Shriram Pistons & Rings Ltd

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Shriram Pistons & Rings Ltd (SPRL) has an exceptional lineage of Shriram Group, one of the most
reputed Industrial houses. Shriram Pistons & Rings Ltd is primarily engaged in the manufacturing of pistons, piston pins, piston rings and engine valves for various automotive companies in the domestic and export markets.

BS-6 Business
The Co. had acquired key businesses for BS-6 models in FY20 requiring the latest technology and stringent quality requirements. This also resulted in higher market share with the key OEMs in India. During FY21, the Co. had a smooth ramp up of products for BS-6 models, to the satisfaction of all its OEMs.
Marquee Clientele
The Co.’s customer base includes most of the OEMs in India like Maruti, Mahindra, Honda, Ford, Nissan, Tata, Bajaj, Hero, TVS, Yamaha, Ashok Leyland, Daimler, VE Commercial, Swaraj, and various others. [5] It also caters to global OEMs, namely Jaguar, Land Rover, JCB, BMW Motorrad, Volkswagen, Rotax, ZF Wabco, Yanmar, etc

In order to meet the Company’s vision for diversification and growth in areas other than IC Engines, the Company has been actively
working on identifying suitable opportunities to diversify its existing product portfolio

Key Business developments:
i. Acquisition of 51% stake in EMF Innovations Private Limited (“EMFI”)
The Company through its wholly owned subsidiary SPR Engenious Ltd. acquired 51% stake in the share capital (on a fully ndiluted basis) of EMFI (CIN: U29309TZ2016PTC027538), for a total consideration of INR 780.03 Mn.
EMFI is a Singapore backed electric motor design and manufacturing Company. EMFI is a young Technology company co-founded by engineering entrepreneurs with substantial R&D and operations in India and Singapore thereby providing localized cost effective e-mobility solutions to customers in India and abroad. EMFI has been leveraging on its strong power electronics & motors research base and extensive semi-automated manufacturing eco-system to deliver reliable EV Motors and Controllers for green mobility solutions and various other applications.
ii. Definitive Agreement to acquire 75% stake in Takahata Precision India Private Limited (TPIPL)
The Company through its wholly owned subsidiary SPR Engenious Ltd. has entered into definitive agreement to acquire 75% stake in the share capital (on a fully diluted basis) of TPIPL (CIN: U29220RJ2010FTC046888), at an Enterprise Value of INR 2,220 Mn. with adjustments for debt, debt like items and working capital to be calculated as on closing date subject to satisfactory completion of all conditions precedent.
TPIPL’s existing portfolio of precision moulded parts, precision metal moulds parts, assembled parts having a variety of functional products for the automotive and other Industrial applications, fits into the Company’s strategy of inorganic growth alongside de-risking its current business model.

Transition to EV: SPRL is exposed to the risks related to changes in regulations within the automotive industry, especially with regards to the transition to EVs, including the potential for acquisitions and/or higher research and development spending. The company derives a sizeable proportion of its revenue from the two-wheeler segment, which is among the first auto segments to witness higher electrification. Hence, the agency believes that an increase in the penetration of EVs could affect the company’s credit profile. To mitigate this risk, SPRL is trying to foray into EV components and is looking at inorganic route for the same. Furthermore, Ind-Ra expects the shift to EVs across auto segments to be gradual, and the risk is likely to play out only over the medium-to-long term. This remains a key rating monitorable.

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Was researching this after good results… But have some questions… If you can answer as very less information available…

  1. Is newly acquired TPPIL Vertical is included in Q2 Results?
  2. Had heared that newly acquired 2 Biz of EV are in losses… any idea about it?
  3. How much revenue contribution is from new vertical & product portfolio is premium or commodity in nature?
  4. KS Kolbenschmidt GmbH is selling stake in Shriram piston is that true? And how much free float available?

If u can answer would be helpful…

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On point 4, KS K GmbH is definitely selling now after expressing intention to sell for past 1 year.

EMFI, the company’s acquired entity recorded an EBITDA margin of negative 18.6% on a standalone level in FY23 . Furthermore, given the small scale of operations, EMFI’s profitability is unlikely to impact SPRL’s consolidated EBITDA margins.

SPRL caters to various segments of the automotive industry including OEMs which have been the highest contributor to revenue (FY23: 64.1%; FY22: 60.4%) followed by aftermarket sales (17.0%; 20.1%) and exports (18.9%; 19.5%).

Furthermore, being a diversified player, the company caters to the entire auto spectrum of two-wheelers, three-wheelers, PVs, CVs and tractors with a healthy market share in each of these segments. SPRL’s exposure to diversified industry segments as well as replacement and exports markets offsets the risk arising from a feeble demand from a particular sector or a customer. Furthermore, with acquisition of EMFI, which is into electric vehicle (EV) drive train components such as electric motors and motor controllers for the EVs and other applications, helping it diversify its revenue to the engine-agnostic segments.

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Read the same in Fitch credit rating report…
Need some insight on product whether it Is commodity or premium type & more on TPPIL acquisition as it has better quality product usage with different industries catering…

Although thanks for that information

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annual report and credit rating remains source of info,in the absence of concalls and access to AGMs.

Operating profit margins and client list suggest some kind of pricing power instead of just commodity pricing.

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So true… Too less information to make analysis or decision :expressionless:

Yes… was thinking the same OPM is suggesting premium nature…

Will hope they are least release a corporate presentation in future to clear some doubt… otherwise very difficult to make a decision

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25% Growth to continue as per management in coming years.

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Can someone explain why there was 100% equity dilution in the recent Sep 23 quarter?

i think its due to bonus shares in the ratio 1:1 and not equity dilution.

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Any one tracking Shriram piston… please share any report…how much selling is left from foreign fund (KS Kolbenschmidt GmbH ) and who is buying.
Thank you

Not aware of any further selling after the one in Nov

That essentially means that out of 88,49,830 equity shares, which KS Kolbenschmidt GmbH holds in the company, only ~3% selling is done.

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KS Kolbenschmidt Gmbh sold approx 33 Lakh shares on 20-12-23.

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SPRL has mentioned that the stake is down from 20 odd percent to 4% now
SHRIPISTON_22122023145052_Intimation_under_Regulation30_update (1).pdf (354.4 KB)

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As per the latest credit rating report by Ind Ratings some negatives which are worth taking note of

**Limited Scope of Expansion: SPRL is already a market leader in its operating segments and products, indicating limited scope for growth in its existing revenue streams. Ind-Ra believes that SPRL’s ability to develop new revenue streams, either through new products or new geographies, will be important to strengthen its business profile.

The agency believes that an increase in the penetration of EVs could affect the company’s credit profile. To mitigate this risk, SPRL is trying to foray into EV components and is looking at inorganic route for the same.

SPRL’s plants are operating at about 80% capacity.

The above points and further exit of their long time technology collbrator namely, KS Kolbenschmidt GmbH,Germany, provides strong detterent of not investing in SPRL atleast for next few quaters.

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Some more insights can be derived from this note.

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First ever concall on 05/April , plus first ever presentation from the company!

https://nsearchives.nseindia.com/corporate/SHRIPISTON_01042024204101_PRESENTATIONINTIMATION.pdf

https://nsearchives.nseindia.com/corporate/SHRIPISTON_01042024203120_INVESTORMEETINTIMATIONSIGNED.pdf

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