SAFE HARBOUR STATEMENT
Investors are cautioned that this discussion contains statements that involve risks anduncertainties. When used in this discussion, anticipate, believe,estimate, intend, will and expect andother similar expressions as they relate to the Company or its business are intended toidentify such forward looking statements. The Company undertakes no obligations topublicly update or revise any forward looking statements, whether as a result of newinformation, future events, or otherwise. Actual results, performances or achievementscould differ materially from those expressed or implied in such statements. Therefore as amatter of caution, undue reliance on forward looking statements should not be made. Thefollowing discussion and analysis should be read in conjunction with the Companysfinancial statements included herein and notes thereto.
According to World Economic Forum, after a number of difficult years, a recovery fromthe economic crisis is tentatively emerging, although it has been very unequallydistributed: much of the developing world is still seeing relatively strong growth,despite some risk of overheating, while most advanced economies continue to experiencesluggish recovery, persistent unemployment and financial vulnerability, with no clearhorizon for improvement. In addition, rising commodity prices are eroding the purchasingpower of consumers and are likely to slow the pace of recovery. Such uncertainties arebeing exacerbated by growing concerns about the sustainability of public debt amidst slowgrowth of some advanced economies. The damage put the very viability of the Euro intoquestion, and further undermined the US dollars value and its place as theworlds preferred reserve currency.
According to the Reserve Bank of Indias Monetary Policy Statement 2012-13, at theglobal level, concerns about a crisis have abated somewhat since January 2012. The USeconomy continues to show signs of modest recovery. Large scale liquidity infusions by theEuropean Central Bank (ECB) have significantly reduced stress in the global financialmarkets. However, recent developments, for example in Spain, indicate that the euro areasovereign debt problem will continue to weigh on the global economy. Growth risks havecropped up in emerging and developing economies. And, amidst all these, crude oil priceshave risen by about 10% since January and show signs of persisting at current levels.
Domestically, the state of the economy is a matter of growing concern. Though inflationhas moderated in recent months, it remains sticky and above the tolerance level, even asgrowth has slowed. Significantly, these trends are occurring in a situation in whichconcerns over the fiscal deficit, the current account deficit and deteriorating assetquality loom large. In this context, the challenge for monetary policy is to maintain itsvigil on controlling inflation while being sensitive to risks to growth and othervulnerabilities.
The global manufacturing Purchasing Managers Index (PMI) for March 2012 moderatedto 54.7 from 56.6 in February 2012, reflecting lower new orders.
The advance estimate of the GDP growth of 6.9 per cent for 2011-12 by the CentralStatistics Office is close to the Reserve Banks baseline projection of 7.0 per cent.
Going forward into 2012-13, assuming a normal monsoon, agricultural growth could stayclose to the trend level. Industry is expected to perform better than in last year asleading indicators of industry suggest a turnaround in IIP growth. The global outlook alsolooks slightly better than expected earlier. Overall, the domestic growth outlook for2012-13 looks a little better than in 2011-12. Accordingly, the baseline GDP growth for2012-13 is projected at 7.3 per cent.
OVERVIEW, STRUCTURE & DEVELOPMENT
Agriculture has been the mainstay of Indias economy with 60% of the populationderiving their sustenance from it.
In the recent past, the sector has recorded a growth of about 5.4% per annum withsubstantial increase in plan allocations and capital formation in the sector withconcessional interest rates to farmers, debt relief for farmers, higher support prices forkey crops and accelerated irrigation benefit programs declared by Government of India inits recent budget. Robust rural liquidity and good monsoons always play a major role inincreasing the demand for tractors and hence cyclical downturns are often witnessed. TheIndian tractor market is primarily a medium HP market; however, there is a gradual shifttowards higher HP segments.
Dynamatic Hydraulics which designs, develops, manufactures and marketsvarious Hydraulic pumps, motors, hitch control valves and related products for Indian andoverseas tractor markets, is the largest manufacturer of Hydraulic pumps and has sustainedits market leadership as one of the worlds largest Hydraulic Gear Pumps makers forthe last 35 years and is focused on becoming the numero uno.
Dynamatic Hydraulics designs and manufactures cast iron pumps for theconstruction equipment segment. As the earth moving and construction equipment sector isgrowing steadily in India, the focus will be on these cast iron pumps timelysupplies. The plant has planned to increase the production of these pumps in a steadymanner. Marketing the cast iron pumps designed and validated in our Swindon plant has alsobeen expedited. These pumps have the advantage in pressure ratings, higher flow andcompetitive prices over the competitors pumps.
Dynamatic Hydraulics, besides the above segments, is seriously involved inmanufacturing and supplying of pumps for Industrial applications such as machine tools andpower packs. This sector demands variety to meet varied applications. Volumes involved arerelatively low but the returns are appreciable.
Hitch control Valves and the Rock Shaft Assemblies
The tractor hydraulics includes, besides pumps, the hitch control valves and thecomplete rock shaft assemblies. The filters and mobile valves are the other elements. Itis necessary for Dynamatic Hydraulics to increase its market share in theseareas to consolidate its position as a hydraulics company. As the basket of productsbecomes larger, the Company will have an advantage in selection of strategic customers andincreasing its turnover.
The coming years will be focussed on increasing the infrastructure required in theproduction of hitch control valves and rockshaft assemblies. The interest shown by tractormajor players such as NHI and John Deere suggests management attention towards reinforcingengineering and production teams in this direction.
The trading of valves and filters will help in retaining our presence and making as aone stop shop for all hydraulic commodities.
The commodity pricing is hardening and competition in this field from both organisedand un-organised sector is mounting; this demands us to resort to lean manufacturingsystems to compete and survive. To expand the market share innovative engineeringsolutions are mandatory. Decentralising the operations and de-skilling the manufacturingprocesses and reducing overheads are the challenges in hand for any hydraulics company.
The Automobile passenger car industry in India has grown by over 40%, from 2.6 millionunits in 2009 to 3.7 million units in 2010. According to a recent report, India is set tomove up to the position of the 6th largest producer of automobiles in the world from the7th position which she held last year. This has made India the second fastest growingautomobile market in the world. India continues to dominate and emerge as a world leaderin the manufacturing of small cars.
