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Force Motors upbeat over FY16 results

 

Force Motors Q4 net up 59% at Rs 74  cr

  Financial year 2015-16 was a cheerful one for Pune-based Force Motors, an automobile and auto engine maker.

Income from operations was Rs 911 crore versus Rs 703 crore a year before, growth of 28 per cent. Net profit grew 77 per cent to Rs 179.6 crore, from Rs 101.4 crore.  The stock has seen a phenomenal run-up, in earlier anticipation of good numbers. The growth pace is expected to be maintained in the year ahead, especially if the monsoon and rural economy are favourable. The company has a Rs 300-crore expansion plan for new facilities and product enhancement.

“Our vehicle business did very well last year. Though we have several challenges like emission issues, regulatory and permits last year,  still we managed very good growth. Similarly our, component business has done very well and the tooling business is growing. Considering the current market situation, getting 32 per cent growth is phenomenal, said Parasan Firodia, managing director.  

Adding: “We will definitely try and achieve 15-20 per cent growth in this new financial year. It depends largely on how the monsoon’s come in and how the rural economy performs.”

Force operates its business under three verticals — vehicle manufacturing, component manufacturing and tooling for other original equipment makers.

The vehicle business contributes 70 per cent. Its Tempo Traveller, a multipurpose utility vehicle, has a significant share of 67 per cent in this business.  In the past two years, production capacity has been taken from 700 units to 1,500 units a month, due to growing demand.   

“The company has a lot of potential to grow further.  They are doing very well in all three verticals. They are supplying engines to the world’s biggest competitors in luxury cars, BMW and Mercedes-Benz, showing reliability.  Plus, their Tempo Traveller is a market leader in the segment. As the bus aggregator business is flourishing in India, this and the school bus, and IT/BPO  transport business will help them boost sales,” said Daljeet Singh Kohli, head of research, India Nivesh.

 

SUV Failure

Despite being successful in all the three business verticals, Force Motors struggled to make its presence in the SUV market. Its first SUV, Force One was launched in 2011 and failed to boost sales. It has managed to sell only 3008 units since its launch. Finally, this year in March, the company decided to quit the segment.

"This was our first attempt of manufacturing an SUV. Traditionally, we are a commercial vehicle company. We never operated in this segment and did not have the right understanding of this segment. Priorities for both car or SUV and a CV are totally different. Also, in the last ten years, Indian consumers' expectations have changed dramatically. The DNA of our company was not really tuned to personal cars. Plus, this is a very competitive market and even big players are struggling in this segment. I don't regret what we have done. However, all of that helped us to move SUV technology to other products. Today, all of our Travellers are 100% ABS compliant," Firodia explains.

The company is also revamping its off road vehicle Gurkha with the much improved features to boost sales. It was launched in 2014. It is now eying export markets for Gurkha. Its exports have grown 33% last year in all products. It supplies the vehicles to markets like Ethiopia, Alngola, Sri Lanka, Nepal, and the entire UAE belt.

Force Motor's significant addition to the topline was achieved with the fully operational engine factory at Chennai for supply to BMW India. This is besides the good growth in the engine and axles business with Mercedes Benz India. Force Motors has recently set up a new engine manufactuirng facility near Chennai for BMW cars with total investment at Rs 200 crore. It can produce up to 20,000 premium engines every year. Force Motors has been assembling Mercedes Benz engines and axles for all its C, E, S and M class cars and SUVs built in India at its Urse plant. Now, it is setting up another plant in Chakan for producing engines for Mercedes Benz with an investment of Rs 150 crore. The plant will be operational by end of June this year.

"We are the only company in the world who is making engines for both of them. This is the first time when BMW has sourced engine manufacturing to another company. The luxury car segment in India is expected to grow further, hence, it will help us to grow the business. We are now coming up with a brand new facility in Chakan which will manufacture engines for Mercedese Benz India," said Firodia.

Tractor business

The company is also eying the tractor segment where it has marginal market share of 1%. Currently, it is selling tractors only in seven states of India. With a focused approach, it will build volume first and then expand business in other states.