RACL Geartech- A Microcap Gem

RACL Geartech- A Microcap Gem                                                                  


Market Cap- 150 cr

Industry- Auto Ancilliary

Company Overview

RACL Geartech Limited (“RACL or Company”) is one of India’s leading automotive gear manufacturers. The Company is engaged in the Business of manufacturing of Automotive Component Transmission Gears and Shafts, Sub-assemblies, Precision Machined Parts and Industrial Components.

The company is expanding into sub-assemblies, industrial gears & circuit breakers.

Established in 1989, (earlier Ranuq Auto) have wide application in 2 wheelers, tractors, Passenger Vehicles, Commercial Vehicles, ATV & Cargo Vehicles.

Broadening its horizon to meet the different industrial demands, RACL has stretched out its production capacity to include innovatively designed assortment of sub-assemblies, Industrial Gears for Electrical Switch Gears & Circuit Breakers, Winches & Cranes.

 The strength to manufacture world class products is an outcome of the dedication and expertise of a team of 350 employees who work efficiently by blending skills with perseverance. It is this combination of technology and manpower that has fetched for RACL Geartech a credible standing both in domestic and overseas market where it is revered for presenting  ultra-modern automotive components.

Revenue Contribution

60% of topline is contributed by 2 wheelers & tractors.

70% of topline is comes from exports.

Luxury Segment

The company is mainly in niche luxury market in Europe which is very difficult to break through especially for the size of RACL, this speaks volumes about the management capabilities and technological advancements in its manufacturing units.

EV ready

RACL is technologically ready for EV disruption in future. Gear components will be used in Electric Vehicles. The main components used in EV will be gear components & shafts, RACL is installing required machinery & required technology for the same.


RACL has already developed products and technology. Quality & margins will improve for BS VI since vehicles sold are at a premium.

Manufacturing Units

One of the state-of-the-art manufacturing units of the company is located in Gajraula and the other division has been set up in Noida.  

The first manufacturing unit in Gajraula is on the national highway NH-24, around 100 kms from New Delhi while the second one in Noida is situated 15 kms from Delhi in state-of- the- art Industrial hub.

Scope of expansion– The existing manufacturing units have surplus land of 24 acres (1 lac sq meters) which will aid RACL to future growth expansion without incurring any major capex into land.

Investment Rationale

High end luxury OEMs as their clientele– RACL has BMW, KUBOTA, DANA, LAMBORGINI in international markets & Honda, Yamaha, KTM & PIAGGIO in domestic markets. Such marquee clients for a company with a market cap of just 150 cr speaks volumes of management quality, technological edge & strong execution capabilities. In 2 wheelers RACL is mainly present in high end racing bikes. 

Focus on higher margins International business- RACL’s concisions shift from domestic to International OEMs has insured higher margins & lesser competition which it would face in domestic auto industry. RACL generates Operating Margins of 20% plus which is very high for an Auto Component company. 70% of revenues generated from exports. 

Future Ready- RACL has already procured machinery and technology for BS6 & EV, which makes the company to smoothly transition into the future without disrupting its growth.

Capex- RACL is doing a 50 cr capex to venture into new segments ie EV, industrial gears for electrical switch gears, circuit breakers, winches and cranes. Auto Ancillary companies can do an Asset Turnover of 3-4x on fixed asset. The new capex can potentially have a peak revenue of 200-250 cr. RACL has 25 acres of surplus land within its existing plants, which further facilitates future capex without adding significant leverage to balance sheet.

Sole Supplier- An Auto Component with a market cap of just 150 cr is sole supplier of gear components to most of its Global  clients, which speak volumes of management credibility, product quality & technological edge.

New Initiatives- Entered into an agreement with a European 4 wheeler player as a Chassis Supplier. Tie up with domestic 2 wheeler player for gear components.


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  • RACL has solid & profitable growth track record in last 10 years. The new capex of 50 crores will aid sales growth going forward.
  • The industry mix is in huge favour for RACL. The company has major contribution (80% of revenues) from 2wheeler sports bikes, Tractors & Recreational Vehicles (ATV & RTV), these segments logically will be least disrupted by EV.
  • FY25 Vision- At peak utilization of existing & fresh capacity, RACL can generate revenues of 450-500 cr in next 4 years and maintaining existing Operating Margins of 20% plus.
  • RACL can annually generate 30-35 cr of Cash Flow from Operations, which means current debt can be repaid in 2-3 years and company can be debt free by FY23.
  • By FY24-25RACL can do EBIDTA of 80-100 cr (EBIDTA margins 20%) & PAT 50-60 cr (PAT margins 10%). At cmp 135 RACL is available at a highly attractive valuations 3x

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