Alicon Castalloy Ltd Management Discussions.


After strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year. Global growth is now projected to slow from 3.6% in FY 2017-18 to 3.3% in FY 2018-19. The threat of trade wars has not entirely receded and casts a pall of gloom over global economic activity.

At the start of FY 2018-19, the Indian economy was expected to achieve higher growth as the economy had overcome the teething troubles of the nationwide rollout of the Goods and Services Tax (GST).

The second advance estimates of national income for FY 2018-19 released by the Central Statistics Office (CSO) on February 28, 2019 show that the economy could not continue the expected growth momentum with GDP growth in the third quarter of FY 2018-19 reducing to 6.6% after clocking 8.0% and 7.0% growth in the first and second quarter of FY 2018-19 respectively. The CSO estimates GDP growth in FY 2018-19 at 7.0% as compared to 7.2% in FY 2017-18. The projected slowdown in growth at 7.0% for FY 2018-19 was on account of multiple factors.

Automobile sales were impacted in the second half of FY 2018-19. The major reasons were rising fuel prices and a steep increase in the price of new vehicles as a result of new insurance regulations which were further accentuated by tight liquidity conditions witnessed in the markets in the third quarter of FY 2018-19. The Reserve Bank of India (RBI) intervened to restore flow of credit and aided by benign inflation trends also reduced policy rates. Despite the lower policy rates and attempts to infuse liquidity to Non-Banking Finance Companies (NBFCs), the sector continues to face a liquidity crunch. Having witnessed the uncertain economic conditions, the Company decided to curtail its capacity expansion plans.

We anticipate a challenging FY 2019-20 given a tepid consumer demand amidst a tight liquidity scenario. However, given our strategy of product and customer diversification, we are hopeful of repeating our FY 2018-19 performance of outgrowing the automobile industry growth.


Global Scenario

The global die casting market is projected to touch USD 80 billion by 2021-22. The market is poised to grow at a CAGR of over 6.60% during the forecast period from 2017 to 2022. Automobiles and auto components are two of the significant sectors that the die casting industry caters to.(Source: Report Modor Intelligence)

In 2017, India overtook the United States to emerge as the second-largest producer of casting, behind China as compared to 2016. Indias production stood at 11 million tonnes, valued at USD 19 billion in 2017, behind China, which produced 40 million tonnes. The ongoing trade and tariff war between the US and China has come as a boon to the Indian foundry sector and India is expected to have an edge on the export front with close to 40-45% of total exports to the US.(Source: Indian Institute of Foundrymen Report)

Indian Foundry Industry and Future Outlook

India is the second-largest producer of castings, globally. The automobile sector is a major consumer of castings produced in the country. Currently, there are around 5,000 foundry units in the small, medium and large-scale sector. Out of these, 1,500 units have international quality accreditation. Coimbatore is the largest foundry cluster in India having 300 to 400 foundries focussing on technology and value-addition. The Indian foundry industry manufacturers metal cast components for applications in Auto, Tractor, Railways, Machine Tools, Sanitary, Pipe Fittings, Defence, Aerospace, Earth Moving, Textile, Cement, Electrical, Power Machinery, Pumps / Valves, Wind Turbine Generators etc. Aluminium casting accounts for 15% of the casting produced due to the shift in demand from iron to lighter metals for manufacturing automobiles and electronic vehicles.

The foundry industry employs around 5 lakh people directly and 2 lakh people indirectly and is expected to generate additional employment for 3 lakh families in the next five years. Foundries across India have upgraded their facilities and technologies to improve productivity and increase capacity. A majority of the foundries in India are SME foundries which are very small and very valuable. They are in maximum need of Government assistance in terms of technology, automation, rejection, reduction and efficiency improvement.

The Institute of Indian Foundrymen (IIF) has set up common facilities in clusters for the benefit of the foundries such as common training facilities, testing labs, common interactive portal, ERP package for members, modern toolrooms, green and clean work environment, and sand reclamation.

The Indian foundry industry is expected to double its growth rate in the next five years due to opening up of defence, railways and aerospace areas for the private sector. The foundry sector in the country is expected to witness an annual growth of 13-14% from the present 5-7%. This would see production of castings increase from 11.5 million tonnes to 14-15 million tonnes by 2021 and was set to reach 20 million tonnes by 2025. The opportunities coming from the defence, railways and the automobile sectors would boost the demand. (Source: Foundry Informatics Centre, IIF)

Opportunities and Challenges:

The Government of India has introduced 100% Foreign Direct Investments (FDI) into the Auto and Auto Component Sector. Due to this, many global companies have started establishing facilities in the country for manufacturing vehicles for the local and global markets._In the electric vehicle segment too, many players have shown interest to invest in the Indian market and here is a need for the die casting industry to upgrade its technologies and processes in order to ride high on the growth wave. The Governments policy has also benefited the industry as now there is an influx of proprietary sub-assembly suppliers to OEMs such as transmission majors, fuel injection systems, filteration systems and braking systems, thus bringing in more opportunity to the die casting industry.

