MIRA
INFORM REPORT
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Report Date : |
28.01.2008 |
IDENTIFICATION
DETAILS
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Name : |
SONA KOYO STEERING SYSTEMS LIMITED |
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Registered Office : |
UGF - 6, Indraprakash, 21, Barakhamba Road, New Delhi - 110 001 |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
14.06.1984 |
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Com. Reg. No.: |
018415 |
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CIN No.: [Company
Identification No.] |
L29113DL1984PLC018415 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
CHES05669G |
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Legal Form : |
Public limited liability company.
The company's shares are listed on the Stock Exchanges. |
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Line of Business : |
Manufacturing of Automotive Components for four Wheelers. |
RATING &
COMMENTS
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MIRA’s Rating : |
A |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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Maximum Credit Limit : |
USD 5336532 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well – established and reputed company having
satisfactory fine track. Directors are reported as experienced, respectable
and having satisfactory means of their own. Trade relations are fair.
Business is active. Payments are reported as usually correct and as per
commitments. The company can be considered good for normal business dealings at
usual trade terms and conditions. It can be regarded as a promising business partner in a medium to long
– run. |
LOCATIONS
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Registered Office : |
UGF - 6, Indraprakash, 21, Barakhamba Road, New Delhi - 110 001, India |
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Tel. No.: |
91-11-23311924 |
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Fax No.: |
91-11-23327205 |
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E-Mail : |
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Website : |
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Corporate Office : |
8th Floor, DLF Square, Jacaranda Marg, M-Block, DLF City Phase II, Gurgaon -122 002, Haryana, India |
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Tel. No.: |
91-124-6560717-19 |
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Fax No.: |
91-124-6563004 |
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Liaison Office : |
2nd Floor, Piramal Mansion, 235, D. N. Road, Fort, Mumbai - 400 001, Maharashtra, India |
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Plants : |
·
38/6 NH 8, Delhi – Jaipur Road, Gurgaon – 122001, Haryana, India ·
P.O. Box 14, Chennai – Bangalore Highway (NH – 4), Sriperumpudur,
District Chinglepet – 602105, Tamilnadu, India ·
Plot No.32, Industrial Area, Phase ii, Dharuhera, District Rewati
Haryana, India |
DIRECTORS
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Name : |
Mr. Dr. Surinder Kapur |
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Designation : |
Chairman and Managing Director |
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Date of Birth/Age : |
63 years |
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Qualification : |
Ph. D.(Mechanical Engineering), Michigan State University, U.S.A. |
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Experience : |
33 years |
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Date of Appointment : |
01.10.1990 |
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Name : |
Mr. A. K. Jain |
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Designation : |
Director |
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Name : |
Mr. Dr. Omkar Goswami |
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Designation : |
Director |
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Name : |
Mr. Kiyoshi takeda |
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Designation : |
Director |
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Name : |
Mr. Ramesh Suri |
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Designation : |
Director |
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Name : |
Mr. Jug Mohan Kapur |
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Designation : |
Director |
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Name : |
Mr. Sanjay Kapur |
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Designation : |
Vice Chairman |
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Name : |
Mr. B. L. Passi |
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Designation : |
Director |
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Name : |
Mr. Lalit Suri |
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Designation : |
Director |
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Name : |
Mr. Chander Uday Singh |
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Designation : |
Director |
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Name : |
Mr. Ravi Bhoothalingam |
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Designation : |
Director |
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Name : |
Mr. P. K. Chadha |
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Designation : |
Director |
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Name : |
Mr. Atanu Maity |
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Designation : |
Operating Management |
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Name : |
Mr. Rakesh K. Gaind |
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Designation : |
Operating Management |
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Name : |
Mr. Pramod K. Agarwal |
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Designation : |
Operating Management |
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Name : |
Mr. Soumya Choudhary |
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Designation : |
Operating Management |
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Name : |
Mr. Sammer Kumar Jindal |
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Designation : |
Operating Management |
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Name : |
Mr. S. C. Gupta |
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Designation : |
Oprating Management |
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Name : |
Mr. A. D. Rao |
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Designation : |
Operating Management |
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Name : |
Mr. Tomizo Nakava |
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Designation : |
Nominee of Jtekt Corporation, Japan |
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Name : |
Mr. Shinichi Takeuchi |
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Designation : |
Nominee of Maruti Udyog Limited |
KEY EXECUTIVES
