Suprajit Engineering


Incorporated as a Private Limited Company in 1985, Suprajit Engineering Limited started manufacturing high quality liner cables to exacting Japanese standards for the automotive industry in 1987.

Currently catering to a wide spectrum of automotive and non-automotive cable requirements, Suprajit Engineering has achieved phenomenal growth and has cemented itself as India’s largest manufacturer of automotive cables with a capacity of over 150 million cables a year.

Main Products/Segments

  • Control Cables, Speedometer Cables, Speedometers, etc for 2 wheeler and 4 wheeler industry
  • Automotive Cables, Non-automotive cables, instruments

Main Markets/Customers

  • Over 60% market share in automotive cables for 2-wheeler segment
  • 60% Sales from 2 Wheeler segment, 40% from 4 wheeler segment
  • Main Customers : TVS, Bajaj, Hero Honda, M&M, General Motors, Suzuki, Piaggio, Tata
  • Main Competition: Remsons Industries, AC Engineering And Madhusudan in 2 wheeler segment and Tata Ficosa, Hilux (Japan), and Infat (Samyeong, major suppliers to Hyundai) in 4 wheeler segment

Bullish Viewpoints

  • Largest automotive cable manufacturer in India having a capacity of 75 Mn cables (FY10) – spread over 10 strategically (close to major customers) located plants
  • SEL enjoys over 60% market share in the two-wheeler automotive cables segment for OEMs
  • Currently sole supplier to TVS, 80% of Bajaj motorcycles & 80% of Hero Honda requirements
  • Aggressive expansion – Total cables capacity likely to touch 110 Mn by Dec 2011 (new chakan plant, non-automotive expansions, and Sanand plant for Tata Nano)
  • Increasing presence in 4 wheelers – customers include Tata Motors, Mahindra & Mahindra, Hyundai, Ford and General Motors- It outbid 5 competitors for Tata Nano Cable supply for which it is the sole supplier
  • Major Export customers include General Motors in US, Suzuki in Hungary, Piaggio
  • New customer additions- Volkswagen (Polo in India), Arvin Meritor, Brozer (Germany), BMW (for Germany & Europe), Nissan (Chennai plant), Palio. BMW, Volkswagen, Nissan are all initial orders, when implemented successfully, can add momentum in FY12
  • Auto Replacement market growing strongly – Contribution likely to double to 25 Cr in FY11 and further to 50 Cr in FY12 on the back of investments made in establishing pan India distribution network – a distributor in every state, 2-3 dealers in every district
  • Non-automotive business growing strongly – Expected to double – Sole supplier to John Deere, the world’s leading manufacturer of farm equipment -the 100% EOU unit for non-automotive cables caters to this customer & others newly added like Kubota, Club Car, EZGo, Jacobson, JCB, L&T
  • 7 yr I/tax and excise duty exemption for the recently completed Haridwar plant (catering mostly to Hero Honda’s requirements). 5yr I/tax holiday for the Pantnagar plant (catering to Bajaj Auto). Effective Tax rate is ~29%

Bearish Viewpoints

  • Large exposure of over 60% to the 2-wheeler segment
  • Top 3 clients contribute over 50% of revenues
  • Export markets may not recover anytime soon – growth may be tempered
  • Raw material price volatility – Raw materials like Steel wires, Steel, PVC, Brass, Alumunium & Copper constitute 60-65% of Sales typically. 50-60% of RM is steel & steel wires
  • Increased use of electronics in 2-wheelers replacing traditional control & transmission products, even speedometers are turning to LCD displays
  • Significant competition in 4-wheelers, presence of MNCs
  • Needs continuous investments in Capex to grow

Barriers to entry

  • Strong Customer Relationships – virtual customer lock-ins in 2-wheeler industry
  • Location – Suprajit has set up capacity at 8 different locations across the country to be close to its main customers in the North, West and Southern belts. Haridwar plant next to Hero Honda, Pantnagar plant next to Bajaj, the planned Sanand plant next to Tata Nano, etc.
  • Cost leadership – Focus on cost & quality leadership – Successful in pursuing new product development strategy for initial orders with multiple clients with – TVS, Tata Nano, John Deere for non-automotive cables, Volkswagen, Nissan

Interesting Viewpoints

  • Company maintains it is progressively de-risking its business model vis-a-vis Auto-Industry cyclicality with following measures:
    • Growing Non Automotive Cables market – is tripling production capacity and is confident of doubling contribution from this segment in FY12 to 25-30 Cr. (FY11 expected 12-15 Cr)
    • Growing Higher-Margin replacement market – Suprajit currently gets only 6% of its revenues from this segment (12-13 Cr in FY10), but is confident of doubling this to 25 Cr in FY11, and 50 Cr in FY12. As a premium cable supplier Suprajit should eventually get to 20% of this estimated 400 Cr market, currently it gets just about 5-6% of this market
    • If the contribution mix of domestic auto OEM:Others is 85:15 today, this is changing to 75:25 tomorrow and 60:40 in 2-3 years time
  • Company maintains it will be able to sustain margins over its historical 15% OPM levels due to following:
    • Growing contribution from higher-margin replacement & non-automotive markets (if auto OEM market is 15% OPM, these are more like 20%)
    • A Rs. 25 cable (or Rs.150 for a cable set in a Mobike) is a low value item -typically under the radar-of OEMs. Even a Rs 1 push-in on end-price per cable is like 4-5% increase
  • Raw material sourcing from China (mainly steel) -10-15% of requirement
  • Huge Relationship potential with major OEMS – does not happen overnight though. new platform product development cycle is 18 months, existing platform new sourcing takes 6-9 months (like in BMW)
    • John Deere -Total annual cable purchase is 20 Mn, Suprajit is just doing 0.5 Mn from a 1year old relationship; John Deere team is expected to come negotiating for a large chunk of business
    • GM global cables buy – atleast 60 Mn, Suprajit does only 2 Mn
    • BMW, Nissan, Volkswagen – all initial orders, big potential from all


Donald Francis: No Holdings in the Company;

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