GLOBAL ECONOMY
The global trade outlook may be at risk of downside due to renewed
bottlenecks in the supply chain and weaker-than-anticipated global demand. The
intensification of trade protectionism, fragmentation of trade networks, and security
concerns about supply chains could further exacerbate trade concerns, leading to a
slowdown in trade growth and supply chain disruptions.
The economic forecast for the next ten years predicts a prolonged
period of turbulence and unpredictability for businesses. Following the conclusion of
regional recessions in 2023, global growth is expected to decelerate once more, with
mature markets contributing less to global GDP in the coming decade. A portion of this
deceleration can be attributed to the inherent convergence of previously fast-growing
economies such as China and Korea. In addition, the recent sluggishness may be attributed
to slow progress in implementing structural reforms, escalating trade tensions, declining
direct investment, and a slower adoption of innovation and technology in scattered
regions. Nevertheless, companies can still capitalise on investment prospects in mature
markets that require innovation to offset the decline in labour force. Furthermore,
emerging markets present opportunities for investment in physical and digital
infrastructure, owing to their large and young labour force.
(Source:
https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023)
INDIAN ECONOMY
Global uncertainties will weigh on growth this year, and India will
need a strong rebound in investments to attain sustainable growth.
India is bound to get impacted from these global developments. However,
several analysts remain optimistic about India?s economic outlook in 2023. Domestic
demand-led growth will provide India with the necessary momentum to post reasonably strong
growth this year. Despite global challenges, India has achieved an impressive growth of
7.2% in FY 2022-23, supported by local consumption and a favorable policy environment, as
well as a stable political democracy.
Our overall outlook for the Indian economy remains positive - the
country is expected to retain the top spot throughout FY 2023-24, with a growth rate of
6.5%. We expect investments to see a turnaround and thrust the economy into sustainable
growth. Private capex is also expected to rise as corporations strengthen their balance
sheets and gain access to more credit financing. Well-capitalised public sector banks are
increasing credit supply, resulting in remarkable credit growth for the Micro, Small, and
Medium Enterprises (MSME) sector. The Government?s Emergency Credit Linked Guarantee
Scheme (ECLGS) is further supporting this growth.
All in all, this economic expansion is expected to boost business
confidence and kickstart the virtuous circle of job creation, income, productivity,
demand, and exports supported by favourable demographics to fuel the growth of the Indian
economy.
However, the road to higher growth rate for the Indian economy is
expected to be longer. Continued inflationary pressures, geopolitical crises, supply chain
reorientations, will weigh on the outlook. At this point in time, investments will be
critical to meet India?s rising demand and are expected to be the primary drivers of
growth, along with the Government?s capital spending playing a major role.
(Source: https://www.indiabudget.gov.in/economicsurvey/doc/echapter)
ROLLER BEARING INDUSTRY
Roller Bearings are a type of rolling-element bearing that uses
cylinders (rollers) to maintain the separation between the moving parts of the bearing (as
opposed to using balls as the rolling element). The purpose of a roller bearing is to
reduce rotational friction and support radial and axial loads. Compared to ball bearings,
roller bearings can support heavy radial loads and limited axial loads (parallel to the
shaft).
Global core Roller Bearing manufacturers include SKF, Schaeffler etc.
The top 5 companies hold a share of about 60%. Europe is the largest market, with a share
about 24%, followed by China and North America with the share about 23% and 19%.
The global Roller Bearing market is valued at US$ 19220 million in
2020. The market size will reach US$ 29630 million by the end of 2027, growing at a CAGR
of 5.4% during 2021 -2027.
Bearings are antifriction components that help improve the mobility of
components. Different types of bearings are manufactured depending on the task
specificity, such as roller bearing, sensor bearings, plain bearings, ball bearings, and
others. Roller bearings are equipped with cylindrical rollers with high radial load
capacity. The increase in demand for roller bearings is directly related to the growth in
production of high-performance industrial machinery.
Increase in usage of heavy machinery in the construction industry and
high demand for application specific bearings drive the market. Rise in investment
projects in mining, infrastructure development, and transport infrastructure development
fuel the growth of the market. Moreover, increase in number of offshore wind farms results
in greater adoption of roller bearings. However, roller bearings incur high installation
costs and complex maintenance operations are few factors that are expected to hamper the
growth of the market.
