Varroc Engineering Limited is an India-based automotive component company engaged in designing, manufacturing, and supplying exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off-highway vehicle (OHV) OEMs directly worldwide. Varroc Engineering Ltd was incorporated in 1988, is the flagship company of the Aurangabad-based Varroc Group. Varroc is a global tier-1 automotive component group.
The Group was initially established as a captive unit for Bajaj Auto Limited's (BAL's) auto components and gradually diversified by adding new customers and products to its portfolio. Over the decades, the company has evolved from a captive supplier to a global automotive technology leader serving diverse OEMs across multiple vehicle segments.
Varroc operates through two segments: Automotive and Others. The Automotive segment consists of the business of automobile products consisting of auto parts for two-wheelers, three-wheelers and four-wheelers, and related design, development and engineering activities and other services. Its Others segment comprises forging components for off road vehicles and components for the mining and oil drilling industry.
Varroc Engineering Limited designs, manufactures, and supplies exterior lighting systems, plastic and polymer components, electrical and electronics components, advanced safety systems, and precision metallic components worldwide. The company operates through Automotive and Others segments. The company has been focusing on expanding its technology capabilities, particularly in advanced driver assistance systems (ADAS) and electric vehicle components.
As of recent data, Varroc Engineering has a market cap of ₹8,687 crore (down -15.4% in 1 year). The company's stock has shown volatility, with 52-week high share price of ₹717.00 and 52-week low share price of ₹398.90. Promoter holding in Varroc Engineering Ltd has remained stable at 75.00 per cent as of Dec 2024.
The company reported challenging financial performance in Q3 FY25. Revenue from Operations reached ₹2,075.2 crore, up 10% from ₹1,884.5 crore in Q3 FY24, driven by robust demand in core segments and international markets. Total Income stood at ₹2,077.86 crore, compared to ₹1,893.16 crore in the year-ago period. However, the company reported a net loss of ₹451.83 million, against a profit of ₹578 million in Q3 FY24. The loss was attributed to increased material costs, a one-time loss of ₹91 crore, and higher depreciation expenses.
Operating income during FY24 rose 9.6% on a year-on-year basis. The company's operating profit increased by 38.5% YoY during the fiscal. Net profit for the year grew by 1,325.6% YoY. Net profit margins during the year grew from 0.6% in FY23 to 7.3% in FY24. The revenues of VARROC ENGINEERING stood at Rs 75,941 m in FY24, which was up 9.7% compared to Rs 69,209 m reported in FY23. VARROC ENGINEERING's revenue has fallen from Rs 112,208 m in FY20 to Rs 75,941 m in FY24.
In 9MFY25, the company achieved net new business wins with annualized peak revenues of Rs10,847 million. The orderbook from EV models constitutes more than 55% of these wins. It is encouraging to see business wins in overseas operations, with two big business wins for overseas operations.
The capex spent in H1FY25 was 1,030 million. The capex spending in H2FY25 will increase driven by need for additional SMT lines and increased EV capacity. The company is also investing in land in southern & western part of India for future growth.
The Company balance sheet continues to strengthen along with improvement in return ratios. The net debt of the company in H1FY25 reduced by 1,554 million and net debt to equity have reduced to 0.50X at the end of H1 FY25 from 0.64X at the end of FY24. The absolute net debt figure is 8,273 million. Annualized ROCE at the end of H1FY25 is 19.0%.
The PE and PB ratio of Varroc Engineering is 134.86 and 5.36 respectively, indicating the stock is trading at premium valuations. Stock is trading at 5.55 times its book value.
The company has delivered a poor sales growth of -6.02% over past five years. Company has a low return on equity of -4.59% over last 3 years. Over the past 5 years, the revenue of VARROC ENGINEERING has grown at a CAGR of -9.3%.
The company has been strengthening its leadership team and R&D capabilities. Varroc Engineering announced the appointment of Dr. Karl-Heinz Glander as the Head of R&D for the Business II. Dr. Glander will play a pivotal role in driving the Company's innovation and technology strategies, reinforcing Varroc's commitment to delivering cutting-edge solutions for the automotive industry. In his new role, Dr. Glander, based out of Germany will oversee the R&D activities for Business II and report to Dhruv Jain, CEO, Varroc Business II.
The Board of Varroc Engineering at its meeting held on 13 November 2024 has appointed Vidyadhar Limaye (DIN 06720053) as Additional Director and Whole Time Director of the Company.
Varroc Engineering represents a significant player in the global automotive component industry, with strong market presence in lighting systems, electronics, and metallic components. While the company faces near-term profitability challenges, its focus on electric vehicle components, overseas expansion, and technological innovation positions it well for future growth in the evolving automotive landscape.
