Well Diversified Business Model
The company’s business model is diversified by customer base, end-segment, geography, and product portfolio.
Customer Base: The company has a diversified customer base. In India, its customers include nine of the top 10 2W OEMs and the leading PV OEM. Globally, its customers include six out of top 10 global Light Vehicle OEMs and three of the top 10 global MHCV OEMs. In FY21, it supplied to 71 customers compared to 64 in FY19.
End Segment: It derives revenue from multiple segments within the automotive sector, including the 2W, PV and CV. Within the non-automotive sector, it manufactures a range of components for aerospace, off-road, agriculture and other segments. (See the table below)
|Particulars (Rs. in Crores)||FY21||FY20||FY19|
|Sub-total of Automotive||1,288.64||88.45%||1,223.97||87.86%||1,342.05||87.89%|
|Sub-total of non-Automotive||168.26||11.55%||169.07||12.14%||184.93||12.11%|
Geography: Sensera has focused on increasing export revenue with a view to reduce dependence on the domestic market. Its revenue is geographically diversified with Europe, the USA, and other countries. (See the table below)
|Particulars (Rs. in Crores)||FY21||FY20||FY19|
|Export Revenue Total||510.21||35.02%||426.56||30.62%||473.37||31.00%|
Product Portfolio: The company manufactures a range of components for multiple end applications. Its key product includes connecting rods, rocker arms, and crankshafts. (See the table below)
|Particulars (Rs. in crores)||FY21 %||FY20 %||FY19 %|
|Crank Shaft Assembly||17.22%||18.17%||18.85%|
|Gear Shifter Forks||6.58%||7.21%||8.37%|
Long-Standing Relationships with Well-Known Indian and Global OEMs
In India, Sensera’s customers include nine of the top 10 2W OEMs and the leading passenger vehicle OEM. Globally, its customers include six out of top 10 global Light Vehicle OEMs and three of the top 10 global MHCV OEMs. It has relationships spanning 10 years or more with 12 of its top 20 customers. (See the table below)
|Sr. No.||Name of the Entity||Years of Relationship|
|4||Honda Mototcycle and Scooter||21|
|6||European 2W OEM||13|
|7||Honda Cars India||13|
|10||One of the leading North American PV OEMs||12|
|12||Royal Enfield Motorcycles||10|
|14||Daimler India CVs||7|
|15||Toyota Kirloskar Motor||6|
|18||Global Tier 1 supplier||4|
Better Financial Performance Trend Compared to Overall Industry
In FY21 (compared to FY20), 2W production volume in India declined by ~12.6% and the PV production volume declined by ~11%. In CY20 (compared to CY19), the global Light Vehicle and CV segments registered a decline in production of ~17.8% and 4.4%, respectively. Despite decreases in production volumes, Sensera’s sales increased by 6.32% YoY in FY21 (Source: AceEquity). Its operating income has grown at a CAGR of 12.12% from FY16 to FY20 compared to the average CAGR of 7.4% for the top 10 listed auto-component manufacturers in India by market capitalization, in the same period.
In FY21, its revenue from new business (i.e., sales of existing and new products to new customers and sales of new products to existing customers) increased 3x from Rs. 72.18 crores in FY20 to Rs. 222.59 crores. The company has been able to increase profits and reduce borrowings over last two years; its consolidated PAT increased from ~Rs. 97.5 crores in FY19 to Rs. 108 crores in FY21, while its Net Debt reduced from Rs. 563.76 crores in FY19 to Rs. 484.61 crores in FY21.
Further Diversification into Non-automotive Businesses and Expanding Addressable
In the aerospace sector, the company plans to expand its engine and landing gear component offerings as well as expand into the supply of subsystems and assemblies. In addition, it plans to expand the end use application of its components from civilian to defence aerospace. In order to facilitate this strategy, it plans to construct a new greenfield manufacturing facility in Bangalore which is dedicated to aerospace and defence. This facility is planned to have a built-up area of ~13,000 sqm. compared to a built-up area of 4,000 sqm for its current facility for aerospace. The management expects the facility to be commissioned during FY23.
