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Manufacturing PMI Weakens to 53.9 in June – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Manufacturing PMI weakens to 53.9 in June

India’s manufacturing activity expanded at the slowest pace in nine months in June as high inflation rates dampened demand and production. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) stood at 53.9 in June 2022, compared to 54.6 in May. Sluggish increases in production, factory orders, and employment dragged down the PMI. 

PMI is a month-on-month calculation, and a value above 50 represents an expansion when compared to the previous month.  

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Auto sales data for June 2022: Highlights  

Maruti Suzuki India posted a 5.76% year-on-year (YoY) increase in total sales to 1,55,857 units in June 2022. Sales of its compact vehicle segment rose 6.8% YoY to 92,188 units. Exports rose 40% YoY to 23,833 units.

Tata Motors Ltd registered an 82% YoY jump in total sales to 79,606 units in June. The automaker’s commercial vehicle sales rose 69% YoY to 37,265 units. Overall passenger vehicle wholesales rose 87% YoY to 45,197 units.

Mahindra & Mahindra’s passenger vehicle segment posted total sales of 26,880 units in June, an increase of 59% YoY. M&M’s exports rose 7% YoY to 2,777 units. 

Bajaj Auto posted a 0.25% YoY increase in total sales to 3,47,004 units in June.  

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Coal India registers record 29% growth in output in Q1

Coal India Ltd (CIL) registered a 29% YoY growth in output to 159.8 million tonnes (MT) in the April-June quarter (Q1) of FY23. CIL’s supplies to the power sector rose to a record 153.2 MTs during the quarter, registering a growth of 19.8% YoY. Coal output for June 2022 stood at 51.6 MT, an increase of 29% YoY.

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Engineers India signs agreement with CSIR-CSIO

Engineers India Ltd has signed an agreement with CSIR-Central Scientific Instruments Organisation (CSIO) for the joint commercialisation of an earthquake warning system. The “EqWS” system, developed by CSIR-CSIO, is being used by Delhi Metro Rail Corp since August 2015. This agreement will help both entities increase the scope of application areas such as critical infrastructures/installations.

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NTPC commissions India’s largest floating solar power project

NTPC Limited has commissioned a 100 megawatt (MW) floating solar photovoltaic (PV) plant in Ramagundam, Telangana. The project’s reservoir spans 500 acres and was built at a cost of Rs 423 crores. One floating platform and an array of 11,200 solar modules make up each block. The presence of floating solar panels also reduces the rate of water evaporation from water bodies, aiding in water conservation.

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Import duty on gold hiked to 15% to curb shipments

The Indian government has hiked import duty on gold from 10.75% to 15% in an effort to curb imports as the rupee slumped to a record low. It has also raised the basic import tax on gold from 7.5% to 12.5%. The country is currently staring at higher trade and current account deficits amidst volatile global macroeconomic conditions.

The Centre has also imposed special additional excise duty/cesses on exports of petrol and diesel at Rs 6 per litre and Rs 13 per litre, respectively. A cess of Rs 23,250 per tonne (by way of special additional excise duty) has been imposed on crude.

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JB Chemicals acquires pediatric brands from Dr. Reddy’s for Rs 98.3 crore

JB Chemicals & Pharmaceuticals Ltd has acquired four pediatric domestic formulation brands from Dr. Reddy’s Laboratories Ltd for Rs 98.3 crore. The four brands are zinc supplement Z&D, insomnia medication Pedicloryl, antibiotic Pecef, and Ezinapi (used against diaper rashes). The four brands combined had sales of Rs 33 crore in the previous financial year (FY22).

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Endurance Tech buys 51% stake in Maxwell Energy to boost foray into EV products

Auto component maker Endurance Technologies Ltd has acquired a 51% stake in Mumbai-based Maxwell Energy Systems Pvt. Ltd for Rs 135 crore. The remaining 49% stake will be purchased in a phased manner in five rounds, spread over the next five financial years. This acquisition will facilitate Endurance Tech’s foray into an electric vehicle (EV)-centric product line as an early participant to offer battery management systems (BMS) to automakers.

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Bharat Forge, subsidiary complete acquisition of JS Autocast

Bharat Forge Ltd and its subsidiary BF Industrial Solutions have completed the acquisition of Coimbatore-based JS Autocast Foundry India Pvt. Ltd for Rs 489.63 crore. JS Autocast supplies critical machined ductile castings for wind, hydraulic, off-highways, and automotive applications.

