Rane Holdings Limited

The Indian automotive industry recorded a positive performance in Q4 FY25, driven by improved demand across most segments. The passenger vehicle segment saw moderate growth with strong traction in utility vehicles, indicating a shift in consumer preference. The farm tractor segment witnessed robust growth due to favorable weather and improved farmer sentiment, while the two-wheeler segment continued its upward trajectory, backed by steady domestic demand and significant growth in exports. The commercial vehicle segment registered modest growth, improving from previous quarters despite infrastructure-related disruptions.

FY25 was a transformational year for the Rane Group, achieving its highest ever turnover of INR7,413 crores despite global and domestic headwinds. Rane Holdings Ltd. (RHL) reported a consolidated total revenue of INR4,380 crores and an EBITDA of INR347 crores. The group made significant progress on several strategic priorities, including strengthening customer partnerships and achieving record sales. Management expressed optimism about continued performance improvement quarter-on-quarter and increased investor interactions.

A key milestone was the successful merger of Rane Engine Valve Ltd. and Rane Brake Lining Ltd. into Rane (Madras), effective April 7, 2025. This merged entity will now operate through five focused businesses: Steering and Linkage, Light Metal Castings, Engine Components, Brake Components, and a new Aftermarket Products business. The Aftermarket business, now a INR700 crore entity, is a priority area with efforts to enhance synergy and cross-leverage products. Rane (Madras) reported Q4FY25 revenue of INR905 crores, a 5.8% YoY growth, with EBITDA improving by 72 bps.

Rane Steering Systems Ltd., now a wholly-owned subsidiary of Rane Holdings, strengthened its partnership with ZF through a license arrangement for column drive EPS for passenger cars. The joint venture, ZF Rane Automotive India, is undergoing a restructuring to demerge its Occupant Safety Division into a new entity, ZF LifeTec Rane Automotive India Pvt. Ltd., expected in Q2 FY26. The Occupant Safety Division secured a significant order of INR157 crores for airbags from a leading passenger vehicle customer. ZF Rane's Q4 EBITDA margin was 12.5%, and management expects this level of performance to continue.

Rane Holdings' consolidated debt stood at INR995 crores as of March 31, 2025. The company aims to reduce debt by INR150-200 crores by the end of the current financial year through the monetization of surplus non-core land parcels, with shareholder approval already received for four parcels. Group capex for FY26 is projected to be INR400-450 crores, with an annual average of INR400 crores for the next three years, allocated across Rane (Madras) (INR200-220 crores), ZF Rane (INR150-160 crores), and Rane Steering (INR70-80 crores). Rane Holdings increased its dividend to INR38 per share, representing an 80% payout ratio, which is expected to continue.

The Indian automotive market is expected to benefit from favorable interest rates and increased discretionary spending. The CV segment is anticipated to grow with infrastructure projects and increased replacement sales. Management aspires for the group to achieve a minimum of 12% growth, potentially up to 15%, over the next three years, despite global uncertainties. The company is optimistic about the export market, especially for steering linkage and brake components, and expects the engine components business to continue making profits with potential to hit double-digit EBITDA margins.

Rane Steering Systems experienced increased losses of INR22 crores in Q4 FY25, partly due to adopting a new tax regime. The business continues to face challenges from low-margin legacy orders, with significant margin improvement expected only after 2-3 years as new, higher-margin orders (secured for 2027-2028 production) come online. The Light Metal Castings business is still in the process of turning around to profitability, though steady improvements are being observed. The share allotment for the RML merger has been delayed due to paperwork and SEBI-related matters.