acoustics Division is a leading manufacturer of automotive horns in India with almost 50% market share in India and also the second-largest player globally.

It also manufactures electronic automotive horns, trumpet horns and disc horns for PVs, 2-W, CVs and off-road vehicles.

The Indian acoustics business caters equally to PV and 2W segments. Major global clients for the division include BMW, Volkswagen, Daimler and Audi while major Indian clients are Maruti Suzuki, Bajaj Auto, Tata Motors, Hyundai and Honda Motorcycles.

(iv) Casting

Minda Industries Ltd - alloy wheel

Minda Group through its subsidiary Minda Kosei Aluminum Co. Private Limited is a leading and the largest Indian manufacturer of alloy wheels. With its manufacturing facility at Bawal, Haryana and Gujarat. Moreover, it has a current installed capacity of approximately 1,80,000 wheels per month.

It is also in all categories of die casting example Pressure die casting, gravity die casting, low pressure die casting, low pressure die casting and squeeze casting.

(v) Seating

Minda Industries Ltd -  Seats

The company has merged Harita Seating Systems Limited (HSSL) with Minda Industries Limited (MIL).

However, it is the leading manufacturer of seating systems in India. MIL-ST specializes in manufacturing & supply safe, ergonomic and reliable driver seats and bus passenger seats. MIL-SD seats are also used in the automotive segments of :

  • Commercial vehicles
  • Tractors
  • Off-road vehicles
  • Buses

(vi) Other Segment

(a) Sensor

The Sensors and Controllers (SAC) division deals in Start Stop Sensors, Contact and Non – Contact type Speed Sensors, HID Ballast, TPMS (Tire Pressure Monitoring System), EAPM (Electronic Accelerator Pedal Module), and DC-DC Converter.

(b) Controllers and Telematics Division

The controller division has pioneered the lamp Leveling motor solutions and is also a leader in this product category with major OEMs as its customers.

The group through its subsidiaries and associates is also engaged in the manufacturing of blow moulding, hoses (breaks and fuel), fuel caps, air filters, airbags, CNG and LPG kits, speakers, and infotainment, among others.

(F) Revenue segmentation of Minda Industries Ltd

Minda Industries Ltd - Segment wise revenue

Out of total revenue Switches contribute 29%, lighting 22%, Casting 16%, Seating contribute 11%, Acoustics 8% while other segment contribute 14%.

Minda Industries Ltd - Channel wise Breakup

Meanwhile, its aftermarket sales got an increase by 25% year on year.

Minda Industries Ltd - Segment wise breakup

In FY21 2-Wheelers constitute of 81% of total production volume, 3-Wheeler constitute of 2.7%, Passenger vehicle of 13.5% while Commercial vehicle constitute of 2.8% of the total volume.

Minda Industries Ltd - Geography wise breakup

(G) Manufacturing Facilities

Minda Industries Ltd - Manufacturing Facilities

The company has 65 plants in India and 6 plants overseas along with 7 sales offices, 4 design Canters and 11 R&D centres.

(H) Cost Structure

(i) As % of Net Sales

Minda Industries Ltd - Cost structure

(ii) Employee Cost % of Net Sales

Minda Industries Ltd - Employee cost

(I) Market Share

Minda Industries Ltd - Market share

It is the largest manufacturer of switches, alloy wheels and horns in India with a total market share of 67%, 45% and 50% respectively.

Meanwhile, in Air Bags it has 25% and in lights, it has 20% of the total market share.

(J) Competitors

Minda Industries Ltd - Compertition

(K) Financial Parameters

(i) Financial Trend

Minda Industries Ltd - Financial Trend

Revenue of the company increase at a CAGR of 20.13% in the last 10 years. Meanwhile, its PAT grew at a CAGR of 28.62% from FY13 to FY22.

(ii) Du Pont Analysis

Minda Industries Ltd - Du Pont Analysis

The company has decreased its debt. As a result, the ratio of assets to equity decreases from 2.81 in FY21 to 1.91 in FY22. Further, it has also improved its PAT margin.

(iii) Term of Trade

Minda Industries Ltd - Term of Trade

Over the previous ten years, the company has maintained a consistent term of trade. But the ratio of debtors to creditors increased marginally from 1.78 in FY20 to 1.90 in FY21. However, lower TOT will increase the company's operating cash flow.

(L) Management Discussion & Concall

Opportunities

  • The demand for auto components is likely to improve with an estimated growth of 5.5% YoY in CY2022 and 3.0% YoY in CY23.
  • Meanwhile, the posting replacement demand for vehicles in FY2019-2020 and FY2020-21 remained sizeable and is expected to come back as the economy recovers.
  • As more people postpone buying new vehicles in the present scenario. Repairs on current and second-hand vehicles could provide a window of opportunity in Aftermarket Segment.
  • Additionally as per the government scrappage policy announced in July 2019. The motor vehicles that were more than 15 years old. As per an estimate, it could generate business opportunities worth Rs. 43,000 Cr. per year.

