21-05-2025
Powering auto giants: Can Belrise's IPO charge up your portfolio?
Mumbai: Belrise Industries, a Pune-based leader in India's two-wheeler auto components sector, opened its ₹2,150 crore initial public offering (IPO) on Wednesday, aiming to capitalize on a recovering market backed by strong rural demand.
The company's 24% share in metal components for two-wheelers and its portfolio of marquee clients, including Bajaj Auto, Hero MotoCorp, Honda, Jaguar Land Rover, and Royal Enfield, position it as an attractive entrant in the capital markets.
The IPO, priced between ₹85 and ₹90 per share, includes a fresh issue with proceeds largely earmarked for repaying ₹1,618 crore of debt. The issue closes this Friday.
With growth slowing and margins under pressure, investors face a key question: does Belrise have the firepower to sustain momentum and deliver returns at its current valuation?
Leaner debt, cleaner balance sheet
Belrise has made strides in improving its financial health.
Its debt-to-equity ratio dropped from 1.48x in FY22 to 0.97x in FY24 and continues to improve. Management plans to maintain debt around ₹1,000 crore post-repayment, well within comfort levels, according to Swastid Shrikant Badve, chief of staff at Belrise.
Net debt stood at ₹2,592 crore as of December 2024.
Valuation also looks compelling. At the upper price band, Belrise's price-to-earnings ratio stands at 18.8x, markedly lower than peers like JBM Auto (83.82x), Bharat Forge (62.57x), Uno Minda (56.81x), Minda Corp (44.91x), and Endurance Technologies (38.08x).
Badve emphasized the company's commitment to fair valuation. "We've consistently outperformed over the past eight years, and we aim to maintain that growth momentum. Our approach is simple, we want to be fair to our investors. We want them to grow with us and benefit over the long term," he told Mint in an interview.
Rajnath Yadav, senior analyst at Choice Broking, noted that BIL is seeking a valuation that remains at a discount to the peer average based on enterprise value/sales. While the company has shown growth in both revenue and net profit, its margins have come under pressure.
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'To address this, BIL is focused on increasing its content per vehicle, which is expected to enhance profitability. Additionally, the planned debt repayment is likely to contribute further to margin improvement. The company's recent acquisition is expected to enhance its product offerings and drive sales growth, contributing positively to its overall business performance, said Yadav.
Despite a strong client base and a leaner balance sheet, Belrise's financial performance has come under pressure in recent years.
Revenue growth, which stood at 25.5% in FY22, slowed to 13.7% in FY24 and further tapered to just 0.9% in the first nine months of FY25. This deceleration has been accompanied by steady erosion in profitability, with net profit margins narrowing from 4.9% to 4.1%, and return on net worth declining from 15.1% to 9.5% over the same period.
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Operating margins improved slightly to 12.8% in 9MFY25 but remain below FY22 levels. To counter these pressures, Belrise is innovating with new products like hub motors, steering columns, and polymer parts to increase per-vehicle content.
'Rural demand remains steady, and we're targeting premium vehicles where content per unit is higher. We're also working on expanding our footprint among smaller OEMs to deepen market penetration," said Badve.
A key concern for investors is Belrise's dependence on a concentrated customer base. In FY22, its top 10 clients accounted for 64.4% of revenue, a figure that dipped to 50.8% in FY24 but climbed back up to 63.8% in the first nine months of FY25.
Such reliance exposes the company to significant client-specific risks. Any reduction in orders, loss of a major customer, or deterioration in a client's financial health could materially impact Belrise's revenue and profitability.
Addressing these concerns, Badve said, 'While we already have strong relationships with major players like Bajaj, Honda, and Hero, the goal now is to replicate that level of engagement with others such as Suzuki, Royal Enfield, and similar customers."
Unlike peers such as Endurance Technologies and Motherson Sumi Wiring India that have been scaling up rapidly, Belrise has seen limited capacity expansion in recent years, operating with the same 15 manufacturing plants since FY22. And while that's now beginning to change, the company still has some ground to cover.
'We have operated with 15 plants until recently, but with the acquisition of H-One India in March 2025—a former subsidiary of Japan's H-One Company—we've added two more facilities in Noida and Rajasthan," Badve said. 'We also have three new plants coming up in Chennai, Bhiwadi, and Pune, which will take our total count to 20 in the coming quarters."
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Even so, a significant portion of Belrise's production remains geographically clustered. Maharashtra alone houses seven of its 17 facilities (post-acquisition), exposing the company to regional disruptions—be it from labour issues, policy shifts, or supply chain bottlenecks.
Meanwhile, rising input costs have added to the pressure. Raw material expenses climbed from 83% of total costs in FY22 to over 85% in 9MFY25.
'Volatility in key raw material prices makes it difficult to maintain profitability and stable return ratios," Yadav said.
'Belrise's margins remain vulnerable to raw material price fluctuations, particularly steel and polymers. While its cost-plus model allows some cost pass-through, delays or limitations in doing so—especially in volatile or competitive markets—can strain profitability and working capital," noted an ICICI Direct Research report.
Two-wheeler tailwinds—and risks
What may work in Belrise's favour is a revival in its core market.
India's two-wheeler market appears to be entering a fresh growth cycle. After bottoming out at 13.7 million units in FY22, volumes are projected to rebound to 30-31 million units by FY30, implying a compounded annual growth rate of 7-8%. The recovery is being led by rural demand, particularly for lower cubic capacity (CC) models, which now account for 45-50% of total domestic motorcycle sales.
For a company like Belrise, which draws a significant share of its revenue from two-wheeler OEMs, this upcycle presents an opportunity, if it can execute well on margin improvement, product diversification, and customer expansion. But analysts urge caution.
'The auto ancillary sector, while supported by strong OEM linkages, is not immune to cyclical pressures," said Anirudh Garg, partner and fund manager at Invasset PMS.
'Slowing revenue growth often reflects a combination of plateauing domestic two-wheeler demand, rising EV penetration affecting traditional parts, and soft exports. Even with robust client relationships, growth can taper if the product mix isn't evolving fast enough or if geographical diversification is limited," he added.
