BALMER LAWRIE & CO

Targeting large logistics pie

Founded by two Scotsmen, Stephen George Balmer and Alexander Lawrie, Balmer Lawrie & Company began life as a partnership firm in 1867. Today, it is a ‘miniratna’ PSU working under the administrative control of the Ministry of Petroleum and Natural Gas since 1972. The company is a well-diversified entity operating across several business verticals, including grease and lubricants, steel barrels, industrial packaging, logistics, and travel & vacations (T&V). It has several strategic business units (SBUs) with a presence in the manufacturing as well as services sectors.

Interestingly, though Balmer Lawrie is a PSU, about 80 per cent of its business lies outside government departments, predominantly in the private sector.

Though the company’s performance was hit hard in the Covid pandemic years, with sales declining from Rs 3,013 crore in fiscal 2013 to Rs 1,526 crore in fiscal 2021 and operating profit tumbling from Rs 234 crore to Rs 141 crore, it started recovering fast and in the last fiscal ended March 2024 earned an operating profit of Rs 305 crore. Prospects for the company going ahead are all the more promising. Consider:

• The company has chalked out an aggressive marketing plan to promote its services in order to capture a significant share in the business travel market. It handles travel and ticketing for government offices and has signed an MoU with the government targeting revenues of Rs 3,400 crore for the current financial year ending March 2025. It is targeting revenues of Rs 6,000 crore by 2030, and is in the process of hiring a consultant to develop a comprehensive growth strategy.
• The industrial packaging (IP) segment is expected to see significant growth in the coming years, with the biggest drivers being the chemicals, food, transformer oils and lubes segments. The IP segment is expected to grow on the back of stability in steel prices and healthy demand from end-user industries. The company also plans to expand aggressively in the exports segment.
• The outlook for the greases & lubricants segment remains positive for the next few years, led by an increased business share in defence and railways, opportunities in infrastructure and mining, development of substitute products for lithiumbased grease, and a greater focus on the tractor & transport segment.

LOGISTICS POTENTIAL

• The logistics infrastructure segment is in the process of establishing long-term contracts with major shipping lines — which will garner steady business. The logistics segment has a well-defined plan to increase its private sector business as the the new sales team gains traction on a pan- India basis.
• The Indian logistics services market presents several opportunities arising from the growing e-commerce industry, government initiatives, the rising demand for cold chain logistics, expansion of the manufacturing sector, and an increase in foreign investments. Adoption of technology and automation in the logistics sector is expected to improve efficiency and reduce costs, presenting a significant opportunity for companies to invest in these areas.
• Balmer Lawrie has significant capex plans over the next three years, including Rs 230 crore for setting up a freetrade warehousing zone (FTWZ) at JNPA, Navi Mumbai and Rs. 339 crore for a 200-klpd (kilo litres per day) grainbased ethanol plant in Andhra Pradesh. The company is in the process of acquiring 25 acres in Andhra Pradesh. The feedstock for ethanol production will include rice and maize. which are available aplenty in that state. Both capex amounts are likely to be funded through a mix of debt and internal accrual. In FY 2025, we expect the company to register EPS of Rs 16.6, which is likely to rise to Rs 18.9 in FY 2026. The scrip trades at Rs 276. P/E on the FY 2026 EPS works out to 14.6.

PERFORMANCE INDICATORS (Rs. in crore)

MUNJALAUTO INDUSTRIES

Piggybacking 2W sales boom

Munjal Auto Industries is a TS 16949 and ISO 14001-accredited leading auto components manufacturing company belonging to the well-known Hero group which owns Hero MotoCorp, the largest manufacturer of twowheelers in the country. The company is engaged in the manufacture of exhaust systems for two- wheelers and fourwheelers, spoke rims and steel wheel rims for two-wheelers and four-wheelers, fuel tanks for four- wheelers, seat frames for four-wheelers, and other automotive components.

The company has expertise in manufacturing a wide range of sheet metal and forging components for motorcycle manufacturers. Its sheet metal components include various types of mufflers and rims for motorcycles, while the forging components consist of gear blanks for motorcycles. The company has an installed plant capacity of 10,000 rims per day, and all rims are tri-nickel chrome- plated to international standards

However, Munjal Auto’s financial performance has not been that gratifying. During the last six years, its sales turnover has improved modestly from Rs 1,214 crore in fiscal 2019 to Rs 1,882 crore in fiscal 2024, with operating profit rising from Rs 71 crore to Rs 120 crore and net profit moving up fractionally from Rs 37 crore to Rs 38 crore. Regardless, prospects for the company going ahead are highly promising. Consider:

The auto components segment is the heart of the automotive industry, and its fortunes move in tandem with those of the latter. The automotive industry had slowed down considerably some decades ago but has been running in top gear in more recent times. In fiscal 2023, the contribution of the automotive sector to the country’s GDP shot up to about 7.1 per cent, from a mere 2.8 per cent in 1992. Needless to say, along with the automotive sector, the auto components industry has also seen a significant rise. Almost all auto components companies have started turning out robust performances and the stock prices of these companies have registered a noticeable uptick. In fact, Munjal Auto Industries has been in the limelight of late.

IN-HOUSE CLIENT

The company’s major client is Hero MotoCorp, the undisputed leader of the Indian twowheeler industry and a Hero group company. The auto components sector in general and Hero MotoCorp in particular are poised for growth. Post-Covid, the sector has seen strong pent-up demand which will benefit auto components companies like Munjal Auto. Demand for motorcycles and scooters, which had been weak in the last few years, has seen a significant revival of late due to a change in consumer preferences in the rural market, which today accounts for almost 55 per cent of two-wheeler sales in the country. After July 2023, sales of two-wheelers have touched a new all-time high, and Munjal Auto stands to benefit from this. Besides Hero MotoCorp, the company has leading automakers like Tata Motors, Bajaj Auto and Royal Enfield as its clients.

Munjal Auto can boast of renowned global companies as its collaborators. It has entered into a tie-up with Lafranconi Spa of Italy, which focuses on exhaust systems for two-wheelers. Another tie-up is with Samsung Industries of South Korea, which specialises in fuel tanks for passenger vehicles. Besides, Munjal Auto has been working with a Japanese company for the last two decades. These collaborations provide access to the latest technologies and innovative solutions that enhance product quality and efficiency. Shares of the company are quoted around Rs. 120 (face value Rs. 2) prospects for the company are highly encouraging and experts feel the price to go up to Rs. 150 within the next six months or so.

PERFORMANCE INDICATORS (Rs. in crore)