AIA Engineering Ltd Management Discussions.


AIA Engineering Limited ("AIA") designs, manufactures and markets a wide range of consumable wear parts (Mill Internals) which are used in the process of Crushing and Grinding in Cement, Mining, Thermal Power and Aggregate industries. AIA partners with customers in these industries in their cost and process optimisation journey, helping them improve operational parameters. The Company employs casting process for the manufacture of the products.

Financial Year 2020-21 has been a year of disruption with COVID-19 occupying central stage and disrupting life as we knew it. It lay bare to many industries which are dependent on movement of people like travel, hospitality and retail. There were lockdowns in many parts of the world as also in India as COVID cases went up in waves. India is currently facing its 2nd wave and the country has again been subjected to varying degrees of lockdowns and movement restrictions. These interruptions affected the Cement Industry much more than the Mining Industry. Cement Industry is more local and linked to construction and real estate activity which slows down or stalls as soon as COVID related restrictions and risks come into force. In F.Y. 2020-21, in the first quarter, there was a sharp fall in Cement related activity which affected our volumes. Things subsequently got better and volumes recovered to pre-COVID levels by 2nd and 3rd quarter. Going forward, we believe Cement sector will continue to be dependent on how COVID-19 fares in various parts of the world. Currently USA and Europe seem to have emerged out of the pandemic and all economic activity is being resumed. This bodes well for Cement consumption in these countries. India had a good uptick in volumes from September/October onwards but stalled again as the 2nd wave of COVID-19 hit in late March/early April timeframe. Mining Industry is not as affected by COVID-19 as consumption of base metals like Copper, Gold, Steel and Platinum continues unabated largely driven by end-use of each of these metals. There is a structural bullish outlook on Gold and Copper while Steel seems to be in revival mode after being depressed for more than a decade. On account of this positive outlook, we believe that our Mining business should continue to be our growth engine. Within mining, conversion of conventional Forged Grinding Media to High Chrome Grinding Media remains the largest growth opportunity. Annual consumption of Grinding Media for the mining segment is estimated at 2.5 Million tons with less than 20% of the same converted to High Chrome, thus offering a sizeable growth opportunity of conversion. AIA is now embarking on a journey of offering Mill Liners to the mining market and widening its wallet share and value addition with customers. Mill Linings is estimated to be 3,00,000 ton global market and represents an additional growth opportunity. AIAs greenfield Mining Liner plant is under commission. There were delays in execution of the plant on account of travel restrictions for overseas equipment suppliers engineers and availability of manpower during COVID linked restriction in Gujarat. The Company expects to commission the plant in F.Y. 2021-22 and start production from the new facility. It is important to note that developmental activity for AIAs business requires its engineers to travel to customer plants and engage with their technical teams on solutions being designed for them. These physical engagements have not been easy to convert to online video calling means and hence opportunity conversion cycle has become longer. At this time, all our engineers are engaged in ensuring continued support to all our customers and making sure existing business continues without interruptions and every issue is well addressed. F.Y. 2020-21 has also been a year of contradictions. On one side there was a lot of demand side contraction and on the other side there has been a lot of volatility and speculative increases in major raw materials, commodities, etc. Scrap and Ferro Chromium prices have soared requiring us to take steps to make sure that price increases are passed on to customers. Likewise, as demand shrunk, shipping lines culled lot of routes which has led to an artificial shortage of vessels for ferrying industrial sea borne cargo. There is a shortage of containers as a lot of erstwhile supply routes have been disrupted as an aftermath of COVID-19. This has led to shipping rates going up significantly. AIA is trying to navigate this by actively working with shipping lines and customers to first ensure there is no delay in supply and second to ensure a fair price pass through of these costs, where possible. Lastly, various cross-currencies have been very volatile through the year as lot of capital flows moved around the world adding to already strained trade deficits.

We believe that most of these prices have moved as a knee jerk reaction to increase in demand as world markets opened up after a prolonged COVID-19 linked shrinkage and as things normalise we expect commodities to soften and shipping rates to get back to normal pricing. Of course these are variables which are outside our control and we will ensure best practice risk management practices to mitigate risks of these variables on our business.


The Company primarily operates in only one segment i.e. manufacturing of High Chrome Mill Internals. In Fiscal Year 2020-21, 76.92% of its total sales came from outside India while balance 23.08 % came from sales within India.


