Minda Industries Ltd.

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam
nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam
erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci
tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo
consequat. Duis autem vel eum iriure dolor in hendrerit in
Initiating Coverage vulputate velit esse molestie consequat, vel illum dolore eu feugiat
nulla
Minda Industries Ltd. ▪ Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy
nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi
enim ad minim veniam,
31-March-2021
▪ quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea
commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate
velit esse molestie consequat,

▪ vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio
dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait
nulla facilisi. et iusto odio dignissim qui blandit praesent luptatum zzril delenit
augue duis dolore te feugait nulla facilisLorem ipsum dolor sit amet, do
1
 Minda Industries Ltd.
Industry LTP Recommendation Base Case Fair Value Bull Case Fair Value Time Horizon
Auto Parts Rs 548 Buy on dips to Rs 460 and add more on dips to Rs 420 Rs 470 Rs 515 2 quarters
HDFC Scrip Code MINDAIEQNR Our Take:
BSE Code 532539 Minda Industries Limited (MIL) is amongst the leading auto component companies in India having a wide basket of products ranging from
NSE Code MINDAIND switches, horns, sensors, lightings, infotainment, castings and alloy wheels. MIL commands a dominant market share of 55%/65% in 4-
Bloomberg MNDA: IN W/2-W switches, while in lighting and in horns (domestic) its market share stood at ~20% and50% respectively. The company has fast
CMP Mar 31, 2021 548 tracked its growth through joint ventures and technology tie-ups with global leaders and scaled up its business in terms of adding new
Equity Capital (Rs cr) 54.4 product lines. This has helped the company to move up the value chain, expand product offerings and consistently increase content per
Face Value (Rs) 2 vehicle. In the positive auto cycle (Pre-BS VI transition led slowdown), company had registered revenue CAGR of 28% led by organic and
Equity Share O/S (cr) 27.2 inorganic route over FY15-19. Bottom-line grew at strong 43% CAGR on the back of ~500bps margin expansion over the same period.
Market Cap (Rs cr) 14895 Company had registered strong performance for 9M FY21 despite Q1 being a washout quarter. Automotive sector, both for the
Book Value (Rs) 69 commercial and consumer segments (passenger vehicles or PVs and two-wheelers or 2Ws) got impacted significantly during Q1 FY21 and
Avg. 52 Wk Volumes 453182 gradual demand ramp up is seen on QoQ basis. MIL has a lot of products (lighting and sensors) in the EV space and products such as Motor
52 Week High 612
controller, Telematics, Body Control Module (BCM) and Battery Management System are under development. In Q3FY21, Minda
52 Week Low 221
commissioned new 2W alloy wheel plant at Supa, Maharashtra. The plant has a manufacturing capacity of 4mn units annually. Due to
increased demand, Minda Industries is considering scaling up this plant’s capacity to 6mn units annually. Further, the company is also
Share holding Pattern % (Dec, 2020)
Promoters 70.9
expanding its lighting facility owing to increased client inquiries. Minda Industries had raised Rs 243cr through rights issue at Rs 250 per
Institutions 19.8 share. Company had issued and allotted 97 lakh equity shares in Sep-2020. Indigenization will also benefit the company (alloy wheels and
Non Institutions 9.3 sensor segments), while its traditional products (switches, lighting, acoustics) are on a strong footing and have long term visibility. Further,
its long term strategy to focus on building integrated solutions that support a connected and autonomous vehicle augurs well for its long
Total 100.0
term growth.

Fundamental Research Analyst View & Valuation:

Kushal Rughani Strong rebound in automobile production post a major slump would be key driver for earnings revival. Moreover higher content, value
kushal.rughani@hdfcsec.com addition on the back of premiumization, entry into high-margin segments would be key triggers for earnings and valuation re-rating, in
our view. Consolidated revenue may see 11% CAGR over FY20-23E led by growth across all segments. Operating margin is expected to
witness 250bps expansion led by product mix and cost control measures. Healthy revenue coupled with strong margin expansion would

2
Minda Industries Ltd.
lead to 43% CAGR in net profit over the same period. We have not included Harita Seating financials in our estimates. Considering the
multiple positive triggers on revenue and margin front from long-term perspective, we expect valuation to remain at premium in the
coming years.
Company’s ability to outpace industry growth over last one decade provides significant comfort. Minda has commanded premium
valuations primarily on the back of its presence in new age technology products like airbags, sensors, alloy wheels and switches. We like
Minda due to its strong relationship with OEMs, progressive products profile, healthy balance sheet. Given expensive valuations, we feel
that investors’ can buy the stock on dips to Rs 460 and add more on declines to Rs 420 for base case fair value of Rs 470 (28x FY23E EPS)
and bull case fair value of Rs 515 (~31x FY23E EPS) over the next two quarters.