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Name : |
Mr. Sudhir Chopra |
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Designation : |
Company Secretary |
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Date of Birth/Age : |
49 years |
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Qualification : |
B. Com, FCS, LL.B |
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Experience : |
29 years |
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Date of Appointment : |
15.05.1993 |
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Name : |
Mr. Kiran M. Deshmukh |
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Designation : |
Chief Operating Officer |
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Date of Birth/Age : |
53 years |
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Qualification : |
B. Tech (Metallurgy) |
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Experience : |
30 years |
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Date of Appointment : |
01.08.1986 |
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Name : |
Mr. P. V. Prabhu Parriker |
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Designation : |
Executive Management |
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Date of Birth/Age : |
60 years |
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Qualification : |
Mechanical Engineer |
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Experience : |
33 years |
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Date of Appointment : |
01.02.1991 |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
As on 31.12.2007
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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Promoter and
Promoter Group 2 |
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Indian |
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Individuals/Hindu Undivided Family |
500424 |
0.52 |
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Bodies Corporate |
29937631 |
30.88 |
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Foreign |
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Bodies Corporate |
19486394 |
20.10 |
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Public shareholding
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Institutions |
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Mutual Funds |
1612898 |
1.66 |
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Financial Institutions/Banks |
3300 |
0.00 |
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Insurance Companies |
780940 |
0.81 |
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Foreign Institutional Investors |
287502 |
0.30 |
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Non Institutions |
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Bodies Corporate |
10731143 |
11.07 |
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Individual Shareholders holding nominal share capital upto of Rs.0.100 Million |
20032804 |
20.66 |
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Individual Shareholders holding nominal share capital in excess of Rs.0.100 Million |
11936153 |
12.31 |
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Any Others |
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Trust |
21500 |
0.02 |
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HUF |
1333049 |
1.38 |
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Clearing Members |
283497 |
0.29 |
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Total |
96947235 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Manufacturing of Automotive Components for four Wheelers. |
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Products : |
-
Rack and Pinion
Manual Steering -
Rack and Pinion
Power Steering -
Re-circulating
Ball Screw type Gear Assy -
Column Assembly – Rigid -
Column Assembly
– Collapsible -
Column Assembly
- Collapsible Tilting -
Universal Joints DRIVE LINE -
Propeller Shaft Application Range -
Passenger Cars, Small Vans -
MUV, SUV -
Light Commercial Vehicle |
PRODUCTION STATUS
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Particulars |
Unit |
Installed
Capacity |
Actual
Production |
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Steering Gear Assembly including component |
Nos. |
550000 |
406996 |
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Axle Assemblies incl. Comp. |
Nos. |
92000 |
901993 |
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Case differential Assembly |
Nos. |
300000 |
-- |
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Propeller Shaft |
Nos. |
112000 |
-- |
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Rack and Pinion Assy. |
Nos. |
120000 |
13834 |
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Column and UJ Assy. |
Nos. |
120000 |
91341 |
GENERAL
INFORMATION
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Suppliers : |
·
Advance Forging Private Limited ·
Onassis Auto Products Private Limited ·
Bosch Chessis Systems India Limited ·
Arjan Auto Private Limited ·
Advantech ·
Paragon Autotechs Private Limited ·
Shram Engineering Works ·
RMP Bearing Limited ·
Gentech Toolings Private Limited |
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No. of Employees : |
689 |
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Bankers : |
· State Bank of India · Standard Chartered Bank · State bank of Hyderabad · Centurion Bank Limited · BNP Paribas · CITI Bank, N.A. · UCO Bank · ICICI Bank Limited · HSBC Limited · The Hongkong and Shanghai Banking Corporation Limited |
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Facilities : |
Notes : 1. Term Loans from Banks include: a) External Commercial Borrowings of USD 1 Million (Previous
Year USD 2 Million) is secured by an exclusive first charge on the specific Plant and Machinery and equitable mortgage of the land in
Chennai. b) External Commercial Borrowings of USD 1.5 Million
(Previous Year USD 2 Million) is secured by first pari-passu charge on all
the movable and immovable properties both present and future. c) External Commercial Borrowing of USD 6 million
(Previous Year USD 6 Million) is secured by first pari-passu charge on all
the movable and immovable properties both present and future. d) Rupees Term Loan of Rs.140.000 Millions (Previous Year
Rs.85.000 Millions) is secured by first pari passu charge on all the movable
plant and machinery both present and future excluding certain plant and machinery
exclusively charged to CITI Bank and GE Capital. 2. Term Loan from others of Rs.100.822 Millions (Previous
Year Rs.114.988 Millions) is secured by exclusive first charge on specific
equipments financed. 3. The Short Term Loans from Banks are secured by
hypothecation of inventories, book debts and other receivables both present
and future. 4. Sales Tax Loan is secured by pari passu first charge
over all immovable property including embedded fixed assets of the Company
excluding the assets exclusively charged to other lenders.
