Wheels India is turning heads. Almost a year after quitting HDFC AMC, market veteran Prashant Jain is on the lookout for multi-baggers again. His fund, 3P India Equity Fund, bought 1 lakh shares of Wheels India in May. Nippon India Mutual Fund, the seller, still holds over 16 lakh shares, amounting to a 6.5 percent stake in the company.
This is Jain's first buy after starting his own Cat-III alternative investment fund. He is well-known for being a patient investor with a value bias focussed on long-term compounding returns.
Wheels India quoted at the Rs 1,200 level back in June 2018. The stock is currently near Rs 650 and has rallied 50 percent from its March 2023 low of Rs 448. Here's all you need to know about the company:
Revenue crosses Rs 4,000 crore mark
In FY23, the wheelmaker clocked Rs 4,332 crore in revenue, crossing the 4,000 mark for the first time ever. In the five years prior to that, sales kept fluctuating in the Rs 2,200 crore – Rs 3,500 crore range.
"While domestic was strong, there is a certain amount of uncertainty on the global environment. However, our exports are showing positive signs, and we are confident that based on the strong relationships that we have with customers and the new programmes that we are getting into, in the coming year, we'll continue to show growth," Srivats Ram, the company’s managing director, had said after the Q4 earnings call.
Clawing back margins
In FY23, the company's operating margins came in at 5 percent due to one-off reasons, including pre-inspection and rectification charges in the export market, as well as higher interest costs.
"The interest cost is not going to improve in the current situation. But the demand situation is improving, so the cost of underutilisation will not be there. So, we should be able to return to earlier levels of margins," the Wheels India chief said.
In 2016-17, the company had peak margins of 9 percent.
New business segments
The company primarily makes wheels for cars, buses, trucks and tractors. It also makes air suspension systems for buses and trucks. In the industrial division, it makes components for the windmill industry and railways, as well as fabrications for the construction division.
That said, automotive components make up over 81 percent for the company's topline, while industrial components are only 19 percent. Wheels India’s plans to increase the second segment’s share rapidly in coming years, with a particular focus on windmills.
"In Europe and North America, the bigger issue is getting regulation clearances to set up windmills. So, clients actually wait till they get the clearances, and then they push it into the channel. I think things will speed up considerably in this industry over the next one or two years on the back of the renewable energy push," Ram said in the earnings call.
Marquee names
Wheels India is part of the TSF Group, whose lineage stems from the TVS Group. TSF Group has a turnover of about Rs 22,000 crore. It includes an auto component division, which has Brakes India, Wheels India, Turbo Energy, and Axles India, among other companies.
Trichur Sundaram Santhanam & Family Private Limited owns over 29 percent of the company, while Sundaram Finance Holdings holds 23 percent.
Domestic mutual funds such as Nippon, IDFC and HDFC also have a significant stake in the company. As of March 2023, domestic mutual funds held an 18.3 percent stake in Wheels India. The company recently organised a plant visit on June 19 for ICICI Prudential AMC, Axis Mutual Fund, Aditya Birla Sunlife Mutual Fund, Bandhan AMC, and Girik Capital among others.
On June 22, the stock closed over 2 percent lower at Rs 655.55 on the NSE.
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