LGBBROSLTD - L G Balakrishnan

📊 NSE: LGBBROSLTD 🏢 Auto Ancillaries 📅 Last Updated: 12/14/2025 9:08

💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue from operations grew 9.93% YoY to INR 2,633.52 Cr in FY2025. Standalone revenue grew 7.24% to INR 2,445.28 Cr. The growth is driven by a dominant 60% market share in the domestic 2W chain segment and a 30% revenue contribution from the high-margin aftermarket segment.

Geographic Revenue Split

The company derives over 80% of its revenues from the domestic 2W industry. It is also a net exporter, which provides a natural hedge against INR depreciation, though specific regional percentage splits outside India are not disclosed.

Profitability Margins

Gross Margin improved to 56.90% in FY2025 from 54.76% YoY. Net Profit After Tax (Consolidated) grew 11.27% to INR 302.09 Cr, with a PAT margin of 12.16%. Standalone PAT grew 7.85% to INR 290.66 Cr.

EBITDA Margin

Operating Margin (EBITDA %) stood at 19.26% in FY2025 compared to 19.53% in FY2024. EBITDA margin excluding other income was 16.98%, a slight compression from 17.33% YoY due to higher employee costs (16.12% of revenue vs 14.87%) and other expenditures.

Capital Expenditure

The company has planned a significant capex of INR 640 Cr over three years: INR 240 Cr in FY2025, INR 200 Cr in FY2026, and INR 200 Cr in FY2027. This is primarily for product diversification, capacity enhancement, and modernization of the acquired RSAL Steel plant.

Credit Rating & Borrowing

ICRA maintains a strong credit profile with the company remaining net debt negative since FY2021. Interest coverage was robust at 48.8 times in FY2024. Unencumbered cash and bank balances stood at INR 689.5 Cr as of March 31, 2025.

⚙️ Operational Drivers

Raw Materials

Steel and Cold Rolled Close Annealed (CRCA) strips are the primary raw materials. Steel costs are a significant portion of the 43.1% total expenditure on materials, though specific percentage per material is not disclosed.

Import Sources

Not specifically disclosed, but the company has integrated backward by acquiring RSAL Steel (now LGB Steel Private Limited) in January 2024 to source CRCA strips for captive consumption.

Key Suppliers

Not disclosed in available documents; however, the company utilizes negotiation-based pass-through mechanisms with its OEM clients to manage supplier price volatility.

Capacity Expansion

Current capacity is being expanded through a INR 240 Cr infusion into LGB Steel Private Limited for modernization of equipment and debottlenecking. Fixed assets in plant and machinery increased from INR 490.96 Cr to INR 688.44 Cr in FY2025.

Raw Material Costs

Raw material costs are managed through periodic price pass-throughs to OEMs. While margins are susceptible to commodity price spikes, historical data shows these measures cap margin moderation.

Manufacturing Efficiency

Inventory days improved from 61 to 58 days in FY2025, indicating better stock management. Debtor days remained stable at 44 days.

📈 Strategic Growth

Expected Growth Rate

10%

Growth Strategy

Growth will be achieved through the modernization of the acquired RSAL Steel (LGB Steel) to widen the product portfolio to CRCA strips, re-entering the industrial chains segment to reduce 2W dependence, and leveraging the 'Rolon' brand to grow the high-margin aftermarket segment.

Products & Services

Automotive chains, sprockets, allied components, industrial chains, and Cold Rolled Close Annealed (CRCA) steel strips.

Brand Portfolio

Rolon

New Products/Services

Industrial chains and CRCA strips for external sale following the acquisition of RSAL Steel.

Market Expansion

Expansion into the industrial chain segment and increasing the share of business with existing 2W OEMs where no single client exceeds 15% of revenue.

Market Share & Ranking

Dominant market leader with over 60% market share in the domestic 2W chain segment.

Strategic Alliances

Acquisition of RSAL Steel Pvt Ltd in January 2024 (now LGB Steel Private Limited) for INR 240 Cr capex cycle integration.

🌍 External Factors

Industry Trends

The industry is shifting toward Electric Vehicles (EVs). e-2W penetration is expected to reach 25% by FY2030. The company is positioning itself by diversifying into industrial chains and steel strips to offset potential ICE chain revenue loss.

Competitive Landscape

LGB is the market leader in 2W chains; competitors are not named but the company maintains a healthy share of business across all major 2W OEMs.

Competitive Moat

The moat is built on a 60% market share and the 'Rolon' brand's 30% contribution from the replacement market. This is sustainable due to the large existing fleet of ICE 2Ws requiring replacement parts for the next 10-15 years.

Macro Economic Sensitivity

Highly sensitive to the domestic 2W demand environment, which is influenced by rural income levels and fuel prices.

Consumer Behavior

Shift toward EVs and ridesharing are noted as long-term risks to personal 2W ownership and chain demand.

Geopolitical Risks

Exposure to global supply chain disruptions for specialized machinery, though 80% of revenue is domestic-focused.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with SEBI Listing Regulations 17 to 27 and Part D of Schedule V regarding corporate governance. Adherence to tightening environmental regulations regarding manufacturing waste.

Environmental Compliance

The company is exposed to tightening emission norms for its OEM customers and waste/pollution regulations, which may increase operating costs for new capacity.

Taxation Policy Impact

Effective tax rate was 25.57% in FY2025 compared to 25.67% in FY2024.

⚠️ Risk Analysis

Key Uncertainties

EV transition risk (potential high impact on 80% of revenue), commodity price volatility (steel), and industrial relations/skilled manpower retention.