Financial Summary
Particulars (Rs cr) Q3 FY21 Q3 FY20 YoY (%) Q2 FY21 QoQ (%) FY19 FY20 FY21E FY22E FY23E
Total Revenues 1802 1327 35.8 1465 23.0 5,908 5,465 5,367 6,488 7,481
EBITDA 264 163 61.8 215 22.7 725 620 619 829 1032
Depreciation 91 75 21.3 81 12.3 234 302 332 375 406
Other Income 10 11 -11.5 12 -20.0 27 39 37 41 48
Interest Cost 19 22 -9.8 18 6.6 63 90 73 58 45
Tax 43 19 126.3 122 -64.8 134 78 75 111 160
APAT 108 45 142.5 81 34.2 286 155 157 307 454
EPS (Rs) 10.9 5.9 5.8 11.3 16.7
RoE (%) 18.4 8.8 7.8 13.1 16.9
P/E (x) 50.3 92.6 94.7 48.6 32.8
EV/EBITDA (x) 20.2 23.6 23.6 17.6 14.2
(Source: Company, HDFC sec)
Q3 FY21 result update
Minda Industries reported ~36% yoy increase in revenue at Rs 1802cr led by growth across business segments. Operating margin
improved 240bps yoy at 14.7% on better revenues. PAT for the quarter surged 142% yoy at Rs 108.4cr on strong revenue and margin
performance.

3
Minda Industries Ltd.
Business segment highlights
Switches
Switches business revenue grew 40% yoy at Rs 631cr. Demand for premiumization led to strong business growth. In 4W segment, the
company received new orders for Steering Wheel Switch, Second Gear Switch, Driver Side Switch, Power Window, Sunroof Switches, and
Audio/Panel Switches from Indian OEMs.
Lighting
Lighting business revenue grew 42% to Rs 426cr. Company continues to receive LED orders in the 2W segment. During the quarter, it has
bagged 2W LED light order from Yamaha. Company plans to set up a greenfield plant to meet the increasing demand.
LMT (Light Material Technologies)
LMT business revenue grew 21% yoy to Rs 270cr. New plant at Supa for alloy wheels has started revenue generation. Management
expects to reach optimum capacity utilization levels over the next couple of quarters.
Acoustics
Acoustics business accounted for ~10% of revenue and stood at Rs 188cr. Its subsidiary, Clarton Horn, received new orders from Ford, Kia
Motors, FCA and Hyundai in the US market.
Other Highlights
Other business revenue grew 45% yoy at Rs 288cr.
Sensor Business: Manufacturing and supply of Wheel speed Sensors to Korea commenced in Q3FY21.
Due to increased customer requests, the company has preponed the second phase of expansion of the alloy wheel plant from 4mn units
to 6mn units annually. The expansion is expected to be completed in the 12-18 months.
Minda Kyoraku Limited (blow-moulded plant) is expected to be commissioned by April-2022.
Harita Seating Systems Merger: NCLT, Delhi has approved the merger; however, the company said it awaits copy of the final orders.
Recently, NCLT, Chennai has also sanctioned the merger.

Market leader in the most of the segments

Minda is the largest automotive switch manufacturer in India, largest PV alloy wheel manufacturer, second largest player globally in
automotive acoustics, and third largest player in India for automotive lightings. Together these four product segments accounted for 72%
4
Minda Industries Ltd.
of the consolidated revenues in FY20. In other product segments, like blow moulded products and air filters, the company enjoys a
leadership position in the domestic market through its subsidiaries/JVs. MIL is mainly a domestic-focused high growth multi-product auto
ancillary play with India forming ~80% of consolidated revenues. Also the company has limited exposure to engine and engine related
parts in its product portfolio which makes it fairly insulated from any electric vehicle (EV) disruption.

Minda’s business profile is well diversified, with presence across multiple automotive and product segments, catering to a wide portfolio
of automotive OEMs. About 37% of revenues are derived from automotive switches, 23% from lighting, 14% from LMT (aluminium die-
casting and alloy wheels), 12% from acoustics (horns), and the rest from products like blow-moulded components, rubber hoses,
batteries, etc. Additionally, it has presence in air bags, air filters, etc., through multiple JVs. The product diversification would further
improve in FY22, with the planned acquisition of Harita Seating Systems (HSSL), which would add automotive seating systems to its
product portfolio.

The company’s customer exposure is also diversified with its largest customer, Maruti Suzuki (MSIL), accounting for around 20% of overall
revenues. In terms of automotive segments, 2Ws and three-wheelers (3Ws) account for 51% of the total revenues, while PVs account for
the rest. The HSSL acquisition would also help increase MIL’s presence in the Commerical Vehicle (CV) segment.

