💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue was INR 2,239 Cr in FY24, a 5% decline from INR 2,354 Cr in FY23 due to the divestment of the loss-making RLMC subsidiary. Domestic OEMs contribute 60-65% of revenue, while die-casting components for domestic and overseas markets contribute 15-20%. Post-merger, the entity expects healthy single-digit growth (approx. 7-9%) driven by steady OEM demand and improved aftermarket sales from the friction material business.

Geographic Revenue Split

Domestic operations (OEM and Aftermarket) account for approximately 80-85% of revenue. Exports to the US are moderate at 10-12% of overall revenues. Other exports, primarily from the die-casting division, are expected to remain flattish in the medium term.

Profitability Margins

Operating margins stood at 7.4% in FY24, down from 8.4% in FY23 due to muted CV segment sales and sluggish exports. PAT margin dropped significantly to 0.1% in FY24 (INR 3 Cr) from 1.3% in FY23 (INR 30 Cr), primarily impacted by a Rs 223 Cr impairment related to RLMC and provisions of USD 2.9 million for sale consideration receivables.

EBITDA Margin

Consolidated operating profitability was 7.2% in the first nine months of FY25. Post-merger synergy benefits and the removal of RLMC's operational losses (INR 40-50 Cr annually) are expected to improve operating margins to a range of 8-10% over the medium term.

Capital Expenditure

Planned capital expenditure is estimated at INR 180-200 Cr per annum from FY26 onwards to support capacity expansion and modernization. Historical capex was approximately INR 100-120 Cr per annum prior to the merger integration.

Credit Rating & Borrowing

The company maintains a moderate financial risk profile with an interest coverage ratio of 2.96 times in FY24, down from 5.96 times in FY23. Gearing is expected to improve significantly from 2.8 times in FY24 to approximately 1.2 times by March 31, 2025, following the merger with debt-free RBLL.

⚙️ Operational Drivers

Raw Materials

Steel, aluminum for die-casting, and specialized chemicals for friction materials represent a substantial portion of the cost structure, though specific percentage breakdowns per material are not disclosed.

Import Sources

Not specifically disclosed, though the company operates manufacturing facilities in Tamil Nadu, Karnataka, and Telangana, sourcing primarily from domestic industrial hubs.

Capacity Expansion

The company operates 7 manufacturing locations including Kanchipuram, Pondicherry, and Tumkur. Expansion is focused on the domestic die-casting division and the new Mexican subsidiary (RACM), where USD 8 million is planned for investment over three years to serve the North American market.

Raw Material Costs

Raw material costs account for a substantial portion of revenue (estimated at 60-70% based on industry standards). Procurement strategies are being streamlined post-merger to leverage common raw material procurement and logistics for better negotiation power.

Manufacturing Efficiency

Operating margin is expected to improve to 8-10% through economies of scale and synergy benefits from the merger. Capacity utilization in the die-casting division has seen substantial improvement over the past two fiscals after a slow initial ramp-up.

Logistics & Distribution

The company utilizes group-level synergies to rationalize freight costs by co-shipping products with other Rane group entities to shared OEM clients.

📈 Strategic Growth

Expected Growth Rate

7-9%

Growth Strategy

Growth will be achieved through the merger with REVL and RBLL to create a larger entity with diversified product lines (steering, valves, friction materials). The company is also expanding its footprint in North America via Rane Auto Components Mexico (RACM) with a planned USD 8 million investment to supply customers in the USA, Mexico, and Canada starting FY26.

Products & Services

Steering linkage products, engine valves, light metal castings, and friction materials including brake linings, disc pads, clutch facings, clutch buttons, brake shoes, and brake blocks.

Brand Portfolio

Rane, Rane Madras Limited (RML), Rane Brake Lining Limited (RBLL), Rane Engine Valve Limited (REVL).

New Products/Services

Expansion into friction materials and engine valves via merger; new product supplies to North American markets from the Mexico facility starting FY26.

Market Expansion

Targeting the North American market (USA, Mexico, Canada) through the incorporation of RACM in September 2023, with production expected to commence in FY26.

Market Share & Ranking

Holds a leadership position in the domestic PV steering components market, competing with ZF Steering Gear (India) Ltd and JTEKT India Ltd.

Strategic Alliances

Part of the Rane Group; merger with group companies REVL and RBLL to consolidate operations and financial strength.

🌍 External Factors

Industry Trends

The industry is seeing a shift toward consolidation to achieve economies of scale. RML is positioning itself as a multi-product supplier (steering, valves, friction) to increase its 'share of business' per vehicle with major OEMs.

Competitive Landscape

Faces stiff competition in the steering segment from ZF Steering Gear (India) Ltd and JTEKT India Ltd.

Competitive Moat

Moat is derived from its established leadership in steering components, long-standing relationships with top Indian OEMs (Tata, M&M, Maruti), and the financial backing/reputation of the Rane Group.

Macro Economic Sensitivity

Highly sensitive to automotive industry cyclicality, particularly in the CV and PV segments which drive 60-65% of revenue.

Consumer Behavior

Shift in OEM demand toward higher efficiency components and localized sourcing in North America is driving the company's investment in Mexico.

Geopolitical Risks

Exposure to US trade policy; a 25% reciprocal tariff on exports to the US is a noted risk, though the impact is expected to be manageable through customer pass-throughs.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to automotive safety and manufacturing standards; the merger requires NCLT approval, which is expected by the end of fiscal 2025.

Taxation Policy Impact

The company has accrued a deferred tax benefit of INR 113 Cr following the sale of RLMC, which will reduce tax liability and improve cash accruals over the medium term.

Legal Contingencies

The merger scheme is currently filed with the NCLT; no other major pending court cases or values were specified in the documents.

⚠️ Risk Analysis

Key Uncertainties

Delay in offtake from new orders or a decline in operating margins below 6% could impact liquidity. The turnaround of the new Mexico facility (RACM) is a medium-term uncertainty.

Geographic Concentration Risk

High concentration in India (80-85% revenue), with specific exposure to the US market (10-12%).

Third Party Dependencies

High dependency on top 3-5 automotive OEMs for over 60% of revenue.

Technology Obsolescence Risk

The company is investing in in-house capabilities to enhance products as per OEM requirements to mitigate the risk of being replaced by technologically superior competitors.

Credit & Counterparty Risk

Receivables quality is generally high due to the blue-chip nature of OEM clients (Maruti, Tata, M&M), though USD 2.9 million is still pending from the RLMC sale, for which USD 1.5 million has been provisioned.