Frontier Springs manufactures coil and leaf springs.
It is a market leader in this niche segment and supplies to prominent customers such as Indian railways, BHEL, BEML, etc. Moreover, Siemens Germany approved its manufacturing facilities for use in its switch gears production.
Management aims to focus on exports to increase future profitability.
The company reported growing operating profits on growing revenues in the last five years, although this has taken a slight dip in the last twelve months (see below) – with operating profits of over 5cr on revenues of over 35cr.  It operated with a modest net debt load as at 31st March, 2012.
The business is largely dependent on the capital investment cycle for its revenues, which is adversely impacted by high interest rates (such as now).
It is also exposed to increasing costs of steel, its primary raw material.  This is, in turn, dependent on the global steel demand/supply scenario.  Management is attempting to enter long-term supply contracts with vendors to mitigate this risk.
Further, there has been an increase in competition, which is putting downward pressure on selling prices.  Its easing would depend on the quality of the company’s products/services as well as demand growth and the creation of additional capacity in the industry.
The company generally imports its plant and machinery (albeit infrequently) and is therefore adversely impacted by a weakening INR – as currently.
By: AI