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SBI’s gold loan portfolio crosses Rs 1 lakh crore mark

State Bank of India’s gold loan portfolio has crossed the Rs 1 lakh crore mark for the first time. The bank has a 24% market share in gold loans in India. It is bullish on growth in the segment as gold provides investors a safe investment option amid rising inflation.

Read more here.

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Market News Top 10 News

India Achieves Full Recovery in Pre-Pandemic Output Level in Q2 – Top Indian Market News

India achieves full economic recovery of pre-pandemic level in Q2: Finance Ministry

In its Monthly Economic Review report for November, the Ministry of Finance stated that India’s real GDP in Q2 FY22 has grown by 8.4% YoY, thereby recovering over 100% of the pre-pandemic output in the corresponding quarter of FY20. India is among the few countries that have recorded four consecutive quarters of growth amidst the Covid-19 pandemic, reflecting the resilience of our economy.  Data also shows that the investment cycle has kickstarted in the country.

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Antony Waste’s subsidiary secures order from North Delhi Municipal Corp

AG Enviro Infra Projects Pvt Ltd, a wholly-owned subsidiary of Antony Waste Handling Cell Ltd, has received an order for door-to-door collection and transportation of municipal solid waste to disposal sites at Sadar Paharganj Zone of North Delhi Municipal Corporation (NDMC). The contract is for ten years, and the company is estimated to handle ~1,000 tonnes of municipal waste per day.

Endurance Tech commences commercial production at new plant in Waluj

Endurance Technologies Ltd has commenced commercial production at its new plant at E-7 1, MIDC Industrial Area, Waluj in Aurangabad, Maharashtra. The plant will manufacture braking systems for the company’s original equipment manufacturer (OEM) customers. Endurance Tech will gradually ramp up the volumes of its disc brake assembly and rotary discs up to 36 lakh units per annum.

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Vedanta to pay Rs 13.5 per share as interim dividend

Vedanta Ltd will reward shareholders with a dividend payout for the second time this year after reporting back-to-back bumper profits in the past year. The mining company has approved an interim dividend of Rs 13.50 a share, totalling Rs 5,019 crore. Earlier this week, Vedanta’s subsidiary Hindustan Zinc Ltd had approved an interim dividend of Rs 18 per share, amounting to a payout of Rs 7,605.57 crore.

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Dr. Reddy’s Labs receives USFDA approval for VeraRing

Dr. Reddy’s Laboratories Ltd has received approval from the US Food and Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) 207577- VeraRing. The pharma company is evaluating further steps in relation to this product. VeraRing covers the category of intra-uterine contraceptive devices.

Four IPOs to hit the markets next week

Medplus Health Services, Data Patterns (India) Ltd, HP Adhesives, and Supriya Lifescience will launch their initial public offerings (IPOs) between December 13th and 16th. Medplus Health Services Ltd is India’s second-largest pharmacy retailer in terms of the number of stores and revenue. It has fixed a price band for its Rs 1,398.3 crore IPO at Rs 780-796 per share.

Data Patterns (India) Ltd is set to launch its Rs 588.22 crore-IPO on December 14 at a price band of Rs 555-585 per share. It is a defense and aerospace electronics solutions provider.

HP Adhesives Ltd, a manufacturer of adhesives and sealants, will launch its initial public offer on December 15. The company has fixed Rs 262-274 per share as the price band for its Rs 125.96 crore IPO.

Supriya Lifesciences Ltd will launch its maiden public offer for subscription on December 10. The company is engaged in the manufacturing of Active Pharmaceutical Ingredients (APIs).

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Market News Top 10 News

IOC Reports 78% QoQ Rise in Net Profit in Q4 – Top Indian Market News

Indian Oil

IOCL Q4 Results: Net profit rises 78% QoQ to Rs 8,781 crore

Indian Oil Corporation Ltd (IOCL) reported a 78.6% quarter-on-quarter (QoQ) increase in net profit to Rs 8,781 crore for the quarter ended March (Q4). Its revenue rose 16.3% QoQ to Rs 1.24 lakh crore during the same period. The oil retailer’s operating profit grew 40.3% QoQ to Rs 13,502 crore. The company’s gross refining margin (GRM) stood at $5.46 a barrel in FY21, compared with $0.08 per barrel in FY20. IOCL’s board has recommended a final dividend of Rs 1.50 per share.

