Rane (Madras) Ltd. (RML) is revisiting its strategy and is looking to limit investment in its U.S. subsidiary as the planned goals could not be achieved, according to a top official.
RML had reported a loss of ₹34 crore for the fourth quarter of FY20. The company plans to ‘keep a close watch’ on its business performance over the next 12 months and take ‘appropriate’ decisions to safeguard the long-term interest of shareholders, said L. Ganesh, chairman, Rane Group, in a communication to shareholders.
In 2016, RML had acquired Rane Light Metal Castings America (earlier known as Rane Precision Die Casting) to establish a global manufacturing footprint. However, the desired results could not be achieved in the planned time frame.
The American subsidiary could secure only limited new business, which resulted in widening of losses and limiting the capacity to invest in operational improvements. Besides, COVID-19 also hampered its business fortunes, he said. Based on current projections, an impairment of ₹37.58 crore had been recognised for the fourth quarter of FY20.
Pointing out that the domestic business was affected due to the slowdown in the auto sector, he said export revenue had also declined. In the steering business, RML’s export order book remained ‘healthy’ and in the light metal casting products, the company was pursuing both new customers and new applications he said.
He added that it was difficult to predict the duration of the pandemic and the extent of the slowdown both in India and globally. The company anticipates significant decline in revenue this fiscal, he said.
RML’s reported for the fourth quarter includes an impairment of ₹37.58 crore compared with a profit of ₹9 crore a year earlier, following a decline in sales to Indian original equipment customers, international customers and in Indian aftermarket sales.
Total revenue for the period was ₹259 crore versus ₹356 crore.
“RML had a challenging year with a significant drop in sales on account of the demand environment in India and lower export volumes. Operational performance continued to improve in the steering and light metal casting business in India, helping partially offset the volume-related impact.
“COVID-19 has significantly affected the business and the company has drafted measures to minimise the impact. This includes a management salary reduction of 10-35% from junior to senior level employees, respectively,” he said.