Background:
- Lumax Auto Technologies Ltd. (LATL) was incorporated as Lumax Auto-Electricals Pvt. Ltd. in year 1981. Subsequently, it became a public company and changed its name to Dhanesh Auto Electricals Ltd. in year 1988. In year 2006 it again changed its name to present one.
- LATL is a part of the DK group of companies. It manufactures automotive components like sheet metal products and lighting systems for two and three wheelers. Its product range includes headlamps, tail lamps, blinkers, fog lamps, engine lamps, chassis assembly, petrol tank and silencers.
- The company has five manufacturing facilities. All facilities are located in Maharashtra, one each at Bhosari and Chakan and three units at Waluj.
- Its customer base includes eminent players like Bajaj Auto Ltd., Maharashtra Scooters and its group company Lumax Industries Limited. Almost 80% of its production is catered to Bajaj Auto Ltd.
- LATL has acquired 100% stake in its group company, Lumax DK Auto Industries Ltd. (LDK) in year 2006 and it became a 100% subsidiary of the LATL. LDK is mainly engaged in manufacturing and supplying of automotive parts for four-wheelers manufacturers.
- Post-issue promoters shareholding will reduce to 59.28% from existing 79.99%.
- To invest in its subsidiary, LDK
- To set-up automotive lighting unit at Pantnagar for Rs. 23.43 crore.
- To set up leveling motor unit at existing Manesar unit in Haryana for Rs. 3.90 crore.
- To enhance infrastructure at Manesar unit for Rs. 0.79 crore.
- To Set up chassis assembly unit at Bhosari for Rs. 11.87 crore.
- Expansion and modernization of existing manufacturing unit at Chakan for Rs.6.58 crore.
- Modernization of development centre at Chinchwad for Rs. 1.15 crore.
- To meet issue expenses of Rs. 2.50 crore.
- LATL has customers like Bajaj Auto, Maharastra Scooters, Maruti Udyog, who have been associated with for quite some time.
- Indian Auto component sector has been growing at a CAGR of 16% for past 7 years and is expected to grow at the same rate.
- The company has negative cash flow since FY 2002.
- LATL’s major customer is Bajaj Auto Ltd, which accounts for 80% of its production. This limits the pricing power of the company.
- Upward trend of raw material like steel sheet, tubes and polymers can put significant pressure on operating profit margin.
- The unorganized sector is very large and a threat to reputed brand because of their low pricing.
- The net sale of the company has increased at a CAGR of 42.72% to Rs. 117.23 crore in FY06 from Rs. 40.32 crore in FY03. Net profit has also increased at a CAGR of 76.47% to Rs. 3.83 crore for the same period.
- Return on net worth has reduced to 28.92% in FY06 from 40.14% in FY05. Current net worth of the company as on 30 June’06 is Rs. 14.51 crore. Return on net worth for the same period is 10.80%.
- The book value per share as on 30th June 2006 is Rs.16.84
- Post issue annualised EPS based on 30th June 2006 is Rs. 5.39. The shares are being offered for a fixed price of Rs. 75/-. Post issue P/E multiple comes out to be 13.91. Industry average P/E is 21.50.
- However, the results of FY05 and FY06 are not comparable, as LATL has acquired LDK on Jan’06 and results for FY06 are given on consolidated basis.