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
S. P. Puri and Company Chartered Accountants |
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Address : |
4/18, Asaf Ali Road, New Delhi 110 002, India |
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Collaborators : |
· Koyo Seiko Company Limited, Japan · Mando Machinery Corporation, Korea |
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Associates/Subsidiaries : |
· Sona Somic Lemforder Components Limited · Sona Cold Forgings Limited · Sona Okegawa Precision Forgings Limited · Mahindra Sona Limited · Pune Heat Treat Private Limited · Three S Solutions Limited · Mandira Investment and Finance Company Private Limited · Trinayana Auto Private Limited · Kapur Properties and Investments · Marugi Udyog Limited · Sona Investment Limited · Hypersonic Investment Limited · Turbo Investment Limited · Sona Koyo Steering Systems Limited |
CAPITAL STRUCTURE
Authorised Capital :
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No. of Shares |
Type |
Value |
Amount |
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125000000 |
Equity shares |
Rs.2/- each |
Rs.250.000 Millions |
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Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
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92330500 |
Equity shares |
Rs.2/- each |
Rs.184.661
Millions |
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a) 4,39,67,000 (Previous Year Nil) Equity Shares of Rs.21- each, fully paid up have
been issued as Bonus Shares by Capitalization of Capital Redemption Reserve.
b) 43,96,700 (Previous Year Nil) Equity Share of Rs.21- each fully paid up have
been issued as preferential issue to the Promoters of the Company.
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
184.661 |
87.934 |
87.900 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
1149.472 |
753.450 |
641.000 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
1334.133 |
841.384 |
728.900 |
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LOAN FUNDS |
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1] Secured Loans |
955.281 |
1051.887 |
863.300 |
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2] Unsecured Loans |
3.800 |
3.800 |
3.800 |
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TOTAL BORROWING |
959.081 |
1055.687 |
867.100 |
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DEFERRED TAX LIABILITIES |
209.496 |
193.534 |
0.000 |
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TOTAL |
2502.710 |
2090.605 |
1596.000 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
1375.940 |
1215.375 |
932.900 |
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Capital work-in-progress |
458.907 |
77.941 |
87.500 |
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INVESTMENT |
298.689 |
297.689 |
296.600 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
304.511
|
241.894 |
209.900 |
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Sundry Debtors |
811.034
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411.936 |
411.600 |
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Cash & Bank Balances |
15.394
|
15.547 |
8.000 |
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Other Current Assets |
20.750
|
24.350 |
0.000 |
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Loans & Advances |
306.605
|
255.568 |
214.600 |
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Total
Current Assets |
1458.294
|
949.295 |
844.100 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
1036.009
|
463.526 |
569.600 |
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Provisions |
98.235
|
65.391 |
62.900 |
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Total
Current Liabilities |
1134.244
|
528.917 |
632.500 |
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Net Current Assets |
324.050
|
420.378 |
211.600 |
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MISCELLANEOUS EXPENSES |
45.124 |
79.222 |
67.400 |
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TOTAL |
2502.710 |
2090.605 |
1596.000 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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Sales Turnover |
5807.533 |
3399.791 |
3629.400 |
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Other Income |
27.118 |
32.027 |
43.900 |
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Total Income |
5834.651 |
3431.818 |
3673.300 |
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Profit/(Loss) Before Tax |
415.745 |
250.677 |
253.300 |
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Provision for Taxation |
138.618 |
88.086 |
86.600 |
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Profit/(Loss) After Tax |
277.127 |
162.591 |
166.700 |
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Earnings in Foreign Currency : |
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Export Earnings |
546.578 |
481.096 |
N.A. |
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Other Earnings |
4.208 |
5.885 |
N.A. |
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Total Earnings |
550.786 |
486.981 |
N.A. |
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Imports : |
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Raw Materials |
7.399 |
10.730 |
N.A. |
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Stores & Spares |
1938.157 |
584.062 |
N.A. |
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Capital Goods |
95.006 |
60.126 |
N.A. |
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Others |
0.000 |
0.000 |
N.A. |
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Total Imports |
2040.562 |
654.918 |
N.A. |
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Expenditures : |
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Raw Material Consumed |
4254.280 |
2322.161 |
2048.500 |
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Finished Goods and Work – In – Process |
(10.466) |
(13.003) |
654.500 |
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Excise Duty on Increase/(Decrease) in