The global roller bearings market is segmented on the basis of product
type, end-user industry, and geography. On the basis of product type, the market is
classified into tapered, needle, spherical, cylindrical, and thrust. Based on the end-user
industry, the market is divided into electrical, automotive, agriculture, construction,
energy & power, and others (general engineering, aerospace). By geography, the market
is analysed North America, Asia-Pacific, Europe, and LAMEA.
The key players operating in the global roller bearings industry are
NTN Corp., SKF AB, Brammer, NBI Bearings, RCB Bearing, Timken, Schaeffler AG, NSK Ltd.,
C&U Group, and JTEKT Corporation.
INDUSTRY STRUCTURE AND DEVELOPMENT
The Company is in the Business of Ball and Roller Bearings which has
applications in Automobiles, pumps, gear boxes, heavy earth moving equipments and
industrial sectors. Predominantly the Company deals in Bearings required by the Automobile
Industry and gear boxes. The growth of the Bearing Industry is primarily dependent on the
growth of OEM and After-Sales Markets and can be more closely related with the Automotive
and Industrial Sectors.
Most of the demand for bearings in the Indian Market comes from the
automobiles sector, whereas the requirement for Industrial Bearings is well spread out
over different varieties of bearings. There is a wide range of different kinds of bearings
and in different sizes with specific purposes depending on the end application of
bearings. Whereas there are many Indian players in the production of different types of
bearings, most of them are producing automobile bearings, while some are producing
bearings which find use in the Industrial sector.
Like all other manufacturing Companies, the bearing manufacturers in
India, have also been severely impacted due to Covid-19 over the past two years. However,
the revival seems promising, and the future appears to be good.
Due to so many developments in the last few years, the economic
scenario has changed very fast. The Government has introduced many reforms like the
introduction of the GST, which replaced VAT and other taxes. The demonetization and many
other reforms in the long-term interest of business and economy of the Country also had
short term impact on small businesses and industries. The COVID-19 also severely affected
the lives and businesses for more than two years, particularly due to the lockdowns
introduced by the Center and State Governments. This also resulted in huge loss
particularly to small and medium scale industries and businesses. However, the overall
economy, after a big struggle, is now normalizing with the active assistance of the
Government to revive trade and industries. The overall turmoil of these last few years has
also affected the business of the Company.
Roller bearings have wide ranging applications and are critical to
industrial progress. With the world?s industrial nations planning to move their
supply chain away from China, and India likely to be one of the beneficiaries of such a
move, it would continue to remain a fast-growing major economy in the world and is
expected to be one of the top three global economic powers over the next decade. Market
growth in the Indian mobility industry for both people and goods have a very large
potential given the geographical spread and size of population- an aspirational young
population spurs personal mobility while the need to establish strong supply chains
between producers and markets drives growth for goods mobility. Also new vehicle models
are being constantly introduced; there is expansion of the public transport systems,
dedicated freight corridors for movement of farm produce.
Your Company?s installed manufacturing capacity will enable it to
continue offering a wide range of products to its customers once demand revives. Customer
relationships and contact are the focus areas to reassure them that quality products
delivered in a timely and cost-efficient manner will be our priority.
FUTURE OUTLOOK
Recovery in global growth will largely be a function of how countries
contain the pandemic and bounce back from its negative impact. Access to medical
interventions, effectiveness of monetary policy support, exposure to cross-country
business is important to drive the recovery. With the world?s largest vaccination
drive currently underway in India, there is hope that the pandemic will stay in control
and there would be no lockdowns to affect output and income.
FY 2023 is likely to be a better year with several economic indicators
such as power demand, rail freight, e-way bills, GST collection, steel consumption, among
others trending positively and could lead to economic recovery. Favorable Government
policies to support the Indian manufacturing industry and the emphasis on spending for
building infrastructure for roads and mass rail transportation, vehicle scrappage policy
and forecasts of a normal monsoon which will aid rural income are all expected to aid
demand for new vehicles. Continuous innovations and new launches, by way of hybrid fuel
efficient vehicles will further propel demand and allow the industry time to adjust their
production facilities to meet the new requirements for the introduction of Electric
vehicles, which are expected to constitute a reasonable proportion of vehicle production
between 2025 and 2030.
SEGMENT WISE PERFORMANCE
During the current year, ball and roller bearings have been the primary
business segment for the Company.
