Rico Auto Industries, the leading Tier 1 supplier which manufactures and supplies a wide range of high precision fully machined aluminium and ferrous components and assemblies to automotive OEMs, is bullish on growth in the Indian market, despite the ongoing slowdown. The company is banking on new customers and orders, consolidation of previous investments and new capex to deliver a robust 60 percent growth in revenue.
In an analyst call, Rico Auto, chairman, CEO and MD, Arvind Kapur said that despite the slowdown in automotive retail and the reduction in production by OEMs, the company sees retail sales picking up. Responding to a query on when he expects recovery to happen, Kapur said: "We are judging it from the retail that is happening in the two-wheeler and car business. We keep on interacting with the dealers also to see what the pulse in the market is and we see that the customers are returning, but the orders maturing are not as what used to happen earlier. Hopefully, since customers have started returning and with the new government in place, the market should start improving."
Rico Auto’s, which recorded revenue of Rs 1,118 crore in FY2018, reported growth of 9.5 percent in FY2019. Now the company is targeting revenues of Rs 2,000 crore, a growth of almost 60 percent. Optimistic about growth and demand returning, the company has lined up additional investment of around Rs 167 crore (Rs 130 crore for equipments and Rs 307 crore for dies).
"At the moment to cross Rs 2,000 crore in revenue, our investment requirement is Rs 167 crore, but if any customer delays it, we will also delay our investment," explained Kapur.
In a response to an analyst query about Rico Auto's confidence in crossing the Rs 2,000 crore revenue milestone in FY2020 despite missing out the Rs 1,500 crore revenue target for FY2019, Kapur explained that the company could have achieved the target but in March 2019, the company acquired its partner’s stake in Magna Rico JV, which makes oil pumps and water pumps. "We took over that company (Magna Rick) and that turnover is about Rs 92 crore that would also add into this because that was a 51 percent subsidiary of ours and we will also include the sales of that," said Kapur.
In terms of new orders, Kapur said Rico Jenfei, which makes aluminium alloy wheels for two-wheelers and supplying to Bajaj Auto, has got additional orders from the company. This, along with getting approvals from Hero MotoCorp for quality, could translate to new business.
In terms of new products, the company says CBS (Combi Brake System) is one major componen, that will see huge demand from the domestic market. Also, the company says it has already submitted the engine block samples to Kia Motors India, which is undergoing evaluation. Since Kia Motors plans to launch its first offering for the Indian market around August 2019, production is slated to begin next month and as a result the sales will reflect soon in Rico's order books.
Also read: Rico Auto’s Abhishek Kulshrestha: ‘We have already invested around Rs 150 crore in this fiscal on R&D, including BS VI.’
Rico Auto records robust growth with 18% profit in Q3 FY19