Chennai, also known as the "Detroit of India" has the largest chunk of carmanufacturing industries, accounting for 60% of the countrys automotive exports.Hyundai continues to be the single largest exporter of cars to over 100 countries, all ofwhich are manufactured at their facility in Chennai. Nissan has started manufacturing carsfrom Chennai and has made it one of their largest export hubs. Ford has completed theproposed expansion of their plant and launched the successful "FIGO" car in theIndian market. The Figo is also being exported to South Africa.
While there is an opportunity for steep growth, India continues to face challenges dueto high investment on production facilities, availability of electricity, skilledmanpower, rising fuel costs and interest rates. The key to success in the Automotiveindustry is to improve labour productivity and flexibility as well as capital efficiency.Qualitative manpower, the ability to make infra structural improvements and raw materialavailability also plays a major role. Access to the latest and most efficient technologiesand techniques will endow major players with a competitive advantage. The ability toutilize manufacturing plants to optimum levels and understanding the implications ofGovernment policies are also essential for growth in Indias Automotive Industry.
JKM Automotive, the automotive division of the Company, is located in Chennai andpossesses state-of-the-art manufacturing technology to produce and supply high qualityautomotive components to leading OEMs including Hyundai Motor India Limited, Fiat India,Tata Motors, Ford Motor Company, John Deere, Cummins, Nissan and Honeywell on a singlesource basis.
The unique locational advantage offered by Chennai has enabled JKM Automotive toforge strong partnerships with each of its customers. With backward integration due toacquisition of Ferrous Foundry, Automotive unit has better advantage on its supply chainmanagement.
Aerospace & Defence Industry
On January 1, 2009 India placed a $2.1 billion order with Boeing for the supply of 8customized P-8I Poseidon Maritime Multi Mission Aircraft (MMA), designated P-8I, for useby Indian Navy. Derived from Boeings commercial 737 airframe, the P-8I is similar tothe P-8A Poseidon that Boeing is developing.
The P-8Is will replace the Indian Navys antiquated fleet of 8 RussianTU-142M Maritime Reconnaissance aircraft. The P-8I is a true multi-mission Maritime PatrolAircraft (MPA) that features greater flexibility and a broader range of capabilities, thanthe MPAs currently in service. The P-8I can operate effectively over land or water whileperforming anti-submarine warfare missions, search and rescue, maritime interdiction andlong-range intelligence, surveillance, target acquisition and reconnaissance.
In October 2010, Ministry of Defence, Government of India cleared the purchase of 4more P-8I that were an option thereby taking the total number to 12.
The US Navy plans to purchase 108 P-8As to replace its fleet of P-3C Aircraft.The first aircraft was tested in 2009 and initial operational clearance is slated for2013.
The P-8I programme is progressing very well. The first flight of the P-8I for Indiathat took place in September 2011 was attended by Indian Navy officials and Boeing. Theprogramme is on schedule for a 2013 delivery. Boeing is completing final assembly of theP-8I in Renton, Washington, taking advantage of the proven efficiencies, manufacturingprocesses and performance of the existing Next-Generation 737 production system. Boeingwas selected to provide eight P-81 long-range maritime reconnaissance and anti-submarinewarfare aircraft to the Indian Navy in January 2009. India is the first internationalcustomer for the P-8 and Boeing believes there are numerous other opportunities forinternational sales to countries currently operating P-3s or similar maritime patrolaircraft.
The P-8 is the latest military derivative aircraft to benefit from a culture oftechnical innovation and the One Boeing approach to manufacturing. The P-8A is aderivative of the highly successful and reliable Next-Generation 737. The P-8A has thefuselage of a 737-800 and the wings of a 737-900. Modifications to the baseline commercialaircraft are incorporated into the aircraft in-line. In the past, commercial aircraft weresent to modification centres where they were taken apart and rebuilt to meet militaryspecifications. The P-8A is Boeings first military derivative aircraft toincorporate structural modifications to the aircraft as it moves through the commercialline.
The P-8I is being developed by a Boeing-led team that consists of CFM International,Northrop Grumman, Raytheon, GE Aviation and Spirit Aerosystems.
On June 6, 2011, the cabinet committee on security under the Chairmanship of the IndianPrime Minister decided to purchase 10 C-17 Globe Master III Heavy-Lift Transport Aircraftfrom the US for the Indian Air Force.
The deal under the Foreign Military Sale (Government to Government) is estimated tocost Rs.18,000 crore (approximately USD 4.1 bn). The contract, when signed, would becomethe single highest value contract that India has entered into with the US and includes anoffset obligation of around 4,500 crore (USD 1 bn). The offer is for 18 Air crafts andwould replace the Russian IL-76 and AN-32 for transporting men and material. Deliverieswould commence 24 months after the signing of the Contract.
The Indian Air Force (IAF) will get the delivery of its first Boeing C17 GlobemasterIII airlifter in June next year and the rest nine will join the force by August 2014.
The test flight of the first C17 for India will begin in January. The certificationwill be done by May and the delivery will start in June. The training of IAFrepresentatives will begin from May this year.
Medium Multi-Role Combat Aircraft (MMRCA)
The Indian Air Force is expected to purchase 126 MMRCA at a cost of approximatelyRs.42,000 crores. Six aircraft manufacturers - the Saab Gripen, Eurofighter Typhoon,Dassault Rafale, Mikoyan MiG-35 and the American Lockheed Martin F-16IN and BoeingF/A-18IN (a version of the Super Hornet) - had responded to the RFP and submitted theirbids.
Flight trials were conducted for the six fighter aircraft during which test pilots flew222 Sorties spanning 270 hrs in different weather conditions in India and abroad. Eachvendor was informed of its Jets performance at every stage. Only Rafale and Typhoonwere found compliant on all 643 -660 technical attributes which are the Air StaffQualitative Requirements (ASQRs) laid down to meet IAFs specific operationalrequirements.
