Management Discussion & Analysis
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The Company operates in two reportable segments: Engineering and Automotive. The Engineering segment has two activities: CNC Machines and Heavy Engineering. The Automotive segment consists of Light Commercial and Sports Utility Vehicles.
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| CNC Machines Division |
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| Industry Stucture & Outlook |
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| The Auto sector has shown much lower growth during this year causing auto ancillaries to taper down their capital investment in the year. The Government PSU and Infrastructure sector continued their buying pattern throughout the year. The scenario for 2012-13 is likely to be very uncertain due to lack of clarity in Government policies. However, long term projects, especially modernization plans of Government Ordnance Factories appear to be on track that should give good support to the CNC Machine business. |
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| Operations |
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| During the year, the division sold 80 CNC machines at an average value of Rs.120 crs. as against 110 machines at an average of Rs.90 lacs in the previous year. During the year, the Company continued to receive orders from BHEL, L&T, Tata Motors, Graziano etc. |
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| In Sept. !11, the Company participated in the European Machine Tools exhibition (EMO) at Hannover, Germany and received a very encouraging response from the international market. The Company is finalizing selling arrangements with dealers in countries like USA, Brazil, Germany, Italy, Turkey etc. it is also working on some international projects for supply of machines. |
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| With its new Design Centre at Bangalore, new products development and value engineering activity is on fast track, it will be showcased at the IMTEX !13 exhibition in Bangalore. Production is being structured to shorten delivery times while the new design machines enhances !value for money" to the customer with reduced manufacturing and assembly time. |
| Quality improvement initiatives are on with standardization of suppliers, parts and processes. Stricter norms are followed looking at market demand. The Company has a world class, ISO 9001-2008 certified Company and it has world class manufacturing facilities. |
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| Product Development |
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| The following products were developed during the year: |
- CNC Vertical Machining Centre suitable for heavy duty applications
- CNC Heavy duty Horizontal Machining Centre with quill and W axis facility
- CNC Gear Hobbing Machines of 630 mm and 900 mm dia. developed with Electronic Gear Box to increase productivity
- CNC Heavy duty Gear Shaper suitable for internal gear shaping
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| Business Strategy |
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- Target ing new cus tomer s in new geographic segments
- Rationalization of existing product portfolio
- Increasing presence in CNC vertical machining centres through additional models for wider customer choice
- Technological improvement in gear cutting machines to offer better solutions to customers and face growing international competition
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| Opportunities |
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- Long term growth in the auto and auto ancillary sector
- Modernization plans and new projects in Defense and Railways
- Export potential especially in BRIC countries
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| Threats, Risks and Concerns |
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- Uncertain Government policies
- Sluggish market conditions
- Rupee-Dollar devaluation
- Threat from used Chinese machines
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| Industry Structure & Outlook |
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| This business serves the general engineering and wind mill sectors. There is a good scope for rapid growth due to the Government’s thrust on renewable energy. |
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| Operations |
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| The Engineering division mainly manufactures and supplies wind mill components for various customers like Enercon India and ReGen Powertech. This division has also developed Metro Rail Bogie frames (the only approved source in India by Delhi Metro Rail Corporation) for BEML and Gear Box Housings for Winergy Drive System India Pvt. Ltd, a Siemens affiliate. In 2011-12, this division achieved a 42% rise in turnover. |
| Nearly Rs.38 crs. were invested to further expand and de-bottleneck manufacturing lines. These lines are flexible and can be used for alternate products and productmix. The Company has a world class ISO 9001 certified manufacturing facility with the highest priority given to quality standards. |
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| Product Development |
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•Gear Box Housings for coal pulverizer mill for winergy
• Six new components requiring precision fabrication, machining & painting, have been developed for wind mill generators
• Wind turbine tower for Enercon India Ltd. |
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| Business Strategy |
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| The Company plans for a diversified customer base by adding at least 3 to 4 new customers every year. Discussion with leading global clients to manufacture wind turbine towers is in process. Apart from the wind energy sector there is also a focus on infrastructure, earth moving and power generation equipment. |
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| Quality |
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| The Engineering division has been ISO 9001 – 2008 certified for its Quality Management System in May 2011. It maintains high quality standards with a 100% inspection standard at multiple stages. There is an “in-house” inspection facility with “state-of-the-art” imported equipment. |
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| Oppertunities |
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• The wind energy sector offers strong opportunities for business growth due to the global thrust on renewable energy development. Due to the Company"s high quality standards, new wind mill generator manufacturers are approaching to develop their components. This is because major suppliers prefer to outsource components and assemblies instead of manufacturing them in-house.
