Discover the Hidden Gem in Small-Cap Stocks: NRB Bearings, the Unsung Hero of India's Future Mobility Trends

An Under-the-Radar Small-Cap Stock for Your 2025 Watchlist

Investing in small-cap stocks requires a keen eye for opportunities that others may overlook. Amidst the noise of the Indian stock market, certain gems hide beneath the surface, waiting to be discovered. One such stock that deserves your attention as you plan your 2025 investment strategy is NRB Bearings, a company that has quietly positioned itself at the heart of India’s transition to newer mobility solutions.

The State of India's EV Landscape: Challenges and Opportunities

The road to electrification in India has been anything but smooth, particularly in the passenger vehicle segment. The transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) has faced several roadblocks. One major hurdle has been the lack of widespread charging infrastructure, making it difficult for the shift to gain momentum.

While the Indian government has made efforts to support EV adoption, including offering subsidies, these measures have been curtailed before they could substantially drive the transition. This has opened up a space for hybrid vehicles, which are expected to outperform EV sales by the end of this decade, according to Maruti, the market leader in passenger vehicles.

This backdrop presents an interesting opportunity for investors: businesses that are EV-agnostic—those whose products can serve both electric and traditional vehicle segments—stand to benefit in the long run.

NRB Bearings: A Key Player in the Changing Mobility Landscape

NRB Bearings, an unassuming name in the world of small-cap stocks, is uniquely positioned to benefit from these shifting trends. The company specializes in the production of ball bearings, roller bearings, and precision friction solutions. Its products are crucial to various sectors, including automotive, railways, defense, aerospace, and agriculture.

Why NRB Bearings Stands Out

NRB Bearings is far from a niche player. Here's why it deserves a spot on your 2025 watchlist:

• Exclusive Supplier to Ola: The company is an exclusive supplier to Ola’s 2-wheeler factory, an essential player in India's burgeoning EV space.

• Massive Market Reach: More than 90% of vehicles on Indian roads rely on NRB Bearings' products. This includes vehicles in diverse sectors, from passenger cars to commercial vehicles and construction equipment.

• Market Leadership: With a 60% market share in its category, NRB Bearings is a dominant force in India’s bearing manufacturing industry.

• Diverse Client Base: The company's revenue is well-diversified, with no single customer representing more than 6-7% of total sales, significantly reducing customer concentration risk.

• Global Presence: NRB Bearings exports over 25% of its products to major markets, including Europe, America, Japan, and Korea. This broadens its revenue base and reduces its reliance on the Indian market.

Strength in Research and Development

One of NRB Bearings' core strengths lies in its research and development (R&D) capabilities. The company has an extensive product portfolio of over 3,000 designs, each tailored to meet the specific needs of its clients. This ability to customize products gives it a significant edge in sectors that demand precision and efficiency, such as aerospace, defense, and automotive.

As India’s mobility trends evolve, the company’s expansion into EV hybrid and EV-agnostic products positions it to tap into growing global demand. Several foreign OEMs have already shown interest in NRB’s innovative solutions, signaling the company’s strong potential for growth.

Tailwinds to Boost Growth

Several structural factors are poised to benefit NRB Bearings in the coming years:

• China Plus One Strategy: Amid ongoing trade tensions with China, many companies are shifting their supply chains to India, creating new opportunities for businesses like NRB Bearings.

• PLI Scheme and Localization Norms: The government’s initiatives, such as the Production Linked Incentive (PLI) scheme, aim to boost domestic manufacturing, which will directly benefit companies like NRB Bearings.

• Vehicle Scrappage Policy: The new policy aimed at removing older, unfit vehicles from Indian roads could further boost demand for NRB Bearings’ products in the automotive sector.

Despite these favorable trends, there are certain risks to consider. A potential slowdown in the auto sector could impact the company’s performance. Additionally, fluctuations in steel prices—its primary raw material—could affect margins, while its working capital-intensive nature could pose liquidity challenges.

Financial Health: Strong and Stable

NRB Bearings boasts strong financials, with key metrics that highlight its robust position:

• Return on Equity (RoE): 15%, signaling efficient use of equity.

• EBITDA Margin: 17.4% for FY24, indicating good operational efficiency.

• Debt to Equity Ratio: A low 0.2, suggesting the company is conservatively leveraged.

• Dividend Payout: Over 20% in FY24, demonstrating a commitment to rewarding shareholders.

A Stock to Watch in 2025

NRB Bearings may not be a household name, but its market leadership, innovative product offerings, and strategic positioning make it an intriguing option for those looking to invest in the evolving mobility sector. While there are risks, the company’s strong fundamentals, diversified customer base, and ability to adapt to industry changes suggest it could be well-placed for growth as India embraces new technologies and trends in mobility.

Investors looking for a small-cap stock with long-term growth potential should consider adding NRB Bearings to their watchlist for 2025. Though not a direct EV play, the company’s diversified portfolio and innovation make it a solid bet as mobility trends continue to shift globally.

This article is not a stock recommendation but aims to provide an informative overview of a potential investment opportunity. Always conduct thorough research before making any investment decisions.