Finished Goods |
3.940 |
3.026 |
51.200 |
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Manufacturing Expenses |
285.246 |
228.303 |
122.300 |
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Employees Remuneration and Benefits |
385.296 |
279.711 |
218.900 |
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Selling and Administration Expenses |
253.791 |
168.903 |
161.700 |
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Research and Development Expenses |
17.449 |
15.676 |
43.300 |
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Financial Charges |
86.888 |
50.536 |
26.700 |
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Other Expenditure |
142.482 |
125.828 |
92.900 |
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Total Expenditure |
5418.906 |
3181.141 |
3420.000 |
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QUARTERLY RESULTS
|
PARTICULARS |
30.06.2007 1st
Quarter |
30.09.2007 2nd
Quarter |
31.12.2007 3rd
Quarter |
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Sales Turnover |
1526.400 |
1645.600 |
1720.400 |
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Other Income |
18.800 |
22.900 |
10.000 |
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Total Income |
1545.200 |
1668.500 |
1730.400 |
|
Total Expenditure |
1366.000 |
1469.000 |
1537.800 |
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Operating Profit |
179.200 |
199.500 |
192.800 |
|
Interest |
21.200 |
27.800 |
32.500 |
|
Gross Profit |
158.000 |
171.700 |
160.100 |
|
Depreciation |
34.700 |
36.000 |
45.200 |
|
Tax |
47.100 |
47.100 |
9.000 |
|
Reported PAT |
79.800 |
87.900 |
73.200 |
KEY RATIOS
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
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|
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Debt-Equity Ratio |
0.93 |
1.22 |
0.92 |
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Long Term Debt-Equity Ratio |
0.93 |
1.22 |
0.92 |
|
Current Ratio |
1.16 |
1.32 |
1.25 |
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Turnover Ratios |
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Fixed Assets |
3.23 |
2.20 |
2.42 |
|
Inventory |
25.77 |
18.12 |
21.76 |
|
Debtors |
11.53 |
9.96 |
11.54 |
|
Interest Cover Ratio |
5.47 |
5.35 |
10.49 |
|
Operating Profit Margin (%) |
8.99 |
10.16 |
10.27 |
|
Profit Before Interest and Tax Margin (%) |
7.23 |
7.53 |
7.71 |
|
Cash Profit Margin (%) |
5.70 |
6.60 |
7.15 |
|
Adjusted Net Profit Margin(%) |
3.94 |
3.97 |
4.59 |
|
Return On Capital Employed (%) |
25.03 |
18.43 |
22.86 |
|
Return On Net Worth (%) |
25.47 |
20.71 |
24.86 |
LOCAL AGENCY
FURTHER INFORMATION
History :
Subject was incorporated on 14th July, 1984 at New Delhi having Company's Registration Number 18415.
Incorporated in June, 1984, Sona Steering Systems (SSSL) commenced business in September, 1985. SSSL has entered into a technical collaboration with Koyo Seiko Company, Japan which holds 20.47% stake in the company. It manufactures steering gears and column assemblies to be used in Maruti and other new-generation fuel-efficient automobiles.
In February, 1988, it came out with a 23 million public issue to part-finance its Rs116.2 millions project to manufacture 0.125 million steering gear assemblies per annum. In August, 1991, it came out with a rights issue of PCDs to finance the capacity expansion (cost : Rs207.7 millions) from 0.125 million pa to 0.175 million pa and diversification to manufacture 50000 axle assemblies.
The company signed an Mou with Oberland Mangold, Germany, to manufacture metallic catalytic convertors which are smaller, more efficient and cost-effective. With environmental protection devices having been made compulsory, there is huge market for convertors. SSSL has tied up with Mahindra and Mahindra to form an new firm, Mahindra Sona. The company was accredited with the ISO-9002 certification by RWTUV.
The company was awarded Maruti's "Best Vendor Award", in the category of steering and suspension components. It has received preferential capital of Rs.100 millions from its collaborators Koyo Seiko Co Limited Japan in the year 1999-2000. With this, the name of the company has been changed to subject.
During the fiscal 2001, its profits suffered due to higher cost of inputs for power steering and delay in implementation of localization plans.
Management
Discussion and Analysis :
The Indian economy has witnessed unprecedented growth in
recent years. According to the latest estimates of the Central Statistical
Organisation, the country's GDP has achieved growth of 9.2 per cent during
2006-07 - thus, lifting the compounded annual growth rate of the economy during
the last four years to over 8.5 per cent. A key element of this growth has been
the resurgence of manufacturing across all sectors, accompanied by an across
the-board buoyancy in investments. As a result of several quarters of
consistent double-digit growth for index of industrial production [IIP] -
closing with 12.5 per cent growth in March 2007 - the share of manufacturing
has increased by over one percentage point to 26.4 per cent of overall GDP.
Within manufacturing, the automotive industry has been one of the highest
growth segments.
Domestic vehicle sales [including two wheelers) increased by
13.5 per cent during 2006-07 and crossed the 10 million mark for the first time
in the country's history. Sale of passenger vehicles, which is the key end-use
segment of subject grew by 21.93 per cent from 1.140 million units in 2005-06
to 1.39 million in 2006-07. Commercial vehicle sales grew by 33.3 per cent from
351,000 units in 2005-06 to 468,000 during 2006- 07. In addition, vehicle
exports also grew at a healthy rate of 25.4 per cent during the year, and
reached the milestone of 1 million units.
This sustained growth in the domestic automobile industry
has augured well for the auto components industry. Not only has demand
increased, but also growth has given the key auto component manufacturers the
opportunity of being the preferred suppliers to global automobile majors.
