RACL Geartech Limited

Notes from the recent ratings report (link)

  • Long term bank limit enhanced to 206.6 cr. (vs 131.5 cr.)
  • FY23 capex of 60 cr. for creating capacities for new products in lieu of nomination letters received from customers + modernization/upgradation (30 cr. spent)
  • RACL invests in machines after getting a nomination letter from a customer (takes 1-2 years for supplies to start)
  • European energy crisis may adversely impact operational performance of the manufacturing sector and consequently RACL
  • Top 5 customers contributed 67% of FY22 revenues (vs 78% in FY21). Largest customer contributed 17% of FY22 sales
  • Exports: 73% of FY22 revenues (vs 76% in FY21). FY22: 57% to Europe, 39% to India and Asia Pacific region, remaining to USA and Mexico
  • 2-wheelers contributed 49% of FY22 revenues (vs 45% in FY21) followed by tractors which contributed ~19% of FY22 revenues (vs 19% in FY21).
  • Company is preferred vendor for many of its premium segment export customers
  • PBILDT margin stood at 22.13% in FY22 (vs 26.18% in FY21). FY21 margins were an aberration due to sale of high margin prototypes to new customer
  • Raw materials: Steel and forgings
  • Company discounts invoices with banks at an early stage to minimize forex fluctuation risk
  • Inventory: 3.5 months, domestic debtors ~ 2 months, overseas creditors ~ 3-4 months, payables ~ 1.5 months. Wcap ~ 5 months
  • Working capital utilization was ~79% during 10-month period ended July, 2022

Disclosure: Invested (position size here, no transactions in last-30 days)

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