All the best for the upcoming Management Q&A.
Sorry I will not be able to accompanybecauseof the Kaveri groundwork in Nagpur belt. Am leaving tomorrow.
Below is my set of top of the mind questions. If we systematically query along these lines, and the Management answers transparently, we might be able to have a good comfort feel. As you mentioned before, the only way to get comfort feel (beyond what we have put forward) will be by talking to Management to know more.
You and Anil Kumar have done lot more work on the company, so kindly add to these base questions. Let;'s get the maximum out of the interaction.
Others - Please go through. Sometimes the questioning itself gives a good feel about the company (as it did for me over the last 2-3 days). You may feel compelled top contribute more and add/refine.
Question for Lumax Auto Technologies
Lumax Auto Technologies has grown
rapidly in the last 5 years and more. Sales have grown by over 26%
CAGR while Net Profits have grown by over 40% CAGR. Kindly take us
through this journey and the key success factors.
2. QUALITY OF GROWTH
What is even more remarkable is the
quality of this growth. You have continuously reduced debt to almost
zero debt. Inventory turns have have gone up more than 2x in 5 years
(7x to 18x). Fixed Asset Turns have also almost doubled (4.3x to
This kind of numbers is perhaps
uncommon in Auto Ancilliary industry. Kindly educate us on what
makes this possible?
Is this sustainable, especially as you
gain more business from other segments like Gear- shifters (MSIL),
and Plastic Moulds (HMSI) which may be more capital intensive than
3. PRODUCT SEGMENTS.
Lighting (55%), Sheet Metal (11%),
Gear-Shifters & Parking Brakes (15%), Rest from Light Adjuster
Kindly educate us on the major product
|Lumax Auto Technologies Product Mix
Gear-Shifters & Parking Brakes
Level Adjuster Motors
Do you see this product-mix changing
significantly over the next few years, as you scale up other
relationships (non BAL)?
4. CUSTOMER SEGMENTS
BAL (49%); MSIL (6%); LIL (12%) ,
Kindly take us through the major
segments, with some colour on the relationship, growth &
Lamps, Tail Lamps, Sheet Metal, Chassis)
What is the scope
of supply to BAL? All above and more?
Is it right to say Lumax Auto-Tech was
started at the behest of Rahul Bajaj? Kindly tell us more on the
long-term nature of this relationship.
Does LATL cater to all the major
platforms? Boxer, Pulsar, Discover? How are the plans drawn up for
these platforms. How early is LATL taken into confidence?
What percentage of BAL's requirements
is catered to by LATL? Platformwise?
How do you see this relationship
scaling up in the next 3-5 years? Can moulded products (around Lamp
assembly) be supplied to BAL also, post HMSI success?
Who are the other prominent
competitive suppliers to BAL in these categories/platforms?
Lamps/Tail Lamps, anything else?)
The next biggest customer is Lumax
Industries. What does LATL manufacture for Lumax Industries, and
Given that it is a related company in
the same line of business as your biggest product segment, how do
you ensure there is no conflict of interest?
Could you throw some light on
following Related Party Transactions.
Sale of Raw Material & Components
: 108.96 Cr (104.23)
Sale of Finished Goods
: 31.92 Cr (22.14 )
Purchase of Raw Material &
Components : 19.70 Cr (8.48)
Purchase of Finished Goods
: 45.93 Cr (43.87)
MSIL: Maruti Suzuki India Ltd.
MSIL is the biggest customer for
Gear-Shifters and Parking Brakes. Is it correct that LATL supplies
around 70% of total Maruti's requirement for these 2 products?
Which platforms does this relationship
How do you penetrate deeper into the
relationship? How do you see this relationship growing over the next
Is it correct that you have Toyota,
Daimler, Fiat and Tata Motors as new customers in Gear- Shifters and
Parking Brakes segment? How much does MSIL contribute today and how
much do the rest?
What are the plans for penetrating
deeper into these new accounts, and addressing new customers?
Who are the competitive suppliers in
Lamps/Head Lamps, others?)
Is it correct After-Market Sales now
comprise a healthy 20% of Sales today? How has the after-market
sales grown over the years? What are the key success factors?
How strong is LATL's pan-India
distribution network today? What was the strength and level of
business 5 years back?
Trading Sales today ~212 Cr (212 Cr)
or 27% of Sales. Is it right to say most of Trading Sales address
Is it right to say most of trading
sales comprise Lumax Industries products after-market sales?
What percentage of after-market Sales
is from LATL's products? How much from LIL products? And Others?
5. Honda Motorcycles &
Scooters India (HMSI)
tell us more about this new relationship? Is the new plant on
schedule? When will commercial supplies start? Is this a sole
This seems to a
big investment (80 Cr)in the midst of the general auto slow-down?
How much has already been spent (FY13) and how much will be spent in
FY14? Kindly comment.
What is the
potential sales from this factory in FY14? What are the plans? Where
do you see Sales in 3-5 years from this segment?
This is for
plastic moulded parts? Is it correct to say that the plastic moulded
parts are for around the Lamp assemblies?
Who is supplying
the Head & Tail lamps? Is it Lumax Industries?
Is there any
restriction on LATL for approaching new customers for Head & Tail
Lamps? Any restrictions for approaching Japanese customers like
Maruti, Suzuki, Toyota's?
6. Lumax DK Auto Technologies
Can you tell us
more about this 100% subsidiary? The IPO prospectus mentioned setting
up Automotive lighting unit at Pantnagar, and Leveling Motor unit at
Manesar. Subsequently Gear-shifters & Parking brakes have been
Kindly give us a
break-up of product segment contributions from Lumax DK Auto?
|Lumax DK Product Mix
Gear-shifters & parking Brakes
Kindly tell us a
little more on level Adjuster Motors? Is it true that you are the
only local manufacturers of this product currently in India? Is it
true that this is mandatory for use with Headlights today?
Who are your
customers currently? Where do you see this segment in 2-3 years?
Looks like this
is not a Capital-Intensive business â initial investment of ~4 Cr
only? Are there any other barriers to entry? Is it likley that OEMS
will buy Level Adjuster Motors assembly along with the headlights
manufacturer only, not stand-alone?
Kindly tell us
more on the Moulded Parts business? Is this catering to Head/Tail
Is it correct to
say Gear-shifter & Parking brakes business is only carried out
from Lumax DK Auto?
So there seems to
be overlap between Lighting business and Moulded Parts business
between this wholly-owned subsidiary and parent company? How do you
prevent overlaps in jurisdiction between marketing/after-sales, and
7. Lumax Industries Ltd
is a leading player in this market. Is it correct that it holds over
60% market share in Inidan market? Do you enjoy exclusive/majority
supplier relationship with some customers?
Kindly comment on
other leading players like Varroc, Minda Industries & Rinder?
What kind of market shares do they enjoy in Automotive Lamps? Do
they have exclusive relationships/majority supplier relationships
with some customers?
What are the
plans for this company along with the JV partner Stanley?
dominant industry position, it looks likely that either Lumax
Industries or Stanley should look to buy out the entire stake?
Is there any
possibility of merging Lumax Industries with LATL being considered?