10-08-2012, 10:47 AM
Automotive Axles Ltd
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Automotive Axles Limited (AAL) established in 1981, is a joint venture of the Kalyani group and
Arvin Meritor Inc, of the USA (formerly the automotive division of Rockwell International Corp). Its
manufacturing facilities are located at Mysore. The company is the largest independent
manufacturer of rear drive axle assemblies in India. AAL spans highly specialised manufacturing
processes involving friction welding, CO2 welding, CNC machining, flexible machine centres and a
range of specially-built machines for production of axles and brakes
KEY HIGHLIGHTS
Wide range of products
AAL is one of the largest manufacturer of rear drive axle assemblies in India. The company makes
all the broad types, viz low floor bus-front axle, 2-speed axle, single drive axle, tandem drive axle,
non-drive axle, axle housing, brake shoe and gear sets. AAL has a wide range of products, catering
to several industries such as passenger cars, commercial vehicles of all sizes, multi-utility vehicles
and tractors and farm equipments.
Company has several reputed clientele
AAL’s clientele includes companies such as Ashok Leyland, Tata Motors, Mahindra & Mahindra,
Volvo and Bharat Earth Movers. The company exports axle parts to the USA and Italy. Exports
contributed 7% of FY10 revenue.
BACKGROUND
AAL was promoted as a joint venture between the Kalyani group and Rockwell International Corp, USA, in 1981. AAL manufactures all types of complete axles and axle
assemblies, including components and corresponding brake sets. It also manufactures automotive gears and hydraulic-activated brake assemblies. AAL’s manufacturing
facilities are located at Mysore. The company exports axle parts to the US and Italy. The range of rear drive axles catering to commercial vehicles ranges from 6-35 tonnes
gross combination weight, S-Cam actuated quick change air brakes for commercial vehicles and trailer axles for 10-13 tonnes gross vehicle weight.
FINANCIAL PROFILE
Revenues, PAT tank as CV volume declines
The company recorded top-line of Rs 2.7 billion (bn) for FY10, down ~65% over
FY09’s top-line of Rs 7.8 bn, on account of a drop in volume in the commercial
vehicle market and the global financial crisis and subsequent recession in developed
economies.
EBITDA margin decreased by ~270 basis points on account of an increase in
employee and administration cost. PAT for FY10 stood at Rs 97 mn, vis-à-vis Rs 558
mn for FY09, down ~83%, principally due to lower-top line and higher interest and
amortisation cost.
INDUSTRY PROFILE
Auto Component
The auto components industry production, in India, is estimated at around Rs 1212 billion in 2009-10. The industry has been reducing its dependence on the domestic
automobile industry over the long term; it also continues to maintain its ability of being cost-competitive and technically proficient in niche segments. These factors along
with foray of Indian auto component players in the international markets through acquistions have enhanced the industry`s popularity among international original
equipment manufacturers (OEMs) in terms of their outsourcing needs. Currently, domestic OEMs account for around 67% of the total auto component production off take,
whereas the replacement and export segments account for around 21% and 12%, respectively. The industry is largely fragmented with over 558 players operating in the
organised segment and many unorganised players catering to the replacement demand. However, with auto OEMs adopting vendor rationalisation, proportion of the
organised segment is likely to increase over the long term. In the long term, exports are expected to grow at a faster pace as global OEMs are expected to implement cost
rationalisation strategies by increasing their sourcing from low cost regions. The bargaining power of players is moderate with OEM's and has been historically high in the
replacement market. The technological edge of a particular auto component segment determines the bargaining power of its players. Further, players with higher
exposure to replacement segment are able to have better margins given higher bargainning power in the segment. However, increasing competition from imports is
impacting the ability to pass on input cost increases in replacement market as well.