Technological collaborations with global automotive component suppliers

Minda Industries has focused on expanding into new product segments and improving its technological capabilities in existing product
segments by entering into JVs and technical collaborations with foreign players. These include Kosei for alloy wheels, Tokai Rika for
switches, seat belts and gear shifters, AMS for lightings, Kyoraku for blow-moulded components, Toyoda Gosei for air bags, rubber hoses
and sealings, Denso Ten for infotainment systems, Katolec for printed circuit boards (PCBs), Onkyo for speakers, TTE for Driving assistance
products and systems (DAPs), Sensata for sensors, and KPIT for telematics, among others. These collaborations have helped the company
to expand its product portfolio and content per vehicle with OEMs.

Recently, Minda Industries announced that it would increase its stake in a JV to 30%. The JV is between Minda group and Tokai Rika Co,
Japan. It is engaged in the manufacturing of safety and security systems, electronic components and automotive switches and is
supplying its products to OEMs. Company will invest Rs 43cr to increase its stake in JV.

5
Minda Industries Ltd.
LMT (Alloy wheel business)
LMT business segment includes aluminum die casting and alloy wheels. The segment forms 14% of revenues and enjoys best in class
margin profile. Alloy wheel penetration has grown at strong pace in India over the past few years. Aluminium alloy wheels carry the
advantage of superior design and lighter weight over their steel counterparts. Despite having grown quickly, alloy wheel penetration
levels in the Indian 4W market are still at 25-30%. There is good scope for future growth amid increasing demand for premiumisation and
regulatory push for vehicle light-weighting. Minda serves the segment through its subsidiary Minda Kosei Aluminium Wheels (MKAW,
MIL has 70% stake while 30% stake is with Japanese player Kosei) and a separate JV i.e. Kosei Minda Aluminium Company (MIL has 30%
stake). It will be expanding its 4W Alloy wheel capacity by 60,000 wheels/month at its plant in Bawal, Haryana to cater to the increased
demand. MKAW supplies to PV market leader Maruti Suzuki (MSIL, 88% of sales) and Mahindra & Mahindra (M&M, 12% of sales), while
the JV counts Honda Cars, Toyota & Renault among its clients. New plant at Supa for alloy wheels has started revenue generation.
Management expects to reach optimum capacity utilization levels over the next couple of quarters. We estimate 13% CAGR in revenue
from this segment over FY20-23E.

Key Agreements with Global Majors

Year Company Country Product/Area
1995 Tokai Rika Japan 4W Switches
2010 Roki Co Japan Air Filters
2011 Kyoraku Nagase Japan Blow Moulding
2011 Toyoda Gosei Japan Safety system & Hoses
2015 Kosei Japan Alloy Wheels
2016 Onkyo Japan Infotainment
2017 Katolec Japan Printed Circuit Board
2017 TTE Taiwan Driver Assistance Systems & Products
2018 Sensata Technologies US High end Sensors for BS-VI
2019 Harita Seating India Seating Systems
2019 iSys RTS Germany Embedded Software
2019 Delvis Germany Lighting
Source: Company, HDFC sec Research

6
Minda Industries Ltd.
Switches Business
Minda Industries is the largest automotive switch player in India (4W & 2W). Its domestic 4W, 2W switches market share is at 55% and
65% respectively. Its products on the 4W side include audio & cruise switches, door lamp switches, HVAC, power window switches, mirror
switches, panel switches and lever combination switches. The 2W switch products include handlebar assemblies, CBS, off-road switches
and other customised switches. The company serves the 4W segment through subsidiary Mindarika (MIL has 51% stake, rest with
Japanese partner Tokai Rika- TRMN) while the 2W switch business is part of the standalone entity. TRMN is engaged in the
manufacturing of safety and security systems, electronic components and automotive switches and is supplying its products to OEMs.
The company has been able to grow faster than the industry by taking advantage of technology evolution in favour of ease of riding, e.g.
climate control and the transition from manual to automatic. Key customers in 4W space include Maruti and Toyota and Bajaj Auto, TVS
Motor and HMSI on the 2W side. We expect 7% CAGR in revenue over FY20-23E.

Lighting Business
The lighting business is one of the oldest product segments and contributed ~23% of consolidated revenues in FY20. Company is India’s
third largest automotive lighting player with overall market share of ~20%. Its capabilities on the lighting side span the product life cycle
from design to aftermarket, backed by R&D facilities in India (for PV), Spain (for 2W) and Taiwan. Acquisition of Spain-based Rinder group
in 2016 pushed it into a higher growth trajectory (Minda Rinder forms ~50% of overall lighting segment). The acquisition of Germany-
based Delvis in 2019 is set to further complement the competitiveness of the lighting division, particularly in PV headlamps. Minda aims
to leverage Delvis’ technological, design and R&D capabilities as well as the company’s presence with global 4-W OEMs like Volkswagen,
Audi and Skoda.

