2. Agenda
• Air conditioning market in India and growth prospects
• About the company
• Products
• Contract manufacturing
• Acquisitions (Sidwal Technologies) and their importance
• What is exciting about the company?
• IPO Listing details
• Fundamentals
• Investors
• Management
3. Room Air conditioning market 1/2
• Room AC sales volume skyrocketed from 2.5 Mn units in FY 2010 to 6.7 Mn units in FY 2019 (approx. CAGR of 12 %)
• In Urban India, AC penetration is still very low at just 10%
• There are 9.1 Mn/24 Mn urban households with washing machine/refrigerators but no ACs
• There is a demand of 18-48 Mn ACs which is 3-8 yrs of annual industry AC sales
• Shift towards inventor ACs accelerates- which is estimated at 50% of industry by FY 20
• Expect 15 to 18% room AC industry CAGR over FY 18 to FY 20
Still a seasonal industry but moving towards round the year use
4. Room Air conditioning market 2/2
• India significantly lags other countries in terms of AC penetration levels
• Perception change from luxury to a necessity/seasonal(summer) to round the year use
• Manufactures have come up with energy efficient ACs reducing electricity bills considerably( e.g. invertor ACs)
• Improving electricity availability/less outage is leading to higher AC sales
• ACs could be one of the largest beneficiary budget items in India over the next few years
Big spike in AC penetration
during 2010 to 2013
5. HVAC Market
• The HVAC(Heating,Ventilation and Air conditioning) market in India is forecast to reach US$ 7.7
billion by 2022
• Government propelled infrastructure investments is expected to drive growth in medium term.
• Sectors like Metro Rail, Healthcare, Education, Airports, Light industrial projects and commercial
offices would see significant capital expenditure
• Proxy to infrastructure growth
• Infrastructure investments in tier-2/3/4 cities like shopping malls, retail complexes, airports will
further push growth
• With urbanization and long summer months, more commuters are preferring air-conditioned
travel in trains or busses, thus increase in demand
6. About the company
Business: Primarily into Contract manufacturing of Air conditioners
Market cap: INR 3,200 Crores
Sales(FY 19): INR 2752 crores
No. of shares outstanding : 3.14 Crores, FV : Rs 10
Headquarters: Rajpura,Punjab
76% 24%
12. • Acquisition happened in 2019 with 80% stake value at approx. INR
230 crore: Amber financed it mostly through internal accruals
• Recently won an order of Rs 167 Cr from BML (Mumbai Metro)
which is to be executed in the next 18-24 months
• Also got an order from BEML
• Order book stands at Rs 480 crores
• On the acquisition of Sidwal, the company gained the following
key customers in mobile application HVAC segment
• Railways and Metros:
• Integral Coach Factory (ICF)
• Rail Coach Factory (RCF)
• Diesel Locomotive Works (DLW)
• Chittaranjan Locomotive Works (CLW)
• Bharat Earth Movers Limited (BEML)
• China Railway Rolling Stock Corporation (CRRSC)
• Defence: Bharat Electronics Limited (BEL)
• Telecom: Department of Telecom (DoT)
• Bus: Original Equipment Manufacturers (OEMs)
• Revenue contribution of subsidiaries for H1 was:
• PICL: Rs 84 Cr (EBITDA: 6%, PAT: Rs 1.37 Cr)
• IL JIN: Rs 166 Cr (EBITDA: 5.1%, PAT: Rs 2.53 Cr)
• Ever: Rs 155 Cr (EBITDA: 3.5%, PAT: Rs 4.35 Cr)
• Sidwal: Rs 94 Cr (EBITDA: 24%, PAT: Rs 15.5 Cr) (For 5 Months)
About Sidwal Technologies
Advantages from Sidwal aquisition
• Entry into the new product segment with a high entry barrier of up
to 6-7 years; setting up a pan-India service network for maintenance
of the coaches makes the entry for any new player quite tough
• Access to proprietary technology for commercial ACs, air handling
units and fan coil units
• New business vertical in the form of mobile application and
commercial application of air-conditioners.
• It will reduce the seasonal dependency of RAC business
• With raw materials being common for both the companies, it will
allow Amber to leverage its procurement capabilities in bringing
down the raw material costs
• The funding for Sidwal was done using internal accruals and partial
debt which saw the rise in debt to equity in FY19
• This acquisition is strategically important because of a few factors:
• The Government of India has planned to build a metro railway
system across cities with a population of over 2 million.
• With urbanization and long summer months, more commuters
are preferring air-conditioned travel in trains or busses, thus
increase in demand.
