Varroc Engineering Limited — Investor Presentation 2020

Sep 11, 2020

Varroc Engineering Ltd.

Regd. & Corp. Office

L-4, MIDC, Industrial Area Tel + 91 240 6653700 email : varroc.info@varroc.com Waluj, Aurangabad 431 Fax + 91 240 2564540 www.varroc.com 136, Maharashtra, India CIN: L28920MH1988PLC047335

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VARROC/SE/INT/2020-21/37

September 11, 2020

To,

(1) The Manager Listing The Listing Department, National Stock Exchange of India Limited BSE Limited Exchange Plaza, Plot No. C/1, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400051 NSE Symbol: VARROC

(2) The Manager - Listing The Corporate Relation Department, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai-400001 BSE Security Code: 541578 Security ID: VARROC

Sub.: Intimation regarding participation in Investor Conference

• Ref.: Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Dear Sir/Madam,

Pursuant to Regulation 30 of the Listing Regulations, this is to inform you that, the Company will be participating in an Investor Conference organized by Ambit Capital Pvt. Ltd., as per the following schedule:

Date*	Name of Investor Conference	Conference Organizer	Mode of Participation
September 25, 2020	Ambit Auto Day Conference	Ambit Capital Pvt. Ltd.	Through Video Conferencing

*Meeting Schedule tentative and is subject to change.

The attached presentation will be presented at the said Conference.

We request you to take this on record, and to treat the same as compliance with the applicable provisions of the Listing Regulations, as amended.

Yours faithfully,

For Varroc Engineering Limited

     

---

Ajay Sharma

Group General Counsel and Company Secretary

Encl: a/a

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Varroc Engineering Limited Corporate Presentation

2020

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Varroc is a leading Indian auto component groupwith a global footprint

• Founded in 1988 in Aurangabad, India by the Jain family

• Successful listing on the Indian Stock Exchanges in July 2018

Two primary business lines:

  **1. Varroc Lighting Systems (“VLS”)** : global supplier of exterior lighting systems to passenger car OEMs

  **2. Varroc India Business** : manufacturer and supplier of diverse range of Polymer, Electrical and Metallic auto components to 2W, 3W and 4W OEMs.

     - **Strong, long-lasting, growing customer relationships** with marquee auto OEMs globally and in India

     - **Well-diversified global auto component business** across geographies, products and customers

  - **Low cost, strategically located global** manufacturing footprint

  - **43 Operating Manufacturing Facilities and 16 R&D Centres across 5 continents**[(4)]

• In-house R&D capabilities in India, Czech Republic, China[(3)] , USA, Mexico, Germany, Italy, Romania and Poland

• ~1,400 R&D engineers[(4)] ; 185 patents granted globally[(4)]

• Experienced management team supported by reputed Board

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Leading

Tier-1 manufacturer and supplier to the Indian 2W and 3W OEMs[(4)]

6[th]

Largest[(1)] , fastest growing among top global exterior auto lighting suppliers

INR 115bn/ USD 1.54bn FY20 revenue[(2)]

• ~14,300 employees across the globe[(4)]

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Note: (1) Based on Yole Report – By revenue published in 2018. For passenger and light commercial vehicles. (2) Including China (3) Activities in China are through a 50% joint venture with Beste Motor Co. Ltd. (4) As of July 31, 2020. Excluding JVs. Confidential
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Business Overview

• ELECTRICAL - ELECTRONICS POLYMER METALLIC (Forging and Valves) GLOBAL LIGHTING IMES (International Forging) • 2W lighting for Indian • Air Filter Assembly • Engine valves • Head Lamps • Undercarriage Links • Digital clusters • Seating Assembly • Transmission gears • Rear Lamps • Drill bit cones & • Motors, Magnetos • Interiors (Instrument • Crank pins, Links • CHMSL heads •

• • Regulator & Rectifiers • panel, Door panel etc.) • Connecting Rods • Fog Lamps Undercarriage • Body switches, CDI, Painted plastic exterior • Crankshafts Segments products

• • Catalytic Converters • Mirror assembly Global PV lighting -15 Facilities Czech(2), China (2), India (2) Mexico, Morocco, Turkey,

• 8 Facilities – India[#] 13 Facilities – India[#] 5 Facilities – India[#] 2 Facilities - Italy Poland, Brazil, Bulgaria

• Global 2W Lighting 3 -Facilities Italy, Romania, Vietnam

• • Comprehensive solutions in • One of the largest polymer • Offers precision forged & • Leading global supplier of • Manufactures hot steel electrical-electronics machined parts for engines exterior automotive lighting forged parts for the solution providers to all

• components, assemblies for and transmissions systems for PV construction and oil & gas major auto OEMs with a

• automotive applications. pan-India presence • Supplies engines valves in • High end lighting systems for industries

