Increased Royalty Burden may Hit Wabco India’s Earnings Growth
and 26% for FY17 and FY18, respectively, and the 12-month consensus target price was ₹ 6,276.
The promoter of Wabco India holds 75% stake in the firm. Wabco India constitutes nearly 10% of the total revenues and 15% of the total operating profit of the parent company. The earnings growth of Wabco India depends on whether the rollout of new products will improve its content per vehicle.
The increase in royalty rate will turn the spotlight on the voting of minority shareholders, which hold 25% in Wabco India. The company requires a nod for the proposal from majority of this group of shareholders since it pertains to related party, that is the parent, in this case.