- 18 Sep 2024
- ICICI Securities
SKF INDIA PARENT INITIATES SEPARATION OF ITS AUTOMOTIVE BUSINESS GLOBALLY
News: AB SKF, the promoter of SKF India, has announced plans to separate its global automotive business and list it on Nasdaq Stockholm by mid-2026. SKF India will be setting up a committee to review and place appropriate proposals before the Board. As per the press release, the key reason behind separating automotive business is to increase the segment’s ability to adapt faster to transforming global automotive markets, by allowing it to make independent business decisions and investments. For CY23, net sales for the Automotive segment amounted to SEK 30 billion with an adjusted operating margin of 5.6%. The corresponding figures for the Industrial segment were SEK 73 billion and 15.4%, respectively.
Views: We believe that spin-off of automotive business globally would be fundamentally positive for the existing entity as the automotive business is less profitable as compared to industrial segment. For SKF India, automotive segment contributes ~40% to total sales in FY24 while industrial segment & exports contribute ~51% & ~9% respectively. In terms of growth also, domestic industrial segment has been faring better and witnessing strong double-digit growth led by segments like railways, heavy industries & metals. Moreover, company’s target to improve localization in the industrial segments over the next few years, will help the company to secure more order wins (due to lower turnaround time) and further improvement in margins.
Impact: Positive