Bharat Seats Limited : Well cushioned seat for a smooth journey

Company details: Bharat Seats

Basically the company is a seating systems manufacturing company running by auto mammoths Suzuki,Maruthi and sharda motors.

Company & Background details:

Bharat Seats Ltd is a seating systems manufacturing company mainly for two and four whelers. It is a joint Venture of auto mammoths Suzuki Motor Corporation(14.8%), Japan, Maruti Suzuki India Ltd(14.8%),Sharda motor (28.7%)and the Relans family16%, all together holding 74% of control in the company.


Products & Clients:-

Company has three manufacturing plants existed in gurgaon and produces Four-Wheeler)Two-Wheeler Seating System,Railway Seats & Berths,Moulded Carpets andTwo-Wheeler Frames.The company got my attention after seeing it’s strong client base.

It’s client base includesMaruti Udyog Ltd,Suzuki Motorcycles Ltd,Indian Railways ,Hyundai Motor Industries Ltd,Mahindra & Mahindra Ltd,Mahindra Renault Ltd,Mahindra International,Tata Motors Ltd,General Motors,Samsung India Ltd,Fleetguard Inc,John Deere andCarrier Air conditioning & Refrigeration Ltd.

Financial Performance (Figures are in Crores except EPS)

FY Mar’2014 Mar’-2013 March-2012

Sales 631 681 432

Interest 6.25 6.47 3.35

Net Profit 6.7 5.3 5.6

EPS 2.13 1.7 1.8


  • Company direct beneficial of auto segment growth. It’s proxy play for many who missed the bull journey of AUTO companies.
  • Company reported better number in the last FY despite lower sales but by better utilization of inventory and reducing the costs.
  • Company reported good set of numbers for September results with increase of Sales to 173cr from 153cr and correspondingly EPS also changed from 0.42 rs to 0.71 rs.
  • Being owned by auto major helps in several aspects such as order flow,promoter integrity and meeting the industry expectation with latest technical changes in the sector.
  • Company providing the seating systems,moulded floor carpet and luggage carpets for Maruthi Suzuki india.
  • Company is providing the seating system and frame assembly for Suzuki Motor cycle.
  • Company providing extruded roof mould for RITZ,WAGONER previously which are imported and also started supplying new seating system for SWIFT model.
  • Company plans in manufacturing expansion by two more units in Manesar(2014) and Gugaon(2015). Manesar plant started the production and is supplying four wheeler seating systems to maruthi suzuki india ltd.
  • Company product divergence from seating system to moulded carpets to two-wheeler frames and Railway seats & Berths.
  • Company’s plans to become a complete interior systems supplier with own R&D centre approved by Ministry of Science and Technology. Already company has technical collaboration with Suzuki motor corporation,Japan and Toyo Seat,Japan in different products.It spent 2.76 cr(0.5% of total turnover or 45% of net profit) under R&D activities.
  • Company has regular dividend payment history, currently the face value is 2rs.
  • Recent Govt tax changes in excise duty is good for company(Excise duty last year @72 crores)


  • Company over dependence on auto sector, this can overcome to certain extent by getting big orders from Indian Railways.
  • Company debt levels are increased in the previous year because of expansion but they are slightly down this year.

Disclaimer: Planning to invest in a SIP manner.

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I am sorry at this CMP, I do not see a great value in the stock. Seat manufacturing is a fairly commoditized business (I know some background on harita TVS). The thing to understand is that OEM’s will allow you to just about earn a ROE - enough to keep you in business

Looking at the past RoE’s of about 15-17%, that seems true. A basic porter’s analysis will tell you that maruti/suzuki will have upper hand on pricing power.

If you are buying the stock for 2 x BV, the effective RoE you are getting is only about 7-8% - so unless you are sure that RoE will improve drastically, And 5 year EPS growth is 13% - about average.

From the analysis I’ve done, it’s only companies that have enormous scale and size like motherson sumi or who do differentiated, critical products (like bosch, amara raja) who can create wealth over long term. Others have to be bought at a margin of safety to get any meaningful wealth.

Just my humble thoughts.


i just did some comparison between Harita and Bharat seats. Bharat seats is looking good on comparison.

Seems like fundamentals are improving from the last 3 years, but this small cap stock seems to be missed the current rally considering the promoter pedigree and future expansion.

