Detailed Narrative
FY25 Performance & Export Challenges
Rico Auto Industries reported a consolidated turnover of INR 2,225 crores for FY25, marking a 2.5% increase year-over-year. However, exports experienced a significant decline, falling to INR 351 crores in FY25 from INR 500 crores in FY23. This reduction was primarily attributed to a 40% drop in BMW's electric vehicle sales in Europe, delays in PSA programs, and underperformance from domestic OEMs like Renault Nissan and Kia, along with delayed Toyota/Aisin programs worth INR 100 crores.
Ambitious FY26 Growth Outlook
The company has set an ambitious target for FY26, projecting a consolidated turnover of INR 2,650-2,652 crores, which would represent a 20% growth. Looking further ahead, management anticipates a 15% plus growth for FY27, aiming for a turnover of approximately INR 3,100 crores. This growth is expected to be driven by new orders, improved capacity utilization, and strategic diversification.
Capacity Utilization Improvement
A key focus for FY26 is the enhanced utilization of existing manufacturing capacities. Iron foundry utilization, which stood at 50%, is targeted to increase to 60-65% in FY26 and further to 80% in FY27. Similarly, aluminum utilization is expected to rise from 62-64% to 75% in FY26 and 90% in FY27. These improvements are crucial for better absorption of fixed costs and overall margin enhancement.
New Plant & EV/Hybrid Focus (Hosur)
Rico Auto is investing approximately INR 220 crores in a new plant in Hosur over three years, with INR 70 crores allocated for FY26 and INR 100 crores for FY27. This plant will primarily cater to Toyota and Aisin, supplying components for hybrid and electric vehicles. Management expects this facility to eventually generate INR 350-400 crores in revenue, contributing significantly to future growth with its focus on premium, complex EV/hybrid components.
Diversification into Defence & Railways
The company is actively diversifying its business into new segments. In defence, it is delivering shooting ranges and expects future orders. A new entry into the railway business, leveraging existing casting and machining capabilities, is projected to contribute INR 70-100 crores in revenue for FY26. This diversification strategy aims to utilize current capacities more effectively and open new avenues for growth.
Order Book & Future Visibility
Rico Auto secured orders worth INR 720 crores in FY24, with INR 150 crores expected to be recognized as revenue in FY25 and INR 320 crores in FY26. For FY25, the company targeted to pick up an additional INR 650 crores worth of orders, of which INR 70 crores have already been secured. This strong order book provides good revenue visibility for the coming years.
Margin Profile & Cost Optimization
The company maintains differentiated margin profiles across its segments, with export margins typically in the 15-20% range and car industry margins between 13-15%. The overall domestic average margin, including 2-wheelers, is around 11.5-12%. Management highlighted ongoing cost reduction efforts, including savings from solar/hybrid power, efficient furnaces, and improved productivity, which are expected to positively impact margins in FY26.
Debt Management & Asset Monetization
Consolidated debt stands at INR 660 crores, and the board has set a target to reduce this by 10% in FY26, with INR 140 crores planned for repayment this year. Additionally, the company is actively pursuing the monetization of a 26-27 acre prime land parcel in Gurgaon, engaging with major developers like Tatas and Godrej, which could further strengthen the balance sheet.