How GKN Driveline India Presents Turnaround Opportunity for Value Investors

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24th June, 2022

GKN driveline India Pvt. Ltd. is basically an international group of companies holding a turnover of near around 430,00,000. GKN Driveline (India) Limited (“GKN” or “The Group ”) was incorporated as Private Limited on July 25, 1985. The company’s name changed more than once and the latest change was from GKN Driveshafts (India) Limited to GKN Driveline (India) Limited on July 3, 2003.

This company is indulged in designing, development and manufacturing of automotive components as well as aerospace and defense equipment. The group is also involved in providing a wide range of industrial services. GKN’s operations are located in more than 31 countries across the globe and this group employs over 36,300 people from all over. 

The company is also receiving support and guidance from GKN Group, which helps the company to remain competitive and further step-up its overall business performance. It has had technical collaboration with GKN Driveline International GmbH, Germany since 2003 and under the collaboration agreement, the company draws various state of the art technologies from GKN.

The Name GKN Driveline is derived from Guest, keen and nettle folds. Initially, it was involved in iron making and coal mining and later on progressed into steel thus serving the railways, building and construction and various other major industries. Along with this, GKN Driveline is a global partner to the automotive industry where more than 50% of the 8 crore new cars sold every year contains GKN Automotive technology. 

GKN Plc has a global network of over 54 production facilities in around 23 countries that supply over 90% of the world’s car manufacturers. The company is duly committed in ensuring support in terms of new products launched, innovations carried out, technologies developed over the time considering the needs of the company thereby enabling it to continue as a market leader. 

GKN Plc has over five manufacturing plants where two plants are in Haryana, one in Maharashtra, one in Tamil Nadu and one in Gujarat. Talking about its clients, GKN Plc has a very impressive automotive industry tycoon leader such as Toyota, Ford, Bajaj, Fiat, Honda and Suzuki. 

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While having a look at its board report, one could analyze that the company made a net turnover of INR 941 crore and PBT of INR 83 crore in FY ending 31st March, 2020. The company made net turnover of INR 1077 crore and PBT of INR 50 crore in FY ending 31st March, 2019. Whereas the net turnover of INR 1067 crore and PBT of INR 127 crore was made in FY ending 31st March, 2018. 

During the FY ending 31st March, 2019 the company posted some export earnings of INR 62 crores in the FY ending 31st March, 2018. Taking into consideration Auto Industry in the year 2020-2021, it was assessed that GKN Driveline provides products and services to the automobile sector, so growth in GKN Driveline is directly proportional to performance of the Automobile sector.

The passenger vehicle industry showed a de-growth in the financial year ending March 2021 as compared to the previous year due to COVID-19 pandemic spread. Before the second wave, the auto sector had been seeing a recovery in sales, despite challenges such as a shortage of semiconductors and increase in the raw material costs. The company is receiving support and guidance from GKN Group to drive functional excellence in marketing, human resource, application engineering, supply management and international technology with GKN group internationally. 

The company continuously imports technology from GKN Group under the technical collaboration agreement and the same is fully absorbed.  

SWOT Analysis of GKN Driveline :

Strength

  • GKN Group, which captures 12% of the automotive driveshaft market share globally provides support and guidance to the company in areas such as marketing, human resources, application engineering, supply management, and information technology, among others, allowing it to stay competitive and improve its overall business performance.
  • The company has no borrowings except lease liabilities. 
  • The company serves all the industry leaders for their requirements for drive shafts. 48% of the vehicles sold with all-wheel drive systems in 2020 had the company’s driveshaft system.
  • GKN Driveline, the global leader in drive systems, which captures 12% of the global market is accelerating its development of next generation eDrive technologies in response to the rapidly increasing global demand for electrified vehicles, which is expected to disrupt the market of the future.

Weakness

  • GKN Driveline has no website of themselves, which reduces the opportunity to increase their footprints and visibility.
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Opportunities

  • The number of operating vehicles across the globe has been increasing significantly, due to the rising sales of new and used vehicles, coupled with the rising average age of vehicles. 
  • With the increasing number of vehicles in use/operation, the demand for aftermarket drive shafts has also increased. 
  • The global automotive motors market is projected to reach USD 25,719 million by 2025 from USD 20,321 million in 2020, at a CAGR of 4.8%. 
  • The advent of fuel-efficient technology will have a significant impact on hybrid electric and battery electric vehicles, which, in turn, will drive the automotive motors market.
  • Further, the increasing average age of passenger cars and commercial vehicles is driving the demand for drive shafts in the aftermarket space.

Threat

  • There are no direct substitutes for automotive driveshaft in the automotive industry.
  • Buyers may switch to independent aftermarket (IAM) players from the original equipment suppliers (OES), owing to pricing concerns during the time of replacement. 

Delivery Instruction Slip is the way through which an investor can sell or transfer the GKN Driveline Unlisted Shares from his/her demat account to any other demat account. There are two Types of DIS Slip.

Offline-DIS – This is an offline mode of transfer of shares wherein the investors need to fill DIS form and give it to their broker for transferring the shares. Following are the fields which are required to be filled.

a. ISIN number of GKN Driveline Unlisted Shares.

b. Name of GKN Driveline Unlisted Shares

c. Quantity of GKN Driveline Unlisted Shares

d. Consideration Amount

e. Target DP ID and Client ID

f. Annexure

Online DIS – Some of the brokers these days give the facility of transferring the GKN Driveline Unlisted Shares via online DIS. So, please check with your broker whether such a facility is available or not. For example: Angel Broking provides the facility of Online-DIS from its platform. As an investor he/she simply needs to add a beneficiary into it and send the GKN Driveline Unlisted Shares by filling the details similar to Offline-DIS. (Check the latest price of GKN Driveline (India) unlisted shares here)

We check the last funding that is being done in the GKN Driveline Unlisted Shares to ascertain the benchmark valuation. If there is no funding happening in the company, then we try to find a business similar to GKN Driveline Unlisted Shares in the listed space and do a comparison method to ascertain the valuation. As an investor in the unlisted space, we would always recommend that you must check all the risk parameters carefully before investing in the unlisted space.

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