CRISIL-Research Ier-Report-Nrb Bearings LTD 2014

CRISIL IERIndependentEquityResearch
NRB Bearings Ltd
Initiating Coverage
Enhancing investment decisions
Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a fivepoint scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).
CRISIL
Fundamental Grade
Assessment
CRISIL
Valuation Grade
Assessment
5/5
Excellent fundamentals
5/5
Strong upside (>25% from CMP)
4/5
Superior fundamentals
4/5
Upside (10-25% from CMP)
3/5
Good fundamentals
3/5
Align (+-10% from CMP)
2/5
Moderate fundamentals
2/5
Downside (negative 10-25% from CMP)
1/5
Poor fundamentals
1/5
Strong downside (<-25% from CMP)
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Last updated: May, 2013
Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.
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purpose.
NRB Bearings Ltd

Supplier of precision engineering bearings to leading OEMs
Fundamental Grade
4/5 (Superior fundamentals)
January 02, 2014
Valuation Grade
5/5 (CMP has strong upside)
Industry
Auto Components
Fair Value
CMP
Tapping global OEMs

NRB Bearings exports to global OEMs such as Renault Volvo and Daimler Trucks.
Association with global OEMs helps the company enhance its engineering capabilities and
benchmark its quality against global standards. The companys exports constituted 21.7% of
total revenues in FY13; exports grew at a CAGR of 66.3% during FY11-13. Strong focus on
exports has enabled NRB Bearings to combat the current slowdown in the domestic
automobile industry, which we expect to recover marginally in FY15.
Key risk: Dependence on domestic auto (OEM) industry
NRB Bearings is dependent on the domestic auto market (64% of FY13 revenues) which is
susceptible to cyclicality. However, its diversified presence across various sectors (such as
two-wheelers, three wheelers, four-wheelers and commercial vehicles, etc.) within the
domestic auto market partially mitigates this risk.
Revenues to increase at a CAGR of 10.3% over FY13-16
We expect revenues to increase at a CAGR of 10.3% to 7.9 bn during FY13-16 led by a
likely recovery in the domestic auto market in FY15 coupled with growth in exports. We
estimate EBITDA margin to improve in FY15 - after dropping in FY14 - following recovery in
demand. We expect PAT CAGR of 11.9% as we expect operational efficiencies to kick in.
Valuations: CMP has strong upside
CRISIL Research has used the discounted cash flow method to value NRB Bearings and
arrived at a fair value of 46. At the current market price of 36, the valuation grade is 5/5.
Excellent
Fundamentals
5
4
3
2
1
Poor
Fundamentals
Valuation Grade
Strong
Upside
Strong
Downside
Preferred supplier of customised bearings to leading OEMs

Indigenous engineering capabilities and a proven track record of supplying customised
bearings rank NRB Bearings as a preferred supplier to the domestic and global auto
companies. Some of its key customers include Hero MotoCorp, Bajaj Auto, Maruti Suzuki,
Renault Volvo, ZF Friedrichshafen AG, Getrag Transmissions Corporation and GKN
Driveline. It works with many OEMs directly and indirectly from the conceptualisation stage to
provide anti friction solutions. This helps it generate better EBITDA margin though it leads to
lower asset turnover.
CFV MATRIX
Fundamental Grade
NRB Bearings Ltd, the fourth largest organised bearings player in India, manufactures
customised bearings for leading domestic and global auto companies. Its strong engineering
capabilities and customised product offering have ensured a steady relationship with its
clients. Being positioned in the niche customised bearings segment, the company faces less
competition from global bearing manufacturers such as SKF (Sweden), Timken (the US), who
largely produce off-the-shelf bearings. As needle roller bearings constitute 50% of NRB
Bearings revenues, it faces competition from the Schaeffler Group as the latter also
produces needle roller bearings. We assign NRB Bearings a fundamental grade of 4/5,
indicating its fundamentals are superior relative to other listed securities in India.
46
36
KEY STOCK STATISTICS

NIFTY/SENSEX
NSE/BSE ticker
Face value ( per share)
Shares outstanding (mn)
Market cap ( mn)/(US$ mn)
Enterprise value ( mn)/(US$ mn)
52-week range ()/(H/L)
Beta
Free float (%)
Avg daily volumes (30-days)
Avg daily value (30-days) ( mn)
6221/20888
NRB
2
96.9
3,488/57
6,180/102
42/29
0.9
37.2%
25,252
0.9
SHAREHOLDING PATTERN
100%
80%
14.6%
14.8%
17.3%
5.1%
7.9%
5.0%
7.9%
1.2%
1.2%
18.7%
19.0%
72.4%
72.4%
62.8%
62.8%
Dec-12
Mar-13
17.1%
60%
40%
20%
0%
KEY FORECAST (CONSOLIDATED)

( mn)
FY12
FY13
FY14E
FY15E
FY16E
Operating income
EBITDA
Adj net income
Adj EPS ()
EPS growth (%)
Dividend yield (%)
RoCE (%)
RoE (%)
PE (x)
P/BV (x)
EV/EBITDA (x)
5,600
1,156
500
5.2
(13.0)
5.6
21.2
22.7
7.0
1.5
4.8
5,912
1,071
449
4.6
(10.3)
4.7
15.6
20.7
7.8
1.7
5.8
6,211
1,084
374
3.9
(16.7)
3.6
15.9
17.7
9.3
1.6
5.4
7,017
1,274
508
5.2
35.9
5.1
18.9
21.4
6.9
1.4
4.4
7,942
1,466
629
6.5
23.8
6.7
20.7
23.2
5.5
1.2
3.9
Promoter
Jun-13
FII
DII
Sep-13
Others
PERFORMANCE VIS--VIS MARKET

Returns
1-m
3-m
6-m
12-m
NRB Bearings
9%
22%
6%
10%
CNX 500
1%
10%
7%
1%
ANALYTICAL CONTACT
Mohit Modi (Director)
Elizabeth John
Vishal Rampuria
NM: Not meaningful; CMP: Current market price
Client servicing desk
Source: Company, CRISIL Research estimates
+91 22 3342 3561
mohit.modi@crisil.com
elizabeth.john@crisil.com
vishal.rampuria@crisil.com
clientservicing@crisil.com
For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.
Table 1: NRB Bearings - Business environment
Revenues contribution - FY13

Revenues contribution - FY16E
Sales (FY11-13) - two-year CAGR
Sales CAGR (FY13-16E)
Key products/ service offering
Key customers
Demand drivers
Key competitors
Key risks
Domestic (OEM)
Exports
64.4%
53.7%
4.1%
4.1%
Big end bearings
21.7%
32.4%
66.3%
26.5%
Needle and cylindrical bearings
Aftermarket
(Replacement)
13.9%
13.9%
-2.8%
10.6%
Ball bearings
Bush bearings
Planetary shafts
Big end bearings
Crank pins
Polyamide cages
Bush bearings
Cylindrical bearings
Crank pins
Specialised ball bearings
Steering column bearings
Rings and sleeves

