Rane (Madras) LtdQ2 FY25Auto Components

Rane (Madras) Ltd

Q2 FY25 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 2

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Rane Group reported a 7.4% increase in total revenue for Q1 FY26, reaching INR 884.4 crores.
→They secured INR 800 crores worth of new business wins in the quarter, positioning for future growth.
→The Occupant Safety Systems division is expected to grow at a strong double-digit rate (15-20%) over the next 3-4 years, driven by domestic and export demand.
→Steering Gear Division growth is tied to the Commercial Vehicle market, which is currently soft but expected to pick up, positively impacting volumes.
→The Group sees opportunities in export markets with new orders and new customer wins, including electric steering programs.
→Continued investments are planned to support an anticipated 15-18% annual growth in the Occupant Safety business.
→The organization is optimistic about sustaining new business wins and maintaining a positive order pipeline.
→Export growth is returning after 4 quarters of stagnation but tariff-related uncertainties exist.

Margin guidance

Category 2

→Rane Group reported 7.4% revenue growth in Q1FY26 and secured INR800 crores in new business wins, indicating strong future growth prospects.
→Occupant Safety Systems division expected to grow at a strong double-digit rate (15%-20%) over the next 3-4 years.
→Steering Gear Division’s growth tied to Commercial Vehicle segment, expected to pick up as the CV market recovers.
→Short-term synergies from mergers expected to improve margins by ~1% over the year.
→Mid to long-term synergies (consolidated procurement, centralized functions) expected over 18-24 months, driving margin expansion.
→EBITDA margins for new businesses expected around 8%, with overall company margins targeting double-digit levels in line with market growth and synergy realization.
→Confident about improving company performance every quarter, with stable margins of 3%-4% in Rane Steering until new businesses kick in after 2 years.
→Management plans quarterly updates to reflect ongoing performance and growth trajectory.

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Fundraise plans

→There is no immediate plan for further mergers or consolidations at the Rane Holdings level, indicating no immediate large-scale fundraising announced.
→The ZF Rane joint venture business is currently carrying INR 679 crores debt, expected to remain at these levels for 1-2 years due to growth investments.
→Rane Madras aims to reduce debt by about INR 150 crores this year, partly funded by land sales (e.g., Velachery land).
→No explicit mention of new equity fundraising; capital infusion is discussed only for Rane Steering to reduce its current INR 170 crores debt.
→Overall, the company is focused on internal debt reduction and managing capacity investment through existing funding and debt rather than raising new funds immediately.

Order book

Yes

→The order book for Rane Group has been quite good in the quarter, driven by a combination of both new order wins and replacement of previous products.
→The company is optimistic about continuing to win and book a lot of new business.
→There are always quarter-to-quarter variations, so exact predictability is limited.
→Newly won businesses, including a new electric steering program for a passenger car platform, contribute to growth.
→The management feels positive about the order book pipeline and expects it to continue strong.
→Export growth, especially in markets including Europe, has started to pick up after a period of flat or negative growth.
→New business wins amounting to around INR800 crores were achieved in the quarter, positioning the company for future growth.

Capex plans

Yes

- Rane Madras is continuously investing to expand capacity, aiming to support around 15%-18% annual growth, especially in the Occupant Safety business. - For the Occupant Safety business, the incremental investment ratio is about 1 INR for every 5 INR of sales growth. - More investments are ongoing and some are supported through the PLI scheme. - ZF Rane JV continues to invest, funded through its own balance sheet without fresh equity from Rane or ZF. - Future capacity expansion and related capital expenditure will align with new business opportunities and market growth. - There is no immediate plan for further mergers or consolidations to affect strategic investments, but the group continues to evaluate land monetization and asset rationalization to reduce debt and possibly reinvest. Overall, the group focuses on capacity building in high-growth segments with measured investments, backed by internal accruals or debt as needed.

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