Fundamental Analysis of Shriram Pistons & Rings: Post-Covid, the auto cycle in India turned around with many OEMs clocking impressive vehicle sales. With it, the finances of auto components producers also improved as they are dependent on large automakers.

While most auto stocks have rallied, watchful investors may find good bets among smaller peers.

In this article, we’ll conduct the fundamental analysis of Shriram Pistons & Rings, a small-cap auto-ancillary company and see if it can be an interesting bet.

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Fundamental Analysis of Shriram Pistons & Rings

We’ll begin our study by understanding the business of the company. After that, we’ll equip ourselves with an overview of the automobile industry. Next, we’ll race through the financials to arrive at the company’s future plans. A summary concludes the article in the end.

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Fundamental Analysis of Shriram Pistons & Rings - Shriram Pistons & Rings Logo

Company Overview

Established close to 5 decades ago, Shriram Pistons and Rings Ltd. (SPRL) is a small-cap automotive component manufacturer. It is part of the prominent Shriram Group which holds a 46.8% promoter stake in the company.

SPRL is engaged in the manufacturing of pistons, pins, rings, and engine valves which go into internal combustion (IC) engines of automobiles. It has two production units in Uttar Pradesh and Rajasthan.

The auto ancillary company employs over 9,000 people. It supplies its products to renowned OEMs not just in India but also across the world under its two brands: SPR and USHA.

It offers integrated solutions to its customers starting from design and development to validation and manufacturing of the components. 

Shriram Pistons and Rings counts well-known giants such as Tata Motors, Bajaj Auto, Maruti Suzuki, BMW, Daimler, Kubota, Cummins, Perkings, Fiat Power Train and more as its clients. 

Talking about the geographical presence of SPRL, it earned a majority of 81% of its FY23 revenue from sales within India. The balance 19% came from exports. 

We got a good understanding of the business of the company. Let us now move forward to learn about the automotive industry landscape in the next section of our fundamental analysis of Shriram Pistons & Rings.

Industry Overview

The auto ancillary or auto component industry derives its demand from the automobile industry as OEMs use auto components to make vehicles. Because of this, the industry’s growth tracks that of the auto industry.

The auto sector worldwide as well as in India recorded negative growth in the past few years. Multiple factors such as the general economic slowdown, the Covid-19-led pandemic, subsequent supply chain disruptions, and shortage of key components dampened the vehicles’ demand pushing many OEMs and auto components manufacturers into losses.

However, auto sales recovered in FY22 and FY23 with sales of the CV segment rising as much as 28-29% year on year.

The production data from the Society of Indian Automobile Manufacturers (SIAM) for various sub-segments captures the recovery in India’s automobile industry.

CategoryFY 2018-19FY 2019-20FY 2020-21FY 2021-22FY 2021-23
Passenger Vehicle4,0283,4253,0623,6514,579
Growth (PV)nil-15%-11%19%25%
Commercial Vehicle1,1127576258061,036
Growth (CV)24%-32%-17%29%28%
Growth (2-W)6%-14%-13%-3%10%

(figures in ‘000s)

Going forward, factors such as a rise in disposable incomes, better monsoons, higher chip availability, a decline in commodity costs, stable fuel prices and increased spending on fleets are expected to bring growth in the automotive and auto ancillary sector.

Shriram Pistons & Rings – Financials

Revenue & Net Profit Growth

Shriram Pistons and Rings earned a net profit of Rs 294 crore on sales of Rs 2,609 crore in FY23. Its operating revenue and net profit grew at a CAGR of 7.49% and 20.70% from Rs 1,955 crore and Rs 138 crore in FY19.

The table below showcases the growth in operating revenue and net profit of Shriram Pistons & Rings over the last five financial years.

Fiscal YearOperating RevenueNet Profit
5-Yr CAGR7.49%20.70%

(figures in Rs Cr except for CAGR)

How is it that the company’s net profit grew faster than its operating revenues? We answer this question in the next section of our fundamental analysis of Shriram Pistons & Rings.

Profit Margins

As the company is in the manufacturing space, the EBITDA margins improved with higher volume. Higher vehicle sales in the recent fiscals prompted OEMs to place more orders for SPRL’s products. 

The table below highlights the improvement in profit margins of Shriram Pistons and Rings over the last five years.

Fiscal YearEBITDA MarginNet Profit Margin

(figures in %)

How did higher earnings impact the profitability of the auto components manufacturer? Let us learn more about this in the next section of our fundamental analysis of Shriram Pistons and Rings.

Return Ratios

Higher profits aided the company to post better return ratios. Its return on equity (RoE) and return on capital employed (RoCE) stood at 21.02% and 23.2% respectively in FY23. 

Furthermore, with RoCE lower than RoE, there is still room for the company to expand its RoE at a sharper rate with more profits in the quarters ahead.

The figures below highlight the improvement in the two return ratios: return on capital employed (RoCE) and return on equity (RoE) of Shriram Pistons and Rings for the last few fiscals.

Fiscal YearRoE / RoNWRoCE

(figures in %)

Debt Analysis

Moving on to the leverage analysis, the debt/equity ratio of the company marginally increased in the recent fiscal because of recent acquisitions. At 0.19, it is within the comfort range with interest coverage at 26.3 times.

The figures below represent the debt/equity ratio and interest coverage ratio of Shriram Pistons & Rings for the past few years.

Fiscal YearDebt / EquityInterest Coverage

Future Plans Of Shriram Pistons & Rings

So far we looked at the previous fiscals’ data for our fundamental analysis of Shriram Pistons & Rings. In this section, let us try to get some sense of what lies ahead for the company and its investors.

  1. The company recently acquired a 51% stake in EMF Innovations, a Singapore-backed e-mobility solutions provider to strengthen its foothold in the fast-growing e-mobility space.
  2. Furthermore, SPRL entered into an agreement to purchase a 75% shareholding of Takahata PRecision India, a manufacturer of precision moulded parts for automobile and industrial purposes.
  3. The management has also been eying external opportunities lately to diversify the auto components maker product portfolio in areas beyond IC engines.

Fundamental Analysis of Shriram Pistons & Rings – Key Metrics

We are almost at the end of our fundamental analysis of Shriram Pistons & Rings. Let us take a quick look at the key metrics of the stock.

CMP ₹1,491.35Market Cap (Cr.)₹6,256.62
EPS₹133Stock P/E18.36
Promoter Holding46.8%Book Value₹694
Debt to Equity0.19Price to Book Value2.86
Net Profit Margin19.8%EBITDA Margin11.5%


As we conclude our fundamental analysis of Shriram Pistons & Rings, we can say that the market rewarded the investors of the company handsomely with multi-bagger returns of more than 200% in the past twelve months. 

However, going forward, it will be important for the investors to closely track quarterly results for revenue growth and stability in margins.

In addition to this, any significant update from the company on product portfolio diversification will also have a long-term impact. What are your views on this small cap auto ancillary stock? How about we continue this conversation in the comments below?

Written By Vikalp Mishra

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