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The Best Auto Ancillary Stocks To Invest in 2024

02 January 20246 mins read by Angel One
The Indian auto ancillary industry is enjoying a growth spurt with demand impetus from domestic and international automobile industries. Find the best auto-ancillary stocks to add to your portfolio.
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The auto ancillary industry is one of India’s crucial sectors contributing to 2.3% of the country’s GDP and generating employment for 1.5 million people directly and indirectly. The sector is primarily driven by strategic partnerships and in-house research and development established by the industry players. 

Having said that, the Indian auto ancillary stocks offer significant capital appreciation to those who invest in them. This article will explore the lucrative investment opportunities in the best auto ancillary stocks and things to consider before investing. Read on to learn more about India’s top 10 auto components stocks.

What are Auto Ancillary/Components Stocks?

Auto ancillary stocks represent shares in companies that manufacture and supply components, parts, and systems used in the production of automobiles. These companies play a crucial role in the automotive industry by providing essential components such as engines, transmissions, brakes, electrical systems, and other parts needed for vehicle manufacturing and maintenance.

Overview of Ancillary/Components Industry in India

India has emerged as the world’s fastest-growing economy, experiencing rapid growth driven by increased incomes, heightened infrastructure spending, and enhanced manufacturing incentives. This economic surge has notably propelled the automobile industry, with the two-wheeler segment dominating due to the burgeoning Indian middle class. In FY 2023, automobile sales reached a substantial 19.45 million units.

The robust demand for vehicles has stimulated the growth of original equipment and auto components manufacturers, establishing India as a hub of expertise in this field. The Automotive Mission Plan (2016-26) anticipates a 5-7% contribution to India’s GDP and aims to generate direct incremental employment for 3.2 million people by 2026.

The auto component industry, ranging from large corporations to micro entities across the country, is leading in exports and employs over 3.7 crore people. From FY 2016 to FY 2022, it registered a Compound Annual Growth Rate (CAGR) of 6.35%, reaching a value of $56.50 billion in FY 2022. Exports of auto components increased by 5.2% to ₹1.61 lakh crore ($19.49 billion) in 2022-23. Notably, North America, Europe, and Asia constitute significant portions of these exports, with key items including drive transmission and steering, engine components, and body/chassis.

The high growth potential across various vehicle industry segments positions the auto component sector for double-digit growth in FY 2022, with expectations for the industry to reach $200 billion by FY 2026. This remarkable trajectory underscores the pivotal role of the auto component industry in India’s economic landscape.

Top 10 Auto Ancillary Stocks In India in 2024

Stock Market Capitalisation 

(₹ Crore)

PE Ratio (x) 1 year return (%) Return on Equity (%) Debt to Equity Ratio (x) EBITDA Margin (%)
Bosch Ltd 62,548.05 43.88 27.46 13.15 0.48 14.80
UNO Minda Ltd 39,182.87 59.95 22.18 15.94 31.47 12.22
Sona BLW Precision Forgings Ltd 33,764.39 85.41 29.09 18.43 12.89 26.20
ZF Commercial Vehicle Control Systems India Ltd 30,646.87 96.47 68.60 14.05 0.00 15.30
Sundram Fasteners Ltd 26,045.41 52.65 36.30 17.45 24.07 15.74
CIE Automotive India Ltd 18,131.62 -133.12 63.43 -2.65 19.31 4.78
JBM Auto Ltd 14,948.21 120.18 196.09 12.91 165.23 10.95
Minda Corporation Ltd 8,056.09 28.32 67.61 19.48 44.83 11.10
Gabriel India Ltd 5,687.58 42.97 120.46 16.17 1.28 7.73
Shriram Pistons & Rings Ltd 4,972.12 16.94 150.61 20.99 21.61 19.09

Note: The above list of auto component stocks is dated November 24, 2023. The following parameters were used to get the list:

  • 1-year Returns 
  • EBITDA Margin 

Now, let’s look at these stocks briefly.

  • Bosch Ltd

Robert Bosch GmbH, known as Bosch, is a German multinational engineering and technology company headquartered in Gerlingen, Germany. Founded in 1886 in Stuttgart by Robert Bosch, the company is 94% owned by the Robert Bosch Stiftung, a charitable institution. Bosch operates in four business sectors: mobility, consumer goods, industrial technology, and energy and building technology. It is the largest automotive supplier globally and significant in other industries.

  • UNO Minda Ltd

Formerly known as Minda Industries Limited, Uno Minda Limited manufactures and sells auto components and systems in India and internationally. Its products cater to various vehicles, including 4-wheelers, 2/3-wheelers, and commercial vehicles. The range includes alloy wheels, automotive switches, horns, infotainment systems, sensors, actuators, controllers, and more. Established in 1958 and based in Gurugram, India, Uno Minda has a broad portfolio that extends to alternate fuel systems, air filtration systems, and various automotive seats and lighting solutions. 

  • Sona BLW Precision Forgings Ltd

Incorporated in 1995 and located in Gurgaon, India, Sona BLW Precision Forgings Limited focuses on manufacturing automotive systems and components. Their offerings include differential assemblies gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors, and motor control units.

