- 09 Oct 2024
- ICICIdirect Research
SKF INDIA TO DEMERGE AUTOMOTIVE AND INDUSTRIAL BUSINESSES
News: SKF India's board has approved the demerger of its automotive and industrial businesses through a scheme of agreement. It has given the corporate restructuring committee the authority to take steps to prepare a detailed scheme for the proposed demerger. The company will consider the detailed scheme and make the required disclosure to the exchanges before taking a final decision. The industrial business of the company will be carried out through a new wholly-owned subsidiary - SKF India (Industrial) Limited
View: The decision of automotive business separation at a global level was announced last month by SKF India’s parent company AB SKF. SKF India’s total revenue stood at Rs 4570 crore in FY24, of which industrial segment contributed ~51% while automotive segment & exports contributed ~40% & ~9% respectively. This development looks largely neutral for SKF India as the margins in automotive segment are relatively better led by high localisation of ~90% vs 40-45% in industrial segment, however industrial segment’s growth has been better (led by strong double-digit growth in railways, heavy industries & metals). Going ahead, company targets to increase localization in the industrial segments to 60% over the next few years (from 40-45% at present), which will help the company in securing more orders and margin improvement
Impact: Neutral