• • 1350+ employees • domestic and international the global 2W industry • 135+ employees 1940+ employees markets • 2 more upcoming facilities • 1650+ employees • 7870+ employees

• 2W, 3W, PV & CV 2W, 3W, PV & CV 2W, 3W, PV, CV & OHV PV & 2W Earth-moving & Oil-drilling

3

Well Diversified Business Across Geographies, Product Groups, Customers and Segments

FY20 Consolidated Revenue: INR 112 bn[(1)] 100% China JV Revenue: INR 8 bn

Revenue Split by Geography (1)

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%
1.8% India
14.6% 1.2%
Europe
33.4%
North America
Asia pacific (Ex
India)
49.0%
Others
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Consolidated Revenue Amount Split by Customer (3)

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%
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Bajaj
18.7%
28.6% Customer A
Customer B
13.0% Customer C
Customer D
12.2% 11.4% Customer E
7.1% 5.6% Customer F
3.4%
Others
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Revenue Split by Vehicle Type (2)

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%
3.0% 4W
34.1%
2/3W
62.9%
Others
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Revenue Split by Segment

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%
4.2% Lighting
6.1%
11.0% Polymer
Electrical
14.8%
63.9%
Metallic
Others
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• Diversified business in developed and emerging markets with strong India presence

• Comprehensive range of engine agnostic products

• Diversified customer relationships; no customer has >20% share

• Presence in fast growing India 2W and Global PV lighting segments

4

Varroc – The Transformation into a Global Auto Component Group

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Technical
Coloration with
Investment in
Heraeus,
Acquired Forging Acquired Visteon’s manufacturing facilities in Germany for 2W Acquired 74%
company, IMES , Brazil and Morocco
global PV lighting catalytic stake in CarIQ,
Italy ,
business (now converters in a leading
VLS) Acquired 90% stake in auto India Telematics
accessories manufacturer solution
Team Concepts (India) Established a JV in provider
Romania for
manufacturing of
Electronic
Components
START
Polymer
Acquired PV Lighting
Business
business in Turkey
Acquired Development of Electronic
Tri.o.m PE Investments by Fuel-Injection Technology
2W and 3W ( Italy ), Omega TC Holdings for 2W in India
catalytic - 2W and Tata Capital
converters lighting
Varroc Engineering Limited
Acquired 50% in
listed on the Indian Stock
Varroc TYC
exchanges (BSE & NSE).
Corporation ( China )
2018
1990 2007 2012 2017 2019
2005 2011 2014
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5

Low Cost, Strategically Located Global Manufacturing Footprint

43 Operating Manufacturing Facilities and 16 R&D Centers Across Asia, Europe, Africa, North and South America

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26 Manufacturing Facilities
for Varroc India Business
Co-location with customers
Poland ensures cost effectiveness and
Czech
Republic efficient delivery
Romania India
Italy BulgariaTurkey China
Morocco
Uttarakhand
India Haryana (1)
(1)
Mexico India Vietnam NCR
(1)
Gujarat (2)
MP (1)
Brazil Maharashtra
(16)
Corporate Headquarters
VLS Headquarters Karnataka(2) Tamil Nadu(2)
Manufacturing plant 17 Global Manufacturing Facilities
R&D Centre across 12 countries (Incl.1 in India) optimizing
production and distribution for VLS & IMES
Business
• •
Proximity to OEMs leading to cost Pan-India presence enabling
Manufacturing and R&D footprint
effectiveness and quicker turn- proximity to customers across
spread across low cost countries
around times key automotive hubs
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• Manufacturing and R&D footprint spread across low cost countries

6

India Business: Comprehensive Solution Provider to 2W OEMs in India

Diversified Portfolio Catering to 2W and 3W Segments

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Wide range of products across Polymer, Electrical and Metallic segments; One-Stop Shop for customers enabling cross-selling

7

VLS: Wide Range of Lighting Product and Technology Offerings

Broad Portfolio of Lighting Technologies for PV OEMs Globally

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Headlamps
Xenon LED Matrix
Rear Lamps
LED
Other Lights
Electronics
LED Module Headlamp Control Projector
Modules
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• Full portfolio of head lamp and rear lamp providing a wide range of products

• Established presence in key emerging technologies such as LED, OLED Laser, Matrix

• Quick adoption of new technology to grow product portfolio

• Customized products for OEMs with long standing relationships

• Providing cost effective, cutting edge technology products

8

R&D Efforts Seek to Capitalize on Emerging Trends

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Euro V / BS-VI emission norms
Reduction in cost of computing power implemented by India along with the
and EFI requirement make “smarter” rest of the world will make Electronic
Stricter
products viable Increased Use Environmental Fuel Injection (EFI) necessary on all
of Electronics
Regulation vehicles
As the composition of the Market technology evolution will
vehicle changes, the ability to make stronger connection with
achieve reliability & fuel end customers viable and
Sustainability,
efficiency will still be prime Reliability & Digitization provide opportunities around
differentiators Efficiency & IoT the same
City traffic congestion has
made 2W, and particularly
scooters, a viable commuting
Urbanization option
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Regulation change creates potential for suppliers with robust operational systems to cross sell product lines; core auto themes like lightweighting and affordability will continue to guide OEM decision making

