With about 65 per cent market share in the supply of springs for commercial vehicles (CVs), Jamna Auto (JAI) has been a beneficiary of the uptick in CV sales since the turnaround of the domestic auto industry in mid-2009.

JAI, which counts Tata Motors, Ashok Leyland, Eicher, AMW and Volvo among its clients, has seen its shares return 121 per cent in the last one year. This is attributable to, one, the shift in focus during 2009-10 to the high-margin parabolic springs, which have better load carrying capacity and are relatively lighter than leaf springs.

The company has started supply of parabolic springs to Tata Motors in 2010. From about 8 per cent of total revenues, the contribution from these springs is expected to go up to 20 per cent by 2012. Two, to move up the value chain and become a complete suspension system solutions provider, JAI has introduced lift axles and bogie suspensions during last year. This will enhance efficiency of CVs covering long distances. It is also making air suspension systems, which are used in low floor buses in cities to give better ride comfort.

Both these moves will better realizations and improve margins over the medium-term. Three, to de-risk from the domestic OE industry, JAI has announced entering into the OE segment in Europe and Japan. It is also setting up a dedicated plant for OE exports at Gwalior.

While these three moves put the company in a sweet spot, over the near-term, a moderation in CV sales due to higher interest rates may be a threat.

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