Market Strategy

52-WEEK BLOCKBUSTER: FAG BEARINGS

Parvatha Vardhini C | Updated on November 15, 2017 Published on May 19, 2012

FAG Bearings is the second largest player in the Indian bearing industry with a market share of about 15 per cent. Outside the auto industry, the company supplies bearings for companies in the capital goods sector. At a time when the auto industry growth moderated and raw material prices moved up sharply, its diversified clientele and superior operating margins have helped the stock find favour in the markets.

In addition, when rising interest rates have been affecting profit margins, the debt-free status of the company has also come in handy. The company has been able to ride over the over all auto industry slowdown by taking advantage of the strong demand for utility vehicles and light commercial vehicles.

Besides, a presence in the automotive after markets, where realisations are higher than in direct sale to auto manufacturers, has also stood the company in good stead.

For the year ended December 2011, net sales grew by 25 per cent to Rs 1,299 crore and net profits grew by 43 per cent to Rs 176 crore. EBITDA margins were at 22 per cent. Going forward, considering the strong demand and the current capacity utilisation of over 100 per cent, the company has planned for capacity expansions from internal accruals.

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