Specialised ball and tapered roller
bearings
Tapered roller bearings
Ashok Leyland Ltd
Daimler Trucks
Bajaj Auto Ltd
Sold through
dealers
Hero MotoCorp Ltd
Honda Motorcycle & Scooters

India Ltd
Getrag Transmissions Corporation

(Worlds largest supplier of
transmission systems to passenger
/commercial vehicles)
Mahindra and Mahindra Ltd
Tata Motors Ltd
GKN Driveline (European automotive

and aerospace player)
Renault Volvo (European truck

manufacturer)
ZF Friedrichshafen AG (Germanybased global leader providing

driveline technology to auto OEMs )
Increased mining of existing

customers through new product
development
New client acquisitions
Deeper
penetration and
wider range of
specialised
bearings
Growth in the domestic automobile

market
Increased mining of existing clients

through new product development
New client acquisition / entry in

new segments
Unlisted player in India - INA Bearings
Listed players in India - SKF India, FAG Bearings and Timken India
Cyclicality in the automobile industry
Foreign currency risk
Note: SKF India, FAG Bearings India and global peers such as Timken (the US) and SKF have financial year ending in December.
Source: Company, CRISIL Research
Needle roller bearings (constitute ~50% of NRB Bearings revenues)

Bearing is a machine element used to support load and reduce friction in moving parts. The bearings industry is classified into a) bimetal bearings
and b) antifriction bearings (which include ball bearings and roller bearings). The rolling element acts as a differentiator in a bearing. Roller bearings
are named after the rollers shape, such as cylindrical roller bearings, needle roller bearings, tapered roller bearings, spherical roller bearings and
thrust roller bearings. The choice of bearing primarily depends on revolutions per minute (RPM) and load. Needle roller bearings are typically
customised bearings as against ball bearings which are generally off-the-shelf bearings.
Needle roller bearings are used in medium RPM, high-load requirements compared to ball bearings which are used in high RPM, medium-load
requirements.
For compact size applications, typically needle roller bearings are preferred. Two-wheeler machinery is more compact than four-wheeler
machinery; hence, needle roller bearings are largely used in two-wheelers.
NRB Bearings Ltd
Grading Rationale
Engineering capabilities rank it as a preferred supplier of
customised bearings to leading OEMs
NRB Bearings, the fourth largest (11% market share by sales) organised bearings player in
India, manufactures customised bearings for the mobility segment (automobiles, off-highway
vehicles such as construction equipment, tractors, etc.). Needle roller bearings constituted
~50% of its revenues in FY13. The company holds a dominant position in the domestic needle
roller bearings market with ~70% share (by sales).
Figure 1: Has 11% share in organised bearings market...
Figure 2: ...and around 70% share in needle roller bearings

Indian Bearing
Industry
90-95 bn
Indian Bearing Industry

(estimated at 90 bn. Out of this,40% is met through imports)
SKF India
(41% share)
FAG
Bearings*
(26% share)
Timken India
(13% share)
NRB
Bearings
(11% share)
Roller
Bearings
(52% share)
INA
Bearings*
(10% share)
Tapered
roller bearing
(42% share)
*FAG Bearings and INA Bearings are part of Schaeffler Technologies

Based on FY13 sales value
Source: Companies, CRISIL Research
Cylindrical
roller bearing
(29% share)
Ball Bearings
(48% share)
Spherical
roller bearing
(17% share)
Needle roller
bearing
(9% share)
Thrust roller
bearing
(4% share)
Source: Industry, CRISIL Research
Figure 3: Needle roller bearings dominate NRBs revenues

Others
22%
Cylinder roller
bearings
16%
NRB holds a dominant position

Ball Bearings
8%
Spherical roller
bearings
1%
Needle
bearings, bushes
, cages and
rollers
50%
in the domestic needle roller

bearing market with ~70% share
(by sales)
Taper roller
bearings
3%
Others include crank pins, hub pins, etc. (as on 9MFY13)

The companys Engineering and Design R&D Centre, set up in 2000, employs 40 dedicated
engineers (from reputed institutes such as Indian Institute of Technology, Birla Institute of
Technology and Science etc). As bearings are used in critical automobile applications (such
as gearbox/transmission system and steering systems), the company has laid down stringent
control over processes such as heat treatment, grinding, etc. to ensure quality of bearings. As
NRBs bearings are largely used for critical applications, the quality standards are important.
Table 2: NRB Bearings product usage in critical applications

Products
Critical automobile application
Polyamide cages
Gearbox
Needle bushes
Gearbox / steering
Big end bearings
Engine
Crank pins
Engine
Source: Company
Technology is a significant entry barrier: Precision is required to make customised
bearings; certain crank pins and needles require 2 micron grades and 2.499 micron grades of
size, respectively, in diameter. A small variation in size could lead to rejection. This leads to
significant entry barriers for new players. The bearings industry requires technology and
technical knowhow.
Engagement with the clients from the conceptualisation phase itself has ensured a steady
relationship with leading OEMs across the automobile industry two/three-wheelers,
commercial vehicles, passenger cars, off-highway vehicles, etc. It strategically targets the
leading automobile OEMs. It is a tier I (direct supplier) supplier to leading domestic OEMs
such as Hero MotoCorp, Bajaj Auto, Tata Motors, Maruti Suzuki and Ashok Leyland; and tier
I/II (direct and indirect supplier) supplier to reputed global players such as Renault Volvo,
Daimler Trucks, ZF Group, and Getrag Group.
Figure 4: Domestic automobile OEMs dominate sales

Revenue mix
100%
90%
17.1%
18.9%
19.3%
17.9%
15.3%
13.9%
80%
70%
60%
50%
40%
71.6%
65.5%
11.3%
15.6%
FY08
FY09
70.6%
72.9%
72.5%
7.8%
9.6%
14.0%
FY10
FY11
FY12
64.4%
Figure 5: Two-wheeler OEMs 48% of domestic (OEM) sales

Others - state
transport
utilities and
defence
0.2%
Two-wheeler
(2W)
47.4%
Farm
equipment off
highway
11.2%
30%
20%
10%
0%
Exports
Domestic (OEM)
21.7%
FY13
Passenger
Car
14.2%
Replacement/ After m arket
FY13 domestic sales break-up

Commercial
vehicles (CV)
27.0%
NRB Bearings Ltd
Reasons for high contribution from two-wheeler OEMs in domestic sales
In volume terms, the industry size of two-wheelers is 15.7 mn units whereas the size
NRB Bearings domestic two-
of four-wheelers is 2.5 mn as of FY13. In value terms, the four-wheeler industry is
wheeler sales recorded a five-
~1 trillion, almost double the 0.6 trillion two-wheeler industry. However, percentage
of needle bearings used in two-wheelers is higher than that used in four-wheelers.
Typically, the mix between needle and ball bearings in two-wheelers is 60:40,
13, in line with the two-wheeler

industry.
compared to four-wheelers where it could be 35:65.
year CAGR of 16% during FY08-
Further, the two-wheeler industry is less cyclical than the four-wheeler industry and
this has helped the company during the current slowdown.
In value terms, NRB Bearings holds ~5% share in the bearing requirement of the twowheeler industry compared to ~3% in the four-wheeler industry. However, for needle/
roller bearings, the share is much higher.
The global bearings industry is dominated by large manufacturers such as SKF, Timken and
Schaeffler Technologies; it is an oligopolistic market as these three players together have
more than 60% share. However, NRB Bearings focuses on the niche customised bearings
segment which helps it to differentiate itself from the global bearing manufacturers who largely
focus on off-the-shelf bearings. As needle roller bearings constitute 50% of NRB Bearings
revenues, it faces competition from the Schaeffler Group as the latter also produces needle
roller bearings.
Figure 6: Global bearings industry is an oligopolistic market

