Rane (Madras) Ltd - 95.00 Rs

Established in 1960, Rane Madras Ltd (RML) is part of the well known Rane group - which is the undisputed leader of South India in auto components with companies like Rane Brakes, Rane engines, KAR Mobiles, Rane NSK Steering etc. Accordingly, RML is also a market leader in manufacturing of critical automotive components like steering linkages, ball joints, axial joints, suspension joints and manual steering gears. Company has broadly divided its product profile into two segments namely a) steering & suspension linkage products and b) manual steering gear products. It is a preferred supplier to most of the OEM’s in India and caters to every segment of automobile industry viz. passenger cars, multi utility vehicles, light commercial vehicles, heavy commercial vehicles and farm tractors. Importantly, it has strategic technical partnerships with M/s TRW Inc, USA for steering gear products & TRW Ehrenreich GmbH, Germany for steering linkage products.

Earlier RML was operating thru three plant one each in Chennai, Pondichery & Mysore with a combined capacity of 10.5 million units for linkage products and 0.6 million units for steering gears. But recently it has established a new facility in Varanavasi, Chennai for producing outer ball joints with an investment of 14 crore. This unit commenced operation only in Oct 2006 and will be primarily catering to export market with an installed capacity of 5.65 million ball joints. Presently, products are being exported to US, Mexico, Japan, Thailand and some European countries. It also supplies to SAARC countries for after-market segment. For future growth, RML is focusing more on global market and intends to take up its export share to 25% from 18% currently. The company has also set up a manufacturing facility at Integral Industrial Estate, Uttrakand for supply of steering gears exclusively to Tata Motors Limited. It is also contemplating to increase the product range to include hydrostatic steering gear for farm tractors and rack and pinion steering gears.

Off late, for better management and consolidation, Rane group has been taking various initiatives and implementing restructuring for all its group companies. Accordingly, in RML the individual promoters have transferred their shares in the company to Rane Holdings Ltd. With this, the shareholding of Rane Holdings in the company has increased from 20.00% to 51.28%, thus, making RML its subsidiary with effect from March 2007. Financially for FY07, it recorded 20% growth in net sales to 330 cr whereas NP jumped up 60% to 13.60 cr registering an EPS of 13.50 Rs on equity of 10 cr. Against this it gave 40% dividend for full year. For FY08 it is estimated to clock a turnover of 400 cr and PAT of 15 cr i.e. EPs of 15 Rs. Investor can consider taking some exposure as scrip has the potential to give 25~30% return in 9~12 months.