Gurdeep Soni, Chairman -; Managing Director, Uniparts India Limited

2 Dec 2022 , 01:12 PM

Why should retail investors invest in your company?

Uniparts is a global manufacturer of engineered systems and solutions and are one of the leading suppliers of systems and components for the off-highway market in the agriculture and construction, forestry and mining (“CFM”) and aftermarket sectors on account of our presence across over 25 countries. Uniparts has a leading presence in the manufacture of 3PL and PMP products globally on account of its serving some of the largest global companies.  Our global business model serves as an effective solution for customers seeking to rationalize their global sourcing and supply chain by providing them multiple choices in the form of Local Deliveries, Direct Exports and Warehouse Sales, while at the same time helping company to manage costs and increase our margins. Our global business model facilitates

• Cost-competitive and ability to diversify margins based on delivery models
• Ability to service multiple customer locations across the globe

Our key strengths include:

• Global service delivery model eliminating the supply chain risk
• Long term relationship with key marquee customers in agriculture and construction sectors
• Dual off shire manufacturing
• Diversified product portfolio and geographies
• Strong financials

 
Our efficient business model has driven operating leverage, has facilitated in sustaining healthy EBITDA margins and cash flow generation facilitating towards promoting continuity in regular cash flows. We have utilized our resources prudently enabling it to fund capital expenditure through internal accruals and have been able to reduce our total debt.

How much is the promoters’ stake in the company now and what will it be after the IPO?

Currently Promoter including Promoters group combined holds 75.54% equity shares in total shareholding. Post issue the Promoter holding will be 65.78%.

How much growth do you expect for the next 4-5 years?

Our product portfolio, apart from core product verticals of 3-point linkage systems (“3PL”) and precision machined parts (“PMP”), also includes adjacent product verticals of power take off (“PTO”), fabrications and hydraulic cylinders or components thereof which provide further head room for growth.

We are well positioned to benefit from increasing mechanization in the agriculture and CFM sectors, in particular through leveraging our global business model, which allows us to efficiently serve OEMs across multiple global locations, contributing to their increasing efforts to rationalize their supply chain and asset/working capital management.
We also cater to the aftermarket segment especially for 3PL product range. We provide replacements of 3PL parts to organized aftermarket retailers and distributors in North America, Europe, South Africa and Australia.

Share with us the key macro opportunities for your company across all key markets.

With reference to United States of America which contributes 49.94% of our total revenue as on three month ended June 30, 2022, the government has passed a USD 1 trillion bipartisan plan in November 2021 to rebuild roads and bridges, modernize public works systems and boost broadband internet, among other major improvements to the nation’s infrastructure according to Crisil Report and we expect that this will positively affect our growth. With the uncertainties with reference to Russia Ukrain wars and other geopolitical issues, there is drain of the export surplus of grain from Russia and Ukrain, this had cause the prices of food grains to grow up which had resulted in the higher income from farmers, also due to two covid years there was lesser focus on replacing or investing in new machines, hence the growing farmer’s income and need for replacement will drive the demand for equipments. In addition, China has slow down due to challenges related to spread of Covid-19 pandemic and China Plus One policy is working in India’s favour.

India comparatively is considered to be uniquely positioned with reference to availability of skilled young work force and technological know-how according to rating agencies which has projected India to be the second fastest growing economy in 2023 and 2024.

Within India we enjoy leading market presence in global off-highway vehicle systems and components segment. Our long term relationships with global customers in the agriculture and CFM sectors, such as TAFE, Claas Tractors and Kramp developed over the years, make us amongst prominent players within India. Four of our top five customers (based on contribution to our revenue from operations during Fiscal 2021) have been our customers for over 10 years. TAFE and Kramp are some of the customers with whom we have had relationships for over 15 years, while with customers like Yanmar, we have developed relationships for over 10 years.

What are your plans to target new customers and expand the existing ones through your presence in the country?

The Company intends to increase our sales and customer penetration by targeting new customer accounts and expanding our existing customer accounts in our principal markets by offering our entire range of products.