Global Bearing
Industry
(estimated at 3
trillion)
Automotive
segment/ mobile
industries
(0.9 trillion)
Industrial segment
( 1.3 trillion)
Af ter market
segment
(0.9 trillion)
1 Euro = 85.2; 1 US$ = 61; 1 SEK =9.44

Source: Companies, Industry, CRISIL Research
Also, as NRB Bearings produces a wide range of customised bearings, it does not face any
threat from Chinese bearing players who play the volume game with off-the-shelf products.
Diversified client base minimises concentration risk

NRB Bearings client portfolio is well diversified no client has more than 10% share; its top
customer had 9% share in FY13. Though contribution of top 10 customers increased to 49%
in FY13 from 41% in FY11 the constitution within top 10 clients has changed over the years.
Figure 7: Diversified clientele (domestic + exports)

50%
45%
40%
35%
30%
25%
44%
41%
20%
35%
31%
15%
49%
47%
43%
34%
33%
31%
10%
5%
10%
8%
9%
9%
9%
0%
FY09
FY10
Top customer
FY11
Top 5 custom ers
FY12
FY13
Top 10 customers
Table 3: Key customers

Category
Based
Key Customers
Two-wheeler OEMs
India
Hero MotoCorp Ltd, Honda Motorcycle & Scooter India Pvt.
Passenger/commercial vehicle/utility vehicle OEMs
India
Transmission systems for passenger vehicles/commercial vehicles
Germany
Getrag Group, ZF Group
Automotive components
British / USA
GKN Driveline, Meritor
Tractor/agriculture machinery
USA
John Deere
Ltd, Bajaj Auto Ltd, TVS Motor Co Ltd

Tata Motors Ltd, Mahindra & Mahindra Ltd, Maruti Suzuki India
Ltd, Ashok Leyland Ltd
Source: Company
Tapping global OEMs

NRB Bearings exports to global OEMs such as Renault Volvo and Daimler Trucks.
Association with global OEMS helps the company enhance its engineering capabilities and
benchmark its quality to global standards. Some of these global OEMs are potential entrants
into India going forward, while some are already established (e.g. Volvo). The company
exports to Europe, the US and Latin America. Its total exports increased at a healthy CAGR of
66.3% during FY11-13; the contribution of exports to total sales increased to 21.7% in FY13
from 9.6% in FY11.
NRB Bearings Ltd
Figure 8: Exports 66.3% CAGR in FY11-13

( mn)
1,400
70%
65%
63%
1,200
1,000
80%
60%
40%
24%
800
20%
600
0%
400
-20%
-40%
200
450
271
446
759
0
FY09
FY10
FY11
Exports
-40%
In the long term, growth of the
-60%
automotive market largely
1,234
FY12
FY13
hinges on the expected recovery
y-o-y growth (RHS)
of the Indian economy and,
consequently, an improvement
Exports help to reduce the impact of volatility in the domestic automobile market, which has
in consumer sentiments
been going through a difficult phase with muted sales across categories. In FY13, although
domestic sales declined by 4% y-o-y (constituting 64.4% of total sales), the companys total
revenues grew by 5.6% y-o-y because export sales increased by 63% during the same period.
Table 4: Automobile industrys volume growth and outlook

FY13
FY14E
Five-year CAGR (FY13-18)
Two-wheeler
2.8%
4 to 6%
9 to 11%
Commercial vehicles
-2%
-6 to-8%
10 to12% for MHCVs and 13 to16% for LCVs
Passenger car and utility vehicles
2%
-8 to -10%
10 to12%
Tractors
1.7%
7 to 10%
7 to 9%
Source: CRISIL Research

CRISIL Research expects growth in the automobile industry to be subdued in the short term
on the back of weak consumer sentiments, high fuel prices and high interest rates.
Accordingly, we expect NRB Bearings domestic revenues to remain muted in FY14 and
recover marginally in FY15 with a 7% growth. We forecast its export revenues to increase at a
CAGR of 26.5% during FY13-16 driven by new products and clients. The companys export
growth will help to combat the domestic slowdown in FY14.
Aftermarket segment offers opportunities to de-risk revenues

The aftermarket segment constituted 13.9% of NRB Bearings total sales in FY13. Currently,
most of its aftermarket sales are largely to the two/three-wheeler industry through a 250strong dealer network. Bearings ideally should get replaced when the vehicle completes
10,000 kms.
Typically, whenever there is any

noise in the machine, there could
be a need for bearing
NRB Bearings aftermarket revenues decreased by 3% CAGR to 791 mn during FY11-13 as

the company focussed largely on exports and domestic sales to OEMs. Since Q2FY14, the
replacement
company has been focussing on the aftermarket segment, especially on off highway segment.
It has launched various products in the aftermarket segment. We expect the companys sales
in the aftermarket segment to increase at a CAGR of 10.6% during FY13-16.
Post demerger, NRB Bearings to cater to mobility segment
NRB Industrial Bearings was
The industrial bearings division of NRB Bearings was demerged into NRB Industrial Bearing
demerged with effect from
Ltd (NIBL) on October 1, 2012. NRB Bearings continues to be managed by Ms. Harshbeena
October 2012
Zaveri and NIBL is managed by her brother, Mr. Devesh Sahney. The demerger agreement
mandates NRB Bearings to cater to mobility segment and NIBL to the process industry
segment. However, on expiry of the demerger agreement, there will be no such restriction for
either company.
Currently, NRB Bearings focuses largely on auto OEMs and we expect this to continue in the
near to medium term. As highlighted earlier, we expect the automobile industry to post doubledigit growth in the long term following an expected recovery of the Indian economy and,
consequently, an improvement in the consumer sentiments.
Highlights of demerger and its impact on NRB Bearings financials

Under the demerger scheme, NIBL shares were allotted to all equity shareholders of NRB
Bearings in the ratio 1:4. Post the demerger of its industrial bearings division into the wholly
owned subsidiary NIBL in October 2012, NRB Bearings consolidated FY13 revenues grew
6% y-o-y, while PAT declined 10% y-o-y.
Table 5: Demerger of industrial bearings division had insignificant impact on

NRB Bearings financials
FY12 ( mn)
Industrial bearings division
NRB Bearings consolidated
Share of industrial bearings division
Revenues
347
5,600
6%
Profit before tax
57
733
8%
Source: Company
Owing to the demerger, NRB Bearings net worth has been reduced by 618 mn in FY13
which relates to the excess of assets over liabilities of the industrial bearings business. This
led to an expansion of NRB Bearings leverage to 1.4x in FY13 from 1.1x in FY12. NRB
Bearings leverage is higher than that of global bearing players.
Debt Equity Ratio
FY11
FY12
FY13
SKF (Sweden)
0.6
0.6
0.7
Timken (US)
0.3
0.3
0.2
NRB Bearings
0.6
1.1
1.4
Source: Companies
Generates healthy EBITDA margin...

