Edited Transcript of RANEHOLDIN.NSE earnings conference call or presentation 15-Feb-19 9:30am GMT

Rane (Madras) stand-alone had a good quarter, 7% growth with good offtake from Indian contractor division and international customers though steering products. Of course, there was an unfavorable mingle at the sensation that aftermarket was no identical buoyant, and inflationary stress above raw material continue, resulting at an EBITDA edge drop.

Rane Precision die casting, the improvement at delivery theorem -- operational theorem has started showing up. However, the sales descend and some costs of utilities and repairs and toolings increased the losses. We outline ought trade above this and targeting the [holdings] discussion we'll interpret at more what we are doing above this.

As you're aware, the revival of operational theorem of Rane REVL is underway. We experienced a good offtake from both Indian, our customers, and international OE customers. This helped REVL mail revenue growth of 16%. complete the plants improved output and reduced inner rejection deliveries consume improved, premium estate has almost become ought nil. hence productivity improvements is seen along the plants. hence certainly, during we've been talking nearly though the final 1 year, operational improvements are noise above its way. However, there was some contrary ForEx shift and produce mingle and raw material employee cost, which affected the results will outline -- and also, at this quarter, we had some one-time provisions, et cetera, which we wish we become reversed at the future. We outline ought follow different cost-reduction initiatives during a division of the turn-around plan.

Rane Brake Lining added sales growth of 5%. M&HCV and tubular customers at Rane Brake Lining did well. There was a negligible descend at aftermarket sales due ought the higher foundation result of Q3 of final year, which is the fourth GST quarter. ought some extent, here, also, ForEx had an amplify at raw material and employee revenue continue. And during we explained before, recovery of the complete estate increases -- revenue amplify is no feasible at the business.

In Rane TRW, there's a healthful export commerce at Occupant Safety business. However, domestic guest cars sales and produce declined affecting, ought some extent, the domestic demand. Raw material and ForEx impacted significantly this commerce and we are negotiating with customers ought reclaim both.

The Rane NSK had a sales growth despite a repel at guest Vehicle division helped by higher offtake at the service margins. However, we had some contrary material revenue and [dealing in] localization here during of guest approvals getting delayed. And there is a provision at this area though estimated expenses towards produce warranty ask of almost INR 20 crores and that affected the profitability severely during this quarter. Overall, Q3 has been challenging. Slowdown at the just is a commerce though concern.

With these opening remarks, I will hand it above ought Harish though his comments and then we'll receive your questions.

--------------------------------------------------------------------------------

Harish Lakshman, Rane Holdings Limited - Vice Chairman [4]

--------------------------------------------------------------------------------

Good afternoon, everyone. impartial a little comments ought add. during Mr. Ganesh explained, the overall domestic OE growth was relatively negligible final quarter, we grew the gang flat by maiden nearly 2%. And the effect -- there are little factors though this. One is, of course, the guest retail segment, which is the largest contributor, truly declined due ought the subdued demand. And at Commercial Vehicle also, silent we had growth, it was no in-line with the just chiefly due ought a mingle mystery above both little Commercial Vehicle division also during the medium and heavy Commercial segment. This is ought conduct with both Rane (Madras) and Rane TRW, depending above what friendly of vehicle application. Our revenue per vehicle is different, hence I study that impacted. That is why our numbers are slightly lower than industry.

Of course, at Farm Tractors, we grew, due ought gaining of just piece both at the mechanical manual steering gear also during our country steering hydraulic business. We also saw certain theorem at the Two-Wheeler segment, supported by ramp-up at supplies of valves and hasten from Rane Brake Lining.

The good commerce eventually area was the international revenue. International customers, we grew by 25% above final year and chiefly driven by the Rane (Madras), the steering division, mechanical steering helped also the seatbelt and airbag commerce flow by Rane TRW. Unfortunately, the aftermarket also declined by nearly 4% due ought muted demand. The domestic appeal continues ought exist sluggish, and we are keenly watching the just and visit how things rgeister up at the coming quarters.

So I study with those little comments, I study we're ready ought receive any questions you can have.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We consume our first mystery from the line of a Viraj Kacharia from Securities Investment Management.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [2]

--------------------------------------------------------------------------------

Just a link of question. First is if we appearance we're almost halfway over the quarter, Q4 FY '19. hence consume you got any revenue amplify from our customers, and does that fully cover though the immense (inaudible) revenue pressures that you are facing the final link of quarters?

