Our Manufacturing Unit at Pune
Premier's plant at Chinchwad, Pune

Investors Management Discussion & Analysis

Management Discussion & Analysis

The Company operates in two reportable segments: Engineering and Automotive. The Engineering segment has two activities: CNC Machines and Engineering. The Automotive segment consists of Light Commercial and Sports Utility Vehicles.

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Industry Structure & Outlook

The year 2012-13 was marked by global uncertainties and slowdown in the Indian economy. The suto sector has shown much lower growth causing auto ancillaries to taper down capital investment during the year. This had an adverse impact on CNC gear machine sales. The Company’s CNC machine business was also adversely affected due to a paucity of orders and deferred capital investment programmes by Railways, PSUs and large private sector customers. The uncertain business scenario is likely to continue in 2013-14 due to lack of clarity in government policies and challenging business environment.

Operations

During the year, the division sold 42 CNC machines at an average value of Rs. 175 lakh. While the Company continues to receive orders from BHEL, Railways, automobile manufacturers and auto ancillaries locally, it is exploring sales tie-ups with dealers in countries such as USA, Brazil, Germany, Italy and Turkey in order to achieve growth in business.

The Design Centre at Bengaluru continues to undertake new product development and value engineering activity, which are vital for growth in CNC machine business. Quality improvement initiatives are undertaken on continuous basis and the norms adhered to are in line with market demand. The Company’s manufacturing facilities are ISO 9001-2008 certified.

Product Development

    The following products were developed during the year :

  • CNC Gear Hobbing Machine – Model PHC Compact Version, with Tailstock as Servo Axis (7 th Axis), Ring type Autoloader
  • CNC Gear Hobbing Machine – Model PHA 250 EGB, with Hob Head Swivel Servo Axis (6th Axis), with Tailstock as Servo Axis (7th Axis)
  • CNC VTL Machine – Model PTC, developed with continuous C Axis
  • CNC Vertical Machining Centre – Model PVM 65, totally new design
  • Special Purpose Machine – Model SPM, totally new design suitable for Connecting Rod Boring Operation
Business Strategy
  • Targeting new customers in new geographic segments : USA, Brazil, Turkey
  • Rationalisation of existing product portfolio
  • Technological improvement in gear cutting machines to offer better solutions to customers and face growing international competition
Opportunities
  • Expected long-term growth in the auto and auto ancillary sector
  • Modernisation plans and new projects in Defence and Railways
  • Export potential
Threats, Risks and Concerns
  • Uncertain government policies
  • Sluggish market conditions
  • Rupee-Dollar devaluation
  • Competition from Taiwanese/Chinese machines

Industry Structure and Outlook

This business serves the general engineering and wind mill turbine sectors. Although there is a good scope for rapid growth in renewable energy, the wind mill turbine sector suffered a setback during the year due to uncertain government policies. This had an adverse impact on the wind mill turbine component business during the year.

Operations
  • The Heavy Engineering Division mainly manufactures and supplies windmill turbine components for various customers such as Wind World India Ltd and Regen Powertech. The Company has also commenced exports to Largerwey Wind of Netherlands.

    This division has also successfully developed and is supplying metro bogie chassis frames to BEML. In fact, the Company is the only approved source in India by Delhi Metro Rail Corporation for metro chassis frames.

    The manufacturing lines in heavy engineering business are flexible and can be utilised for alternate products and product mix. The manufacturing facilities are ISO 9001 certified.
Product Development
  • Six new components requiring precision fabrication, machining and painting for windmill generator
  • Wind turbine tower for World Wind India Ltd.
  • Wind turbine steel and forging parts for 2.5 MW capacity for export to Largerwey Wind, Netherlands
  • Crusher frames required in mining sector for Sandvik mining equipment division
  • SGI parts (turbine parts) such as Hub and Main frame for 1.25 MW turbine
Business Strategy

While the Company is well established in the Windmill Turbine Components business, the management is in the process of increasing its focus on other sectors such as infrastructure, power, mining equipments, railways and defence.

Quality


  • The manufacturing facility is ISO 9001 – 2008 certified for Quality Management System. There is an in-house inspections facility with state-of-the-art imported equipment like unique 3D co-ordinate measuring machine of size 4000 x 3000 x 2000 mm.
Opportunities

  • The wind energy sector offers strong opportunities for business growth due to global thrust on renewable energy. Due to the Company’s high quality standards, new windmill generator manufacturers are approaching it to develop their components.
  • The Government of India proposes to double the renewable energy capacity in the country from the present 25,000 MW to 55,000 MW by the year 2017.
  • The other sectors such as infrastructure, power, mining, defence and railways are also expected to grow rapidly in the next five years.
Threats, Risks and Concerns
  • Risk of revenue loss and profitability due to non-utilisation of equipment in the short-term if a customer cancels an order.
  • High dependence on the wind energy sector business. However, the management is in the process of diversifying the business to other industries.
  • Slowdown in the economy affecting infrastructural growth.