On April 27, 2011, India informed the US, Russia and Sweden that their respective bidshad been rejected subsequent to IAFs technical evaluation and that the Euro Fighterand the French Rafale were short listed for commercial negotiations.
French Rafale is the L1.
Hindustan Aeronautics Limited Sukhoi 30MKI
The Sukhoi 30MKI is without doubt one of the finest multi-role aircraft in the worldtoday. The melting pot of a robust Russian airframe combined with state-of-the-art westernavionics and locally developed computers, has given the Indian Air Force a quantum leap inoffensive capability unrivalled in Asia. The Government of India plans to more than doublethe number of Russian-made Sukhoi 30MKI fighter aircraft in the Indian Air Force fleet, to230 by 2015.
Hindustan Aeronautics Limited (HAL) has mastered the manufacturing of wing and tail,and has started producing the Fuselage this year. The manufacturing of the engine is themost challenging aspect of indigenisation and will be undertaken soon.
Defence Procurement Procedure 2011
The Defence Procurement Procedure (DPP) 2011, which supersedes earlier versions witheffect from January 1, 2011, has incorporated several new provisions and revised some. Therevised provisions, especially those related to the validity of RFPs, Offsets, Transfer ofTechnology for maintenance infrastructure, technical oversight committee, performance andwarranty bond, fast track procedure, exchange rate variation and trial evaluations are allwelcome changes that will together help expedite defence acquisition and enable greaterdefence industrialisation in India.
In the strongest evidence yet of strengthening recovery in the commercial aviationsector, the two largest makers of aircraft in the world announced more than $24 billionworth of new jet orders at the Farnborough Air Show 2010, the bulk of which came fromlessors eager to help airlines bolster capacity as global air traffic revived.
The single-aisle market is the fastest-growing sector of the world aircraft fleet.Boeing predicted that the vast majority of new jet sales during the next 20 years around69% - would be of Single-Aisle Aircraft like the Boeing 737 and the Airbus A320, whichnormally seat around 150 passengers. The demand from emerging markets in Asia and thelow-cost carriers in Europe and North America are expected to drive those future sales.
Rapidly expanding Indian carriers, including a crop of new discount airlines, haveordered close to $40 billion worth of big jets over the past two years.
Airbus has bagged 295 orders from Indian customers, while Boeing has secured 138orders. The value of Boeings order book, which is close to $20 billion at listprices, is nearer to Airbus approximate $22 billion in Indian orders.
The growth potential of the Indian aviation sector has led global manufacturers torecognize that India would continue to be one of the fastest growing aviation markets inthe world. With the average growth rate next 10 years pegged at 12.2%, the number of newaircrafts required by Indian carriers places the country at the fifth largest in theworld.
In recognition of the countrys strategic importance, Airbus has pledged to play along term role in the development of the Indian aviation sector. Apart from establishingan engineering center and a full-fledged flight training center, Airbus also worksdirectly with Indian Companies in the design and manufacture of Aero-Structures andencourages its major tier-one partners to do so, as appropriate.
Airbus-built aircrafts have become a key element in the operations of Indian basedairlines. Starting with the 1960 delivery of an A300 to Indian Airlines, the fleet ofIndian carriers now include both Single-Aisle and Wide- Body Aircraft and is poised toexpand with the future introductions of A350 and A380 by King Fisher Airlines, whosedeliveries start next year.
Airbus continues to pursue other potential areas of co-operation with India, includingair traffic control, management and safety management.
Boeings 2010 current market outlook for India forecast that the Indian aviationmarket will require 1,150 commercial jets valued at approximately USD 130 bn, over thenext 20 years a market representing more than 4% of Boeing commercial airplanes worldwideforecast.
Boeing is continually exploring new business and investment opportunities and potentialpartnership businesses in India. In addition to direct work placement, Boeing collaborateswith industrial partners in lean manufacturing techniques. The Boeing program managementincludes best practices as a part of its drive to bring the best of Boeing to India andthe best of India to Boeing.
Bombardier forecasts 24,000 deliveries in the business aircraft arena valued at USD 626bn over the next 20 years. It concedes both business and commercial aircrafts marketscontinue to remain down with the ongoing economic slump but reiterates that the businessaircraft indicators are improving, while commercial aircraft market begins to recover. TheCanadian Original Equipment Manufacturer also points to developing regions, such as Chinaand India, as an important part of the future market.
As part of its efforts to weather the downturn, Bombardier is moving ahead with newproducts that will be ready to capture the market when the condition improves. Largercapacity aircraft, in the 100-149 seat range, will account for 7,000 unit shipments valuedat USD 423.7 bn over the next 20 years. Aircrafts with 60-99 seats will follow, with 5,800shipments valued at USD 208.6 bn. The 29-50 seat range will account for 300 new aircraftsworth USD 6.5 bn. Bombardier further predicts that more than half of the currentcommercial fleet will be replaced in the next 20 years.
Embraear expects the executive jet business in India to grow four times, to around USD8.9 bn by 2020. While the demand leans towards medium and large size business jets, itsentry level aircraft that can reach the entire sub continent is also popular. India ishopeful of co-operating with Embraear on the development of a 90-100 seater regionalairliner.
Gulfstream points out that while it had five aircrafts in service in India in 2001, thenumber has grown to 17 today. Of those, twelve are its large cabin long range G-550, whichare capable of travelling over 12,000 km non-stop. Much of this demand is driven byIndias growing wealth. The country has reported 47 billionaires according to theForbes 2010, list. It also has more than 126,000 millionaires, and, is the worlds8th largest base of high net-worth individuals.
Bell Helicopter is an industry leading producer of commercial and military aircraft andis globally recognized for world-class customer service, innovation and superior quality.
Bell has experienced considerable growth in both commercial and military sectors. Thisincrease in the demand of Bell Helicopter existing products and new program developmentsresulted in the need to investigate for new Strategic Suppliers in the commodities ofMinor and Major Structures, Bonded Panels and Tooling.
In the light of the above, Bell has identified the Company as a potential supplier thatmay be interested in becoming a key strategic supplier to Bell and share in theirtremendous growth.
