RACL Geartech Partners with ZF Rane to Develop Power Steering Components for American Pickup Trucks
RACL Geartech, a leading Indian automotive components manufacturer, has made a significant move in the auto industry by partnering with ZF Rane (a ZF Group Company) to develop Electric Power Steering (EPS) components. This collaboration is poised to strengthen RACL’s position in the global market, particularly in North America. The joint effort will cater to a major American pickup truck manufacturer, with prototype production set to begin in early 2025 at RACL’s Gajraula plant.
This strategic partnership marks RACL Geartech’s entry into the electric power steering segment, opening doors for expansion in both domestic and international markets.
Share Price Movement & Market Performance
Following the announcement of the partnership, RACL Geartech’s share price rose by 1.2%, reaching ₹825 per share, up from its previous close of ₹815.60. As of February 7, 2025, the company’s market capitalization stands at approximately ₹878.70 crore.
Despite the recent surge, the stock is trading below its 52-week high of ₹1,350, reflecting broader market trends. However, with expanding global collaborations and increasing demand for precision-engineered components, investor confidence in RACL Geartech remains strong.
Key Highlights of the RACL-ZF Rane Partnership
- Development of Advanced EPS Components:
- The partnership will focus on ring gears, sun gears, drive gears, and planetary gear assemblies for Electric Power Steering systems.
- These components are integral to improving vehicle maneuverability, fuel efficiency, and overall driving experience.
- Strategic Expansion into North America:
- By catering to a leading American pickup truck manufacturer, RACL Geartech is expanding its footprint in the North American market, which is one of the largest automobile hubs globally.
- Prototype Production Timeline:
- The prototype production and testing for the EPS components are scheduled for Q2 FY 2025-26 at RACL’s Gajraula plant in Uttar Pradesh.
- Strengthening Technological Edge:
- This collaboration enhances RACL Geartech’s technological expertise by integrating ZF Rane’s global innovation with its own precision manufacturing.
Financial Performance & Growth Trends
Q3 FY25 Financial Highlights
- Revenue: ₹113.05 crore (YoY decline of 1.92% from ₹115.27 crore in Q3FY24, but QoQ growth of 2.48% from ₹110.33 crore in Q2FY25).
- Profit: ₹6.54 crore, down 45.38% YoY from ₹12.02 crore in Q3FY24, but stable compared to Q2FY25.
- Stock P/E: 32.0, above the industry average P/E of 26.5, indicating a premium valuation.
- Market Capitalization: ₹874 crore.
Despite a temporary decline in profit, RACL Geartech’s strategic expansion and new partnerships are expected to drive future revenue growth.
Competitive Landscape
RACL Geartech operates in a highly competitive market, with notable industry rivals such as:
- JTEKT India
- Hi-Tech Gears
- ZF Steering Gear (India)
- HIM Teknoforge
- Bharat Gears
- Gajra Bevel Gears
- Samvardhana Motherson International Ltd.
With its new technological collaborations and increasing focus on electric mobility, RACL is positioning itself as a key player in the EV and power steering component segment.
Market Outlook: What Lies Ahead?
The auto ancillary sector in India is witnessing rapid growth, driven by:
✔️ Global demand for high-precision automotive components
✔️ The rise of electric and autonomous vehicles
✔️ Government incentives for automotive innovation (BNCAP and PLI schemes)
Growth Projections
- The Indian auto component industry is expected to grow at a CAGR of 10.67% until 2029.
- The global automotive components market is projected to expand at a CAGR of 6.6% until 2032.
However, rising raw material costs and fluctuating demand pose challenges. Companies like RACL Geartech, which invest in advanced technology and global collaborations, are best positioned to capitalize on these trends.
Valuation & Investment Potential
🔹 Book Value: ₹199
🔹 Dividend Yield: 0.18%
🔹 Return on Capital Employed (ROCE): 18.2%
🔹 Return on Equity (ROE): 22.0%
🔹 Intrinsic Value: ₹553
🔹 Debt: ₹312 crore
With a PEG ratio of 1.00, RACL Geartech is considered fairly valued relative to its growth potential. While its P/E ratio of 32.0 is higher than the industry average of 26.5, its strategic partnerships and expansion into North America make it an attractive investment for long-term investors.
Conclusion: A Game-Changing Partnership for RACL Geartech
The RACL-ZF Rane partnership marks a turning point for RACL Geartech as it steps into the high-growth Electric Power Steering market. By aligning with a global automotive technology giant, RACL is well-positioned to:
✅ Expand its international presence
✅ Strengthen its technological capabilities
✅ Drive long-term revenue growth
While short-term financial fluctuations exist, RACL’s strategic direction and innovation-driven approach make it a strong player in the evolving auto ancillary industry.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.