prime industries ltd Management discussions

Our company in order to optimize resources is undergoing a strategic transformation, primarily focusing on the dynamic capital goods segment. Our first step in this direction is acquiring a stake in Kay Bovet engineering limited, marking our entry into the capital goods industry. Recognizing the capital goods sectors significance, especially in Indias goal to become an 8 trillion-dollar economy, we see promising opportunities ahead. This industry also plays a vital role in the defense domain. With this in mind, we are enthusiastic about our prospects in this segment and are actively seeking acquisitions that align with our strategic direction.

As we embark on this ambitious journey, we are also restructuring our management and board to align with our Tran formative goals. This restructuring aims supports innovation, growth, and strategic partnerships.

Indian Economy

The Indian economy holds the position of the fifth-largest in the world by nominal GDP and the third-largest based on purchasing power parity (PPP). It operates as a mixed economy, characterized by a significant public sector and a steadily expanding private sector. Notably, Indias economic growth has been noteworthy, maintaining an average of 7% GDP growth annually.

In the recent financial year 2022-23 (FY23), the Indian economy experienced a remarkable 8.7% growth, marking the highest rate in the past four years. The growth in GDP was broad-based, spanning various sectors. Private investment took a prominent role in driving this growth, surging by 26.2% due to increased spending on capital goods. Concurrently, private consumption expenditure grew by 7.5%, primarily buoyed by escalating rural demand. During FY23, the country experienced a noteworthy surge in exports, which grew by 24.4%.

Overall, the Indian economys recent growth trajectory has been marked by notable achievements and challenges, as reflected in its various economic indicators.

Capital Goods Sector

The capital goods sector plays a pivotal role in Indias economic growth, contributing 12% to its manufacturing output and 1.8% to GDP. This sectors market size was estimated at US$ 92 billion in 2019, projected to reach US$ 115.17 billion by 2025.

Government-led infrastructure initiatives, aimed at projects spanning highways, railways, and power plants, are elevating demand for construction and heavy machinery. The "Make in India" campaigns impetus on local manufacturing is fostering a conducive environment, amplifying capital goods production prospects. Investments in renewable energy, particularly solar and wind power, are generating heightened demand for equipment such as solar panels and turbines.

Simultaneously, the modernization of the defense sector is paving the way for supplying advanced defense equipment. Indias competitive cost structure and skilled workforce further enable robust exports, particularly to emerging economies. Innovation driven by research and development efforts is bolstering efficiency, technological advancements, and environmental sustainability across these sectors, fuelling the overall growth trajectory of the capital goods industry.

The Indian government plays a proactive role in fostering capital goods sector growth through diverse initiatives. These encompass financial aid, export support, R&D investments, streamlined regulations, and public-private partnerships. Programs like TUFS and MLI provide incentives to manufacturers, while TDB and NMCC boost innovation and competitiveness. Simplified regulations, including GST and single-window clearance, enhance business ease. Export promotion schemes like EPCG aid global market presence. Public-private partnerships stimulate investment and expertise sharing, enhancing sectoral expansion.

Defense and Space industries

The defense and space sectors in India hold immense significance within the countrys economy, contributing substantially to GDP, employment, and technological innovation. Heres a breakdown of these sectors:

Defense Industry:

The defense budget for 2022 was approximately 4.78 lakh crore (equivalent to 5.6 trillion or US$70 billion in 2023). The government stands as the primary customer for defense products, while a growing private sector market is also emerging.

Manufacturing and Production: The defense manufacturing sector in India is robust, encompassing public and private entities engaged in producing equipment, weapons, and ammunition.

Imports and Exports: India, historically a significant defense equipment importer, aims to curtail imports by promoting local production and fostering foreign partnerships.

Defense Budget: The 2021-22 budget amounted to around USD 65 billion (INR 4.78 lakh crore), positioning India as a major global defense spender.

Space Industry:

Indias space industry is experiencing rapid growth. In 2022, the country launched 104 satellites, setting a record for the most satellites launched in a single year. The Indian Space Research Organisation (ISRO) is the leading space agency, complemented by various private space companies.

ISRO has achieved significant milestones in space research, including satellite launches, lunar missions (Chandrayaan-1, -2), Mars Orbiter Mission, and commercial launch services. India boasts strong capabilities in satellite communication and operates a satellite constellation. ISROs IRS remote sensing satellites are instrumental in applications like agriculture, disaster management, urban planning, and weather forecasting. India excels in satellite launch vehicles like PSLV and GSLV, both successfully launching satellites into space. The development of GSLV-Mk III strengthens Indias capacity for heavy satellite launches. ISRO actively engages in global collaborations, participating in joint space missions, technology sharing, and satellite launches. Commercial agreements on global level solidify Indias reputation as a reliable player in the global space industry. In conclusion, Indias defense and space sectors are pivotal for national security, technological progress, and strategic capabilities. The space industry, led by ISRO, has achieved remarkable feats in space research, satellite communication, and remote sensing.

Nuclear industry

The nuclear industry holds a prominent position in Indias energy landscape, contributing significantly to its energy mix with nuclear power accounting for approximately 3% of total electricity generation. Presently, India has 22 operational nuclear power reactors, collectively generating 6,780 megawatts (MW) of electricity. The Indian government has an ambitious goal of increasing nuclear powers share to 25% by 2050.

The Indian nuclear industry offers several advantages, including its low carbon emissions which help reduce the overall carbon footprint. It ensures a reliable energy supply to meet the demands of the growing economy and benefits from a robust nuclear science and technology expertise, fostering industry advancement. The government has set an ambitious target to achieve a nuclear power capacity of 22,480 MW by 2031.

In conclusion, Indias nuclear industry plays a vital role in its energy sector, offering the benefits of low carbon emissions and stable energy supply. The government is taking proactive steps to promote the industrys growth and intends to expand its nuclear power capacity to meet future energy demands.

Cryogenics sector

The cryogenics sector in India is burgeoning, driven by significant potential and existing strengths. India hosts premier research institutions and companies dedicated to cryogenic advancements, with ISRO, the Indian Space Research Organisation, taking a leading role. ISRO has pioneered indigenous cryogenic technologies, including engines propelling the GSLV Mk III launch vehicle. Government support is evident through initiatives like the National Cryogenic Centre (NCC), fostering research and development:

India excels in cryogenic technology, focusing on superconductivity and cooling systems. Leading institutions like BARC and NPL are pioneers, advancing cryogenic materials and applications. Cryogenics are pivotal in space and defense sectors. ISROs GSLV Mk III integrates efficient cryogenic engines for space missions. Emerging fields like cryopreservation, freezing biological samples, also progress. Facilities, liquid helium production, and cooling system testing centres support technology advancements. Cryogenic tech finds increasing demand in space exploration, medical research, and food preservation.

In conclusion, Indias cryogenics sector advances due to research prowess and government backing. Applications span space, defense, medical, and industrial sectors. Overcoming challenges and leveraging opportunities will harness cryogenic technologys full potential.