OPPORTUNITIES AND THREATS
The long-term prospects for the Indian economy remain bright owing to
the growth of internal consumption. Demand for personal vehicles will be driven by the
aspirations of the rising middle class with improving purchasing power and disposable
incomes. Rapid urbanization will drive the need for public transportation. As India
addresses the twin challenges of inclusive growth and sustainability, even a normal
monsoon, with improved availability of rural finance, will positively influence demand for
motorcycles as well as agricultural tractors. The overall mobility sector is expected to
benefit from continued growth in the longer term.
The domestic bearing industry is facing the following threats:
a) The menace of spurious bearings continues to adversely affect the
industry. As per estimates roughly one in every four bearings sold in the replacement
market is fake/ of inferior quality presenting a threat to unsuspecting users. The problem
continues owing to the slow legal process, in spite of industry-wide efforts to thwart
unscrupulous suppliers.
b) With global demand weakening resulting in idle/ low utilization of
installed capacities, the industry must work on enhancing operational efficiencies and
flexing costs further with supply chain readiness to help counter these additional costs.
c) Regulatory demands on emission levels, improved safety norms, higher
expectations for improved reliability of the vehicles and the need for readiness to meet
requirements for the new fuel efficient and environmentally friendly vehicles may result
in need for investments in newer technology, research, and development. This could cause a
higher burden of fixed costs. Of course, the industry and your Company have to
continuously explore ways and take all measures to produce consistently high-quality
products cost effectively to counter the threat of cheap imports.
RISKS AND RISK MITIGATION
To sustain long term competitive advantage for the Company, the Company
has comprehensive risk management processes for identification, assessment and mitigation
of all potential business risks which include operational, financial, legal, and strategic
risks. Depending on the probability of occurrence and extent of potential damage, these
risks are categorized as material risks and noncritical risks. These are periodically
presented to the Board. Risk mitigation measures and their implementation are regularly
reviewed and discussed, and after evaluation, improved and updated.
Company?s internal auditors review the internal controls, risk
assessment and mitigation procedures, independently as part of their internal audit
process and their observations and findings are presented, reviewed, and discussed in the
audit committee meeting.
The Plant head and his team with continuing interactions with the
functional heads of the holding Company, is charged with driving operational efficiencies
and optimizing efficient allocation of financial resources - prudent & judicious
capex, better inventory management and minimizing overdue.
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Company has in place adequate internal control systems which
ensures reliable financial reporting, safeguarding of assets, adherence to management
policies, the detection and prevention of frauds and errors, adequacy and completeness of
accounting records and timely preparation of reliable financial information. The efficacy
of the internal checks and control systems are validated by internal as well as statutory
auditors.
Based on the nature of the business and size of operations the Company
has in place adequate systems of internal control and documented procedures covering all
financial and operating functions. These controls have been designed to provide for:
• Accurate recording of transactions with internal checks and
prompt reporting
• Safeguarding assets from unauthorized use or losses
• Compliance with applicable statutes, and adherence to management
instructions & policies
• Effective management of working capital
• Monitoring economy and efficiency of operations
The Audit Committee closely interacts with and guides management and
along with statutory auditors and internal auditors reviews significant findings and
follows up thereon.
INDUSTRIAL RELATIONS AND HUMAN RESOURCE MANAGEMENT
The Company has continued its efforts towards strengthening human
resources by providing employees with a better working atmosphere and creating a culture
which nurtures personal and organizational growth.
We continuously aim to provide career development and growth
opportunities to our people through our Talent Management Process. It provides dual
opportunities for people to grow in their managerial capabilities aligned with their
career aspirations. We continuously encourage our people to broaden their horizons and
fulfil their potential via a wide and varied range of learning and development
opportunities.
CAUTIONARY STATEMENT
Statements in this report on Management Discussion and Analysis
describing the Company?s objectives, projections, estimates, expectations, or
predictions may be forward looking statements within the meaning of applicable laws and
regulations.
These statements are based on certain assumptions and expectations of
future events. Actual results could differ materially from those expressed or implied
since the Company?s operations are influenced by many external and internal factors
beyond its control. The Company assumes no responsibility to publicly amend, modify or
revise any forward-looking statements, based on any subsequent developments, information,
or events. The readers are cautioned that the risks outlined here are not exhaustive. The
readers are requested to exercise their judgment in assessing the risks associated with
the Company.
+91-9892691696