• The infrastructure, power and earth moving equipment sectors are al l expected to grow rapidly in the next five years. |
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| Threats, Risks and Concerns |
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• Risk of revenue loss and profitability due to non-utilization of equipment for the short term, if a customer cancels an order.
• High dependence on the wind energy sector business . How ever, the Management is in the process of diversi fying the business to other industries.
• Slow down in economy af fect ing infrastructural growth. |
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| Industry Structure & Outlook |
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| During the year under review, the passenger car vehicle has grown by 2.2% due to general economy lowdown. But Utility Vehicle market has grown by 16% in India during this period. It is expected that Utility Vehicle market and SUV market will continue to grow as these markets at present are only 14 % of assenger vehicle market in India. |
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| Operations |
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| The RiO project is progressing smoothly. During the year, the Company introduced the refurbished new look RiO in the market and feedback received is encouraging. The Company has also introduced BS IV petrol version in the market during the year. |
After developing the dealer network in North and North-East, the Company is focusing on dealer development all over India and expects to have such national presence by the 3rd quarter of the current
year. The Company has also initiated the concept of Premier Authorised Service Station (PASS), which will help to have better network for service and spares to the customers. |
| The Company participated in Auto Expo in January, 2012 in Delhi, wherein RiO with new look, fitted with 1.3 Ltr. BS-IV Engine, was displayed. |
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| Product Development |
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| The Company is developing diesel BS IV compliant RiO with 1.3 Ltr state of art world class engine which is currently being used by leading car manufacturers to be supplied by FIAT. The integration and homologation process is in progress and expected to be completed shortly. |
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| Oppertunities |
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| In spite of slowdown in passenger vehicle,the SUV market continue to grow at the rate 16%. At present no compact SUV is available in the market. Indian Government continue to support small passenger vehicles by lower excise duty in this product segment. |
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| Threats, Risks and Concerns |
| The automobile industry is affected by general economy slow down and global competition. |
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| The Company`s Industrial relations remained cordial and harmonious throughout the year. The bargainable workmen have formed their own internal union. The overall manpower strength is 2062, including 583 managerial personnel. The Company has 417 engineers, technicians, constituting 72% of the total officer strength. Recruitment of qualified personnel to improve human resources is an on-going process. |
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Employee training at all levels is a key priority. Specific training and skill building programs, both in-house and external were conducted during the year including officers and workmen.
A cumulative number of 1391 employees have undergone learning and development this year. These programs included Train the Trainer workshops which was an initiative to form a stronger in-house faculty for training and empower them with various training techniques.
Some of the other trainings undertaken during this year were team building, SAP, communicat ion dynamics, business etiquette, design from manufacturing and assembly, 7 QC, gear testing, hydraulic balancing and ISO testing to name a few. Our officers were also nominated for numerous external training and certification programs organized by IMTMA, ICSI, SAPIndia, Deloitte, etc.
The Company re-launched a revamped version of its Performance Management system and extensive training was imparted to all the employees to familiarize them to the new system.
The employee suggestion scheme called “I-suggest” did very well this year with 201 suggestions received. Out of the total suggestions received 72 were implemented and resulted in a gross saving of approx Rs.57 lacs. A Lakhapati incentive scheme was announced this year wherein the top three suggestions won heavy monetary prizes upto 1 lac, which had a positive impact on employee morale and motivation.
The management follows an Affirmative Action Employment policy. Currently 8% of our employee base comprises of women, which is targeted to increase to 25% within the next 2 years. HR practices, as well as special personalized workshops were conducted for our women employees to empower them in the workplace. 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/ SC category. In the last 6 years the number of SC/ST employees increased by 5%.
During the National Safety week from 3rd March, 2012 to 11th March, 2012 training sessions were organized to educate our employees about general health and safety norms. In addition to the above, to create awareness on early disease detection, a health check-up camp was organized inhouse in collaboration with Sahayadri hospital for all workmen during March 2012.
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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.
Management Discussion & Analysis
