Auto & Auto Ancillaries

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    Auto & Auto Ancillaries

    Ashwini Prasad - JSABalram Ramesh - JSA

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    Auto Sector IntroductionSize - $40Bn a year and contributes to5% of Indias GDP

    Scale - 1.5 millionvehicles produced

    and employs inexcess of 13

    million people

    Domestic Sales 10 Million(2008-

    09) approx with aCAGR of 9.79%(2002-03)

    9th largest in theworld

    Indian two wheeler segment being 2 nd

    largest in theworld

    Industry isseasonal in nature

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    Market Segmentation

    2 Wheelers Bikes, Mopeds

    3 Wheelers Auto Rickshaws

    Passenger Cars Cars, UVs and

    JeepsCommercial Vehicles LCV,HCVlike Buses, Trucks and Tractors

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    Domestic Market Share for

    2008-09

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    Major Players2 Wheelers HHML, BAL, TVS, HMSI, Yamaha, Royal

    Enfield (Eicher)3 Wheelers Piaggio, BAL, M & M

    Passenger Vehicles - Maruti Suzuki, Tata Motors, M &M, Hindustan MotorsPassenger Cars GM, Ford, Fiat, BMW, Mercedes-

    Benz, Skoda, Hyundai

    Commercial Vehicles Tata Motors, M & M, Eicher,Swaraj Mazda, Piaggio, Force MotorsCV- Tractors M & M, Punjab Tractors, Escorts

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    Major Automobile ClustersMumbai-Pune-Nasik-AurangabadChennai-Bangalore-Hosur Delhi-Gurgaon-Faridabad

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    Value Chain

    Procurement Production Quality/TestingMarketing &

    Sales Services

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    Inputs

    Steel, Rubber, Aluminium, Plastics

    Broadly prices aligned to global markets

    Cost advantage depending on proximity to source

    Mix of local as well as imports

    Safety components imported

    CKDs imported for assembly

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    Cost

    Distribution

    RawMat

    cost 79%

    Manu.Cost

    4%

    Labour Cost

    3%

    S & DCosts

    7%

    Other Costs

    7%

    Drivers

    Commodities Forex

    SalesDiscou

    nts

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    G rowth Drivers

    Increasingconsumer demand

    CostCompetitiveness

    New ProductLaunches

    GovernmentPolicies

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    Government Regulations

    Excise, VAT, Import DutiesTaxation

    Simulated collision of a vehicle or vehicles - Design strengths &weaknesses and Crash compatibility

    Crash TestNorms

    BS IV norms to be introduced in 11cities by 2010 & BS III to beintroduced across India

    EmissionNorms

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    Sector Characteristics

    100% FDI allowed

    Increased competition with new entrants

    Capital intensive with high entry and exit barriers

    Greater emphasis on exports

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    Key Financial Ratios

    Debt to Equity Ratio

    Price to Earnings Ratio

    Price to Book Value Ratio

    Operating profit marginOPM

    Inventory

    Dividend Yield

    Cash Conversion Cycle

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    Positives

    Proactive Government

    Receding InflationSoftening of Int. rates and lending by PSU banks

    Stabilizing commodity prices

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    Challenges

    Interest

    RatesCrude

    Consumer Sentiment Credit Availability

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    Global News

    Cyclical recovery is underway in the global auto industry

    Sales in June posted their best performance since last July led by

    China in the developing markets and Germany in mature markets

    Car sales in China accelerated by 48% yoy in June

    Government stimulus and tax incentives are spurring the revival inChina.

    In Brazil, a combination of tax breaks, lower prices and improvedconfidence lifted sales to a record annual rate of 3.1 million units inJune 21% above a year earlier

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    Global News

    Sales in North America bottomed in the opening months of 2009

    Sales will increase in coming months by the recentlyimplemented cash-for-clunkers program in the United States

    In Germany, government scrappage programs have led tostronger-than-expected car sales in the first half of 2009

    The program is scheduled to expire at the end of 2009

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    Outlook

    Strong sales figures for August onthe back of healthy July numbers

    Raw material prices are expected toremain stable

    Deficient Monsoons remain aConcern

    Cautious with a positive bias

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    Auto Ancillaries

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    Auto Ancillaries - Introduction

    Industry Size is about $18.7Bn (2008-09)

    550 organized & 6000 unorganized players

    Domestic Revenues have shown a CAGR (2002-07) of 27.2%

    Exports grew at the rate of 35% during 2002-07

    Investments in the industry are estimated at $7.2 Bn in 2007-08

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    S ector Characteristics

    Runs in parallel with automobile sector

    High Bargaining by the OEMs: Low Margins

    High Competition: Global Players Presence

    Competitive Pricing: Low cost & focus on cost cutting

    Exports on the riseHigh Barriers to entry: Technology & Relationship with OEMs

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    S trengths of the S ector

    Low Cost of Components

    Availability of Labour

    More than 550 ISO9000 companies

    Low Cost Automation

    Flexibility in SmallBatch Production

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    S egments of IndustryEngine Parts

    Drive Transmission & Steering parts

    Suspension & Braking parts

    Body & Chassis

    Equipments

    Electrical PartsTyres

    Others

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    S hare of each segment

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    M ajor Players : S egmentsEngine Parts Bosch, Federal-Mogul Goetze, Samkrg Pistons, Ucal FuelSystems

    Electrical Parts Exide, Amara Raja, Denso, Minda, Motherson Sumi

    Drive Transmission & Steering Parts Sona Koyo, ZF Steering, Automotive Axles, Steel Strips Wheels, Clutch Auto, Ceekay Daikin

    Suspension & Braking Parts Amtek Auto, ANG Auto, Sundaram Clayton,Brakes Auto

    Equipment Fiem Inds, Phoenix Lamps, Lumax.

    Tyres Apollo Tyres, MRF Tyres

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    S ector Characteristics

    Runs in parallel with automobile sector

    High Bargaining by the OEMs: Low Margins

    High Competition: Global Players Presence

    Competitive Pricing: Low cost & focus on cost cutting

    Exports on the riseHigh Barriers to entry: Technology & Relationship with OEMs

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    Revenue & ExpenditureThe S ources of revenue for auto-ancillary industry :

    1. OEMs purchases (50%)2. Replacement Parts (35%)3. Exports (15%)

    The Demand depends on the Domestic (85%) & Global Auto Industry Demand (15%)

    Expenditure for the industry :1. Raw Material costs- Steel & Aluminum prices2. Plant, Machinery & Maintenance, Wages

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    F uture Prospects

    Aided by a 7% growth in OEM segmentand 8.5% increase in exports and after market segment, ancillary production isexpected to grow by 8.2% in 09-10

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    Why we are hopeful?

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    Thank You