LED adoption is even increasing in the domestic market. However, India remains behind western markets, with overall penetration
currently at ~30%. Domestic PV OEMs started introducing LED elements for headlamps in a meaningful manner only from 2014 with the
pace of adoption increasing thereafter. Now, most of the PV players have incorporated LED content and it will grow further in the coming
years. Company plans to set up a greenfield plant to meet the increasing demand. It will be setting up world class lighting manufacturing
plant at Bhagapura, Gujarat to cater to increased demand for 4W automotive Lighting. The business has existing manufacturing facilities
at Pune, Chennai and Manesar. The new plant will be in vicinity of key OEM’s hence will also achieve better logistic management. It
also plans to tap potential export business in Europe and America in future from this plant. .Company derives ~40% of the segment
revenues from 2W space while around 30% from PV and the balance from others. We expect demand for LED lighting to form an
7
Minda Industries Ltd.
important leg of MIL’s premiumisation play over the next few years. Further, the technological edge provided by acquisitions of Rinder
and Delvis are expected to help MIL further improve LED share of overall lighting business and gain incremental market share in this
space. We expect 13% CAGR in revenue over FY20-23E.

Delvis: Global lighting play

Recently, Minda Industries completed the acquisition of Delvis GmbH, which is a German player providing advanced lighting solutions to
major German PV OEMs (VW, Audi, Porsche) for exterior and interior lighting, lighting electronics and testing services. Delvis offers the
full range of products from cost-optimised basic headlights and design solutions up to adaptive LED headlight systems with dynamic
lighting functions. Company acquired Delvis at an enterprise value of €21 million (Rs 150-160cr). It is expected to clock sales of €40 million
(~Rs 300 crore) with EBITDA margin of 6-7% in FY21E. We view this acquisition as a strategic play in the premiumisation drive that will
further augment the content provided by MIL to its customers.

To expand capacity for 4W lighting and Alloy Wheel segment

Board has approved the expansion plans in its two businesses i.e. Four Wheel (4W) Lighting and 4W Alloy Wheel, considering the
improved market scenario and increased demand, wherein the said businesses have been operating at near capacity. Company will set up
lighting manufacturing plant at Bhagapura, Gujarat to cater to increased demand for 4W automotive Lighting. The business has existing
manufacturing facilities at Pune, Chennai and Manesar. It also plans to tap potential export business in Europe and America in future
from this plant. Total capital expenditure for this new facility in Gujarat is at Rs 90cr, which will be funded through mix of debt and
internal accruals. The plant is expected to commence operations by Q4 FY22 and will stabilize in subsequent couple of quarters.

Minda Kosei Aluminum Wheel Private Limited, a subsidiary of Minda, will be expanding its 4W Alloy wheel capacity by 60,000
wheels/month at its plant in Bawal, Haryana, to cater to the increased demand. The additional capital expenditure for the aforesaid
capacity expansion will be about Rs 167cr. The expanded facilities are expected to commence operations by Q4 FY22 and expected to
stabilize by Jun-2022.

Acoustics Segment
Acoustics (horns) form ~12% of consolidated revenues. The company is India’s largest player in this segment (around 50% domestic
market share) and also the second largest player globally. It manufactures electronic automotive horns, trumpet horns and disc horns for
8
Minda Industries Ltd.
PVs, 2-W, CVs and off-road vehicles. The company acquired Spain based Clarton Horns in 2013, which significantly expanded scale in the
segment. The Indian acoustics business caters equally to PV, 2W segments. Major global clients for the division include BMW,
Volkswagen, Daimler and Audi while major Indian clients are Maruti Suzuki, Bajaj Auto, Tata Motors, Hyundai and Honda Motorcycles.

Given the high exposure of the segment to Europe, we build in ~5% revenue CAGR for acoustics in FY20-22E. Nevertheless, MIL’s
presence across product technologies, diverse client mix and evolving industry landscape in favour of value migration towards premium
products like electronic horns are supportive of the division. We expect 7% CAGR in revenue over FY20-23E.

Safety Airbags Business

Component makers in areas of airbags, sensors, ABS/CBS and other electronics are key beneficiaries in the coming years. Front airbags
have reached 50-60% penetration (heavily skewed towards driver side airbag), while other airbags are penetrated to the extent of 10-
20%. Minda is well placed in this space to further grow its business being one of the leading players. It serves the segment through its
48% JV with Toyoda Gosei i.e. TG Minda India and counts Toyota Kirloskar and Maruti Suzuki among key customers.

