Veljan Denison - Veljan Denison

📊 BSE: 505232 🏢 Auto Components & Equipments 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

Total Operating Income (TOI) grew by 13.1% YoY to INR 155.70 Cr in FY25 (Abridged) from INR 137.69 Cr in FY24. On a standalone basis, revenue grew by ~14% to INR 142 Cr in FY25 compared to INR 124 Cr in FY24, driven by higher demand for hydraulic equipment in the construction and manufacturing sectors.

Geographic Revenue Split

The company operates primarily in India with manufacturing units in Patancheru, Hyderabad. It expanded its geographic footprint to the UK through the 100% acquisition of Adan Holding Limited (AHL) for INR 13.90 Cr in August 2022, though AHL's contribution to consolidated revenue remains on the lower side.

Profitability Margins

Profitability has shown volatility due to raw material price fluctuations. PAT margin deteriorated by 80 bps to 15.23% in FY25 from 16.03% in FY24. Historically, PAT margin was 17.25% in FY22 before dropping to 13.29% in FY23 and recovering in FY24.

EBITDA Margin

PBILDT margin stood at 23.70% in FY25, a marginal decline of 59 bps from 24.29% in FY24. This follows a significant recovery from FY23 when margins had dipped to 21.33% (a 491 bps drop from FY22) due to input cost pressures.

Capital Expenditure

While specific future capex figures are not disclosed, the company maintains a strong liquidity position with free liquid investments of INR 37.02 Cr as of March 31, 2025, and a low overall gearing of 0.05x, providing significant headroom for debt-funded expansion.

Credit Rating & Borrowing

CARE Ratings reaffirmed 'CARE BBB+; Stable' for long-term facilities and 'CARE A2' for short-term facilities in July 2025. Borrowing is primarily restricted to working capital, with an exceptionally high interest coverage ratio of 57.83x in FY25, up from 32.54x in FY24.

⚙️ Operational Drivers

Raw Materials

Key raw materials include steel and casting, which are critical for manufacturing precision hydraulic components. These materials are susceptible to price volatility, which directly impacts the company's fluctuating PBILDT margins.

Import Sources

Not specifically disclosed, but the company faces longer procurement times for major raw materials like steel and casting, which necessitates maintaining high inventory levels.

Capacity Expansion

The company is targeting a scale of operations above INR 250 Cr to trigger a positive rating action. Current operations have seen a 4-year CAGR of 12.31% as of FY25.

Raw Material Costs

Raw material costs are a major component of the cost structure; volatility in these costs led to a 491 bps deterioration in PBILDT margins in FY23. The company manages this through a procurement strategy that involves holding 4-6 months of inventory.

Manufacturing Efficiency

Return on Capital Employed (ROCE) improved to 14.89% in FY25 from 14.63% in FY24, reflecting steady efficiency in utilizing its capital base despite moderate scale.

📈 Strategic Growth

Expected Growth Rate

3.62%

Growth Strategy

Growth is targeted through the strategic acquisition of Adan Holding Limited (UK) to enhance scale and market reach. The company is also leveraging the Indian government's 'Smart Cities Mission' and infrastructure projects (road and metro rail) which drive demand for hydraulic-intensive machinery like excavators and cranes.

Products & Services

Precision hydraulic components and systems, including hydraulic vane pumps, motors, valves, and power pack systems.

Brand Portfolio

Veljan, Adan.

New Products/Services

The company continuously develops new products under the leadership of MD Mr. V. C. Janardan Rao, a qualified engineer responsible for many of the company's existing product designs.

Market Expansion

Expansion into the UK and European markets via the acquisition of Adan Holding Limited, which serves agricultural, marine, and mining industries.

Market Share & Ranking

The company holds a 'moderate' scale of operations in a highly competitive landscape dominated by established global players.

Strategic Alliances

Originally commenced as a joint venture in 1977 with the Denison Hydraulics division of Abex Corporation, USA.

🌍 External Factors

Industry Trends

The global hydraulic equipment market is expected to grow from US$ 45.16 billion in 2023 to US$ 54.71 billion by 2028. Trends include a shift toward high-efficiency drilling rigs and earthmoving operations in urban development.

Competitive Landscape

Highly competitive market with a mix of large global multinationals and emerging domestic manufacturers in the hydraulic equipment space.

Competitive Moat

VDL's moat is built on a 50-year track record, specialized technical expertise in fluid power, and established long-term relationships with a diverse client base, making it a 'reliable partner' for repeat orders.

Macro Economic Sensitivity

Highly sensitive to the construction and manufacturing sectors. The Indian construction industry's growth to over INR 3 trillion in Q4 2022 directly correlates with increased demand for VDL's hydraulic components.

Consumer Behavior

Increased demand for productivity-enhancing hydraulic systems in material handling and earthmoving due to large-scale urban infrastructure projects.

Geopolitical Risks

Exposure to the UK market through AHL makes the company sensitive to UK-specific industrial demand and trade regulations.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to industrial safety standards for high-pressure machinery and environmental norms regarding the disposal of hydraulic fluids and metal waste.

Environmental Compliance

The company must comply with hazardous waste disposal norms. Leaks in hydraulic systems pose risks of fluid contamination, which VDL mitigates through regular maintenance and safety practices.

Taxation Policy Impact

Not disclosed.

Legal Contingencies

The management team is reported to have no major corporate governance issues or significant pending legal disputes in the provided documents.

⚠️ Risk Analysis

Key Uncertainties

The primary risks are the high working capital intensity (operating cycle of 233 days) and the volatility of raw material prices (steel/casting), which can cause double-digit swings in profitability.