Despite the opportunities, the industry is faced with several challenges. The main challenge bogging the industry down is lack of resources for technology upgradation, access to quality manpower, an abnormal increase of raw material costs and pending GST refunds. Cost of fuel and power in India is almost double that in China, Germany and Turkey, requiring the Government to address this problem to make India internationally competitive. Some foundries are gearing up to get energy-saving modern technology and material resource saving techniques to help in mass productivity and improvement of working environment.


The Alicon Group is a global consortium of companies involved in Design, Engineering, Casting, Machining and Assembly, Painting and Surface Treatment of Aluminium Components. As one of the largest aluminium foundries in India, the Company amalgamates the best of European Engineering, Japanese Quality and Indian Ingenuity to produce exceptional and innovative aluminium casting products. Alicon caters to the capital component input needs of various sectors such as automobiles, agriculture, aero and marine, locomotive, infrastructure, energy, defense, medical and health among others.

Today, the Alicon Group is a union of Alicon Castalloy Ltd., Atlas Castalloy Ltd., Silicon Meadows Engineering Services Ltd., Illichmann Castalloy GmbH & Illichmann Castalloy s.r.o., all grouped under one umbrella.

We have operations spread across India at Shikrapur and Chinchwad in Pune, Maharashtra and Binola in Gurugram, Haryana along with international presence in Slovakia, a technology centre, globally competent tool rooms, quality and testing laboratories and a full-fledged machine shop (including a sub-assembly facility).

We have developed foundries at strategic locations to key markets, enabling increased speed-to-market and better cost efficiencies. We enjoy long-standing relationships with major, local and international OEMs, including leading two-wheeler OEMs, four-wheeler OEMs, as well as several tier-I and other non-auto brands. With our key customers, we have created a strong and differentiated position as an integrated solution provider.

At Alicon, our focus is to offer design and manufacturing enhancements with every component in order to optimise its performance. To achieve this goal, weve devised and perfected our signature Eight-Step Process which ensures twin benefits for our customers – a dramatic drop in rejection rates and guaranteed on-time delivery.


Our ongoing strategy of continually expanding our product suite to align our product offerings in line with changing technologies and emerging trends helped us to achieve robust business growth despite challenging demand conditions and a downtrend in the domestic auto industry. The Company achieved a 17% top-line growth in FY 2018-19 as compared to the automobile industry growth estimated at 9%. It is worth highlighting that our global business grew by 26% and the Company added products intended for electric vehicles with a potential for volume growth in future. This business growth was achieved with improved performance metrics.

We continue to remain focussed on our strategy to take advantage of the emerging trends in the automobile industry where all players strive to reduce the weight of vehicles. This trend is both in the traditional vehicles which must transition to the BS-VI norms on April 1, 2020 as well as electric vehicles. Our product range of aluminium castings helps us to take advantage of these trends. We also remained focussed on the use of advanced materials and alloys which would enable us to develop lighter products and give us a competitive edge.

During FY 2018-19, the Company engaged with all domestic customers to support them in their endeavours to transition to BS-VI norms and the value-added solutions provided, placed the Company in an advantageous position to improve business prospects with such customers and hopefully enhanced margins.

As far as our global business is concerned, the Company has made considerable headway with multiple customers in developing parts for their traditional and electric vehicles which are under development. These developments are a ‘work in progress at this stage and we are in the process of converting these to being part of our regular business.

On the whole, we believe our technological prowess, design capabilities and the focus on transformative solutions over the last few years have enabled us to emerge as a one-stop solution for design, economics, raw material composition to manufacture and delivery of components, in both domestic and international markets. We are further continually expanding our product suite to align our offerings with changing technologies and emerging trends. As demand conditions improve, our endeavour is to substantially outperform the industry growth rate through our product portfolio, diverse customer base and focus on innovation and R&D.

Risks, Concerns & Mitigation

Having dwelt on our strengths and opportunities, we enumerate some of the risks and threats to our business operations. Global tension in terms of trade wars may disrupt globally integrated supply chains posing an indirect threat to our operations. Our geographical diversity and strong technical prowess enable us to minimise such challenges. Other challenges that we closely monitor include:

Demand slowdown risk: Macro economic slowdown may impact performance of certain sectors and pose risk of business growth.

Mitigation: We strive to diversify revenue stream, reduce dependence on one sector, strong focus on product innovation and increase contribution from international geographies including exports to mitigate this risk.

Raw material cost fluctuations: Volatility in prices of key raw materials may have a bearing on the profitability of the Company.

Mitigation: We follow standardisation of alloys policy wherein we endeavour to reduce the number of alloy variants in use to be able to consolidate raw materials purchased with a minimal number of alloys. We also link our sale price to benchmarked raw material costs to minimise impact of any unforeseen fluctuation in raw material price.

Competitive pressure: We are exposed to heightened competitive intensity given the lucrative growth prospects for the industry.

Mitigation: Our strong in-house R&D, superior service and a history of timely deliveries which ensures long-lasting relationship with most clients based on trust enables us to keep the competition at bay. The Governments thrust on Make in India and other similar policies, keeps international competition at minimum risk.

High dependence on a single sector: It is imperative for us to diversify revenue streams and reduce dependence on one sector to avoid risk to revenue growth in case of slowdown in the particular sector.

