### **Overview** Harsha Engineers International Limited (HEIL) is a leading Indian precision engineering company and the largest manufacturer of bearing cages in India’s organized sector, with a growing global footprint. Established in 1986, HEIL has evolved into a globally diversified player, serving the automotive, industrial, wind energy, railway, and aviation sectors. The company operates through two core segments: - **Engineering Solutions**: Precision bearing cages, bronze bushings, complex stamped components, welded assemblies, brass castings. - **Solar EPC & O&M**: Through its subsidiary Harsha Abakus Solar Private Limited, offering turnkey photovoltaic solutions. HEIL operates manufacturing facilities in **Changodar & Moraiya (India), Changshu (China), and Ghimbav, Brasov (Romania)**, enabling it to serve over 25 countries across five continents. It has in-house capabilities in tool design, product development, and precision manufacturing, positioning it as a strategic partner to the top six global bearing manufacturers. --- ### **Strategic Position & Market Positioning** - **Global Market Share**: - ~6.5% in the global organized market for brass, steel, and polyamide bearing cages. - ~50–60% in India’s organized bearing cage market—dominant position with minimal competition. - Second-largest supplier globally in the outsourced cage segment, after Japan’s NKC. - **Customer Diversification**: Supplies all top six global bearing makers (e.g., SKF, Schaeffler, Timken), though ~70–75% of standalone revenue comes from three key customers, creating some concentration risk. - **Geographic Reach**: 42.7% of standalone revenue is export-oriented (Europe: 20–22%, US: 7–8%, China: 7–8%, remainder from Japan and Southeast Asia). --- ### **Growth Drivers & Strategic Initiatives** #### **1. Bronze Bushings: Emerging Core Growth Engine** - Achieved **INR 100+ crores in FY25 turnover**, growing rapidly due to industry shift from traditional bearings to bushing-based gearboxes, particularly in wind energy. - **H1 FY26 sales: INR 55 crores** (+25% YoY), with full-year guidance of **~30% growth**. - **Wind Energy Focus**: Sole/primary Indian supplier of bronze bushings for planetary axles in wind turbines; produces bushes with outer diameters of 200–600 mm and heights up to 800 mm. - Positioned as a beneficiary of **import substitution** and **China+1 sourcing**, with global MNCs shifting supply chains to India. #### **2. Large-Size Bearing Cages & Industrial Diversification** - Core product line generating **INR 117 crores in FY25**, now projected to grow at **≥30% in FY26**. - Demand rising for **large-diameter cages (up to 2,000 mm)** used in wind, mining, and rail sectors. - Secured **major sourcing contract** expected to generate peak annual revenue of **INR 117 crores**, with incremental sales beginning in Q4 FY26. - Diversified away from auto cyclicality—**~50% of revenue now comes from industrial and non-automotive sectors**. #### **3. Greenfield Expansion & Capacity Augmentation** - **Harsha Engineers Advantek Limited (HEAL)**: Wholly-owned subsidiary established in FY23–24 to execute a **₹250 crore greenfield project** near Bavla, Gujarat. - **Phase-1 commissioned on June 26, 2025**, producing bushings, large steel bearing cages, and stamping components. - Total expected investment: **₹300 crores over 3 years**; capital expenditure in FY24: ₹51+ crores. - Annual bushing capacity: **INR 120 crores**, with modular scale-up linked to demand. - This expansion enables HEIL to capitalize on increased outsourcing and large-component demand. --- ### **Regional Performance & Subsidiary Outlook** #### **India (HEIL & HEAL)** - **Q1 FY26**: 5% top-line growth, 6.5% Adj. EBITDA growth QoQ (flat QoQ due to seasonality). - **Exports recovering**: Early signs of demand rebound in Europe and China. - Benefits from **China+1 strategy**, customer capex expansions (e.g., NBC Bearings), and import substitution. - Expect **low-teens growth in India business**, **>10% consolidated top-line growth in FY26**, with stronger bottom-line growth. #### **China** - Returned to profitability in Q4 FY24; performance improving in FY25–26. - Target EBITDA margin: **12–13% in normal operating years**. - Contributes positively to consolidated earnings. #### **Romania** - Faces structural challenges: weak European industrial demand, high energy costs, and a low-margin product mix (80% semi-finished castings). - **Loss of INR 5.7 crores in H1 FY26** due to low utilization; expected to be **capped at manageable levels**. - Strategic shift underway: increasing bearing cage output from **15% to >30%** of production. - Targeted to reach **cash breakeven within FY26–27**, supported by improved product mix and new European customer orders. #### **Solar EPC Division** - Legacy, **non-core segment**, contributing **5–7% of revenue** historically. - Installed **>500 MW of solar capacity** across India (as of Mar 2024). - Focused on **smaller ground-mounted (4–5 MW) and rooftop projects** to limit working capital pressure. - Operates with **limited capital and management bandwidth**, but continues to deliver **mid-single-digit margins**. - Viewed as self-sustaining, not a key growth driver. --- ### **Industry Trends & Tailwinds** #### **1. China+One Strategy** - Major global firms are reshoring or diversifying manufacturing to India. - HEIL is a **preferred Indian partner** due to technical capabilities, in-house tooling, and quality alignment. - Already seeing **increased order inflows** from Japanese, European, and US customers shifting production to India. #### **2. Growth in Wind Energy & Rail Modernization** - Rising wind investments in Europe benefit HEIL’s bushing and large cage business. - Romania plant strategically located to serve European OEMs. - Domestic tailwinds from **Indian Railways expansion (Vande Bharat, Dedicated Freight Corridor)** and **private vehicle growth**. #### **3. Electric Vehicle (EV) Transition** - Developing **EV-specific components**: lightweight polyamide and steel bearing cages, precision-stamped parts. - Not exposed to ICE decline (does **not** make needle bearing cages). - Investments in toolroom, cleaning systems, and advanced mold development to support EV demand. - Expected higher realizations due to **technical complexity and low-noise, low-vibration designs**. --- ### **Operational Strengths** - **In-House Capabilities**: Over 250 engineers, in-house toolroom with 197+ skilled personnel, and advanced design software (Pro E, Hyperworks, AutoCAD). - **Precision Infrastructure**: 22 manufacturing facilities, 22 warehouses, CMMs, CNC machines, EDM, and multi-axis machining centers. - **Innovation Pipeline**: Developed **>1,200 new products in the past 3 years**, added **300+ SKUs in FY23–24 alone**. - Certifications: **TPM-certified** (Japan Equipment Maintenance Association), **Six Sigma** since 2009.