Management’s Perspective

Dear Shareholders,

The fiscal year 2022-23 presented a dynamic economic landscape characterized by various challenges. Several macroeconomic headwinds such as elevated inflation and supply chain disruptions impeded the growth of the global economy.

Despite headwinds, FY23 was one of our best years in terms of performance and value creation. Our cash accruals were H 103.48 crore. The capacity utilisation rate for the year stood at 71.32%. Net debt has been reduced from H 290 crores to H 225 crores. As a result, the debt-to-equity ratio is 0.87. In addition, our working capital cycle was also reduced, taking into account client credit and procurement requirements, thus bolstering our cash flow.

Knowledge

We employ specialised manufacturing techniques to create prototypes and assist our customers in reducing the time to market for innovative product ideas. We are also continuously searching for methods to increase our production efficiency, and we have recently implemented a number of automated technologies to assist us in this endeavour.

We have always relied on innovation to propel the Company forward. It is a never ending adventure of growing better every day that we treasure. Innovation has been ingrained in our DNA since its inception, driving us to constantly seek new ideas and solutions. This relentless pursuit of improvement fuels our passion and ensures that we stay at the forefront of our industry.

We continue to focus on building new and innovative products that cater to a wide range of downstream industries to expand our value proposition and create long-term value for our customers throughout their operational processes. Through our focus on development, we have successfully designed over 6200 laminations and numerous machine components.

Progress

In our 40 years of existence, we have steadily built a solid foundation for expansion and our manufacturing operations are at the core of our growth strategy. Our manufacturing operations have consistently delivered high-quality products, allowing us to establish a strong reputation in the industry. With this solid foundation, we are now well-positioned to explore new markets and seize opportunities for further growth.

In FY23, we made a significant capital expenditure of H 107 crore, a testament to our commitment to enhancing our production capabilities. Out of the total approved capex of H 467 crore, we have incurred H 244 crore upto 31st March 2023 and the balance will be incurred as per our capex schedule.

We continue to focus on developing components for new products such as Pumped Hydro, Compact hydro power, marine generators and BLDC Motors that cater to a wide range of downstream industries and forayed into fabrication and machining to service diverse industries. In addition, development and approvals of our Railway business is progressing well.

Impact

Our strategic diversification in manufacturing capabilities has successfully broadened our market reach and strengthened our ability to meet the specific needs of our customers. In addition to maintaining consistent growth with our existing capacities, the upcoming facilities will generate substantial value creation. These advanced facilities are expected to bring about a notable decrease in overhead and direct labour costs, ultimately enhancing our cost efficiencies.

In parallel, our export order book is witnessing an unprecedented surge, surpassing all previous records in recent history, potentially even the past decade. This remarkable growth is primarily attributed to the railways and the mining industry. These sectors are presently undergoing substantial transformation, modernisation, and upgradation initiatives.

Additionally, due to robust order flows from both international and domestic markets, our sales for FY23 amounted to 36297 MT, resulting in H 747.48 crores domestic revenue and H 370.51 crores export revenue, setting a new record for profitability.

Given this favourable market environment, we foresee a consistent and substantial increase in orders for our export business in the foreseeable future. The strong demand we are experiencing in these regions reflects the continuous progress in the industry and the growing requirement for state-of-the-art solutions.

Emerging Opportunities

The government’s initiative to fortify the nation’s infrastructure has led to a substantial increase of 37.40% in capital expenditure as per Union Budget 2023-24.

The railway infrastructure sector has received a substantial allocation of H 2.41 trillion, with a focus on the development of the Vande Bharat Express 2.0 with further enhancements. The government intends to improve the cargo loading capacity of Indian Railways to 3,000 million tonnes by 2027, with the Dedicated Freight Corridor playing a vital role in realizing this objective.

In line with the nation’s ambitious goal of achieving net zero emissions by 2070, the government has announced several key measures to support the electric vehicles (EVs) industry. The Indian government is also enthusiastic about this sector and is creating demand for EVs through the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme. These present more business opportunities for us.

Renewable energy sources such as wind power, hydroelectricity, and pumped hydro storage, are gaining momentum, with a notable increase in adoption and investment. Additionally, the industrial power requirements are also witnessing strong growth.

Our expertise and commitment to sustainability enable us to make a valuable contribution to the renewable energy landscape, strengthening our position in this thriving industry. This presents substantial opportunities for us to engage in the green energy sector to capitalise on the expanding market.

The implementation of energy conservation norms IE-3 for electrical motors has also thrown open the door of a huge replacement market for the Company.

The Indian economy’s growth prospects are encouraging, supported by favourable conditions, government policies, and increased budgetary allocations. Strong play of ‘China-plus- one’ in machined components contribute to growth of our Machining business. These factors are expected to bolster the development of robust railway systems, enhanced connectivity, efficient mobility of goods and people as well as job creation, and acting as long-term tailwinds for our business growth.

Way Forward

I am pleased to share that our expansion efforts are right on track, and we are eagerly anticipating the installation of new machines and the completion of this phase by the end of FY24. Looking ahead, the demand outlook for FY24 remains highly promising, particularly in key segments such as railways and power generation. Additionally, we are excited about the new business opportunities that lie ahead, particularly in automotive, power generation and railways, which are expected to significantly contribute to our growth starting this year. Our order book forecast is a testament to our positive trajectory, standing strong at an impressive H 823 crore.

In conclusion, we would like to thank all our stakeholders and the Board, for their continued support and being part of our journey of growth. We look forward to another exciting year ahead.

Warm Regards,

Sharad B Pitti

Chairman & Managing Director

Akshay S Pitti

Vice Chairman & Managing Director