Business-wise update

  • Switching Systems – The segment generated a revenue of Rs 2,474 Cr in FY22 led by strong growth in export 2Ws. The company has also won multiple orders for next-generation switches – this includes a sunroof, cruise control, paddle switches, vehicle stability switches etc.
  • Lighting segment – The Company has won a large order for a tail centre position lamp from a key Indian PV OEM, and several key order wins in LED lamps over the last few quarters. The cumulative order book is at Rs 350-400 Cr which will ramp up over the next 2-3 years.
  • Casting - Expansion in four-wheeler alloy wheel business at Bawal and Gujarat is on track with 30,000 out of 60,000 capacity per month enhancement at Bawal being commissioned recently.
  • Others – Minda also received orders for speakers and tweeter from an Indian OEM; It received a seating order from E-bus OEM, and also an order for accelerator pedal sensors from American 2W OEM.

Concall Highlights

  • Company had applied for Auto PLI scheme for sensors, ADAS, controllers & EV specific products (e.g. BMS, Charger) and has been approved for the same
  • Further, revenue from 2-W alloy segment is Rs 280 crore and 4-W alloy wheels topline for Rs 800 crore for the full year.
  • Sensors, controllers, telematics combined revenue for FY22 were at Rs. 220 crore. At the company level, margins are expected to remain in a range of 11-12% over the next years.

Capex and Investments

The company has announced Capex which includes both growth and maintenance Capex.
Growth Capex includes –

  • Capex of Rs 73 Cr for expansion of the 4-wheeler switches plant in Chennai to serve new orders received from Japanese and Korean OEMs and
  • Capex of Rs 37 Cr for an additional facility in Indonesia given the company has won new orders from Italian 2-wheeler OEM for blinkers and tail lamps. Also, the company has announced an investment of Rs 25 Cr in Tokai Rika Minda under the rights issue. Tokai Rika Minda will be setting up a plant, which will require an investment of Rs 170 Cr to cater to new order wins from Japanese OEMs.

(M) Strengths & Weaknesses

Strengths

(i) Diversified business profile in terms of segments, customers and products

MIL’s business profile is well-diversified, with a presence across multiple automotive and product segments, catering to a wide portfolio of automotive OEMs.

Meanwhile, about 29% of the consolidated revenues are derived from automotive switches, 22% from lighting, 12% from aluminium die-casting, 10% from horns, and the rest from products like blow-moulded components, and rubber hoses, batteries, etc. Additionally, it is present in other products such as airbags, air filters, DAPS, etc., through multiple JVs.

The product diversification has improved further with the acquisition of HSSL and HFRL, with automotive seating systems contributing to 10% of its consolidated revenues (FY2021).

(ii) Well-established market position in most product segments

MIL is the largest automotive switch, automotive seat and PV alloy wheel manufacturer, the second-largest player globally in automotive acoustics, and also the third-largest player in India for automotive lighting. Further, these five product segments accounted for approximately 82% of the company’s
consolidated revenues in FY2021. Meanwhile in other product segments, like blow-moulded products, airbags, speakers and air filters, MIL enjoys a leadership position in the domestic market through its subsidiaries/JVs.

(iii) Technological capabilities and business prospects

MIL has also focused on expanding into new product segments and improving its technological capabilities in the existing product segments by entering into JVs and technical collaborations with foreign players.

The company’s product portfolio also remains powertrain agnostic, thereby limiting any risk arising from a prospective transition towards electrical mobility, going forward.

Even as the company’s current product portfolio is powertrain agnostic, it is focused on upgrading its product line to cater to the EV segment, while also developing several EV-specific products focused on the 2W and 3W market.

(iv) Healthy financial risk profile, characterized by a conservative capital structure and strong debt coverage indicators

Over the years, MIL has focused on maintaining a healthy financial risk profile, characterized by low leveraging and strong debt coverage indicators. Additionally, over the past two fiscals notably, the company has also raised more than Rs. 940 crores through equity issuance to strengthen its balance sheet and financial risk profile.

Weaknesses

(i) Susceptible to inherent cyclicality of the automotive industry

As most of its revenues (84% in FY2021) are from the domestic automotive market, which makes its earnings cyclic.

Over the past two years, the industry underwent a sharp downturn due to multiple headwinds.

Although MIL’s earnings were also impacted during Q1 FY2021, the sequential recovery thereafter offers comfort and demonstrates the company’s strong market position across various automotive segments.

(ii) Ongoing capex plans to enhance capacities and recently set up JVs in nascent stages of operations

Meanwhile, the company has over the years, undertaken sizeable debt-funded capex with a view to enhancing its capacities for various products. However, it also has ongoing capex expansion plans for alloy wheels, lighting and blow moulding, with a total capex of ~Rs. 350 crore announced for these projects (FY2022), and Rs. 200-250 crore annually for sustaining capex.

Some of MIL’s JV’s - entities like Minda Onkyo, Minda TTE and Minda Katolec, which are at present in nascent stages of operations. Which would also require some funding support from MIL over the medium term, for meeting their debt repayment

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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