Auto: It’s A Joyride
During 2016-17 the Indian automotive industry (excluding two-wheelers) grew 6.5 per cent, with the passenger vehicle industry registering a growth of 9.2 per cent and record sales crossing the 3-million mark. The commercial vehicle industry grew 4.2 per cent. However, the medium and heavy commercial vehicles segment remained flat at a volume of 0.3 million. The two-wheeler industry, in fact, did even better. It grew 6.9 per cent, with sales crossing a record 17-million mark.
As a consequence, many industrialists, who are from the automotive and its allied sectors, reaped rich dividends during the last fiscal.
One such prominent figure is Anand Mahindra, chairman of Mahindra Group, a Mumbai-based business conglomerate. The group has market leadership in many business verticals including utility vehicles, tractors (world’s largest company by volume), used cars (India’s largest multi-brand pre-owned car company), finance (largest rural NBFC in India), hospitality (India’s largest chain of resorts) and IT (among the top five IT service providers). Mahindra’s net worth rose 32 per cent to $11 billion in 2017.
The group’s flagship company Mahindra and Mahindra (M&M) recorded a 7.92 per cent increase in revenue from operations to Rs 47,096 crore in FY16-17 compared to Rs 43,639 crore in the previous year. Its automotive division recorded a total sales of 5,06,624 vehicles (4,52,893 four-wheelers and 53,731 three-wheelers) against 4,94,096 vehicles (4,37,911 four-wheelers and 56,185 three-wheelers) in the previous year, registering a growth of 2.5 per cent in vehicle sales. On the domestic sales front, M&M sold a total of 469,384 vehicles compared to 4,58,065 vehicles in the previous year, resulting in a growth of 2.5 per cent.
Rahul Bajaj, chairman of the Indian conglomerate Bajaj Group and member of Parliament, is another stalwart of the auto industry. His son Rajiv Bajaj — managing director (MD) of Bajaj Auto since 2005 — who introduced the Pulsar range of motorcycles, is credited with reviving the fortunes of the company, and subsequently benefiting the Indian auto industry. The family’s net worth rose 67 per cent and reached a whopping Rs 152,071 crore ($23.8 billion) in 2017.
Even though Bajaj Auto’s net sales de-grew by 3.5 per cent to Rs 21,374 crore, its operating EBITDA was at 21.7 per cent, which continues to be the highest in the industry. Its total sales in the domestic market grew 5 per cent as the company sold over 20.01 lakh units compared to 18.98 lakh units in FY15-16. Despite the temporary blip in the market created by demonetisation, Bajaj Auto was the first two-wheeler maker in the country to introduce BS IV-compliant models.
Siddhartha Lal, CEO and managing director of Eicher Motors (EML), is taking rapid strides to go global to attain scale, while remaining local in terms of its product lines. He shifted base to London in 2015 to expand the company’s global footprint, and also spearheaded the establishment of an R&D centre of Royal Enfield (RE), the motorcycle division and profit engine of EML. Lal’s net worth went up by 34 per cent (Rs 10,242 crore) on a year-on-year basis, and reached Rs 40,261 crore ($6.42 billion) in FY16-17.
EML’s consolidated net revenue from operations for the year 2016-17 was Rs 7,033 crore, a growth of 35 per cent over 2015-16. During the same period, EML’s consolidated EBITDA grew 50.9 per cent to Rs 2,174 crore and PAT grew 45.8 per cent to Rs 1,667 crore. In terms of margins, EML consolidated set a new industry benchmark with an EBITDA margin of 30.9 per cent in 2016-17. VE Commercial Vehicles (VECV), EML’s joint venture with Volvo Group, had a good year in tough market conditions as its consolidated net revenue from operations for the year 2016-17 stood at Rs 8,549 crore, a growth of 10.5 per cent over the previous year. EBITDA and PAT of VECV grew 4 per cent and 3 per cent respectively, over the previous year. Sale of commercial vehicles grew 12.9 per cent to 58,604 units driven by a strong growth in sales of heavy duty trucks (23.1 per cent) and exports (23.4 per cent).
RE successfully withstood all rumblings such as the sudden change in implementation dates for BS IV emission norms, cyclone ‘Vardah’ at Chennai (where RE has a plant), demonetisation, etc., and managed to register a growth of 31.2 per cent over the previous year by selling 6,66,135 motorcycles. This enabled it to enhance its market share in the 150cc and above category of motorcycles in India from a mere 4.7 per cent in 2011 to 24 per cent in 2016-17.
Vivek Chaand Sehgal is one of the rare entrepreneurs who has prospered through mergers and acquisitions in the auto ancillary space. Despite constant disruptions in the market, his group of companies have constantly overdelivered on every occasion. Sehgal is the chairman and co-founder of the $9.1-billion (approx. Rs 58,240 crore) Samvardhana Motherson Group (SMG), whose flagship company Motherson Sumi Systems (MSSL) makes components including wiring harness, rear-view mirrors, plastic components and modules for the global automobile industry. While MSSL garnered new orders worth Rs 18,922 crore (€2.5 billion) during the first half (H1) of FY17-18, the execution of orders worth Rs 11,705 crore (€1.5 billion) started during H1 FY17-18. Sehgal’s net worth shot up by a whopping Rs 21,771 crore (75 per cent) during the year, and was worth Rs 50, 621 crore ($7.9billion) Pawan Kant Munjal is another automobile billionaire . He belongs to the promoter family of Hero Group. Munjal, the third child of Brijmohan Lall Munjal, currently serves as the chairman, managing director and CEO of Hero MotoCorp (HMCL), the largest two-wheeler manufacturer in the world. Despite the dwindling gap in total monthly sales compared with Honda Motorcycle and Scooter India, HMCL has affirmed that it will be able to hold on to its marketshare and record sustained double digit growth over the next few years. Munjal family’s networth, which also includes various auto ancillary firms, went up by 27 per cent (Rs 5,942 crore) to Rs 28,221 crore. The family’s net worth stood at $4.4 billion in 2017.
The world’s largest two-wheeler maker in terms of volumes, HMCL is now looking at aggressive market share gains to further consolidate its leadership this fiscal (FY17-18), without compromising on the bottom line and its margins. In 2012, the BSE-listed firm had announced that it was looking at $10 billion sales in five years with total sales of 10 million units, out of which 10 per cent was to come from exports. Later, in 2014, it revised its projections to 12 million units by 2020, without disclosing export targets. Its revenue during FY16-17 went up to Rs 31,368 crore.
