The bidding for Carraro India Limited’s Initial Public Offering (IPO) began today, marking its second day. Investors can place their bids for this issue until tomorrow, December 24. The company’s shares will be listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on December 30.
Balaji Gopal, Managing Director of Carraro India, mentioned that the company is the only one in the country providing axles and transmission gearboxes for tractors. He stated that they supply axles and gearboxes to a wide range of tractor manufacturers, from Mahindra Group and Escorts Kubota to smaller regional tractor makers.
Bhaskar asked the company’s MD about Carraro India’s journey and other questions related to the IPO:
Question: How has the journey of Carraro India Limited been so far?
Answer: Carraro India Limited was a subsidiary of an Italian multinational company, established around 1996. The company entered into a joint venture with Escorts Limited, which was very successful, but the joint venture ended in 2006-2007. The venture ended due to differences in priorities, but the relationship with the customer and supplier continued. Escorts Kubota, which emerged from the joint venture, remains one of our oldest clients.
Question: What is the company’s main mission and vision?
Answer: Gopal explained that earlier, tractors in India were all two-wheel drive and low horsepower. Now, the tractors used for farming and other applications are high horsepower and four-wheel drive, which is where Carraro is contributing. We provide the right technology to tractor manufacturers, and we believe that India offers the best support and skill levels in the world. As an Italian company, we are not only focusing on “Make in India” but also taking it a step further with “Design in India.”
Question: How many assembly lines and production facilities does the company have?
Answer: We have 53 acres of land at Ranjangaon MIDC, Pune, with two factories, employing about 1,800 people. We have eight modern automatic assembly lines that work in dust-free rooms.
Question: Who is your primary customer, and do you have plans to expand this customer base?
Answer: Our largest customer is the Mahindra Group, followed by companies like Escorts Kubota. We proudly provide axles and transmission gearboxes to a range of customers, from Mahindra to the smallest regional tractor manufacturers. We have 38 customers, including construction vehicles and tractors, and export to six countries.
Question: Can you share any product innovation from Carraro India that differentiates you from others?
Answer: Our products are unique. We do not provide standard products from a catalog. Instead, we offer custom-made products according to customer needs, ensuring that they are the right fit.
Question: Who are Carraro India’s competitors?
Answer: Gopal mentioned that in the agricultural sector, Mahindra and other Indian companies manufacture mechanical gearboxes with 60-70 horsepower capacity. Carraro India is the only company globally that supplies gearboxes for tractors. Therefore, we have no direct competition in this area.
Question: What are the company’s future plans, and when did you decide to launch the IPO?
Answer: As per SEBI regulations, I cannot discuss future projections, but I can say that five to six years ago, our valuation was around ₹800-900 crore, and today we are nearing ₹1,800 crore.
Question: The IPO includes an Offer for Sale (OFS) of ₹1,250 crore, from which the company won’t receive any funds. How do you view this?
Answer: This is a positive aspect for the company’s financial health. We are not raising money to conduct business. The IPO is for the benefit of shareholders who have invested around ₹2,000 crore over the past 25 years.
Question: How do you think the stock will perform in the next 2-3 years?
Answer: Gopal stated that in India, the market for four-wheel drive tractors was only 2% five to six years ago, but it has now grown to 15-17%. In developed countries like Europe or the US, nearly 98% of tractors are four-wheel drive.
Question: Can you summarize the company’s financial performance over the last five years?
Answer: The company’s financial performance has been consistent and stable. We have focused on market entry, providing the right products, and adopting the best technology. As technology advances, our established reputation with customers enhances business growth. Previously, the technology used in India was of a medium level, but Carraro’s strength lies in technology, and we started upgrading it. Four to five years ago, we imported 43% of components, which limited our margins, but now we have developed local suppliers, and today, 64% to 70% of our components are sourced locally.
