Sona koyo steering systems

I would like to bring your attention to this company called Sona Koyo steering.This company claims to be the largest manufacturer of steering systems in India, catering to passenger cars, utility vehicles and light commercial vehicles.Customer includes Maruti Suzuki, Toyota, Hyundai, Tata Motors, Mahindra & Mahindra, General Motors and Ford. Independently, as well as through its network of overseas joint-venture partners, it exports high quality precision products to USA, Europe and Japan.
List of exact products -
High performance tilt steering column
High performance intermediate shaft for CEPS
High performance telescopic shaft for steering column
Advanced telescopic I-shaft for CEPS
Improved hydraulic power steering gear
High performance steering gear for CEPS system
Electronically controlled power steering system (ECPS)
Advanced column technology for HCV
Advanced telescopic I-shaft technology for HCV
Advanced steering column with value added features
Intermediate shaft with vibration dampener for UV
Improved steering column
Steering Electronic Control Unit
Electric Power Assist Module (EPAM)

Details can be found on their website i.e.

Basic financials are as follows - (source - screener)

Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017
Sales 683.68 692.00 852.80 1,206.78 1,421.25 1,460.02 1,492.31 1,552.97 1,518.30 1,583.19
Expenses 622.55 685.54 770.15 1,060.86 1,246.59 1,295.48 1,313.80 1,337.30 1,324.34 1,379.88
Operating Profit 61.13 6.46 82.65 145.92 174.66 164.54 178.51 215.67 193.96 203.31
OPM 8.94 0.93 9.69 12.09 12.29 11.27 11.96 13.89 12.77 12.84
Other Income 7.38 4.94 7.54 9.14 3.09 9.35 39.70 4.88 15.97 9.08
Interest 12.69 32.41 36.33 43.67 45.93 41.09 39.23 31.14 31.73 28.54
Depreciation 16.78 25.08 28.45 37.74 45.75 58.50 67.95 103.68 98.75 103.00
Profit before tax 39.04 -46.09 25.41 73.65 86.07 74.30 111.04 85.71 79.46 80.84
Tax 14.14 -14.49 9.64 24.55 25.85 26.34 24.73 26.72 25.30 27.42
Net Profit 24.91 -31.74 16.95 44.64 48.71 38.09 67.76 37.90 37.05 36.49

The financials seems ordinary.However, there are few things which should be paid attention to -

  1. JTEKT Japan has taken over the company from current promoters.This started when JTEKT bought 25% stake from the current promoters.Point to be noted is this takeover was done at a 50 % premium price as per this news -
  1. As per the press release yesterday, now amalgamation has been completed and the share holding is as follows -

JTEKT - 75% (promoter)
Maruti Suzuki - 5% (co-promoter)
public - 18%

  1. According to bloomberg -

“India’s largest carmaker Maruti Suzuki India Ltd., one of the promoters of Sona Koyo who could not participate in the open offer, was also separately given the option to sell its shares to JTEKT, but it declined. JTEKT, the world’s largest maker of steering systems, is 33.51 percent owned by Toyota Group.”

  1. JTEKT is diversified group of Japan and have products ranging from steering systems, bearing ,machine tools , sensors etc.The latest annual report of JTEKT can be found here -

Positives -

  1. The opportunity in auto business to grow is still huge in India considering the under penetration.
  2. The steering business is less prone to getting affected due to disruption of EV , autonomous cars etc.
    3.Taking over of the company by mgmt such as of JTEKT proves to be betterment as it can be inline with the Japanese company spreading their footprints out of Japan for growth especially in auto sector.
    4.JTEKT is worlds largest producer of steering systems.

.I believe the first look at valuation does not attract me and growth is more or less flat if not degrowth.I am keeping it on my watch list and any interesting development should not be ignored.

I am starting this thread for health discussion over how to mainly read the management takeover by JTEKT Japan over a sector that is already growing but still have headroom to grow a lot.

  1. I fail to understand so far that while the auto sales growth has been good at least since last few quarters, why the top and bottom line is flattish for this company.
  2. Who is then eating away the steering business share in India.zf sterring to some extent (robert bosch JV) and bharat gears too have flattish top and bottom lines.
  3. Why did the promoters exited if a clear growth path was visible.
  4. There has been exits of key top level person - It could be that the new promoters wants to rejig things but clarity is not there.

Views are invited to delve deep in.

Disc - Not holding.


Looking at the charts of the stock, it can be seen that it is in consolidation mode since long and is kept of falling by some major buyers who are holding it at its current levels.
Hence, it looks a buy on the charts.

Steering business market share being taken away by Rane Group companies-look at the sales growth of Rane Madras and Rane NSK(This is a JV,part of Rane holdings). They have been successful in being appointed as sole/major suppliers for most of Maruti’s new models. Probably the reason that Sona Koyo hasnt been doing so well lately

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Seems like it shall be waiting for the transaction to get over with JTEKT. Sharing an article on the restructuring which aims to simplify its corporate structure.

Article - JTEKT strengthens muscles by increasing confidence in SONA

Discl : Not Invested personally.

A few points that I like about this company

  1. Its not much impacted with the shift to EV. Their major revenue is from steering’s which isnt impacted with the shift to EV
  2. Reduced debt considerably in the last 1 year
  3. Backed by the JTEKT Group in Japan. So have access to Japanese banks, so easy access to loans at lower rates
  4. Toyota the worlds largest car manufacturer holds a majority stake in JTEKT Japan. So will always get business from Toyota
  5. Good cashflows
  6. Major customers include Maruti Suzuki, Toyota, Tata Motors
    and Mahindra & Mahindra. Also exports to US, Japan
  7. Maruti holds 5% stake in JTEKT India

Also they manufacture bearings which is a component in Semiconductor manufacturing facilities. So with the recent semiconductor industry push by the govt, maybe this will be beneficial for them?