Recognising the potential of the auto industry, the Government
of India has laid out an ambitious target in its Automotive Mission Plan,
2006-2016'. The vision in this plan is for India to emerge as "... the
-destination of choice in the world for design and manufacture of automobiles
and auto components with output reaching a level of US$ 145 billion, accounting
for more than 10 per cent of the GDP and providing additional employment to 25
million people by 2016."
Subject shares this vision and recognises that scale and
technology are going to be the key drivers to make it a reality. In line with
this, the company had already announced in the previous year's Annual Report,
its investment plans amounting to Rs.4 billion over the next four years. During
2006-07, Subject invested over Rs.0.660 billion in expansion and modernisation
of its operations. While the benefits of these additional investments will
accrue in a more substantial way in the future, the Company registered an
impressive performance in the current fiscal year. Highlights of Subject
financial performance during 2006-07 are:
·
Net sales increased by 70.8 per cent - from Rs.3,400 million
in 2005-06 to Rs.5,808 million in 2006-07
·
Operating profit (OPBDIT) rose by 59.3 per cent – from
Rs.377 million in 2005-06 to Rs.600 million in 2006-07
·
Cash profits (PBDT) grew by 50.8 per cent - from Rs.358
million in 2005-06 to Rs.540 million in 2006-07
·
Profit after tax (PAT) increased by 70.4 per cent - from
Rs.163 million in 2005-06 to Rs.277 million in 2006-07
·
Return on capital employed (ROCE) increased by over 6 percentage
points to 27.8 per cent in 2006-07
·
Return on net worth (RONW) grew by 1.5 percentage points to
20.8 per cent over the same period,
·
Earning per share increased from Rs.1.85 in 2005-06 to
Rs.3.1 in 2006-07.
Markets :
Subject product portfolio includes two types of products -
steering systems and driveline products. The steering systems portfolio
includes Manual Steering, Hydraulic Power Steering, Steering Column and more
recently introduced Column-type Electronic Power Steering Systems. Driveline products
include case differentials, rear axle assemblies and propeller shafts.
During 2006-07, steering systems accounted for approximately
85 per cent of the total revenues of the Company, while driveline products
constituted the rest.
Subject is the largest supplier of steering systems to
passenger vehicle manufacturers in the country. While the Company intends to
maintain its dominant position in the domestic market, it has identified
exports as a thrust area and has targeted 35 per cent of its revenues to come
from exports by 2010.
Domestic :
Subject focuses on supplies to the passenger car and
multi-utility vehicle segments (including utility vehicles and multi-purpose
vehicles). In the domestic market, passenger vehicle sales increased by 20.7 per
cent from 1 ,1 43,076 units in 2005-06 to 1 ,379,698 units in 2006-07. Chart A
gives the breakup for the sub-segments for over the past few years.
During 2006-07 passenger car sales - which is the largest
and most important segment for the Company - grew by 22 per cent and crossed
the one million mark. Utility vehicles [UV] grew by a relatively modest 13.2
percent; whereas multipurpose vehicles (MPV) grew at an impressive 25.2 per
cent, albeit on a smaller base.
The sales of Electronic Power Steering Systems, which came
on-stream during the year, have resulted in a disproportionate increase in the
Company's turnover. Gross sales of the Company increased from Rs.4,092 million
in 2005-06 to Rs.7,042 million in 2006-07 Chart B shows the trends in the Company's
top-line since 2001-02.
Subject continues to maintain its leadership in the domestic
passenger vehicle market. Moreover, there are several promising developments,
which place the Company in a favourable position in this segment in the years
to come.
First, due to the unprecedented rise in disposable income of
households, the passenger car segment is expected to grow at a CAGR of over 15
per cent for the next four to five years as against 16.2% CAGR of the past five
years ending March, 2007
Second, the compact car segment, where subject has a strong
presence, is expected to continue to account for over 90 per cent share over
the next few years. This trend will be compounded by the growth of compact cars
exported from India with the plans of existing as well as new OEMs to make
India a global export hub for compact cars.
Third, there is a new class of light commercial vehicles as
well as an entry-level car, which are indigenously developed and low-cost
entry-level vehicles for the mass market. subject has the capability of
supplying both Steering and driveline parts to these high volume platforms.
Their forecast of the trends in steering technology
indicates that the proportion of passenger cars in India with electronic power
steering will increase from current levels of approximately 20 per cent to
around 40 per cent by 2012. Subject, being the pioneer in the domestic segment
for Electronic Power Steering will have the first mover advantage.
Further details of the Company's plans with respect to Electronic
Power Steering have been discussed later.
Exports :
Subject recognises export as an important element of its
strategy for long-term growth. During 2006-07, the Company's exports grew by
9.4 per cent from Rs.500 million in 2005- 06 to Rs.547 million in 2006-07.
Chart C shows the export performance of the Company since 2001-02.
