Lbo - Target Selection

Submitted by:

Team Castle Black Ananya Utkarsh Manish Jain Yogesh Gidwani

The IB League 2018 STG Campus Case Study

Auto ancillary industry

Demand drivers: ▶ Sales of automotive vehicles ▶ Growth in economic activity ▶ Increase in the personal

disposable income ▶ Growth in rural economy ▶ Multiple finance options ▶ Decline in tax rates

Value Chain

Downstream Upstream R&D Design Concepts

Component Specialists Component Manufacturer

Tier n suppliers

Tier 2 suppliers Tier 1 suppliers

Government initiatives ▶ Significant push for rejuvenation of rural economy and economic

development for better infrastructure connectivity ▶ Greater availability of credit facilities

OEM/ Automaker Retailers

▶ Increased customs duty rates (15%) on completely knocked down

component imports to encourage ‘Make in India’ ▶ Lower corporate income tax of 25% for companies upto Rs 250 crores

in revenues (MSME)

Future trends ▶ Expected revenue growth estimate (ICRA)from 9%-11% to 13%-15%

for FY2018e driven by increase in commodity prices ▶ Robust growth estimated in domestic passenger vehicles, commercial

vehicles, tractor and 2W segment ▶ Strong growth in rural income and infrastructure activity driven by growth in construction and mining equipment and tipper segment

Key characteristics ▶ Cyclical Industry ▶ Fragmented with large

and small players

1

Industry analysis

Source: IBEF; OECD

Supply drivers: ▶ Interdependent on industries of raw materials: steel, aluminum and copper ▶ Lower labour costs per unit ▶ Regulatory measures of government(GST, demonetization) ▶ Integration of local markets with

the supply chain ▶ Localization of advanced

manufacturing capabilities ▶ Arrival of international car makers operating as joint ventures with local partners

Bargaining power of suppliers (Low): ▶ Well established supplier base network

Competitive rivalry: Medium

Bargaining power of customers (Medium): ▶ Prevalence of alternative options ▶ Price sensitive customers

Industry overview

Raw Materials

Barriers to entry (Low) ▶ Need of huge capital ▶ High degree of

precision requirement and technical knowhow ▶ Government