In anticipation of strong growth, GNA Axles Limited has announced its first ever Initial Public Offering. Story by:
Ashish Bhatia
Jalandhar-based GNA Axles Limited was established in 1993. Specialising in the manufacture of rear axle shafts, splined shafts and spindles, the company has announced its first ever Initial Public Offering (IPO) in anticipation of strong growth. Made up of two business arms – GNA Duraparts (Gears division) and GNA Udyog Limited (Propeller Shafts division), GNA Axles Limited decided upon an IPO to fuel growth. Encouraged perhaps by the good performance of diverse IPOs launched in India in the recent past, the IPO that GNA Axles has announced is worth Rs.130 crore. On Septmebr 14, 2016, the company came out with an issue of 63,00,000 equity shares. Of this, the net public issue comprised of 61,00,000 lakh equity shares. The remaining 2,00,000 equity shares will go to the eligible employees of the company. Expressed Ranbir Singh, President and Chief Executive Officer of GNA Axles Limited, that out of the net proceeds of the issue, Rs.80 crore will be utilised for the purchase of plant and machinery. For the working capital of the company, Rs.35 crore will be allocated. An additional undisclosed sum will be utilised for other miscellaneous corporate expenses. The equity shares of the company will be listed on the BSE and NSE. Claim financial experts, that this move by the company will enhance the value of the brand apart from facilitating an inflow of capital.
Growth from rear axle
Expected to facilitate growth by infusing funds in working capital, corporate expenses and debt reduction exercises, GNA Axles, according to Singh, sees growth in the supply of axles to every second truck in the country. Admitting that this is a large market to quantify, Singh informed that the rear axle shaft segment in India is expected to grow at a Compounded Annual Growth Rate (CAGR) of 13 per cent. “It is here that we want to grow big time,” he mentioned. In FY2015-16, rear axle shafts constituted 81 per cent in terms of volume, and 84 per cent in terms of sales. Expressed Singh, “GNA Axles has a well defined growth strategy. The focus areas include exports, diversification of product portfolio, expansion of customer base, quality and cost reduction.” “Focus will be also on rationalising the investment in new plant and machinery,” he said.
Manufacturing a diverse range of shafts, from 1.5 kg to 65 kgs, GNA Axles has the capability to scale the product portfolio up to 165 kgs. The rear axle flanged shafts the company makes are up to the dimension of 425 mm. In the case of splined shafts, the company caters to a variety of requirements. The hollow spindles find place in heavy-duty CVs where the company caters to OEMs like Volvo. According to Singh, the current capacity utilisation across the two (Hoshiarpur and Kapurthala) plants is 80 per cent. “Production can be scaled up to two million axle shafts annually if needed,” he added. The splined shafts and spindles find use in on-highway and off-highway vehicles. In FY2015-16, spindles contributed approximately seven per cent to the total sales in terms of volume. Apart from spindles and rear axle shafts, the company also manufactures drive shafts, power take-off shafts, hydraulic lift shafts, and transmission shafts according to Singh. These products, he mentioned, contributed 12 per cent to the total sales in terms of volume in FY2015-16. Apart from trucks and buses, GNA Axles caters to the needs of off-highway equipment like tractors, forest and agricultural equipment, construction equipment, electric carts, and mining and defense machinery. Apart from Volvo, OEM clients of the company include Mahindra, John Deere, and TAFE.
Tractors and off-highway equipment
Close to two third revenue of the company comes from the tractor segment. In FY2015-16, GNA Axles manufactured 5.48 lakh tractor units according to Singh. It is a single source supplier to some tractor OEMs. The company also supplies to Tier 1 suppliers like Automotive Axles Limited, Meritor HVS AB and Dana Limited. In FY 2015-16, the domestic and export sales constituted 45.29 per cent and 54.71 per cent of the revenue according to Singh. Catering to the export markets of USA, Sweden, Turkey, Brazil, Italy, Germany, Spain, Mexico, Japan, UK, France, China and Australia, Transaxle Manufacturing of America and Kubota Corporation are among the major global customers of the company. Averred Singh, “Exports last year grew exponentially at 54.1 per cent compared to 34 per cent the year before. What started as a production of two components a day has scaled up to three million units per annum for the domestic and exports markets cumulatively. Apart from focusing on production, we are ensuring that we give equal importance to every stage of the entire value chain. From packaging to dispatching the component.”
Automation
As part of the growth plan, the company is looking at increasing automation. This, said Singh, will also help with the capacity utilisation. Looking at leveraging its relations to keep growing, both domestically and internationally, GNA Axles is also looking at diversifying the product portfolio. It is working towards integrating its manufacturing setup and enhancing its engineering capabilities. New machinery as per the plan will be in the area of forging, heat treatment and machining according to Singh. He averred, “Going forward, we will focus on increasing automation in forging and machining in order to better utilise the resources and enhance efficiency.