I feel that there is good scope for further appreciation in the long term considering the following factors.

1). This q2 results are resembling the improvement in environment.

2). Harita sales/eps are going down from last 3 years, where as in in bharat seats sales grown more than 80% percent. Market capitalization of bharat is 90 crores Vs Harita 135 crores. Annual sales of Bharat is 620 crores Vs Harita 500 cr sales(going down annually).

2.The company product divergence from seats to auto interiors is good scope for earning improvement.

3). I tried to see their order book size from indian raliways,but nothing available in AR. how to find their existing/ completed order size for indian railways?

4). Management opening 2 manufacturing units with in a year means surely there will be some long term agreements with suzuki and maruthi according to my opinion.

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Any update from the results yesterday…seems really good result

The Result of 2017-18 Q4 Announced April 19,2018. Very good Result.
results-2017-18q4.pdf (1.3 MB)

Bharat seats is now trading at 18 PE based on FY18 while Harita seats is (TVS group company) is trading at 15.5 PE. From last 3 years Harita has been performing quite well both in terms of sales and profits. Does anyone have a revised comparison in both companies? Problem with Harita is not much informartion is available in public and free float is low. Just going by report from HDFC its eps is expect to jump from 48 to 68 by FY20. Appreciate view of fellow boarders.

Disclosure: Have positions since long in Harita and have added more recently. No position in Bharat seats yet.

@Ankurhere @varadharajanr @sateesh

Has anyone looked at Harita Seats or Bharat seats at CMP? Looks good for long term.
Good promoters, sufficient promoter shareholding, buoyant auto market, good growth plans. around 15 to 18 PE appears reasonable…

Not invested but looking closely.

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To me Harita seems really cheap now quoting at 13 PE based on Fy18 and potentially less than 10 PE for Fy20. I don’t know the reason for sudden fall in last 10 days after holding strong in all tvis carnage. Being a tvs group definitely gives lot of comfort. Also good thing about the seat business in general that I see is that it’s immune to electric car disruption. Any more views welcome

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Hey Sateesh,

Bharat Seats is looking like a good pick at the moment. Where did you get the information about the client list from? Any update on that? Also, any competitors other than Harita Seating? Thank you!

Also, any updates on the order book and details on the shift to interiors? Thanks a ton