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Adani Green Energy to acquire 5-GW renewable portfolio from SB Energy for $3.5 billion

Adani Green Energy Ltd (AGEL) has signed definitive agreements to acquire 5 gigawatts (GW) of renewable power portfolio from SB Energy India for a fully completed enterprise evaluation of $3.5 billion (~Rs 25,600 crore). SB Energy is a joint venture (JV) between Japan-based Softbank Group and Bharti Group, who held 80% and 20% stake, respectively. It has a total renewable portfolio of 4,954 megawatts (MW) across four states in India. This transaction marks the largest acquisition in the renewable energy sector in India.

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JK Tyre Q4 Results: Net profit at Rs 196 crore

JK Tyre & Industries reported a consolidated net profit of Rs 196.02 crore for the quarter ended March (Q4 FY21). It had posted a net loss of Rs 46.95 crore in the corresponding quarter last year (Q4 FY20). Its revenue from operations rose 63.3% YoY to Rs 2,921.28 crore in Q4 FY21. For the financial year ended March 31, 2021 (FY21), net profit has jumped 111% YoY to Rs 319.34 crore. The company’s board has recommended a dividend of Rs 2 per share.

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Anupam Rasayan secures orders worth Rs 540 crore to supply specialty chemicals

Anupam Rasayan India Ltd has secured orders worth Rs 540 crore from two multinational companies for supplying specialty chemicals. The company will provide life sciences-related specialty chemicals to both firms for a period of five years. It will produce the materials required for these contracts in its current multipurpose facilities. Gujarat-based Anupam Rasayan is engaged in custom synthesis and manufacturing of specialty chemicals.

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BEML unveils mechanical minefield marking equipment for Indian Army

BEML has rolled out the prototype of mechanical minefield marking equipment Mk-II, built on BEML TATRA 6×6— an ‘Atmanirbhar’ product. The equipment is designed for marking minefields at a faster rate, semi-automatically, and with minimal human intervention. The product was developed through a transfer of technology (ToT) from Research & Development Establishment Engineers (R&DE Engineers) of the Defence Research and Development Organisation (DRDO). 

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Heritage Foods Q4 Results: Net profit at Rs 24 crore

Heritage Foods Ltd reported a consolidated net profit of Rs 24.4 crore for the quarter ended March (Q4 FY21). It had posted a net loss of Rs 209.9 crore in the corresponding quarter last year (Q4 FY20). The dairy company’s revenue from operations declined by 5% YoY to Rs 619.4 crore in Q4 FY21. The board of Heritage Foods has recommended a dividend of Rs 5 per share.

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Royal Enfield to recall 2.36 lakh motorcycles due to defects in ignition coil

Eicher Motors-owned Royal Enfield announced that it will recall around 2,36,966 motorcycles across several models due to defects in the ignition coil. The defects could cause misfiring, and in rare cases, an electric short circuit. The recall will apply to Meteor, Classic, and Bullet model motorcycles sold in India, Thailand, Indonesia, Philippines, Australia, New Zealand, and Malaysia. The defect was discovered during routine internal testing.

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Endurance Tech Q4 Results: Net profit rises 75% YoY to Rs 187.4 crore

Endurance Technologies reported a 75.42% YoY increase in consolidated net profit to Rs 187.4 crore for the quarter ended March (Q4). Net profit has declined by 1.4% when compared to the previous quarter. Its sales revenues rose 33.58% YoY to Rs 2,132.90 crore during the same period. For the financial year ended March 31, 2021 (FY21), net profit has declined by 8% YoY to Rs 519.7 crore. The company’s board has recommended a dividend of Rs 6 per share. Endurance Technologies is a leading manufacturer of automotive components in India.

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Happiest Minds partners with Coca Cola Bottling Company to drive robotic automation journey 

Happiest Minds Technologies said it has successfully executed a digital transformation project for Coca Cola Bottling Company United. The order is for streamlining Coca Cola United’s order management with robotic process automation (RPA) in Microsoft Power Automate. The new, simplified process allows orders from all channels, such as inbound and outbound call center agents, field service sales representatives at customer sites, and via a customer self-service portal.

