Z F Steering - Z F Steering

📊 BSE: 505163 🏢 Auto Components & Equipments 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

The Auto-Components segment reported a Profit Before Tax (PBT) of INR 20.43 Cr in FY25, showing substantial improvement. The Renewable Energy segment reported a PBT of INR 8.55 Cr. Standalone revenue from operations and other income grew by 1.05% YoY from INR 515.65 Cr in FY24 to INR 521.07 Cr in FY25. Consolidated revenue grew by 0.47% from INR 512.16 Cr to INR 514.59 Cr.

Geographic Revenue Split

Not disclosed in available documents. The company primarily caters to the domestic Indian market, specifically supplying to various State Transport Undertakings and leading automotive OEMs.

Profitability Margins

Consolidated PAT margin declined significantly from 9.0% in FY24 to 2.5% in FY25. Standalone Net Profit Margin decreased by 31% YoY, falling from 10.00% in FY24 to 6.90% in FY25, primarily due to lower other income and a 99% increase in tax expenses (from INR 8.32 Cr to INR 16.55 Cr).

EBITDA Margin

Consolidated OPBDIT/OI margin stood at 10.8% in FY25, down from 12.0% in FY24. Standalone Operating Profit Margin remained stable at 11.09% in FY25 compared to 11.00% in FY24, reflecting consistent core operational efficiency despite subsidiary-level pressures.

Capital Expenditure

The company has planned a consolidated capital expenditure of INR 140-150 Cr for FY2026-FY2027. This is focused on backward integration and capacity addition. As of March 31, 2024, the company had already incurred over INR 75.0 Cr of this planned outlay.

Credit Rating & Borrowing

ICRA reaffirmed the long-term rating at [ICRA]A+(Stable) and short-term rating at [ICRA]A1+ as of June 2025. Borrowing costs have increased, leading to a 72% drop in the standalone Interest Coverage Ratio from 62.58x in FY24 to 18.64x in FY25.

⚙️ Operational Drivers

Raw Materials

Machined castings represent the primary raw material component. The company is pursuing backward integration to manufacture these in-house to reduce dependency and improve margins.

Import Sources

Not disclosed in available documents; however, the company is shifting toward in-house sourcing via its Pithampur plant and subsidiaries.

Key Suppliers

Not disclosed in available documents. The company is transitioning to internal supply through subsidiaries like DriveSys Systems and Metacast Auto Private Limited.

Capacity Expansion

Planned capex of INR 150 Cr for FY26-27 is dedicated to backward integration and capacity addition. DriveSys Systems Private Limited started commercial production in March 2024 to support this expansion.

Raw Material Costs

Not disclosed as a specific percentage of revenue, but the company notes that backward integration into machined castings is expected to support future profitability by reducing procurement costs from external vendors.

Manufacturing Efficiency

The company emphasizes quality betterment and productivity at all levels. Standalone Inventory Turnover Ratio improved slightly by 1% from 7.48x to 7.57x in FY25.

📈 Strategic Growth

Expected Growth Rate

Not disclosed in available documents

Growth Strategy

Growth is driven by a backward integration strategy through subsidiaries (DriveSys, NexSteer, Metacast) to manufacture key components in-house. This is intended to stabilize the supply chain and improve consolidated margins as these entities scale up from their current nascent stage.

Products & Services

Steering Gear Systems (Power Steering and Mechanical Steering) for Medium & Heavy Commercial Vehicles (M&HCV), tractors, dumpers, and haulage trucks.

Brand Portfolio

ZF (currently under litigation), ZF India.

New Products/Services

The company is investing in technology-driven products to prevent obsolescence during emission norm transitions. Expected revenue contribution from new subsidiaries is envisaged to improve over the medium term as they attain operational stability.

Market Expansion

The company is focusing on deepening its presence in the domestic CV and tractor steering systems market, where it already holds a dominant position.

Market Share & Ranking

The company operates in a duopolistic market for M&HCV and tractor steering systems, jointly commanding virtually the total market share with the Rane Group.

Strategic Alliances

Formed a Joint Venture, Metacast Auto Private Limited, for manufacturing machined castings. Previously had a JV with Robert Bosch Automotive Steering GmbH, which exited in March 2023.

🌍 External Factors

Industry Trends

The industry is shifting toward tighter emission controls and electric vehicles. While the transition in M&HCVs is gradual, the company must invest in EV-compatible steering components to remain relevant.

Competitive Landscape

The primary competitor is the Rane Group. JTEKT is a competitor but is primarily focused on the passenger vehicle segment.

Competitive Moat

The moat is based on a duopolistic market structure and long-standing OEM relationships. This is sustainable due to the high technical barriers and safety-critical nature of steering systems, though it is currently challenged by trademark litigation.

Macro Economic Sensitivity

Highly sensitive to the domestic CV and tractor industry cycles, which are linked to infrastructure spending and agricultural output.

Consumer Behavior

Demand is driven by OEM production schedules rather than direct consumer behavior, though end-user demand for haulage and transport affects OEM orders.

Geopolitical Risks

The exit of the foreign JV partner (Bosch) and the ongoing litigation with ZF Friedrichshafen AG (Germany) represent significant corporate-geopolitical risks regarding technology access and brand usage.

⚖️ Regulatory & Governance

Industry Regulations

Subject to automotive safety standards and tightening emission norms (BS-VI and beyond), which require continuous product redesign.

Environmental Compliance

The company operates a zero-discharge plant at Pithampur and utilizes renewable energy (windmills) for 25-30% of power, reducing regulatory risk related to carbon footprints.

Taxation Policy Impact

Standalone tax expense increased by 99% to INR 16.55 Cr in FY25, which significantly impacted net profit margins.

Legal Contingencies

A major Commercial Suit is pending in the Bombay High Court regarding trademark infringement. ZF AG has demanded INR 100 Cr in damages, while ZFI has filed a counter-suit claiming INR 200 Cr for 'passing off' and injunctions against ZF AG.

⚠️ Risk Analysis

Key Uncertainties

The outcome of the trademark litigation with ZF AG is a key uncertainty. A negative ruling could result in a INR 100 Cr payout and the loss of brand identity. Subsidiary ramp-up risks also impact near-term consolidated profitability.