Bharat Seats Limited: Ratings reaffirmed; rated amount enhanced
Summary of rating action
Instrument* Previous Rated Amount
(Rs. crore)
Current Rated Amount
(Rs. crore) Rating Action
Long-term Fund-based – Term
20.00 76.89 [ICRA]A- (Stable); reaffirmed and
assigned for enhanced amount
Long-term– Fund-based working
capital 35.20 35.20 [ICRA]A- (Stable); reaffirmed
Short-term – Non-fund based
working capital 30.00 30.00 [ICRA]A2+; reaffirmed
Long-term/ Short-term –
Unallocated 0.80 0.00 -
Total 86.00 142.09
*Instrument details are provided in Annexure-I
The rating reaffirmation factors in Bharat Seats Limited’s (BSL) established position as a seat supplier to Maruti Suzuki India
Limited (MSIL), and its favourable ownership structure with Suzuki Motor Company (SMC) and MSIL holding a combined equity
stake of 29.6%. Its established market position provides healthy revenue visibility and is likely to help the company generate
steady cash accruals, going forward, aiding it in maintaining its credit profile. BSL is one of the two suppliers of car seat sets
for MSIL and continues to be the sole supplier of seat sets for several key models. The company enjoys technical collaborations
with Toyo Seats Co. Ltd., Japan, for seats, and with Hayashi Telempu, Thailand, for its carpets, which has helped it adapt to the
Original Equipment Manufacturer’s (OEM’s) technological requirements. The company is also the sole supplier of two-wheeler
(2W) seats to Suzuki Motorcycle India Private Limited (SMIPL).
BSL recorded a healthy 29% YoY growth in revenues in FY2023 and 4% YoY growth (on a high base) in revenues in 9M FY2024,
supported by growing demand for MSIL’s vehicles and BSL’s steady share of business (SOB) with the OEM. The company’s
EBIDTA margins also witnessed an YoY improvement as it stood at 4.4% in FY2023 (3.9% in FY2022) and 5.5% in 9M FY24, aided
by easing in input prices and operational efficiencies. The company’s ability to further improve its profitability over the near
to medium term continues to remain a monitorable. During FY2023, the overall financial profile of the company remained
healthy supported by an improvement in OPBITDA and low debt levels (Rs. 65.7 crore, including promoter term loan of
Rs. 32.6 crore as of March 31, 2023), as evident by interest coverage and TD/OPBITDA of 12.7 times and 1.4 times, respectively.
Furthermore, the company started operations at its second plant in Suzuki Motor Gujarat’s (SMG’s) supplier park in Hansalpur,
Gujarat in April 2023, which was set up at an outlay of ~Rs. 50 crore. During FY2024, the company incurred a overall capex of
~Rs. 40-45 crore towards construction of buildings and machinery at its existing plants in Manesar (Haryana) and Gujarat; its
overall borrowings (WC and TL) increased to ~Rs. 88 crore as of March 31, 2024 (including promoter loans of Rs. 39.6 crore).
Further, the company plans to set up a new plant at Kharkhoda (Haryana) in the MSIL supplier park, at an outlay of ~Rs. 53
crore in FY2025, with commencement of its operations expected from March 2025. It also plans to spend another ~Rs. 14 crore
towards extension of building and additional production facilities at its existing plant in Bhorakalan (Haryana) and ~Rs. 30-35
crore towards new models/products of MSIL and SMIPL during the fiscal. BSL has been sanctioned fresh term debt of Rs. 60
crore in FY2024 to fund this expenditure of ~Rs. 100 crore in FY2025. Accordingly, the company is expected to witness some
moderation in credit metrics in the near term due to an increase in borrowings. Despite this, the company’s revenue prospects
over the medium term are expected to remain healthy, aided by steady demand in the passenger vehicle (PV) industry and
new business gains from the OEMs.
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ICRA notes that the ratings continue to be constrained by the company’s high dependence on the domestic market and MSIL,
given that more than 85% of its revenues are linked to the OEM’s performance. The same is mitigated to an extent by the
company’s healthy SOB with MSIL, along with the leadership position of MSIL in the PV segment.
Further, as discussed with the management, regarding the income tax search operations conducted earlier at the company’s
premises in May 2023, the business and operations of the company had continued without any disruptions and no demand
notice/tax liability was raised by the IT department as of March 2024.
The Stable outlook reflects ICRA’s opinion that despite the sizeable debt-funded capex plans in FY2025 and some weakening
of the credit metrics in the near term, the same are expected to improve over the medium
term backed by an increase in
accruals and scheduled debt repayments and remain at levels commensurate to the rating level.
Key rating drivers and their description
Credit strengths
Well-established relationship with MSIL – BSL has an established relationship with MSIL, the market leader in the PV industry,
and is one of the two suppliers of car seat sets for the OEM. The company currently caters to around one-third of the OEM’s
seat sets requirement. BSL registered a YoY growth of 16% in FY2023 and 8% in 9M FY2024 (annualised) for seat volumes sold
to MSIL and the car seat segment’srevenues grew steadily at 17% and 9% in FY2023 and 9M FY2024, respectively. The company
has recently won business for a few new models of the OEM; of which it has already started supplying for two new models in
FY2024. Moreover, the company manufactures carpet sets for some of the models of MSIL, even as the vertical forms a small
share of its overall revenues (~5% in 9M FY2024). ICRA expects BSL to maintain a healthy SOB with MSIL over the near-tomedium term and continue to remain a critical supplier for OEM.
Favourable ownership with MSIL and SMC owning stakes in BSL, beside benefits of technical collaboration – BSL has been
