Jitendra Divgi, Managing Director, Divgi TorqTransfer Systems Limited

3 Mar 2023 , 09:43 AM

Run us through the company’s business model.

Our business model is supported by stable and recurring revenues, with a consistent track record of revenue growth and profitability.

We are amongst the very few suppliers in India who have the capability to develop and provide system level transfer case, torque coupler and DCT solutions. We manufacture and supply a variety of products under the broad categories of (i) torque transfer systems (which includes four-wheel-drive (“4WD”) and all-wheel-drive (“AWD”) products); (ii) synchronizer systems for manual transmissions and DCT; and (iii) components for the above-mentioned product categories for torque transfer systems and synchronizer systems in manual transmission, DCT, and EVs. We have also developed (i) transmission systems for EVs; (ii) DCT systems; and (iii) rear wheel drive manual transmissions.

We have three manufacturing and assembling facilities across India located at Sirsi in Karnataka, and Shivare and Bhosari near Pune in Maharashtra, with the manufacturing facilities at Shivare and Bhosari being strategically located in proximity to our key clients, and one under-construction manufacturing facility located at Shirwal, Maharashtra. 

We have long term relationships with OEMs such as Mahindra & Mahindra, an Indian supplier to global automotive OEM, and a USA based multi-national automotive supplier. 

We have made investments in our R&D and in building production capacities for future growth. We have developed in-house capabilities to deliver evolving technologies for future mobility solutions.

What is the growth strategy of the company?

As part of our growth strategy, we plan to increase our market share in both the Indian and overseas markets by catering significantly to EV OEMs. We intend to further leverage our presence in yet another fast-developing trend, which is the increasing demand for automatics observed across the entire UV segment. 

In our existing automotive powertrain solutions and products portfolio, we aim to consolidate and strengthen our market share in domestic and global markets by leveraging our long-standing customer relationships to enter into new products and vehicle programs, expand into new geographies for existing customers and develop new customers.

We are in the process of launching domestically manufactured DCT systems for the Indian market, post which we will be the only manufacturer of DCT systems in India. We are planning to localize and commercialize 7 Speed Dual Clutch Automatic Transmission. 

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

As electrification of vehicles which continues to expand, driven by government regulations related to emissions, such as CAFE norms, as well as consumer demand and with the increasing penetration for automatics in passenger vehicles and with the emergence of EV, we believe that automotive drivetrains will shift from just mechanical systems to electronics control with embedded software to control the operation of these systems. The market for EV transmission is expected to increase by CAGR of 77-82% from Fiscal 2022 and 2027 in volume terms as well as value terms. 

Provide us with a snapshot of the company’s financial profile. What are the company’s key strengths thereof?

Our focus on continuous efficiency improvements, improved productivity and cost rationalization has enabled us to deliver consistent and strong financial and operational performance. Despite the overall slowdown in the global automotive sector in Fiscal 2020 and the impact of the COVID-19 pandemic, we were able to maintain our EBITDA margins. We have established a track record of growth and financial performance with steady cash flows from our operations. Between Fiscal 2020 and Fiscal 2022, our profit after tax increased at a CAGR of 28.30%. Our strong balance sheet and positive operating cash flows enable us to fund our strategic initiatives, pursue opportunities for growth and manage unanticipated cash flow variations. 

How will you deploy the funds raised via the IPO?

We aim to capture the growth trend in revenue realization per system assembly and component with increasing electronics, embedded software and electrification by continuously investing in R&D to develop and deliver new innovative systems, components,. For achieving the same, we propose to purchase equipment/ machineries for our existing manufacturing facilities in Sirsi, Karnataka; Shivare, Maharashtra; and our under construction facility at Shirwal, Maharashtra. The equipment’s being procured will be used for the purpose of EV transmissions, DCT automatic transmissions and 4X4 transfer case

From the total net proceed of fresh issue of Rs. 180 crore, we intend to utilize Rs. 150.7 crore towards funding capital expenditure requirements to purchase equipment’s / machineries for our manufacturing facilities and the balance amount towards general corporate purpose. 

Share with us the key challenges facing the company. How are you mitigating the same?

The market for electric vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and consumers’ willingness to adopt electric vehicles. 

We are one of the very few suppliers in India having the capability to develop and provide system level transfer case, torque coupler, DCT solutions and transmission systems for EVs across a wide array of automotive vehicles and geographies, with leadership across select product categories. 

Our future growth depends on our ability to continue to design, develop and commercialize innovative, viable and sustainable new automotive systems and components in a timely and cost-effective manner, improve our existing systems and components, or to develop process improvements that can shorten production times, improve quality and cost efficiency. We are an R&D led systems and solution provider offering differentiated and customized solutions to our customers as demonstrated by our recent contracts for EVs and Hybrid Vehicles. We aim to capture this growing trend by continuously investing in R&D to develop and deliver new and innovative systems and components.