The company also plans to start shipping cast aluminium wheels shortly from its new plant in Chennai
Leading auto components firm Wheels India has registered a net profit of Rs 7.43 crore for the Q2 ended September 30, 2020. The company had registered a net profit of Rs 28.67 crore for the corresponding quarter the previous year. But these numbers are not strictly comparable as the net profit of Q2 of the previous year had a onetime write back of a deferred tax liability of Rs 19.80 crore. The company registered revenues of Rs 510.84 crore for the Q2 ended September 30, 2020. It recorded revenues of Rs 595.63 crore in the same period last year.
New Plant
Earlier this week, Wheels India began production at a newly commissioned cast aluminium wheel plant at Thirvoy Kandigai. The plant has an annual capacity of 7.5 lakh wheels. Initially, the company plans to export its production to customers overseas. Srivats Ram, Managing Director, Wheels India, said: “After the lockdown in March, we started running our plants at some level only towards the end of the first quarter. With the unlocking of the economy, we reached around 90% of our pre-pandemic production levels in September. We will start shipping the cast aluminium wheels shortly. Initially it will be exports but will look at the domestic market as well going forward. We have invested Rs. 177 cr. into this project.” Wheels India will also be investing Rs. 72 cr. this year in capex including Rs. 41 cr. in the windmill segment.
Export Thrust
The company exports around 20 per cent of its sales and has a diversified customer base with over 40 customers globally. On the revival of the exports segment, Srivats said: “We have been able to build and grow relationships with export customers and expect this to auger well as we move into the next year.” On the outlook for the second half of the year, Srivats said: “There has been some build-up of demand towards the festival season, in most segments barring the CV segment. The current momentum that we are seeing augurs well and should build into growth in FY22.”
“We had an unusual mix in the first half. De-growth in exports was a lot less than the overall de-growth. Exports have been reasonably robust. We have not shrunk that much in exports. We are building new orders in exports which should reflect in growth next year. There is also some benefit we have got out of global customers’, especially in North America and Europe realignment strategy. Customers are also looking at increasing the production base in India for exporting from India in the coming years, in a move away from China-centric production base,” Srivats commented.
Turnover and Demand
The reduction in turnover in the first half of the year was because of a large part of Q1 being a washout. “By September, we had reached 90% of the pre-pandemic turnover which is a significant improvement. Customers have been placing robust orders with us. Tractor demand has been high compared to last September. The demand in this sector follows a seasonal trend and we expect a pick up again in February after a slowdown in the next few months. Overall the scenario is better but we have to see if demand continues post the festival season. We hope the momentum will carry into next year. The mood is of cautious optimism,” Srivats said. In the CV segment, while Q1 was dormant, ICV and tippers, driven by infrastructure investment, are showing signs of growth.
Future Potential
According to Srivats, there is some visibility for the next 2-3 months. “We have to wait till the end of the festive season to confirm the demand situation will indeed sustain. If the spending continues post the festive season, then we would be optimistic on the way forward. The bus segment has been completely dormant. I expect some activity in the new calendar year. The state transport undertakings could start releasing funds from December. Hopefully the air suspension segment will improve after that,” he said.