NRB Bearings has better EBITDA margin than its peers because of the following:
Production of a wide range of high-margin, low-volume bearings (50% of which are

needle bearings): Margins of global bearing manufacturers such as SKF (Sweden) and
Timken (the US) are relatively lower than that of NRB Bearings because these global
players largely focus on off-the-shelf products. NRB Bearings EBITDA margin is not
comparable with that of domestic bearing players such as INA India, FAG India and
Timken India as these players also generate sales through trading operations which fetch
lower margins.
NRB Bearings Ltd
Integrated operations NRB Bearings has integrated operations - from engineering and
Loose needle
design, needle / rollers in-house manufacturing, heat treatment, testing to final assembly
rollers (000s)
of bearings. Our channel checks indicate that other players such as INA Bearings import
rollers, while SKF India produces a limited quantity indigenously.
Due to better EBITDA margin but low asset turnover, the company has moderate RoCE of
FY10 FY11 FY12 FY13
Utilisation (%)
66%
53%
80%
70%
Sales/production
33%
36%
28%
27%
Captive utilisation
67%
64%
72%
73%
Source: Company
15.6% (in line with that of peers).
Figure 9: Better EBITDA margin...
Figure 10: ... but low gross asset turnover...
(%)
(x)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
4.0
FY11
FY12
FY13
3.7
2.8
2.3
1.2
1.5
1.4
Timken (the US)
2.7
2.9
2.5
1.7
1.9
1.9
SKF (Sweden)
2.5
3.0
2.7
1.2
1.2
1.2
1.0
3.1
3.4
3.3
2.0
NRB Bearings
FY11
SKF India
Timken India
0.0
FAG Bearings India
INA Bearings
Tim ken India
SKF India
FAG Bearings India
Tim ken (the US)
Schaeffler
(Germ any)
17.2
16.1
14.0
9.9
16.0
18.0
22.1
21.0
18.3
18.0
19.6
16.3
13.2
13.0
11.8
15.4
13.5
10.4
6.6
13.3
SKF (Sweden)
NRB Bearings
24.1
20.6
18.1
3.0
Schaeffler
(Germany)
Most of the indigenously produced

rollers are captively consumed
FY12
FY13
Note: SKF India, Timken India and FAG Bearings India have trading sales
Figure 11: ... lead to moderate RoCE than peers
Figure 12: High leverage leads to better RoE
INA Bearings
4.7
17.1
Tim ken India
27.6
17.1
20.4
SKF India
30.1
30.9
FAG Bearings India
32.4
0.5
Tim ken (the US)
6.7
6.9
10.5
15.6
NRB Bearings
0.0
10.0
20.0
FAG Bearings India
30.0
15.7
23.3
23.0
22.1
0.0
20.0
(%)
FY13
FY12
30.0
28.3
20.7
22.7
NRB Bearings
40.0
47.7
36.4
2.2
SKF (Sweden)
31.2
22.2
22.4
26.8
23.9
Timken (the US)
21.2
22.8
19.1
Schaeffler
(Germany)
18.1
16.8
15.6 21.6
19.3
SKF (Sweden)
14.2
16.7
SKF India
35.8
31.5
13.5
Timken India
25.5
Schaeffler
(Germ any)
2.5
INA Bearings
15.0
30.1
40.0
60.0
(%)
FY11
FY13
FY12
FY11
Note: NRB Bearings leverage is 1.4x in FY13 compared to 0.7x and 0.2x
for SKF (global peer) and Timken (the US)
... but elongated working capital cycle

NRB Bearings inventory days are relatively higher than that of other bearing manufacturers
such as FAG and SKF India on account of the following:
To provide an extensive range of products it is crucial for NRB Bearings to stock a significant
quantity of products. Our channel checks indicate that INA Bearings product range is limited
compared to that of NRB Bearings. Also, SKF Indias regular product range comprises 150160 types of bearings, whereas it NRB Bearings product range includes 500-600 types of
bearings.
10
FY13
53
54
INA Bearings
110
84
93
Timken India
54
51
51
SKF India
FY12
As of FY13
59
61
46
83
76
70
Schaeffler (Germany)
FY11
FAG Bearings India
90
86
92
140
120
100
80
60
40
20
0
Tim ken (the US)
Work in
Progress
26%
(days)
102
104
103
Raw m aterial
25%
SKF (Sweden)
Finished
goods
37%
Figure 14: Higher inventory than other manufacturers
125
129
127
Stores and
spares
12%
NRB Bearings
Figure 13: Inventory break-up
NRB Bearings Ltd
Key Risks
Dependence on domestic OEMs; cyclicality of the industry
NRB Bearings is dependent on the domestic auto market. The company derives almost 64%
of its revenues from the domestic automotive industry which experiences cyclicality. However,
its diversified presence across various sectors (such as two-wheelers, three wheelers, fourwheelers and commercial vehicles to name a few) within the domestic auto market mitigates
this risk.
Though we expect the automobile industrys growth to marginally improve in FY15, higherthan-expected delays may affect financials and, consequently, the valuations. NRB Bearings
dependence on exports also provides a fillip to its revenues.
Foreign currency volatility

In rupee terms, the foreign currency loan as on March 31, 2013 was 1.1 bn, representing
46% of total borrowings. The company exported 1.4 bn of products in FY13. The company
remains a net exporter, which provides a natural hedge to the foreign currency borrowings.
Volatility in raw material prices

There could be a challenge to pass through the significant increase in raw material costs,
which is an industry-wide phenomenon. For instance, one of the factors for low profitability in
FY09 was the companys inability to pass on the sharp increase in raw material costs (steel
and oil) entirely to its customers.
11
Financial Outlook
Revenues to rise at CAGR of 10.3% to 7.9 bn during FY13-16
We estimate consolidated revenues to increase at a three-year CAGR of 10.3% to 7.9 bn in
Revenues: CAGR of 10.3%
FY16 driven by exports and a likely recovery in the domestic automobile market. We forecast
during FY13-16
exports to increase at a CAGR of 26.5% during FY13-16 fuelled by client additions and by
mining the existing client base. We expect revenues of the domestic automobile segment to
increase over FY13-16E to 4.1 bn at 4.1% CAGR following improvement in demand scenario
from FY15 onwards. As domestic sales constitute a major portion of total sales, the growth of
the domestic automobile industry would be a key determinant of the companys performance.
Figure 15: Three-year revenue CAGR of 10.3% over FY13-16
Figure 16: Contribution of exports to sales to increase
( mn)
(%)
100%
9,000
40.0
90%
8,000
35.0
80%
7,000
30.0
70%
25.0
60%
34.7
6,000
5,000
16.3
4,000
13.0
13.2
3,000
5.6
2,000
1,000
5,600
5,912
6,211
7,017
7,942
FY11
FY12
FY13
FY14E
FY15E
FY16E
Revenues
20.0
40%
15.0
72%
10%
0.0
0%
% growth y-o-y (RHS)
10%
14%
FY11
FY12
Exports
CRISIL Research expects the companys EBITDA margin to be 18.5% in FY16, following
improvement in demand scenario.
Figure 17: Trend in EBITDA margin

