SKF India: Swedish bearing manufacturer SKF India eyes capacity expansion to meet demand

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MUMBAI: The Indian arm of Swedish bearing manufacturer SKF is looking to expand production capacity at the earliest as all its manufacturing units are running at full capacity, SKF India managing director Manish Bhatnagar said.

“We had to sadly turn down orders because we were running at full capacity. We need to invest fairly quickly in capacity (expansion),” he told ET.

The company is considering both greenfield and brownfield options to increase production capacity, Bhatnagar said.

He did not disclose the quantum of capital earmarked for the capacity expansion but said the company will continue with its planned capital expenditure of Rs 100-150 crore this fiscal.

SKF India and its affiliates together have six plants in India. It managed to lock in key customers and gain market share after it resumed production much before the competition when the lockdowns to contain coronavirus eased earlier this year, Bhatnagar said. The maker of bearings and lubricants had got its workforce and supply chain back in order as early as May, he said.

The company is now running three shifts a day, seven days a week at its facilities to meet demand.

The maker of bearings and lubricants received most demand from the automotive segment even as vehicle sales increased during the Diwali festive period. The segment grew to contribute almost half of SKF’s revenue in India, up from about 45% earlier. The balance came from the industrial bearings segment, which has been sluggish so far.

However, with the government’s infrastructure push, the industrial bearings business too is expected to pick up in the coming months, especially in the rail segment, Bhatnagar said.

The company’s stock, though, doesn’t mirror its revival in sales yet. The stock price of SKF India has declined more than 23% on the Bombay Stock Exchange since the beginning of the year, closing at Rs 1,678 on Friday. During the same period, benchmark index Sensex gained 13.7%.

Among its peers, rival Schaeffler India’s stock declined by 8.4% during the same period while Timken India and NRB Bearings gained 24.3% and 2.9%, respectively.

ICICI Direct analysts in a report on October 29 had said they expected SKF India’s overall revenues to grow at a compounded annual growth rate of 5.3% between 2019-20 and 2021-22 though they expect its revenues to decline 12% year on year in the current fiscal. “Currently, the stock is trading at 25x FY22E earnings and, thus, leaves very little upside,” the report said.

Rising commodity prices may bite into the company’s margins in the coming quarters.

SKF expects a 5-8% increase in steel prices for it during the next fiscal, Bhatnagar said. It may absorb some of the cost increase while passing some on to its customers, depending on market situation, he said.

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