Varroc Engineering Limited — Investor Presentation 2020

Jul 25, 2020

Varroc Engineering Ltd.

Regd. & Corp. Office

L-4, MIDC, Industrial Area Waluj, Aurangabad 431 136, Maharashtra, India Tel + 91 240 6653700 Fax + 91 240 2564540

VARROC/SE/INT/2020-21/25 July 25, 2020

To,

(1) The Manager – Listing (2) The Manager - Listing The Listing Department, The Corporate Relation Department, National Stock Exchange of India Limited BSE Limited Exchange Plaza, Plot No. C/1, G Block, Phiroze Jeejeebhoy Towers, Bandra-Kurla Complex, Dalal Street, Fort, Bandra (East), Mumbai-400051. Mumbai-400001.

NSE Symbol: VARROC BSE Security Code: 541578 Security ID: VARROC

Sub: Investor Presentation of the Company

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

Dear Sir/Madam,

Please find enclosed latest Investor Presentation of the Company.

Kindly take the same on record.

Yours faithfully, For Varroc Engineering Limited

______________________________________

Ajay Sharma Group General Counsel and Company Secretary

Encl: as above

Email: varroc.info@varroc.com www.varroc.com CIN: L28920MH1988PLC047335

Varroc Engineering Limited Corporate Presentation

July 2020

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

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)

Business Overview

ELECTRICAL -ELECTRONICS	POLYMER	METALLIC (Forging and Valves)	GLOBAL LIGHTING	IMES (International Forging)
•2W lighting for Indian•Digital clusters•Motors, Magnetos•Regulator & Rectifiers•Body switches, CDI,•Catalytic Converters	•Air Filter Assembly•Seating Assembly•Interiors (Instrumentpanel, Door panel etc.)•Painted plastic exteriorproducts•Mirror assembly	•Engine valves•Transmission gears•Crank pins, Links•Connecting Rods•Crankshafts	•Head Lamps•Rear Lamps•CHMSL•Fog Lamps	•Undercarriage Links•Drill bit cones &heads•UndercarriageSegments
India#8Facilities –	India#13 Facilities –	India#5 Facilities –	Global PV lighting -15 FacilitiesCzech(2), China (2), India (2)Mexico, Morocco, Turkey,Poland, Brazil, BulgariaGlobal 2W Lighting 3 -FacilitiesItaly, Romania, Vietnam	2 Facilities -Italy
•Comprehensive solutions inelectrical-electronicscomponents, assemblies forautomotive applications.•1350+ employees	•One of the largest polymersolution providers to allmajor auto OEMs with apan-India presence•1940+ employees	•Offers precision forged &machined parts for enginesand transmissions•Supplies engines valves indomestic and internationalmarkets•1650+ employees	•Leading global supplier ofexterior automotive lightingsystems for PV•High end lighting systems forthe global 2W industry•2 more upcoming facilities•7870+ employees	•Manufactures hot steelforged parts for theconstruction and oil & gasindustries•135+ employees
2W, 3W, PV & CV	2W, 3W, PV & CV	2W, 3W, PV, CV&OHV	PV & 2W	Earth-moving & Oil-drilling

# Pantnagar facility is included in metallic but caters to all 3 verticals of India business. Global 2W lighting business is part of VLS and domestic 2W lighting business is part of Electrical and Electronics business India business also has a small After Market Division, Solar and Windmill units whish are not shown separately; Employees for these division and Corporate are over and above the divisional break-up shown above

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

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

Consolidated Revenue Amount Split by Customer (3) Revenue Split by Segment

F are mainly the customers of VLS

• 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

Note: (1) 50% China revenues not included (JV accounted under equity method) and other operating revenue not included(2) 4W – 4-wheeler (includes PV), 2/3W – 2/3-wheeler; data as per MIS (3) Customer A is an American multinational car manufacturer, Customer B is a large British car manufacturer, Customer C is an American electric car manufacturer, Customer D is an international automotive manufacturer, customer E is a large European car manufacturer and Customer F is a global automotive manufacturer headquartered in Europe. Based on MIS data; (4) Bajaj is the customer of the India Business; Customer A, B, C, D, E, 4

