RACL Geartech Limited

Intimation of resumption of operations at the Gajraula Plant - 06-05-2020

“The operations at the Gajraula Plant of RACL Geartech Limited have been resumed w.e.f Tuesday, 5th May, 2020 on a single shift basis. The Company shall start full fledged operations at the said plant after all logistics arrangements are made appropriately.”

Offices and plants were shutdown since March 27, 2020.

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Brief update on current status of plant and expectation going forward - https://www.bseindia.com/xml-data/corpfiling/AttachLive/8acb5b9d-98cc-4ff1-a3ac-27405b6d6d1e.pdf

Disc: Invested


Hi Ayush,
Thanks for sharing the update. Considering (1) how badly businesses that RACL supplies to have been affected, (2) given the current state of over supply that suppliers and OEMs have to manage such as unsold inventories, shouldn’t we take this update with a pinch of salt?
Secondly, has your conviction in the company’s future prospects dropped because of how the dynamics have changed this year?
Look forward to learning, thanks :pray:
Disclosure: Invested.

Hi Nikhil,

I’m also trying to figure out. Not much clarity as of now but a bit comforting to see positive undertone by the company. Q1 should be a wash-out. But if they are able to come back to 70-80% of earlier levels in a quarter or so, it will be great.


Board Meeting Outcome (Link)

Projecting 4% growth despite 6 weeks of shutdown. Looks more than expectation

@ayushmit any comments here?

Disclosure: Invested

PS: There was a typo which I have rectified


Yes, looks much higher than expectations. Automobile sales would be badly affected globally so a bit surprised to see this (though their end product mix is ok - tractors, 2 wheeler etc plus they mentioned about new customer additions).
I hope they are conservative and end up delivering. If yes, it would be great.


Their edge according to me is :

1)Respectable Clientele 2) contribute to “important component part “which may not be costly to the principle company but without it cannot go ahead 3) have good pricing power -on such low revenue of little over 200cr +such operating margin % is commendable and hence there will huge operating leverage when they get 500cr turnover in 2025 (even if it takes little longer )4)culture of “can do” spirit which is why they came out of BIFR 5) senior management have been many years in this company (their is also leadership transition in place ) 6) they have created a niche in 2 wheeler (luxury space )and tractor with good stickyness to clients


@ayushmit ji Whats your take on Q4 results. Interest cost almost 2.5 Times YOY.PAT has increased YOY due to tax expense.

Now since Q1 results have come.
Q1 - FY 21 - 22.62 Cr
Q1 - FY 20 - 52.82 Cr, decline of approximate 57%

There is a dip of profitability by 59%
Q1 results RACL

What is your opinion about future prospects of this company, seeing general negative perspective for auto ancillary business.
Thank you!

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I am no longer invested in any of the auto stocks (including RACL). As you have mentioned there is tough environment for whole auto sector in near term.

I don’t have competence to know when the turnaround will happen so I chose to stay away from the sector until clarity emerges.


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The company looks interesting on the numbers part and the respectable clients it has.
Other than what has already been said in the thread, some of the things which I found in the annual reports are:

  1. Company seems to spending a good amount in energy conservation i.e reducing costs, varying from 10-60 lakhs. Seems like a good amount for a company this size
  2. The company manufactures 5 million gears a year (FY 16)
  3. Company has taken an early lead by entering into Defence and Aerospace sector under Govt. of India ‘Make in India’ initiative (details were not there, so remains an interesting part on what the company make of this)

Some interesting points about the Indian Auto Sector as per AR 2018:

a) The Automobile Industry contributes around 7.1% to India’s GDP by volume.

b) India is poised to be the third largest automotive market in the world by 2020.

c) India is home to four large auto manufacturing hubs: Delhi-Gurgaon-Faridabad in the North, Mumbai- Pune-Nashik-Aurangabad in the west, Chennai-Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.

d) Six million-plus hybrid and electric vehicles to be sold annually, by 2020.
(The last point should be taken with a pinch of salt according to me)

Also found this video on youtube which shows their plants and the products they have - YouTube

Will be interesting to see how RACL plays out, the opportunity size is huge with the kind of products and clients they have if they can scale.

Disclosure: Invested

Edit: The link for the video stopped working, so I messaged the youtube channel


I have been trying to find ConCalls of RACL. Does this company not organize ConCalls? I couldn’t find any.

