As per the news published in the economics times, Studds Accessories, the market leader in helmet manufacturing has commissioned 2 new facilities in the state of Haryana. The company has invested a total of 200 Crores in these two plants.
Studds has a market share of about 27% in the helmet market. 55% of its sales come from the Northern and Western regions. It is present in more than 40 countries mainly Europe, Latin America, Africa, the USA, and southeast Asia.
This new facility will also produce helmets for bicycles. The two new plants are spread in the area of 5.5 acres and 1.5 acres each. This new facility will produce 75 lakhs helmets for motorcycle and 15 Lakh helmets for bicycles per year. The additions of new facilities will double the capacity of Studds Accessories. Now they will have 4 manufacturing plants, all in the states of Haryana. The total helmet manufacturing capacity now stands at 1.4 Crores helmet per year.
Present Situation of Studds( Covid-19 times)
1. The company has already started manufacturing post-covid-19. At present working at 80% capacity.
2. The company at present has employed 1850 laborers and not facing any issue on this front.
3. Supply chain issues are already sorted now.
4. As per the company, the Capex and working capital requirement shall be met out of internal accruals. They will able to meet other obligations including Employee Cost, Finance cost, and other expenses from internal accrual only.
5. The company has not taken any additional credit lines for COVID.
Outlook for FY20-21 by Manish Mehta CFO
1. Post covid-19, the demand for 2W, new and old, is set to increase as people will prefer personal vehicles as compared to public transport. This will drive the demand for helmets as well.
2. The management is quite optimistic and expects an overwhelming response. The company is expecting to surpass last year’s sales in the current financial year.
3. SMK, which is the premium brand, has received an overwhelming response in Indian and Foreign Markets. Last year they faced a shortage of supply due to capacity constraints. However, this year with two new plants already operational, the company will able to fill the gap. Studds is also coming up with new products in the market.
4. Studds is also planning to add 12 new Exclusive Brand Outlets (EBOs) across the country. The capex for the EBOs would be about Rs 3 crores.
5. BS-VI norms will put up a challenge for 2W manufacturers to sell as the cost of motorcycles will increase. So the impact would also be seen on helmet companies.
Currently, the share price in the unlisted market is Rs. 825 per share. This translates into a valuation of 1623 Crores. The company in 2018 during IPO preparation was looking for a valuation of around 1800 Crores. With a supply shortage in 2019 and a positive outlook in 2020, doubling the capacity, we can easily conclude that it may easily command 2400-2500 Crores of valuation.