A Smallcap Market Leading Stock that You Should Have on Your Watchlist

There is many a slip between the cup and the lip.

The road to electrification has not been as smooth as projected, more so in case of passenger vehicles.

Subsidies were curtailed before the transition could gather momentum.

The Indian EV industry is yet to resolve the classic chicken (charging infrastructure) and egg (a drastic shift to EV from ICE) situation. In the meantime, hybrid vehicles have entered the fast lane.

As per Maruti, the market leader in passenger cars, hybrid cars will outpace EV sales by the end of the decade.

As such, it would be prudent to not bet on EV pure plays but on EV agnostic businesses.

So, this article is about one such company that is doing well with regards to its relevance in a world marked by shifts in mobility trends.

Here are some interesting facts about this company.

It is an exclusive supplier to Ola's 2-wheeler factory in its product category.

More than 90% of the vehicles running on Indian roads use this company's products.

The insiders have been on a buying spree on this stock for quite some time now.

And the company enjoys 60% market share in its niche.

The stock in question is NRB Bearings.

It makes ball bearings, roller bearings, and other components that offer precision friction solutions. Its products find applications in many mobility applications in auto, railways, defense, farm equipment, aircraft, and aerospace.

NRB Bearings was the first in India to introduce needle roller bearings. It also makes other products like planetary shafts, crank pins, and kingpins.

Within the auto sector, the strategy is de-risked serving all segments - the commercial vehicle, two/three-wheeler, and passenger car segments. It also caters to agriculture and construction equipment industries, and global defence too.

OEMs and tier 1 clients account for 60-65% of its revenues. The rest comes from export (25% of revenue) and aftermarket (10%l-12% of revenue).

No single customer with its tier-1 supplier accounts for more than 6-7% of the total revenue, limiting customer concentration risk.

Exports are dominated by segments such as hybrid and E-Drive passenger cars and trucks, and electric power trains. It supplies to the world's foremost E-vehicles in Europe, America, Japan, and Korea.

What sets it apart is a strong R&D arm that allows it to introduce new and more efficient products. Its product range spans over 3,000 designs, which are customised as per clients' needs.

With an expansion of product portfolio to include EV hybrid and EV agnostic products, it has been contacted by several foreign OEMs interested in such products.

Apart from market leadership, innovative products, and strong relationships with clients in India and abroad, the business is likely to benefit from structural tailwinds such as China plus one, and other industry tailwinds like the PLI scheme, localisation norms, and the vehicle scrappage policy to remove old unfit vehicles from the roads.

That's all good.

The risks to watch out for include a slowdown in the auto sector, and ability to maintain margins. It's key raw material is steel the price of which can fluctuate. Further, the business is working capital intensive.

Coming to its financial performance, the return ratios stand at 15%. EBITDA margin for FY24 was 17.4%. The dividend payout in FY24 was over 20%. The debt to equity is at a comfortable 0.2.

The stock is trading at a PE or price to earnings of 31 times.

Now, remember at the beginning I mentioned an increase in insider stake. The promoter stake is up from 49.1% in September 2020 to 50.69% in June 2024. The net insider buying has been upto a price level of Rs 320 per share in the month of September.

Do note this is not a stock recommendation. But it is indeed a stock for your smallcap watchlist.

Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
What are the 3 main types of stock? Research Private Limited (formerly What are the 3 main types of stock? Agora Research Private Limited) (Research Analyst)