In line with its vision to become a 'Supplier of Choice' to
global customers, Subject has now revised 2010 target of overseas business from
45 per cent to 35 per cent due to much greater potential order book in the
domestic market, while maintaining the export sales target for 2010. To achieve
this target, the Company continues to focus aggressively on its two-pronged
strategy for exports.
The first involves leveraging subject partnership with JTEKT
Corporation and Fuji Kiko Company. The Company plans to become an important
element in JTEKT's and Fuji Kiko's global sourcing chain by being the preferred
Tier II supplier of Steering System sub-assemblies and components.
Last year's Annual Report had discussed the ongoing
restructuring of the European operations of Fuji Kiko – Sona Koyo's joint
venture partner in Fuji Auto tech France SAS [FAF). This process is now
complete. Subject is now present in the French, Czech and Brazilian market
through Fuji Auto tech Europe [FAE] the holding Company of FAF and Fuji Koyo
Czech [FKC].. Fuji Auto tech Brazil (FAB) is a 100% subsidiary of FAF. This
will significantly improve subject access to the European and Latin American
markets. During 2006-07, the Company established an associate company called
Sona Auto comp Europe in France to be close to its key clients and provide
logistics management services for auto components sourced from India.
Secondly, Subject intends to enhance its product design
capabilities and provide complete steering solutions as a Tier I supplier in
the non-passenger car segment, primarily the off highway vehicle segment in the
North America and European markets.
Operations :
In view of the growth opportunities presented by both
domestic and international markets, subject has taken a conscious decision to
invest in both scale and technology. The objective is to develop capabilities
to become a provider of end-to-end solutions, and thus transit from being a vendor
to a fullfledged steering solutions provider. This requires developing an
efficient and robust supply chain to service the enhanced capacities,
maintaining high quality standards, and building product designing and testing
capabilities through investment in research and development.
Manufacturing
Capacities :
During the previous year, the Company had announced its plan
to invest Rs.4.000 Million for expansion and modernisation of its facilities in
a phased manner between April 2006 and March 2010. More specifically, it had
earmarked Rs.0.660 million for 2006-07, primarily towards capacity expansion of
Column-type Electronic Power Steering systems (C-EPS) in the new plant in
Dharuhera.
During 2006-07, Subject added capacity for manufacturing
300,000 units of C-EPS at its Gurgaon plant. The Dharuhera plant, which will
manufacture C-EPS, among other products, is complete and will start commercial
production in July 2007.
During the year under review, both manufacturing facilities
of your Company (Gurgaon and Chennai] operated at high levels of capacity
utilisation.
In the next few years, subject is looking to align and
strengthen its geographic presence in the country by setting up facilities that
take into account new projects and capacity expansion plans of the various
vehicle manufacturers. By doing so, the Company will be able to be at close
proximity to its customers and unlock greater value from its operations. In
line with this, subject is in advanced stages of finalising its plans for green
field investments in Uttaranchai and West Bengal. In addition to the ongoing
expansion of manual steering systems, the Company also has plans to
substantially increase the hydraulic power steering capacity at the Chennai
plant.
Subject has also recently entered into a majority owned
Joint Venture "Arjan Stampings Private Limited" with Arjan Auto
Private Elmited. The JV will manufacture stamped parts used by customers in
Europe for Steering Columns and Seat Recliners. This will enable the Company to
capture a share of sheet metal stamping exports to Europe as well as exercise
greater control over the Tier II / III auto component business. In addition,
the Company is exploring other Tier II components for manufacture, since the
export potential of these components will be significant.
Supply Chain
Management :
With most automobile manufacturers employing internationally
benchmarked inventory management practices and delivery schedules, success in
the auto-component industry depends critically upon an efficient and
well-managed supply chain. Supply chain management has become a critical
activity for subject, due to focus on new customer locations, exports and new
suppliers for new products or projects.
Recognising this, the Company revamped its entire supply
chain practices by creating a new supply chain management (SCM) team during the
previous year. In 2006-07, many new initiatives took shape. With a goal to
supply defect-free parts at globally competitive rates, the SCM team created a
model aiming at lowering cost while sustaining partnership with our existing
suppliers.
During the year, the Company started evaluating the past
performance of suppliers and set cost reduction targets for the future. It also
introduced fact-based negotiations, cost control and elimination of wastages at
suppliers' end, while building alternate sources. These initiatives resulted in
substantial cost savings for subject.
Through weekly inventory monitoring and creation of third
party warehouses, the Company's inventory turnover improved by over 36 per cent
from 14 turns in 2005-06 to 19 turns in 2006-07. The Company expects to
aggressively increase the coverage of third-party warehouses in the next year.