AIAs core business involves offering solutions around grinding and crushing operations with focus on wear parts used in these processes at Cement plants, Mines and Coal fired Thermal Power Plants. AIAs growth prospects are linked to overall economic conditions in these industries in addition to its strategy around taking higher market share.

As the world recovers from COVID-19 linked uncertainty around the business environment, AIA is preparing itself to take advantage of a relatively stable economic environment as things settle down. Our Cement business was affected in the first quarter of last year but got back to pre-Covid levels by 2nd/3rd quarter. But fortunately, our mining business largely continued without being affected by COVID-19 linked issues mainly because most mines are away from city centres with less risk of the virus spread and operated with minimal staff while still maintaining optimal throughput. This was possible also because underlying metals of Gold, Copper and Steel continued to do well throughout this period, all driven by demand for these metals. Copper has a lot of use in electronics, smartphones, EV vehicles while Gold remains the only proxy to US Dollar and hence there is a solid base demand for both these metals. Steel is largely driven by the appetite for infrastructure and construction activity and is well supported by similar projects embarked by most large economies. Most importantly, our focus is on conversion of almost 80% of the annual replacement demand in mining space from Forged Grinding Media to the High Chrome products and solutions being offered by AIA. On account of this, our Mining segment continues to have a very positive outlook and we remain optimistic about our prospects in this segment.

AIAs primary growth prospects are linked to its strategy for the mining space from which bulk of its growth is expected to accrue from. The growth prospects are primarily emanating out of the large annual replacement market in this industry. Conventionally, Forged Grinding Media is being used for grinding and crushing in grinding mills. Less than 20% of this is converted to High Chrome and hence presents an opportunity to AIA to convert Forged Media to High Chrome. Main benefits of High Chrome include reduction in wear cost, reduction in consumption of reagents and down process benefits including higher recovery of metal in gold and copper ore. AIA engages with a customer over 18 to 24 months to develop a mine site by doing trials and establishing optimal chrome grade for that set of operating conditions. Because of these benefits we expect High Chrome to take higher market share over Forged over time.

AIA is further entrenching itself in the mining space by venturing into Mill Linings wherein the offering will include optimisation of grinding circuit. The Company will be able to offer reduced power costs and increased throughput as a solution to customers. These will be material savings for the customer and with Companys existing solutions around wear cost reduction and down process benefits of increased recovery of metal and reduction in reagent consumption, it will position the Company as a true partner with its Customers and help sharpen its engagement meaningfully in the Mining space.

In the near term, AIAs development cycle for conversion of Forged to High Chrome has become longer on account of inability of our engineers to travel to customer sites. On account of the technical nature of our solution and requirement to engage on site with plant managers, travel is an important requirement to further new mine development. At the same time we are happy to report that all our existing customers continue to be serviced by our tech teams from our global offices and have ensured that every customer problem is solved to customers satisfaction. We expect travel to open up soon as the world gets vaccinated, especially the few key regions that are important for business development and we should get back to growth phase very soon.

In the Cement segment, the near-term prospects continue to remain flat. As and when Indias cement production will go up your company will be an immediate beneficiary in terms of incremental production going to service the additional requirement. On the global front, most developing and developed markets continue to be marginal growth phase reflecting flat sales for AIA. In China, the Company currently maintains a limited presence by marketing specific products.

In as much as the Thermal Power Plants are concerned the Company continues to enjoy a niche position in this particular segment in India. The Company will strive to maintain a steady growth rate in this particular segment matching with the rate at which the sector grows.


The Companys current capacity stands at 3,90,000 MT of annual production of High Chrome Mill Internals.

The Company has started implementing a greenfield facility at Kerala GIDC near Ahmedabad to manufacture 50,000 MT of "Mill Linings" at a cost of Rs. 250 Crores and is estimated to be commissioned in 2nd half of 2021-22.

In line with various uncertainties emerging on account of Covid-19 Pandemic the Company has decided not to break ground on the second phase of the Grinding

Media Greenfield capacity expansion of 50,000 MT at GIDC Kerala, Ahmedabad – this phase will be activated as things stabilise in terms of global Covid linked uncertainty. The Company plans to fund all above Capex from its internal cash accruals.


Your Company is a manufacturing concern with facilities in Four cities in India and with sales and distribution spread across the world. The Company is exposed to certain operating business risks, similar to most manufacturing companies, which is mitigated by regular monitoring and corrective actions.

