Saturday, July 30, 2016

SNL Bearing: Business Analysis


SNL Bearing was promoted by Shriram group of Industries in technical collaboration with INA Germany in 1983. SNL manufactures needle roller bearings & special purpose machines for the bearing industry. 

NRB Bearings took over the management of SNL Bearing in the year 2000. The acquisition of SNL was done to consolidate NRB’s technical and machine expertise given the similar nature of the product line. SNL has single manufacturing unit in Ranchi.

Needle Bearing

Industries which find use of needle roller bearing include automobiles, general engineering, railways, electrical equipment etc. SNL operates in the following market segments:

1. Automotive OEM
2. After Market
3. Exports

The market segmentation of demand is approximately 90% from original equipment manufacturers
(OEM) and balance from replacement market/exports. 

Types of bearings:

Bearing is an instrument which supports weight & reduces friction. Two main types of bearings are:

1. Ball bearing
2. Roller bearing

There are multiple subtypes / types basis the application of bearings. Needle roller bearings are the smallest and lightest of the roller bearing family. Needle roller bearings are useful in applications where weight and space is a concern. Some of the characteristics are: 

1. Higher load capacity
2. Ability to handle a larger, more rigid shaft in a given application
3. Excellent rolling characteristics within a small cross section

Industry view:

The domestic bearings market is pegged at ~INR 8000 crore. Demand of ~INR 5000 cr is met through domestic production; rest is imported. The bearing sector is equally distributed between industrial and automotive segments.

Needle roller bearings forms about 10% of the market; needle roller bearing market size is around INR 450-480  crore.

Financial Analysis: 

The financial and operating parameters are captured in below table. 

SNL has strong margins which it has been able to sustain over last 10 years except for FY2010. SNL implemented VRS schemes in 2009 which impacted it’s bottom line by ~INR 1.95 cr for settlements towards VRS. The profits & margins adjusted for the VRS payment would have been comparable in 2010.

The top line has grown at CAGR of 9% over last 5 years; mainly due to slow down in industrial activity. 

SNL has generated strong free cash flow of INR 33 cr over last 10 years. All other operating parameters have improved or sustained over last few years.

NRB & SNL Relationship: 

NRB is majority stakeholder in SNL and SNL liens on NRB for majority of its business. SNL’s 60% sales were to NRB in FY2016. SNL leverages marketing / sales network of NRB. This is further established by the fact that the product portfolio of NRB and SNL is different from each other; hence there is low possibility of cannibalisation.

SNL has a market cap of INR 62 cr (73.45% share-holding of NRB Bearing) and NRB has market cap of INR 1100 Cr.

While SNL and NRB are in similar business line, their performance parameters defer significantly from each other. Before comparing performance parameters, let’s get perspective of NRB’s business. 

NRB manufactures both ball bearings and roller bearings with manufacturing facilities at Jalna, Waluj, Hyderabad, Aurangabad, Thane, Pantnagar and Thailand (NRB Bearings Thailand Limited). It serves both OEM & after market business through its ~250 dealers and distributors.

NRB is leader in the needle bearing segment in India with ~70% market share. Needle roller bearings constituted ~42% of the NRB’s topline in FY2015. Needle roller bearing is a customised product which require NRB to work with OEMs from the conceptualisation stage. This enables it to build relationships with almost all major OEM players. 

Key clients include Hero MotoCorp, Bajaj Auto, HMSI & TVS Motors in the two-wheelers space and Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Ashok Leyland in PV, CV space. 

Interestingly, NRB didn’t merge SNL with itself, probably due to high de-listing costs. The sheer small size wouldn’t have made much difference to NRB’s top or bottom line. Management is common for NRB and SNL; all directors derive their salary from NRB.

Coming back to performance parameters, SNL & NRB margins were more or less at same level in 2007. SNL improved its margins in 2008 & 2009 but saw a slide in 2010. SNL’s margins have been better than NRB since then. 

The dip in SNL’s margin was due to implementation of VRS scheme in 2009. SNL has been able to sustain its margins over last 10 years. NRB margins have also sustained except for the FY2009, which the management attributed to volatility due to global crises.  

One question we need to answer is - Why SNL’s margins are better than NRB's? 

One of the reason seem to be product profile and customer segmentation. NRB has a larger product portfolio & larger replacement market / export sector contribution, as compared to SNL, which seems to be lower margin business due to competition. 

Other reason is lower operational expenses for SNL. due to its small scale of operations. The operational expenses for NRB is ~82%, while the same is ~73% for SNL due to its significantly lower material expenses.


SNL and NRB management is common. SNL’s board members are: 

1. Ms. H. S. Zaveri - Chairman (Managing Director & President of NRB Bearings Ltd.) 
2. Mr. S. C. Rangani - Director
3. Mr. J. S. Maini - Director
4. Mr. V. S. Iyer - Director
5. Mr. Jayavardhan Dhar Diwan - Director

Other than Ms. H S Zaveri who is part of the promoter family of NRB Bearings Ltd. and Mr. S C Rangani who receives remuneration from the holding Company, other directors are independent. Directors have been remunerated only by way of sitting fees and no other benefits are paid.

The aggregate remuneration of Ket Managerial Personnel is INR 28.6 lakhs. This renumeration is 0.94% of the annual revenue 3.31% of the Profit before tax. 

The median remuneration of employees of the Company was increased by 23% during the FY2016 (from INR 2.80 lacs to INR 3.45 lacs p.a.). Out of the above increase, 13% is the increase on account of settlement with workmen for a period of 3 years.

SNL has 148 number of permanent employees on the rolls of company as on 31st March, 2016. 


The shareholding by the promoter group is close to 75%, which reinforces the commitment of management towards SNL’s business. 

NRB infused the liquidity in 2002 by subscribing to redeemable preference shares to sustain SNL as it was a loss making entity then. SNL has now repaid the amount raised through preferential shares including dividends.  

Issued capital: INR 4.05 cr equity shares & INR 10 cr of 11% redeemable preferential shares

Subscribed & Paid up (as on March 31 2016): INR 3.61 cr equity shares & INR 25 lakhs of redeemable preferential shares

The coupon rate applicable for preferential shares was 2% from 2002 to 2005 and 6% from 2005 onwards with repayment terms of 12 years repayable. 

SNL repaid Rs. 9.5 Cr by 2014; balance of Rs 50 lakhs was to be redeemed equally over the period of two years on 18th June, 2015 and 18th June, 2016 with an enhanced coupon rate of 11% p.a. effective 18th June, 2014 till its redemption. 

There is no outstanding preferential share outstanding as on date. SNL has also settled the dividend accrued for the preferential shares.


SNL & NRB presents an interesting case study for relationship between parent company and its subsidiary manufacturing similar product line. 

While SNL provides strength to NRB’s product suite; in turn NRB allows SNL to flourish under its umbrella. It will be interesting to see how the relationship shapes up in future - Will management keep the SNL a separate entity or will it de-list SNL and merge with NRB?  


All data has been taken from public sources. I don't have any financial interest in SNL or NRB Bearing. I don’t own shares of SNL & NRB Bearing at the time of writing this article. I may or mayn't invest in these companies in future. An investor should do her own analysis before making an investment decision. The views expressed are personal and doesn't represent that of my employer’s.

This article is just a collection of my thoughts about the company.

I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. As per the clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Please refer to 'Disclaimer' page for further details. 

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