Minda Corporation Vs Pricol – Financials, Future Plans & More

Minda Corporation Vs Pricol: A car is a very complicated machinery. The list of components that are fit together to assemble a car runs in the thousands. Due to such a long list, it would become very challenging for a car maker such as Tata Motors or Mahindra to manufacture all components in-house. 

In this article on Minda Corporation Vs Pricol, we compare their operations, financials, future plans and see which one has a bigger scale..

Minda Corporation Vs Pricol

That brings us to Automotive Component Manufacturers. These Companies are set up only with the intention of supplying parts to those car brands. They receive design inputs or requirements from the Automaker. They also collaborate with foreign manufacturers to bring the latest tech to the Indian market.

Now, we have picked two such manufacturers, both with rich expertise in the Indian Automotive market. Both Companies have a very diverse portfolio of products ranging from Vehicle Starter systems to Driver Information Systems. 

Now let’s learn more about these Companies & understand their market. Then take a look at their financials and compare them against each other. Also, we have a special bonus that we think you might like to read. So stay tuned & find out.

Company Overview 

Minda Corporation Ltd

Minda Corp was the first company of the Spark Minda group. It was established by founder Late Shri S. L. Minda in 1985. The Company set up its first plant in Noida to manufacture switch components for automobiles. 

The Company’s diverse product portfolio includes Mechatronics, Vehicle Access Systems, Wiring Harnesses, Interior Plastics, and other Advanced Technologies. Their products are designed to cater to a wide range of vehicle segments, including Two – commercial vehicles and off-road vehicles. 

Minda Corporation has 34 manufacturing units, both domestic and Overseas. 12 of its Units are situated in the Western states of Gujarat and Maharashtra. North has about 9 units and 5 in South India.

Due to the ever-changing nature of the Auto Components industry, Minda constantly undergoes Acquisitions and JVs with other Companies to either acquire or collaborate on technology. During FY23, the Company announced a technical collaboration with DAESUNG, South Korea. 

The Company also secured a Technology License Agreement (TLA) with LocoNAV to integrate its proprietary telematics technology in products supplied by Minda Corp. It has also established two Minda Technical Centres in Pune as well as Bangalore. They currently own 250+ patents, out of which 50% were filed in the last 5 years.

Minda Corp is divided into 4 specific business segments:

1. Security System: Minda Corp is a leader in the lock and key sets of 2-wheeler vehicles. It also supplies Electronic, Mechanical, and connected Vehicle Access Control, with a 40% share in the 2-wheeler market.
2. Die-Casting: The Company manufactures Aluminium and Zinc die-cast which contributes to about 17% of the Company’s revenue.
3. Starter Motors & Alternators: The Company supplies Starter motors with Gear Reduction Technology (GRS). This helps improve fuel efficiency, especially while starting vehicles. It manufactures alternators for stationary engines, farming machinery, and tractors.
4. ASEAN Business: Minda sells Fuel Tank, Side Cover Lock, Seat Latch, and Speedometer to Indonesian, Malaysian, and Vietnamese markets.
5.  MINDA VAST Access System: This is a JV with an American Company VAST & Minda Corp. The JV allows Minda to manufacture a Hybrid blend of Mechanical and electrical architecture called Mechatronics. These include products such as Bracketless handles, electric steering, and column locks. 

Pricol Ltd

Pricol is one of India’s leading precision-engineered product manufacturers for the Automotive segment. The Company commenced operations in 1975 in Coimbatore, South India. Today it supplies its products to over 45 countries across the globe.

The Company is a manufacturer of components such as Driver Information Systems, Sensors, Pumps, Telematics, and wiping systems. It supplies Passenger & Commercial Vehicles, Farm equipment, and Off-Road Vehicles across India, with a diverse variety of 2000+ products. 