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Dr Reddy’s in talks with RDIF on Sputnik V for other countries

Dr Reddys Laboratories is in discussions with the Russian Direct Investment Fund (RDIF) for acquiring rights of Covid-19 vaccine Sputnik V for more countries. Recently, Dr Reddy’s and Apollo Hospital announced that they have kicked off the first phase of vaccinations with Sputnik V in Hyderabad and Visakhapatnam. The pharma company plans to supply Sputnik V to the Indian government only when local production begins around July.

Read more here.

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Editorial

Auto Ancillaries Industry in India: An Analysis

After months of production slowdown and decline in demand amidst the Covid-19 pandemic, the automobile industry in India is now witnessing a strong recovery. This is very evident from the December sales data of automobile manufacturers that were released last week. Almost all companies posted a healthy increase in their sales. 

As we know, the process that goes into the manufacturing of vehicles is very complex. The cars and two-wheelers that are sold in the market today include very sophisticated electronic or digital features. Thousands of components or parts need to be sourced from different manufacturers, which are spread all around the world. Thus, automakers are heavily dependent on the firms that produce essential auto ancillary components. Let us take a look at some of the main listed companies that fall under the automotive components industry.

Motherson Sumi Systems

Motherson Sumi Systems Ltd (MSSL) is a joint venture between Noida-based Samvardhana Motherson International Ltd and Sumitomo Wiring Systems Ltd of Japan. It is engaged in the manufacturing and sales of components to the automotive original equipment manufacturers (OEMs) in India and also internationally. MSSL is one of the world’s largest manufacturers of electrical wiring harnesses for commercial vehicles and rearview mirrors for passenger cars. It is also a leading supplier of plastic modules and components in Europe and India. 

The company has established a very strong customer base in Germany, the USA, France, Mexico, China, and many more. Some of the prominent clients of MSSL include the Daimler Group (Mercedes-Benz), Audi, Volkswagen, BMW, Renault, Ford, and Maruti Suzuki. Thus, we can see that Motherson Sumi has created synergies with some of the greatest automobile manufacturers in the world.

In the previous financial year (FY20), MSSL initiated a dedicated 5-year plan that focuses on obtaining a total revenue of $36 billion (~Rs 2.62 lakh crore) by 2024-2025. The company also stated that 40% of its consolidated profits at the end of 5 years would be provided as dividends. Motherson Sumi plans to fund its growth by utilising its reserve of profits and also raising debts.

Financial Performance

Over the past 5 years, the company has registered a consistent increase in revenue and profit. Its consolidated revenue for FY 2019-2020 stood at Rs 63,925 crore. Over the past 5 years, MSSL’s revenue has grown at an annual rate of 12.74%, whereas the industry average revenue stood at 6.96%. The company has been able to establish a market share of 34%. During the second quarter of FY21, MSSL reported a 2.7% YoY increase in consolidated net profit at Rs 388 crore. The company stated that it was seeing a huge surge in the demand for auto components all across the globe.

Since the beginning of FY21, the share price of Motherson Sumi Systems has risen by 190%.

Sundaram Clayton

Sundaram Clayton Ltd (SCL) is part of one of the largest conglomerates based in India- the TVS Group. SCL was founded in 1962 in collaboration with UK-based Clayton Dewandre Holdings plc. The company manufactures and markets machined and sub-assembled aluminium castings for the automotive industry. SCL’s product range includes flywheel housing, gear housing, clutch housing, filter heads, and much more. It provides these components for the heavy and medium commercial vehicle, passenger car, and two-wheeler markets. The company’s customer base includes prominent automakers such as Hyundai, Volvo, and Honda.

In 2019, SCL inaugurated its first overseas production facility in the United States by investing Rs 630 crore. Through this facility, the company plans to serve its customers in North America, which is its biggest export market. During the same year, the company inaugurated its new foundry at Oragadam, near Chennai. This major capacity expansion aims to meet the rapidly growing demand for its products from the automotive industry and will primarily serve Hyundai Motor India Limited.

Financial Performance

Over the past 5 years, SCL’s revenue has grown at a yearly rate of 11.73%, as compared to the industry average of 6.96%. The company has been able to establish a market share of 10.79%. Till FY 2019, the company had been registering a consistent increase in its overall revenue. However, there was a small decline in revenue during the previous financial year (FY20)- which was reported at Rs 19,914 crore.