In off-road, Sensera has recently secured additional business to supply multiple new components, including suspension parts, for an existing customer’s new program. It has added another customer in the segment for eventual supplies in Canada and the European Union and management intends to increase revenue from this segment by adding new products and customers. The company also plans to develop and manufacture additional precision components for other non-automotive applications where it can leverage its capabilities.
|Particulars (Rs. in Crores) FY21||Revenue CAGR (FY18 - FY21)||OPM (%)||PAT (%)||RoE (%)||RoCE (%)||EPS||PE (x)|
|Motherson Sumi Systems||0.63%||7.62%||1.81%||8.27%||8.23%||3.29||64.82|
Key Risks and Concerns
Incorporated in 1981, Sansera Engineering Limited is an integrated manufacturer of precision engineered components across automotive and non-automotive sectors. Within the automotive sector, it manufactures a range of components and assemblies such as connecting rod, rocker arm, crankshaft, gear shifter fork, stem comp, aluminium forged parts, etc. for the two-wheelers, passenger vehicles, and commercial vehicles. Within the non-automotive sector, it manufactures a range of components for the aerospace, off-road, agriculture and other segments, including engineering and capital goods.
It is one of the top 10 global suppliers of connecting rods within the light vehicle segment and connecting rods within the commercial vehicle segment for CY20. It is India's major supplier of 2W OEMs' connecting rods, rocker arms, and gear shifter forks. In FY21, it sold components across 69 products compared to 51 during FY19. The recently developed products by the company include I) suspension, rotor, and aluminium forged components for internal combustion engines (ICE) and electric 2W, II) steering system components and drive train parts for ICE and hybrid PV, III) cabin tilt system components and braking system parts for CVs, among others.
As of July, 2021, Sensera had 16 manufacturing facilities, of which 15 are in India and one in Sweden. The company is in the process of setting up a dedicated facility for hybrid and electric components at one of its plants in Bangalore and the company expects this facility to be commissioned during FY22. It also plans to construct a greenfield manufacturing facility in Bangalore dedicated to aerospace and defence and this facility is expected to be commissioned during FY23E.
The company is one of the oldest suppliers to OEMs and has been in the industry for four decades now. It has maintained long term relationships with some of the top names in the industry. The company has managed to outperform the industry trends through the introduction of new products and acquisition of new customers. Its revenue from new business has increased 3x from Rs. 72.2 crores in FY20 to Rs. 222.6 crores in FY21. Further, the company intends to develop multiple technology driven systems and components to cater the growing opportunities in electrification of vehicles and is in a process of setting up a dedicated facility for hybrid and electric components in one of the plants in Bangalore and this facility is expected to be commissioned during FY22. As the industry will come out of head winds caused by Covid-19 and supply side disruptions, domestic sales of the company could see an uptick in medium-to-long term. At the upper price band of Rs. 744, the issue is valued at 33.4x of FY21 earnings.
Use of Proceeds:
The issue is Offer for Sale. The promoters and selling shareholders are offering 1,72,44,328 equity shares. Net proceeds from the issue will not be used for company’s operations.
Book running lead managers:
ICICI Securities Limited, IIFL Securities Limited, and Nomura Financial Advisory and Securities (India) Private Limited.
Subramonia Sekhar Vasan (Chairman and Managing Director), Fatheraj Singhvi (Joint Managing Director), Raunak Gupta (Non-Executive, Nominee Director), B R Preetham (Group Chief Executive Officer), and Vikas Goel (Chief Financial Officer of the company)
|Year End March (Rs. in Crores)||2018||2019||2020||2021|
|Depreciation & Amortization||60.77||70.49||93.90||101.68|
|EBIT Margin %||13.88%||13.34%||9.16%||11.14%|
|Interest & Finance Charges||44.00||50.92||60.73||49.55|
|Profit Before Tax - Before Exceptional||157.50||182.12||88.68||146.15|
|Profit Before Tax||145.29||166.46||88.68||146.15|
|Effective Tax rate||37.11%||36.87%||9.52%||24.83%|
|Net Profit Margin||6.39%||6.11%||5.51%||7.09%|
|Consolidated Net Profit||85.26||97.46||80.64||107.99|
|Net Profit Margin after MI||6.28%||6.00%||5.53%||6.97%|