Pricol Ltd has 8 domestic manufacturing units across Coimbatore, Manesar, Pantnagar, and others, and 1 in Jakarta, Indonesia. It has also set up its international offices in Japan, the United Arab Emirates (UAE), and Singapore.

It has a sought-after list of Marquee clients ranging from BMW, Bajaj, Ducati, and Harley Davidson in the Motor Vehicle segment. Force, Daimler, Ashok Leyland, and Tata in the Commercial Vehicle segment. 

Pricol also supplies Caterpillar, Escorts, Hyundai Construction Equipments, and JCB in the Off-Road Segment. It also produces critical components for Companies like Generac, Kohler, Kirloskar, and Polaris.

The Company has partnered with multinational International Organizations for technical collaborations. A few of those partnerships are listed below:

1. Heilongjiang Tianyouwei Electronics: Partnership for Driver Information Systems and Heads-Up Display.
2. Sibros: Partnering to access Sibros’ cloud-based platform for software OTA updates, firmware updates, vehicle data Analytics, and a lot more.
3. BMS PowerSafe: Pricol has partnered with Europe-based BMS Powersafe to manufacture and sell their Battery Management Systems (BMS).
4. PSG College of Technology: Pricol is partnering with the institute to develop high-efficiency micromotors with Robotics and AI equipment.
5. Candera CGI Studios: Partnership to develop Human Machine Interface Solutions (HMI) to support their next-generation display systems.

Industry Overview

The Indian automobile industry has become the key indicator of the country’s economic performance. The sector is touching new highs every month and with a strong domestic manufacturing presence. 

With this, India established itself as a global leader, ranking first in 2 wheelers and tractors, second in bus manufacturing, third in heavy truck manufacturing, and fourth in the passenger vehicle market. 

With an estimated worth of over $222 billion, the Indian automotive industry contributes 8% to the country’s total exports and accounts for 7.1% of its GDP.

The Government has rolled out multiple initiatives to make Electric Vehicles (EVs) an attractive investment. They are investing Rs. 10,000 Cr in the Faster Adoption and Manufacturing of (Hybrid) Electric Vehicles (FAME-II) scheme. Likewise, Bharat Stage VI (BS VI) emission standards for vehicles have been announced by the Government. 

These measures are expected to substantially reduce carbon emissions and traffic pollution. In addition to EVs, the Government has allocated funds to develop smart cities with integrated public transit systems.

They have also launched Production-linked incentive (PLI) schemes by investing USD 10 billion to encourage domestic manufacturing of displays and semiconductors. 

Minda Corporation Vs Pricol – Financials

Revenue & Net Profit

Minda Corp reported a Revenue of Rs. 4316 Cr in FY23, which increased by 44% from Rs. 3000 Cr in FY22. Pricol Ltd has increased revenue by 26%, from Rs. 1554 Cr in FY22 to Rs. 1963 Cr in FY23.

When we compare both Companies in terms of Revenue, we find that although Pricol is half the size of Minda, it maintains the same CAGR rate in the long Term. This puts Minda in a better position to scale revenue.

Minda’s Net Profits increased from Rs. 192 Cr in FY22 to Rs. 285 Cr in FY23, increasing by 48%. During the same time, Pricol’s Profits increased by as much as 144%, from Rs. 51 Cr in FY22 to Rs. 125 Cr in FY23.

Raw Material Prices have stayed stable since last year, leading to better profitability for both Companies. Pricol inches ahead in terms of Profitability growth due to its smaller size.

Profit Margins

Minda Corp & Pricol Ltd reported Operating Margins of 10.77% & 11.67% respectively in FY23. Both Companies have more or less maintained double-digit margins in the last 3 years. However, Minda was making an Operating loss in FY19 & only turned a  Profit in FY19.

In terms of Net Profit Margins, we see the dire state of both companies just barely turning a profit. Minda Corp & Pricol Ltd reported Net Profit Margins of 6.85% & 6.37% respectively. However, Investors must note that this is their best margin in the past 5 years, as the 5-year average falls in the low 2% category.

