Pricol limited - OEM automotive

Pricol Limited
CMP: 69.20 MARKET CAP: 655.99
Pricol Limited is an automotive components and precision engineered products manufacturer,Pricol Limited commenced operation in1974 with headquarters in Coimbatore, India. It manufactures automotive components for motorcycles, scooters, cars, trucks, busses, tractors and Off-road vehicles. Pricol also manufacture sintered components and product for fleet management solution.
It has following Subsidiary Companies

  • Pricol Pune, India
  • PT Pricol Surya, Indonesia
  • Pricol do Brasil
  • Pricol Asia, Singapore
    o Telematics Control Units
    o Body Control Modules
    o Display & Infotainment
    o Park Assist System

o Asset Tracking and Monitoring System
o Cab Tilting System
o Centralized Lubrication System
o Digital Fare Meter, and Speed Governors

o Instrument Clusters
o Gauges
o Fuel Level Sensor
o Speed Sensor
o Temperature Sensor
o MAP Sensor
o Position Sensor
o Safety Switches
o Temperature Switches
o Power Sockets
o Oil Level Switches

o Oil Pumps
o Water Pumps
o Fuel Feed Pumps
o Auto Decompression Unit
o Auto Fuel Cock
o Chain Tensioner
o Fuel Pump Modules
o Pressure Relief Valves
o Vacuum Switching Valves

β€’ Revenue breakup - Market (standalone dated-2June 2016)
Products % Sharing
2-wheelers 52.8
3-wheelers 1.9
4-wheelers 11.8
Commercial vehicles 21.5
Tractors 6.0
Off-road vehicles 6.1

β€’ Revenue breakup – products
Products % Sharing
Driver Information System 39.7
Sensor 15.7
Pumps and mechanical products 26.9
Telematics 1.3
Fleet management solutions 15.8
Others 0.7

β€’ Bullish Viewpoints:
o Industry specific:
 Automotive mission plan 2016 – 26 envisages a 4 time growth in value of auto industry
 Automotive component industry CAGR of 14% from FY 2013 – 14 to FY 2013 – 14 to FY 2020 – 21
 Automotive component industry to show robust growth to USD 115 billion by FY 2020 – 2021, contributing to at least 10% of India’s GDP, up from 7 % of GDP currently
 Exports to accounts for 26% of total Indian auto component market by 2021

o Company specific:

Segment Driver information system Pumps & Mechanical Products Sensors Asset management system
2W - Higher disposable income

  • Scooters-favorable demographics
  • India Export hub
  • Shorter replacement period of 2W
  • Increasing rural penetrations - Reducing fuel price to increase demand of entry level vehicles
  • Regulations on emissions
  • Fuel efficiencies - Regulations on emission & safety aspects.
  • Increased need for β€œSmart” vehicles. - Increased theft of 2W demanding the need for vehicle security systems in 2W.
    3W - Exports to African & Asian countries and generates higher margins for OEMs
  • New licenses in NCR & Jaipur regions. - Emission regulation creates a drive for alternate fuels such as LPG. - Regulations on emission & Safety aspects. Not Applicable
    4W PPV - Rising standard of living
  • Higher Income levels - Regulations on efficiency & emissions – Fuel efficient car
  • Localization of Engine Mfrg. In India - Regulations on emissions & Safety aspects
  • Increased Need fir β€œSMART” vehicles - Increased Taxi Fleet.
  • VSS requirement as a measure if asset protection
    CV - Economy growth
  • Infrastructure development
  • Revival of mining industry - Emission regulation creates a drive for alternate fuels.
  • Increase in M& HCV population drives need for Cab tilt products. - Regulation on emissions &Safety aspects
  • Increased Need for β€œSMART” vehicles - Speed regulations imposed by Govt. – Need for speed limiters.
  • Revival of Mining & Infra industry – demand for CLS products & VTS products.
    Tractors & ORV - Govt. subsidies for farmers
  • India. Export hub for Tractors
  • Infrastructure development
  • Monsoon reliant
  • Increased efficiency
  • Revival of Mining Industry - Localization of Engine Mfrg. In India
  • Increased penetration of tractors in lower acreage farms
  • Tractors are also looked as material handling equipment - Regulations on emissions & Safety aspects
  • Increased Need for β€œSMART” vehicles
    • Revival of Mining & Infra industry – demand for CLS products & Telematics products

β€’ MARGIN IMPROVEMENT [Point 1 and 2 will contribute 4% and points 3 and 4 will contribute 2.5% in coming years)
1 High Margin Markets & Segments
a. Increased focus on exports
b. Introduction of new products will demand high margins
c. Penetrate more into 4W PPV, CV, Tractors & ORV segment with a wider basket of product offerings which will help to increase margins
d. Acquisition of businesses which can yield better margins
2. Product Mix:
a. Differentiating products on roll out such as:
i. Emission/ Exhaust management sensing
ii. Driver information system for tractors & ORV
iii. Customized telematics solutions; applicable in CV, Tractors & ORV
b. Develop fleet Management solution product in line with regulatory requirements
3. Cost restructuring
a. Productivity improvement through automation
b. Reduce cost of quality through process improvements & automated EOL
c. Companywide drive- War on materials war on waste
4. Price recovery & consolidation:
a. Consolidation of loss making, Non Core and Non strategic businesses
b. Price recovery from customers through Forex, Raw material indexation & inflation increases
β€’ With International Purchasing Office opening up aggressively in India by global players, there is a good opportunity for Pricol to sell its range of products to the same customers in multiple geographies
β€’ Pricol has won a global contract for Oil and Water Pumps with Renault for their new A Entry vehicle which is common in India, Europe and Brazil.
Joint-ventures: (Annual report 2015)

