Bharat Gears Ltd. (BGL) (Incorporated in 1971) is India’s largest gear manufacturer. BGL is a major global supplier of automotive gears and heat treatment furnaces. BGL manufactures a wide range of gears for HCV, MCV, LCV, utility, and off-highway vehicles. The manufacturing facilities are located in Mumbra, Faridabad, and Satara. The Company has a strong Dealer network of 72 dealers in 26 states covering the entire domestic geography and 3 sales offices in Delhi, Mumbai & Kolkata
roduct Portfolio
Gears(90%): The co. manufactures a wide range of Ring Gears and Pinions, Transmission Gears and Shafts, Differential Gears, Gear Boxes, and a wide spectrum of bevel gears and assemblies which find application majorly in the automotive industry.
Furnaces: Co. ventured into the construction of furnaces for captive use initially and thereafter, moved into its commercial production. They continue to build batch and continuous heat-treating furnaces in collaboration with technology major, AFC – Holcroft of Michigan, USA.
Automotive Components: This division includes automotive products such as automotive clutches and components, turbochargers and components, driveline products, axle shafts, flywheel assemblies, and rings, air suspension, etc
lientele
Gears :
Domestic: Ashok Leyland, Mahindra and Mahindra, JCB India, SMK ISUZU, John Deere India, Toyota Kirloskar, TATA Motors etc.
Overseas: Carraro Italy, CLAAS Tractor SAS France, EATON Corporation, John Deere UK, Spain, Mexico, Brazil, Germany, Transaxle Manufacturing of America (TMA) USA, ZF USA, Germany, etc.
Furnace: Automotive Axles Ltd., AAM India Manufacturing (American Axles), Oerlikon Drive Systems, Varroc, Timken India, Mahindra & Mahindra Ltd., Avdhoot Heat Treat Pvt Ltd, etc [3]
Revenue Segment
Industry Sector wise:
Agricultural Machinery: 60%
Commercial Vehicle: 13%
Construction Equipment: 15%
Others: 12%
Tractors are the key end-user sector for its products.
Geography Wise:
India: 66% of revenue in FY20
USA: 21% of revenue in FY20
Rest of the world: 14% of revenue in FY20
Revenue Concentration FY20
One single client contributed to 27% of the Revenue[5]
Co. had 4 customers (2019: 5 customers) that accounted for approximately 46% of all the outstanding receivables (2019: 52%)
Red Flags of the past
Withdrawal of One-Time Debt Restructuring
The co. had earlier informed that it has applied for restructuring of its term loans availed from KKR India Financial Services Limited (KKR). Simultaneously, the company had also applied for an additional loan facility under the Emergency Credit Line Guarantee Scheme (ECLGS 2.0) announced by the Government of India under the Atma Nirbhar 3.0 package. In light of the aforesaid sanctioned facilities as well as improved business scenario, restructuring of debt was no longer required.
Rights Issue
Issue of 12 Lakh equity shares with a face value of Rs. 10/- each at a price of 105/- per equity share for an amount aggregating to Rs. 12 Cr. on a rights basis in the ratio of 1:7
Financials :
| Particulars | Mar-18 | Mar-19 | Mar-20 | Mar-21 | Mar-22 |
|---|---|---|---|---|---|
| Sales | 508.13 | 594.40 | 463.12 | 503.03 | 729.44 |
| Expenses | 465.32 | 535.69 | 444.43 | 467.19 | 663.68 |
| Operating Profit | 42.81 | 58.71 | 18.69 | 35.84 | 65.76 |
| OPM | 8% | 10% | 4% | 7% | 9% |
| Other Income | 1.55 | 4.47 | 4.82 | 1.33 | 7.13 |
| Depreciation | 18.28 | 21.76 | 26.69 | 24.15 | 20.39 |
| Interest | 16.84 | 21.97 | 21.65 | 22.67 | 18.43 |
| Profit before tax | 9.24 | 19.45 | -24.83 | -9.65 | 34.07 |
| Tax | 2.94 | 6.92 | -6.05 | -1.95 | 8.23 |
| Net profit | 6.30 | 12.53 | -18.78 | -7.70 | 25.84 |
| EPS | 6.12 | 12.17 | -18.41 | -7.55 | 25.33 |
| Equity Share Capital | 8.14 | 8.14 | 9.31 | 9.31 | 10.24 |
| Reserves | 69.68 | 80.35 | 70.27 | 63.52 | 97.95 |
| Borrowings | 133.85 | 161.50 | 151.61 | 118.09 | 91.90 |
| Other Liabilities | 154.06 | 169.72 | 142.95 | 192.71 | 203.00 |
| ROE | 8% | 14% | -24% | -11% | 24% |
| CFO | 9.13 | 9.47 | 1.68 | 3.50 | 24.08 |
The company had some issues in the past but has been present in the business for 20 years+
Interesting points:
- Turnaround in the yearly numbers
- Tangible INR 700 cr+ top line: a sizeable auto anc player.
- INR 25 cr odd operating profit… trading at 140 cr mcap
- Last 10 years:
- Never made an operating loss
-Pat loss in 4 years out of 10
Dont know:
- Doesnt do concalls and does not share presentations. Only AR
- Seems to hv got a big order from an OEM which lead to top line growth in current yr
- Will this traction sustain
Probable Mkt hesitancies:
- Cigratte butt investing: ICE is a dying business
- Inconsistent in delivering results
- Was close to a BIFR case at one point of time. Taking PE fuding at high rates raises concern
- High Debt
Do share your views:
Disclosure: have a small tracking position for more than 2 qtrs.
