Fiem Industries was originally established as Rahul Auto Pvt Ltd. on February 6, 1989. The company is a manufacturer of automotive lighting and signaling equipment. The major business of Fiem industries comes from 2 wheeler segment of the automobile industry. Fiem has a diversified product portfolio from headlamps, signaling lamps, rear view mirrors, warning triangles rear fender assembly, tail lamps, roof lamps, wheel covers, frame assembly, mudguards to other plastic parts. Recently, Fiem industries ventured into LED luminaries for indoor and outdoor applications and Integrated Passenger Information Systems with LED display. Fiem has one wholly owned subsidiary – Fiem Industries Japan Co. Ltd. and one JV Company – Centro Ricerche Fiem Horustech SRL, Italy.
Key Milestones achieved
Below figure enlists the key milestones achieved by Fiem industries since its inception.
Over the couple of years, Fiem Industries has increased its exposure towards the LED segment mainly due to diversify its sources of revenues (automobile industry is highly characterized by its cyclical nature). Below chart provides further information regarding the segment break up over the period of two years.
Within the Auto segment, Fiem Industries has four sub-segments – Auto Lamps, Plastic moulded parts, rear view mirrors and others. Over the period of two years, Auto lamps contribution has declined slightly (change – 180bps). However, the contribution from the remaining segments has increased over the period.
Fiem industries auto segment product concentration is heavily focused towards the 2 wheeler segment, about 94.5% of the auto segment revenues in FY 2016 were from the 2 wheeler segment. In the auto segment, about 86.6% of the revenues are contributed by the OEMs, whereas the remaining comes from exports and replacement market.
The company operates in two divisions: Automotive components and LED. Automotive components constitute a major part of revenues for Fiem Industries.
Automotive Components: Within the automotive components, Fiem Industries manufactures automotive lighting and signaling equipment, rear view mirrors, plastic moulded parts and others.
1. Automotive lighting and signaling equipment: Fiem industries manufactures various types of headlamps, tail lamps, fog lamps, interior lamps and beacon lights for two-wheelers and four wheelers. The automotive light segment has registered a CAGR growth of 12.26% over FY 2011 – FY 2016. The company has over four decades of experience in the manufacturing of automotive lighting segment.
2. Rear View Mirrors: Fiem Industries operates various manufacturing plants in its units with all the in-house processes for designing – Mirror plate making, plastic housing, rod making and final assembly. The rear view mirrors have grown at a CAGR of 16.31% from FY 2011 to FY 2016. Below mentioned are the manufacturing facilities for rear view mirrors:
- Unit 1 – Kundli, Sonepat, Haryana
- Unit 2 – Hosur, Tamil Nadu
- Unit 5 – Hosur, Tamil Nadu
- Unit 6 – Nalagarh, Himachal Pradesh
3. Plastic Moulded Parts: Plastic moulding is a key part of automotive lamps and rear view mirrors, as they are required to make the finished good. The revenue contribution from this segment has witnessed a CAGR of 62.60% over the period FY 2011 to FY 2016. Fiem currently has over 450 latest injection moulding machines in their six plants, ranging from 50 tonnes to 1400 tonnes. These moulding machines are capable of making parts which weigh from 20 gms to 2.5 kgs. The company has two manufacturing facilities in Unit 2 – Hosur, Tamil Nadu and Unit 8- Tapukara, Rajasthan.
4. Others: This segment contributes less than 10% of the total revenues and includes fabrication items among others. The others segment has grown at a CAGR of 18.67% over the period FY 2011 to FY 2016. The company has full-fledged sheet metal fabrication facilities. Moreover, it even has Mudguard rolling plants to produce front and rear mudguards for 2 wheeler segments (esp. motorcycles and mopeds). The fabrication facilities are equipped with in-house processes like Presses (over 50 presses like hydraulic, double action deep draw, single action presses, etc.), pipe blending, zinc plating (blue/black passivation, yellow passivation), rolling plant, phosphating facilities and powder coating for base coat and top coat.
LED Division: FIEM industries recently diversified its business operation into the LED segment under two major product categories: LED luminaires for indoor & outdoor applications and Integrated Passenger Information Systems with LED display (for buses and railways). The company has in-house R&D and manufacturing facilities for LED products in Rai, Sonepat, Haryana. Fiem Industries only imports LED chips and electrical component and the remaining LED luminaires parts are manufactured by the company itself (even the most crucial part, i.e., LED Drivers).
1. LED Luminaires: The company manufactures numerous types of LED luminaires ranging from LED bulbs, LED tubes, LED ceiling lights, LED down lights, LED solar lanterns to LED torches. These products are used for variety of purposes mainly commercial, residential, factories, malls, etc. Moreover, Fiem industries even manufactures outdoor LED lights (like LED bay lights, LED street lights, LED sport lights, LED park lights, LED flood lights and Bollards). Outdoor LED lights are used for various applications like roads, highways, tunnels, open spaces in the building, hotels, Banquets, etc
LED Display Systems: Integrated Passenger Information System (with LED display) is an electronic information system that provides real-time information to the passengers. Fiem industries has played a key role in helping its partners deliver an effective solution by providing passenger relevant information in relevant locations along the bus routes. The company has received an approval from the Ministry of Railways to manufacture and supply this system (consisting of Train indication, Metro, overseas market, etc.)
Within the automotive segment the key clients of Fiem Industries are as follows:
- Two Wheeler: Honda, TVS, Suzuki, Yamaha, Eicher Royal Enfield, Mahindra, Harley Davidson, etc.
- Four Wheeler: Tata Motors, Force Motors, Honda Siel, GM, Hyundai, Daimler, Mahindra Reva, etc.
Key competitive advantages:
- Wide Customer base – Fiem Industries has a wide customer base that ranges from OEMs, replacement market to tie-ups with State government. Further, even the company’s exposure to exports has significantly increased over the couple of years – rather than only relying on the domestic part.
- Diversified revenue streams – Fiem Industries has a diversified revenue streams of automotive parts and LED lights. LED lighting is a growing area, mainly driven by the urbanization, and Fiem industries have been successful in leveraging this opportunity. Not only this reduces the business cyclicity (highly dominant in the automotive sector) but also lowers the overall risk to the security.
- In-house manufacturing facilities – Fiem Industries has in-house production facilities for almost all of its automotive parts & LED lights manufactured. Presence of in-house manufacturing facilities provides economies of scale and even brings in integration within the different capacities operating within the same plant.
- On path to achieve cost leadership – Fiem Industries has reduced its cost structure over the period by establishing manufacturing facilities as well as by improving their operational efficiency. In automotive industry, where the margins are supposed to be quite constrained, Fiem has set an exemplary example to continuously improving their margins over time.
Fiem Industries is an interesting company in the auto component space with an impressive list of clientele. It has made the right moves in terms of diversifying into LED segment and is well on its way to attain cost leadership. Prudent investor will do well to keep the following key considerations in mind about Fiem Industries