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [3]

--------------------------------------------------------------------------------

You had a second question? You said 2 questions.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [4]

--------------------------------------------------------------------------------

I know. This is my question, so...

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [5]

--------------------------------------------------------------------------------

Well, we consume large revenue increase, of course, with complete customers, and we are at the process of negotiations. silent during for OEM customers appeal also has friendly of softened, certainly their reply is no during good during it used ought exist at Q3. hence longer discussions are taking place. They're also trying ought defer, if possible, any revenue increases, silent during we outline ought figure effort.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [6]

--------------------------------------------------------------------------------

Okay. So, hence far, you've got no revenue amplify cabin from the OE's.

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [7]

--------------------------------------------------------------------------------

No, there's an ongoing process, some we consume got, some we are discussing, hence I won't speak nothing. silent during it is no during forthcoming during it used ought exist at Q3 during we're also finding softening demand.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [8]

--------------------------------------------------------------------------------

Okay. Any changes ought produce schedules from OEs at the complete term, I mean, obviously, any indications above that? And if I appearance at the next 6 or 9 months, what are the communication we're getting from OEs with count ought BS6 I mean, are there some who wish ought prebuy and hence, they're looking ought ramp up production?

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [9]

--------------------------------------------------------------------------------

So I mean, clearly, this quarter, the appeal and the scheduled releases are lower than what everyone anticipated. I study that's definitely a fact. Now how wish this will continue? Is this temporary? I study honestly, flat the vehicle manufacturers are no clear. nobody give us a identical clean answer. silent during everyone is cabin holding above that there will exist pre-buy, specially Q2 and Q3 of next year. That's the mutual hint at the industry.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [10]

--------------------------------------------------------------------------------

Okay. Second mystery was above the warranty expenses. The provision, which we made at Rane at this illustration at the quarter. hence if you can elaborate what are the question and which models conduct you illustrate into?

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [11]

--------------------------------------------------------------------------------

Yes. Well, Rane NSK, we had a question at a link of models, which we serviced and the question is somewhat maiden ought India. First of all, this question has no been faced by NSK at Japan or at other markets. hence this obviously had something ought conduct with humidity and the operating conditions at sure parts of India is no coming complaints from complete over, silent during sure coastal areas, that's quantity one. hence it took us a silent ought find what is the root cause, and we study we consume fixed the mystery now ought a large extent. hence during this period, warranty announcement agreed that Maruti, there is no indispensable ought memorize during complaints are coming maiden from some areas, some customers. hence during and while sickness come, they said we replace the EPS. hence that is what we consume provided. hence we made some evaluate based above the debit hence far. We made some evaluate though the next little months and made a produce at discussions with the regulators. hence the authentic debit, et cetera will maybe exist above the next 6 months during we influence at forward. silent during we consume made a provision and of course, we are discussing with the insurance corporation though how ought commerce with it during distant during the ask is concerned.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [12]

--------------------------------------------------------------------------------

Okay. Second commerce is above NSK, are we there, flat the new models or refreshers which models you will launch [the wagoner utility] car, or the new Baleno which is going ought launch flat at some point…

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [13]

--------------------------------------------------------------------------------

Yes, these discussions are going on. Nothing presently silent during nothing has been finalized. silent during obviously, we conduct cite and we visit that our pipeline also is there though complete new models. hence it's an ongoing thing.

--------------------------------------------------------------------------------

Viraj Kacharia, Securities Investment Management Pvt Ltd - Senior Analyst [14]

--------------------------------------------------------------------------------

Just wanted ought know on...

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

(Operator Instructions) We consume the next mystery from the line of Sunil Kothari from maiden Investments.

--------------------------------------------------------------------------------

Sunil Kothari, maiden Investments (Private) Limited - fellow [16]

--------------------------------------------------------------------------------

My mystery is above a minute longer scale, whenever we endow ourselves our theorem differ is ought become better than just and become profitability. hence currently, I know that the condition is identical challenging. at this surroundings and this situation, what strategically, internally, we are doing ought perhaps adding some products or technological improvement or revenue cutting, anything you used to clothing ought speak during final year what we consume done?

