Rajratan Global Wire: Outlook On Company’s Profitability

“We are projecting a growth of around 15% in India. From current year of close to 60,000, we are talking of 70,000 tons total production in FY’24. In Thailand, our strategy is to use the enhanced capacity of production, which has now become 60,000 tons and we plan to do minimum 40,000 tons in Thailand. So from the current last year’s 30,000 tons, we will minimum do 40,000 tons, even if it requires compromising on the price. But we will make up in the bottom line by lower cost of production at high productivity level, continuous production. And that is what we want to do. And I’m optimistic for the next year. I’m also satisfied with the last year’s performance because there was a turmoil in the global market.”
-Sunil Chordia, Chairman & Managing Director

Stock Data

Ticker	RAJRATAN
Industry	Automotive
Exchange	NSE & BSE

Share Price

Last 1 Month	-2.5%
Last 6 Months	-16.7%
Last 12 Months	11.2%

Business Basics

Rajratan Global Wire Limited is a leading manufacturer of high-quality wires and cables based in India. With a rich history spanning several decades, the company has established itself as a trusted name in the wire industry, offering a wide range of products catering to various sectors. Rajratan’s core business revolves around the manufacturing and distribution of automotive wires, industrial wires, and specialty cables. The company serves the automotive sector by providing wire solutions for applications such as wiring harnesses, electrical systems, and connectors. RGWL’s automotive wires comply with international standards and are known for their durability, reliability, and superior performance.

In addition to the automotive segment, the company also caters to the industrial sector, supplying wires and cables for applications in sectors like power transmission, telecommunications, construction, and infrastructure. The company’s industrial wires are designed to meet the specific requirements of different industries, ensuring efficient electrical connectivity and optimal performance. It specializes in manufacturing specialty cables, including fire-resistant cables, flame-retardant cables, heat-resistant cables, and other customized solutions. These cables find applications in critical environments where safety, reliability, and performance are of utmost importance.

The company’s manufacturing facilities are equipped with state-of-the-art technology and adhere to stringent quality control measures. Rajratan’s places great emphasis on product innovation, research, and development to stay at the forefront of the industry. The company’s commitment to quality and customer satisfaction has earned it certifications and approvals from renowned national and international bodies. It has a customer which base spans across India and various countries worldwide. The company has a strong distribution network, enabling efficient product delivery and after-sales support. Rajratan’s focus on customer-centricity, timely delivery, and technical support has helped it build long-term relationships with clients and establish a strong reputation in the market.

Q4 FY23 Financial Performance

Rajratan Global Wire reported a decline of 11.4% in Revenue from Operations year on year, to ₹219.43 Crore from ₹247.57 Crore. This decline in performance was due to drop in Sales Volume of Thailand business. For this quarter, the Consolidated PAT totals ₹20.27 Crore compared to ₹37.03 Crore in same quarter previous year. The Earnings per share is ₹3.99 for this quarter.

Rajratan’s Profitability Highest in Industry

Rajratan’s net profit margin for the fourth quarter of FY23 was 9.24%, which is lower than the margin for FY22. Although the company has one of the best profitability rates in its sector, this year’s margin is the only exception. The cost was reduced as a result of the company’s increasing efficiency. As the capacity is increased to 90% or 95%, the cost is further reduced. Both the fixed cost and the variable cost went down. Two years ago, Rajratan increased capacity in India and built the biggest bead wire line in the entire world. As a result, both the cost of conversion and the cost of making bead wire have significantly decreased.

The profitability was influenced by factors such as increasing capacity and efficiency, lowering variable costs, improving product quality and product mix, and changing customer profiles. As a result, the company is very competitive both domestically and internationally. Bead wire is currently cheaper to purchase from Rajratan than it is in China, and it costs less to import bead wire from Vietnam or Malaysia for Indian consumers.

Additionally, due to the extremely low, secure, and stable total cost of management involved in serving a local customer, operations in Thailand will always be significantly more profitable. There is no volatility in terms of outside factors, the exchange rate, or logistics. Rajratan claims to be the most affordable manufacturer of bead wire at the moment. We can anticipate higher earnings per share from this company and strong future profitability.

Tyre Industry Change & Challenges

The world’s transition to electric vehicles is causing some significant changes in the automotive industry. However, tyres won’t change and will continue to exist whether it is an electric vehicle, a fuel vehicle, or a vehicle with gasoline and diesel. Additionally, there are no visible changes or variations in the consumption of bead wire. Additionally, no work is being done to create a bead wire replacement. Bead wire’s quality is unquestionably rising, and consumer preferences are also changing. The rising cost of raw materials globally has presented challenges for businesses in this sector. Other input costs have also increased, such as those for power, gas, and transportation. Fears of a recession have decreased demand for automobiles in several developed countries.