( mn)
1,600
30%
24.1%
25%
20.6%
18.1%
17.5%
18.2%
18.5%
1,000
800
20%
15%
600
10%
400
200
5%
1,162
1,156
1,071
1,084
1,274
1,466
FY11
FY12
FY13
FY14E
FY15E
FY16E
0%
EBITDA
12
13%
14%
15%
13%
64%
61%
59%
56%
54%
22%
26%
26%
30%
33%
FY15E
FY16E
FY13
H1FY14 FY14E
Domestic (OEM)
EBITDA margin estimated to be 18.5% in FY16
1,200
71%
14%
20%
5.0
1,400
15%
30%
10.0
5.1
4,817
50%
18%
EBITDA margins (RHS)
Replacement/ After market
NRB Bearings Ltd
PAT to increase at 11.9% CAGR during FY13-16

We expect PAT to decline to 374 mn in FY14 compared to 449 mn in FY13 as we have
raised the tax rate to 27% from FY14 onwards compared to 20% in FY13. This is largely due
to the 30% tax exemption at the companys Pantnagar plant compared to 100% earlier. We
expect profitability to improve in FY15 and further in FY16 following a) a likely recovery in the
domestic automobile market, b) EBITDA margin improvement and c) operating leverage
starts.
Figure 18: PAT margin of 7.9% expected in FY16
Figure 19: Return ratios to improve, after declining in FY14
( mn)
(%)
(%)
700
200
35.0
164
600
150
500
36
300
30.1
-13
-10
24
0
-50
575
500
449
374
508
629
FY11
FY12
FY13
FY14E
FY15E
FY16E
-100
Adjusted PAT
Adjusted PAT margins (RHS)
21.4
20.7
50
-17
23.2
22.7
25.0
200
100
30.0
100
400
31.2
20.0
17.7
21.2
20.7
18.9
15.0
15.6
15.9
FY13
FY14E
10.0
FY11
FY12
RoE
FY15E
FY16E
RoCE
13
Management Overview
CRISILs fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.
Experienced management
Mr. Trilochan Singh Sahney, Executive Chairman, is the founder promoter of NRB Bearings.
He has handed over the operational management to his daughter - Ms. Harshbeena Zaveri -
Managing Director and President
currently the Managing Director and President of the company. She has almost 26 years of
Harshbeena Zaveri featured in
experience in the bearings industry. Under her leadership, the company set up the R&D
Fortune Indias The Most
centre and increased export sales by tapping leading global automobile OEMs. She is also the
Powerful Women in Business in
chairman of the board of SNL Bearings (subsidiary).
November 2012
Strong focus on in-house R&D

NRB Bearings set up an in-house Research and Development Centre in India in 2000. The
R&D initiative has enabled the company to position itself as a customised bearings supplier
for high-end /critical applications offering a wide and diversified product range.
Strong second line of management

NRB Bearings management has a professional approach towards managing the company. It
has inducted various professionals from the industry at the senior and mid-management levels
who have significant experience in the bearings industry.
Dr. S T Salunke, MBA in Engineering Management from US and UK, is the Vice
President of the Engineering Centre, Thane. He has been associated with the company
for over 13 years. He has previously worked with FAG Bearings in the R&D, product and
process development department.
Mr Hemant Jog is Vice President, Manufacturing and heads the Waluj plant in
Aurangabad. He holds a Bachelors degree in Mechanical Engineering and Post
Graduate Diploma in Materials Management. He has 28 years of experience in the
bearings industry.
Mr Sumit Mitra, MBA from IIM Calcutta, heads the international business and supply
chain. He has 16 years of experience in bearings, precision auto component and other
industries. He has previously worked at Honeywell Automation, SRF Group, Dalmia
Cement, etc.
Ms. Tanushree Bagrodia has recently joined the company as CFO. She is an INSEAD
MBA graduate and has substantial experience in the investment banking industry.
Senior leaderships involvement in business is high

The managing director (MD) is deeply involved in decision-making on key issues. As
mentioned above, the company also has a strong second line of professional management
team that supports decision-making and subsequent execution. Even though the MD is not
near retirement age, succession planning is a monitorable as her kin are not inducted into the
business.
14
NRB Bearings Ltd
Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate
governance and management quality, apart from other key factors such as industry and
business prospects, and financial performance. In this context, CRISIL Research analyses the
shareholding structure, board composition, typical board processes, disclosure standards and
related-party transactions. Any qualifications by regulators or auditors also serve as useful
inputs while assessing a companys corporate governance.
Corporate governance at NRB Bearings is good. It is supported by strong board and efficient
board practices. Further, it adheres to all regulatory requirements.
Board composition currently complying with the listing norms
Currently, the board of NRB Bearings consists of eight members, of whom one is an
executive chairman and four are independent directors, thus meeting the requirements
under Clause 49 of SEBIs listing guidelines.
Corporate governance at NRB

Bearings is good
During October 2012 to May 2013, the board composition did not comply with SEBIs
listing norms - Independent directors constituted 43% of the board instead of at least 50% as
per SEBIs requirement. This was because Mr. S.C. Rangani was appointed as an executive
director
in
October
2012
which
reduced
the
number
of
independent
directors.
In May 2013, Mr. Tashwinder Singh was appointed as an independent director and now 50%
of the board constitutes of independent directors.
Mr. S.C. Rangani was appointed as the executive director and company secretary on the
board in October 2012. He has worked for more than two decades with NRB Bearings
across various departments finance, IT, legal and secretarial. He has four decades of
experience in the manufacturing industry. He has been a key member of the top
management team.
The independent directors are highly qualified, have strong industry experience and have
been on the board for more than three years. Mr. Tashwinder Singh, Director at KKR, a
private equity firm, was inducted as an independent director in May 2013. Prior to joining
KKR, he worked with Citigroup for 18 years across various divisions.
There was almost full attendance in all the board meetings held in FY13.
Board processes
The company has audit and shareholders grievance committees in place to support corporate
governance practices. Both these committees are chaired by an independent director - Dr.
(Ms.) Kala Pant, who has been on the board for over a decade. Dr. Pant has conducted post
graduate doctoral research in banking and transport. Currently, she is on the board of I.F.B.
Agro as a nominee director on behalf of UTI. In the past, she has served as nominee director
on the board of various public limited companies.
15
Valuation
Grade: 5/5
CRISIL Research has used the discounted cash flow method (DCF) to value NRB Bearings
and arrived at a fair value of 46 per share. The fair value implies P/E multiples of 8.8x and
7.1x in FY15E and FY16E EPS, respectively. At the current market price of 36, the valuation
grade is 5/5.
Key DCF assumptions

