NRB Bearings looks at exports and diversifications to beat slowdown blues

Auto ancillary maker NRB Bearings, the top bearings and friction solutions maker in the country for automobiles, is readying to take on the slowdown blues. The company is intensifying sales in its export markets and is looking at diversifications in fear of a prolonged recession in the automobile industry.

"I feel this is one among the worst recession or economic slowdown I have witnessed in my career. Such challenges throw up opportunities as well and we are ready with the plans," said Harshbeena Sahney Zaveri, vice chairman and managing director of the listed NRB Bearings.

She said the disruption and slowdown happening in the industry were mainly due to factors such as consumers postponing new vehicle purchases in anticipation of the new emission norms (BS-VI norms with a deadline of April 2020) that are going to be in place by the next year, changing preferences and tastes of new generation consumers, anticipated transition to electric vehicles and the big festival season sales that are yet to start.

She said NRB, which makes 500-plus types of bearings for vehicles, has intensified operations in the international markets. Now about 75-80 per cent of the production is for supplying to almost all domestic vehicle makers, as 90 per cent of the vehicles on Indian roads use NRB's bearings inside. NRB's Greenfield manufacturing facility in Thailand, started a couple of years ago, is likely to become a key supplier to the US market, as US-China trade relations are worsening. "From Thailand, we can cater to the US besides supplying to the Chinese market," said Zaveri. NRB also has a German marketing subsidiary, which caters to the European auto makers such as Daimler, Renault, Volvo and Getrag.

"We expect 11 per cent compounded annual growth rate (CAGR) in exports in FY19-21(estimated). Higher exports are also expected to act as a natural hedge for its import of raw materials," said a recent report from ICICI Direct Research. "The company has made strong inroads in overseas geographies such as Europe, US and South East Asian countries," observed the report.

Zaveri said the company is currently not looking at retrenching permanent employees at plants if the demand slump continues. She said efforts are being undertaken to reduce operational and capex costs.

She said another option before the company is to diversify into new areas such as railways, elevators and other industrial solutions wherever mobility solutions require bearings. The company has a strong research and development team, which can take care of technological challenges.

For FY19, NRB had revenues of Rs 964.9 crore with a net profit of Rs 108.2 crore, compared to Rs 855.1 crore sales with a net profit of Rs 90.7 crore in the previous year.  The growth was primarily due to growth in supplies to domestic original equipment manufacturers (OEMs) and exports, which grew 15 per cent year-on-year.

She said the focus of the company is more on strong financials and profits than on aggressively increasing the top line, which helps the Indian manufacturer perform at par with the international auto ancillary makers, says Harshbeena. The company's total debt as of end of 2018-19was only Rs260 crore. The company had executed a capex of Rs 50 crore during the last financial year.

"With growth moderation expected in FY20, we expect revenue, EBITDA and PAT of NRB to grow at 9.8 per cent, 8.1 per cent and 4.3 per cent CAGR respectively in FY19-21," said the ICICI Securities research report.

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