Varroc Engineering Limited , a leading auto components manufacturer, has successfully issued and allotted commercial paper worth Rs. 50 crores to Kotak Mahindra Bank Limited. The company has informed the stock exchanges about this strategic financial move under Regulation 30 of SEBI Listing Regulations.

Updated Commercial Paper Details

The latest issuance comes with revised terms compared to earlier announcements:

Key Transaction Features

The commercial paper has been issued at an improved discount rate of 6.70%, down from the previously indicated 6.90%. The significantly shorter tenure of 26 days, compared to the earlier 90-day period, reflects the company's refined approach to short-term liquidity management.

Regulatory Compliance and Listing

Varroc Engineering has appointed ICICI Bank Limited as the Issuing and Paying Agent (IPA) for this commercial paper. The company is currently in the process of listing the commercial paper on the National Stock Exchange of India Limited and is awaiting listing approval.

Strategic Financial Management

This issuance demonstrates Varroc Engineering's continued focus on optimizing its capital structure through diversified funding sources. The commercial paper market provides the company with cost-effective short-term financing options to support its operational requirements.

Company Performance Highlights

Varroc Engineering has maintained strong financial performance with consolidated revenue of Rs. 81,541.00 million, representing 8.0% growth. The Indian business segment showed robust growth of around 10.4%, while the company generated free cash flow of Rs. 3,116.00 million, equivalent to 3.8% of sales.

Business Focus Areas

As a global tier-1 automotive component manufacturer headquartered in Aurangabad, Maharashtra, Varroc Engineering specializes in exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components. The company continues to focus on emerging automotive trends including EV penetration, premiumization, electronics integration, and advanced lighting technologies to drive future growth.

Varroc Engineering Limited, a leading auto components manufacturer, has reported a consolidated revenue of INR 2,028.00 crores for the quarter, marking a 6.8% year-over-year growth. The company's India operations outperformed the overall market growth, registering a 7.2% increase.

Financial Performance

The company demonstrated improved profitability, with EBITDA margin expanding to 9.5% from 9.1% in the same quarter last year. Profit Before Tax (PBT) as a percentage of revenue increased significantly to 4.1% from 2.8% in the previous year.

Debt Reduction and Balance Sheet Strengthening

Varroc Engineering made substantial progress in strengthening its balance sheet. The company reduced its net debt by INR 300.00 crores to INR 448.00 crores, bringing the net debt to equity ratio down to 0.3x. This reduction in debt is expected to result in lower interest costs in the coming quarters.

EV Business Expansion

A notable highlight of the quarter was the significant growth in Varroc's electric vehicle (EV) business. Revenue from EV customers doubled, now accounting for 11% of total revenue compared to 5% in the previous year. This growth aligns with the company's strategy to capitalize on the expanding EV market.

New Order Wins

During the quarter, Varroc secured new order wins with an annualized peak revenue potential of INR 291.00 crores. Significantly, 67% of these new orders came from the 2-wheeler and 3-wheeler segments, indicating strong demand in these sectors.

Innovation and Sustainability

Varroc continued to focus on innovation, filing 10 new patents during the quarter. The company also made strides in sustainability, increasing its renewable energy sourcing to nearly 50% of total energy consumption.

Future Outlook

Looking ahead, Varroc Engineering is well-positioned to supply components for the growing EV market. The company can provide INR 30,000.00 to INR 35,000.00 worth of content per 2-wheeler EV and INR 35,000.00 to INR 40,000.00 for 3-wheeler EVs.

Management expects to further reduce debt by INR 100.00-150.00 crores by the end of the fiscal year. Additionally, the company plans to invest INR 150.00 crores for land acquisition, indicating confidence in future growth prospects.

While the near-term outlook for electric vehicles in India faces challenges due to the supply of rare earth magnets, Varroc is leveraging its global footprint and R&D capabilities to develop alternative solutions.

As the automotive industry navigates through uncertainties, Varroc Engineering remains focused on revenue growth, margin improvement, cost control, and optimization of capital expenditure and working capital. These strategies are expected to generate healthy free cash flow and further strengthen the company's financial position in the coming quarters.