Business

Wheels India net rises 26%

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‘Auto slowdown offset by growth in industrial components’

Wheels India Ltd. recorded 26.4% growth in a net profit to ₹28.67 crore for the quarter ended September 30, 2019 from a year earlier, thanks predominantly to the adjustment of deferred tax liability, stemming from the corporate tax cut announced by the Centre recently.

Revenues for the quarter declined 26% to ₹595.63 crore compared to the same quarter in the last fiscal.

The company’s net profit for the quarter included ₹19.8 crore arising from the re-measurement of the deferred tax liability.

Srivats Ram, MD, Wheels India, said, “While there was a severe slowdown in the commercial vehicle (CV) and passenger vehicle (PV) industry affecting the automotive component business, it was partially offset by strong growth in the industrial component business.”

The firm includes business from the windmills sector, the railway industry as well as thermal power plants under the industrial components business.

New plant

The firm is setting up a cast aluminium wheel plant in Thervoy Kandigai near Chennai with an investment of ₹140 crore. It is expected to start operations next year.

The plant will have capacity of 750,000 wheels a year in Phase I. According to Mr. Ram, products from the new plant would begin with an export focus. “We have a dedicated customer serving global markets for the product,” he said, adding, “While we have cut back on some investments in CV and PV, our overall investments for the year will not be dramatically lower than planned, driven by growth prospects in export-oriented and industrial component sectors.”

Asked about the slowdown in the economy, Mr. Ram said “The truck industry had a quarter of severe slowing down accompanied by a similar trend in the light vehicle and construction equipment industry. There are signs of slowing global demand affecting our business. At the same time, we have been able to grow our bus air suspension business and our railway and windmill business, where we have started executing some export opportunities.”

In Q2, August and September were progressively worse than July, he said. “Even if we assume that November and December may see better fortunes, it’s unlikely Q3 will be better than Q2, on a production basis.” He explained that Wheels India customers were still witnessing de-stocking — following a period of build-up in stocks — leading to loss of production days. “Capacity utilisation in the auto business is lower than seen in the past couple of decades. This slowdown is more prolonged than I have seen in 25 years.”

As to improvement in the economy, he said, “We do not see any change [from the negative] sentiment prevalent. If the government prioritises funding for infrastructure, then industrial construction equipment will benefit. But even if action is taken now, it would be next year before benefits can be felt.”

Exports contribute more than 20% to total sales and the company has a diversified base of over 40 customers.

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Printable version | Dec 16, 2019 6:05:26 PM | https://www.thehindu.com/business/wheels-india-net-rises-26/article29881815.ece

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