Subject also took forward its VA/VE initiatives to 14 ideas
with potential cost saving impact of Rs.12 million. A cluster of 23 suppliers
was formed to train and inculcate best practices in quality management. The
Company also identified a group of suppliers to implement a common
cost-effective ERP solution for them. This will enable seamless sharing of
information between the supplier and subject, and is expected to result in
improved efficiencies. the Company expects to extend this facility to all
suppliers by 2007-08.
The Procurement function was also centralised across all
Subject plant locations, and six commodity-sourcing groups were formed. This is
expected to result in a further reduction in cost due to economies and better
resource management. Moving forward, the Company is also looking at utilising
eprocurement solutions to control costs.
Quality Management
:
In the current market scenario, customer expectations on
product performance are becoming bigger. Therefore, there is a constant need to
innovate and deliver high quality products. Subject has always stressed on its
quality management initiatives to continuously improve its efficiencies and
meet customers' expectations.
During the year, the Company started a major initiative
called 'High Volume Production Trial' CHVPT). The purpose of HVPT - which is
conducted before start of production for a new item - is to judge whether or
not the mass production can be started. This enables smoother launch of a new
product or a new production line. The result of this exercise can be seen in
terms of the reduction in rejection of new products [see Charts D and E). Both
in-house rejection and customer rejection of new products have come .down
significantly to 428 and 75 parts per million (PPM] respectively, by the end of
2006-07.
During 2006-07, the Company also introduced 'Quality Gate
20', which is a sequence of processes and approval activities for the
development of new products. Every gate indicates achievement of a milestone in
the product development cycle; and satisfactory closure of the activity is
essential before moving on to the next activity.
In addition, some new initiatives were taken during the year
to meet the enhanced warranty period extended by Subject. These include using
statistical TPM techniques and capturing feedback from the dealers. As shown in
Chart F, warranty returns came down from 5,570 PPM in 2005-06 to 2,390 PPM in
2006-07
Research and
Development :
In line with its objective to become a preferred supplier to
global customers, Sona Koyo continues to strengthen its design and development
capabilities.
During 2006-07, it acquired technology for electronic power
steering systems for passenger cars from its partner JTEKT as well as Steering
Column for commercial vehicles from Fuji Autotech AB, Sweden. As a next step,
the Company is working on increasing localisation of these technologies to
become more competitive, and enhance its market position.
Regarding in-house technology, Subject is in advanced stages
of developing Electric Power Steering for off-highway vehicles for the US
market. This will be a very competitively priced product and, hence, the future
demand is expected to be strong. The Company has filed for patents and expects
commercial production to begin in 2007-08. In addition, the Company has also
tied-up with premier research institutions such as NT Delhi and NT Mumbai to
develop future technologies in Steering Systems and components thereof.
During the year, Subject significantly upgraded its testing facilities.
Currently, the Company is self-sufficient in testing hydraulic products, and is
now exploring the idea of developing this facility as a testing hub for its
global partners.
Financials :
Driven primarily by fresh capacities of C-EPS, net sales of
the Company grew by 70.8 per cent from Rs.3.400 million in 2005- 06 to Rs.5,808
million in 2006-07. Operating profit (OPBDITJ rose by 59.3 per cent from Rs.377
million in 2005-06 to Rs.600 million in 2006-07. There was an increase in
depreciation and interest expense due to investments made during the year under
review. Profit after tax (PAT) increased by 70.4 per cent from Rs.163 million
in 2005-06 to Rs.277 million in 2006-07
Though raw material market, especially steel, remained
inflationary throughout the year, the 5 percentage points increased from 67.9
per cent in 2005-06 to 73.1 per cent in 2006-07 was due to change in product
mix and the initial "indenting" nature of the C-EPS business. The
operating profit margin came down by almost one percentage point from per cent
in 2005-06 to 10.3 per cent in 2006-07 due to almost 30°/o of sales coming from
the low indenting margin from non-localized C-EPS sales. Table 2 also presents
some of the profitability indicators of the Company. Return on capital employed
(ROCE) increased by over 6 percentage points to 27.8 per cent in 2006-07.
Return on net worth (RONW) grew by 1.5 percentage points to 20.8 per cent in
2006-07
Due to the infusion of equity during the year, the Company's
debt-equity ratio has come down from 1.3 in 2005-06 to 0.7 in 2006-07. The
liquidity situation continues to be comfortable, with an interest coverage
ratio of over five.
Outlook :
The domestic automobile industry, especially the passenger car segment,
is expected to grow at around 15 per cent for the next few years. If one
includes the export potential, this growth will be substantial. Subject is well
placed to service this growth in terms of both technology and scale. In
addition, it expects exports to contribute in a more substantial way in the
future. As a result, the outlook of the Company for 2007-08 is optimistic.