We have considered the discounted value of the firms estimated free cash flows from FY14 to
FY23. We have assumed a terminal growth rate of 3% beyond the explicit forecast period until
FY23.
WACC computation
FY14-23
Cost of equity
Terminal value
18.6%
Cost of debt (post tax)

WACC
18.6%
8.7%
8.7%
15.1%
15.1%
Terminal growth rate
3%
Terminal WACC
Terminal growth rate

1.0%
2.0%
3.0%
4.0%
5.0%
13.6%
49
50
53
55
58
14.6%
46
47
49
51
54
15.6%
44
45
46
48
50
16.6%
42
43
44
45
47
17.6%
40
41
42
43
44
One-year forward P/E band
One-year forward EV/EBITDA band
()
( mn)
12,000
90
80
70
60
50
40
10,000
8,000
6,000
30
20
10
0
4,000
NRB
9x
Source: NSE, CRISIL Research
16
6x
12x
8x
15x
EV
5x
Dec-13
Apr-13
Aug-13
Dec-12
Apr-12
Aug-12
Dec-11
Apr-11
4x
Aug-11
Dec-10
Apr-10
3x
Aug-10
Dec-09
Apr-09
Aug-09
Dec-08
Apr-08
0
Aug-08
Dec-13
Apr-13
Aug-13
Dec-12
Apr-12
Aug-12
Dec-11
Apr-11
Aug-11
Dec-10
Apr-10
Aug-10
Dec-09
Apr-09
Aug-09
Dec-08
Apr-08
Aug-08
2,000
8x
NRB Bearings Ltd
P/E premium / discount to CNX 500
P/E movement
(Times)
0%
25
-10%
+1 std dev
20
-20%
-30%
15
-40%
10
-50%
-60%
-1 std dev
Premium/Discount to CNX 500

Median premium/discount to CNX 500
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
1yr Fwd PE (x)
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Apr-09
Oct-09
-5
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
-70%
Median PE
Peer valuation comparison

FY13
7.8
P/E
FY14
9.3
FY15
6.9
FY13
1.7
P/B
FY14
1.6
FY15
1.4
26
35
12
12.7
13.7
24.9
17.1
13.7
20.1
19.6
NA
19.8
19.8
15.8
16.5
NA
16.2
16.2
1.9
2.7
2.5
2.4
2.5
2.7
2.8
NA
2.7
2.7
2.3
2.5
NA
2.4
2.4
US$ bn
17.2
18.3
14.9
2.0
NA
US$ bn
12
19.5
17.0
13.3
3.4
3.0
Company
NRB Bearings Ltd*
Bearings Manufacturers
Domestic
Fag Bearings India Ltd
SKF India Ltd
Timken India Ltd
Average
Median
Global
Timken
SKF
Currency
bn
Market
cap
5
bn
bn
bn
EV/EBITDA
FY13 FY14 FY15
5.8
5.4
4.4
FY13
20.7
ROE
FY14
17.7
FY15
21.4
10.9
12.3
15.1
12.8
12.3
12.9
13.3
NA
13.1
13.1
12.9
13.3
NA
13.1
13.1
19.8
17.5
13.5
16.9
17.5
14.4
14.2
NA
14.3
14.3
17.4
15.4
NA
16.4
16.4
NA
7.9
8.1
7.2
14.1
14.1
21.4
3.4
10.8
9.2
7.6
23.3
20.1
23.8
FY13
ROE
FY14
FY15
Source: CRISIL Research estimates*, Industry sources
Auto Component sector valuation comparison

Company
Currency
Auto Component Manufacturers
Domestic
Motherson Sumi Systems Ltd bn
Mahindra Forgings Ltd
bn
Setco Automotive Ltd
bn
Sundram Fasteners Ltd
bn
Munjal Showa Ltd
bn
Automotive Axles Ltd
bn
Average
Median
Global
Delphi Automotive PLC
US$ bn
Denso Corp
JPY bn
Valeo SA
Eur bn
Average
Median
FY13
P/E
FY14
FY15
FY13
P/B
FY14
FY15
170
6
2
10
3
4
38.3
NA
7.7
10.2
4.6
29.4
18.1
10.2
19.8
NA
7.8
8.1
4.1
22.3
12.4
8.1
14.7
12.0
5.1
7.1
3.7
9.6
8.7
8.3
5.9
0.8
1.0
1.4
0.9
1.3
1.9
1.2
4.5
0.7
0.9
1.2
0.8
NA
1.6
0.9
5.9
0.8
1.0
1.1
0.7
NA
1.9
1.0
13.0
27.1
6.6
6.8
2.4
7.7
10.6
7.3
8.2
7.6
7.3
6.3
2.3
NA
6.4
7.3
6.5
5.6
4.7
6.3
2.3
NA
5.1
5.6
21.4
-14.0
16.6
18.9
29.2
17.5
14.9
18.2
32.6
43.1
13.2
16.6
20.2
6.2
22.0
18.4
33.7
58.4
18.3
16.1
18.7
13.8
26.5
18.5
19
4,907
6
13.0
24.5
11.8
16.4
14.1
16.1
14.9
15.0
12.4
15.4
12.4
13.4
6.2
1.8
2.6
3.5
4.4
1.6
2.2
2.8
6.2
1.8
2.6
3.5
8.2
10.0
4.4
7.5
8.7
7.6
5.4
7.2
7.9
7.1
4.8
6.6
49.3
8.4
17.7
25.2
48.2
11.1
18.0
25.8
43.7
10.9
18.9
24.5
13.0
14.9
12.4
2.6
2.2
2.6
8.2
7.6
7.1
17.7
18.0
18.9
Market
cap
EV/EBITDA
FY13 FY14 FY15
Source: Industry sources
17
Company Overview
The company was incorporated in 1965 as Needle Roller Bearing Company Ltd. It was set up
as a joint venture (30% stake) with French needle bearings manufacturer Nadella SA (which
Top fourth largest bearing
was later on acquired by Timken France) which gave technological support. In 2005, NRB
company in India (organised), in
promoters bought the stake held by Timken.
terms of sales
Manufacturing facilities
NRB Bearings has eight manufacturing plants one each in Waluj, Jalna, Chikalthana
It has a product range of over
(Aurangabad) and Thane (Maharashtra), Pantnagar (Uttarakhand), Hyderabad (Andhra
3,000 different sizes of bearings
Pradesh), Ranchi (Jharkhand) and Rayong (Thailand). NRB Bearings has total capacity to
produce 144 mn pieces as of FY13. Waluj and Jalna plants constitute more than 80% of the
companys bearings production.
Bearings capacity and utilisation
Domestic sales dominates revenue mix
(mn)
Revenue mix
160
140
82%
81%
80%
120
77%
76%
85%
90%
80%
75%
80
18.9%
71.6%
65.5%
11.3%
15.6%
FY08
FY09
15.3%
19.3%
17.9%
72.9%
72.5%
7.8%
9.6%
14.0%
FY10
FY11
FY12
13.9%
80%
60%
50%
68%
70%
40%
70.6%
64.4%
30%
118
144
112
144
103
127
75
99
59
86
65
81
40
20
17.1%
70%
100
60
100%
65%
60%
FY08
FY09
Capacity
FY10
FY11
Production
FY12
FY13
Blended utilisation (RHS)
20%
10%
0%
Exports
Domestic (OEM)
Includes needle roller bushes, cages, ball and roller bearings