The Company intends to continue to consolidate and develop our relationships with large and renowned global OEMs whose product portfolios are spread across industries such as agriculture, CFM and industrial equipment, as well as our value engineering and process innovation competencies so as to be able to enter new and related markets and acquire, evolve and strengthen our customer relationships.

The Company intends to offer our customers additional 3PL and PMP products to meet our customers’ requirements and thereby growing our share of customers’ spend per vehicle. In particular, we believe that the CFM sector offers us the opportunity to target new customers for our products. Between 2021 and 2026, growth is expected to be driven by Europe and India due to higher expected investment in infrastructure projects. We believe that we will be able to capitalize on our reputation for quality, consistent performance and customer satisfaction in our existing markets and product verticals to target new customers.

How are you taking the benefit of China plus one strategy?

Management believes that it is well positioned to benefit from the China+ 1 trend. There are regular enquiries as well as awards which are being witnessed as several western customers and corporations are looking to increase sourcing from India.

What are the expansion plans of your company?

We have established an end-to-end and scalable business model which caters to a number of requirements of our customers in the OHV market. We intend to leverage our manufacturing and warehousing infrastructure, global footprint and value proposition to expand further in newer geographies, adjacent product verticals, acquire additional customer accounts as well as increase wallet share among our existing customers. We intend to achieve this by focussing on increasing the share of customer spend per vehicle by manufacturing additional 3PL products for more than 60 horsepower vehicles, PMP products for large construction equipment, fabrication solutions such as agriculture implements and construction attachments, and new PTO applications.

We are also actively exploring adjacent vehicle and equipment types such as utility task vehicles and all-terrain vehicles where we have developed prototypes of system solutions that are currently in trial phase. We believe there are opportunities for these solutions both in the aftermarket segment as well as with OEMs.

We further believe that there exist significant opportunities to cross-sell our products and offer the same product to additional locations of our existing customers with the help of our established capabilities and manufacturing, warehousing and distribution infrastructure. We have multiple such global customers wherein we service their different business divisions, several manufacturing plants in multiple global geographies.

Our experience in servicing aftermarket customers and large retail store chains provides us with additional opportunities in large adjacent product spaces and in particular in agriculture segment.

What are your growth strategies?

• The company would leverage its integrated precision engineering capabilities and established global business model, to tap additional business opportunities and expand addressable market.
• Target new customer accounts and expand existing customer accounts.
• Grow inorganically through strategic acquisitions and alliances.

What are the key challenges the company is facing? How are you mitigating the same?

Our domestic and international operations are subject to competitive pressures in all our product lines. We compete directly and indirectly with other manufacturers and suppliers of engineered components to OEMs (including OEMs that produce such components for their own use) and in the aftermarket.

We compete on the performance, functionality, customer service and support, availability, price and brand recognition of our products. Increased competition may force us to improve our process, technical, product and service capabilities and / or lower our prices or result in loss of customers, which may adversely affect our profitability and market share, in turn, affecting our business, financial condition, results of operations and prospects.

Our global business model serves as an effective solution for customers seeking to rationalize their global sourcing and supply chain by providing them multiple choices in the form of Local Deliveries, Direct Exports and Warehouse Sales, while at the same time helping us to manage costs and increase our margins.
We have grown our global business model in a scalable manner, optimized to provide premium-priced Local Deliveries manufactured on-shore in smaller lots and with shorter lead times, as well as cost-competitive offshore deliveries from India with longer lead times and inventory cycles.

In our experience, our India-led manufacturing and overseas-led warehousing coupled with localized customer service capabilities have been a key driver for the growth of our operations. Our global business model also enables us to diversify our margins based on different delivery models for the same product.

We maintain inventory in our warehouses which helps mitigate supply chain risks for our customers and reduces long lead time involved in transit of cargo internationally. We believe, our facilities in India, the United States and Europe are strategically located in proximity to several global OEMs in the OHV industry. We provide timely deliveries tailored to customer specifications in terms of their production schedules, geographical needs, applications, vehicle sizes and technical specifications, and also provide customized packing, warehousing and kitting solutions and logistical support to our customers. We serve our OEM customers from all of our manufacturing, warehousing and distribution facilities, across all our product verticals.