Varroc Engineering, a leading Tier-I automotive component supplier, has secured new order wins exceeding Rs 8,700 crore during FY24, positioning it for significant growth in the coming years.
According to the company, the new order wins correspond to an annual peak value of approximately Rs 1,500 crore. These wins are projected to generate additional revenue of Rs 850 crore in FY25, bolstering
the company’s financial performance. It will add up to Rs 1450 crore in FY26 and Rs 1750 crore in FY27, provided production as indicated by respective original equipment manufacturers (OEMs) takes place as per the schedules.
In terms of lifetime revenue, about 52% of this new order intake comes from Bajaj Auto, while the rest comes from others. Bajaj Auto, which is Varroc Engineering’s largest customer, contributed about 42% of the company’s overall business, the company’s earnings call with investors revealed.
Another interesting fact is that electric vehicles (EVs) constituted nearly 43% of the new order intake, which the company management believes is a positive sign. Varroc Engineering’s revenue from supplying to EV players during the previous fiscal stood at approximately 5.3% of the overall revenue.
In terms of segments, close to 81% of the new orders fall into the categories of two-wheelers and three-wheelers. These two segments contributed roughly around 75% of the company’s revenue.
Varroc Engineering specialises in manufacturing and supplying electrical-electronics, polymers, metallic, and exterior lighting systems to leading original equipment manufacturers (OEMs) worldwide. With their comprehensive capabilities spanning design, development, and manufacturing, they cater to a wide range of vehicles, including two-wheelers, three-wheelers, passenger vehicles, commercial vehicles, and off-highway vehicles.
In FY24, Varroc Engineering achieved consolidated revenue from operations amounting to Rs 7,551.9 crore. Moreover, the company’s net profit for the same period reached Rs 553 crore. Regarding the revenue breakdown, it’s important to consider that two of the company’s largest segments — electrical and electronic lighting – contributed 37.8%. Secondly, about 32% of revenue came from polymers.
In terms of geographical distributions, about 87% of the revenue came from within India, while the rest came from global markets. Varroc’s overseas business was impacted in FY24 as two-wheeler automotive sales in the overseas market fell, and dependence on single customers impacted its revenue. The company management claims that it is taking corrective measures to boost performance, including driving cost reduction efforts to improve their margins through backward integration initiatives like SMT lines that are already in place. The management hopes to revive the overseas business in the coming 1-2 years.
Tarang Jain, CMD, said, “The global economy faced several uncertainties during FY24 due to intensified conflicts in Europe and Asia. The expectations for decisive rate cuts across the world have been moderated in recent times, as underlying inflationary pressures are not easing as fast as expected. However, the risk of a global recession seems to be receding now. We hope that the geopolitical issues don’t escalate further.” He added, “For the full FY24, our India operations continued to deliver strong performance with growth of over 14.1%. Our overseas business was impacted in FY24 due to significant degrowth in 2W automotive sales and heavy customer concentration in certain overseas markets.”
This feature was first published in Autocar Professional’s June 15, 2024 issue.