Excludes subsidiaries capacity and production
Based on standalone revenues
21.7%
FY13
Replacement/ After m arket
It has also set up four marketing offices in Pune, Delhi, Bengaluru and Kolkata with 11
warehouses in India.
Subsidiaries and demerged entity

NRB Bearings has two subsidiaries, SNL Bearings (73.7% stake) and NRB Bearings Thailand
(wholly-owned). In October 2012, NRB Bearings demerged its industrial bearings division into
a wholly owned subsidiary - NRB Industrial Bearings Ltd.
Company structure
NRB Bearings
(M Cap 3,550 mn)
73.7% holding
SNL Bearings
(M Cap 70 mn)
100% holding
NRB Bearings - Thailand
(Unlisted)
NRB Industrial Bearings got listed in April 2013

18
NRB Industrial Bearings

[Demerged from NRB
Bearing effective Oct 2012]
(M Cap 180 mn)
Subsidiaries contribution is
miniscule in consolidated
financials
NRB Bearings Ltd
Table 6: Subsidiaries contribution is miniscule in consolidated entity

Subsidiaries
SNL
NRB Bearings
Consolidated
Contribution of subsidiaries
Bearings
Thailand
Total
PAT
to consolidated entity
42
-25
17
449
3.8%
FY13 PAT ( mn)

Source: Company
SNL Bearings
In 2000, NRB Bearings acquired 45% stake in the DCM Shriram group-promoted Shriram
Needle Bearings (known as SNL Bearings). SNL Bearings manufactures various types of
needle roller bearings such as needle bushes, needle roller, etc. The purpose to acquire SNL
was to get its technical and machine capabilities. NRB turned around SNL Bearings which
now is a profit making company with a PAT of 39 mn in FY13.
Milestones
1965
Incorporated in Mumbai as Needle Roller Bearing Company; an Indo-French

joint venture with Nadella France (Timken)
1966
Set up first plant in Thane, Mumbai to produce needle roller bearings
1980
New plant set up in Chikalthana, Aurangabad for needle rollers
1982
New plant set up in Jalna, Aurangabad to produce cylindrical roller bearings,

ball bearings, spherical roller bearings, tapered roller bearings
1990
Name changed to NRB Bearings
1991
New plant set up in Waluj, Aurangabad
1995
NRB Bearings got listed on the BSE
2000
NRB Bearings got listed on the NSE
Acquired Shriram Needle Bearings Industries Ltd (SNL)
Set up R&D centre in Thane plant
2005
Promoters of NRB Bearings bought out the stake held by Timken
2008
NRB established a wholly-owned subsidiary NRB Bearings Thailand Ltd
New plant in Pantnagar, Uttarakhand
Demerged NRB Industrial Bearings as a part of family settlement
2012
Table 7: List of institutional investors holding >1% stake (September 2013)

Name of Shareholder
% holding
Nalanda India Equity Fund
9.99
ICICI Prudential Life Insurance Company
5.59
Acacia Partners
3.59
Acacia Institutional Partners
2.21
Catamaran Management Services Pvt. Ltd
1.39
Acacia Banyan Partners
1.14
HDFC Trustee Company
1.02
Total
24.94
Source: NSE
19
Annexure: Financials (Consolidated)

Income statement
( m n)
Operating income
EBITDA
EBITDA m argin
Depreciation
EBIT
Interest
Operating PBT
Other income
Exceptional inc/(exp)
PBT
Tax provision
Minority interest
PAT (Reported)
Less: Exceptionals
Adjusted PAT
Balance Sheet
FY12
5,600
1,156
20.6%
293
863
154
710
24
(1)
733
224
10
499
(1)
500
FY13
5,912
1,071
18.1%
321
751
206
544
35
23
603
122
9
472
23
449
FY14E
6,211
1,084
17.5%
337
747
225
522
2
524
142
9
374
374
FY15E
7,017
1,274
18.2%
366
908
205
703
5
708
191
9
508
508
FY16E
7,942
1,466
18.5%
394
1,072
212
860
14
874
236
9
629
629
FY12
FY13
FY14E
FY15E
FY16E
16.3
(0.5)
(13.0)
(13.0)
5.6
(7.3)
(10.3)
(10.3)
5.1
1.2
(16.7)
(16.7)
13.0
17.5
35.9
35.9
13.2
15.1
23.8
23.8
Profitability
EBITDA margin (%)
Adj PAT Margin (%)
RoE (%)
RoCE (%)
RoIC (%)
20.6
8.9
22.7
21.2
18.4
18.1
7.6
20.7
15.6
15.4
17.5
6.0
17.7
15.9
13.1
18.2
7.2
21.4
18.9
15.7
18.5
7.9
23.2
20.7
17.7
Valuations
Price-earnings (x)
Price-book (x)
EV/EBITDA (x)
EV/Sales (x)
Dividend payout ratio (%)
Dividend yield (%)
7.0
1.5
4.8
1.0
38.8
5.6
7.8
1.7
5.8
1.1
34.9
4.7
9.3
1.6
5.4
0.9
33.7
3.6
6.9
1.4
4.4
0.8
34.9
5.1
5.5
1.2
3.9
0.7
37.4
6.7
B/S ratios
Inventory days
Creditors days
Debtor days
Working capital days
Gross asset turnover (x)
Net asset turnover (x)
Sales/operating assets (x
Current ratio (x)
Debt-equity (x)
Net debt/equity (x)
Interest coverage
129
74
77
104
1.2
2.7
2.4
2.8
1.1
0.9
5.6
127
64
87
130
1.2
2.6
2.2
3.0
1.4
1.3
3.6
127
65
85
130
1.2
2.7
2.5
2.9
1.1
1.1
3.3
125
65
80
124
1.2
3.0
2.9
2.9
1.0
0.8
4.4
123
65
80
123
1.3
3.3
3.2
2.9
0.9
0.8
5.1
FY12
5.2
8.2
24.2
2.0
96.9
FY13
4.6
7.9
20.6
1.7
96.9
FY14E
3.9
7.3
23.0
1.3
96.9
FY15E
5.2
9.0
26.1
1.8
96.9
FY16E
6.5
10.6
29.8
2.4
96.9
Ratios
Grow th
Operating income (%)
EBITDA (%)
Adj PAT (%)
Adj EPS (%)
Per share
Adj EPS ()
CEPS ()
Book value ()
Dividend ()
Actual o/s shares (mn)
Financials have been classified as per CRISIL standards