Dynamatic Oldland Aerospace, India, is a pioneer and a recognized leader in theIndian Private Sector for the development of Complex Aero-Structures and manufacture ofAircraft Parts & Accessories. Dynamatic Oldland Aerospace has successfully executedimportant projects for defence agencies of national importance such as DRDO, HAL, etc.Products include the wing and rear fuselage of the LAKSHYA, Indias first pilotlesstarget aircraft and ailerons & flaps for the HJT-36 intermediate jet trainer (IJT).This is the first time such capabilities have been developed in the Indian private sector.
The unit is actively involved in HALs HJT-36 project, which is the intermediatejet trainer program of HAL. Key projects include the fabrication and assembly of thecontrol surface (Flaps & Ailerons) and development of wings assembly jigs for IJT.
The largest defence program in India is the manufacture and assembly of major airframestructures for the Su-30MKI fighter-bomber. There are 6 different control surfaces -Vertical Fins, Ventral Fins, Horizontal Stabilizers, Slats, Canard and Airbrake - that goon to the aircraft. To meet the production demand, the Jigs have been duplicated and allthe assemblies are being relocated to the new facility in Nasik, where the complete SukhoiAircraft is assembled by HAL.
The Company has signed a contract with Boeing for the manufacture of cabinets to housecritical power and mission equipment for the P-8I program.
On the commercial aircraft business, Dynamatic Oldland Aerospace has achieved globalsingle source status for the supply of Flap Track Beam assemblies for the Airbus SingleAisle Aircraft family. The Company is working closely with Spirit AeroSystems, theworlds largest Aero- Structure manufacturer, as an industrial partner in thisproject. By July 2010, every Airbus A320 Family Aircraft is partly Made inIndia as the Company has been the single source supplier of the Airbus Flap TrackBeams since June 2010. Currently your Company produces over 30 sets on an average permonth and has supplied over 400 Aircraft sets as a responsible single source supplier.
Dynamatic Oldland Aerospace is vertically integrated tomanufactureCNCcomponents,SheetMetalComponents, Soft Tooling, Hard Tooling, JigManufacturing and has Comprehensive Engineering capabilities. The Aerospace Division isAS9100 approved, NADCAP approved for Heat Treatment and Non Destructive Testing and Airbus/ Boeing approved for the manufacture of Aero-Structures.
Dynamatic Oldland Aerospace, UK, a division of Dynamatic Limited, UK, is a high endprecision engineering Company in Bristol, UK, and an unique state-of-the-art Aeronauticalmanufacturing facility which is a Center of Excellence for 5 axis machining capabilities.It is a certified supplier to Airbus UK, Boeing, GKN Aerospace, Magellan Aerospace, GEAviation Systems, Lockheed Martin and Agusta Westland. The induction of Oldland Aerospaceinto the Dynamatic group has conferred the business with the strategiclocational advantage required for the forging of strong direct relationships with leadingAerospace Companies in Europe and Americas.
The Aerospace Division has been continuously expanding to build capabilities in largeAero-Structures Assemblies,
Composites and Complex Engineering. It is poised to grow into the role of preferredstrategic supplier to both Tier Ones and Primes. As a pioneer in Indian Private Sectorwith a demonstrated track record for the manufacture and development of complexAero-Structures, the Company enjoys the first mover advantage and has formulated astrategic growth plan for its future.
As a first step towards its goal, the Company signed an MoU with the Government ofKarnataka in June, 2010, for the acquisition of land in the Aerospace park to be set up bythe KIADB, adjacent to the International Airport in Bangalore. Recognizing the growthimperatives in the emerging aerospace industry in India, the Company shared plans ofestablishing state-of-the-art aerospace manufacturing facilities and ceremoniously brokeground in February 2011.
B. OPPORTUNITIES AND THREATS
Your Company believes that it is well positioned to sustain its existing leadershipposition in each business segment across key markets, as well as to exploit significantgrowth opportunities that exist in each of its businesses.
Your Company produces highly engineered products for various applications in theAutomotive Sector, Aerospace & Defence Sector, Agricultural Equipment and ConstructionEquipment Industries. The Company has its state-of-the-art manufacturing facilitieslocated in Bangalore, Chennai and Nasik, India, and in Swindon & Bristol, UK, Erla,Germany, which offers it a geographical advantage in managing its customer relationships.The Companys presence in India and Europe also grants its business processes theflexibility to combine the strengths of each location, to deliver cost and long-termglobal manufacturing advantages to its customers.
The Yellow Brick Road strategy, which uniquely positions the Company toachieve greater economic relevance is implemented by achieving synergies in competence& skills, cost of efficiency and the maximizing of capacities, without departing fromthe Companys philosophy of building a green enterprise. This will enable us torespond swiftly to customer needs of the Company, achieve business synergy, the costcompetitiveness, risk mitigation, and develop a stable supplier base.
With over three decades of manufacturing experience, is vertically integrated withmanufacturing facilities in two continents and the Company making global deliveries intoall six continents. The Company is equipped to undertake projects from concept and designstage to the manufacture of products and delivery of services in each of its businesssegments.
Your Company operates in the following business segments
DynamaticR Hydraulics, India & UK
JKM AutomotiveTM, India
Dynamatic-Oldland AerospaceTM, India & UK
PowermetricR Design, India
Dynamatic Homeland SecurityTM, India
DynamaticR Wind Farm, India
Dynamatic Hydraulics, India and UK
Rs. in lacs
| || ||31 March 2012 ||31 March 2011 |
|Financial Highlights ||Segment sales ||30,038 ||23,037 |
| ||Profit before interest & Tax ||3,706 ||1,957 |
| ||Capital Employed ||15,568 ||17,682 |
GLOBAL SCALE: One of the Worlds largest manufacturers of HydraulicGear Pumps.
GLOBAL PRESENCE: Production facilities in two continents, India &Europe. Sales in 6 continents.
DOMINANT PLAYER IN INDIAN MARKET: Single source supplier to 75% ofIndias Tractor OEMs and Construction Equipment Industry.