Varroc – The Transformation into a Global Auto Component Group

Low Cost, Strategically Located Global Manufacturing Footprint

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

• • Manufacturing and R&D footprint spread across low cost countries
• • Proximity to OEMs leading to cost effectiveness and quicker turnaround times
• • Pan-India presence enabling proximity to customers across key automotive hubs

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

Diversified Portfolio Catering to 2W and 3W Segments

VLS: Wide Range of Lighting Product and Technology Offerings

Broad Portfolio of Lighting Technologies for PV OEMs Globally

• 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

R&D Efforts Seek to Capitalize on Emerging Trends

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

Varroc — Key Strengths

10

Varroc Leadership

Tarang Jain*^ Managing Director

• Co-founded Varroc in 1988
• Nearly 30 years experience in the automotive industry
• Experienced management team
• Independent directors with experience across industries & practices
• Strong governance: Big-4 statutory and internal auditors; independent board committees

Naresh Chandra* Chairman and Non-Executive Director

• Total Experience: 35+ years in the automobile industry
• Previously associated with Kaycee Industries

Gautam Khandelwal Independent Director

• Executive Chairman, Nagpur Power and Industries Ltd

Marc Szulewicz Independent Director

• Ex-General Manager, Foreign equipment division, Plastic Omnium Management

Vinish Kathuria Independent Director

• Co-Founder and President of Rank software Inc.

Vijaya Sampath Independent Director

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

Arjun Jain*^

Business Head – Electrical & Electronics Division and Whole-time Director

• Previously associated with Bain & Co India Pvt. Ltd.

Stephane Vedie

President and CEO – VLS

• Total Experience: 15 years in Automotive Lighting
• Previously associated with Magnetti Marelli

• Total Experience: ~22 years
• Previously associated with Assa Abloy, Stanley Black & Decker, Schneider Electric, General Electric and Lucas TVS

T. R. Srinivasan Group Chief Financial Officer

• Total Experience: ~30 years
• Previously associated with Hindustan Lever Ltd, ATC Tires Private Ltd

Note: * denotes member of Promoter Group. ^ denotes member of Board of Directors. Board of Directors President - Business Head -Metallic and Whole-time Director

• Total Experience: ~30 years
• Previously worked with Sogefi Engine systems India, NTTF Industries Ltd and at FIEM industries

Financials & Share Details

Financial Summary : Key Performance Indicators

Revenue Trend last 6 years and current year YTD

ROCE & ROE trend*

%

Reported EBITDA and Reported EBITDA margin #

INR Billion, %

Financial Summary: Income Statement Q4 & FY20

						(INR million)
	Q4 FY20	Q4 FY19*	% Change	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%

*EBITDA = Profit before share of net profits of investments plus Depreciation plus Finance Cost less Non-operating Portion of Other Income $ like-for-like excludes impact of Interior Plastics business closure in North America and adjusted for comparative launch costs

Financial Summary : Segmental Break-up

	FY20				FY19*				Revenue
SBU	Revenue	Revenuelike-for-like	EBITDA	EBITDA #Like-for-like	% EBITDA	Revenue	Revenuelike-for-like	EBITDA	EBITDA #Like-for-like	% EBITDA	Change YoY
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
	FY20					FY19*				Revenue
SBU	Revenue	Revenuelike-for-like	EBITDA	EBITDA #Like-for-like	% EBITDA	Revenue	Revenuelike-for-like	EBITDA	EBITDA #Like-for-like	% EBITDA	Change YoY
VLS -Euro	901	901	65	58	6.4%	928	920	79	86	9.3%	-2.1%

Financial Summary : Balance Sheet

	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

Shareholding Details

* As on 16th April, 2020 for top 250 portfolios only. Shareholding under multiple portfolios/ plans clubbed together. Stake rounded off to nearest decimal

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