Varroc Engineering Ltd

i have a question here, pardon me if it seems silly…

Car making companies are known not to have sufficient margins and just able to sail through… am i right ?
how then can companies that supply to this car making companies make lot of money ?

anyone’s guess. my presentation on auto sector in the Chintan Baithak thread gives some possible timelines, according to what I think.

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majority of their revenues (2/3rd) come from abroad, where EV transition is and will happen faster.

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Major issue is too many subsidiaries. Which is a prerequisite for misappropriation of funds. All companies who have diverted funds have used this subsidiary route. And overseas subsidiary only plays to their advantage.
I dont say management is dishonest or something. But this aspect sure needs attention.

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Hi All,

I was going through the AR. Their EBITDA margins declined in FY16, FY17. Would be really helpful to understand the factors behind the decline.

Thanks

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June SHP :
FPIs offloaded 2% stake. DII funds added up. but with promoter holding 85% , how come market participants could influence the price from 1150 to 400+ ?

Axis mutual fund is holding varroc engineering in many of their schemes.

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This reflects the R&D efforts of the company.

~Disclaimer: Invested

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Hi

Quite poor results by Varroc.

  • 10% fall in revenues
  • 75% fall in bottom line

The profit for the quarter was impacted negatively by lower revenues which is largely driven by market decline, operating losses at new facilities during the ramp-up phase, higher interest and depreciation & amortisation costs and losses in China JV.

India Business: Revenue declined by 12.0% as against 14.9% decline in 2W industry volumes; EBITDA margin at 10.2% improved sequentially over the previous two quarters but were lower than Q2 FY19*

The profitability of both our businesses suffered due to a challenging external environment as well as the
cost/ investments associated with the new facilities to support the next phase of growth.
We will continue our focus on rationalising costs as well as optimising capex and capacity utilisation over the next few quarters. - Tarang Jain

Lets see how it pans out in the coming 4-6 quarters.

Rgds

Disc: Have a minor position in my auto basket. Added a little in last 30 days.

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  • Varroc will manufacture for Battery Management System for lithium-ion batteries for e-two wheelers and three-wheelers
    *** Lithium Balance deals in developing, manufacturing and selling Battery Management Systems (BMS) for lithium-ion battery technologies**

According to a report by the Economic Times, Varroc Engineering Limited has entered into an agreement to manufacture EV Battery Management System (BMS) in India for Danish BMS solutions provider Lithium Balance A/S. Under this tie-up, Varroc will manufacture BMS for lithium-ion batteries for e-two wheelers and three-wheelers. It will be done at its manufacturing facility in Pune.

Drive growth by using sustainable automotive trends

As per the report, Arjun Jain, president – electrical and electronics business at Varroc said that the company has a direction to drive growth by using sustainable automotive trends. These trends include the desire to be greener, safer, smarter and connected. He added that the company supplies almost the entire electrical-electronic system for the IC engine. It aims to do the same for EVs. The collaboration with Lithium Balance is a step to achieve that.

Lithium Balance A/S was founded in 2006. It deals in developing, manufacturing and selling Battery Management Systems (BMS) for lithium-ion battery technologies. It has 700 customer projects.

Developing technologies for electric and connected vehicles in India

The report said that Kasper Torpe, vice president, sales and marketing at Lithium Balance said that the company has confidence in Varroc’s capabilities due to its focus on developing technologies for electric and connected vehicles in India. The company is glad to partner with Varroc that shares the same vision to develop technologies for greener means of transportation.

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https://www.manufacturingtodayindia.com/6497-varroc-showcases-solutions-for-next-generation-mobility-at-auto-expo-components?utm_source=newsletter&utm_medium=email&utm_campaign=manufacturingtodayindia_newsletters&utm_email=bbwealth67@gmail.com

Tarang Jain, Founder & Managing Director, Varroc stated on the occasion, “Varroc’s engineering capabilities provide it an edge over its competitors. Our vision is to capitalize on this edge to drive market share growth leveraging automotive trends that remain constant, such as the desire to be greener, safer, smarter and more connected. This vision is clearly reflected at our display at this year’s auto expo.”

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SHARE MAKES A NEW 52 WEEK HIGH. WILL IT GAIN MOMENTUM?

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A cryptic tweet on utilization of cash. Can old timers please throw light on conduct of promoters. If indeed they have a history then this sale will not percolate to minority

The management doesn’t have a history of bad corp governance imo, though the capital allocation record is debatable.

The issue is that the management didn’t highlight any significant dividends /buybacks to return the funds to shareholders. Unsurprisingly, the call was full of analysts interested more in near term earnings, rather than the longer term capital allocation decisions, and none of them pressured the management about plans to return cash.

However, most Indian promoters usually are quite reluctant to return cash, whether generated through the core business, or sales of the whole business. Even companies with otherwise great corp governance sit on high cash loads for years and years, without any significant distribution.

Apart from this, the business should do well as the shift from halogen to LED in the 2W segment continues in India. The realisations in LED are 4x the realisations in halogen. Apart from this catalyst, Italy and China could be a drag, but the indication was that the management could look to move out from these countries in case things got tough. And hopefully, we should be looking at the auto cycle turning up over the next few years.

I’m biased and have added. And I could be totally wrong.

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https://www.google.com/amp/s/www.bloombergquint.com/amp/research-reports/varroc-engineering-lighting-business-divestment-a-paradigm-shift-in-roce-icici-securities

It’s behind paywall, can anyone tell what’s in it?

Why would they give dividends if in one swoop, they can retire most or all of their debt on books? The company becomes net cash post the deal versus Rs27bn net debt earlier.

The Twitter post is hinting towards promoters misusing funds.

there is some confusion. as per the concall, they will have only 200 cr cash net of debt + 280 cr in escrow not 1500-1800 cr as you mentioned

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I think that kind of insinuation of misuse/fraud is without any basis. Company never said that it will give back the funds to shareholders. Infact the sale itself was done so as to get itself out from the debt problems it was facing due to huge capex it has undertaken over the past few years. So, they are going to use the sale proceeds to retire debt first. Guess someone was expecting case dole out to shareholders but got disappointed when it didn’t happen, and sold out

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