9

Varroc — Key Strengths

Comprehensive Solution Provider to OEMs

• End-to-end services across design, development and delivery

• Wide range of products across polymer, metallic and electrical segments

• Ability to cross-sell to meet customer requirements

Long Standing, Growing Customer Relationships

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4
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• Strong long-standing relationships with marquee OEMs across high-end and mass market segments

• Expansion of business with key customers

Global Footprint Servicing key Auto Markets

• India Business has Pan-India presence enabling proximity to customers. Plants located in all major auto hubs

• VLS business has Strategically-located manufacturing

• 5 1 in low cost locations. Footprint covers major PV markets

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Wide Range of Product Offerings
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2
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• Diversified product portfolio covering a wide range of technologies

• Cost effective, cutting edge technology products to premium and mass market PV OEMs

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3
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Robust in-house Technology, Innovation & R&D Capabilities
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• Nimbleness, flexibility and cost consciousness enables developing products with shorter turn-around time.

• Developing proprietary products with continuous focus on innovative, cost competitive designs

• Well-positioned to benefit from key trends such as electrification, shared mobility and emission reduction

10

Varroc Leadership

Tarang Jain*^ Managing Director

• Tarang Jain*^ • Experienced management team

• Managing Director •

• • Co-founded Varroc in 1988 •

• • Nearly 30 years experience in the automotive committees

• industry

• Naresh Chandra* Marc Szulewicz Chairman and Non-Executive Director Independent Director • Total Experience: 35+ years in the automobile • Ex-General Manager, Foreign equipment industry division, Plastic Omnium Management

• • Previously associated with Kaycee Industries Gautam Khandelwal Vinish Kathuria Independent Director Independent Director • Executive Chairman, Nagpur Power and • Co-Founder and President of Rank software Inc. Industries Ltd

• Arjun Jain*^ Stephane Vedie Business Head – Electrical & Electronics Division President and CEO – VLS and Whole-time Director • Total Experience: 15 years in Automotive • Previously associated with Bain & Co India Pvt. Lighting Ltd. • Previously associated with Magnetti Marelli

• Sethumadavan D. Rohit Prakash^ Business Head - Polymer President - Business Head -Metallic and • Total Experience: ~22 years Whole-time Director • Previously associated with Assa Abloy, Stanley Black • Total Experience: ~30 years & Decker, Schneider Electric, General Electric and • Previously worked with Sogefi Engine systems India, Lucas TVS

• Independent directors with experience across industries & practices

• Strong governance: Big-4 statutory and internal auditors; independent board committees

Vijaya Sampath Independent Director

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• Lawyer, ex-Group General Counsel for Bharti Airtel Ltd

T. R. Srinivasan

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Group Chief Financial Officer

President - Business Head -Metallic and Whole-time Director

• Total Experience: ~30 years

• Previously associated with Hindustan Lever Ltd, ATC Tires Private Ltd

• Previously worked with Sogefi Engine systems India, NTTF Industries Ltd and at FIEM industries

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Financials & Share Details

Financial Summary : Key Performance Indicators

Revenue Trend last 6 years and current year YTD

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INR Billion
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CAGR 10%
120 111
104
96
82
70
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
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Reported EBITDA and Reported EBITDA margin #

INR Billion, %

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12 12.0%
9.3%
10 10.1% 8.2% 10.0%
8.8%
8 7.2% 8.0%
7.0%
6 6.0%
4 4.0%
2 2.0%
0 0.0%
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
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ROCE & ROE trend*

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%
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Debt to Equity

Multiple (x)

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26.0% 1.4
20.9%
18.0%
15.3% 16.9%
16.9%
13.5% 0.8 0.8
11.8% 12.7% 0.7
0.5
3.30%
1.2% 0.0% 0.3
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
ROCE ROE
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
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13

Financial Summary: Income Statement Q4 & FY20

(INR million)