Industry Structure and Outlook

There has been slowdown in passenger car market with minus 4.26% negative growth on year-on-year basis due to the general economic slowdown. However, the utility vehicle market has grown by 52%, but the base of utility vehicle market is very low (3.70 lakh vehicles) as compared to total passenger vehicle base (32 lakh vehicles). It is expected that in the current year, passenger car market will continue to decline due to general economic slowdown, high interest rate, etc., but utility vehicle market may continue to grow.

Operations
  • During the year the Company introduced the 1.3 Ltr CRDi4 diesel engine on the RiO vehicle. This state-of-the-art engine is being procured from FIAT India.
  • With this engine, the Premier RiO meets the Bharat Stage IV norms including On-Board Diagnostic-II (OBD-II).
  • Now Premier RiO is available in petrol and diesel across India.
  • During the year, 20 new dealers were added, taking total dealership to 64 across India.
  • The Company also appointed 31 Premier Authorised Service Stations (PASS) to provide better service and spares network in the market.
Product Development


  • During the year under review, the 1.3 Ltr CRDi4 diesel engine manufactured by FIAT was fully integrated and homologated for the Premier RiO vehicle including OBD-II.
Opportunities


  • The utility vehicle market continues to grow even in the overall economic slowdown and sluggish passenger vehicle market.
Threats, Risks and Concerns
  • Due to devaluation of the rupee verses the US dollar and the strengthening of the Chinese RMB, material cost has gone up, as many items used in the Premier RiO are imported from China.
  • Competition in compact SUV’s is increasing as all manufacturers including multinationals are launching their small SUV’s.

The Company’s industrial relations remained cordial and harmonious throughout the year. The overall manpower strength is 1446, including 91 managerial personnel. The Company has 382 engineers and technicians constituting 81% of the total officer strength. Recruitment of qualified personnel to improve human resources is an ongoing process.

Employee Training

    Employee training at all levels is a key priority. Corporate training and technical skill building programs were conducted during the year for our employees. The main focus of training this year was on hard skills and technical training.

    On an average, the cumulative man-days of training that took place during year was 600. Training highlights included Customer Service workshops for sales and marketing divisions, familiarisation on the new Euro IV - CRDi4 engine for RiO dealers, CNC and Electrical Systems training, Electrical Design workshops for the CNC Machines division and welding sessions for our Engineering Division employees.

    Some of the other trainings undertaken during this year were ISO awareness, Finance for Non-Finance executives and Statutory Compliance. This year there was a special focus on awareness sessions for Premier's women employees through the 'Women’s Empowerment' series. These ranged from debates to panel discussions and outbound retreats.

    Our officers were also nominated for numerous external seminars and certification programmes organised by IMTMA, BSE and the Indian Welding Society.

Employees Suggestion Scheme

The Premier employees suggestion scheme called 'i-Suggest' did very well this year with more than 200 suggestions received. Out of the total suggestions received, more than 50 were implemented and appreciated and resulted in a gross saving of approx Rs. 50,00,000/-

Affirmative Action Employment policy

    The Management follows an Affirmative Action Employment policy. Currently, in the officer cadre, 11% of our employee base comprises women. Keeping in line with the bill passed by Indian Parliament on Feb 26, 2013, the Company also has a Sexual Harassment Cell in place.

    In keeping with the Confederation of Indian Industry (CII) Code of Conduct for Affirmative Action, the Company has taken initiatives to increase the employability of the SC / ST category.

National Safety week

    During the National Safety week from March 4 to 11, 2013 training sessions on Industrial safety, how to prevent accidents, and ESI norms were held to educate our employees about safety norms and medical facilities available.

    In addition to the above, several health checks such as a bone density and blood sugar testing, heart disease prevention workshops for employees over 45 years of age were conducted.

Cautionary Statement : The Management Discussion and Analysis Report contains forward looking statements describing the Company’s projections and estimates. These are based on certain assumptions and expectations of future events. The Company cannot guarantee the realization of projections as the actual results may differ due to factors like prices of raw materials, demand-supply conditions, changes in government regulations, tax structures, etc. which are beyond the control of the Management. The Company assumes no responsibility in respect of forward looking statements which may undergo change on the basis of any subsequent developments, information or events.