INTELLECTUAL PROPERTY OWNERSHIP: Owns the design of every part made.Applies cutting edge technologies and highly sophisticated machinery for productmanufacturing.
COMPREHENSIVE RANGE: Manufactures a wide range of sophisticated HydraulicValves and custom tailored Hydraulic Solutions extending from simple Hydraulic PumpingUnits to sophisticated Marine Power Packs, complex Aircraft Ground Support Systems toTurnkey Industrial Installations.
COMPREHENSIVE DISTRIBUTION BASE: Possesses a global delivery chain, avastly broadened product offering. An incomparable distribution network of over 50distributors and 500 stockists have given us the broadest possible coverage of the IndianHydraulics Market, catering to over 80% of mobile hydraulic gear pump applications.
DESIGN & DEVELOPMENT: The Company has World-class design laboratoriesas well as enhanced technologies to support its growth plans in a sustainable manner.Partners with major Global Tractor OEMs. Among the Worlds finest EngineeringLaboratories.
GLOBAL REACH: Strong design and development partnerships with majortractor OEMs. Its customers/suppliers include Mahindra & Mahindra, Eicher Tractors,Mahindra Swaraj Tractors, Same Deutz-Fahr, Escorts Limited, John Deere, New Holland India,BEML, Godrej & Boyce, HMT, BHEL, Telco, VST Standard combines, etc.
EXPORTS: are made to over 30 countries and are used in original Equipmentin USA, UK, Canada and South Korea.
Supplier to the Infrastructure Sector by developing cast iron body pumps forclients like JCB, Caterpillar, Cummins, etc.
VALUE ADD: Supplier of Total Tractor Hydraulics Systems (Hitch lifts) tonew generation tractor manufacturers, currently catering to Same Deutz-Fahr.
Producer of Hydraulic Transmission System for Indias T-72 Battle Tanks.Additionally, the Company has designed the Steering Control System, Turret Control Systemand Braking System for the ARJUN Main Battle Tank.
QUALITY MANAGEMENT SYSTEMS: Certified to ISO 9001 specifications (ISO9001:2008) and also to ISO 14001 specifications for Environmental Management System.
GLOBAL MARKETS: Dynamatic, UK, reach Global markets in terms ofquality, cost and delivery system.
DEVELOPING NEW MARKETS: During the downturn, Dynamatic, UK, utilizedits resources to discover its replacement market, along with OEM, developing variousproducts to the Customers. To ease the capacity constraint issue at Bangalore, Swindon hastaken over the John Deere US orders from Bangalore. The Bangalore division, isattempting to expand the product range by focussing on hitch control valves and rock shaftassemblies. To cater to OE market, which demands products at competitive prices, newdivisions such as JKM Pump Division and Center For Bush Excellence have been established.
Automotive, India and Germany
in lacs Rs.
| || ||31 March 2012* ||31 March 2011 |
|Financial Highlights ||Segment sales ||1,13,099 ||19,249 |
| ||Profit before interest & Tax ||3,112 ||206 |
| ||Capital Employed ||18,217 ||14,658 |
JKM AutomotiveTM, India
SINGLE SOURCE: Produces high quality ferrous and non-ferrous critical engineand transmission components on a single source basis for Global Automotive OEMs,approximately 35% of Indias automobiles.
INNOVATIVE SUPPLY CHAIN CONTROL: Incorporates state-of-the-arttechnologies to produce high quality automotive components for Hyundai Motor IndiaLimited, Ford Motor Company, TATA Motors, John Deere, Fiat India, Daimler India, RenaultNissan India, Cummins & Honeywell on a single source basis.
Moving from being Hyundai-centric to multiple customer business to mitigatebusiness risk.
GEOGRAPHICAL ADVANTAGE: JKM Automotive has two manufacturing facilitieslocated in Chennai, one of Indias prominent automotive hubs.
STRADDLES THREE SEGMENTS: Incorporates highly efficient productionsystems and processes to produce automotive components for Highway, Off-Highway andTechnology oriented applications.
GREEN ENERGY: The Companys Wind farm generated 13 Million units ofgreen energy during the year, resulting in 87% of annual grid power being saved andenabled the Automotive production facility to considerably reduce their Carbon Foot-Print.
QUALITY MANAGEMENT SYSTEMS: JKM AutomotiveTM facilities arecertified to the highest quality and safety standards specified by the automotive industryincluding TS 16949, OSHAS 18000 and ISO 14000 as well as to Ford Q1 quality standards andfurther approved by various Global Automotive Majors.
SYNERGY ON ACQUISITION OF FOUNDRY UNIT IN GERMANY AND INDIA: To be at theforefront of designing and producing Emission Control and Fuel Efficiency enhancementdevices and products having application in Automobiles. The mission will be to acquire andgrow knowhow ranging from Material Sciences, Material Forming and ManufacturingTechnologies required to achieve global leadership in Emission Control and Fuel Efficiencyenhancing products and methods. To work with all Global Automobile majors as developmentpartners.
With expertise of JKM Automotive in machining, assembly, testing andsupply of highly engineered automotive parts to global OEMs, the acquisition of EisenwerkErla will enable us to achieve the following: 1. Strengthen its supply chain by owning astate-of-the-art Ferrous foundry.
2. Exposure to latest technology in high end ferrous material and Emission controltechnology devices.
3. Strong customer base - Become Tier 1 supplier to global OEM / Turbo technologycustomers like Volkswagen, Audi, MAN, BMW, Borg Warner, IHI etc.
4. To achieve market leader position in Turbo technology parts.
Eisenwerk Erla GmbH
Producing Turbine housings, Exhaust manifolds, Crankshaft bearing caps,Compensation shafts, Engine- and vehicle components.
Supplier for the most important OEMs in Germany and almost allinternational acting Turbocharger manufacturers.
Production facility located in Germany Saxony Ore Mountains.
Supplies the automotive industry with more than 85%. Further business segmentsare the agricultural and mechanical engineering and construction machinery.
Special knowledge and experience in the core making technology of Turbochargersas well as in the production of high alloy materials, having two patents.