	Q4 FY20	Q4 FY19*	% Change	FY20 FY19*	FY20 FY19*	% Change
Revenue from Operations - Reported	27447.5	31534.0	-13%	111218.7	120364.7	-8%
Revenue from Operations : like-for-like	27447.5	31379.0	-13%	111218.7	120282.1	-8%
Other Income - Operating	479.4	226.1		925.7	650.2
Other Income - non-Operating	7.9	59.8		63.2	257.7
EBITDA : Reported	1158.3	2855.9	-59%	9133.6	11237.8	-19%
EBITDA : like-for-like	985.2	3030.2	-67%	8478.5	11798.9	-28%
EBITDA %	3.6%	9.7%		7.6%	9.8%
Depreciation & Amortisation	2066.1	1529.7	35%	7318.6	5656.4	29%
Finance Cost	361.9	258.6	40%	1391.7	968.5	44%
Share of net profits of JVs under equity method	-105.5	50.8		-91.7	314.5
PBT - Reported	-1367.2	1178.3		394.9	5185.2	-92%
Tax	3.9	-111.0		369.8	898.4	-59%
Tax rate	-0.3%	-9.8%		76.0%	18.4%
PAT - Reported	-1371.0	1289.3		25.1	4286.8	-99%

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Financial Summary : Segmental Break-up

SBU	FY20	FY20	FY20	FY20	FY20	FY19*	FY19*	FY19*	FY19*	FY19*	Revenue Change YoY
	Revenue	Revenue like-for-like	EBITDA	EBITDA # **Like-for-like **	% EBITDA	Revenue	Revenue like-for-like	EBITDA	EBITDA # Like-for-like	% EBITDA
India Business	38,253	38,253	3,901	3,832	10.0%	42,720	42,720	4,623	4,623	10.8%	-10.5%
VLS (Incl TRIOM)	71,054	71,054	5,116	4,531	6.4%	75,101	75,018	6,385	6,946	9.3%	-5.3%
Others (IMES)	2,291	2,291	100	100	4.4%	3,076	3,076	303	303	9.9%	-25.5%
Elimination	(380)	(380)	15	15		(533)	(533)	(74)	(74)
Total	1,11,219	1,11,219	9,134	8,478	7.6%	1,20,365	1,20,282	11,238	11,799	9.8%	-7.5%
China JV-50%@	3,981	3,981	230	230	5.8%	4,731	4,731	578	578	12.2%	-15.9%
Difference with FS >>	0 (0.0) 0 0
Euro Performance	Euro million
SBU	FY20					FY19*					Revenue Change YoY
	Revenue	Revenue like-for-like	EBITDA	EBITDA # **Like-for-like **	% EBITDA	Revenue	Revenue like-for-like	EBITDA	EBITDA # Like-for-like	% EBITDA
VLS -Euro	901	901	65	58	6.4%	928	920	79	86	9.3%	-2.1%

15

Financial Summary : Balance Sheet

	Fiscal Year Ending March 31,	Fiscal Year Ending March 31,
	2018	2019	2020
Non-Current Assets
Fixed Assets	31,480	45,593	52,448
Others - Non-Current Assets	6,439	8,355	7,881
Right of use of asset		-	8,282
Total Non - Current Assets	37,920	53,948	68,612
Current Assets
Current Investments	30	186	40
Cash and Bank Balances	3,289	1,634	10,688
Inventories	8,641	8,904	10,758
Receivables	14,027	13,495	10,893
Other -Current Assets	4,616	9,156	9,031
Total Current Assets	30,604	33,376	41,411
Total Assets	68,524	87,324	1,10,023
Equity and Liabilities
Shareholder's Funds
Share Capital	135	135	135
Reserves and Surplus	28,145	30,529	29,910
Equity attributable to owners	28,280	30,664	30,045
Minority Interest	208	241	249
Total Shareholder's Funds	28,488	30,906	30,295
Lease liability		-	6,522
Long Term Borrowings	6,361	4,572	9,002
Other Non-Current Liabilities	1,944	4,137	4,232
Total Non-Current Liabilities	8,306	8,709	19,756
Current Liabilities
Short Term Borrowings	3,439	12,015	17,004
Finance Lease obligations	59	-	604
Current Maturities of LT debt	2,130	7,806	9,418
Trade Payables	19,794	20,322	23,646
Others Current Liabilites & provisions	6,308	7,566	9,299
Total Current Liabilities	31,730	47,709	59,972
Total Equity and Liabilities	68,524	87,324	1,10,023

16

Shareholding Details

Equity Share Information • Share Price(As on 24 Aug 2020)* INR 339.90 • Market Capitalization INR 45.7 Bn • Financial Year April to March • Listing Details Indian Stock Exchange NSE (VARROC.NS) BSE (541578) • BloombergCode VARROC:IN Shareholding Pattern Promoters 85% Institutional 12.2% Retail & Others 2.8%	**Top Institutional Shareholders ***
	DSP Blackrock 2.4%
	Nippon 1.4%
	L&T MF 1.1%
	IIFL 1.0%
	Bajaj Allianz Life 0.7%
	I Pru MF 0.5%
	Kotak MF 0.4%
	Others 2.5%
	Total Institutional holders 10.1%

• As on 21 August, 2020 for top 250 portfolios only. Shareholding under multiple portfolios/ plans clubbed together. Stake rounded off to nearest decimal

17

Our Core Values