The shares of the leading automotive service provider gained up to 6 percent after the company’s board approved the segregation of its automotive and industrial businesses.
With a market capitalization of Rs 26,469.58 crore, the shares of SKF India Ltd were trading at Rs 5,354.10 per share, increasing around 3.52 percent as compared to the previous closing price of Rs 5174.30 apiece.
Reason for Rise:-
Today the shares of the company have seen a positive movement after the board of directors of SKF India Ltd has given its in-principle permission to separate the Automotive and Industrial businesses through a plan of arrangement, as well as concluded that demerger of the Industrial division the preferable alternative.
Furthermore, the Board has approved the immediate creation of a fully owned subsidiary, with the understanding that the Proposed Subsidiary Company will be necessary if and when the Board decides to effectuate the Proposed Demerger.
Financial performance:-
Examining the company’s financial condition, revenue ramped up by 5 percent from Rs 1,150 crore in Q1FY24 to Rs 1,206 crore in Q1FY25, during the same time frame net profit zoomed significantly by 3 percent from Rs 155 crore to Rs 159 crore.
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Footprint & expansion:-
SKF India’s capacity expansion involves equipping its Pune production plant with a new cutting-edge manufacturing line for large-size bearings, increasing capacity by 40%. This endeavor is consistent with SKF’s commitment to expanding its footprint in the Indian market and satisfying the rising demand for industrial bearings and related solutions.
SKF has a pan-India footprint that includes six production sites, twelve offices, a supply network of over 450 distributors, and over 1700 devoted employees.
Localization Strategy:-
SKF India has a localization level of approximately 60%, with its automotive business highly localized at about 95%. The company aims to increase localization in the industrial segment from 40-45% to 65% over the next 2-3 years while continuing investments in India.
Margin Insights:-
In FY23, global inflation affected the company’s margins, prompting pricing actions to stabilize them in FY24. Although the manufacturing mix rose to 60%, overall margins remained stable due to higher trading product margins, ensuring reasonable profitability regardless of manufacturing entity performance.
Capex plan:-
Capex for FY25 is projected to remain around ₹140 crores, similar to FY24, with ₹30 crores designated for maintenance. The investments will focus on expanding capacity in the Automotive and Industrial segments, supporting growth, and enhancing operational capabilities across these areas.
Management Guidance:-
The company anticipates pressure from rising industry capacities but does not foresee drastic pricing pressures due to its established strengths and value propositions. Management remains optimistic about future growth, highlighting prudent strategies to ensure sustainable development despite current challenges in the market dynamics.
Company Profile:-
SKF India Limited specializes in providing products, solutions, and services for rolling bearings, seals, mechatronics, and lubrication systems. The company operates via the Bearings segment. Its products include rolling bearings, mounted bearings and housings, super-precision bearings, and slewing bearings.
Also Read: Auto ancillary stock jumps 6% after announcing demerger of auto and industrial business
Written by:- Abhishek Singh
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