Key risks that the Company faces are around stability in the mining market, foreign exchange rate fluctuation, fluctuation in raw material prices, debtor defaults and disruption and uncertainty in business due to Covid-19 pandemic.

COVID-19: The Companys operations might be impacted due to exposure to the pandemic. These could impact revenue growth and lead to under utilisation of established capacity. Demand for the Companys product may be adversely affected in our industrial segments of Mining, Cement and Thermal. This is likely to affect the Companys earnings in the short and medium term.

However, the Companys relative competitiveness is expected to increase because of its traditional value focus and its strong track record in helping customers improve their efficiency and saving costs. Various measures taken by Company include deployment of infrastructure enabling employees to work from home and ensure business continuity, Ensuring continuation of production at required level with minimum disruption and cost, guidance and mandate of appropriate workplace operating procedures including social distancing measures, regular coordination with key suppliers for smooth deliveries of material required for desired level of production and regular communication with customers and monitoring of receivable position, review of cash surplus and current capex spend.

Currency fluctuation:

On account of high exchange volatility, there is possibility of big exchange fluctuation due to higher export in turnover and import of raw material. Proactive and adoptive hedging policy which is aligned with market best practices and Dynamic Pricing Mechanism are in place to limit impact of exchange volatility on receivables and forecasted revenue.

Raw material price fluctuation:

The Company engages with the customers and is able to pass through most of the raw material price changes – either through price pass through clauses if there are longer tenure contracts or by re-pricing new offers. The Company is closely monitoring raw material price movements and is regularly buying the raw materials during low price cycles so as to average out the impact of price fluctuations.

Debtor defaults:

Company has taken up comprehensive credit insurance policy to mitigate risks around financial conditions of export mining customers.


The Company has proper and adequate systems of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorised, recorded & reported properly and to ascertain operating business risks, which are mitigated by regular monitoring and corrective actions. The internal control systems have been designed so as to ensure that the financial and other records are reliable and reflect a true and fair view of the state of the Companys business. The Company has the SAP-ERP system which has also helped in further strengthening the Internal Control System.

The Company continues to co-partner and engage with reputed external firms for are conducted on an on-going basis, based on a comprehensive risk based audit plan, which is approved by the Audit Committee at the beginning of each year. The Audit Committee meets on a quarterly basis to review and discuss the various Internal Audit reports and also review closure of all agreed actions and compliance to the audit plan.

BSR & Co. LLP, the statutory auditors of the Company have audited the financial statements included in this Annual Report and have issued an attestation report on our internal control over financial reporting (as defined in Section 143 of Companies Act 2013). Based on its evaluation (as defined in Section 177 of Companies Act 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI LDR Regulations"), our audit committee has concluded that, as of March 31, 2021, our internal financial controls were adequate and operating effectively.


The financial performance of the Company as a whole (on consolidated basis) is as under:-

I. Consolidated Performance:

An analysis of the consolidated performance of the Company is given below:

• Physical Production:

The production achieved is as under: (Qty in M.T.)

Product 2020-21 2019-20
High Chrome Mill Internals 2,62,969 2,71,274

• Sales Turnover:

The Comparative position of sales turnover achieved by the Company is as under:

(Rs. in Lakhs)

Particulars 2020-21 2019-20
Sales in India (20.29%) (P.Y. 20.69%) 57,201.27 59,682.27
Sales Outside India (79.71%) (P.Y. 79.30%) 2,24,676.60 2,28,744.26
Total 2,81,877.87 2,88,426.53

• Key Performance Indicators :

An analysis of the key indicators as percentage to Revenue is given below:

(Rs. in Lakhs)

Particulars 2020-21 2019-20
1 Revenue from Operations 2,88,149.24 2,98,087.75
2 Cost of Materials Consumed (Including change in Inventories) 1,14,260.58 1,17,346.87
- % of revenue from operations 39.65% 39.37%
3 Employee Benefit Expense 13,350.47 13,438.76
- % of revenue from operations 4.63% 4.51%
4 Other Expenses 95,013.59 99,274.02
- % of revenue from operations 32.97% 33.30%
5 EBIDTA 82,744.19 82,219.10
- % of revenue from operations 28.72% 27.58%
6 Finance Costs 429.31 558.75
- % of revenue from operations 0.15% 0.19%
7 Depreciation and Amortisation Expense 9,350.09 9,787.92
- % of revenue from operations 3.24% 3.28%
8 Profit Before Tax 72,964.79 71,872.43
- % of revenue from operations 25.32% 24.11%
9 Profit AfterTax (Including Other Comprehensive Income and after Minority Interest) 54,310.02 58,645.60
- % of revenue from operations 18.85% 19.67%