Has a Quality- and Environmental Management and is certified by the TVDeutschland according to ISO/TS 16949:2009 and ISO 14001:2004.
Very short distance to the development locations of the automotive industry andthe turbocharger manufacturers. Our customers enjoy the advantage, that in case a problemoccurs, our team would be able to be onsite after 5 hours at the latest.
Major customers include IHI Charging Systems International GmbH, BorgWarnerTurbo Systems GmbH, BoschMahle Turbo Systems GmbH & Co.KG, Audi AG, Volkwagen AG,AGCO-Fendt, Joseph Vgele AG, Mitec Automotive AG.
The synergy effect for the acquisition of Erla consists in the direct and goodrelationship to the German Automotive industry and their subcontractors.
Dynamatic Oldland AerospaceTM, India and UK
Rs. in lacs
| || ||31 March 2012 ||31 March 2011 |
|Financial Highlights ||Segment sales ||14,118 ||10,242 |
| ||Profit before interest & Tax ||4,573 ||3,185 |
| ||Capital Employed ||13,372 ||11,742 |
POLE POSITION: Dynamatic Oldland Aerospace, India is a pioneer & arecognized leader in the Indian Private Sector for the development and manufacture ofexacting Airframe Structures and Precision Aerospace components. Largest Infrastructure inthe Private sector. Having its facilities in India and Europe. Working closely with EADSand Spirit Aerosystems to assemble Flap-Track Beams for the Airbus A-320 Family ofAircrafts.
SUPPLIER OF CHOICE: Customers like DRDO, ADE, HAL, Boeing and Spirit haveawarded Dynamatic Oldland Aerospace, India with key projects and awards.
GEOGRAPHICAL ADVANTAGE: HAL, NAL, ISRO, DRDO, ADE are all headquarteredin Bangalore. A rare and exemplary instance of Public Private Partnership, The Companyrecently commenced the transfer of assembly work of Air Frame Structures for the Sukhoi30MKI Fighter Bomber from its production facilities in Bangalore to a new facilityprovided by Hindustan Aeronautics Limited at Nasik.
Deliveries of the first sets of Air Frame Structures for Indias largestdefence programme, the Sukhoi 30MKI Fighter Bomber, have commenced from the new facilityin Nasik. HAL and the Company partnership resulted in placing our engineers at their workplace for development of CAD data for new generation aircraft.
PRESENCE IN BOTH COMMERCIAL AND DEFENCE SEGMENTS: Dynamatic OldlandAerospace, India is HALs largest developmental partner on the Sukhoi 30MKI programmeand builds major Air Frame Structures for the Fighter Bomber including Canard, VentralFin, Horizontal Stabilizer, Slat, Vertical Fin and Air Brake.
Other Products include the Wing and Rear Fuselage of the LAKSHYA, IndiasPilotless Target Aircraft & Aileron and Flap for HJT-36, Intermediate Jet Trainer.
Dynamatic Oldland Aerospace, India manufactures Cabinets to house critical powerand mission equipment for the P-8I, a multi-mission maritime patrol aircraft customizedfor the Indian Navy.
The Company is working closely with Spirit AeroSystems, the worldslargest Aero-Structure manufacturer, as an Industrial Partner in the assembly of FlapTrack Beam Project. The assembly of the Airbus Single Aisle A320 Flap Track Beams is beingundertaken at a new modern industrial production facility in Bangalore.
OFFSET POLICY: Poised to ride the tidal wave of business fromGovernments offset policy. Agreements signed with Boeing, Lockheed Martin, NorthropGrumman for being their Offset partners in India. The products and solutions offered bythe DynamaticBlue Bird partnership are cutting, edge, combat proven and designed foroutstanding performance in all weather conditions.
GLOBAL SINGLE SOURCE: Works very closely with EADS and Spirit AeroSystemsto assemble Flap Track Beams for the Airbus A-320 Family of Aircrafts. This is the firsttime that a functional aero-structure of a major commercial jet is being manufactured inIndia. The Company has successfully achieved Single Source Supplier status for the Airbus320 Flap Track Beams being supplied to Spirit AeroSystems (Europe) Limited.
i. DGAQA approval for in-house processes.
ii. AS 9100 Rev B Certified by Underwriters Laboratories (UL).
iii. NADCAP approvals for In-house processes.
iv. Secured three industrial defence production licences from the Ministry of Commerce& Industry, Government of India, for the Industrial Production of Heavy Vehicles suchas Battle Tanks, Land Systems and Sub-Systems, and for the manufacture of two defenceproducts - Distribution Mechanism & Hydraulic Coupling which are fitted on HeavyArmoured Vehicles. The Company has also received a license to manufacture Aircraft partsand accessories.
v. First Company in the Private sector to be certified by Airbus for Manufacture ofAero-Structures.
Dynamatic Aerospace has been continuously expanding to build capabilities in largeaero-structural assemblies, composites and complex engineering and is poised to grow intothe role of a preferred strategic supplier to both Tier Ones & Primes. As apioneer in the Indian Private Sector with a demonstrated track record for the developmentof complex aero-structures, Dynamatic Aerospace enjoys the First MoverAdvantage and has formulated a strategic growth plan for its immediate future.
Recognising the growth imperatives in the emerging Aerospace industry in India, theCompany plans to establish a state-of-the-art Aerospace Manufacturing Facility at theAerospace Park to be set up by the Karnataka Industrial Area Development Board (KIADB)adjacent to the International Airport in Bangalore.
As a first step towards this goal, the Company signed a Memorandum of Understandingwith the Government of Karnataka in June 2010 for the acquisition of land in the AerospacePark as well as to secure the Governments support in obtaining fast-trackclearances, approvals and infrastructure such as land, water, power, etc., necessary forthe commencement of commercial production.
Dynametal, India - Aluminium Casting (including Metallurgy)
Rs. in lacs
| || ||31 March 2012 ||31 March 2011 |
|Financial Highlights ||Segment sales ||5,116 ||3,371 |
| ||Profit before interest & Tax ||(854) ||(72) |
| ||Capital Employed ||1,172 ||1,855 |
Dynametal uses the latest metallurgical technologies to produce highquality Non-Ferrous Alloy and Castings for Industrial, Automotive and Aerospaceapplications at its modern foundry in Chennai.