Mitigation: We are constantly working to increase the revenue share from the non-automotive sector and international businesses.


(Rs In Lakhs, unless otherwise stated)
Particulars 2018-19 2017-18 % ? /?
Total Income (Net of taxes) 119,205 102,296 ? 17
Raw Material Costs 59,950 49,953 ? 20
Manpower Costs 16,504 15,410 ? 7
Other Expenses 27,790 25,169 ? 10
Earnings before Interest, 14,961 11,764 ? 27
Depreciation,Tax and
Amortisation (EBITDA)
Depreciation and 3,809 3,221 ? 18
Amortisation Expense
Finance Costs 3,534 2,987 ? 18
Profit Before Tax (PBT) 7,619 5,557 ? 37
Profit AfterTax (PAT) 5,295 3,868 ? 37
Earnings Per Share (Basic) 39.3 29.5 ? 33
(In Rs)

Performance Highlights: (Consolidated)

Total Income (Net of Duties) : Rs 119,205 Lakhs, grew by 17%

EBITDA recording a robust growth of 27% touching amount of Rs 14,961 Lakhs

Profit Before Tax (PBT) : Rs 7,619 Lakhs up by 37%

Profit After Tax (PAT) : Rs 5,295 Lakhs up by 37%

The Company declared a final dividend of 100%. This coupled with the interim dividend of 40% amounted to a total dividend of 140% for FY 2018-19 against 125% in FY 2017-18


Intellectual capital is one of our key resources to ensure business sustainability and growth. Being our greatest strength, most policies revolve around betterment of human resources. We ensure that we provide ample employee growth opportunities both at personal and professional levels and at the same time we work to align their goals with ours to create a win-win situation. Holistic employee engagement is the manifestation of our ‘One Path, One Goal approach. In our efforts to create a unified culture throughout the organisation, we successfully initiated a number of policies as enumerated below.

The number of Permanent Employees on roll of the Company as on March 31, 2019 was 1039.

Challenge the Now

Employees are constantly motivated to work in team and imbibe a deep sense of belongingness to work towards the growth of self and the organisation. We encourage employees to move out of their comfort zone, raise benchmarks and deliver improved designs, processes and products. We promote the cause of waste-reduction at the work processes based on Kaizen. The success of numerous KPIs is a good indicator of the internalisation of our mission to ‘Challenge the Now.

‘N orth Star Philosophy

"We are proud to be Indians, we work to make India proud".

Alicon endeavours to promote Indian self-reliance in the present domains. Our North Star philosophy aligns the corporate pledge, vision, mission, values, DNA and future growth strategy. Our philosophy is aimed to achieve higher growth in each department, drawing inspiration from the North Star, the brightest star in the night sky. Our employees are inspired to set shining examples similar to this Star which provides direction and inspiration.

We are proud that our employees are highly committed both towards the organisation and the nation at large. We have been the biggest advocators of ‘Make in India even prior to the Governments mega campaign. Our strong position in various domains on the international front is well reflective of our priority towards Indian self-reliance. Effectively, our philosophy has been truly internalised and resulted in a workplace resonating with peace, belief and loyalty.

Other Initiatives

Training and employee motivation is an integral part of the Company. We constantly endeavour to boost production efficiencies through recognition, motivation and appreciation. Several initiatives are underway to boost employee morale:

Creating leaders: We prioritise homegrown leaders over outside recruitment, as our unique culture and philosophy is already firmly embedded in their working styles. Thus, employees are groomed in managerial and leadership roles at appropriate times.

Student engagement: We hire several interns from the various technical and non-technical institutes which are closely associated with Management and Engineering students from various prestigious institutes are also given internship opportunities as deemed fit.

Training: Our employees are regularly provided with training and development programmes to enhance their skills and focus on career progression through capability-building exercises across all levels and departments.

Safety first: We are committed to a safe, conducive and productive work environment at all times. Safety monitoring systems are mandatory at all shop levels. Enhanced safety is ensured at the workplace through various mechanisms to monitor strict adherence to the safe practices laid down. As on March 31, 2019, our permanent employee strength was 1,039.


We have a proper and adequate system of internal controls to ensure that all assets are verified to ensure their veracity, safeguarding and protection against unauthorised use. We are committed to good corporate governance practices and have well-defined systems and processes.

Our internal control framework centres on strong governance, precise systems and processes, vigilant finance function and independent internal reviews. The Audit Committee approves the audit plans which are independently scrutinised by the internal audit function for critical audit areas. Risk evaluation exercise prioritises risks facing the business, basis which strategies are formulated.

Audit Committee periodically reviews and takes suitable actions for any deviation, observation or recommendation suggested by the internal auditors. The Audit Committee of the Board oversees the Audit function through regular reviews of audit findings and monitoring corrective actions taken on the same. As deemed fit, we reassess our internal control systems and take appropriate corrective action.


Statements in the Management Discussion and Analysis Report describing the Companys projections, estimates and expectations may be interpreted as "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to its operations include economic conditions affecting demand/supply, price conditions in the domestic and international markets in which it operates, changes in Government regulations, tax laws and other statutes. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent development, information or events.