SKF India (500472) Status Update summary

Strategic rationale and overview

• Demerger aims to create two independent, focused entities—automotive and industrial—to accelerate growth, profitability, and address distinct industry dynamics, customer needs, and manufacturing philosophies.

• Enhanced management focus, agility, and tailored capital deployment are expected for each business, enabling pursuit of distinct growth opportunities and innovation strategies.

• Automotive and industrial businesses face different macro drivers, such as EV adoption and premiumization in automotive, and infrastructure, manufacturing, and renewables growth in industrial.

• Customer requirements and product innovation are tailored for each segment, with automotive focusing on high-performance, energy-efficient bearings and industrial emphasizing uptime, predictive maintenance, and customized solutions.

• Manufacturing processes differ: automotive relies on large batch, automated production for OEMs, while industrial requires flexible, customized manufacturing for diverse applications.

Financial performance and pro forma outlook

• FY24 revenue reached ₹45,701 million, with EBITDA of ₹8,116 million, PAT of ₹5,518 million, and a 27.4% return on capital employed.

• Demonstrated strong financial growth: 13% CAGR in revenue, 16% CAGR in EBITDA, and 18% CAGR in PAT over five years.

• Pro forma FY24 (unaudited): Automotive revenue ₹16,722 million, EBITDA margin 18.7%, PAT margin 11.9%, ROCE 24.9%; Industrial revenue ₹28,979 million, EBITDA margin 17.2%, PAT margin 12.2%, ROCE 29.1%.

• Both entities are expected to maintain strong financial performance, leveraging targeted product innovation, value selling, and operational efficiency.

• CapEx is expected to remain around INR 150 crores annually, with potential for additional investments as both businesses expand.

Demerger process, timeline, and shareholder impact

• Demerger will not affect public shareholding; shareholders will receive one share of the new industrial entity for each existing share.

• Both entities to be listed on NSE and BSE post-demerger.

• The process began in Q4 FY24, with board approval, application filing in Q1 FY25, regulatory observations in Q2 FY25, NCLT filing and shareholder meetings in Q3 FY25, and expected completion and listing by end of Q4 FY25.

• Asset allocation and plant division are in advanced planning, with more details to be shared as decisions are finalized.