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [17]

--------------------------------------------------------------------------------

See, one is -- some of these activities are no direct correlated ought contemporary performance. hence technique development, new products, looking at opportunities, this is an ongoing exercise. hence that's one thing. Second is our reaction ought the just obviously, things were going at a high growth flat cabin nearly perhaps September or so, October. maiden then we started seeing signs of softening. And flat then, our customers were no clearly indicating that it is softening. They're talking nearly some guest demand, some liquidity issue, et cetera. hence it frequently takes time at our industry ought -- though customers also ought realize, yes, there's a slowdown. hence now that seems ought exist during Harish said, flat now customers are no fully saying if it's a slowdown or if it's a temporary blip. hence however, what we conduct is immediately, of course, companies appearance at fixed cost, discretionary cost, trying ought chop hind some noncritical CapEx, there's an automatic reaction we presently do. maiden commerce during I said it takes a link of months, 3 months at our industry ought -- though complete of us ought become ought a consensus that yes, there is a slowdown.

--------------------------------------------------------------------------------

Sunil Kothari, maiden Investments (Private) Limited - fellow [18]

--------------------------------------------------------------------------------

All right, sir. And another point is this (inaudible). Somewhere we were able ought better our operational efficiency with reduced [blade] cost, silent during other expenses consume been going up. hence during final 2, 3 quarters, we are ready ought receive a shout above this divesture. Any thoughts or any changes, anything at detail if you can speak us nearly that situation.

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [19]

--------------------------------------------------------------------------------

I study I during explained at the final call, I study I communicated that while we acquired the commerce at 2016, February, we put together a plot class of 3 years turnaround, silent during it truly breakeven from -- at the goal of 3 years. Now unfortunately, that is getting definitely delayed by 2 years during I said due ought some operational problems that we were optimistic of improving, silent during we could no truly [wall] our target. And secondly, a big contributing factor was lack of new business. silent during definitely, there is some traction at the final 3, 4 months above some new commerce that we consume started winning. And most of this will vary into revenue at the next 12 ought 18 months. hence I study we're cabin maintaining that it will receive 2 years ought become this commerce around. during of now, the visibility is cabin there, silent during the commerce can exist turned around. Honestly, we cannot exist reviewing this quarter-to-quarter. I study perhaps we made the statement final October. hence perhaps by this coming October, we will become a good confidence during ought where the commerce is heading and if this is -- at the goal of 5 years, from acquisition, we acquired at 2016 -- at the goal of 5 years, if we are cabin in-line with differ -- the revised differ or not, we will consume a clearer picture. I study it'd exist identical difficult ought comment above it above a quarter-to-quarter basis.

--------------------------------------------------------------------------------

Sunil Kothari, maiden Investments (Private) Limited - fellow [20]

--------------------------------------------------------------------------------

That is fair. I totally receive that. silent during what I scene is at Q3, any -- the condition which is perhaps no at our conduct or can no exist during (inaudible) if you used to clothing ought convert or any thoughts above that. That's why I asked you, anyway. Second sir, is die casting, domestic die-casting business. Any change, any main orders I study we are trying during wish though some new commerce also and some parts above this hydraulic segment, which is doing well?

--------------------------------------------------------------------------------

Lakshminarayan Ganesh, Rane Holdings Limited - Chairman & MD [21]

--------------------------------------------------------------------------------

So at perish pitch division, silent we conduct visit some latent new [articles] with corporate, et cetera, we study '19, '20 can outline ought exist stressful at condition of peak line and capability utilization. hence '19, '20, we are maiden focusing above revenue reduction farther or diminish revenue and own the losses ought a minimum. silent during we conduct visit some good possibilities though '20, '21 though which we are discussing with customers and maybe at the next 3 ought 6 months we will know how 2021 bid book is, which looks a minute promising during of now. Now at condition of hydraulic business, that continues ought conduct well. at fact, we expanded our capability and flat compared ought Q3 of final year while we did nearly INR 12.2-odd crores, we did nearly INR 17 crores at this area of this year, and it continues ought grow. 1 or 2 new customers increasing just piece and 1 or 2 new technologies there, initial projects though automation at the farm sector, customers are talking ought us. hence