The facility is equipped with electric furnaces, which makes it highlyeco-friendly.
Infrastructure created and controlled in-house.
Powermetric Design, India
A world class Design Center with the capability of total product and systemdesign.
Advanced engineering techniques for concept of total product andcustom made design solutions.
Strength of system design and integration with the highly experienced engineers.
Design optimization and validation for static, thermal and dynamic stability ofsystem by using high end mathematical tools.
Design of water and oil pumps for new generation cards of Renault-Nissan fortheir global supply.
Design of automation integration with sand core shooting machines for aluminiumfoundry.
Design validation and optimization of Honeywell Turbocharger housing forFord-Puma engine.
Technology demonstration and prototyping of Electrical Vehicle Charging Pointwith communication link and built-in intelligence system.
Design and development of automatic air leak testing system for Exhaust manifoldcastings.
Design and development of automatic liner pressing machines for Gear pump buses.
Design and development of various test rigs for water and oil pump validation.
Design of assembly jigs and tooling for Aerospace applications.
Upgrading the machines at Foundry by retrofitting / re-conditioning withelectro-mechanical systems.
Spindle Design modification and re-condition of high precision"Kummer" chucker machines for bush manufacturing.
Dynamatic Homeland SecurityTM, India (New division effective from2010)
A division of the Company, Dynamatic Homeland Security offers cutting edgesecurity products and technologies like the Unmanned Aerial Vehicles, Mobile SurveillanceVehicles, Under vehicle Scanners which will enhance potential customers capabilitiesin countering modern day security threats.
By partnering potential customers like Indias National Defence Forces,Homeland Security, Police and Civilian Agencies in developing security solutions relatingto Access Control, Visual-Intelligence, Counter Terror Mechanisms, SpecializedCommunications, Armour, Bomb-disposal, Command and Training Centres, the Company enablesagencies in the Government and private sectors to enhance their abilities to prepare andplan for emergencies as well as their response and recovery skills.
Dynamatic Wind Farm, India - Non-Conventional Energy
Generating 12MW of power approximately 13 million units annually forcaptive consumption at JKM Automotive and Dynametal.
Strategically located, less than an hours drive from Coimbatore airport.
48 Windmills on 440 acres of free-hold land.
Uninterrupted supply of power to Automotive & Metallurgy businesses.
Giant Leap towards achievement of Zero Carbon footprint by manufacturingfacilities in Tamil Nadu.
87% reduction in monthly energy costs, improving our cost competitiveness.
Provides freedom from energy price inflation.
Scalable-Windmills can be added.
Strategic land bank near Coimbatore
In spite of the Companys advantageous position, there are various external riskfactors viz. a slowdown in global economy, economic slow down in India, change or delay ineconomic reforms in India, political instability, hostilities, terrorist attacks, civilunrest and other acts of violence could adversely affect the financial markets and itsbusiness. Investors may be subject to potential losses arising out of exchange rate riskon the Indian rupee and risks associated with the conversion of Indian rupee proceeds intoforeign currency. Understanding opportunities for growth as well as the barriers in eachsegment, your Company constantly strives to achieve desired results attributable to yourCompanys competitive strengths, namely:
Presence in diverse, synergistic business segments
Leadership position in Hydraulics business
Strong competence in Automotive business
Early-Bird-Advantage in the Aerospace business
Strong Design capability and scalability
Proven management team and skilled manpower with wide experience
Well-developed, strong Blue-Chip Customer base
C. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
The sales revenues (gross) from each of the major business segments that the Company isinvolved in are as follows :
|Segment ||Amount ||Percentage |
|(Gross Sales) || |
( Rs. in lacs)
| ||2012 ||2011 ||2012 ||2011 |
|Hydraulics & Precision || || || || |
|Engineering ||30,038 ||23,037 ||18 ||41 |
|Aluminium Casting ||5,116 ||3,371 ||3 ||6 |
|Automotive Components ||1,13,099 ||19,249 ||69 ||34 |
|Aerospace ||14,118 ||10,242 ||9 ||18 |
|Wind Farm ||499 ||546 ||1 ||1 |
|TOTAL ||1,62,870 ||56,445 ||100 ||100 |
The overall outlook for next accounting year April 2012 to March 2013 looks positive.Your Companys reputation for developing innovative, cost-effective and high qualityproducts continues to grow, both in the Domestic and Overseas markets. With the Companygoing global, both in terms of expansion as well as sales, it becomes very relevant tounderstand the outlook overseas especially in UK and Germany
According to the H. M. Treasury Office of Budget Responsibility, the outlook for the UKeconomy sees growth as flat through the remainder of 2012 with a gradual upturn forecastin 2013 with GDP anticipated at 1.7% by the end of next year. This has indeed trended downin recent months due to the fact that the Eurozone crisis has reignited and hence theconsensus projections over the next few months show a fall before we see the upturntowards the end of the year. Lower inflation is a positive development, which iscontinuing to fall and dropped down to 2.4% in July 2012 and is heading towards the 2%target over this next year. As for the Company, with customers outside UK such as JohnDeere, the coming year looks promising.
The German economy recorded further growth in 2011-12. Driven by the increased exportbusiness, the Federal Government has announced a 0.7% increase in gross domestic productto 2,588.8 billion euros. Despite the current cautious optimism, a further increase of1.6% to 2,630.22 billion euros is expected. The overall impression is stable with highemployment figures.
The German automotive industry is continuing its upward trend. Following the impressivegrowth of 10% in 2011, the increase in 2012 is expected to be plus 4% with a predictedfurther augmentation of 2.75% in 2013.
The turbocharger industry is growing tremendously. The goal for an increase of 40% inthe worldwide production of turbocharged petrol engines by 2015 is, from currentperspectives, realistic.