Future regulatory push towards compulsory front passenger airbag would provide an additional leg of growth. Largely popular new
models launched over the past few years already feature dual front airbags as a standard fitment. It has become common for top end
variants of new launches to feature up to six airbags in some cases e.g. Tata Harrier, Kia Seltos, Hyundai Venue, MG Hector, Hyundai
Creta all carry six airbags in premium model variants.

Borrowings continue to remain high due to planned capex

Over the previous and current year, Minda has availed considerable debt to fund its capex requirements and investments related to
acquisitions and consolidation exercise within the group. Gross debt on books has risen from ~Rs 500cr in FY18 to around Rs 1000cr as on
Mar-2020. Company has two sizeable ongoing projects - Rs 250cr 2W alloy wheel plant project and Rs 100cr sensor plant project coming
up in collaboration with Sensata - besides regular maintenance and technological upgradation requirements. As per the management, the
total capital expenditure outlay behind the lighting business for the new facility in Gujarat is Rs.90Cr which will be funded through
mix of debt and internal accruals. The plant is expected to commence operations by quarter ending Mar ‘22. Also its Four wheel Alloy
wheel business would entail an additional capex of Rs. 167Cr. In addition to the debt availed for these projects, the HSSL acquisition may
also lead to increase in leverage, if HSSL’s shareholders opt for redeemable preference shares as part of the transaction. Hence, over the
9
Minda Industries Ltd.
medium term, debt levels are expected to remain elevated. Company raised Rs 243cr through rights issue of equity shares which has
helped in debt reduction.

Base business to offer steady state support to overall growth

Company’s traditional business lines i.e. automotive switches, lights and horns contribute ~72% of revenues at present. As part of its
longer term strategy, the company wants to reduce dependence on these products and expects to reduce to ~40% of revenues over the
next five years. While newer products and emerging opportunities (alloy wheels, sensors/controllers, seating systems, airbags etc.) are
seen growing faster than legacy verticals, the base business would continue to play an important supportive role in the overall picture for
the company.

The 2W alloy wheel business & sensors business have commenced production. The company highlighted that both businesses are import
substitution beneficiaries over the next three to five years. The company expects 2W alloy wheel business to post around Rs 100cr
revenues in FY21E and ~Rs 300 crore in FY22E (at full capacity). Phase 1 has flexibility to increase capacities by 50% and could potentially
grow to Rs 700-800 crore per annum revenues over the long term. Sensors revenue in FY20 was around Rs 130 crore, with potential for
Rs 300 crore over 2-3 years.

The 2W alloy wheel space is competitive in nature, with about two-thirds of the industry served by imported wheels in the absence of any
anti-dumping duty unlike the PV segment that provides an import substitution opportunity to domestic manufacturers. Among local
players, the segment is dominated by Endurance Technologies, Rockman Industries and Enkei Wheels at present, and is marked by
entrenched relationships of existing players with key OEMs, for instance Endurance with Bajaj Auto and Rockman with Hero MotoCorp.

Replacement Market
Minda Distribution & Services Ltd. (MDSL), wholly owned subsidiary of MIL, distributes all the group products in the aftermarket.
Aftermarket products are sold to MDSL, which sells auto parts and components in the aftermarket through dealers and distributors and
retailers. There are 800+ distributors throughout India supported by retailer and mechanics network comprising of > 40,000 retail points
as on FY20. Aftermarket segment accounted for ~11% of revenue in FY20. We expect the segmental growth to remain healthy in the
medium-term on the back of rising premiumization trend, introduction of new products, increasing preference for branded products post
GST roll-out and a widespread distribution reach. We expect 5% CAGR in revenue over FY20-23E.
10
Minda Industries Ltd.
Harita Seating Systems acquisition update
In Feb-2019, Minda Industries announced that it would acquire Harita Seating Systems (HSSL). Company will issue 152 equity shares of
MIL for 100 shares held in Harita. HSSL is amongst the largest players in the seating system business in India. Recently, MIL said that it has
received requisite approvals from NCLT, Delhi and NCLT, Chennai. The merger is expected to close soon. HSSL caters to the requirements
of CV segment (MHCV-Trucks and LCV), tractor segment, bus passenger seats segment and off-road vehicle segment and enjoys
considerable market share in seating systems for CV, tractors and Bus Passenger seats. HSSL has a strong client base and established
relationship with leading OEMs in Commercial Vehicles and Tractor segments with some of the major customers being Tata Motors,
Ashok Leyland, Daimler India in the CV segment, John Deere, TAFE etc. in the tractor segment, Volvo, Tata Marcopolo and other private
players in the Bus segment. Diverse product offering, established R&D support, strong brand image and ability to quickly scale up the
operations in line with requirements of the OEMs, have helped the company in establishing a strong association with OEMs. Major
portion of the revenue came from CV segment (41.5% of FY19 net sales) followed by bus passenger segment (17%), tractor segment
(16.3%), Exports (15.3%) and remaining by off-road vehicle segment and spare parts segments. HSSL has a consistent history of CFO
generation with strong returns ratios (>20%) and has minimum leverage on books. Harita had registered revenue of Rs 744cr with ~7%
EBITDA margin in FY20.

