Ways2Capital Reviews : Bosch Outlines Rs1,700cr Capex Plan For India Over Next Three Years

Leading technology and auto ancillary company, Bosch Limited (Bosch), part of the Robert Bosch Group, has outlined for capex of Rs1,700cr over the next three years. Most of this amount will be utilized for revamping its facility at Adugodi near Bengaluru. In a press release on its website, Dr. Volkmar Denner, chairman of the board of management of the Bosch Group, stated that he sees strong potential from India as the economy “is on the rise again”.

India recently surpassed Germany to become the world’s fourth largest automobile market. Starting April 2020, India will switch from BS-IV to BS-VI. Both these events open up huge opportunities for companies such as Bosch. In order to fully exploit the opportunities in India, the company plans to invest €220mn (Rs1,734cr @ Rs78.81/€). Apart from modernizing Bosch manufacturing plants in India, the bulk of the investments will go towards further expanding Bosch’s new Adugodi smart campus in the major city of Bengaluru, located in the southern part of the country. The former manufacturing site is being converted into a high-tech engineering center. In the past five years, Bosch has already invested a total of some €670mn (Rs5,280cr) in the country.

Revenue growth, which had weakened over past 2-3 quarters due to disruptions (GST, BS-IV, discontinuation of two divisions) showed signs of pick up in Q3&Q4FY18 (up 14% and 23% yoy respectively). EBITDA margins were under pressure in Q4FY18 (contraction of 544bps yoy to 21.9%) due to higher input costs and consultancy costs for BS-VI implementation. Auto revenues were up 15% yoy in FY18 led by powertrain business while non-auto revenues were flat due to weakness in energy business. Bosch is set to benefit over the long term due to higher content per vehicle in BS-VI (April 2020 onwards). Bosch has debt free balance sheet, ROCE above 20% and parent with strong global presence. We expect revenue, EBITDA and PAT CAGR of 9%, 15% and 15% respectively over FY18-20E.
 
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