Skip to main content

Bharat Gears


Bharat Gears supplies gear components to the light, medium, heavy, utility vehicle segments as well as construction equipment and agricultural tractors.

It is the leading supplier of gear components in India with a strong customer base including the likes of John Deere, JCB, Toyota, M&M, Tata, etc.

The company reported stable operating profits on growing revenues in the last five years – reporting about 45cr in operating profits on revenues of 430cr in the last twelve months.  It operated with a modest net debt load as at 31st March, 2012.

Demand for the company’s products is cyclical and strongly linked to interest rates.  These rates also have an impact the company’s existing debt servicing costs and future investment plans.

A large portion of the revenues is derived from tractor and off-highway segments and is therefore largely dependent on agricultural conditions (monsoon factors, etc.) and demand from construction equipment manufacturers (infrastructure economics, etc.).

One segment of the company’s market - the replacement market - doesn’t appear to be strong enough to provide opportunities for substantial growth in the future probably as a result of higher quality and longer-lasting original equipment currently in the market.

There is increasing competition from global OEMs and this will pose a competitive threat to the company in the future.

The revenue is somewhat concentrated on a few large customers and therefore, the loss of one such customer could dent the revenues and profits badly.

The business is exposed to inflationary cost increases on all fronts including crude oil, steel, and other raw materials.

It is a net exporter and therefore, it is exposed to a strengthening INR.

Comments

Post a Comment

Popular posts from this blog

On The Radar: India's Small-Cap Equities (Concluded)

We have been running a series of articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in December 2011 - and followed up twice - with the last article in December 2013. We would like to conclude this series after updating the small-cap index level and returns, comparing it to our expectations ex-ante, and analysing the current scenario.  Following this, we have also outlined where we may take this blog in the future. The small-cap index closed at 11,087.07 on December 31 st , 2014.  This compares to a level of 6,150.65 in our last article – resulting in an advance of over 80% to date. This is a handsome absolute return by any standard, particularly compared to Indian government bonds, which yielded around 8-9% for the period.  This justifies the conclusion at the end of our previous article that “small-caps in India offer among the most attractive bargains during any time since 2006 and certainly in the entire Indian stock market today...
1 comment
Read more

Under the Radar: India’s Mid-Cap and Small-Cap Equities

Indian stock markets have been one of the worst performers in 2011 – worse than their BRIC peers, worse than the rest of Asia and far worse than the US with the leading indices declining about 25% during the year.  Foreign investors in India have also suffered substantial declines of nearly 20% in INR currency value. There appear to be several reasons for the market’s dislike for Indian equities in 2011, which include persistent inflation (including food inflation, which constitutes the major proportion of the typical Indian household), political paralysis (e.g. rollback of foreign investment in retail etc.) and global concerns about the solvency of several Eurozone countries. As a result, estimated GDP growth for the next financial year has been revised downwards from about 8% earlier in the year to about 6% now - with many market commentators wondering whether this rate of growth is India’s ‘new normal’.  This is still, however, substantially higher than global av...
2 comments
Read more

Under The Radar: India’s Small-Cap Equities (Part Three)

In February of this year, we summarised the valuation parameters of the BSE Small-cap Index in India (now the S&P BSE Small Cap Index) - following on from an earlier report we wrote in December, 2011 - and drew certain conclusions. We would like to update the valuation scenario with the data today, review those conclusions, and form new ones based on the available information. The small-cap index closed today (17 th December, 2013) at 6,150.65 with an indicated price to book value of 1.04. The closing value as on February, 2013 was 7,006.73 representing a decline of over 12% as of today. The current index value masks a greater fall of over 27% to a low of 5,085.56 in August, 2013. This represents an unsatisfactory overall performance for those who invested in small caps at the beginning of the year. In our earlier report, we made two assumptions towards the end of our report to form a conclusion as to prices then:          ...
Post a Comment
Read more