E. RISKS & CONCERNS, INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
Your Companys increasing exposure to Global markets and Customers also bringswith it the inherent risks of a Global company like Foreign Currency Risk, ProductLiability, Warranty, and so on. These risks are being mitigated through appropriatede-risking strategies. The Strategic Business Units of your Company are headed by highlyexperienced Chief Operating Officers, who are supported by teams of capable personnel.
All key functions and divisions of your Company are independently responsible formonitoring risks associated within their respective areas of operations. Your Company hasidentified various risks and procedures to mitigate the same.
Your Company has deployed a comprehensive Internal Audit System, which is commensuratewith its scale of operations. Competent and qualified professionals, who are external tothe Company business, conduct regular and detailed internal audits, both at themanufacturing locations and at branches in India. The Internal Auditors submit auditreports & management reports regularly, which highlight areas of concern and alsosuggest improvements in systems and procedures. The Audit Committee periodically reviewsthe audit plans, audit observations of both internal and external audits and adequacy ofinternal controls.
The Board level Audit Committee of the Company meets every quarter to review theInternal Audit Reports as well as Managements feed back on Internal Audit Reportsand suggests improvements in the control systems from time to time. A detailed report onthe Audit Committee forms part of the Corporate Governance Report. Your Company hasadopted the new operational strategy to decentralise the operations into smaller divisionsso as to facilitate incorporating the state-of-the-art production technologies and shopfloor cultures. This will also pave path for innovative ideas with the employees tosurface and get implemented. Monitoring the progress will become easier and internal benchmarking for achieving excellence will become possible Your Company has evolved a stringentInformation Security Management System to protect and safeguard key information and datafrom unauthorised access across its units in India and abroad. The system has beendesigned to ensure confidentiality, integrity and availability of critical data within theorganization. New tools are used to upgrade existing systems periodically, to fit thegrowing size and needs of the Company.
F. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS (HR / IR)
AsyourCompanycontinueswithitsstrongtranscontinental growth, there has been a growingneed for robust, diverse Human Resource strategies and systems capable of straddlingacross countries and cultures to help the organization manage change in a dynamic businessenvironment. The global environment within which the Company operates calls for a subtlebut definite shift from the traditional HR role of being a manager of employee welfaremeasures and industrial relations to being a manager of change across borders. The keychallenge has been in designing and setting in place an integrative HR framework based onthe Companys vision and values which enables greater synergies between the variousbusiness units of the Company located in India and Europe, without compromising on theinherent advantages bestowed by geography and culture.
The Corporate Human Resources Team, which is led by the Head - Group HR, works atdesigning and implementing integrative HR strategies that keep pace with the challengesposed by the changing business environment. The Department assumes three strategic rolesin the ongoing transformation of the Company into a Global company First of the builderwho sets in place necessary fundamentals of Human Resource Management, secondly, the roleof the change partner which calls for the realignment of HRD to meet the needs of thechanging external environment as the Company expands its overseas operations, and finally,the role of the Navigator in developing the capabilities of the organization and itspersonnel to manage the balance between short-term and long-term HR goals, thusfacilitating global integration. The strategies and efforts of the CompanysCorporate HRD continue to be shaped and guided by the Leadership, Human ResourceDevelopment & Remuneration Committee, a Board level committee, which meets regularlyto provide direction and guidance to the Companys HR policies, initiatives and toreview ongoing programs.
The Company envisages the diversification of its Human Resource base, the nurturing,management and retention of its talent and the development of leadership skills as thebasic requisites for its continued growth. The Company remains focused on these objectivesthrough the provision of safe and healthy work places, harmonious industrial relations,formulation of value based HRM practices and systems across geographies, training andmentoring programmes and through appropriate welfare measures.
The Company is committed to providing all its employees with a safe work environmentthrough adherence to safe work practices, enforcing use of Personal Protective Gear on theshop floor and by continuously educating the workforce through training programmes anddemonstrations. On-site healthcare facilities, Health
& Accident insurance coverage, access to regular health checkups at reputedhospitals, medical feedback from experts and support in maintaining special healthrequirements are all a part of the welfare regimen followed in the Company.
The greater part of the Companys competent workforce has worked with the Companyfor an average of 20-25 years, contributing greatly to its business stability andenriching its repository of knowledge and skill sets. The Company continues to makesignificant investments in the development of its human resources, especially in theidentification, development and retention of capable, professional talent. The workforcestrength as on March 31, 2012 was 2205. Despite the post recessionary spurt inrecruitment, the attrition rate across the Company during the year under review hasremained below 7% for the entire Group. The Companys ability to retain talent inspite of the challenges posed by a competitive business environment can be attributed toits ability to nurture and develop talent through the alignment of individual goals andaspirations to the organizations goals.
HUMAN RESOURCE HIGHLIGHTS FOR THE YEAR UNDER REVIEW
Performance measurement and incentivisation of the work force based onsustained performance and behavioural traits.
Based on feedback from the employees and the business heads, the IntegratedPerformance Management System was revised to comprise of Work Books for quarterly reviewsand an updated Performance Appraisal Format for Annual Performance Appraisals.
Based on the feedback obtained from the new Performance Appraisal Formatintroduced during the previous year, 25 High Potential Executives have been identified fora structured soft skills training programme.
BasedonthefeedbackobtainedfromthenewPerformance Appraisal Format, SpecialTraining Programmes designed to meet the specific needs of each Business Segment have beendesigned and implemented for all segments of work force.
Formulation of a detailed Code of Conduct for all employees of the organization.
Streamlining of the Induction process to ensure employee engagement.
Resource Sharing programmes for greater business synergies between internationalbusiness units.
Establishment of safe and secular work environment.
Talent identification and retention.
Two way communication channels between workforce and management.
Broad-basing of work force through gender diversification.
Increased participation of women in management.
Participative Management by workforce in the Companys business processes.
Shop Floor Poster Campaigns aimed at educating employees about the changingbusiness environment.
Introduction of Biometric System to manage attendance, leave management, payrollmanagement and other administrative functions.
Elevation of 17 workers into the managerial cadre.
Annual Medical Health Check Up for all employees above the age of 35 at ColumbiaAsia Hospital.