Group EV Products

11
Minda Industries Ltd.
EV products under development

Update on business reorganisation

Minda Industries announced the reorganization of its business into four domains effective 01 Apr 2021. These include the following:

1. Electrical & Control Systems (ECS)

Mr. Ravi Mehra, CEO - Switches, Controllers, Sensors, Seat Belts & Gear Shifters, RPAS, Infotainment Systems, EMS.

2. Lighting & Acoustics Systems (LAS)

Mr. Rajeev Gandotra, CEO - Lamps, Acoustics, CNG Kits, ASEAN Business

3. Light Metal & Powertrain Systems (LPS)

Mr. Kundan K Jha, CEO - 2W & 4W Alloy Wheels, Castings and Filters

4. Safety & Comfort Systems (SCS)

Mr. Sudhir Kashyap, CEO - Seats, Blow Molding, Airbags, Weather Strips & Hoses, Air Brakes

12
Minda Industries Ltd.
Risks & Concerns
Covid-19 led to slowdown in domestic auto industry
There was almost no manufacturing activity in the first 45 days of Q1 FY21 with slow ramp up thereafter amid conflicting views on
automobile purchase as a discretionary spends getting deferred vs. the preference for personal mobility for safety purposes. In Q2 and
Q3, the company has posted strong performance led by strong volume growth in the auto sector. It remains a concern given OEMs form
large part of consolidated revenues.

Delay in higher kit value (premiumisation) thesis

The domestic automotive space is currently in the midst of severe demand challenges. If OEMs withhold or cut back on the pace of
introduction of premium features e.g. LED lights/alloy wheels/infotainment systems in their products in favour of basic alternatives such
as halogen lights and steel wheels. This could lead to lower kit value for the company.

Acquisitions led growth

Company has done series of acquisitions in India and abroad and this led to debt burden on the balance sheet. With fund raising through
rights issue, the B/S has strengthened. Given the slowdown in the auto segment, the company may find difficult to ramp up the acquired
businesses. Any big ticket acquisition may lead to pressure on the B/S and profitability.

Higher commodity prices

As the company derives ~85% of its revenue from OEMs, any sharp increase in RM prices would impact margin and profitability.

Company Background
Minda Industries Limited, the flagship company of the N.K. Minda Group, is one of the diversified auto component manufacturers in India
with a presence across multiple product segments, such as switches, lighting, acoustics (horns), fuel cap, alloy wheels & die casting and
other segments. The company is a leading domestic player in automotive switches (across 2W, 3W and PV segments) and automotive
horns, and the third-largest player in automotive lighting systems (for 2Ws, 3Ws and four-wheelers or 4Ws). On a consolidated basis, the
company has a well-diversified revenue portfolio, spread across switches (37%), lighting systems (23%), horns (12%), alloy wheels and
die-casting (14%), and others (14%). Company derives 51% of its revenues from the 2W and 3W segments, and the balance from 4Ws.

13
 Minda Industries Ltd.
Over the last few years, Minda Industries has scaled up substantially and diversified its business profile through acquisitions, scale-up in
greenfield projects, and consolidation of group companies (in the auto component business). In Apr-2013, Minda acquired Clarton Horn,
a Spanish horn manufacturer, making it a global player in the horns market for PVs. In FY17, Minda Industries acquired 100% stake in
Rinder India Private Limited, along with Rinder Riduco, S.A.S. Columbia (50%) and Light & Systems Technical Center (part of the Spanish
Rinder Group). Its other major subsidiaries include Minda Kosei (manufactures alloy wheels for PV OEMs), PT Minda, Sam Global, Minda
Distribution and Services (trading wing of the Group), and MJ Casting Limited (manufactures aluminium die-casting products for 2W
OEMs and tier-I suppliers). In Feb-19, Minda announced the acquisition and amalgamation of HSSL and its 51% JV, HFRL, to enter the
automotive seating space. The merger has got all approvals and Harita Seating will merge into MIL in the near term. The company has
also set up multiple JVs with global automotive majors, which have helped it improve its technical capability and expand its product
portfolio over the years. Additionally, Minda has entered into collaborations with players like Sensata Technologies and KPIT Engineering
Limited for acquiring knowhow and capabilities in specific product segments and areas.

