SWARAJ ENGINES

The fortunes of this company are directly linked with that of the agriculture sector as it makes tractors and diesel engines, spare parts and components. Q1 and Q2 are seasonally weak and that is what we saw in previous quarter and now in Q2. In fact the effect of deficit rain is seen directly on this company’s performance. Its engine sales fell from 20,054 units to 18.890 units (YoY) and this fall was on account of decline in tractor sales, which registered a 20% drop. Net sales for the quarter was at Rs.153 crore, down 8% and operating profit came in at Rs.23 crore, down 8%. Cost rationalization and process improvement helped the company improve its EBITDA margins marginally from 14.7% to 14.8%. Net profit was down 12% at Rs.15 crore.

A debt free company, Mahindra & Mahindra holds 33.22% stake and Kirloskar Industries holds 17.39%. The company, apart from supplying engines to Swaraj division of Mahindra & Mahindra also supplies hi-tech engine components to SML Isuzu.  A debt free company, it funded its recent capacity expansion via internal accruals. The fortunes of the company are directly linked with that of the agriculture sector, which is for tractors. Thus if the harvest is good, the company could have a much better fiscal. Lets see how H2 pans out despite deficit rains.