promoted by the Relan family and its key OEMs, MSIL and SMC. Both OEMs have a combined stake of 29.6% in BSL. Moreover,
it enjoys technical collaborations with foreign players such as Toyo Seats Co. Ltd. (Japan) for seats and INOAC Corporation
(Japan) for roof moulding and windshield components. This has aided BSL’s in-house product development capabilities and
helped in maintaining a healthy SOB with MSIL over the years.
Status as sole supplier of 2W seats to SMIPL providing diversification benefits – BSL remains the sole supplier of 2W seats for
majority of the models of SMIPL. The overall supplies to SMIPL, including the seat sets and frame assemblies, accounted for
~10% in FY2023. The company has also been awarded business for the upcoming electric vehicle (EV) of SMIPL and is also
working on launching new products for 2Ws. It has investment plans for its 2W plant in Bhorakalan in FY2025 towards setting
up additional production facilities. While the revenue share from this division remains low at present, as this share increases,
it is likely to provide greater diversification benefits to BSL over the medium term.
Credit challenges
High client concentration risk with more than 85% of revenues generated by MSIL – MSIL and SMG together accounted for
more than ~88% of BSL’s revenue in FY2023. This exposes the company to high customer concentration risk with its revenue
prospects primarily remaining linked to MSIL’s volumes. However, the same is partially mitigated by the company’s healthy
SOB with MSIL and the OEM’s stake in the company. Additionally, the leadership position of MSIL in the PV segment helps in
mitigating the risk to an extent.
Capacity expansion plans to lead to moderation in credit metrics in near term – The company has significant debt-funded
capex plans in FY2025 to set up a new plant at the MSIL vendor park in Kharkhoda, Haryana, at an outlay of ~Rs. 53 crore,
which is to be funded by debt of ~Rs. 30 crore and by internal accruals. It also plans to invest Rs. 45-50 crore, to be funded by
another debt of ~Rs. 30 crore, towards extension of the building and additional production facilities at its Bhorakalan plant
(~Rs. 14 crore) as well as for new models/products of OEMs (~Rs. 30-35 crore). This is likely to lead to some moderation in the
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debt metrics over the near term. However, expected ramp up of operations at this new plant with an increase in accruals and
scheduled debt repayments would support improvement in credit metrics over the medium term.
ESG Considerations
Environmental considerations: Though BSL is not directly exposed to climate-transition risks from a likelihood of tightening
emission-control requirements, its automotive manufacturing customers remain highly exposed to the same. Accordingly,
BSL’s prospects are linked to the ability of its customers (MSIL and SMIPL) to meet tightening emission requirements. The
company has been taking steps to reduce its carbon footprint by enhancing its reliance on renewable sources and various
energy saving efforts, such as implementing energy saving techniques on the shop floor. The company also manages effective
handling of waste. BSL’s exposure to litigation/ penalties from issues related to waste and water management remains low.
Social considerations: BSL, like most automotive-component suppliers, has a healthy dependence on human capital; and
retaining human capital, maintaining healthy employee relations and supplier ecosystem remain essential for its disruption
free operations. BSL’s annual reports indicate that the entity has been taking initiatives to support its vendors in upgrading
their operations, skills, quality, and technology. The company has also implemented monthly, zone-wise safety audit systems
for the safety of its employees and to ensure zero accident cases. Another social risk that BSL faces pertains to product safety
and quality, wherein instances of product recalls and high-warranty costs may not only lead to a financial implication but could
also harm the reputation and create a more long-lasting adverse impact. In this regard, BSL’s strong track record in catering to
leading automotive OEMs underscore its ability to mitigate these risks to an extent. Moreover, the company’s strong
technological capabilities are likely to help it align its products with any change in customer preferences.
Liquidity position: Adequate
BSL’s liquidity profile is adequate, supported by estimated net cash accruals of Rs. 40-50 crore in FY2024 and working capital
buffer of ~Rs. 13 crore as on March 31, 2024. The company has capex plans of ~Rs. 100 crore in FY2025, which are to be funded
by debt of ~Rs. 60 crore and by internal accruals. It is expected to have overall repayment obligations of ~Rs. 6 crore in FY2025
and ~Rs. 25 crore in FY2026 towards bank debt. In addition, BSL has promoter debt of Rs. 39.6 crore, as of March 31, 2024, for
which there is no fixed repayment schedule, and repayments will depend on the cash flow generated by the company.
Moreover, the company continues to enjoy healthy financial flexibility, as a part of the Rohit Relan Group.
Rating sensitivities
Positive factors – A sustained improvement in BSL’s share of business with MSIL or diversification of its clientele through new
business awards could result in a positive rating action. ICRA would also favourably consider any improvement in profitability
indicators aided by cost efficiency and backward integration measures, such that the company can generate RoCE above 18%
on a sustained basis.
Negative factors – A decline in share of business with MSIL or weakness in demand in the PV industry, leading to reduced scale
of operations and weak cash accruals for BSL, ultimately impacting its return and credit metrics, could result in a negative
rating action.