Peer Comparison
Revenue EBITDA Margin PAT RoE
Company Mcap (Rs cr)
FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
Minda Industries 14895 5465 5367 6488 7481 11.3 11.5 12.8 13.8 155 157 307 454 8.8 7.8 13.1 16.9
Endurance Technologies 20595 6915 6343 8015 9125 16.4 15.9 16.8 17.2 566 475 703 856 19.8 14.5 18.5 19.3
Motherson Sumi 63822 63537 59800 72400 78136 8.2 8.0 10.7 11.5 1170 975 2490 3278 10.8 8.4 19 21

EV/EBITDA P/E
Company
FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
Minda Industries 23.6 23.6 17.6 14.2 92.6 94.7 48.6 32.8
Endurance Technologies 18.8 20.3 15.7 13.2 35.5 42 28.5 23.5
Motherson Sumi 14.3 15.8 9.8 8.4 54.4 65.3 25.6 19.4

Source: Bloomberg Consensus, HDFC sec Research

14
Minda Industries Ltd.
Revenue Mix (%) EBITDA and Margin Trend Strong Return Ratios
1200 15 30
13.8
11.9 12.3 12.8 25
1000 11.3 11.5 25
Switches 12
14
800 20 18
9 16 17
Lighting 16 15
37 600 15 13
14 12
6
Acoustics 400 9 9
10 8 8

200 3
12 LMT 5
534 725 620 619 829 1032
0 0 0
23 Others FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E

EBITDA EBITDA Margin RoE RoCE

Segment-wise margin (FY20) Revenue Split (%) Acoustics revenue split (%)
30.0
26.1 BMW
25.0
19
20
24
20.0 VW

15.0
Hyundai
9.9 9.3
10.0 7.8 7.2 13
81 30 Daimler
5.0
2.0
13
0.0 Others
Switching Lighting Other Acoustics Light Metal After Market
Systems Products (Horn) Technology
India International
(LMT)
Source: Company, HDFC sec Research

15
Minda Industries Ltd.
4W Switches revenue mix (%) 2W Switches revenue mix (%) 4W Lighting revenue split (%)

Maruti Bajaj Maruti

18
30 32 M&M
36 Toyota TVS
42 6
46 Toyota
M&M Honda Motorcycles
12 Renault

Tata Motors Royal Enfield Tata Motors

13
6 11 21
6 10 4 7 Others
Others
Others

2W Lighting revenue mix (%) Alloy Wheels (%) Die Casting revenue mix (%)

