Promoted by J.K.Jain, FIEM Industries is one of the leading manufacturers of automotive lighting and signaling equipment and rear-view mirrors. Major business comes from the two-wheeler segment of the vehicle industry. The company is capable of catering to the needs of almost all segments of the automobile industry: two-wheelers, three-wheelers, light commercial vehicles (LCVs) and tractors.
FIEM has technical support agreement with Ichikoh Industries, Japan. Ichikoh is supplier of automotive lighting, rear-view mirrors to major Japanese vehicle manufacturers such as Nissan Motors, Tyota Motor Corporation, and Daihatsu Motor. It has also entered into a memorandum of understanding (MOU) with Zadi Divisione Fanaleria CEV Spa, Italy, for producing products as per Zadi's specification for the European as well as the Indian markets. However, this MOU is yet to be converted into any agreement.
Customers of FIEM, both in India and abroad, range from TVS Motor Company, Honda Motorcycles and Scooters India, Suzuki Motorcycle India, LML, Kinetic Engineering., Kinetic Motor Company., Majestic Auto, Scooters India, General Motors, Hyundai Motors India, Skoda Auto India, Swaraj Mazda, Ashok Leyland, HMT Tractors, and Tractors and Farms Equipment to Piaggio Italy, Aspock Systems GmbH, Austria, and Geka, Germany.
The objects of the issue are to put up new manufacturing facilities and expand existing facilities. FIEM is setting up a 100% EOU (Unit-V) at Hosur, Tamil Nadu, and a unit at Nalagarh, Himachal Pradesh, a state that accords various tax benefits. Commercial production at both the units is expected to commence by January 2007.
Strengths
- The Indian auto component industry is expected to experience robust growth over the coming years. Growing demand from domestic original equipment manufacturers (OEMs) coupled with massive export opportunity created due to outsourcing by global OEMs and Tier 1 companies will be good for FIEM's growth. Already an established player with good technical collaboration, the company is expanding aggressively to capitalise on new opportunities as also to win over business from competitors, which are not aggressive. However, if it fails to tie up enough new business for the new and expanded capacities, its financials will suffer.
Weaknesses
- FIEM is dependent on TVS Motors, which accounted for around 70% of the total income in FY 2006. This makes it vulnerable to the fortunes of TVS Motors and also reduces its bargaining power with TVS Motors.
- The details of the MoU/ joint venture agreement by FIEM with Korea Airconditioners Company and Aspock Holding GmbH, Austria, for entering into totally new auto ancillaries such as air-conditioners and wiring harness are not available. These can increase the risk profile of the company.
- The FY 2006 performance is extraordinary, with sales up 24% and net profit 136% due to the sharp rise in operating profit margin (OPM) from around 9% in the past four years to 12.6%. This is despite the sluggish sales and profit of its largest customer, TVS Motors.
Valuation
The post-IPO EPS based on FY 2006 earning works out to Rs 6.6. At the offer price band of Rs 125-145, the PE range is 18.9x to 21.9x. The TTM PE of the Auto Ancillary-Lamps industry is around 13.5.