NRB Bearings Ltd – Rolling out growth

NRB Bearings (NRB) was the first company to manufacture needle roller bearings in India. For over 40 years, NRB has been the pioneer and leader in the bearing technology space. It is a recognized leader and the largest manufacturer of needle roller bearings in India, with ~70% segmental market share. With 65% revenue coming in from domestic OEMs, NRB is expected to be a key beneficiary of robust growth in the automobile sector. We are especially positive about the 2 wheeler segment (30% revenue contribution) in view of improving rural economic conditions. It has two government accredited R&D centers that focus on quality engineering and disruptive technologies that will drive future growth.

NRB’s product range covers over 5,500 different types of parts of primarily customized friction solutions. It is one of the three largest suppliers of customized bearings, and crank pins to the two and three-wheeler industry. NRB Group has a market share of ~70% in the needle roller bearings segment, and a strong market position in the cylindrical roller bearings segment. The Company is a leader in needle roller bearings, conventional cylindrical roller bearings, and has developed a new generation of lightweight drawn cup bearings.

NRB has a diversified revenue stream with no customer contributing to more than~10% of revenues for the Company. The top 10 clients contribute ~50% of the top-line. With a proven track record of over 50 years, it is the preferred supplier for leading domestic OEMs such as Hero MotoCorp, Bajaj Auto, Maruti Suzuki, Tata Motors and Ashok Leyland, among others. NRB will be a key beneficiary of the strong volume growth witnessed in the automobile segment across sectors, with OEMs accounting for ~65% of revenues. Exports are also growing at a robust pace, led by a recovery in the North-American and European truck/PV markets (~20% of revenue). Increasing traction in the after-market segment and incremental revenue from the defence, aerospace and railway segments, coupled with a fall in interest cost, would aid in topline growth and margin expansion.

In the CV segment, it now supplies 100% of needle and cylindrical bearing requirements to Eicher Motors & Volvo. Among tractors, apart from supplying entrenched players such as Mahindra and TAFE, NRB is also the sole supplier of needle and cylindrical bearings to high-growth newer companies, who are swiftly gaining market share, like Sonalika and John Deere. In passenger cars, the company is the most crucial supplier of custom-designed bearings for India’s largest players, especially in transmission bearings. NRB’s foray into defense has commenced successfully, with its products being accepted at DRDO and NAL.

NRB has three subsidiaries viz. SNL Bearings Ltd, NRB Bearings (Thailand) Ltd and NRB Bearings Europe GmbH. SNL Bearings Ltd (SNL), in which NRB holds 73.45% equity, reported PAT of Rs 6.6 cr in FY17. Despite the challenging environment in the Indian economy post demonetization and implementation of new BIS-IV emission norms, SNL achieved a sales growth of 11.5% from increased sales volumes from existing and new OEM customers. SNL expects to further capitalize on growth opportunities during the current year, and enhance profitability with an emphasis on improving quality and productivity. NRB Bearings (Thailand) Ltd (NRBT), a wholly-owned subsidiary, increased its sales by 18% to Rs 29.9 cr in FY17. The company has made a maiden profit for the year at Rs 85 lks, mainly owing to higher manufacturing volumes and lower exchange losses. NRB Bearings Europe GmbH, a wholly-owned subsidiary, was set up to support an increase in exports to Europe.

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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’

 

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