  • ZF Commercial Vehicle Control Systems India Ltd

Previously known as WABCO India Ltd, ZF Commercial Vehicle Control Systems India Limited manufactures air-assisted and air brake systems for commercial vehicles. Its product range encompasses chassis systems, braking systems, and driveline controls. The company operates five manufacturing facilities nationwide based in Chennai, Tamil Nadu, India. 

  • Sundram Fasteners Ltd

This company specialises in manufacturing critical, high-precision components for the automotive, windmill, and aviation sectors. Their product range includes fasteners, powertrain components, metal products, iron powder, radiator caps, water pumps, and more. 

  • CIE Automotive India Ltd

Engaged in manufacturing and selling automotive components, CIE Automotive India Limited serves original equipment manufacturers and other customers in India and Europe. Their extensive product line includes forging products, gears, shafts, axle and transmission parts, and various other automotive components. The company was previously known as Mahindra CIE Automotive Limited and is based in Mumbai, India. It is a subsidiary of Participaciones Internacionales Autometal, Dos S.L. 

  • JBM Auto Ltd

Incorporated on November 5, 1996, JBM Auto Limited is a publicly listed company based in South West Delhi, Delhi. It specialises in the manufacture of sheet metal components, assemblies, and sub-assemblies. 

  • Minda Corporation Ltd

Minda Corporation Limited, founded on March 11, 1985, is a public company in New Delhi. It specialises in manufacturing mechanical and electrical auto parts for the automobile industry. The company’s product portfolio includes ignition switches, fuel tank lids, helmet locks, electronic VLDUs, antennas, and more. 

  • Gabriel India Ltd

Established on February 24, 1961, Gabriel India Limited is a listed public company in Pune, Maharashtra. The company manufactures and sells ride control products to auto component manufacturers, including front forks, gas and hydraulic shock absorbers, struts, cabin and seat dampers, front fork components, oil seals, front fork oils, wheel rims, gas springs, coolants, and more. 

  • Shriram Pistons & Rings Ltd

Shriram Pistons & Rings Limited, founded on December 9, 1963, is a publicly listed company in New Delhi, Delhi. The company manufactures pistons and rings, with products including pistons, piston pins, piston rings, and engine valves. 

Overview of Agriculture Industry in India

India has emerged as the world’s fastest-growing economy, experiencing rapid growth driven by increased incomes, heightened infrastructure spending, and enhanced manufacturing incentives. This economic surge has notably propelled the automobile industry, with the two-wheeler segment dominating due to the burgeoning Indian middle class. In FY 2023, automobile sales reached a substantial 19.45 million units.

The robust demand for vehicles has stimulated the growth of original equipment and auto components manufacturers, establishing India as a hub of expertise in this field. The Automotive Mission Plan (2016-26) anticipates a 5-7% contribution to India’s GDP and aims to generate direct incremental employment for 3.2 million people by 2026.

The auto component industry, ranging from large corporations to micro entities across the country, is leading in exports and employs over 3.7 crore people. From FY 2016 to FY 2022, it registered a Compound Annual Growth Rate (CAGR) of 6.35%, reaching a value of $56.50 billion in FY 2022. Exports of auto components increased by 5.2% to ₹1.61 lakh crore ($19.49 billion) in 2022-23. Notably, North America, Europe, and Asia constitute significant portions of these exports, with key items including drive transmission and steering, engine components, and body/chassis.

The high growth potential across various vehicle industry segments positions the auto component sector for double-digit growth in FY 2022, with expectations for the industry to reach $200 billion by FY 2026. This remarkable trajectory underscores the pivotal role of the auto component industry in India’s economic landscape.

Factors To Consider Before You Invest in Auto Components Stocks

  1. Industry Trends and Outlook: Stay informed about current trends and the future outlook of the auto industry. Understand how factors like technological advancements, electric vehicles, and regulatory changes may impact the demand for auto components.
  2. Global Supply Chain Dynamics: Assess the global supply chain dynamics, as many auto component manufacturers operate in a global market. Factors like trade policies, geopolitical events, and currency fluctuations can impact their performance.
  3. Customer Base and Diversification: Analyse the customer base of the auto component companies. A diversified customer portfolio helps mitigate risks associated with dependence on a single customer or market.
  4. Innovation and Technology Adoption: Assess the company’s commitment to innovation and adopting new technologies. Companies that invest in research and development to advance technological advancements may have a competitive edge.
  5. Regulatory Environment: Understand the regulatory landscape affecting the auto industry, including emission norms and safety standards. Compliance with these regulations is crucial for long-term sustainability.
  6. Aftermarket Potential: Consider the aftermarket potential for auto components. Companies that provide replacement parts for vehicle maintenance and repair may have a stable revenue stream even during economic downturns.
  7. Competitive Landscape: Analyse the competitive landscape to understand the company’s position within the industry. Assess the market share, strengths, and weaknesses relative to competitors.

Conclusion

When choosing investments in Indian auto ancillary stocks, it’s crucial to get expert advice. Look at the company’s financial history for the past five years, including the balance sheet, profit and loss statement, and cash flow statements. 

For a clearer picture of the company’s recent updates, check their latest quarterly financial results before making investment decisions. This approach ensures you’re well-informed and making choices based on a comprehensive understanding of the company’s financial health.

Aligning strategies with industry trends remains pivotal for capitalising on the potential growth of India’s auto component sector. So, open your Demat account today with Angel and explore various investment opportunities. 

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.

 

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