  1. Johnson Control Pricol Private Limited
    o The Joint Venture supplies Instrument Clusters to Personal Passenger Car and Utility Vehicles manufactured by Renault Nissan, Tata Motors, Mahindra & Mahindra, General Motors India, FIAT India and 2 Wheelers by Bajaj Auto in the Western Region.
    o Reduction in passenger vehicle sales of Tata Motors and Mahindra & Mahindra. Increase in input costs could not be passed on to the customers and product mix change-over resulted in a loss of RS 66,900 Million before amortization of goodwill.
  2. Denso Pricol India Private Limited
    o The Joint Venture performance did not improve as envisaged and continued to incur losses.
    o On 17th March, 2015 Pricol Limited sold its 49% of shareholding in Denso Pricol India Private Limited to Denso Corporation, Japan for a consideration of RS 200 Million. Subsequent to the sale the Company of Denso Corporation, Japan.

Share holding pattern:
April 30, 2016(investor presentation)
Promoters 40.21%
Corporate 16.34%
Mutual Funds 38%
FII 0.36%
DII 3.38%
Others 1.71%
Market cap Free float 393.60cr
P/E 477.71
 Phi capital trust – Phi capital growth fund – 1
 Rajesh Madhwan unni (HUF)
 Bank
 Financial Institution
 Anil Kumar Goel (reducing stake)

  • Valuation:
    o Ratios:
    Particulars 2015 2014
    Book value 28.221 33.95
    ROA -3.15% 11.63%
    ROE -6.12% 23.29%
    ROCE -3.94% 25.17%
    Fixed asset turnover 2.17 1.89
    Receivable days 57.12 61.30
    Inventory days 36.18 38.15
    Payable days 67.29 73.83
    Cash conversion cycle 26.00 25.98
    Total debt/Equity 0.24 0.14
    Interest cover -1.56 12.18

o P & L A/c: (Standalone)

Mar-15	Mar-14	Mar-13

SALES 949.66 891.15 873.89
SALES% 6.57% 1.98% -9.44%
EBITDA 23.97 62.95 62.14
EBITDA% 2.52% 7.06% 7.11%
NET PROFIT -18.00 67.00 15.74
NETPROFIT MARGIN -1.90% 7.52% 1.80%
NET PROGIT GROWTH -126.87% 325.67% -72.10%
EPS -1.90 7.16 1.75

β€’ Standalone latest numbers
Mar 16 Mar 15
Net Sale 342.85 229.17
EBITDA 48.33 -7.40
PAT 22.07 -2.40
EPS 2.33 -0.25
β€’ Consolidated numbers
Mar 16 Mar 15
Total Income 144.86 114.32
EBITDA 9314.32 -1271.57
Net Profit 127.15 (3600.87)
EPS 0.13 (3.80)

β€’ Technical chart:

Disc: Not invested. Only educative purpose


Their customers are:


latest management interview on CNBC TV18

Sale of 100% stake in Integral Investments Limited, a Wholly Owned Subsidiary Company:Source

Altran acquires Pricol Technologies, an India-based engineering solutions provider.

Disc: Invested

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Any updates on Pricol doing good since few days?

Please advise if any news trigger

What happened to this stock?

Pricol to acquire wiping systems biz of PMP Auto Components

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What are the next growth triggers for Pricol? Who are the other competitors for their Sensors, Pumps & Driver Information systems? As per my understanding their Brazilian business and Indonesian business are both down due to the automotive sector headwinds there.

As per their latest investor presentation, they have said that they are working on realigning their sensors strategy since its a low margin business. How are they planning to do this?

Promoters have also pledged 7% of holdings of the 40% odd they are holding.

On the positive side, they have setup energy efficient plants in Hyderabad, Hosur and Pune.

Would be really helpful if fellow boarders can throw light on how they can improve their bottom line in the next 12 - 18 months.