18. Share price performance since listing
• INR 600 Crores IPO came in Jan 2018 at Rs 859 @ 70 PE which was very expensive
• Current price is Rs 1018 @PE of 22.4
• PEG ratio: 0.65
• Considerable PE contraction has happened since IPO because of good earnings growth
19. What is exciting about the company/business
• Decent growth- In the last 6 years, Sales has grown 3x , whereas Profit has grown 4-5x
• Outsourced industry counts for 38% of total industry volumes and the company accounts for 57-58% of this market share
• The company’s market share in the AC market inched up to 19 per cent in FY17 against 15 per cent in FY15
• 11 manufacturing facilities over 7 locations
• The company has the capacity to make more than 5 million ACs a year in a market expanding 12 per cent annually.
• Consolidating market: Most of the AC brands are their customers, and some competition is going away as LEEL almost collapsed due to fraud
• Acquisitions for diversification into AC market : Sidwal (Market leader in Railway & Metro AC), IL Jin and Ever electronics(AC Parts maker)
• Focused approach on manufacturing only ACs
• To promote ‘Make in India’ initiatives, the government has imposed steep custom duties(20%) on imported RACs and its components. This
should help Amber bag new contracts.
• 25-30% of indoor units are still being imported from China
• Competition for the company in the outsourced manufacturing market is mainly from Chinese exporters- so import duty increase is a
boon for the company
• Recently they added Toshiba,Livpure,Amazon India & Flipkart as their customers and decent growth from digital market
• Seasonality change in the RAC market is reducing going forward and the RAC industry is not being affected by the overall economic slowdown in
the domestic market
• The company has identified the land package in Tirupati for expansion in South India with approx. Capex of Rs 100 Cr over two years. The
capacity expansion from this facility should be around 1 million units: expected to be financed by internal accruals
• Currently, export contribution to revenues is only Rs 80-90 Cr at annual levels. This is expected to come up slowly and prove to be a good
opportunity for the company in the next 10 years
20. SWOT analysis
• The company has the capacity to make more than
5 million ACs a year in a market expanding 12 per
cent annually.
• The company’s market share in the AC market
inched up to 19 per cent in FY17 against 15 per
cent in FY15.
• Not much info about the promoters
• Dependent on key customers and even a
significant reduction in purchases by a key
customer could hit its business
• The top 3 customers are LG (17-18%), Voltas (14-
15%) and Panasonic (14-15%).
•
• Penetration of ACs in India is just 4 per cent compared with
the global average of 30 per cent
• Manufacturers have come up with an increasing range of
energy-efficient air conditioners. This addresses the Indian
consumers’ concerns about high electricity bills.
• The narrowing price gap between fixed and inverter air
conditioners, which now stands at only INR 3,000- 4,000,
will lead to increasing preferences towards this technology
• Government in this budget has increased custom duty on
imported AC from 10% to 20% - room for growth
• LEEL closing down can give more business to Amber
• Acquisition of Sidwal- diversification, broaden base
• Expansion in South India and exports
• Consumption slowdown
• Economy slowdown
• Aggressive in acquisitions
STRENGTH WEAKNESS
OPPORTUNITY
THREAT
21. Promoters and Senior Management
-B.E(Industrial
engg,Karnataka),
M.B.A.(U.K.)
-Chairman and CEO
since 2017
-Played key roles in
raising funds through
3 PE- IFCI -
Ventures,Reliance pvt
equity and ADV -
Partners,Singapore;
-Worked on
successful IPO;
-Received “Man of
Appliances” award
from CEAMA
Consumer Electronics
Appliances
Manufacturers assn.
-12 years in financial
services and 10 years
in RAC sector
-B.E.(Nagpur
univ),Master(IT) from
Rochester,US
-MD since 2017
- “Entrepreneur of
the Year 2016”
award from Ludhiana
Management
Association.
Sanjay Arora
Director, operations
-Diploma in Elec engg
-With company since 2012
-34 yrs in the industry
-Earlier worked with Onida
Savak ltd,Monica
electronics pvt ltd,Kortek
electronics(India) ltd & LG
electronics India limited
Udaiveer Singh
President-RAC
-Diploma in
Mechanical
Engineering
-With company
since 2003
-22 Yrs of industry
experience
Sachin Gupta
Vice President-RAC
-B.E. from Punjab
Technical university
-With company since
2014
-14 Yrs of industry
experience
-Earlier worked with
LG India, Godrej &
Boyce
Sudhir Goyal
CFO
- B.Com. Delhi univ.
-With company since
2012
-13 Yrs of industry
experience
-Earlier worked with
Hythro power
corp,Altima
systems,ETA
Ascon,Jamshedpur
mineral wood manfg
col
Konika Yadav
CS and compliance
officer
-B.Com. ,Dayanand
univ,Rohtak
-With company since
2014
-5 Yrs of similar
experience
-Earlier worked with
DLF hotel holding
limited,Green Infra
Assets limited;
Adlakha & Adlakha
associates