Sundaram Clayton’s share price has seen a surge of 75% since the beginning of the financial year 2020-2021. 

Endurance Technologies Ltd

Endurance Technologies Ltd is a leading manufacturer and supplier of automotive components for OEMs in the automotive industries of Europe and India. It was founded in 1985 and is based in Aurangabad. The company primarily offers die castings, which are used to create complex parts for vehicles. It also manufactures components for engines, gearboxes, and transmission parts. Other products include suspension products, including hydraulic, mono, shock absorbers, steel wheel hubs, head axles, cross members, and steering housings. The company offers its products for use in two, three, and four-wheelers, as well as scooters and quadricycles. One of my favourite companies in this list, they supply to Bajaj Auto, Hero MotoCorp, Royal Enfield and Honda in India. European clients include Volkswagen and even Porshe.

Financial Performance

The company’s consolidated revenue during FY20 stood at Rs 6,965 crore. There had been a fall in both revenue and profit as compared to the previous financial years. Over the last 5 years, its revenue has grown at a yearly rate of 7.07%, whereas the industry was at 6.96%. Endurance Technologies has been able to establish a market share of 3.77%

Since April 2020, the shares of Endurance Technologies has increased by 137%.

Bosch Ltd

Bosch Ltd manufactures and trades in automotive products in India, as well as internationally. The company was founded in 1951 and is headquartered in Bengaluru. It is a subsidiary of Robert Bosch GmbH, a German multinational engineering and technology company. Interestingly, the Bosch Group operates in India through a total of 13 companies.

Bosch offers powertrain solutions (including gasoline and diesel injection products) and electrified drives with battery and fuel cell technologies in the electric vehicle, passenger car, and commercial vehicle market segments. It also provides automotive aftermarket services such as auto diagnosis and repairs. Bosch is well known for its power tools and measuring technologies. They also offer professional audio and communications solutions for the automotive industry.

Recently, Bosch Ltd claimed that it has secured orders worth €2.5 billion for its vehicle computers since 2019. The company also announced plans to start full-scale production of distributed power stations based on solid oxide fuel cell (SOFC) technology in 2024. It has continued investment in its restructuring & reskilling strategies and also for other transformational projects. 

Financial Performance

The company’s consolidated revenue for FY20 stood at Rs 10.45 crore. As compared to the previous financial years, the company had posted a significant decline in its revenue and profit. Over the past 5 years, Bosch Ltd’s revenue has grown at an annual rate of -3.74%, whereas the industry average is 6.96%. During the same period, the company’s market share decreased from 8.27% to 5.66%. It reported a consolidated net loss of Rs 64.57 crore for the quarter ended September (Q2 FY21). 

Since the beginning of FY21, the share price of Bosch Limited has increased by over 50%.

Conclusion

We have only mentioned four top companies that fall under the category of auto component or parts manufacturers. Other prominent listed firms in this category include Minda Industries, Varroc Engineering, Sundaram Fasteners, Schaeffler India, and Wabco India. Bharat Forge Ltd, which is part of the Pune-based Kalyani Group, is also one of the largest exporters of automotive components from India. These companies have partnered with some of the biggest automakers around the world. The different components that you see on your cars or two-wheelers today would have been made by these firms. 

According to a study conducted by the India Brand Equity Foundation (IBEF), the automotive components industry registered a CAGR of 6%, reaching $49.3 billion in FY20. Exports grew at a CAGR of 7.6% during 2016-2020, to reach $14.5 billion during the same financial year. It was found that this industry accounted for 2.3% of India’s Gross Domestic Product (GDP) by 2020. According to the Automobile Component Manufacturers Association (ACMA), automobile component export from India is expected to reach $80 billion by 2026. Thus, we can see that this industry is vital not just for automobile manufacturers but also for the overall economic development of our country. 

We can see that these companies are investing heavily in their research and development (R&D) activities. They are constantly introducing new components in the market to meet the rising demand of the automakers. Most companies are now making a shift towards the production of electric and hybrid cars. This would lead to greater demand and more opportunities for auto-component manufacturers. Let us look forward to seeing how these firms plan to expand their production and sales in the years to come.