II Standalone Performance

The analysis of standalone performance of the Company is given below:

Sales Turnover :

The Comparative position of sales turnover achieved by the Company is as under:

(Rs. in Lakhs)

Particulars 2020-21 2019-20
Sales in India (21.08%) (P.Y. 22.40%) 50,804.91 55,797.25
Sales Outside India (78.92%) (P.Y. 77.60%) 1,90,226.76 1,93,303.97
Total 2,41,031.67 2,49,101.22

Key performance indicators:

An analysis of the key indicators as percentage to Revenue is given below:

(Rs. in Lakhs)

Particulars 2020-21 2019-20
1 Revenue from Operations 2,47,299.38 2,58,762.44
2 Cost of Materials Consumed(including change in inventories and purchase of stock in trade) 1,10,142.89 1,22,354.41
- % of revenue from operations 44.54% 47.28%
3 Employee Benefit Expense 9,805.91 9,953.04
- % of revenue from operations 3.97% 3.85%
4 Other Expenses 67,534.42 69,191.28
- % of revenue from operations 27.31% 26.74%
5 EBIDTA 74,296.87 1,05,812.16
- % of revenue from operations 30.04% 40.89%
6 Finance Costs 398.52 519.89
- % of revenue from operations 0.16% 0.20%
7 Depreciation and Amortisation Expense 9,097.06 9,551.24
- % of revenue from operations 3.68% 3.69%
8 Profit Before Tax 64,801.29 95,741.03
- % of revenue from operations 26.20% 36.99%
9 Profit AfterTax (Including Other Comprehensive Income) 48,217.01 83,515.58
- % of revenue from operations 19.50% 32.28%


Pursuant to amendment made in Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 details of significant changes (i.e. change of 25% or more as compared in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefor are given below:


Particulars F.Y. 2020-21 F.Y. 2019-20 Change Change in % Explanations
1 Debtors Turnover (Days) 154 137 17 12.41% --
2 Inventory Turnover (Days) 37 38 (1) (2.63%) --
3 Interest coverage Ratio 163.60 185.16 (21.56) (11.64%) --
4 Current Ratio 8.84 10.45 (1.61) (15.41%) --
5 Debt Equity Ratio 0.04 0.03 0.01 33.33% On account of Increase in Borrowings
6 Operating Profit Margin (%) 32.17% 42.36% (10.19%) (24.06%) On account of Non-declaration of dividend by subsidiary during the year.
7 Net Profit Margin (%) 20.12% 33.42% (13.30%) (39.80%) On account of Non-declaration of dividend by subsidiary during the year.
8 Return on Net worth (%) 12.58% 24.53% (11.95%) (48.72%) On account of Non-declaration of dividend by subsidiary during the year.


Particulars F.Y. 2020-21 F.Y. 2019-20 Change Change in % Explanations
1 Debtors Turnover (Days) 84 86 (2) (2.33%) --
2 Inventory Turnover (Days) 75 74 1 1.35% --
3 Interest coverage Ratio 170.96 129.63 41.33 31.88% On account of reduction in Interest rate and increase in Operating Profit
4 Current Ratio 7.78 8.67 (0.89) (10.27%) --
5 Debt Equity Ratio 0.04 0.03 0.01 43.70% Due to increase in Borrowing
6 Operating Profit Margin (%) 31.41% 28.65% 2.76% 9.63% --
7 Net Profit Margin (%) 20.08% 20.47% (0.39%) (1.91%) --
8 Return on Networth (%) 14.25% 16.36% (2.11%) (12.90%) --


The Company believes that human resource is the most important asset of the organisation. During the year under review, your Company continued its efforts to improve HR related processes, practices and systems to align these to the organisational objectives. Training and development of its employees is ensured through on the job and outside training programs and workshop. The Company continues to attract excellent talent to further its business interests. Industrial Relations continue to be cordial.


Statements made in the Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations may be "Forward-looking statements" within the meaning of applicable securities Laws & Regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws & other statutes & other incidental factors.