Honda Motorcycles
Bajaj Auto 12 11

24
TVS 32
35 Maruti
TVS Motors
Honda Motorcycles

Royal Enfield
16 M&M
57 Wabco India
8 Hero
9 88
8
Others

Source: Company, HDFC sec Research

16
 Minda Industries Ltd.
Financials
Income Statement (Consolidated) Balance Sheet
(Rs Cr) FY19 FY20 FY21E FY22E FY23E As at March FY19 FY20 FY21E FY22E FY23E
Total Income 5908 5465 5367 6488 7481 SOURCE OF FUNDS
Growth (%) 32.2 -7.5 -1.8 20.9 15.3 Share Capital 52.4 52.4 54.4 54.4 54.4
Operating Expenses 5183 4845 4748 5660 6449 Reserves 1652 1763 2159 2434 2823
EBITDA 725 620 619 829 1032 Shareholders' Funds 1704 1816 2213 2489 2877
Growth (%) 35.8 -14.5 -0.1 33.9 24.5 Long Term Debt 606 780 694 618 488
EBITDA Margin (%) 12.3 11.3 11.5 12.8 13.8 Net Deferred Taxes -33 -29 -31 -29 -29
Depreciation 234 302 332 375 404 Long Term Provisions & Others 175 291 315 329 353
EBIT 491 318 287 454 628 Minority Interest 267 283 283 283 283
Other Income 27 39 37 41 48 Total Source of Funds 2720 3140 3474 3690 3972
Interest expenses 63 90 73 58 45 APPLICATION OF FUNDS
PBT 455 253 249 437 631 Net Block (incl. CWIP) 1761 2116 2141 2181 2038
Tax 134 78 75 111 159 Intangible Assets 250 437 427 416 406
Share of Profit of Associates 19 13 8 15 21 Non-Current Investments 453 447 477 518 561
Non-Controlling Interests 54 33 25 33 39 Total Non-Current Assets 2465 3001 3050 3127 3015
RPAT 286 155 157 307 454 Inventories 561 555 573 663 738
Growth (%) -8 -46 1 95 48 Trade Receivables 899 726 794 939 1070
EPS 10.9 5.9 5.8 11.3 16.7 Short term Loans & Advances 2 6 9 11 14
Cash & Equivalents 110 328 515 570 878
Other Current Assets 161 174 183 198 219
Total Current Assets 1734 1790 2074 2381 2919
Short-Term Borrowings 349 217 228 203 160
Trade Payables 798 963 922 1070 1208
Other Current Liab & Provisions 309 439 461 502 548
Short-Term Provisions 22 32 39 43 47
Total Current Liabilities 1479 1651 1650 1818 1963
Net Current Assets 255 138 424 563 956
Total Application of Funds 2720 3140 3474 3690 3972
17
 Minda Industries Ltd.
Cash Flow Statement Key Ratios
(Rs Cr) FY19 FY20 FY21E FY22E FY23E FY19 FY20 FY21E FY22E FY23E
Reported PBT 455 253 249 437 632 EBITDA Margin 12.3 11.3 11.5 12.8 13.8
Non-operating & EO items -27 -39 -37 -41 -48 EBIT Margin 8.3 5.8 5.3 7 8.4
Interest Expenses 63 90 73 58 44 APAT Margin 5.4 3.2 3.2 5 6.3
Depreciation 234 302 332 375 404 RoE 18.4 8.8 7.8 13.1 16.9
Working Capital Change -193 439 -98 -84 -86 RoCE 15.8 9.3 7.7 11.5 15
Tax Paid -134 -78 -75 -111 -159 Solvency Ratio
OPERATING CASH FLOW ( a ) 398 967 444 633 787 Net Debt/EBITDA (x) 1.2 1.1 0.7 0.3 -0.2
Capex -618 -761 -350 -410 -250 D/E 0.6 0.5 0.4 0.3 0.2
Free Cash Flow -170 192 94 223 537 Net D/E 0.5 0.4 0.2 0.1 -0.1
Investments -263 -40 -31 -40 -43 PER SHARE DATA
Non-operating income 27 39 37 41 48 EPS 10.9 5.9 5.8 11.3 16.7
INVESTING CASH FLOW ( b ) -854 -761 -344 -409 -245 CEPS 19.8 17.4 18 25.1 31.6
Debt Issuance / (Repaid) 457 102 -63 -61 -106 BV 65 69 81 91 106
Interest Expenses -63 -90 -73 -58 -44 Dividend 1.1 0.4 0.8 1.8 3
FCFE 154 404 -42 104 386 Turnover Ratios (days)
Share Issuance/MI 46 16 245 0 0 Debtor days 56 49 54 53 52
Dividend -34 -16 -22 -50 -84 Inventory days 30 37 39 37 36
FINANCING CASH FLOW ( c ) 406 12 87 -169 -234 Creditors days 66 88 86 83 81
NET CASH FLOW (a+b+c) -50 218 187 55 307 VALUATION
P/E 50.3 92.6 94.7 48.6 32.8
P/BV 8.4 7.9 6.7 6 5.2
EV/EBITDA 20.2 23.6 23.6 17.6 14.2
EV / Revenues 2.4 2.6 2.7 2.2 2
Dividend Payout 10.1 6.8 13.8 16 18

18
 200
250
300
350
400
450
500
550
600
Mar-20

Apr-20

May-20
One Year Price Chart

Jun-20

Jul-20

Aug-20

Sep-20
Minda Industries Ltd.

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

19
 Minda Industries Ltd.
Disclosure:
I, Kushal Rughani, MBA author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also
certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately
preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.

Any holding in stock - No

HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

Disclaimer:
This report has been prepared by HDFC Securities Ltd and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual
investor; readers are requested to take professional advice before investing. Nothing in this document should be construed as investment advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in securities of
the companies referred to in this document (including merits and risks) and should consult their own advisors to determine merits and risks of such investment. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources
believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or
companies or their securities mentioned herein are not intended to be complete. HSL is not obliged to update this report for such changes. HSL has the right to make changes and modifications at any time.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be
contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to the
attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in any manner.
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies
effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security.
This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with HSL. HSL may from time to time solicit from, or perform broking, or other
services for, any company mentioned in this mail and/or its attachments.
HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or
act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.
HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency
rates, diminution in the NAVs, reduction in the dividend or income, etc.
HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies /
organizations described in this report.
HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking,
brokerage services or other advisory service in a merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this
report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research
Report.
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email:
complianceofficer@hdfcsec.com Phone: (022) 3045 3600

SEBI Registration No.: INZ000186937 (NSE, BSE, MSEI, MCX) |NSE Trading Member Code: 11094 | BSE Clearing Number: 393 | MSEI Trading Member Code: 30000 | MCX Member Code: 56015 | IN-DP-372-2018 (CDSL, NSDL) | CDSL DP ID: 12086700 | NSDL DP ID: IN304279 | AMFI
RegNo.ARN -13549 | PFRDA Reg. No - POP 11092018 | IRDA Corporate Agent Licence No.CA0062 | Research Analyst Reg. No. INH000002475 | Investment Adviser: INA000011538 | CIN-U67120MH2000PLC152193

Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

20