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Pricol update

They have entered into a collab to mfr BS-VI compliant fuel pumps


After 3 years of poor performance majorly due to the losses suffered in the subsidiaries ,the company seems to have turned around .The loss making foreign subsidiaries have been sold off, the cash flows are increasing and they are looking to go debt free in next 2-3 years. They have reentered the 4 wheeler market with expiration of their non compete clause with Denso .In recent call with analysts, the management indicated they are trying to place their bets on the EV space and a new strategic plan is being formulated to be presented in Sep 2021

Disc; Invested with tracking quantity


Analyst call key point discussed – Pricol Limited
β€’ The closure of plants of different regions in India caused the loss.
β€’ The price of raw material increased which created an impact on the Ebita (11.1%). Would have has 3 percent higher if no lockdowns.
β€’ Operations in Indonesia have been effected but the operation continues to generate free cash flows and is debt-free.
β€’ Ebita could have been 15% if not for the shortage of electronic components and price increase of electronic components.
β€’ 360 crs of sales. Business with Tata motors is going up. 4 wheeler – 10% export has grown – 15%. New product – over 20%.
β€’ Another 4-6 quarters the problem of shortage of electronic components will exist. The customers supply chain is not eased off.
β€’ Driver information system there has been a significant change in technology. Supplying EV car cluster. IQube – PFP connected EV solution.
β€’ All technology is developed by the company on its own. By December 2022 or a maximum 2023, the company will become debt-free.
β€’ Lead time is 12 to 18 months which has resulted in more inventory and working capital which is effecting the bottom line.
β€’ Holding 25cr additional inventory. Exports are giving a good gross margin.
β€’ Started export business from Indonesia to the USA for Harley Davidson and BMW.
β€’ 2000 – 2100 crs sales target to be achieved by FY 2023-2024.


Having recently come across this firm, I have initiated a tracking position in this stock. The triggers driving this position are primarily the following

  1. The last year performance and the remarkable turnaround from loss to profit.

Edit: Missed this very important set of figures yesterday. The firm grew in almost every segment its is in, while the industry degrew by 14%

  1. The client list


Note that Caterpillar is a last year break through. It is not easy to break into CAT.

  1. Good Management moves:
  • Terminated a o2 sensor project at loss.
  • Sold off loss making subsidiaries even at loss.
  • Company is projecting greater than industry growth (by +10%),
  • Improving the range of instrument clusters and clientele, Building Connected Vehicle systems, Striving to add on partnership with a software oriented form to improve its hardware telematics (which the Candera partnership link above illustrates)
  • Imbibed technology from sold off subsidiaries, which led to a second line of fuel pumps which led to the Caterpillar break, and others. Company projects a doubling of revenues from here in the next two years in this second line. (aug con call transcript).
  • Targeting EV readiness for its instrument clusters and other equipment.
  • Targeting zero debt by 23.

My analysis indicates the following pros/cons for the firm.


  • Complicated holding structure.
  • Lots of related party transactions.
  • High debt.
  • Loss making international subsidiaries.
  • Labor disputes.
  • Semi-conductor problem.
  • Provisioning complexities. Good PBT but low PAT.


  • Awesome growth in a degrowing sector.
  • Low valuations, so further downside is limited.
  • Second line of fuel pumps coming up solidly.
  • Instrument cluster range expanding.
  • Exports coming in very well.
  • Non-compete clause expiry, leading to greater comeback scope. A Tata motors contract is the most immediate fallout.
  • Significant turnaround from loss to profit.
  • Awesome range of clients - breaking into caterpillar is not a joke.
  • New business lines should double in terms of contribution to revenue.
  • Growth guidance of industry +10%

My conclusions here are the firm is an old one which made mistakes of overreaching in the past, but is now sincerely trying to clean up its past mistakes. It has a stable line of primary business which it is focusing on well, and a growing secondary line coming up. It has turned around from large losses to significant profits. It has a healthy client list and long relationships. With certain non-compete clauses expiring, the operating environment and market is much improved, and at its current valuations, downside seems limited.

If the firm continues on its path of cleaning up its messes while focusing on core competencies, while there will still be a year or two of flat growth and pain (as projected), the long term possibilities are high.

Lastly, one minor, probably irrelevant item, the quality of the annual report is vastly improved over the prior year. An annual report presentation can be easily ignored, but I kind of take it as an indication of the little things that matter. (but maybe that’s just me).

Key monitorables.

  • debt reduction.
  • export / new client growth
  • exit from loss making subsidiaries.
  • handling of labor issue - this is a long standing problem here it seems.

Would appreciate any long term investors in this ticket to provide their view or counter-opinions on this analysis.

Tagging a few folks whose ideas and opinions I value. @Malkd , @sahil_vi @Tar . Especially @sahil_vi , since your in depth look at RACL has been invaluable and in the same sector.


Not really sure about how this will pan out, but overall seems a right move for the firm.

Disc: Invested.


Some of the points I noted from Q2 Concall.

Currently export is 10% of revenue

400Crs Export target

No immediate plan to make CAPEX

Apr’23 new factories to be built for Pumps & new switches

Aim to grow 10% above the market growth

Expectation is that by 2025 30% EV 2wheelers will be on road

Market Share

53% DIS (Display information system) in India

2nd place in the world by volume in DIS

75% market share in CV in India

In DIS, currently at Top5 in the world


Mid to low 20% margin in Pumps from exports

In India

15% in Pumps

12~13% in DIS

8~9% in mechanical DIS

8% in Chain Tensioner (will be phased out)


Update from business standard -