@sahil_vi, Since this is part of your PF, if I may ask, did you find ConCalls?
I am yet to go through ARs.

Disc: Got interested in this recently. Not invested so far.

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It does not. I have found this forum and the annual reports to be the major source of my learnings about this company. Was led here from my screen which looks for small-cap turn around companies. The company is severely undervalued, though the value added by the company (in terms of its products) is low, the small size of the company wrt the market makes it an attractive stock to own imo. The downside is really limited compared to upside. They provide auto parts like Gears and shafts for export to international 2-wheelers and tractors both of which are one of the more robust segment among vehicles. They have long-term relations with reputed auto-makers. When the economic cycle turns and auto sector turns, RACL would have good tailwinds manifesting in a larger earnings expansion and valuation expansion and I’m excited to hold until the company remains a value creator and also add until then.

Disc: invested, full portfolio is on this thread.



One query - if anybody has done a product benchmarking of RACL vs global players it would be very helpful.

I was trying to dig into a few player mainly Germans, Italians, Americans and Japanese players and figure out their clientele. But only could get a very rough estimate of the actual major players.

The major 5 players in my opinion are:

  1. Eaton - 100 yr old American company. Has outsourced manufacturing to China. Also a step ahead on EV drivetrain systems. Was on an aggressive spree to gain market share in emerging and under developed countries. They have an aerospace entity in India also. Not sure what does it do exactly.
  2. ZF Friedrichshafen - A german giant. I think it acquired Wabco US and thus owns Wabco India majorly (havent verified numbers). One of the largest manufacurers of powertrain products. Again cant get customers.
  3. Aisin Seiki - Japanese company with majority holding by Toyota. So I guess Toyota.
  4. Borg Warner - Another American giant. Specialises in gear systems.
  5. Magna - A German company with relationships with high end as well as common man cars like VW. But mostly supplies to developed markets.

Apart from these there are some very niche companies who specialize in making products for high end cars. Most of them will be found in the Turin area in Italy eg Graziano Trasmissioni. We can ignore them.

My objective was to think from a point of view of where could the next relationship come from. My limited understanding in auto part contracts came from a Brembo scientist I got to know. And testing and contractual relationships take years to come by that is why this concern. I see the MD is very proactive and execution oriented which is a big plus.


Disc: Hold token position


Notification from the company on Covid impact:


  1. Gajraula plant opened from 5th May, Corporate office and Noida plant from 11th May
  2. Company did not avail moratorium
  3. Sees no major risk in receivables and contracts
  4. Comfortable liquidity position
  5. While demand has reduced from earlier levels, company expects increase in demand in future
  6. Well positioned to fulfill demand, sees no shortage of supplies from vendors

I have a questions.
csr spending - amount not spend
Can this be an issue or as this is emerging company, it can improve upon this aspect…

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I was curious to see how the Auto Ancillary industry has done as a whole in FY20. To my surprise, only 11 companies (out of 75) had a positive sales growth in FY20 over FY19. The median growth rate was negative 12%. Frontier Springs topped the list followed by RACL Geartech. These were the only two companies that had a growth of more than 10%. In fact, since Frontier makes springs for locomotives, it really should not be considered as an Auto Ancillary. Which leaves RACL as the only Auto Anc. company to have grown more than 10% in FY20 in the entire space.

The auto industry was one of the most severe hit industries due to the pandemic. In Q1FY21, the median de-growth was 68%. However, it was heartening to see that RACL was one of the few companies where the EBITDA level profitability was intact.

I further ran a screen to see how many Auto Ancs have grown their sales more than 15% CAGR in the last 3 years. These name came up- Minda Ind, Hi-tech Gears, GNA Axle, Precision Camshaft, RACL, and Pritika Auto.

RACL looks like one of the few Auto Ancillaries with an amazing set of clients that has done well in the recent past and has weathered this storm quite well when compared to its peers and is still trading relatively cheap. The company has invested close to 60cr in capex in the last 2 years which should drive future growth.
Auto Anc. Data (1).xlsx (14.3 KB)

Disc: Invested at lower levels.


Thanks for sharing the excel, it was pretty interesting.
I’m curious to know what tool did you use to pull out the data?


Hey Ansh, I wanted to see how each company in the industry did, what the growth rates were across different companies and hence, I compiled the data manually :slight_smile:


Annual Report 2019-2020