Source: CRISIL Research
20
( m n)
Liabilities
Equity share capital
Reserves
Minorities
Net w orth
Convertible debt
Other debt
Total debt
Def erred tax liability (net)
Total liabilities
Assets
Net fixed assets
Capital WIP
Total fixed assets
Investm ents
Current assets
Inventory
Sundry debtors
Loans and advances
Cash & bank balance
Marketable securities
Total current assets
Total current liabilities
Net current assets
Intangibles/Misc. expenditu
Total assets
FY12
FY13
FY14E
FY15E
FY16E
194
2,303
34
2,532
2,415
2,415
102
5,048
194
2,649
43
2,886
2,515
2,515
102
5,503
194
2,144
9
2,346
194
1,787
17
1,998
2,575
2,575
119
5,040
2,723
2,723
102
4,822
194
2,009
26
2,228
2,445
2,445
102
4,775
2,303
456
2,758
2
2,174
349
2,522
2
2,386
74
2,460
2
2,346
24
2,369
2
2,501
24
2,525
2
1,378
1,256
344
556
1
3,534
1,266
2,268
12
5,040
1,475
1,515
414
31
1
3,436
1,150
2,286
13
4,822
1,565
1,446
435
79
1
3,527
1,226
2,300
13
4,775
1,730
1,538
492
278
1
4,038
1,373
2,665
13
5,048
1,915
1,741
572
293
1
4,522
1,558
2,963
13
5,503
Cash flow
( m n)
Pre-tax prof it
Total tax paid
Depreciation
Working capital changes
Net cash from operations
Cash from investm ents
Capital expenditure
Investments and others
Net cash from investments
Cash from financing
Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Others (incl extraordinaries)
Net cash from financing
Change in cash position
Closing cash
FY12
734
(221)
293
(482)
325
FY13
580
(140)
321
(542)
219
FY14E
524
(142)
337
33
753
FY15E
708
(191)
366
(166)
717
FY16E
874
(236)
394
(284)
748
(1,061)
(2)
(1,062)
(86)
(0)
(86)
(275)
(275)
(275)
(275)
(550)
(550)
60
1,436
(224)
(69)
1,202
465
556
148
(192)
(614)
(658)
(525)
31
(278)
(152)
(0)
(430)
48
79
(30)
(213)
(243)
198
278
100
(283)
0
(183)
15
293
Quarterly financials (Standalone)

( m n)
Net Sales
Change (q-o-q)
EBITDA
Change (q-o-q)
EBITDA margin
PAT
Adj PAT
Change (q-o-q)
Adj PAT margin
Adj EPS
Q3FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

1,492
1,442
1,445
1,319
1,541
8%
-3%
0%
-9%
17%
239
249
200
195
263
-13%
4%
-19%
-2%
35%
16.0%
17.2%
13.8%
14.8%
17.1%
114
147
101
69
105
114
147
101
69
105
-8%
29%
-31%
-32%
51%
7.6%
10.2%
7.0%
5.3%
6.8%
1.2
1.5
1.0
0.7
1.1
NRB Bearings Ltd
Focus Charts
Bearings capacity and utilisation
Domestic OEMs dominate revenues
(mn)
100%
160
77%
76%
80%
100
75%
80
68%
60
70%
118
144
112
144
103
127
75
99
59
86
65
81
65%
FY08
FY09
Capacity
FY10
FY11
Production
FY12
60%
50%
72%
40%
14%
15%
13%
64%
61%
59%
56%
54%
71%
22%
26%
26%
30%
33%
FY15E
FY16E
20%
0%
FY13
Blended utilisation (RHS)
(%)
9,000
40.0
35.0
34.7
8,000
35.0
7,000
30.0
6,000
25.0
16.3
13.0
4,817
5,600
FY11
FY12
FY12
FY13
H1FY14 FY14E
Domestic (OEM)
Replacement/ After market
13.2
15.0
10.0
5.6
5.1
5,912
6,211
7,017
7,942
FY13
FY14E
FY15E
FY16E
Revenues
31.2
30.0
30.1
23.2
22.7
25.0
5.0
0.0
21.4
20.7
20.0
3,000
2,000
FY11
Return ratios to improve, after declining in FY14

(%)
4,000
14%
Exports
( mn)
5,000
10%
Three-year revenue CAGR of 10.3% during FY13-16
20.0
17.7
21.2
20.7
18.9
15.0
15.6
15.9
FY13
FY14E
10.0
FY11
FY12
RoE
% growth y-o-y (RHS)
FY15E
FY16E
RoCE
Movement in PAT margins
Share price movement
( mn)
(%)
250
200
164
200
600
150
50
100
50
-100
FY11
FY12
FY13
Adjusted PAT
FY14E
FY15E
FY16E
Adjusted PAT margins (RHS)
NRB Bearings
Dec-13
Jun-13
629
Nov-12
508
May-12
374
Apr-11
449
Nov-11
500
Oct-10
-50
575
Apr-10
-17
200
Mar-09
24
Sep-09
-13
-10
Feb-08
300
Aug-08
36
Jan-06
400
150
Jan-07
100
Aug-07
500
100
13%
70%
10%
60%
700
14%
30%
40
1,000
15%
80%
120
20
18%
90%
Jul-06
140
82%
81%
80%
85%
CNX 500
-Indexed to 100;
Note: We have taken closing price of NRB Bearings adjusting for split and
de-merger
21
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CRISIL IERIndependentEquityResearch

NRB Bearings Ltd

Enhancing investment decisions

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

Strong upside (>25% from CMP)

Upside (10-25% from CMP)

Align (+-10% from CMP)

Downside (negative 10-25% from CMP)

Strong downside (<-25% from CMP)

About CRISIL Limited

About CRISIL Research

NRB Bearings Ltd

4/5 (Superior fundamentals)

January 02, 2014

5/5 (CMP has strong upside)

Tapping global OEMs

Preferred supplier of customised bearings to leading OEMs

KEY STOCK STATISTICS

KEY FORECAST (CONSOLIDATED)

PERFORMANCE VIS--VIS MARKET

NM: Not meaningful; CMP: Current market price

Client servicing desk

Source: Company, CRISIL Research estimates

+91 22 3342 3561

For detailed initiating coverage report please visit: www.ier.co.in

Table 1: NRB Bearings - Business environment

Revenues contribution - FY13

Big end bearings

Specialised ball bearings

Steering column bearings

Rings and sleeves

Tapered roller bearings

Ashok Leyland Ltd

Bajaj Auto Ltd

Hero MotoCorp Ltd

Honda Motorcycle & Scooters

Getrag Transmissions Corporation

Mahindra and Mahindra Ltd

Tata Motors Ltd

GKN Driveline (European automotive

Renault Volvo (European truck

ZF Friedrichshafen AG (Germanybased global leader providing

Increased mining of existing

New client acquisitions

Growth in the domestic automobile

Increased mining of existing clients

New client acquisition / entry in

Unlisted player in India - INA Bearings

Cyclicality in the automobile industry

Foreign currency risk

Needle roller bearings (constitute ~50% of NRB Bearings revenues)

NRB Bearings Ltd

Figure 1: Has 11% share in organised bearings market...

Figure 2: ...and around 70% share in needle roller bearings

Indian Bearing Industry

*FAG Bearings and INA Bearings are part of Schaeffler Technologies

Source: Industry, CRISIL Research

Figure 3: Needle roller bearings dominate NRBs revenues

NRB holds a dominant position

in the domestic needle roller

Others include crank pins, hub pins, etc. (as on 9MFY13)

Table 2: NRB Bearings product usage in critical applications

Critical automobile application