Swaraj Engines Ltd - Stock TechnoFunda Ideas

Swaraj Engines Ltd (1535 to 2244)

#SWARAJENG
Recommended on: 08-May-2022
Recommended Price: 1535
High since Rec: 2244
Highest Return: 46.19%
Date High Made: 04-July-2023

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Swaraj Engines Ltd.: A Leading Manufacturer of Diesel Engines for Swaraj Tractors

Swaraj Engines Ltd. (SEL) is a prominent company engaged in the manufacturing and supply of diesel engines for “Swaraj” tractors, which are produced by Mahindra & Mahindra Ltd. (M&M). With a strong track record since its commercial operations began in 1989-90, SEL has supplied over 1.3 million engines for fitment into “Swaraj” tractors.

History and Operations

Established in 1985 as a Joint Venture between Punjab Tractors Ltd. (PTL) and Kirloskar Engines, SEL was initially set up to manufacture engines for PTL. Over the years, the company has evolved and expanded its product offerings. Currently, SEL supplies five types of engines, ranging from 20 HP to 50 HP, to PTL. The company also manufactures high-tech engine components for Swaraj Mazda.

Acquisition and Merger

In 2007, Mahindra & Mahindra Ltd. (M&M) and Mahindra Holdings & Finance Ltd. (MHFL) acquired a majority stake in PTL, which further consolidated M&M’s equity holding in the company to 64.64%. Following the Scheme of Amalgamation, PTL was merged with M&M in 2008-09, leading to the transfer of PTL’s 33.2% shareholding in SEL to M&M.

Capacity Expansion

In 2022, SEL successfully completed the enhancement of its engine manufacturing capacity to 150,000 units per annum. This increased capacity puts the company in a favorable position to meet the growing demand in the tractor industry.

Robust Growth Drivers

Swaraj Engines (SEL) specializes in manufacturing and supplying diesel engines ranging from 22 HP to above 65 HP, as well as hi-tech engine components. The company’s promoters, Kirloskar Industries and Mahindra & Mahindra group, hold a combined stake of 52.13% as of March 2022. Currently, SEL has an engine manufacturing capacity of 150,000 units per annum.

Tractor Industry Overview

According to data from the Tractor Manufacturers Association (TMA), the tractor industry experienced a marginal decline of 0.43% in production and 1.73% in sales, including exports, in FY22. However, major players in the industry, such as Escorts, Mahindra & Mahindra, and Sonalika, reported significant volume sales growth in April 2022. This strong start to FY23 is supported by factors like successful Rabi harvesting, high demand for Indian wheat crop, and favorable monsoon forecasts by IMD and Skymet.

With a solid track record, enhanced capacity, positive industry outlook, and strong financial position, Swaraj Engines is well-positioned for sustained growth in the coming years. The company’s expertise in manufacturing diesel engines coupled with the favorable market conditions in the tractor industry make it an attractive investment opportunity for stakeholders.