Contingent Liabilities :
31.03.2007 (Rs. In Millions)
|
I. Claims
against the company not acknowledged as debt on account of |
|
|
Excise Duty |
56.572 |
|
Others |
0.000 |
|
Service Tax |
8.122 |
|
Income Tax –
Matters |
17.113 |
|
|
|
|
II. Customer
Bills Discounted |
173.639 |
In terms of the resolution passed by the company on 22nd November
2006, 70,40,216 nos. of Convertible Warrants were allotted to the
Promoter/Promoter Group(s) on 7th December 2006. Out of these Convertible
Warrants, 46,16,535 Warrants were eligible for conversion at the option of the
Warrant holders, into Equity Shares of the Company at a price of Rs.67.10 per
Warrant within a period from 1st April, 2007 to 30th April, 2007 and 24,23,681
Warrants at same terms and conditions from 1st April, 2008 to 30th April, 2008.
One Optionally Convertible Warrant will be converted into one Equity Share of
Rs.21- each at a premium
of Rs65.10 per Equity Share.
Other liabilities include Rs.47.240 Millions (Previous Year
Rs. Nil) being the amount received as advance against the Convertible Warrant
issued to the Promoter Group(s). In the event the option for conversion is not
exercised the said amount shall stand forfeited.
Trade Reference :
· Maruti Udyog Limited
· Koyo Seiko Company Limited Japan
· Sona Okegawa Precision Forgings Limited
· Sona Somic Lemforder Components Limited
· Sona Cold Forgings Limited
· Mahindra Sona Limited
· Hypersonic Investment Limited
· Turbo Investment Limited
· Pune Heat Treat Private Limited
· Three S Solutions Limited
· Mahindra Investment and Finance Company Private Limited
· Kapur Properties and Investment
Fixed Assets
· Land
· Building
· Lease Hold Improvements
· Plant and Machinery
· Jigs and Fixture
· Electric Installation
· Furniture and Fixture
· Office Equipments
· Vehicles.
· Computers
Website details :
In the Indian auto component industry Subject is a name that
is synonymous with quality after having been conferred the Deming prize for
quality in November 2003. With its modest beginnings as a small Maruti (Suzuki)
supplier in 1987, Subject Group's aggregate turnover currently exceeds US$ 140
mil with Exports of $ 20 mil.
The subject Group comprises five operating and one design
services company, the majority in joint venture partnerships with global
technology leaders.
Subject Group's range of products include Steering and Driveline
components for the automotive OEM segments including passenger cars, utility
vehicles, commercial vehicles and specialty vehicles.
The Group is committed to expansion of its products range
and clientele by continuous investment in research and development. Subject is
drawing upon the strength of its joint venture partners which include Koyo
Seiko Company, Japan; Mando, Korea; Mitsubishi Materials Company, Japan; Somic
Ishikawa, Japan; and ZF Lemforder, Germany to upgrade it's systems, skills and production
values to offer its customers contemporary and high quality products. Apart
from maintaining its dominant position in the domestic market, the subject
Group is making efforts to leverage its intrinsic strength and tap the overseas
market including USA and Europe.
Subject has optimistic growth plans for the future. The
industrious work force of the group is turning Subject's vision, of making
products of international quality and meeting and exceeding customer
requirement at all times, into a reality. For it is through the leadership of
the mind that we shall earn leadership of the market.
Company Location :
Sona
Cold Forgings Limited
Sona Enclave,Village Begumpur
Khatola, Gurgaon-122001
Ph: 0124-5030186
Fax: 0124-5031807
Sona
Somic Lemforder Components Limited
Sona Enclave,
Village Begumpur Khatola,
Gurgaon-122001
Ph: 0124-5031271 – 72
Fax: 0124-2373303
Sona Okegewa Precision Forgings
Limited
Sona Enclave,
Village Begumpur Khatola,
Gurgaon-122001
Ph: 0124-5030192 – 5
Fax: 0124-2215766
Mahindra Sona Limited
89/1, MIDC Area,
Satpur, Nasik-7
Ph: 0253-2350470 – 72
Fax: 0253-2350710
Sona e-Design and Technologies Limited
582, Udyog Vihar, Phase – V
Gurgaon – 122002
Ph: 0124 - 5031871-72
Fax: 0124 – 5031876
CMT REPORT
(Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is or
was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE
GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on Corporate
Governance to identify management and governance. These factors often have been
predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.39.40 |
|
UK Pound |
1 |
Rs.77.95 |
|
Euro |
1 |
Rs.58.14 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
7 |
|
PAID-UP CAPITAL |
1~10 |
7 |
|
OPERATING SCALE |
1~10 |
7 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
9 |
|
--PROFITABILIRY |
1~10 |
6 |
|
--LIQUIDITY |
1~10 |
9 |
|
--LEVERAGE |
1~10 |
9 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
8 |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
YES |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
70 |
This score serves as a reference to assess SC’s credit risk and
to set the amount of credit to be extended. It is calculated from a composite
of weighted scores obtained from each of the major sections of this report. The
assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING
EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit consideration.
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|