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A few years ago, I was traveling in an old Mahindra Jeep. The destination was more than 500 km away and we tried covering it in one without-a-break session. As is the case with old vehicles, we found ourselves stuck midway on a dilapidated road nearby a small town. A mechanic was called for who announced coldly that the radiator had busted. I enquired about a good, reliable replacement and he promptly said: “Banco ka best hai”. This is how I was initiated to the company.
The curiosity got better of me and there I was a few days later searching about the company on the internet. I discovered that it is a listed publicly-traded company known as Banco Products India. Incorporated in 1961, the company manufactures engine cooling components and engine sealing gaskets for the automotive industry. It offers a line of radiators, intercoolers, oil-coolers and various types of engine gaskets. The company’s customers include Tata Motors, Ashok Leyland, Mahindra & Mahindra, JCB, Maruti, TVS and Indian Railways. The country’s travel lifeline contributes 5 per cent to its revenues.
Banco has shown a healthy growth in its revenue of 21 per cent and net profit of 36 per cent CAGR over last five years. It also acquired Netherlands-based radiator company NRF in March 2010 for around Rs 110 crore and was able to push its consolidated sales of Rs 460 crore in 2010 to Rs 844 crore in 2011. With return on investment of above 20 per cent in last 5 years, price to earning of 7 and rising institutional holding, it makes for a lucrative long term investment.
The company’s OEM sales account for 80-85 per cent which make it heavily dependant on the performance of automobile sector. Competition from low- margin unorganised manufacturers is also a threat; as is the rising metal cost.
This article was originally published on June 05, 2012.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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