Return Ratios

Return on Equity of Minda was at 20.21% in FY23 and 19.48% for Pricol Ltd. ROE figures of both Companies have improved significantly, with Pricol scaling by over 1000Bps. This is because the Company’s reserves increased by only 22.7% compared to a 144% increase in Profits.

Return on Capital Employed was at 17.64% & 22.02% for Minda Corp & Pricol Ltd respectively. Pricol grew its ROCE by ~750bps by deleveraging its business. (Reducing Debt)

Despite having extremely low Margins, both companies maintain strong return ratios. This has only been possible due to the established structure of both Companies. Considering that they operate in a capital-intensive sector, maintaining such high returns is a commendable task. It also raises the barrier to entry for new competitors.

Debt Analysis

Debt levels of Minda & Pricol are at 0.35x & 0.13x respectively. Pricol has been aggressively reducing debt, which has decreased from a high of 1.09x in FY20 to a low of 0.19x. Minda on the other hand, chooses to effectively manage debt and maintain under the 0.5x range.

Interest Coverage ratio (ICR) of Minda & Pricol is at 8.06x and 9.02x respectively. Both Companies were in a dire state in terms of ICR back in FY20, and have improved significantly since then.

Future Plans

Minda Corporation

1. Minda currently has an EBITDA margin of 11% in the EV category, which it intends to expand to 15% in the upcoming years.
2. The Company has planned FY24 CAPEX of 5%-6%, out of which 2-3% will be in R&D and the rest into greenfield expansions and other maintenance activities.
3. The Company has secured an order book worth Rs. 7800 Cr in EV consulting, which is ~20% of the book. The Company is already building the necessary infrastructure & technology for this.

Pricol Ltd

1. Pricol, in its Analyst Concall held in May 2023 stated that it has a clear order pipeline for the next three years, with a CAPEX spend of about 600 Cr.
2. The company will be focusing on three vehicle segments: two-wheelers, commercial vehicles, and off-road vehicles. 
3. The Company anticipates about 60% – 65% of revenue coming from driver information systems and connected vehicle solutions.
4. The Company plans to power all its facilities with 100% renewable energy by 2026. It already generates 33.81 Lakh Units per year from solar energy.

Minda Corporation Vs Pricol – Bonus

Considering that we have been comparing both these Companies, it is very important to note that Minda is actually looking to acquire a minority stake in Pricol Ltd. Yes, you read that right!

As per Company filings, on February 17, 2023, Minda Corporation acquired a 15.7% stake in Pricol by purchasing 1.91 Cr shares from the open market. As of May 1st, the board has decided to raise its stake in Pricol to 24.5%. It has also filed an application with the Competition Commission of India (CCI), for the same.

However, it is also important to note that the promoter family of Pricol will not be liquidating their stakes for this transaction. They continue to own 36.53% of the Company. 

Key Metrics

We have now understood both the Companies’ business as well as taken a good comparative look at their financials. Now let us look at a few Key Metrics.

Conclusion

As we conclude our article on Minda Corporation Vs Pricol , both are very well-established enterprises with decades of experience in the Industry. The reason we call them established is simply because of the high barriers to entry in the industry. 

It requires heavy CAPEX to begin with, setting up massive manufacturing units using complex machinery. To top it all off, the technology and consumer preference is forever changing. So, this makes both Companies really strong in their segment. 

However, if we compare them, we notice that in the face of adversity (Market downcycle), Minda Corp performs slightly better than Pricol. This is because Pricol made losses in two of its recent 5 Years, as compared to just 1 Year at Minda Corp. In terms of margins, however, Minda is a clear winner although marginally. 

Nevertheless, with a successful acquisition on the books, Minda will end up owning ~25% of this very competitor. Who do you think will turn out a winner from this acquisition? Let us know in the comments below.

Written by Nasir Hussain

By utilising the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investment.